Xylitol Canada Inc.
TSX VENTURE : XYL

November 30, 2010 16:58 ET

Xylitol Canada Provides Corporate Update Following Release of Third-Quarter ("Q3") Financial Results

Integration of Emerald Forest Performing on Schedule and Company Advancing Strategy to Become Leading Producer of High-Quality, Low Cost Xylitol

TORONTO, ONTARIO--(Marketwire - Nov. 30, 2010) - Xylitol Canada Inc. ("Xylitol Canada", or the "Company") (TSX VENTURE:XYL) has released its financial results for the quarter ended September 30, 2010. Copies of the unaudited statements, notes and related MD&A may be found at www.sedar.com.

Third Quarter Results: overview and strategic impact

The company completed the acquisition of certain assets and trademarks of Emerald Forest Sugar Inc., a Denver, Colorado-based producer and marketer of xylitol and xylitol-based products ("Emerald Forest") on September 29, 2010. As a result, there was limited impact from this acquisition in the Q3 results and the sales reflected are primarily those of the Canadian xylitol business (formerly "Sweet Diabetic") that was the subject of the Company's qualifying transaction. With the acquisition of Emerald Forest, the Company advances its efforts to become a significant manufacturer of low-cost, high quality xylitol, by developing additional high-value distribution channels for an increasing range of finished xylitol products.

"Our manufacturing strategy is on track and we expect to complete the timeline, cost and pathway to commercial production of bulk xylitol during the first quarter of 2011", stated Andrew Reid, Xylitol's CEO. "We are continuing to work diligently with MASCOMA Corporation and others to determine the most cost-effective means of exploiting our proprietary technology for the reliable production of low-cost, high quality xylitol from readily available cellulose or biomass. In the interim, we are building a profitable distribution business that is providing revenue today and will provide a ready and growing demand for our bulk xylitol once our manufacturing lines comes on stream", added Reid.

Operations and integration of Emerald Forest continue on schedule with the installation of new accounting and inventory systems which provide greatly improved visibility through the order chain and enhanced fulfillment capabilities. Operations at Emerald's Colorado facility have also been enhanced with the retention of new finance and operations personnel reporting directly to Xylitol Canada, allowing the existing local personnel to focus exclusively on the sales necessary to achieve the Company's growth targets. 

Revenue

Revenue for the third quarter increased by $21,796 or 104.3% to $42,690 compared to $20,894 for the third quarter of 2009. The increase in revenue is due an increase in sales volume to retail, wholesale and to direct customers in the markets served, primarily by the Company's Canadian operations. The Company expects these numbers to grow significantly as the impact of the Emerald Forest acquisition is properly reflected in Revenue.

Gross Profit

Gross profit margin for the third quarter increased to 76% compared to 67% from the third quarter of 2009. Gross profit margin for the nine months ended September 30, 2010 increased to 51% compared to 48% for the same period ended September 30, 2009. The increase is due to the volatility in the cost of xylitol given that there is not currently a stable, high quality producer available to meet the growing demands of the market. As noted above, once the Company establishes its own production facilities, it expects gross (and overall) margin to greatly increase and stabilize as it gains access to its own bulk xylitol. 

Overall, the Company lost a total of $252,606 or $0.00 per diluted share in Q3 and at September 30, 2010 the company had cash of $3.89 million available to fund its business plan. 

On November 24, 2010, the Board of Directors appointed Mr. Jonathan D.M. Wolch as Corporate Secretary. In conjunction with this appointment, Mr. Wolch will receive 300,000 options that vest over a two year period and have an exercise price of $0.20, being the closing price of the Company's shares on the TSX-V on the day prior to the date hereof. Mr. Wolch also serves as a strategic advisor to the Company.

About Xylitol Canada Inc.

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 an all-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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