Burnaby, B.C., June 27, 2016 – Photon Control Inc. (“Photon Control” or the “Company”) (TSX-V: PHO), a leading developer of optical measurement technologies, announces that the Board of Directors (“the Board”) has become aware that on June 3, 2016, Christopher Weston, President and CEO, and Gerald Adams, CFO, made a $4.5 million transfer (“the Transfer”) of Company funds to Photon Control R&D Ltd., a private company in which David Dueck, Chairman of the Company, is a significant shareholder.

The Transfer was intended by Mr. Weston as an investment opportunity involving Photon Control R&D Ltd., an entity with which the Company already had business dealings, and whereby the Company would receive interest payments over a 60- day loan term. However, the Transfer was made without the required approval by the Board of Directors of the Company, including approval of the customary documentation.

On June 14, 2016, Mr. Weston notified the Board of the Transfer. A committee of independent directors (the “Independent Committee”) was immediately constituted to engage independent legal counsel, investigate the Transfer, and make recommendations to the Board. Through the course of multiple meetings and interviews, the Independent Committee became aware that the funds transferred to Photon Control R&D Ltd. were subsequently loaned to another company controlled by David Dueck for business purposes unrelated to Photon Control R&D Ltd. The Independent Committee and Board have confirmed non-approval of the Transfer and have requested immediate repayment of the unauthorized Transfer. They have been advised that the funds will be returned as soon as possible, failing which the Independent Committee and Board have resolved to take all such action as required to ensure the return of the funds.

Following recommendations from the Independent Committee, a special Board meeting was held on June 26, 2016, and the following was approved:

  • David Dueck, who has served as Chairman of the Board of Photon Control since June 2008, has stepped down as Chairman with immediate effect. He continues to serve as a director of Photon Control.
  • Christopher Weston, who has served as a director of Photon Control since March 2009 and President since October 2009, has stepped down as President and CEO and has resigned from the Board of Photon Control. The Company and Mr. Weston will undertake to create a new management role for Mr. Weston with a mandate to support and reinforce the ongoing success of Photon Control.
  • Michael Goldstein, Deputy Chairman of the Board, has been appointed Chairman and Acting CEO. Mr. Goldstein will undertake to reinforce the ongoing integrity, controls and actions necessary to assure the continued growth and success of Photon Control. Mr. Goldstein is a veteran CEO with more than 25 years of experience driving growth for both publicly traded and private companies in semiconductor equipment, medical, resources, energy and the industrial sectors.
  • The Company is also implementing additional measures to reinforce its processes, including additional controls on material transactions, additional training on corporate governance, an independent internal audit of non-arms’ length interactions, and the addition of more independent directors.

“This has been a regrettable financial decision and a clear breach of governance procedures,” said Michael Goldstein, Chairman and Acting CEO and a member of the Independent Committee. “We are making the appropriate moves now to reinforce the Company’s governance controls. The Board is committed to taking every possible action to recover the Company funds as soon as possible. I am confident that this will have no impact on operations because our Company is strong and well positioned to build on our track record of innovation and profitability. I would like to thank Christopher Weston for his significant contribution to the success of the Company and for his continued commitment to the Company’s future growth. We will keep shareholders updated with further announcements as needed.”

Conference Call

Photon Control will hold a conference call to discuss this announcement and provide an update on its outlook today, June 27 at 11:00 a.m. Eastern/8:00 a.m. Pacific. Michael Goldstein, Chairman and Acting CEO, and Christopher Weston, will co-chair the call. The Company will refer to an updated investor presentation that will be available from the Company’s website.

All interested parties can join the conference call by dialing 1-888-231-8191. Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until Monday, July 4, 2016 at midnight. To access the archived conference call, please dial 1-855-859-2056 and enter the encore code 41725576.

About Photon Control Inc.

Photon Control Inc. designs, manufactures and distributes a wide range of optical sensors & instruments to measure temperature, pressure, position, and flow. These products are used by original equipment manufacturers (OEM) as well as end-users in the Semiconductor, Oil and Gas, Power, Life Science, and Manufacturing industries. Photon Control’s products provide high accuracy and reliability in extreme conditions and are supported by a team of experts that offer onsite installation, training, and support. Photon Control Inc. also provides engineering services for customized optical measurement systems. Headquartered in an ISO 9001:2008 manufacturing facility in Burnaby, BC, Photon Control Inc. is listed on the TSX Venture Exchange, trading under the symbol ‘’PHO”. Additional information about the company can be found at www.photon-control.com/investorrelations.html

Forward-Looking Statements

This News Release contains “forward-looking statements” within the meaning of applicable Canadian securities legislation. Such forward-looking statements concern the business and anticipated financial performance of the Company and include, without limitation, statements with respect to the Transfer to Photon Control R&D Ltd., the timing and likelihood of the return of the funds transferred, including, but not limited to, action taken by the Company to recover the funds, further investigations and conclusions of the Independent Committee; additional controls and measures to be taken by the Company, the Company’s objectives, goals, liquidity, sources of capital, expectations of sales and continued development of technologies and products.

These forward-looking statements are based on certain factors and assumptions, including, without limitation, the Company’s ability to recover the funds transferred, the Company’s ability to successfully operate with the management and board transitions, the Company’s ability to successfully complete new purchase orders along the timelines expected; continued and future demand for the Company’s products; continued sales to the Company’s major customers; the continued financial health of the semiconductor industry; and the Company’s ability to continue and further enhance revenue diversification and open new market opportunities.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation, the Company may not be able to recover the funds transferred in a timely manner or at all; the Company may be involved in legal action as a result of the Transfer; additional measures and controls may not be implemented as expected or along the timelines anticipated; uncertainties in the availability and cost of financing for the Company to enable the Company to achieve its goals; uncertainties relating to the market for the Company’s products and maintaining a stable level of orders; fluctuations in revenue as a result of volatility in the markets and product mix; risks relating to the Company’s present reliance on four major customers for the majority of its sales; risks relating to the Company’s reliance on the financial health of the semiconductor industry; risks relating to the development of competing technologies and the possibility of increased competition; the effect of slow growth in the United States, the Company’s principal market, as well as in Canada and other economies generally and other economic trends and conditions in the markets that the Company and its customers serve; risks associated with technical difficulties or delays in product introductions, improvements, implementation; uncertainties in product pricing or other initiatives of the Company and its competitors; uncertainties in factors that may result in a reduction in capital expenditures and/or delayed buying decisions affecting demand for the Company’s products; risks relating to currency fluctuations, particularly between the Canadian and United States dollars; and risks in pursuing additional development projects to support existing customers or pursue other business opportunities.

The foregoing assumptions, risks and uncertainties are not exhaustive of the items that may affect our forward-looking statements. Should underlying assumptions prove to be incorrect or one or more of these risks and uncertainties materialize, actual results may vary materially from those described in the forward-looking statements. The Company’s forward-looking statements are based on beliefs, expectations and opinions of management on the date the statements are made. For the reasons set forth above, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements included herein if these beliefs, estimates and opinions or other circumstances should change, except as otherwise required by applicable law.

For Investor Relations Inquiries Please Contact:
Helena Rebec, CPIR
Chief Administrative Officer / IR
604.422.8861 Ext 101

Neither TSX Venture Exchange 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.

News Release 7-16