Dr. Suresh Venkatesan reports

POET TECHNOLOGIES REPORTS FULL YEAR 2017 FINANCIAL RESULTS

Poet Technologies Inc. has released its audited condensed consolidated financial results for the full year ended Dec. 31, 2017. The company's financial results as well as the management discussion and analysis have been filed on SEDAR.

2017 and recent highlights:

• Revenue increased 50 per cent year over year to $2.79-million (U.S.) and gross margin expanded to 52 per cent;
• Introduced new datacom and sensing products, including distributed feedback (DFB) lasers for the datacom market and a new family of narrow linewidth (NLW) lasers for the distributed acoustic sensing (DAS) market;
• Granted six patents and submitted another six new applications in 2017, bringing the total granted to 57 and the number of pending patent applications to 12;
• Appointed three highly experienced members to the board of directors within the last seven months: Jean-Louis Malinge, Don Listwin and Peter Charbonneau;
• Announced the Optical Interposer platform, which leverages Poet's dielectric waveguide technology to facilitate the co-packaging of electronics and optics in a single multichip module;
• Successfully demonstrated a high-frequency waveguide integrated PIN Photodiode targeting 100G and 400G optical transceivers for data centre applications;
• Signed a memorandum of understanding with Accelink for the co-development, qualification and sales of a family of transceiver products based on Poet's Optical Interposer platform;
• Completed a successful bought deal public offering in March, 2018, resulting in gross proceeds of approximately $10.8-million (U.S.) ($13.8-million);
• Entered into a master collaboration agreement with SilTerra, a Malaysia-based semiconductor wafer foundry, for the co-development of certain fabrication processes and the manufacturing of Poet's Optical Interposer platform.

Financial summary

Revenue for full-year 2017 increased to $2.79-million (U.S.), reflecting higher sales of photonic sensors for test and measurement applications. This compared with revenue of $1.86-million (U.S.) in calendar year 2016, which represented approximately seven months of revenue contribution from Poet's DenseLight subsidiary that the company acquired in May, 2016. Gross margin for full-year 2017 was 52 per cent, compared with 49 per cent in 2016. Net loss before taxes in 2017 was $13.1-million (U.S.), or five cents per share, compared with a net loss before taxes of $13.4-million (U.S.), or six cents per share, in 2016. The net loss in 2017 included non-cash stock-based compensation of $3.2-million (U.S.) and depreciation and amortization of $2.3-million (U.S.). In 2016, non-cash stock-based compensation and depreciation and amortization were $4.1-million (U.S.) and $1.5-million (U.S.), respectively. Capital investment in plant, equipment and patents decreased to $1-million (U.S.) in 2017 compared with $1.3-million (U.S.) in 2016.

Business and technology update

During 2017, the company began focusing its resources on the development of photonic solutions using a hybrid integration approach, which combines its indium-phosphide-based photonics chips and its dielectric-based waveguide devices into a single package. The company's approach to hybrid integration utilizing the Optical Interposer platform was borne by the unique capabilities acquired through its acquisitions of DenseLight Semiconductor and BB Photonics in 2016. This new approach targeted the same objective, namely the replacement of discrete high-cost passive optical components with lower-cost embedded devices and proven wafer-level semiconductor process and assembly technologies. Using embedded dielectric passive devices and advanced packaging techniques, Poet could lower the cost of data communications transceiver solutions for data centre operators and telecom applications. By late 2017, the company had successfully validated the potential to dramatically reduce the cost of conventional transceivers through the wafer-scale integration of photonics devices and passive waveguides into a single package, leading to the announcement of Poet's Optical Interposer platform in January, 2018.

Management comments

Dr. Suresh Venkatesan, chief executive officer of Poet, commented: "During 2017, we made significant progress across several areas of the business. From a financial perspective, we increased revenue 50 per cent year over year with the increased shipments of light sources for sensing applications. Additionally, we recorded approximately $1.7-million in credits from the Singapore Economic Development Board (EDB) in support of our ongoing research and development efforts at our DenseLight facility.

"From a technology perspective, we achieved a real breakthrough in designing and demonstrating key elements of the Poet Optical Interposer. It is a true platform technology that is readily scalable for applications in data communication transceivers that undergo rapid evolutions in standards and generations. It is also flexible enough to address critical applications in other markets such as automotive lidar [light detection and ranging] and high performance computing. Placing photonic components in close proximity to data generators like ASICs [application-specific integrated circuits] and microprocessors has been an industry objective for decades. Among the many difficult challenges, thermal management and reliability are ones that the Optical Interposer platform can potentially address.

"While using the Poet Optical Interposer platform for photonics assembly provides thermal management and reliability advantages, its primary advantage is cost, which is the basis for competition in a standards-driven industry. We achieve low cost by employing proven semiconductor known-good-die assembly, testing and packaging techniques to the optical components of the transceiver. Our architecture is unique, allowing us to both manufacture the passive interposer assembly platform at low cost in a factory that is compatible with mainstream silicon semiconductor fabrication and to place active devices on this platform without requiring complex alignment and expensive micro-optical components. Further, our waveguides embedded in the interposer function as multiplexers/demultiplexers, spot-size converters and guides and are independent of the active devices that determine the speed of the device. The waveguides for a 100G optical engine are the same low cost as those for a 400G optical engine. Furthermore, there is little incremental cost in adding additional communication channels to the platform. This is one example of the scalability of the Poet Optical Interposer.

"Most recently, we've taken additional meaningful steps toward commercializing Poet's interposer technology, including our announced master collaboration agreement with SilTerra for the co-development of the waveguide manufacturing process flow, consignment of equipment and entry into a wafer purchase agreement. We did this in order to establish a reliable and consistent manufacturing resource for the supply of wafers incorporating the Optical Interposer devices. We also entered into a memorandum of understanding with Accelink Technologies to become preferred co-development partners on the collaborative development, qualification and sales of a family of advanced multichannel (100G/400G) transmit and receive devices based on Poet's Optical Interposer platform. These strategic engagements with a leading foundry and global supplier of transceivers represent significant milestones in the commercialization process as they each position the company to engage more credibly in discussions with additional prospective customers.

"We continue to be on schedule to deliver receive optical engine prototypes to Accelink this summer, with our main challenges to that schedule being the logistics of installing and bringing up new tools and processes at eight-inch wafer foundry. We are very pleased with the co-operation and support that we are receiving from SilTerra and our equipment vendors. Beyond the short-term goal of prototypes for receive optical engines, we are working on the more complex transmit side of the transceiver and look forward to some announcements on that front later in the year. We see a very significant opportunity in the Optical Interposer platform applied to a number of application areas and vertical markets."

About Poet Technologies Inc.

Poet Technologies is a developer and manufacturer of optical light source products for the sensing and data communications markets. Poet is headquartered in Toronto, with operations in Silicon Valley, the United Kingdom and Singapore.

We seek Safe Harbor.