Xylitol Canada Inc.
TSX VENTURE : XYL

Xylitol Canada Inc.
Fountain Asset Corp.
TSX VENTURE : FA

Fountain Asset Corp.

April 11, 2016 20:08 ET

Xylitol Canada Inc. Issues Secured Convertible Debentures to Fountain Asset Corp. and Other Subscribers

TORONTO, CANADA--(Marketwired - April 11, 2016) - Fountain Asset Corp. (TSX VENTURE:FA) ("Fountain") and Xylitol Canada Inc. (TSX VENTURE:XYL) ("Xylitol") are pleased to announce the completion of a secured convertible debenture financing (the "Secured Financing") in the principal amount of $1,000,000. Fountain's total participation was $710,000 of the Secured Financing. The net proceeds of the Financing shall be used to as working capital for Xylitol to increase their product sales within the North American natural foods market.

The Financing included the issuance of debentures (the "Debentures") maturing four years from the effective closing date of April 8, 2016, 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. The Financing also included the issuance of 10,000,000 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.

Xylitol has also entered into a one year fiscal advisory agreement with Fountain and certain other consultants whereby Xylitol will receive strategic financial advisory services in exchange for a monthly fee of CAD $20,000 and the issuance of 3,100,000 options with an exercise price of $0.08 per warrant, expiring 2 years from the date of issue.

In addition to closing the Secured Financing, Xylitol is also pleased to announce closing and issuance today of an unsecured convertible debenture in the aggregate principal amount of $250,000 (the "Unsecured Financing"). The Unsecured Financing included the issuance of a debenture in the principal amount of $250,000 (the "Unsecured Debenture") accruing interest at a rate of 10% per annum and convertible into common shares of the company at a price of $0.10 per share. The Unsecured Debenture matures 3 years from the date of issuance. Xylitol also issued an aggregate of 500,000 share purchase warrants (the "Unsecured Warrants") to the Unsecured Debenture subscriber, each Warrant entitling the holder thereof to acquire one common share of Xylitol at an exercise price $0.15 per share, for a period of three years from date of issuance.
Xylitol's operations address the growing xylitol and coconut sugar markets which are natural sugar alternatives. With its consumer packaged goods division, based in Denver Colorado, Xylitol's North American sales have grown from under $500,000 in revenue in 2010, to over $8,600,000 in 2014, and today its major retail customers include Costco, Whole Foods, Loblaws, Trader Joe's, Sprouts and many others.

"Xylitol offers a product catalog of natural sweeteners as substitutes to refined, processed sugar and has built strong relationships with its major North American retailers. Their growing portfolio of natural sweetener products are accepted globally and provide numerous health benefits. We are pleased to be able to provide this financing and are looking forward to working with them," said Fountain's C.E.O., Jason Ewart.

Steven Haasz has been appointed interim CEO of Xylitol effective immediately. Mr. Haasz is the Chief Financial Officer of Fountain. Over a career spanning 20 years, Mr. Haasz has been working in the financial services sector and consumer retail across North America. Previously, Mr. Haasz worked at KPMG Audit and KPMG Business Transformation Services. In announcing the appointment, Mr. Haasz said "The priority at the onset will be to immediately work with the Xylitol team to restructure the operations of the business. Initially, we will focus on a plan to achieve profitability by targeting incremental revenue opportunities within its existing distribution channels, executing gross margin expansion through disciplined product reviews and implement strict cost rationalization programs. It will be important to emphasis the need to foster a culture that creates value for all stakeholders including Xylitol's employees, customers, suppliers and investors. From there, we will then be able to utilize the operating platform to transform and grow the business to be a leading natural sweetener company in North America."

Dundee Corporation has, indirectly through an affiliated entity ("Dundee"), purchased a $250,000 Unsecured Debenture and a $250,000 Secured Debenture and been issued 2,500,000 Warrants, and 500,000 Unsecured Warrants pursuant to the Secured Financing and the Unsecured Financing respectively (the "Dundee Participation"). Immediately prior to closing of the Unsecured Financing and the Secured Financing Dundee held 25,651,901 common shares of Xylitol, being approximately 27% of Xylitol's issued and outstanding common shares on a non-diluted basis. Following the Dundee Participation, Dundee has acquired convertible securities exercisable for an additional 8,000,000 common shares, bringing Dundee's percentage shareholdings of Xylitol to approximately 33.2% on an as-converted basis. The Dundee Participation was completed for investment purposes, and Dundee has a long-term view of their investment in Xylitol and may acquire additional securities either on the open market or through private acquisitions or sell the securities they hold either on the open market or through private dispositions in the future depending on market conditions, reformulation of plans and/or other relevant factors.

As noted above, Fountain purchased a $710,000 Secured Debenture and has been issued 7,100,000 Secured Warrants pursuant to the Secured Financing as well as 3,100,000 options pursuant to a fiscal advisory agreement (the "Fountain Participation"). Following the Fountain Participation, Fountain has acquired convertible securities exercisable for 17,300,000 common shares, bringing Fountain's percentage shareholdings of Xylitol to approximately 15.8% on an as-converted basis. The Fountain Participation was completed for investment purposes, and Fountain has a long-term view of their investment in Xylitol and may acquire additional securities either on the open market or through private acquisitions or sell the securities they hold either on the open market or through private dispositions in the future depending on market conditions, reformulation of plans and/or other relevant factors.

This press release is issued in accordance with National Instrument 62-103 - The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, which also requires a report to be filed with regulatory authorities in each of the jurisdictions in which Xylitol is a reporting issuer containing information with respect to the foregoing matters (the "Early Warning Report"). A copy of each of the aforementioned Early Warning Reports will appear with Xylitol's documents on the System for Electronic Document Analysis and Retrieval and may also be obtained by contacting Xylitol at the number noted below.

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.

About Fountain Asset Corp.

Fountain Asset Corp. is a merchant bank which provides equity financing, bridge loan services (asset back/collateralized financing) and strategic financial consulting services to companies across many industries such as oil & gas, mining, real estate, manufacturing, retail, financial services, technology and biotechnology.

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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