HaloSource Inc Completion of Conditional Fundraising (9277C)

TIDMHAL TIDMHALO

RNS Number : 9277C

HaloSource Inc

21 April 2017

21 April 2017

THIS ANNOUNCEMENT IS NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, TO US PERSONS OR IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

HaloSource, Inc.

("HaloSource" or the "Company")

Fundraise to raise GBP1.9 million and Trading Update

HaloSource Inc. (HAL.LN, HALO.LN), the global clean water technology company traded on London Stock Exchange's AIM market, is pleased to confirm that the Company has conditionally raised approximately GBP1.9 million ($2.3 million) through the issue of an aggregate of 125,377,866 new Common Shares to new and existing investors at a price of 1.5 pence per new Common Share (the "Placing Price").

Highlights of the Fundraise

-- The Company has raised approximately GBP1.9 million ($2.3 million) through a conditional placing (the "Placing") of 73,173,333 new Common Shares (the "Placing Shares") and a conditional subscription (the "Subscription", together with the Placing, the "Fundraise") for 52,204,533 new Common Shares (the "Subscription Shares", together with the Placing Shares, the "New Common Shares"), in each case at the Placing Price.

-- The net proceeds of the Fundraise will provide additional working capital to the Company and also be used to fund commercialisation of the Company's lead removal technology and expansion of its drinking water business.

-- The New Common Shares will represent approximately 36% of the enlarged issued common share capital of the Company.

-- The Fundraise is conditional upon, amongst other things, one of the cornerstone investors to the Fundraise receiving certain Chinese governmental approvals to enable the investor to complete its participation in the Subscription, and the necessary shareholder resolutions being passed at a general meeting of the Company to be held on 17 May 2017. Shareholders are directed below to further details of the conditions of the Fundraise.

-- Liberum Capital Limited ("Liberum") is acting as nominated adviser in connection with the Fundraise. Hybridan LLP ("Hybridan") is acting as sole broker in connection with the Fundraise.

Reasons for the Fundraise and Use of Proceeds

On 6 April 2017, the Company announced its preliminary results for the year ended 31 December 2016 which confirmed total cash at year end, including short-term investments, of $2.1 million, which is expected to fund the Company until the end of Q2 2017.

Since 2016 the Company has taken proactive steps in order to reduce its cash burn rate. However, the Fundraise is necessary to provide additional working capital so that the Company can continue to trade as a going concern beyond Q2 2017. Assuming completion of the Fundraise, including receipt of the Chinese governmental approval for the cornerstone investor referred to above, the Company expects to have sufficient cash to fund it through to Q2 2018.

In addition, the Company also reported that during 2016 it had made solid progress on the development and scale-up of its new lead removal technology, which would enable the Company to offer a powerful combination of heavy-metal removal along with viral and bacterial disinfection already provided by its HaloPure(R) technology. Accordingly, a portion of the net proceeds of the Fundraise will also be used to fund commercialisation of the Company's lead removal technology and expand its drinking water business.

Trading Update

Assuming the Fundraise completes, the Company expects that for the year ended 31 December 2017 revenue from continuing operations will be between $4 million and $5 million, operating expenses will be between $5.5 million and $6 million and the net loss will be between $3.5 million and $4.5 million.

The appendix to this announcement (the "Announcement"), which forms part of the Announcement, sets out further important details of the Fundraise and the action to be taken by shareholders to allow the Fundraise to occur.

The information communicated in this Announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 ("MAR"). For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Craig Crowell, Chief Financial Officer.

Enquiries:

 
 
   HaloSource, Inc. 
 James Thompson, Acting Chief 
  Executive Officer                 [phone] 
 Craig Crowell, Chief Financial 
  Officer                           [phone] 
 
 Hybridan LLP (Sole Broker) 
 Claire Noyce, Niall Pearson        [phone] 
 
 Liberum Capital Limited (NOMAD) 
 Richard Bootle, Jill Li, Steve 
  Pearce                            [phone] 
 

About HaloSource

HaloSource, Inc. innovates and integrates technologies to deliver clean drinking water solutions to partners with trusted brands around the world. The Company works with scientists and industry experts across the globe in search of new ways to improve drinking water quality and has been awarded more than 30 patents for its ground breaking chemistries, which provide safe drinking water for more than 10 million consumers globally. The Company's class-leading HaloPure(R) Drinking Water technology has the highest global certifications, including registration with the US EPA.

Founded in Seattle, Washington, HaloSource has grown to become an influential leader in drinking water purification. HaloSource is headquartered in the US with operations in China and in India. Learn more about the Company's research and development and future cutting edge technologies by visiting www.halosource.com.

HaloPure(R) is a registered trademark of HaloSource, Inc. All other trademarks, brand names or product names belong to their respective holders.

This document contains certain forward-looking statements relating to the Company. The Company considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Company to differ materially from those contained in any forward-looking statement. These statements are made by management in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Hybridan LLP, which is regulated by the Financial Conduct Authority, is acting exclusively for HaloSource in connection with the Placing and no-one else and will not be responsible to anyone other than HaloSource for providing the protections afforded to customers of Hybridan LLP, or providing advice in connection with the Fundraise or any transaction or arrangement referred to in this announcement.

Liberum Capital Limited, which is regulated by the Financial Conduct Authority, is acting exclusively for HaloSource in its role as nominated adviser and no-one else and will not be responsible to anyone other than HaloSource for providing the protections afforded to customers of Liberum Capital Limited, or providing advice in connection with the Fundraise or any transaction or arrangement referred to in this announcement.

This announcement does not constitute, or form part of, an offer, or solicitation of an offer, or invitation to subscribe for or purchase any rights, ordinary shares or other securities of the Company in the United States. In addition, the securities of the Company to be issued in the Placing have not been, and will not be, registered under the US Securities Act of 1933 (as amended) (the "Securities Act") or the securities laws of any state or other jurisdiction of the United States and may not be offered or sold or delivered within, in or into the United States or to, or for the account or benefit of, US Persons absent an applicable exemption from the registration requirements of the Securities Act. There will be no public offer of securities within the United States.

APPIX: FURTHER DETAILS OF THE FUNDRAISE

Terms of the New Common Shares

The New Common Shares will be issued credited as fully paid and will rank equally with the existing Common Shares, including the right to receive all dividends and other distributions declared in respect of such shares after the date of their issue. Following completion of the Fundraise, the total issued common share capital of the Company will comprise 345,656,270 common shares of no par value, admitted to trading on AIM.

Conditions of the Fundraise

The Fundraise is conditional on one of the key cornerstone investors to the Fundraise receiving certain Chinese governmental approvals to enable the investor to complete its participation in the Subscription. In the event that such governmental approvals are not obtained on or prior to 31 May 2017, the Fundraise will not proceed and the Company does not expect to have funds immediately available to continue trading as a going concern, in which case, shareholders will be at risk of losing all or a substantial amount of their investment.

The Fundraise is also conditional on, amongst other things, the Company obtaining (a) sufficient approval from the existing shareholders to amend the articles of incorporation to increase the authorised share capital of the Company (the "Articles Amendment"); and (b) the requisite number of waivers of existing shareholders to issue the New Common Shares without having to make a pre-emptive offer to existing shareholders ("Pre-Emptive Rights").

The Board of Directors of the Company considers the approval of the Articles Amendment and the waiver of the Pre-Emptive Rights in order to effect the Fundraise to be in the best interests of the Company and its shareholders as a whole, and therefore unanimously recommends that shareholders vote in favour of the Articles Amendment and consent to the waiver of the Pre-Emptive Rights.

Articles Amendment

The Articles of Incorporation of the Company currently authorise 400,000,000 total Common Shares for issuance by the Company. Completion of the Fundraise will take the number of issued common shares in the Company close to 400,000,000, and as such, the Company is seeking the authority of shareholders to amend and restate the Articles of Incorporation of the Company to increase the total number of shares which the Company has authority to issue to 600,000,000 shares of common stock in order to issue additional shares pursuant to offerings or commitments that may take place in the future, up to the amount in aggregate of 600,000,000 Common Shares.

Pre-emptive Rights

The Articles of Incorporation of the Company provide that each shareholder shall have a pre-emption right to purchase its pro rata share of any new securities that the Company may propose to sell and issue wholly for cash ("Pre-emptive Rights"), save that the Pre-emptive Rights are subject to waiver by existing shareholders of the Company holding 75% of the Company's outstanding Common Shares voting in person or by proxy at an annual or special meeting.

Shareholders holding their shares in certificated form will shortly receive a circular and Form of Proxy for execution to provide such written waivers, and should execute and return to Computershare Investor Services (Jersey) Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99 6ZY or by return of a PDF copy by email to![e-mail] as soon as possible and in any event before 5.30pm (London time) on 15 May 2017.

Shareholders holding their shares as depository interests in CREST will shortly receive a circular and Form of Instruction for execution to provide such written waivers from Computershare Investor Services PLC and should execute and return their form for execution by post to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, or alternatively instruction via CREST or email a PDF copy to Computershare Investor Services PLC (email: ![e-mail]), as soon as possible and in any event before 4pm (London time) on 14 May 2017.

Importance of shareholder vote

Your attention is again drawn to the fact that the Fundraise is conditional and dependent upon, amongst other things, shareholders approving the resolutions at the general meeting of the Company and the cornerstone investor in the Fundraise receiving Chinese governmental approvals to enable the investor to complete its participation in the Subscription. In the event that such conditions are not satisfied on or prior to 31 May 2017, the Fundraise will not proceed.

Shareholders are asked to vote in favour of the resolutions at the general meeting in order for the

Fundraise to proceed. However, if the resolutions are not passed, the Chinese governmental approvals referred to above are not obtained by 31 May 2017 or another condition of the Fundraise is not satisfied for any reason, the Fundraise will not proceed and the Company does not expect to have funds immediately available to continue trading as a going concern, in which case, shareholders will be at risk of losing all or a substantial amount of their investment.

Application for Admission

The Company will apply for admission to AIM of the New Common Shares on all conditions of the fundraise being satisfied.

Related party transactions

Under the AIM Rules for Companies (the "AIM Rules") a non pre-emptive issue of shares to a related party which exceeds specified class tests is subject to certain disclosure requirements.

Due to their holding of over 10% of the Company's current issued common share capital, the participation in the Placing by Invesco Asset Management Limited ("IAML") as agent for and on behalf of its discretionary managed clients (which has previously notified HaloSource that the aggregate holding of these clients was 62,997,274 Common Shares, representing approximately 29% of HaloSource's current issued common share capital) is deemed a transaction with a related party under the AIM Rules. IAML as agent for and on behalf of its discretionary managed clients has agreed conditionally to subscribe for 35,733,333 Placing Shares under the Placing, such that it will hold approximately 29% of the enlarged issued common share capital of the Company following the Fundraise. The directors of the Company consider, having consulted with Liberum, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Due to their holding of over 10% of the Company's current issued common share capital, the participation in the Placing by Woodford Investment Management ("WIM") is deemed a transaction with a related party under the AIM Rules. WIM has conditionally agreed to subscribe for 31,200,000 Placing Shares under the Placing, such that it will hold approximately 25% of the enlarged issued common share capital of the Company following the Fundraise. The directors of the Company consider, having consulted with Liberum, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Directors, senior management and associates participation

Certain directors, members of senior management and associates of the Company have agreed to subscribe for an aggregate of 6,871,200 Subscription Shares, further details of which are set out below:

 
 Subscriber            Subscription Shares 
 James Thompson             3,200,000 
 Martin Coles                533,333 
 Kent Johnson               1,066,666 
 Alan Matthews               666,667 
 Craig Crowell               333,333 
 G. Scott Greenberg         1,071,201 
 

James Thompson, Martin Coles, Kent Johnson and Alan Matthews, directors of the Company, are related parties of the Company for the purposes of the AIM Rules. Craig Crowell is also deemed to be a related party of the Company by reason of his position as senior management of the Company. Scott Greenburg is also deemed to be a related party of the Company by reason of his prior position as company secretary of the Company.

The participations in the Subscription as set out above are deemed related party transactions pursuant to the AIM Rules. The independent directors, being Jerry Wetherbee, Michael Ducey and Massoud Entekhabi, consider, having consulted with Liberum, that the terms of the participations in the Subscription are fair and reasonable insofar as the Company's shareholders are concerned.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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April 21, 2017 02:00 ET (06:00 GMT)