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Xylitol Canada Inc. Reports 67% Six Month Revenue Growth Over Prior Year and Strategic Realignment

August 12, 2014

TORONTO, ONTARIO--(Marketwired - Aug. 12, 2014) - Xylitol Canada Inc. (TSX VENTURE:XYL) reported revenues for its second quarter ended June 30, 2014 of approximately $2.0 Million, representing an increase of 43% over the same period from the preceding year. Gross margin performance for the quarter ended June 30, 2014 was 15.2%, compared to 32.0% for the same period of the preceding year. Several factors influenced the recent decline in gross margins, including an increased mix of lower margined sales, the addition of new bulk customers, and currency exchange rates. Operating results for the second quarter 2014 include a provision for restructuring expenses of approximately $200,000 related to asset write-downs, staff and contract termination costs, and other related expenses. Going forward, the Company will be working to improve gross margin levels to normalized industry standard by focusing on continued sales growth and continuing to implement measures that improve supply chain efficiencies.

For the six months ended June 30, 2014, the Company reported a 67% revenue increase over the prior year to $4,137,652, reflecting new customer wins as well as increased demand from existing bulk customers.

Three months ended June 30, 2014 2013 ---------------------------------------------------------------------------- Revenue $ 1,967,028$ 1,373,981 Gross profit $ 299,892$ 440,208 Net loss $ (846,330)$ (217,832) Loss per share $ (0.010) $ (0.003) Six months ended June 30, 2014 2013 ---------------------------------------------------------------------------- Revenue $ 4,137,652$ 2,476,984 Gross profit $ 798,557$ 813,887 Net loss $ (1,423,152)$ (697,453) Loss per share $ (0.018) $ (0.010)



During the second quarter, the Company conducted a strategic analysis with the goal of reducing duplicate overhead and increasing gross margins, shifted all its product distribution activities to its subsidiary based in Denver, Colorado, engaged a new Chief Financial Officer and established a separate business unit based in Toronto and focussed on the construction of a commercial scale xyltol plant.

"We believe that our strong and continuing revenue growth confirms that Xylitol is capitalizing on its opportunities," stated Andrew Reid, President and CEO of Xylitol. "We are seeing benefits from the re-structuring measures implemented to date and are confident that the various strategic realignment initiatives our team has identified will strengthen the Company's profitability and long-term competitive position," Mr. Reid added.

The full text of the Company's interim consolidated financial statements and related management's discussion and analysis can be found at: www.sedar.com.

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 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. Xylitol Canada supplies its catalog of natural and organic products to retailers throughout North America, including some of the largest chains in Natural, Conventional Grocery, And Club channels. For further information about the Company, please contact 1-866-995-9952, or by email at IR@xylitolusa.com.

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.

Forward Looking Statements:

This press release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future anticipated results, performance or achievements expressed or implied by the forward- looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: general economic conditions; viability of the business model and stability of costs; sufficient working capital for development and operations; access to adequate services and supplies; availability of markets for products; commodity prices; foreign currency exchange rates; interest rates; access to capital markets and other sources of financing and associated cost of funds; availability of a qualified work force; availability of manufacturing equipmeny; and no material changes to the tax regime. While the Company anticipates that subsequent events and developments may cause its views to change, the Company specifically disclaim any obligation to update these forward- looking statements. These forward-looking statements should not be relied upon as representing the

Company's views as of any date subsequent to the date of this press release. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the Company. Additional factors are noted under "Risk Factors" in the Company's financial statements and related management's discussion and analysis.

FOR FURTHER INFORMATION PLEASE CONTACT: Xylitol Canada Inc. 1-866-995-9952 IR@xylitolusa.com Source: Xylitol Canada Inc.


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