Xylitol Canada Inc.

Xylitol Canada Inc.

July 19, 2016 19:41 ET

Xylitol Canada Inc. Issues Promissory Notes to Insiders

TORONTO, ONTARIO--(Marketwired - July 19, 2016) - Xylitol Canada Inc. (TSX VENTURE:XYL) ("Xylitol" or the "Company") announces today that it is issuing promissory notes (the "Loans") to certain insiders of the Company (the "Lenders") in the aggregate principal amount of $325,000 ("Loan Amount"). The Lenders are Fountain Asset Corp. for $175,000 and Roger Daher, a director of Xylitol, for $150,000. The net proceeds of the Loans shall be used as working capital for Xylitol and to increase their product sales within the North American natural foods market.

The Company intends to convert the Loans into secured convertible debentures and common share purchase warrants on the same terms and conditions as the secured convertible debenture financing (the "Secured Financing") completed by Xylitol on April 16, 2016. For further background, the following securities were issued pursuant to the Secured Financing:

  1. Secured convertible debentures (the "Debentures") maturing four years from the effective closing date of the Secured Financing, and bearing interest at a rate equal to the greater of (a) an annual interest rate of 15% payable per annum (b) a royalty equal to 3% of net sales per annum, subject to an annualized combined effective interest of a maximum of 24%. The Debentures are convertible into common shares of Xylitol at a price of $0.10 per share. Xylitol may redeem the Debentures at any time by repaying the principal amount of the Debenture then outstanding plus all accrued but unpaid interest thereon.
  2. Common share purchase warrants (the "Warrants"), each such Warrant being exercisable for one common share of Xylitol for a period of 2 years and an exercise price of $0.08 per share.

The Lenders may be considered "related parties" of the Company. The participation in the issuance of the Loans to such "related parties" will constitute a "related party transaction" as defined under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The issuance however will be exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as neither the fair market value of securities being issued to the related parties nor the consideration being paid by related parties will exceed 25% of the Company's market capitalization.

About Xylitol Canada Inc.

Xylitol Canada operates two business units that address the growing xylose and xylitol markets. Xylitol Canada's consumer packaged goods division is based in Denver, Colorado, and has grown from under $500,000 in revenue in 2010, to over $8,600,000 in 2014. Xylitol Canada operates a 50,000 square foot xylitol facility where it produces and packages a full catalog of natural sugar free products, most notably its natural sugar alternatives. Through this Denver based facility, the Company services major retail customers such as Loblaws, Whole Foods, Costco, Sprouts, and many others.

Xylitol Canada markets xylitol and xylitol based-products and is focused on becoming a major low-cost manufacturer of xylitol and related products, serving the global market from operations in North America. Xylitol Canada's business strategy is to leverage novel proprietary technology and processes to become North America's premier manufacturer of low cost, high quality xylitol from readily available environmentally-sustainable biomass. Xylitol is a natural sweetener which is marketed globally including Canada and the United States and is accepted by the American Food and Drug Administration, the World Health Organization and the American Dental Association. Xylitol contains 75% less carbohydrates and 40% less calories than sugar, has a myriad of oral health benefits including the prevention of tooth decay and is safe for diabetics. To date, wider spread use of xylitol has been limited by the lack of a reliable, low cost, high quality supplier.

Neither TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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