Dr. A.F. Zerrouk reports

CHINESE OEM SUCCESSFULLY ASSEMBLES FIRST POSITRON EMISSION TOMOGRAPHY MEDICAL SCANNER AND ORDERS LFS SCINTILLATION CRYSTALS FOR SECOND UNIT

The major medical original equipment manufacturer based in China, which selected Zecotek Photonics Inc.'s patented lutetium fine silicate (LFS) scintillation crystals for a new line of high-resolution positron emission tomography (PET) medical imaging devices, has assembled the first PET medical scanner for testing and has ordered Zecotek's patented LFS crystals for a second unit. As previously announced on March 23, 2016, Zecotek Imaging Systems signed a memorandum of understanding (MOU) with the medical OEM to purchase LFS scintillation crystals for a new line of medical scanners. The OEM is now projecting the installation of up to five LFS-based PET scanners by year-end, and 200 scanners over the next five years in hospitals and clinics across China. For competitive reasons, the OEM has requested to remain anonymous until the contract is in effect.

"We are working closely with the Chinese OEM, and the assembly of a PET medical scanner with our LFS crystals is a significant milestone," said Dr. A.F. Zerrouk, chairman, president and chief executive officer of Zecotek Photonics. "The initial test results of the assembled device are very positive, and the OEM has ordered more crystals for a second PET unit. OEM is working through various tests, and when complete, the installation of the first unit will be finalized. While we were expecting the installation of the first scanner in July, the second order of LFS crystals is a significant endorsement of our faster and brighter crystals. We now anticipate up to five LFS-based PET scanners to be installed by the end of December. We look forward to the installation of the first PET medical scanner in the very near future and completing the order of LFS crystals for the second PET medical scanner."

As one of the world's fastest-growing markets, China's medical scanning device industry represents a significant opportunity for the OEM and Zecotek. China has experienced rapid economic growth, a growing middle class and an aging population, which have placed pressure on the Chinese government to increase investment in medical diagnostic equipment. Each PET scanning device is made up of scintillation crystals, photo detectors and a read-out system, and costs approximately $1-million to manufacture. Scintillation crystals represent approximately 45 per cent of the total production cost of a PET medical scanner. It is anticipated that Zecotek's other key technologies, such as solid-state MAPD/T photo detectors and the associated electronics which make up the other 35 per cent of the cost of a PET scanner, will be ready for full production by end of third quarter 2016.

Zecotek's patented (U.S. patent No. 7,132,060) LFS series of scintillation crystals cover a wide range of emission wavelengths which can be tailored to match the spectral sensitivity of various photo detectors including Zecotek's own solid-state MAPD/T photo detector arrays. The solid-state MAPD/T photo detectors offer significant performance cost advantages over competing photomultiplier tubes (PMT) and other solid-state, silicon-based photo detectors. Its low manufacturing cost, excellent timing resolution and photon detection efficiency are key characteristics for the new configurations of high-resolution PET scanners.

The LFS scintillation crystals will be supplied by the Beijing Opto-Electronics Technology Company (BOET), a subsidiary of North-China Research Institute of Electronics-Optics, an industry leader in growing, cutting, polishing and large-scale production of scintillation crystals grown by the Czochralski method. Zecotek's manufacturing process permits the growth of very large-diameter boules with uniform properties and without cracking (a problem with many competing scintillation materials), resulting in high element output and lower unit costs.

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