Dr. Suresh Venkatesan reports

POET TECHNOLOGIES REPORTS SECOND QUARTER 2017 FINANCIAL RESULTS

Poet Technologies Inc. has released its unaudited condensed consolidated financial results for the second quarter ended June 30, 2017. The company's unaudited condensed consolidated financial statements as well as the management discussion and analysis for Q2 2017 have been filed on SEDAR. All figures are in U.S. dollars.

Second quarter and recent highlights:

• Revenue was $648,382;
• Product revenue, which excludes non-recurring engineering (NRE) revenue, increased 39 per cent year over year;
• Gross profit was $327,525, or 50.5 per cent of sales, compared with 51.4 per cent in the second quarter of 2016, after taking into account a reclassification of certain costs from cost of sales to operating expenses;
• Ended the quarter with cash and short-term investments of $9.8-million;
• Held 2017 AGM in July, where all proposals were approved:
  • Delivered detailed presentation and business update covering strategy, technology and products;
  • Highlighted strategy to address rapidly growing InP (indium phosphide) market;
  • Announced industry-leading performance of new narrow line width laser products;
• Sponsored and previewed new products at Conference on Lasers and Electro-Optics (CLEO-Pacific Rim) in Singapore, with a formal product announcement planned in conjunction with the world's largest optoelectronic expo in Shenzhen, China (CIOE).

Revenue in the second quarter of 2017 was $648,382, compared with $712,550 in the first quarter of 2017 and $576,741 in the second quarter of 2016. Revenue primarily reflects the sale of DenseLight photonic sensors for test and measurement applications. Gross margin remained strong year over year at 50.5 per cent during the second quarter of 2017, compared with 59.6 per cent in the first quarter of 2017 and 51.4 per cent in the second quarter of 2016. In the second quarter of 2017, management performed a detailed review of the company's cost structure and determined that certain product costs historically included in cost of sales should be more appropriately categorized in selling, marketing and administration expenses. As a result, gross margin for comparative periods has been adjusted to reflect this determination. Second quarter 2017 net loss was $2.8-million, or one cent per share, compared with a loss of $3.5-million, or one cent per share, in the first quarter of 2017, and a loss of $3.4-million, or two cents per share, in the second quarter of 2016. The second quarter 2017 loss included non-cash stock-based compensation of $159,783 and depreciation and amortization of $558,919. Non-cash stock-based compensation and depreciation and amortization in the first quarter of 2017 were $894,813 and $540,393, respectively, and $887,990 and $239,958 in the first quarter of 2016.

Management comments

Dr. Suresh Venkatesan, chief executive officer, commented: "Our second quarter results reflect a year-over-year increase in product revenue attributable to our continued shipment of DenseLight photonic sensors, primarily for test and measurement applications. Gross margin was over 50 per cent in the quarter, and we continued to diligently manage operating expenses. Our collective reductions in wages, professional fees, as well as management and consulting fees resulted in a meaningful year-over-year improvement in net loss during the second quarter.

"As outlined at the 2017 annual general meeting (AGM) in July, we are focusing our design and engineering resources on further development of our indium phosphide-(InP)-based hybrid dielectric photonics platform to introduce disruptive new solutions with lower cost and higher performance. Also, as discussed at the AGM, we are focused on securing a strategic partner to assist with further developing and commercializing our monolithic gallium arsenide (GaAs) optical engine. InP-based solutions for 100G applications have emerged as one of the largest and fastest-growing segments in the data communications market. We believe our recently introduced hybrid dielectric photonics platform based on InP, which leverages a combination of Poet's integrated photonics expertise and proprietary dielectric waveguide technology, provides a compelling and differentiated solution in the multibillion-dollar transceiver market. Reinforcing our strategic decision to focus on an InP-based hybrid platform is the ability to leverage the company's established InP fabrication and manufacturing facility in Singapore, which provides a number of operational and economic benefits.

"As we make progress toward developing a transceiver optical engine, we also expect to introduce photonic transceiver components for the data communications market. As an example, we recently introduced multiplexing and demultiplexing devices that are based on our proprietary dielectric waveguide technology. We also expect to introduce distributed feedback (DFB) lasers with wavelengths spanning the O-band and C-band, with delivery of engineering samples to customers expected during the third quarter. Additionally, we are making solid progress on incorporating our hybrid integrated photonics packaging (HiPP) into new high performance packaged solutions, such as narrow line width lasers, that will expand DenseLight's existing line of sensor products beginning in 2018.

"In conclusion, our fundamental vision continues to be enabling disruptive solutions by leveraging innovative photonics integration to lower cost and increase performance for the data communications and sensing markets. Poet's strategic direction fully capitalizes on our core competencies and assets, and is also well aligned with the trends and substantial growth opportunities within our targeted end-markets, which is critical to realizing the highest return on investment for Poet's shareholders."

Grant of options

The company has also granted the previously approved incentive stock options under the company's stock option plan to Kevin Barnes. The grant consists of the right to purchase up to an aggregate of 150,000 common shares and a four-year vesting schedule beginning on July 13, 2018. The options are exercisable at 28 cents per share. The options were granted subject to provisions of the company's stock option plan and are subject to TSX Venture Exchange policies and applicable securities laws.

We seek Safe Harbor.