Xillix Technologies Corp.

Xillix Technologies Corp.

October 16, 2006 13:31 ET

Xillix Announces Receipt of Demand Letter From Secured Lender

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - Oct. 16, 2006) - Xillix Technologies Corp. (TSX:XLX) announced today that after the close of trading on Friday, October 13, 2006 it received a demand letter from Hercules Technology Growth Capital, Inc. ("Hercules") for the repayment of the term loan (the "Loan") advanced by Hercules to the Company's wholly-owned subsidiary, Xillix US Ltd. ("Xillix US"), pursuant to the loan agreement dated as of December 20, 2005 (the "Loan Agreement"), which Loan is guaranteed by the Company.

Hercules has alleged that Xillix is in default under the Loan Agreement and related security agreement by reason of the occurrence of material adverse effects consisting of the Company's failure to meet its internal forecasts of sales and EBITDA for August, 2006 and the fact that the Company's total assets to liabilities ratio in August was less than 1.0 to 1.0. Hercules has demanded repayment of the Loan in the amount of US$4,091,034, plus interest from October 1st at a daily rate of US$1,369.35 and a back end fee of $115,500, all by October 23, 2006.

The Loan was advanced by Hercules to Xillix US in December 2005, bears interest at the rate of 12.40% per annum, is repayable in equal blended monthly instalments of principal and interest in the amount of US$260,000 each, and is guaranteed by the Company and secured by a security interest in all of the Company's assets.

In August 2006, Xillix had a number of discussions with Hercules regarding the restructuring of the Loan, which on August 21, 2006 culminated in the execution of an amendment to the Loan Agreement (the "Amendment"), pursuant to which the Company agreed to amend certain of the terms of the Loan, including the amount of the monthly payments, and paid the sum of US$1 million to Hercules as a partial prepayment of principal. In exchange, Hercules agreed to waive certain claims which it otherwise may have had with respect to defaults under the Loan Agreement.

Since August 2006, the Company has continued to keep Hercules' apprised of developments in its business and has made all required payments and believes that it has complied with all of the covenants set out in the Loan Agreement.

In view of the foregoing, the Company is considering its response to Hercules' demand, and will take whatever steps are necessary to protect its intellectual property and other assets.

About Xillix

Xillix Technologies Corp. is a Canadian medical device company and the world leader in fluorescence endoscopy for improved cancer detection. Xillix's currently approved device, Onco-LIFE™, incorporates fluorescence and white-light endoscopy in a single device that has been developed for the detection and localization of lung and gastrointestinal (GI) cancers. An international multicenter lung cancer clinical trial of Onco-LIFE demonstrated a 325% per-lesion improvement in the detection of early lung cancer (moderate-severe dysplasia and carcinoma in situ) and a 250% per-patient improvement compared to white-light alone. Onco-LIFE is approved for sale in the United States for the lung application and in Europe, Canada and Australia for both lung and GI applications. The Company also recently announced that it has developed a new product, LIFE Luminus™, designed to allow fluorescence imaging of the colon using conventional video endoscope technology.

"Statements contained in this document which are not based on historical fact, including without limitation, statements containing the words "may", "will", "plans", "intends", "expects", "anticipates", "believes", "estimate", "continue" and similar expressions, constitute "forward-looking information" within the meaning of applicable Canadian securities laws. Forward-looking statements contained in this document may involve, but are not limited to, statements relating to the Company's objectives, priorities, strategies, actions, targets, expectations and outlook. Forward-looking statements are necessarily based upon assumptions and predictions with respect to the future, including but not limited to the factors referred to below. As a result, forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied thereby. These risks, uncertainties and other factors include, but are not limited to the factors referred to in the Company's Annual Information Form dated March 28, 2006 and its other filings with the applicable Canadian securities regulatory authorities. In light of these uncertainties, assumptions and risks, readers are cautioned not to place undue reliance on such forward-looking statements, and the Company assumes no obligation to update or revise such information to reflect later events or developments, except as required by law."

The Company is listed on the Toronto Stock Exchange under the trading symbol "XLX".

Contact Information

  • Xillix Technologies Corp.
    Sonja Rematore
    Investor Relations
    (604) 278-5000
    Xillix Technologies Corp.
    Brett Gannon
    President and Chief Executive Officer
    (604) 278-5000
    (604) 278-5111 (FAX)
    Email: ir@xillix.com
    Website: www.xillix.com