Dr. Suresh Venkatesan reports

POET TECHNOLOGIES REPORTS SECOND QUARTER 2023 FINANCIAL RESULTS

Poet Technologies Inc. has released its consolidated financial results for the second quarter ended June 30, 2023. The company's financial results as well as the accompanying management discussion and analysis have been filed on SEDAR and EDGAR. All financial figures are in United States dollars unless otherwise indicated.

Business highlights since first quarter results reported on May 15, 2023:

• On June 14, 2023, the company announced alpha sample readiness of Poet Infinity, a chiplet-based transmitter platform for 400G, 800G and 1.6T pluggable transceivers and co-packaged optics solutions. Two lead customers have partnered with Poet to test the alpha version of the Infinity chiplet.
• On June 29, 2023, the company announced that it had established an at-the-market (ATM) offering program in Canada and the United States with Craig-Hallum Capital Group LLC and Cormark Securities Inc. The ATM program allowed the company to issue and sell, at its sole discretion, common shares of the company not to exceed, in aggregate, $30-million (U.S.), through the facilities of the TSX Venture Exchange and Nasdaq Capital Market. For further details concerning the ATM program, refer to the company's news release dated June 29, 2023. The company suspended the ATM program on Aug. 5, 2023, due to the expiry of the company's Canadian short form base shelf prospectus and Securities and Exchange Commission F-10 registration statement on Aug. 5, 2023.
• On June 30, 2023, the company held its annual general and special meeting of shareholders (AGM). All resolutions recommended by management and voted on by shareholders were passed by substantial positive margins, including the election of directors who will serve a term until the next AGM.
• On Aug. 9, 2023, the company filed a shelf registration statement on the Form F-3 with the United States Securities and Exchange Commission (SEC). The Form F-3 is intended to allow the company the flexibility to raise additional capital through the sale and issuance of securities outside of Canada. The filing is subject to review and approval by the SEC. Once effective, the Form F-3 may be used, among other things, to support the resumption of the sale of securities through the Nasdaq Capital Market under a newly established ATM.

Management comment

Chairman and chief executive officer Dr. Suresh Venkatesan commented: "We continue to execute on our road map, while also accelerating certain aspects of it through increased customer engagements. The company now has five product lines that we are actively sampling and engaged with at new and existing customers. Poet Infinity, Poet Starlight, Poet LightBar, Poet Legacy and Poet ONE have emerged as foundational products for us and are providing the opportunity for expanded discussions with customers. Our AI product line features competitively priced and scalable optical engines for high-speed ethernet-based transceivers and packaged light sources for CXL 3.0-type interfaces. Within the datacom and telecom markets, we have delivered alpha versions of the Poet Infinity optical chiplet solution to two lead customers for testing. These customers aim to develop industry-leading 800G 2xFR4 QSFP-DD and OSFP transceiver solutions. To further support our team's engineering and commercialization achievements, we have increased our sales and marketing activities. As a result, website visitation grew by more than 300 per cent during the quarter, with U.S. interest accounting for a majority of the uptick in traffic."

Non-IFRS (international financial reporting standards) financial summary

The company reported non-recurring engineering revenue (NRE) of $177,000 in the second quarter of 2023 compared with $120,000 for the same period in 2022 and $181,000 in the first quarter of 2023. In the second quarter, the company provided under NRE contract 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 $4.4-million, or (11 cents) per share, in the second quarter of 2023 compared with a net loss $5.3-million, or (14 cents) per share, for the same period in 2022 and a net loss of $5.3-million, or (14 cents) per share, in the first quarter of 2023. The net loss in the second quarter of 2023 included research and development costs of $2.0-million compared with $1.8-million for the same period in 2022 and $2.3-million in the first quarter of 2023. Fluctuations in R&D for a company of Poet's size and stage of growth is 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 2023 included stock-based compensation of $700,000 and depreciation and amortization of $500,000. Non-cash stock-based compensation and depreciation and amortization in the same period of 2022 were $1.0-million and $300,000, respectively. First quarter 2023 stock-based compensation and depreciation and amortization were $1.2-million and $400,000, respectively. The company had non-cash finance costs of $11,000 in the second quarter of 2023 compared with non-cash finance costs of $13,000 in the second quarter of 2022 and non-cash finance costs of $11,000 in the first quarter of 2023.

The company recognized other income, including interest of $57,000 in the second quarter of 2023, compared with $40,000 in the same period in 2022 and $78,000 in the first quarter of 2023.

Non-cash impact of the company's joint venture, Super Photonics Xiamen (SPX), in the second quarter of 2023 was nil, compared with a net loss of $700,000 in the same period of 2022 and nil in the first quarter of 2023. The company's share of loss was approximately 80.7 per cent of the loss of SPX in the second quarter of 2023, 88.5 per cent in the second quarter of 2022 and 80.7 per cent in the first quarter of 2023. The company's current share of the operating loss is a result of the high value of the company's initial contribution. Although the company's equity ownership of SPX approximated 80.7 per cent at June 30, 2023, the company did not recognize a share of loss in SPX in the second quarter of 2023 because the value of its investment is carried at nil on the consolidated statements of financial position precluding further loss recognition under the relevant accounting standards.

Cash flow from operating activities in the second quarter of 2023 was ($4.0)-million, compared with ($3.4)-million in the second quarter of 2022 and ($4.4)-million in the first quarter of 2023.

The company received $1.6-million from the exercise of warrants and stock options in the second quarter of 2023. From Jan. 1, 2023, to June 30, 2023, the company received $7.9-million from the exercise of warrants and stock options.

Stock option grant

The board of directors approved the grant of 952,171 options to purchase common shares to non-executive directors, officers and employees of the company. All option grants must be exercised within 10 years of the grant once they are vested. The total granted included 162,171 options to non-executive directors, paid in lieu of cash for services to be rendered until the next AGM, with an exercise price of $5.70 (Canadian), vesting quarterly over the year. A total of 415,000 options were awarded to officers and 375,000 options to other employees as a key part of their compensation packages. The options to non-executive directors and other employees have an exercise price of $5.50 (Canadian) and vest over four years, with the first vesting of 25 per cent on the first anniversary of the grant and the balance vesting quarterly over the following three-year period.

About Poet Technologies Inc.

Poet Technologies 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 chip using advanced wafer-level semiconductor manufacturing techniques and packaging methods. Poet's optical interposer eliminates costly components and labour-intensive assembly, alignment 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, the Internet of Things, autonomous vehicles, and high-speed networking for cloud service providers and data centres. Poet Technologies is headquartered in Toronto, with operations in Allentown, Pa., Shenzhen, China, and Singapore.

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