Dr. Suresh Venkatesan reports

POET TECHNOLOGIES REPORTS SECOND QUARTER 2022 FINANCIAL RESULTS

Poet Technologies Inc. has released its unaudited condensed consolidated financial results for the second quarter ended June 30, 2022. The company's financial results, as well as the management's discussion and analysis, have been filed on SEDAR. All financial figures are in U.S. dollars unless otherwise indicated.

Recent business highlights

The company achieved the following significant milestones during the three months ended June 30, 2022:

• Announced the availability of its 400G FR4 and 800G (two times 400G FR4) Receive (RX) optical engines and the sampling of its 200G FR4 Transmit (TX) and Receive (RX) optical engines through Super Photonics Xiamen (SPX), the company's joint venture in China;
• SPX added two new customer engagements in China with module companies designing their transceivers to use the company's 100G, 200G and 400G optical engines, bringing the total number of active customer engagements for both SPX and Poet to 10;
• Appointed Theresa Lan Ende, chief procurement director of Arista Networks, and Michal Lipson, PhD, professor of physics at Columbia University, and pioneer and thought leader in silicon photonics, as advisers to the company's board of directors. The company intends to nominate both as directors at its annual general meeting, currently scheduled for Oct. 14, 2022;
• Joined the Singapore Hybrid-Integrated Next Generation micro-Electronics (SHINE) Centre, located in the College of Design and Engineering at the National University of Singapore (NUS). Its participation as a founding member gives the company access to a variety of advanced packaging tools and engineers, as well as opportunities to showcase its technology and collaborate with a global industrial and academic network of companies and universities;
• Presented "A Wafer Scale Hybrid Integration Platform for Co-packaged Photonics using a CMOS based Optical Interposer" at the 2022 IEEE Symposium on VLSI Technology & Circuits in Hawaii. The acceptance of this paper through a peer review process is a recognition of the novelty and importance of Poet's technology to hybrid integration in both optics and microelectronics;
• Presented at the PIC International Conference in Brussels, Belgium, as a sponsor, lecturer and panel participant in which the company demonstrated that its Optical Interposer platform is available both as a solution to a variety of optical, mechanical, electrical, thermal and packaging challenges in hybrid opto-electronic integration, and as a means to integrate newly developed components from a variety of innovative companies into real-world applications;
• Participated in several investor conferences and one-on-one meetings with institutional and retail investors, including: the Global Chinese Financial Forum; the Sidoti Micro-Cap Conference; the Oppenheimer 7th Annual Emerging Growth Conference; the 19th Annual Craig-Hallum Institutional Investor Conference; and the MoneyShow Virtual Expo. Combined, the conferences during the quarter reached dozens of institutional investors and thousands of retail investors in the United States and abroad.

The company has identified two key milestone objectives for the balance of 2022: (a) the development of a 400G FR4 multiplexed TX engine that will be combined with the existing 400G RX to create a full transmit and receive subassembly for a 400G transceiver module; and (b) the delivery of samples of a packaged light source assembly for Celestial AI, a lead customer in the emerging growth market for artificial intelligence-machine learning (AI-ML) accelerator chips. The 400G FR4 TX and RX optical engines are the building blocks for an 800G FR4 optical engine that Poet intends to introduce to the market in time to capture a major inflection point identified in the April, 2022, LightCounting forecast report, in which deployment of 800G (two times 400G) and 1.6T transceiver modules are expected to grow from about two million units in 2024 to 14 million units by 2027, a compounded annual growth rate of nearly 80 per cent. For packaged light sources, the ultimate market potential is larger, with estimates of the total market size being approximately $125-billion by 2027, which the company estimates will offer a serviceable market opportunity of over $4-billion by 2027.

In support of the strategy to develop transceiver modules, the company has also modified the Optical Interposer platform so that it can more readily accept lasers from leading global suppliers and included the capability to assemble the necessary electronic components directly onto the platform. Poet has developed and will sample later this year a 400G RX with an integrated transimpedance amplifier (TIA) and a 200G FR4 TX with an integrated laser driver. This integration of additional electronics components has demonstrated a further increase in performance of the optical engines and simplified module board design for customers.

Management comments

"Following the live demonstration of our 200G FR4 multiplexed TX and RX optical engines and our groundbreaking live demonstration of our 400G/800G FR4 multiplexed RX engine at the Optical Fiber Conference in March, we received multiple requests for technical data, samples and meetings with interested customers and business partners. We are executing well towards our dual strategy to make available integrated optical engines for 100/200G to promote market traction and acceptance, while simultaneously delivering more differentiated solutions at 400/800G and beyond. There is a strong desire among module companies to embrace our approach as we qualify our solutions and demonstrate the required levels of reliability and manufacturability by releasing our solutions to production. We have already begun the process of validating performance, reliability and manufacturability with select customers who are designing modules with our 100G and 200G optical engines," said Dr. Suresh Venkatesan, chairman and chief executive officer.

"Even though the vast majority of 100/200/400G optical transceivers sold today are built using discrete subassemblies, the discussions during the recent PIC conference strongly indicate that the industry is rapidly approaching a period in which hybrid integration will be recognized as one of the few paths to meeting the scale, size and energy performance requirements of the industry. As the number of channels increase from four to eight to 16 (in going from 400G to 1.6T), the balance between conventional assembly and integrated assembly transitions quickly in favour of chip-scale integration and wafer-level processing, both fundamental tenants of the Poet approach. It is widely acknowledged that a small form factor two times 400G multiplexed FR4 integrated solution is needed at 800G and absolutely required at 1.6T and we believe that Poet is in a pole position to deliver it.

"Further, we believe the Optical Interposer platform is among a few, if not the only, packaging technology that can provide the scale, size, power and cost requirements needed for opto-electronic applications outside of datacom and telecom, including optical computing, AR/VR, wearables, lidar and other more consumer-oriented products, that will require vastly larger numbers of devices to be produced annually at lower cost and higher performance."

Non-IFRS (international financial reporting standards) financial summary

The company reported non-recurring engineering revenue (NRE) of $120,000 in the second quarter of 2022, compared with $209,000 for the same period in 2021 and nil in the first quarter of 2022. The company provided services under an NRE contract to one customer in 2021. In 2022, the company is now providing similar services to multiple customers, one of which continued to contract services from last year. The revenue relates to unique projects that are being addressed utilizing the capabilities of the Poet Optical Interposer.

The company reported a net loss of $5.3-million or 14 cents per share in the second quarter of 2022, compared with a net loss $4.4-million or 13 cents per share for the same period in 2021, and a net loss of $5.4-million or 15 cents per share in the first quarter of 2022. The net loss in the second quarter of 2022 included research and development costs of $1.8-million, compared with $1.8-million for the same period in 2021 and $2.2-million in the first quarter of 2022. Fluctuations in research and development (R&D) for a company of this size and this stage of growth are expected on a period-over-period basis as the company transitions from technology development to product development.

Non-cash expenses in the second quarter of 2022 included stock-based compensation of $1.0-million and depreciation and amortization of $300,000. Non-cash stock-based compensation and depreciation and amortization in the same period of 2021 were $1.2-million and $300,000, respectively. First quarter 2022 stock-based compensation and depreciation and amortization were $1.0-million and $300,000, respectively. The company had finance costs of $13,000 in the second quarter of 2022, compared with $95,000 in the second quarter of 2021 and $14,000 in the first quarter of 2022. All of the finance costs recognized in the second quarter of 2022 were non-cash, compared with $49,000 during the same period in 2021. The finance costs in the first quarter of 2022 were also non-cash. The company recognized other income, including interest of $40,000 in the second quarter of 2022, compared with $20,000 in the same period in 2021 and $22,000 in the first quarter of 2022.

Non-cash impact of joint venture in the second quarter of 2022 was negative $700,000, compared with nil in the same period of 2021 and negative $400,000 in the first quarter of 2022. The company's share of loss is approximately 88.5 per cent of the loss of Super Photonics, the company's joint venture with Sanan. The company's current share of the operating loss is a result of the high value of the company's initial contribution.

Cash flow from operating activities in the second quarter of 2022 was negative $3.3-million, compared with negative $2.7-million in the second quarter of 2021 and negative $3.7-million in the first quarter of 2022.

About Poet Technologies Inc.

Poet is a design and development company offering integration solutions based on the Poet Optical Interposer, a novel platform that allows the seamless integration of electronic and photonic devices into a single multichip module using advanced wafer-level semi-conductor manufacturing techniques and packaging methods. Poet's Optical Interposer eliminates costly components and labour-intensive assembly, alignment, burn-in and testing methods employed in conventional photonics. The cost-efficient integration scheme and scalability of the Poet Optical Interposer brings value to any device or system that integrates electronics and photonics, including some of the highest-growth areas of computing, such as artificial intelligence (AI), the Internet of things (IoT), autonomous vehicles, and high-speed networking for cloud service providers and data centres. Poet is headquartered in Toronto, with operations in Allentown, Pa., Shenzhen, China, and Singapore.

We seek Safe Harbor.