UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

OR

OR

OR

Date of event requiring this shell company report . .. . . . . . . . . . . . . . . . . .

For the transition period from                   to

Commission file number: 000-55135001-41319

POET TECHNOLOGIES INC.

(Exact name of Registrant as specified in its charter)

Ontario, Canada

(Jurisdiction of incorporation or organization)

1107 – 120 Eglinton Avenue East

Toronto, Ontario, M4P 1E2, Canada

(Address of principal executive offices)

Suresh Venkatesan, CEO

2550 Zanker Road1107 – 120 Eglinton Avenue East

Toronto, Ontario, M4P 1E2, Canada

San Jose, California 95131Telephone No.: 416368 9411

Tel: (408)435-2665Email: svv@poet-technologies.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:None.

Securities registered or to be registered pursuant to Section 12(g) of the Act:Common Stock, no par value. None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:Not Applicable. None.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

42,488,045 Common Shares, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Not Applicable.

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒

POET TECHNOLOGIES INC.
FORM 20-F ANNUAL REPORT
TABLE OF CONTENTS

POET TECHNOLOGIES INC.

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

INTRODUCTION

INTRODUCTION

POET Technologies Inc. is organized under the Business Corporations Act (Ontario). In this Annual Report, the “Company”, “we”, “our”, “POET” and “us” refer to POET Technologies Inc. and its subsidiaries (unless the context otherwise requires). We refer you to the documents attached as exhibits hereto for more complete information than may be contained in this Annual Report. Our principal Canadian corporate offices are located at Suite 501, 121 Richmond Street West,1107, 120 Eglinton Avenue East, Toronto, Ontario M5H 2K1,M4P 1E2, Canada. Our principal operationsU.S office is located in the U.S. at 2550 Zanker Road, San Jose, CA, 95131.1605 N. Cedar Crest Boulevard, Allentown, PA, 18104. Our telephone number in Toronto is (416) 368-9411. Our telephone number in San Jose is (408) 435-2665.

We file reports and other information with the Securities and Exchange Commission (“SEC”) located at 100 F Street NE, Washington,

D.C. 20549. You may obtain copies of our filings with the SEC by accessing their website located at www.sec.gov. We also file reports under Canadian regulatory requirements on SEDAR; you may access our reports filed on SEDAR by accessing the website www.sedar.com.

This Annual Report (including the consolidated audited financial statements for the years ended December 31, 2023, 2022 and 2021 attached thereto, together with the auditors’ report thereon), and the exhibits thereto shall be deemed to be incorporated by reference as exhibits to the Registration Statement of the Company on Form F- 10, as amended (File No. 333-227873), and to be a part thereof from the date on which this report was filed, to the extent not superseded by documents or reports subsequently filed or furnished.

Business of POET Technologies Inc.

POET designs, develops, manufactures and sells integrated opto-electronic solutions for data communications, telecommunications and artificial intelligence markets. POET has developed and is marketing its proprietary POET Optical Interposer^TM, a novel platform that allows the seamless integration of electronic and photonic devices onto a single chip using advanced wafer-level semiconductor manufacturing techniques. The semiconductor industry has adopted the term “Wafer-Level Chip-Scale Packaging” (or “WLCSP”) to describe similar approaches within the semiconductor industry. POET’s Optical Interposer eliminates costly components and labor-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 devices or systems that integrate electronics and photonics, including high-growth areas of communications and computing, such as high-speed networking for cloud service providers and data centers, 5G networks, machine-to-machine communication, sometimes referred to as the “Internet of Things” (IoT), self-contained “edge” computing applications, such as accelerators for Artificial Intelligence – Machine Learning (AI-ML) systems and sensing applications, such as LIDAR systems for autonomous vehicles and point-of-use health care products.

On October 21, 2020, the Company signed a Joint Venture Agreement (“JVA”) establishing a joint venture company (the “JV”), Super Photonics Integrated Circuit Xiamen Co., Ltd (“SPX”) with Xiamen Sanan Integrated Circuit Co. Ltd. (“Sanan IC”) whose purpose is to assemble, test, package and sell cost-effective, high-performance optical engines based on POET’s proprietary Optical Interposer platform technology.

SPX’S capitalization will consist of a combination of committed cash, capital equipment and intellectual property from Sanan IC and intellectual property and know-how from POET, with a combined estimated value of approximately $50M. Capitalization is on-going and has not yet been completed. POET’s contribution of certain intellectual property and know-how was valued by an independent appraiser at $22.5M. Sanan IC will contribute cash of approximately $25M for capital equipment and operating expenses, with the expectation that the eventual ownership of the JV will be approximately 52% Sanan IC and 48% POET. SPX is an independent company and is operated as a true joint venture, so its financial results are not consolidated into POET’s but are reported as a gain in the value of the contribution to the JV and a gain or loss in the Company’s percentage ownership of the JV.

Sanan IC is a developerworld-class wafer foundry service company with an advanced compound semiconductor technology platform, serving the optical, RF microelectronics and power electronics markets. Sanan IC is a wholly owned subsidiary of opto-electronicSanan Optoelectronics Co., Ltd. (Shanghai Stock Exchange, SSE: 600703), the leading manufacturer of advanced ultra-high brightness LED epitaxial wafers and photonic fabrication processes and products. Photonics integration is fundamental to increasing functional scaling and lowering the cost of current photonic solutions.  POET believes that its advanced opto-electronics process platform enables substantial improvements in energy efficiency, component cost and sizechips in the productionworld.

Significant progress on SPX included the registration of smart optical components,SPX, appointment of the engines driving applications rangingboard of directors and key personnel, hiring of 36 employees, completion of 5,000 square feet of temporary facilities, ordering of key capital equipment for installation and qualification and outflow of approximately $7 million from data centersSanan IC to consumer productscover initial operating and capital expenditures to military applications. Silicon Valley-based POET’s patented module-on-a-chip process, which integrates digital, high-speed analogbe contributed to the JV.

While each joint venturer has appointed one member to the Board of Directors of SPX, the company has its own governance and optical devicesmanagement structure and is operated under the laws of the Peoples Republic of China.

The Company has recognized a gain of $5,366,294 related to its contribution of intellectual property to SPX in accordance with IAS 28. The Company only recognizes a gain on the same chip,contribution of the intellectual property equivalent to the Sanan IC’s interest in SPX, the unrecognized gain of $17,127,825 will be applied against the investment and periodically realized as the Company’s ownership interest in SPX is designed to serve as an industry standardreduced. As at December 31, 2023, Sanan IC’s and the Company’s ownership interests were approximately 23.9% and 76.1% respectively.

Net loss for smart optical components.

the year ended December 31, 2023 was $20,267,365. The Company currently operates at a loss. We have no revenues. Our expenses,net loss included $10,077,930 incurred for research and development activities directly or indirectly, relaterelated to the development and commercialization of the POET process or our status as a publicly traded Company. During the fiscal year ended December 31, 2015, researchOptical Interposer and POET Optical Engine products. Research and development expenses were $3,532,492 while generalincluded non-cash costs of $1,539,235 related to stock-based compensation. $10,795,155 was incurred for selling, marketing and administration expenses were $8,614,109. Included in generalwhich included non-cash costs of $2,662,209 related to stock-based compensation and administrative$1,922,140 related to depreciation and research and development are non-cash share based expensesamortization.

The Company incurred $70,182 of $4,265,704 and $552,416, respectively, relatinginterest expense, of which $53,614 was non-cash.

The Company recorded a gain on contribution of intellectual property to the fair valuejoint venture of stock based compensation. We have yet to commercialize the POET technology. To date, proceeds from the issuance of its common shares have financed$1,031,807. Additionally, the Company’s continuing operations and research and development initiatives.share of loss in joint venture was limited to $1,031,807 as required by IFRS standards.

AsThe Company’s statement of financial position as of December 31, 2015, we had over $14.5 million2023 reflects assets with a book value of $8,777,417 compared to $15,390,453 as of December 31, 2022. Thirty six percent (36%) of the book value at December 31, 2023 was in current assets consisting primarily of cash and approximately $515,000cash equivalents of accounts payable$3,019,069 compared to sixty two percent (62%) of the book value as of December 31, 2022, which consisted primarily of cash and accrued liabilities. We are confident that the current levelcash equivalents of working capital is sufficient to support the Company beyond 2016  as we work toward the goal of monetizing the POET process.$9,229,845.

Financial and Other Information

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in United States Dollars (“US$”, “USD” or “$”).

Cautionary Statements Regarding Forward-Looking Statements

This Annual Report on Form 20-F and other publicly available documents, including the documents incorporated herein and therein by reference contain forward-lookingforward- looking statements and information within the meaning of U.S. and Canadian securities laws. Forward-looking statements and information can generally be identified by the use of forward-lookingforward- looking terminology or words, such as, “continues”, “with a view to”, “is designed to”, “pending”, “predict”, “potential”, “plans”, “expects”, “anticipates”, “believes”, “intends”, “estimates”, “projects”, and similar expressions or variations thereon, or statements that events, conditions or results “can”, “might”, “will”, “shall”, “may”, “must”, “would”, “could”, or “should” occur or be achieved and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. Forward- looking statements and information are based on management’s current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

TheOur actual results, performance and achievements may differ materially from those expressed in, or implied by, the forward-looking statements and information in this Annual Report are subject toas a result of various risks, uncertainties and uncertainties, including those described in ITEM 3.D. “Risk Factors”,other factors, many of which are difficult to predict and generally beyond the control of the Company, including without limitation:

For all of the reasons set forth above, investors should not place undue reliance on forward-looking statements. Other than any obligation to disclose material information under applicable securities laws or otherwise as maybe required by law, we undertake no obligation to revise or update any forward-looking statements after the date hereof.

Data relevant to estimated market sizes for our technologies under development are presented in this Annual Report. These data have been obtained from a variety of published resources including published scientific literature, websites and information generally available through publicized means. The Company attempts to source reference data from multiple sources whenever possible for confirmatory purposes. Although the Company believes the foregoing data is reliable,However, the Company has not independently verified the accuracy and completeness of this data.

PART I

ITEMItem 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORSIdentity of Directors, Senior Management and Advisers

A.A. Not Applicable.required.

ITEMItem 2. OFFER STATISTICS AND EXPECTED TIMETABLEOffer Statistics and Expected Timetable

Not Applicable.required.

ITEMItem 3. KEY INFORMATIONKey Information

The selected financial data of the Company for the years ended December 31, 2015, 2014 and 2013 was derived from the audited annual consolidated financial statements of the Company, which have been audited by Marcum LLP, independent registered public accounting firm. Selected financial data of the Company for the years ended December 31, 2012 and 2011 was derived from the consolidated financial statements of the Company, which are not included in this Annual Report.

The information contained in the selected financial data for the 2015, 2014 and 2013 years is qualified in its entirety by reference to the Company’s consolidated financial statements and related notes included under the heading “ITEM 17. Financial Statements” and should be read in conjunction with such financial statements and with the information appearing under the heading “ITEM 5.

Operating and Financial Review and Prospects.” Except where otherwise indicated, all amounts are presented in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Since its formation, the Company has financed its operations from public and private sales of equity securities, proceeds received upon the exercise of warrants and stock options, research and development contracts from U.S. government agencies and, prior to 2012, by sales of solar energy equipment products. The Company has never been profitable, so its ability to finance operations has been dependent on equity financings. The Company believes that it will continue to rely on the sale of its equity securities to provide funds for its activities. We believe the Company is well capitalized , nevertheless the Company may effect a future financing if an appropriate opportunity presents itself. See ITEM 3.D. “Risk Factors.”

The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future.

The following consolidated financial information is separated between continuing and discontinued operations.

Consolidated Statements of Operations

Under International Financial Reporting Standards

(US$)

Consolidated Statements of Discontinued Operations

Under International Financial Reporting Standards
(US$)

Consolidated Statements of Financial Position

Under International Financial Reporting Standards

(US$)

Not Applicable.required.

Not Applicable.required.

We are subject to various risks, including those described below, which could materially adversely affect our business, financial condition and results of operations and, in turn, the value of our securities. In addition, other risks not presently known to the other information presented in this Annual Report, the following shouldus or that we currently believe to be considered carefully in evaluating the Companyimmaterial may also adversely affect our business, financial condition and its business. This Annual Report containsresults of operations, perhaps materially. The risks discussed below also include forward-looking statements and information within the meaning of U.S. and Canadian securities laws that involve risks and uncertainties. The Company’s actual results may differ materially from the results discussed in the forward-looking statements and information.information Factors that might cause such differences include those discusseddiscussed. Before making an investment decision with respect to any of our securities, you should carefully consider the following risks and uncertainties described below and elsewhere in this Annual Report. See also “Cautionary Statement Regarding Forward-Looking Statements.”

Risks Related to Our Business

As a result of our limited financial liquidity, we and our auditors have expressed substantial doubt regarding our ability to continue as a going concern.

As a result of our current limited financial liquidity, our auditors’ report for our 2023 financial statements, which is included as part of this report, contains a statement concerning our ability to continue as a going concern. Our limited liquidity could make it more difficult for us to secure additional financing or enter into strategic relationships on terms acceptable to us, if at all, and may materially and adversely affect the terms of any financing that we may obtain and our public stock price generally.

Our continuation as a going concern is dependent upon, among other things, achieving positive cash flow from operations and, if necessary, augmenting such cash flow using external resources to satisfy our cash needs. Our plans to achieve positive cash flow primarily include engaging in offerings of securities. Additional potential sources of funds include negotiating milestone payments for non-recurring engineering services or royalties from sales of our products. These cash sources could, potentially, be supplemented by financing or other strategic agreements. However, we may be unable to achieve these goals or obtain required funding on commercially reasonable terms, or at all, and therefore may be unable to continue as a going concern.

We have a limitedhistory of large operating history, and we do not expect to become profitable in the near future.

We are a fabless semiconductor technology development company with a limited operating history. We are not profitable and have incurred losses. We continuemay not be able to incur research and development and general and administrative expenses related to our operations. We expect to continue to incur losses for the foreseeable future, and these losses may increase as we move toward the commercialization of our technology currently under development. If our POET technology platform does not achieve market acceptance, we may never become profitable. Even if we achieveor sustain profitability in the future and as a result we may not be able to sustain profitability in subsequent periods.maintain sufficient levels of liquidity.

Accordingly, it is difficult

We have historically incurred losses and negative cash flows from operations since our inception. As of December 31, 2023, we had an accumulated deficit of $214,291,025. We expect that operating losses will continue into the near term. Our revenues are not considered sufficient to evaluate our business prospects. Moreover, our prospects mustcover operating expenses. We can give no assurance that we will be considered in light ofprofitable even if we successfully commercialize or products. Failure to become and remain profitable may adversely affect the risks and uncertainties encountered by an early-stage company and competitive markets, such as the semiconductor market where market acceptanceprice of our technology is uncertain.common stock and ability to raise capital and continue operations.

As of December 31, 2023, we held $3,019,069 in cash and cash equivalents. We dependhad working capital of $716,881.

We divested our major operating asset, adopted a new “fab-light” strategy, and we plan to focus on the implementationOptical Interposer as our main business. Any or all of these decisions if incorrect may have a material adverse effect on the results of our operations, financial position and cash flows, and pose further risks to the successful operation of our business plan,over the short and long-term.

There are substantial risks associated with our adoption of a “fab-light” strategy, including the loss of revenue associated with the divested operation, the loss of control over an internal development asset, and the loss of key technical knowledge available from personnel who will no longer be employed by the Company, many of whom we may have to replace.

We have some previous experience with managing development without an internal development resource under a similar “fab-light” strategy which was not successful, and there is no guarantee that our abilitynew approach to makeoperating a company with our chosen strategy will be successful. Further, our strategy will be solely dependent on the future progressmarket acceptance and sale of Optical Interposer-based solutions, which in some cases are neither fully developed nor in qualification stages. Customers are in the initial stages of committing to a production product.

We have taken substantial measures to protect POET’s intellectual property in the Optical Interposer, including development and production with a separate third-party company which engaged no engineering personnel from our former subsidiary company DenseLight. We conducted development of component devices with a segregated team at our DenseLight facility and took measures to protect POET’s intellectual property on those developments as well. However, we cannot guarantee that all our measures to protect our intellectual property on either the POET technology. Optical Interposer or its component devices have been totally effective. In addition, we cannot guarantee that DenseLight or any other third-party that we rely on to perform development, manufacturing, packaging or testing services will perform as expected and produce the devices we will need to grow our Optical Interposer business.

There can be no assurance that our efforts will ultimately result in profits.

We have not yet commercialized the POET technology and there is no certainty that we will be able to do so.

We have not yet commercialized our POET technology, andsuccessful in addressing these or any other significant risks we may neverencounter in the divestment of DenseLight, the adoption of a “fab-light” strategy or the focus of our business solely on the Optical Interposer.

We may not be able to obtain additional capital when desired, on favorable terms or at all.

We operate in a market that makes our prospects difficult to evaluate and, to remain competitive, we will be required to make continued investments in capital equipment, facilities and technology. We expect that substantial capital will be required to continue technology and product development, to expand our contract manufacturing capacity if we need to do so. Weso and to fund working capital for anticipated growth. If we do not know whengenerate sufficient cash flow from operations or ifotherwise have the capital resources to meet our future capital needs, we will completemay need additional financing to implement our development efforts or successfully license our technology. Even if we are successful in developing a commercially useful POET platform, we will not be successful unless POET gains market acceptance. The degree of market acceptance of these products may depend on a number of factors, including:business strategy.

We have had a historyThe Company expects that it will need to raise additional capital in the future to fund more rapid expansion, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of lossesunanticipated opportunities, and expectit may seek to continue to incur additional losses for the foreseeable future.

do so through public or private financing, strategic relationships or other arrangements. The Company’s primary focus is on the research and developmentability of a specific semiconductor technology, which requires the expenditure of significant amounts of cash over a relatively long time period. As at December 31, 2015, the Company’s total deficit was $90,850,672, with net losses in fiscal years 2015, 2014 and 2013 of $12,070,170, $11,785,800 and $7,849,017 respectively. There can be no assurance that the Company to secure any required financing will ever record any earnings.

We may need to obtain additional investmentdepend in part upon prevailing capital market conditions and therebusiness success. There can be no assurance that the Company will be successful in generating sufficientits efforts to secure any additional financing on terms satisfactory to Management or at all. Even if such funding is available, the Company cannot predict the size of future issues of common shares or securities convertible into common shares or the effect, if any, that future issues and sales of common shares will have on the price of the Company’s common shares.

If the Company raises additional capital through the issuance of equity securities, the percentage ownership of the Company’s existing shareholders may be reduced, and such existing shareholders may experience additional dilution in net book value per share. Any such newly-issued equity securities may also have rights, preferences or privileges senior to those of the holders of the common shares. If additional funds are raised through the incurrence of indebtedness, such indebtedness may involve restrictive covenants that impair the ability of the Company to pursue its growth strategy and other aspects of its business plan, expose the Company to greater interest rate risk and volatility, require the Company to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness, thereby reducing the availability of its cash flow to continue its development.

As stated above,fund working capital and capital expenditures, increase the Company’s vulnerability to general adverse economic and industry conditions, place the Company expectsat a competitive disadvantage compared to incur losses for the foreseeable future. As of December 31, 2015, 2014 and 2013,its competitors that have less debt, limit the Company’s working capital was $14,045,498, $11,079,641ability to borrow additional funds, and $3,272,349 respectively.

The Company has no capital asset commitments. The increased working capital balance in 2015 over 2014 was due to the $12.1 million dollars raised through the exercise of stock options and warrants during the year ended December 31, 2015.

The Company’s balance sheet as at December 31, 2015 reflects assets with a book value of $15,934,839 (2014 - $12,850,946) of which 91% (2014 - 89%) or $14,560,919 (2014 - $11,531,365) is current and consists primarily of cash totaling $14,409,996 (2014 - $11,287,864). It is our intention that the Company’s liquidity and unencumbered balance sheet will allow for investments in research and development and valuable human capital which are necessary to enableotherwise subject the Company to achieve its technicalthe risks discussed under “Indebtedness” below and operational milestones

As of February 22, 2016, there were 1,116,051 warrants outstanding to purchase common shares at an average exercise price of CAD$0.23 expiring between June 22, 2016 and September 27, 2016. Should those warrants be exercised, there is a potential for an additional CAD $256,692 to be raised byheighten the Company. Whether the warrants will be exercised is dependent on a number of factors that are outsidepossible effects of the Company’s control.

Between January 1, 2016 and February 22, 2016, the Company raised $1,965,327 from the exercise of 2,686,947 warrants and 628,000 stock options.

Based on current plans and cash utilization, we believe we have sufficient liquidity to support our operations and technological programs beyond 2016, which include further development of the POET semiconductor process and increasing the POET intellectual property portfolio to enable us to exploit POET, through licenses and collaborative arrangements.

The Company has no external sources of financing such as bank lines of credit. The Company will likely require future additional financing to carry out its business plan. The current market for both debt and equity financings for companies such as the Company is challenging, and there can be no assurance that a financing, whether debt or equity, will be available on acceptable terms or at all. The failure to obtain financing on a timely basis may result in the Company having to reduce or delay one or more of its planned research, development and marketing programs and to reduce related overhead, any of which could impair the Company’s current and future value. Any additional equity financing, if obtained, may result in significant dilution to the existing shareholders at the time of such financing. The Company may also seek additional funding from other sources, including technology licensing, co-development collaborations and other strategic alliances, which, if obtained, may reduce the Company’s interest in our intellectual property. There can be no assurance, however, thatrisks discussed in these risk factors. In connection with any such alternative sourcesfuture capital raising transaction, whether involving the issuance of funding will be available.

Rapid technological change could render our technology non-competitive and obsolete.

The semiconductor industry is subject to rapid and substantial technological change. Developments by others may renderequity securities or the Company’s POET technology non-competitive, andincurrence of indebtedness, the Company may not be ablerequired to keep pace with technological developments. Competitors have developed technologiesaccept terms that compete with the functionality expectedrestrict its ability to raise additional capital for a period of the Company’s technology. Some of these technologies have an entirely different approachtime, which may limit or means of accomplishing the desired process and function than the POET process being developed byprevent the Company from raising capital at times when it would otherwise be opportunistic to do so.

The process of developing new, technologically advanced products in semiconductor manufacturing and may be more effectivephotonics products is highly complex and less costly to implement than the technologies developed by the Company.uncertain, and we cannot guarantee a positive result.

Currently, the industryThe development of new, technologically advanced products is dominated by silicon-based semiconductor technology that requires the fabrication of multiple chips for opticala complex and electrical functions. As such, manufacturers of electronic devices are accustomed to designing their products around multi-chip platforms. If more advanced silicon-based technology is developed, manufacturers may determine that maintenance of the silicon platform will be less costly to implement and utilize than alternative technologies. Also, competitors may develop other integrated circuit platforms that are easier for manufacturers to adopt.

Our researchuncertain process requiring frequent innovation, highly-skilled engineering and development efforts are focused on the POET platform,personnel and any delay in the development, or the abandonment of the POET technology, or the POET technology’s failure to achieve market acceptance, would compromise our competitive position.

We have devoted and expect to continue to devote a large amount of resources to develop new and emerging technologies and standards that can be developed into products or commercially licensed in the future. Our POET platform is a new technology which as of yet does not have an established base of application and may not be embraced for use by the semiconductor industry. Should we fail to develop commercially available products based on our POET platform, or should we fail to license POET to technology companies who in turn develop products on the platform, our research and development efforts with respect to these technologies and standards likely would have no appreciable value. In addition, if we do not correctly anticipate new technologies and standards, or if the products that we and our licensees, if any, develop based on these new technologies and standards fail to achieve market acceptance, our competitors may be better able to address market demand than we would. Furthermore, if markets for these new technologies and standards develop later than we anticipate, or do not develop at all, demand for our technologies or products that are currently in development would suffer, resulting in reduced product sales or licensing sales of these technologies, if any.

We are a relatively small company with limited resources compared to some of our current and potential competitors and we may not be able to compete effectively and increase market share.

Some of our current and potential competitors have longer operating histories, significantly greater resources, name recognition and a base ofcustomers. As a result, these competitors may have greater credibility with our potential customers. They also may be able to adoptmore aggressive pricing policies and devote greater resources to the development, promotion and licensing of their products and technologies thanwe would be able to. In addition, some of our potential competitors have likely already established sales, licensing or joint development relationships with the decision makers at our potential customers. In addition, many of what we perceive as potential customers have the capabilities to develop technology competitive to ours internally. These competitors may be able to leverage their existingrelationships to discourage their customers from buying POET products or licensing or otherwise utilizing our technology. These competitors may elect not to support our technology which could complicate and impede our sales efforts. These and other competitive pressures may prevent us from competing successfully against current or future competitors, and may materially harm our business.

We are party to an intellectual property license agreement granting a portion of certain future revenues.

The Company has a License Agreement, as amended in 2014, with the University of Connecticut (“UCONN”) whereby UCONNgranted the Company an exclusive license to the intellectual property developed by a consultant of the Company,

Dr. Geoffrey Taylor, who is also a member of the faculty at UCONN. Such a license may reduce the profitability of the Company ifand when our products reach market. The Company is obligated to pay up to $1,000,000 per year when revenues reach certainmilestonessignificant capital, as well as pay an additional 3%the accurate anticipation of certain revenue received in connection with the exploitation of the licensed intellectualproperty or sales of products to third parties other than engineering expenses received from third parties.

We will be dependent on both semiconductor manufacturers and major intellectual property licensees.

We will be dependent on semiconductor manufacturers, as licensees of our technology, to manufacturetechnological and market opto-electronic productsbased on our architecture in order to receive royalties in the future. We also depend on them to add value to our licensed technology byproviding complete POET-based solutions to meet the specific application needs of systems companies. However, the semiconductormanufacturers, if any, will not be contractually obliged to manufacture, distribute or sell devices based on our technology or to market our POET technology on an exclusive basis. Some potential semiconductor partners design, develop and/or manufacture and marketdevices based on different competing architectures, including their own, and others may do so in the future.

We anticipate that our revenue will depend in part on these major license customers, although the companies considered to be major customers and the percentage of revenue represented by each major customer may vary from period to period depending on the addition of new agreements, the timing of work performed by us and the number of products utilizing our platform technology. In addition, we cannot be certain that any of the opto-electronic manufacturers will produce products incorporating our intellectual property components or that, if production occurs, they will generate significant royalty revenue for us.

trends. We cannot assure you that we will be successful in developing relationships with semiconductor manufacturersable to identify, develop, manufacture, market or support new or enhanced products successfully or on a timely basis. Further, we cannot assure you that our new products will gain market acceptance or that we will be able to maintain relationships with semiconductor manufacturers once developed, that semiconductor device manufacturers will dedicaterespond effectively to product introductions by competitors, technological changes or emerging industry standards. We also may not be able to develop the resourcesunderlying core technologies necessary to promotecreate new products and developenhancements, license these technologies from third parties, or remain competitive in our markets.

The optical data communications industry in which we have chosen to operate is subject to significant risks, including rapid growth and volatility, dependence on rapidly changing underling technologies, market and political risks and uncertainties and extreme competition. We cannot guarantee that we will be able to anticipate or overcome any or all of these risks and uncertainties, especially as a small company operating in an environment dominated by large, well-capitalized competitors with substantially more resources.

The optical data communications industry is subject to significant operational fluctuations. In order to remain competitive, we incur substantial costs associated with research and development, qualification, prototype production capacity and sales and marketing activities in connection with products based on our POET technology or that they will manufacture products based on our POET technology in quantities sufficient to meet demand.

Our revenues will depend in part on royalties that may be received on POET-based devices,purchased, if at all, long after we have incurred such costs. In addition, the rapidly changing industry in which will likely be generated based onwe operate, thevolumes length of time between developing and priceintroducing a product to market, frequent changing customer specifications for products, customer cancellations of devices manufacturedproducts and sold bygeneral down cycles in the industry, among other things, make our semiconductor manufacturer licensees, if any. Our royalties will betherefore influenced by many of the risks faced by the semiconductor market in general. These risks include reductions in demand and reduced average selling prices. The semiconductor market is intensely competitive. It is also generally characterized by decliningaverage selling prices over the life ofprospects difficult to evaluate. As a generation of devices. The effectresult of these price decreasesfactors, it is compoundedpossible that we may not (i) generate sufficient positive cash flow from operations; (ii) raise funds through the issuance of equity, equity-linked or convertible debt securities; or (iii) otherwise have sufficient capital resources to meet our future capital or liquidity needs. There are no guarantees we will be able to generate additional financial resources beyond our existing balances.

Investors may not be able to obtain enforcement of civil liabilities against the Company.

The enforcement by investors of civil liabilities under the U.S. federal or state securities laws may be adversely affected by the fact that royalty rates decreaseseveral of the Company’s officers and directors reside outside of the U.S. and that all, or a substantial portion, of their assets and a portion of our assets, are located outside the U.S. It may not be possible for an investor to effect service of process within the U.S. on, or enforce judgments obtained in the U.S. courts against, us, certain of our subsidiaries or certain of our directors and officers based upon the civil liability provisions of U.S. federal securities laws or the securities laws of any state of the U.S. In light of the above, there is doubt as to whether a judgment of a U.S. court based solely upon the civil liability provisions of U.S. federal or state securities laws would be enforceable against the Company, certain of its subsidiaries or the Company’s directors and officers.

We have contributed a portion of our intellectual property and exclusive assembly and sales rights for certain key initial products to a joint venture company that we formed in China. Although we believe that the joint venture offers significant opportunities for growth that we might not otherwise have and solves several major known challenges, we also recognize that there are substantial risks and uncertainties associated with executing a major portion of our strategy through a joint venture, regardless of the intentions and capabilities of the parties involved.

On October 21, 2020, the Company signed a Joint Venture Agreement (“JVA”) with Sanan IC to form a joint venture company, Super Photonics Xiamen Co., Ltd. (“SPX”), which will eventually be owned 48% by the Company once SAIC is fully invested. SPX will assemble, test, package and sell certain optical engines on an exclusive basis globally and certain others on an exclusive basis in the territory of Greater China. Optical engines based on the POET Optical Interposer are expected to be a primary component of several types of optical transceivers used in data centers. The joint venture is based on the contribution by the Company of certain assembly and test know-how and other intellectual property and cash to be contributed by Sanan IC in stages, subject to meeting certain milestones, to cover all capital and operating expenses of SPX until it is self-sustaining. We cannot guarantee that SPX will meet each milestone or that Sanan IC will or will not contribute capital on schedule when and if such milestones are met, nor can we guarantee that SPX will be successful in assembling and testing optical engines, nor in the marketing and sales once the optical engines are tested and qualified by potential customers.

Because no party to the joint venture, including the Company has a control position, we are not able to consolidate revenue and expenses directly into the Company’s financial statements. The earnings or loss from the joint venture operations are included as a functionsingle line item in the financial statements and the gain or loss on the intellectual property contributed to the joint venture is reported on another. Further, even though the joint venture may appreciate in market value if successful, the Company will not be able to reflect any increase in fair value, other than adding or subtracting on a periodic basis the income or loss experienced by the joint venture in relation to the Company’s percentage ownership at the time.

The Company’s investment into “Super Photonics Xiamen” (“SPX”) is into an independent company operating as a true joint venture under the laws of volume.the Peoples Republic of China (“PRC”). There are significant governance and operational risks associated with joint ventures and with companies operating in the PRC, in general. We cannot assure youguarantee that we will be able to anticipate or overcome the risks and uncertainties of operating a joint venture company in China.

Although SPX has its own governance structure to which both parties contribute directors, most major decisions must be unanimous, which means that such decisions will require the support of the management of SPX and both of the JV partners. Although the Company has sought the support of well-known and competent legal and other professional advisors and has had a major role in the recruitment of the senior management team of SPX, the Company has no prior experience with either the operation of a joint venture or with the operation of a JV company under the laws of the PRC, so we cannot guarantee that the joint venture will be successfully managed without substantial investment in time and effort by the Company’s current management team or at all

If our customers do not qualify our products for use on a timely basis, our results of operations may suffer.

Prior to the sale of new products, our customers typically require us to “qualify” our products for use in their applications. At the successful completion of this qualification process, we refer to the resulting sales opportunity as a “design win.” Additionally, new customers often audit our manufacturing facilities and perform other evaluations during this qualification process. The qualification process involves product sampling and reliability testing and collaboration with our product management and engineering teams in the design and manufacturing stages. If we are unable to accurately predict the amount of time required to qualify our products with customers, or are unable to qualify our products with certain customers at all, then our ability to generate revenue could be delayed or our revenue would be lower than expected and we may not be able to recover the costs associated with the qualification process or with our product development efforts, which would have an adverse effect on our results of operations.

We have limited operating history in the data center market, and our business could be harmed if this market does not develop as we expect.

The initial target market for our Optical Interposer-based optical engine is the data center market for data communications within the data center and beyond. We have limited experience in selling products in this market. We may not be successful in developing a product for this market and even if we do, it may never gain widespread acceptance by large data center operators. If our expectations for the growth of the data center / datacom market are not realized, our financial condition or results of operations may be adversely affected.

Customer demand is difficult to forecast accurately and, as a result, we may be unable to match production with customer demand.

We make planning and spending decisions, including determining the levels of business that we will seek and accept, production schedules, component procurement commitments, personnel needs and other resource requirements, based on our estimates of product demand and customer requirements. Our products are typically sold pursuant to individual purchase orders. While our customers may provide us with their demand forecasts, they are typically not contractually committed to buy any quantity of products beyond firm purchase orders. Furthermore, many of our customers may increase, decrease, cancel or delay purchase orders already in place without significant penalty. The short-term nature of commitments by our expected customers and the possibility of unexpected changes in demand for their products reduce our ability to accurately estimate future customer requirements. If any of our customers decrease, stop or delay purchasing our products for any reason, we will likely have excess manufacturing capacity or inventory and our business and results of operations would be harmed.

The markets in which we operate are highly competitive, which could result in lost sales and lower revenues.

The market for optical components and modules is highly competitive and this competition could result in our existing customers moving their orders to our competitors. We are aware of a number of companies that have developed or are developing integrated optical products, including silicon photonics engines, remote light sources, pluggable components, modules and subsystems, photonic integrated circuits, among others, that compete (or may in the future compete) directly with our current and proposed product offerings.

Some of our current competitors, as well as some of our potential competitors, have longer operating histories, greater name recognition, broader customer relationships and industry alliances and substantially greater financial, technical and marketing resources than we do. We may not be able to compete successfully with our competitors and aggressive competition in the market may result in lower prices for our products and/or decreased gross margins. Any such development could have a material adverse effect on our business, financial condition and results of operations.

We depend on a limited number of suppliers and key contract manufacturers who could disrupt our business and technology development activities if they stopped, decreased, delayed or were unable to meet our demand for shipments of their products or manufacturing of our products.

We depend on a limited number of suppliers of epitaxial wafers and contract manufacturers for our Indium Phosphide (“InP”) laser developments and optical interposer production activities. Some of these suppliers are sole source suppliers. We typically have not entered into long-term agreements with our suppliers. As a result, these suppliers generally may stop supplying us materials and other components at any time. Our reliance on a sole supplier or limited number of suppliers could result in delivery problems, reduced control over technology development, product development, pricing and quality, and an inability to identify and qualify another supplier in a timely manner. Some of our suppliers that may be small or under-capitalized may experience financial difficulties that could prevent them from supplying us materials and other components. In addition, our suppliers, including our sole source suppliers, may experience manufacturing delays or shutdowns due to circumstances beyond their control such as pandemics, earthquakes, floods, fires, labor unrest, political unrest or other natural disasters. A change in supplier could require technology transfer that could require multiple iterations of test wafers. This could result in significant delays in licensing, poor demand for servicesresumption of production.

Any supply deficiencies relating to the quality or decreases in pricesquantities of materials or inequipment we use to manufacture our royalty rates will notproducts could materially and adversely affect our ability to fulfill customer orders and our results of operations. Lead times for the purchase of certain materials and equipment from suppliers have increased and, in some cases, have limited our ability to rapidly respond to increased demand, and may continue to do so in the future. To the extent we introduce additional contract manufacturing partners, introduce new products with new partners and/or move existing internal or external production lines to new partners, we could experience supply disruptions during the transition process. In addition, due to our customers’ requirements relating to the qualification of our suppliers and contract manufacturing facilities and operations, we cannot quickly enter into alternative supplier relationships, which prevent us from being able to respond immediately to adverse events affecting our suppliers.

Our international business and operations expose us to additional risks.

We have significant tangible assets located outside Canada and the United States. Conducting business outside Canada and the United States subjects us to a number of additional risks and challenges, including:

These factors, individually or in combination, could impair our ability to effectively operate one or more of our foreign facilities or deliver our products, result in unexpected and material expenses, or cause an unexpected decline in the demand for our products in certain countries or regions. Our failure to manage the risks and challenges associated with our international business and operations could have a material adverse effect on our business.

If we fail to attract and retain key personnel, our business could suffer.

Our future success depends, in part, on our ability to attract and retain key personnel, including executive management. Competition for highly skilled technical personnel is extremely intense and we may face difficulty identifying and hiring qualified engineers in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Our future success also depends on the continued contributions of our executive management team and other key management and technical personnel, each of whom would be difficult to replace. The loss of services of these or other executive officers or key personnel or the inability to continue to attract qualified personnel could have a material adverse effect on our business.

If we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, our business and results of operations and financial condition.could be materially harmed.

The enforceability of the Company’s patents and the Company’sOur success depends on our ability to maintain trade secrets cannot be predictedprotect our intellectual property and suchpatents or trade secrets may not provide the Company with a competitive advantage against competitors with similar products ortechnologies.

other proprietary rights. We rely on a combination of patent, andtrademark, copyright, trade secret and unfair competition laws, as well as license agreements and restrictions on disclosureother contractual provisions, to establish and protect our intellectual property and other proprietary rights. We have applied for patent registrations in the U.S. and in foreign countries, some of which have been issued. We cannot guarantee that our pending applications will be approved by the applicable governmental authorities. Moreover, our existing and future patents and trademarks may not be sufficiently broad to protect our proprietary rights or may be held invalid or unenforceable in court. A failure to obtain patents or trademark registrations or a successful challenge to our registrations in the U.S. or foreign countries may limit our ability to protect the intellectual property rights that these applications and registrations intended to cover.

Policing unauthorized use of our technology is difficult and we cannot be certain that the steps we have taken will prevent the misappropriation, unauthorized use or other infringement of our intellectual property. Any failureproperty rights. Further, we may not be able to effectively protect our intellectual property rights from misappropriation or other infringement in foreign countries where we have not applied for patent protections, and where effective patent, trademark, trade secret and other intellectual property laws may be unavailable or may not protect our proprietary rights as fully as Canadian or U.S. law. We may seek to secure comparable intellectual property protections in other countries. However, the level of protection afforded by patent and other laws in other countries may not be comparable to that afforded in Canada and the U.S.

We also attempt to protect our intellectual property, rights would diminish or eliminateincluding our trade secrets and know-how, through the competitive advantages that we derive fromuse of trade secret and other intellectual property laws, and contractual provisions. We enter into confidentiality and invention assignment agreements with our employees and independent consultants. We also use non-disclosure agreements with other third parties who may have access to our proprietary technology. We cannot assure youtechnologies and information. Such measures, however, provide only limited protection, and there can be no assurance that our confidentiality and non-disclosure agreements will not be breached, especially after our employees end their employment, and that our trade secrets will not otherwise become known by competitors or that we will be ablehave adequate remedies in the event of unauthorized use or disclosure of proprietary information. Unauthorized third parties may try to adequately protectcopy or reverse engineer our technologyproducts or otherportions of our products, otherwise obtain and use our intellectual property, from third-party infringementor from misappropriation in the U.S. and abroad. Any patent licensed by usmay independently develop similar or issued to us could be challenged, invalidatedequivalent trade secrets orcircumvented or rights granted thereunder may not provide a competitive advantage to us. Furthermore, patent

applications that know-how. If we file may not result in issuance of a patent or, if a patent is issued, the patent may not be issued in a form that is advantageous to us. Despite our effortsfail to protect our intellectual property rights, others may independently develop similar products, duplicate our products or design around our patents and other rights. proprietary rights, or if such intellectual property and proprietary rights are infringed or misappropriated, our business, results of operations or financial condition could be materially harmed.

In addition, it is difficultthe future, we may need to monitor compliance with, and enforce,take legal actions to prevent third parties from infringing upon or misappropriating our intellectual property on a worldwide basis in a cost-effective manner. In jurisdictions where foreign laws provide lessor from otherwise gaining access to our technology. Protecting and enforcing our intellectual property protection than affordedrights and determining their validity and scope could result in significant litigation costs and require significant time and attention from our technical and management personnel, which could significantly harm our business. We may not prevail in such proceedings, and an adverse outcome may adversely impact our competitive advantage or otherwise harm our financial condition and our business.

We may be involved in intellectual property disputes in the U.S.future, which could divert management’s attention, cause us to incur significant costs and abroad,prevent us from selling or using the challenged technology.

Participants in the markets in which we sell our technology orproducts have experienced frequent litigation regarding patent and other intellectual property mayrights. There can be compromised,no assurance that third parties will not assert infringement claims against us, and we cannot be certain that our businessproducts would not be materially adversely affected.

We may occasionally become involved in administrative proceedings, lawsuits or other proceedings if others allege that we infringefound infringing on their intellectual property rights. Some of these claims could subject us to significant liability for damages and invalidate our property rights. If successful, such claims could impair our ability to collect royalties or license fees or could force us or our customers to:

Our failure to protect our proprietary rights, or the costs of protecting these rights, may harm our ability to compete.

Our success depends in part on our ability to obtain patents and licenses and to preserve other intellectual property rights covering our products and development and testing tools. To that end, we have obtained certain domestic and foreign patents and intendof others. Regardless of their merit, responding to continue to seek patents on our inventions when appropriate. The process of seeking patent protectionsuch claims can be time consuming, divert management’s attention and expensive.

We cannot ensure the following:

resources and may cause us to incur significant expenses. Intellectual property rights are uncertain and adjudication of such rights involves complex legal and factual questions. We may be unknowingly infringing on the proprietary rights of others and may be liable for that infringement, whichclaims against us could result in significant liability for us. We may receive correspondencea requirement to license technology from third parties alleging infringementothers, discontinue manufacturing or selling the infringing products, or pay substantial monetary damages, each of their intellectual property rights. could result in a substantial reduction in our revenue and could result in losses over an extended period of time.

If we are foundfail to infringeobtain the proprietary rights of others, we could be forcedright to either seek a license touse the intellectual property rights of others or alterthat are necessary to operate our technologies so that they no longer infringe the proprietary rights of others. A license could be very expensivebusiness, and to obtain or may not be available at all. Similarly, changing our processes to avoid infringing the rights of others may be costly or impractical.

We would be responsible for any patent litigation costs. Our License Agreement with UCONN does not provide for indemnification of the Company by UCONN. If we were to become involved in a dispute regardingprotect their intellectual property, whether ours or thatour business and results of another company, we may have to participate in legal proceedings in the United States Patent and Trademark Office or in the United States or Canadian courts to determine any or all of the following issues: patent validity, patent infringement, patent ownership or inventorship. These types of proceedings mayoperations will be costly and time consuming for us, even if we eventually prevail. If we do not prevail, we might be forced to pay significant damages, obtain a license, if available, or stop making a certain product. adversely affected.

From time to time, we may prosecute patentchoose to or be required to license technology or intellectual property from third parties in connection with the development of our products. We cannot assure you that third party licenses will be available to us on commercially reasonable terms, if at all. Generally, a license, if granted, would include payments of up-front fees, ongoing royalties or both. These payments or other terms could have a significant adverse impact on our results of operations. Our inability to obtain a necessary third-party license required for our product offerings or to develop new products and product enhancements could require us to substitute technology of lower quality or performance standards, or of greater cost, either of which could adversely affect our business. If we are not able to obtain licenses from third parties, if necessary, then we may also be subject to litigation to defend against othersinfringement claims from these third parties. Our competitors may be able to obtain licenses or cross-license their technology on better terms than we can, which could put us at a competitive disadvantage.

Failure to comply with requirements to design, implement and maintain effective internal control over financial reporting could have a materially adverse impact on our financial reporting and our business. We are required to have our internal controls over financial reporting audited under Section 404(b) of the Sarbanes-Oxley Act.

Preparing our consolidated financial statements involves a number of complex manual and automated processes, which are dependent upon individual data input or review and require significant management judgment. One or more of these elements may result in errors that may not be detected and could result in a material misstatement of our consolidated financial statements. The Sarbanes-Oxley Act in the U.S. requires, among other things, that as a publicly traded company we disclose whether our internal control over financial reporting and disclosure controls and procedures are effective. Until December 31, 2021 we qualified as an “emerging growth company” under the JOBS Act, and, as a result, were exempted from certain SEC reporting requirements, including those requiring registrants to include an auditor’s report regarding the Company’s internal controls as part of such litigation,registrant’s periodic reports. Our “emerging growth company” status expired on December 31, 2021. The report of our auditors regarding the effectiveness of our internal controls over disclosure and financial reporting as of December 31, 2023 is attached as an exhibit to this annual report.

Our internal control over financial reporting cannot guarantee that no accounting errors exist or that all accounting errors, no matter how immaterial, will be detected because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute assurance that the control system’s objectives will be met. If we are unable to implement and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely impacted. This could result in late filings of our annual and quarterly reports under the Securities Act (Ontario) and the Securities Exchange Act of 1934 (the “Exchange Act”), restatements of our consolidated financial statements, a decline in our stock price, suspension or delisting of our common shares by the TSX Venture Exchange (“TSXV”), or other partiesmaterial adverse effects on our business, reputation, results of operations or financial condition.

The process of designing and implementing effective internal control over financial reporting is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal control that is adequate to satisfy our reporting obligations as a public company. In addition, we are required, pursuant to Section 404(a) of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment must include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Testing and maintaining our internal control over financial reporting may allegedivert our management’s attention from other matters that are important to our patents are not infringed, are invalid and are unenforceable. We also rely on trade secrets, proprietary know-how and confidentiality provisions in agreements with employees and consultants to protect our intellectual property. Such parties may not complybusiness. In connection with the termsimplementation of their agreementsthe necessary procedures and practices related to our internal control over financial reporting, we and/or our independent registered accounting firm may identify material weaknesses and other deficiencies that may require significant effort and expense to remediate. We may encounter problems or delays in completing the remediation of any such weaknesses or other deficiencies.

If there is a change in conditions, or the degree of compliance with us,policies or procedure deteriorates, internal review of our internal control over financial reporting or the subsequent testing by our independent registered public accounting firm may reveal deficiencies in our internal control over financial reporting that are deemed material weaknesses. If this occurs, our consolidated financial statements or disclosures may contain material misstatements and we could be required to restate our financial results. Additionally, we may not be able to adequately enforceconclude on an ongoing basis that we have effective internal control over financial reporting or our rights against these parties.independent registered public accounting firm may not in future issue an unqualified opinion, each of which could lead to investors losing confidence in our reported financial information, which could have a material adverse effect on the trading price of our common shares, and we may be unable to maintain compliance with applicable stock exchange listing requirements.

Our management has identified a material weakness in the Company’s internal control over financial reporting and may identify additional material weaknesses in the future. If we fail to remediate the material weakness or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results may be affected, and such failure may adversely affect investor confidence and business operations.

In connection with the audit of our financial statements for the fiscal years ended December 31, 2023, a material weakness in our internal control over financial reporting was identified related to Cybersecurity controls.

The identified material weakness, if not corrected, could result in a material misstatement to our consolidated financial statements that may not be prevented or detected. In addition, even if we remediate our material weakness, we may be required to expend significant time and resources to further improve our internal control over financial reporting. If we fail to remediate our material weakness or fail to maintain adequate internal control over financial reporting, any new or recurring material weaknesses could prevent us from concluding that our internal control over financial reporting is effective and impair our ability to prevent material misstatements in our consolidated financial statements, which could cause our business to suffer.

Our resultsability to use our net operating losses and certain other tax attributes may fluctuate significantlybe limited.

As of December 31, 2023, we had accumulated net operating losses (“NOLs”), of approximately $150 million. Varying jurisdictional tax codes have restrictions on the use of NOLs, if a corporation undergoes an “ownership change,” the Company’s ability to use its pre-change NOLs, R&D credits and other pre-change tax attributes to offset its post-change income may be unpredictable.limited. An ownership change is generally defined as a greater than 50% change in equity ownership. Based upon an analysis of our equity ownership, we do not believe that we have experienced such ownership changes and therefore our annual utilization of our NOLs is not limited. However, should we experience additional ownership changes, our NOL carry forwards may be limited.

AssumingWe are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets. Such controls have recently increased for companies in China under the US government’s “control list”, and may further limit or impair our ability to use certain sub-contractors or to sell directly to companies on the list

We are subject to export and import control laws, trade regulations and other trade requirements that limit which raw materials and technology we can import or export and which products we sell and where and to whom we sell our products. Specifically, the Bureau of Industry and Security of the U.S. Department of Commerce is responsible for regulating the export of most commercial items that are so called dual-use goods that may have both commercial and military applications. A limited number of our products are exported by license under certain classifications. Export Control Classification requirements are dependent upon an item’s technical characteristics, the destination, the end-use, and the end-user, and other activities of the end-user. Should the regulations applicable to our products change, or the restrictions applicable to countries to which we ship our products change, then the export of our products to such countries could be restricted. As a result, our ability to export or sell our products to certain countries could be restricted, which could adversely affect our business, financial condition and results of operations. Changes in our products or any change in export or import regulations or related legislation, shift in approach to the enforcement or scope of existing regulations, or change in the countries, persons or technologies targeted by such regulations, could result in delayed or decreased sales of our products to existing or potential customers. In such event, our business and results of operations could be adversely affected.

Our manufacturing operations are subject to environmental regulation that could limit our growth or impose substantial costs, adversely affecting our financial condition and results of operations.

Our properties, operations and products are subject to the environmental laws and regulations of the jurisdictions in which we operate and sell products. These laws and regulations govern, among other things, air emissions, wastewater discharges, the management and disposal of hazardous materials, the contamination of soil and groundwater, employee health and safety and the content, performance, packaging and disposal of products. Our failure to comply with current and future environmental laws and regulations, or the identification of contamination for which we are liable, could subject us to substantial costs, including fines, cleanup costs, third-party property damages or personal injury claims, and make significant investments to upgrade our facilities or curtail our operations. Identification of presently unidentified environmental conditions, more vigorous enforcement by a governmental authority, enactment of more stringent legal requirements or other unanticipated events could give rise to adverse publicity, restrict our operations, affect the design or marketability of our products or otherwise cause us to incur material environmental costs, adversely affecting our financial condition and results of operations.

We are exposed to risks and increased expenses and business risk as a result of Restriction on Hazardous Substances, or RoHS directives, which have been amended but are still in effect.

Following the lead of the European Union, or EU, various governmental agencies have either already put into place or are planning to introduce regulations that regulate the permissible levels of hazardous substances in products sold in various regions of the world. For example, the RoHS directive for EU took effect on July 1, 2006. The labeling provisions of similar legislation in China went into effect on March 1, 2007 and is still in effect, as amended. Consequently, many suppliers of products sold into the EU have required their suppliers to be compliant with the new directive. We anticipate that our customers may adopt this approach and will require our full compliance, which will require a significant amount of resources and effort in planning and executing our RoHS program, it is possible that some of our products might be incompatible with such regulations. In such events, we could experience the following consequences: loss of revenue, damages reputation, diversion of resources, monetary penalties, and legal action.

Failure to comply with the U.S. Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits companies operating in the U.S. from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Non-U.S. companies, including some that may compete with us, may not be subject to these prohibitions, and therefore may have a competitive advantage over us. If we are not successful in implementing and maintaining adequate preventative measures, we may be responsible for acts of our employees or other agents engaging in such conduct. We could suffer severe penalties and other consequences that may have a material adverse effect on our financial condition and results of operations.

Natural disasters or other catastrophic events could harm our operations.

Our operations in the U.S., Canada, Singapore and China could be subject to significant risk of natural disasters, including earthquakes, hurricanes, typhoons, flooding and tornadoes, as well as other catastrophic events, such as epidemics, terrorist attacks or wars. For example, our testing facility in Singapore is in an area that is susceptible to hurricanes. Any disruption in our facilities or those of our contractors and suppliers arising from these and other natural disasters or other catastrophic events could cause significant delays in the production or shipment of our products until we are able to finish development of the POET platform technology and commence its exploitation, we will likely experience in the future significant quarterly fluctuations inarrange for third parties to manufacture our results of operations. Our results may fluctuate because of a variety of factors. Such factors include:

In future periods, our operating results may not meet the expectations of public market analysts or investors. In such an event the market price of our shares could be materially adversely affected.

products. We anticipate that sales of POET products and licenses of our POET platform to a relatively limited number of customers will account for a significant portion of our total net revenues.

Once our POET technology is fully developed, we expect that a relatively small number of customers will account for a significant portion of our future net revenues in any particular period. Due to this, some of the following may reduce our future revenues or adversely affect our business:

We cannot be certain that any potential customer will purchase products or license technology from us, or, once established as a customer, that they will generate further income to us by means of further product sales, licenses or royalties.

Our success will depend substantially on systems companies.

Our future success will depend substantially on the acceptance of our technology by systems companies, particularly those which develop and market electronic products in the defense, wireless, consumer electronics and networking markets where demand may be highly cyclical. The reason for this dependence is that sales of POET-based devices by us and other semiconductor manufacturers to systems companies directly affect the amount of product sale revenue or royalties we might receive. We are subject to many risks beyond our control that may influence the success or failure of a particular systems company. These risks include:

It will likely take a long time to persuade systems companies to accept our POET technology and, even if accepted, we cannot assure you that our devices or technology will be used in a product that is ultimately brought to market. Furthermore, even if our devices or technology are used in a product brought to market, we cannot assure you that such product will be commercially accepted or result in significant sales by us or royalties to us. Demand for our products and intellectual property may also be affected by consolidation in the integrated circuit and related industries, which may reduce the aggregate level of purchases of our intellectual property components and services by the combined companies.

Competition — we may not be able to compete successfully in the future.

Our target markets are intensely competitive and characterized by rapid technological change and compliance to standards. We cannot assure you that we will have the financial resources, technical expertise or marketing or support capabilities to compete successfully in the future. Competition is basedobtain alternate capacity on a variety of factors including price, performance, features, software availability, marketing, customer support, name recognition and financial strength.

Our future capital needs may require us to seek debt financing or additional equity funding which, if not available, could cause our business to suffer.

From time to time, we may be required to raise additional funds for our future capital needs through public or private financing, strategic relationships or other arrangements. There can be no assurance that the funding, if needed, will be available on attractive

favorable terms or at all. Furthermore,Our property insurance coverage with respect to natural disaster is limited and is subject to deductible and coverage limits. Such coverage may not be adequate or continue to be available at commercially reasonable rates and terms. The occurrence of any additional financing arrangementsof these circumstances may adversely affect our financial condition and results of operation.

We may be dilutivesubject to shareholders,disruptions or failures in information technology systems and debt financing, if available, may involve restrictive covenants. Strategic arrangements, if necessary to raise additional funds, may require us to relinquish our rights to certain of our technologies or products. Our failure to raise capital when needednetwork infrastructures that could have a material adverse effect on our business.business and financial condition.

We are dependentrely on key personnelthe efficient and uninterrupted operation of complex information technology systems and network infrastructures to operate our business. A disruption, infiltration or failure of our information technology systems as a result of software or hardware malfunctions, system implementations or upgrades, computer viruses, third-party security breaches, employee error, theft or misuse, malfeasance, power disruptions, natural disasters or accidents could cause a breach of data security, loss of intellectual property and critical data and the release and misappropriation of sensitive competitive information and partner, customer, and employee personal data. Any of these events could harm our competitive position, result in a loss of customer confidence, cause us to incur significant costs to remedy any damages and ultimately materially adversely affect our business and financial condition.

A significant disruption in, or breach in security of, our information technology systems or violations of data protection laws could materially adversely affect our business and reputation.

In the ordinary course of business, we collect and store confidential information, including proprietary business information belonging to us, our customers, suppliers, business partners and other third parties and personally identifiable information of our employees. We rely on information technology systems to protect this information and to keep financial records, process orders, manage inventory, coordinate shipments to customers, and operate other critical functions. Our information technology systems may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures and user errors. If we experience a disruption in our information technology systems, it could result in the loss of any of these individualssales and customers and significant incremental costs, which could materially adversely affect our business. We may also be subject to security breaches caused by computer viruses, illegal break-ins or hacking, sabotage, or acts of vandalism by disgruntled employees or third parties. The risk of a security breach or disruption, particularly through cyberattack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has increased as the Company.

The Company’s abilitynumber, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our information technology network and systems have been and, we believe, continue to continue its developmentbe under constant attack. Accordingly, despite our security measures or those of potential products, and to developour third-party service providers, a competitive edge in the marketplace, depends, in large part, on its ability to attract and maintain qualified key management and technical personnel. Competition for such personnel is intense and the Companysecurity breach may occur, including breaches that we may not be able to attractdetect. Security breaches of our information technology systems could result in the misappropriation or unauthorized disclosure of confidential information. Such breaches could also result in legal action against us by third parties.

Outbreaks of diseases and retain such personnel. public health crises could delay our development activities and adversely affect our results of operations.

The Company’s growthCompany faces risks related to health epidemics and other outbreaks of communicable diseases, which could significantly disrupt its operations and may materially and adversely affect its business and financial conditions.

The global outbreak of COVID-19 has resulted in Canada, the United States, Singapore, China and other countries halting or sharply curtailing the movement of people, goods and services. The curtailed activity has negatively affected many businesses, including the Company and other businesses that operate in our sector. The prolonged economic impact of COVID-19 remains uncertain. At this point, we believe the conditions may have a material adverse impact on our business, as our suppliers are experiencing major delays resulting from high backlogs of orders and an inability to operate at full capacity. Such delays have resulted in a four to six months delay or longer in the Company achieving certain development objectives. Given the rapidly changing developments we cannot accurately predict what effects these developments will have on our business going forward, which will depend on, among other factors, the efforts of its senior management, particularly its; CEO, Dr. Suresh Venkatesan; Executive Co-Chairman, Peter Copetti; Founder and Chief Scientist, Dr. Geoffrey Taylor, Chief Operating Officer, Dr. Subhash Deshmukh and other officers and membersultimate geographic spread of the team. virus, governmental limitations, the duration of the outbreak, travel restrictions and business closures.

The Company has entered into a consulting agreement with Dr. Taylor,continues to monitor the developments and employment agreements with Mr. Copetti, Dr. Venkatesanimpacts of any health crises and Dr. Deshmukh. Ifpandemic diseases as they may arise. The Company cannot estimate whether, or to what extent, any future outbreak of epidemics or pandemics or other health crises may have an impact on the business, operations and financial condition of the Company. The outbreak of epidemics, pandemics or other public health crises, such as COVID-19 pandemic, may result in volatility and disruptions global supply chains and financial markets, as well as declining trade and market sentiment and reduced mobility of people, all of which could affect prices, interest rates, credit ratings, credit risk, share prices and inflation. The risks to the Company loses the services of key personnel through loss of life, impairment or resignation, it may be unable to replace them, and its business could be negatively affected.

We will be dependent upon collaborative partners to develop and commercialize products using our POET Technology.

A key part of our strategy is to form collaborations with semiconductor, defense and electronics companies that will assist us in developing, testing, and commercializing the POET platform.

We expect to negotiate specific ownership rights with respect to the intellectual property developed as a result of the collaboration with each partner. While ownership rights will likely vary from program to program, in general we will seek to retain ownership rights to developments directly relating to POET and our partner will retain rights specific to the application under development.

Despite our existing development agreements we cannot ensure the following:

If we are unable to obtain development assistance and funds from other companies to fund a portion of our development costs and to commercialize our technology, we may be required to delay, curtail, or stop development of our projects.

We face risks from failures in the device manufacturing processes of the POET Technology.

The fabrication of integrated circuits, particularly those made of gallium arsenide (“GaAs”), is a highly complex and precise process. Integrated circuits incorporating the POET platform are primarily manufactured on wafers made of GaAs. Compared to the manufacturing of silicon integrated circuits, GaAs technology is less mature and more difficult to design and manufacture within specifications in large volume. In addition, the more brittle nature of GaAs wafers can result in lower manufacturing yields than with silicon wafers. Further, during manufacturing, each wafer is processed to contain numerous integrated circuits or which may also result in lower manufacturing yields. As a result, we or our customers utilizing POET GaAs wafers may reject or be unable to sell a substantial percentage of wafers or the die on a given wafer because of, among other factors:

Our future customers may experience similar difficulty in maintaining acceptable manufacturing yields, which in turn may hinder adoption of our POET platform for cost or yield reasons.

Our POET platform incorporates technology licensed from third parties.

We incorporate technology (including software) licensed from a limited number of third parties in the deployment of our POET platform, including from UCONN. We could be subjected to claims of infringement regardless of our lack of involvement in the development of the licensed technology. Although a third-party licensor may, in some cases, indemnify us if the licensed technology infringes on another party’s intellectual property rights, such indemnification is typically limited in amount and may be worthless if the licensor becomes insolvent. Our agreement with UCONN does not provide for indemnification of us for intellectual property infringement. Furthermore, any failure of third-party technology to perform properly would adversely affect the development or exploitation of POET.

Our intellectual property indemnification practices may adversely impact our business.

We expect to be required to indemnify our customers for certain costs and damages of intellectual property rights in circumstances where one of our products is the factor creating the customer’s infringement exposure. This practice may subject us to significant indemnification claims by our customers. In some instances, our technology may be utilized to manufacture devices by us or our customers that comply with international standards. These international standards are often covered by patent rights held by third parties, which may include our competitors. The costs of obtaining licenses from holders of patent rights essential to such international standards could be high. The cost of not obtaining such licenses could also be high if a holder of such patent rights bringspublic health crises also include risks to employee health and safety, a claim for patent infringement. We are not awareslowdown or temporary suspension of any claimed violations on our part. However, we cannot assure you that claims for indemnification will not be madeoperations in geographic locations impacted by an outbreak, increased labor costs, regulatory changes, political or that if made,economic instabilities or civil unrest as well as the Company’s ability to service its obligations as they arise. As such, claims would notthe impacts of such crises may have a material adverse effect on ourthe Company’s business, results of operations or financial condition.

We may be subject to information technology failures that could damage our reputation, business operations and financial condition.

We rely on information technology forcondition and the effective operation of our business. Our systems are subject to damage or interruption from a number of potential sources, including natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, cyber attacks, sabotage, vandalism, or similar events or disruptions. Our security measures may not detect or prevent such security breaches. Any such compromise of our information security could result in the unauthorized publication of our confidential business or proprietary information, result in the unauthorized release of customer, supplier or employee data, result in a violation of privacy or other laws, expose us to a risk of litigation or damage our reputation.

Although safeguards exist, third parties with which we currently conduct business may have access to certain portions of our sensitive data. In the event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact our business. In addition, our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business, which could negatively affect our business and operating results, operations and financial results.

The high cost of building advanced semiconductor manufacturing facilities may limit the number of foundries or manufacturing facilities and potential customers for our POET platform.

The cost of developing leading-edge manufacturing facilities and processes needed for building advanced chips is rising. Some of our potential foundry customers may delay or cancel plans for expanding current processes or developing new manufacturing processes, which, if done, may reduce our licensing opportunities. In addition, the bargaining powermarket price of the remaining foundries with advanced manufacturing facilities wouldCommon Shares. There can be increased. This could make it harder for us to win profitable licensingno assurance that the Company’s personnel or manufacturing deals withits contractors’ personnel will not be impacted by these foundries, further reducing both licensingpandemic diseases and royalty revenueultimately see its workforce productivity reduced or incur increased safety and medical costs / insurance premiums as well as adversely affecting product sales margins.a result of these health risks.

There are foreign exchange risks associated with our Company.

The Company is exposed to foreign currency risk with the Canadian dollar. The Company maintains bank accounts and cash reserves in both currencies with the majority of reserves currently in Canadian dollars which has exposure to currency fluctuations. Most of the company’s operations are transacted in US dollars. A 10% change in the Canadian dollar would increase or decrease other comprehensive loss by $1,135,639.

Risks Related to Our Common Stockshares

In order to qualify for listing on Nasdaq, we consolidated our common shares on a 10-for-1 basis, thereby reducing the total number of our common shares which are outstanding on a post-consolidation basis. We cannot guarantee that the reduction in the number of our outstanding common shares as a result of the consolidation will not adversely affect the liquidity of our common shares or decrease the overall value of the Company in the future.

On February 28, 2022, the Company completed a 10-for-1 consolidation of our outstanding common shares, resulting in a total of 36,496,456 common shares of the Company outstanding on a post-consolidation basis. The reduced number of outstanding shares may reduce market liquidity of our common shares and/or affect investor perception of the value of the Company, and as a result shareholders may not be able to sell their shares on a timely basis, or at all.

Our stock price has been and may continue to be volatile.

The trading price for our common stockshares on the TSX Venture Exchange (“TSXV”)TSXV has been and is likely to continue to be highly volatile. Although we have registered our stock with the U.S. Securities Exchange Commission (“SEC”),SEC, the U.S. market for our shares has been slow to develop, and if and as such a market develops, prices on that market are also likely to be highly volatile. The market prices for securities of early stageearly-stage technology companies have historically been highly volatile.

Factors that could adversely affect our stock price include:

As of February 22, 2016,March 15, 2024, our 52-week high and low closing market priceprices for our common stockshares on the TSXV waswere CA$2.00 (US$1.607.15 and CA$0.62 (US$0.47), respectively, based1.01. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation of this type may be expensive to defend and may divert our management’s attention and resources from the operation of our business

The listing of our common shares on multiple exchanges may adversely affect the liquidity and value of our common shares.

Currently, our common shares are traded on the closing exchange ratesTSXV and Nasdaq. We cannot predict the effect of listing our common shares on multiple exchanges on the respective dates.market price of our common shares, and listing on multiple exchanges may dilute the liquidity of these securities in one or more markets.

We have historically obtained, and expect to continue to obtain, additional financing primarily by way of sales of equity, which may result in significant dilution to existing shareholders.

We have not earned profits, so itsthe Company’s ability to finance operations is chiefly dependent on equity financings. Since 2012 weFunds raised over CA$43.9 million (US$38 million) inthrough equity public offerings, financing through private placements or the exercise of stock options and warrants and the conversion of convertible debt into common shares in support of the POET initiative, whichCompany’s business has resulted in significant dilution to existing shareholders.shareholder dilution. Further equity financings will also result in dilution to existing shareholders, and such dilution could be significant.

Future sales of common stock or warrants,shares, or the prospect of future sales, may depress our stock price. The exercise of share purchase options and warrants will create dilution which could adversely affect the Company’s shareholders.

Sales of a substantial number of shares of common stock or warrants,shares, or the perception that sales could occur, could adversely affect the market price of our common stock.shares. Additionally, as of February 22, 2016,March 15, 2024, there were outstanding options to purchase up to 15,298,500 shares7,918,358 of our common stock that are currently exercisable and additional outstanding options to purchase up to 10,747,000 shares of common stock that are exercisable over the next several years.shares. As of February 22, 2016,March 15, 2024, there were outstanding warrants to purchase 1,116,051 shares7,285,907 of our stock.common shares. The holders of these options and warrants have an opportunity to profit from a rise in the market price of our common stockshares with a resulting dilution in the interests of the other shareholders. The existence of these options and warrants may adversely affect the terms on which we may be able to obtain additional financing. The weighted average exercise price of issued and outstanding options is CAD$1.04 and4.82, the weighted average exercise price of warrants is CAD$0.23,1.79, which compares to the CAD$1.001.75 market price at closing on February 22, 2016.

Dilution through exercise of share options could adversely affect the Company’s shareholders.

Because the success of the Company is highly dependent upon its employees, the Company has granted to some or all of its key employees, directors and consultants options to purchase common shares as non-cash incentives. To the extent that significant numbers of such options may be granted and exercised, the interests of the other stockholders of the Company may be diluted. As of February 22, 2016, there were 26,045,500 share purchase options outstanding with a weighted average exercise price of CAD$1.04 and 1,116,051 share purchase warrants outstanding with a weighted average exercise price of CAD$0.23.March 15, 2024. If all of these securities were exercised, an additional 27,161,55115,265,764 common shares would become issued and outstanding. This represents an increase of 13.55%31.68% in the number of shares issued and outstanding and would result in significant dilution to current shareholders.shareholders

The risks associated with penny stock classification could affect the marketability of the Company’s common shares and shareholders could find it difficult to sell their shares.

The Company’s common shares are subject to “penny stock” rules as defined in 1934 Securities and Exchange Act Rule 3a51-1. The SEC adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Transaction costs associated with purchases and sales of penny stocks are likely to be higher than those for other securities. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker- dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the Company’s common shares in the United States and shareholders may find it more difficult to sell their shares.

The rights of our shareholders may differ from the rights typically afforded to shareholders of a U.S. corporation.

We are incorporated under the Business Corporations Act (Ontario) (the “OBCA”). The rights of holders of our common shares are governed by the laws of the Province of Ontario, including the OBCA, by the applicable laws of Canada, and by our Articles of Continuance and all amendments thereto (collectively, the “Articles”), and our by-laws (the “By-laws”). These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. The principal differences include without limitation the following:

Under the OBCA, we have a lien on any common share registered in the name of a shareholder or the shareholder’s legal representative for any debt owed by the shareholder to us. Under U.S. state law, corporations generally are not entitled to any such statutory liens in respect of debts owed by shareholders.

With regard to certain matters, we must obtain approval of our shareholders by way of at least 66 2/3% of the votes cast at a meeting of shareholders duly called for such purpose being cast in favor of the proposed matter. Such matters include without limitation: (a) the sale, lease or exchange of all or substantially all of our assets out of the ordinary course of our business; and (b) any amendments to our Articles including, but not limited to, amendments affecting our capital structure such as the creation of new classes of shares, changing any rights, privileges, restrictions or conditions in respect of our shares, or changing the number of issued or authorized shares, as well as amendments changing the minimum or maximum number of directors set forth in the Articles. Under U.S. state law, the sale, lease, exchange or other disposition of all or substantially all of the assets of a corporation generally requires approval by a majority of the outstanding shares, although in some cases approval by a higher percentage of the outstanding shares may be required. In addition, under U.S. state law the vote of a majority of the shares is generally sufficient to amend a company’s certificate of incorporation, including amendments affecting capital structure or the number of directors.

Pursuant to our By-laws, two persons present in person or represented by proxy and each entitled to vote thereat shall constitute a quorum for the transaction of business at any meeting of shareholders. Under U.S. state law, a quorum generally requires the presence in person or by proxy of a specified percentage of the shares entitled to vote at a meeting, and such percentage is generally not less than one-third of the number of shares entitled to vote.

Under rules of the Ontario Securities Commission, a meeting of shareholders must be called for consideration and approval of certain transactions between a corporation and any “related party” (as defined in such rules). A “related party” is defined to include, among other parties, directors and senior officers of a corporation, holders of more than 10% of the voting securities of a corporation, persons owning a block of securities that is otherwise sufficient to affect materially the control of the corporation, and other persons that manage or direct, to a substantial degree, the affairs or operations of the corporation. At such shareholders’ meeting, votes cast by any related party who holds common shares and has an interest in the transaction may not be counted for the purposes of determining

whether the minimum number of required votes have been cast in favor of the transaction. Under U.S. state law, a transaction between a corporation and one or more of its officers or directors can generally be approved either by the shareholders or a by majority of the directors who do not have an interest in the transaction.

There is no limitation imposed byNeither Canadian law nor our Articles or other charter documents onBy-laws limit the right of a non-resident to hold or vote our common shares. However,shares of the Company, other than as provided in the Investment Canada Act (the “Investment Act”), as amended by the World Trade Organization Agreement Implementation Act (the “WTOA Act”),. The Investment Act generally prohibits implementation of a direct reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian,” as defined in the Investment Act (a “non-Canadian”), unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be aof net benefit to Canada. An investment in ourthe common shares of the Company by a non-Canadian (other than a “WTO Investor,” as defined below) would be reviewable under the Investment Act if it were an investment to acquire direct control of the Company, and the value of ourthe assets of the Company were CA$5.0 million or more. However,more (provided that immediately prior to the implementation of the investment the Company was not controlled by WTO Investors). An investment in common shares of the Company by a WTO Investor (or by a non- Canadian other than a WTO Investor if, immediately prior to the implementation of the investment the Company was controlled by WTO Investors) would be reviewable under the Investment Act if it were an investment in our sharesto acquire direct control of the Company and the value of the assets of the Company equaled or exceeded certain threshold amounts determined on an annual basis. The threshold for a pre-closing net benefit review depends on whether the purchaser is: (a) controlled by a national of a country (other than Canada) that isperson or entity from a member of the World Trade OrganizationWTO; (b) a state-owned enterprise (SOE); or has a right of permanent residence in such(c) from a country (or byconsidered a corporation or other entity that is a “WTO Investor-controlled entity” pursuant to detailed rules set out in“Trade Agreement Investor” under the Investment Act) wouldAct. A different threshold also applies if the Canadian business carries on a cultural business. The 2024 threshold for WTO investors that are SOEs will be reviewable at a higher thresholdCA$528 million based on the book value of the Canadian business’ assets, up from CA$375512 million in assets , except2023. The 2023 thresholds for certain economic sectors with respect to whichreview for direct acquisitions of control of Canadian businesses by private sector investor WTO investors is $1.326 billion and private sector trade- agreement investors is $1.989 billion and are both based on the lower threshold would apply. “enterprise value” of the Canadian business being acquired.

A non-Canadian, whether a national of a WTO memberInvestor or otherwise, would be deemed to acquire control of the Company for purposes of the Investment Act if he or she acquired a majority of ourthe common shares.shares of the Company. The acquisition of less than a majority, but at least one-third of our commonthe shares, would also be presumed to be an acquisition of control of the Company, unless it could be established that the Company wasis not controlled in fact by the acquirer through the ownership of votingthe shares. The United StatesIn general, an individual is a WTO Member for purposesInvestor if he or she is a “national” of a country (other than Canada) that is a member of the WTO (“WTO Member”) or has a right of permanent residence in a WTO Member. A corporation or other entity will be a “WTO Investor” if it is a “WTO Investor-controlled entity,” pursuant to detailed rules set out in the Investment Act. The U.S. is a WTO Member. Certain transactions involving our common shares would be exempt from the Investment Act, including:

We have adopted a Shareholders Rights Plan, which may discourage takeover offers, and limit the price investors may be willing to pay for our stock.

In 2014 our Board of Directors adopted and our shareholders ratified a Shareholder Rights Plan, the effect of which would cause substantial dilution to acquirors of more than 20% of our outstanding Common Shares, which could have the effect of delaying, deferring or preventing a change in control of our Company even if a change in control would be beneficial to our shareholders. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our Common Stock.

As a “foreign private issuer”, the Company is exempt from certain sections of the Exchange Act, which results in shareholders having less complete and timely datainformation concerning the Company than if the Company were a domestic U.S. issuer.

As a “foreign private issuer,” as defined under the U.S. securities laws, we are exempt from certain sections of the Exchange Act. In particular, we are exempt from Section 14the proxy statement rules whichthat are applicable to domestic U.S. issuers. The submission ofCompany submits its proxy materials and annual meeting of shareholder information (prepared to(which are prepared in accordance with Canadian standards) onby filing a Form 6-K haswith the SEC, although those documents typically beenhave more limited information than the submissionscorresponding documents required ofto be filed by U.S. domestic issuers, andwhich results in our shareholders having less complete and timely data, including, among others, with respect to disclosure of: (i) personal and corporate relationships and age of directors and officers; (ii) material legal proceedings involving the Company, affiliates of the Company, and directors, officers promoters and control persons; (iii) the identity of principal shareholders and certain significant employees; (iv) related party transactions; (v) audit fees and change of auditors; (vi) voting policies and procedures; (vii) executive compensation; and (viii) composition of the compensation committee.Compensation Committee. In addition, due toin light of the Company’s status as a foreign private issuer, the officers, directors and principal shareholders of the Company are exempt from the short-swing insider disclosure and profit recovery provisions of Section 16 of the Exchange Act. Therefore, these officers, directors and principal shareholders are exempt from short-swing profits which apply to insiders of U.S. issuers. The foregoing exemption results in our shareholders having less data in thisthat regard than is made available by U.S. domestic issuers.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq Capital Market (“Nasdaq”) corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq’s corporate governance listing standards.

As a foreign private issuer listed on Nasdaq, we are subject to Nasdaq’s corporate governance listing standards. However, pursuant to Nasdaq rules, foreign private issuers are permitted to follow the corporate governance practices of their home country in certain instances, provided that disclosure regarding which requirements have not been complied with and confirmation regarding applicable Canadian corporate governance practices which are being followed has been provided. The Company has availed itself of the ability to follow applicable corporate governance standards of its home country in certain instances, and provided such disclosures and confirmations in applicable periodic reports filed with the SEC. Certain corporate governance practices in Canada, which is our home country, may differ significantly from Nasdaq corporate governance listing standards. Therefore, our shareholders may be afforded less protection than they otherwise would have in certain instances as a result of following such Canadian corporate governance practices.

The Company may lose its foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

We are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2023. In order to maintain our current status as a foreign private issuer, either (a) a majority of our common shares must be owned of record by persons who are not residents or citizens of the United States or (b)(i) a majority of our executive officers and a majority of our directors cannot be citizens or residents of the United States, (ii) more than 50 percent of our assets must be located outside the United States and (iii) our business must be administered principally outside the United States. If we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, including the requirement to prepare our financial statements in accordance with U.S. generally accepted accounting principles, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. If we lose foreign private issuer status and are unable to comply with the reporting requirements applicable to a U.S. domestic issuer by the applicable deadlines, we would not be in compliance with applicable SEC rules or the rules of Nasdaq, which could cause investors could lose confidence in our public reports and could have a material adverse effect on the trading price of our common shares.

Additionally, we are currently eligible to use the multijurisdictional disclosure system (“MJDS”), which, among other things, allows eligible Canadian issuers to make registered public offerings in the United States using a prospectus prepared and reviewed in Canada that is mainly, although not exclusively, in accordance with Canadian disclosure requirements. If the Company no longer qualifies as a foreign private issuer, it would not be eligible to use the MJDS, or other foreign issuer forms for certain securities offerings. The regulatory and compliance costs under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs incurred as a Canadian foreign private issuer eligible for MJDS.

If the Company is characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences.

As more fully described below in ITEMItem 10.E. “Taxation” — United States Federal Income Tax Considerations — Passive Foreign Investment Company Status”, if for any taxable year our passive income, or the value of our assets that produce (or are held for the

production of) passive income, exceed specified levels, we may be characterized as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. This characterization could result in adverse U.S. tax consequences to our U.S. shareholders, including gain on the disposition of our common shares being treated as ordinary income and any resulting U.S. federal income tax being increased by an interest charge. Rules similar to those applicable to dispositions generally will apply to certain “excess distributions” in respect of our common shares.

The actual allocation of proceeds from any financing undertaken may differ from the Company’s initial or current intentions.

The Company has discretion in the use of the net proceeds from any offering of equity securities. The Company may elect to allocate proceeds differently from its initial or current intentions. The failure by the Company’s management to apply these funds effectively could have a material adverse effect on its business.

Warrants included with financings

Warrants offered with financings are not listed on any exchange. Investors may be unable to sell the warrants at the prices desired or at all. There is no existing trading market for the warrants and there can be no assurance that a liquid market will develop or be maintained for the warrants, or that an investor will be able to sell any of the warrants at a particular time (if at all). The liquidity of the trading market in the warrants, and the market price quoted for the warrants, may be adversely affected by, among other things:

ITEMItem 4. INFORMATION ON THE COMPANYInformation on the Company

The legal and commercial name of the Company is POET Technologies Inc. The Company was originally incorporated under the British Columbia Company Act on February 9, 1972 as Tandem Resources Ltd. On November 14, 1985, Tandem Resources Ltd. amalgamated with Stanmar Resources Ltd. and Keezic Resources Ltd., to continue as one company under the name Tandem Resources Ltd. under the British Columbia Company Act. By Articles of Continuance dated January 3, 1997, Tandem Resources Ltd. was continued under the OBCA. By Articles of Amendment dated September 26, 2006, Tandem Resources Ltd. changed its name to OPEL International Inc. By Certificate of Continuance dated January 30, 2007, OPEL International Inc. was continued under the New Brunswick Business Corporations Act. By Articles of Continuance dated November 30, 2010, OPEL International Inc. was continued under the OBCA and changed its name to OPEL Solar International Inc. By Articles of Amendment dated August 25, 2011, OPEL Solar International Inc. changed its name to OPEL Technologies Inc. By Articles of Amendment dated July 23, 2013, OPEL Technologies Inc. changed its name to POET Technologies Inc.

On May 11, 2016, in an all-stock transaction, the Company acquired all the issued and outstanding shares of DenseLight Semiconductor Pte. Ltd., a privately held Singapore company that provides optical solutions. DenseLight designs, manufactures and sells optical light source products. DenseLight was acquired for $10,500,000 of the Company’s stock. The Company has two U.S. subsidiaries, issued 1,361,115 common shares to the former shareholders of DenseLight.

On November 8, 2019, the Company sold 100% of the issued and outstanding shares of DenseLight for $26,000,000. The Company recognized a gain on the sale of $8,707,280.

On June 22, 2016, in an all-stock transaction, the Company acquired all the issued and outstanding shares of BB Photonics Inc., a privately held US Company with a wholly owned subsidiary, BB Photonics UK Ltd. Both companies design integrated photonics solutions for the data communications market. BB Photonics and its subsidiary were acquired for consideration of $1,550,000. The acquisition was settled with the issuance of 199,609 common shares of the Company to the former shareholders of BB Photonics. The Company dissolved BB Photonics UK Ltd. on October 6, 2020.

On May 17, 2019, the Company established POET Technologies Pte. Ltd. (“PTS”), a wholly owned subsidiary in Singapore. On August 4, 2020, PTS established POET Optoelectronics Shenzhen Co., Ltd (“POET SZ”), a wholly owned subsidiary in Shenzhen, China.

On October 22, 2020, the Company signed a Joint Venture Agreement establishing a joint venture company, Super Photonics Xiamen Co., Ltd with Xiamen Sanan Integrated Circuit Co. Ltd. Super Photonics Xiamen Co., Ltd was formed on March 12, 2021.

The following is a graphic description of the Company and its subsidiaries:

OPEL Solar Inc. (“and ODIS Inc.

OPEL Solar”)Solar, Inc. (OPEL)

OPEL is a wholly-owned subsidiary of POET Technologies and is the assignee for all patents and patent applications filed by the Company prior to 2019.

ODIS Inc. (“ODIS”).

ODIS is wholly-owneda wholly owned subsidiary of OPEL Solar, which in turnInc. and is the designer of the POET Optical Interposer platform, and developer of optical engines based on the POET Optical Interposer platform.

BB Photonics Inc.

BB Photonics developed photonic integrated components for the datacom and telecom markets utilizing embedded dielectric technology that enabled the partial integration of active and passive devices into photonic integrated circuits. BB Photonics’ operation is currently dormant.

POET Technologies Pte Ltd. (“PTS”)

PTS is a wholly owned bysubsidiary of POET Technologies Inc. Situated in Singapore, PTS designs and tests variations of the Company.

Through our subsidiary ODIS, we developPOET Optical Interposer for specific applications. PTS also develops the technology to produce a monolithic, integrated opto electronic microchip having several potential major market applications: infrared sensor arraysassembly and test methodologies for Homeland Security monitoring and imaging along with the unique combinationproduction of optical lasers,engines designed by ODIS.

POET Optoelectronics Shenzhen Co., Ltd (“POET SZ”)

POET SZ is a wholly owned subsidiary of PTS. Situated in Shenzhen, China, PTSZ validates optical engine designs produced by ODIS and electronic control circuitsworks with customers to incorporate optical engine designs into modules.

Super Photonics Xiamen Co., Ltd, (“SPX”)

SPX is a joint venture, situated in Shenzhen, China. SPX was established with Sanan IC with a sole purpose to assemble, test, package and sell cost-effective, high-performance optical engines based on POET’s proprietary Optical Interposer platform technology.

The Company operates geographically in the same microchip for potential applications in various military programsUnited States, Canada, Singapore and potentially telecom for Fiber-to-the-home. ODIS’ technology also provides the opportunity for higher speed computing capabilities.China.

Capital Expenditures

Our capital expenditures for the last three years, which principally consist of purchases of research and development equipment and instrumentation and patents are as follows:

The Company’s registered office is located at Suite 501, 121 Richmond Street West,1107, 120 Eglinton Avenue East, Toronto, Ontario, Canada M5H 2K1M4P 1E2 and its phone number is (416) 368-9411. The Company’sCompany has operations office is located at 2550 ZankerSuite 308, 1605 N. Cedar Crest Boulevard, Allentown, PA, 18104, 21 Changi North Way, #04-06, Singapore, 498774 and Unit 02, 10^th Floor, A4 Building, Kexing Science Park, No.15 Keyuan Road, San Jose, CA, 95131.Science Park Middle District, Nanshan District, Shenzhen, 518057

Corporate Overview

The Company is incorporated under the laws of the Province of Ontario. The Company’s shares trade under the symbol “POET” on Nasdaq in the U.S and under the symbol “PTK” on the TSXV in Canada.

POET Technologies is a design and development company offering photonic integrated packaging solutions based on the POET Optical Interposer™, a novel platform that allows the seamless integration of electronic and photonic devices onto a single chip using advanced wafer-level semiconductor manufacturing techniques. The semiconductor industry has adopted the term “Wafer-Level Chip-Scale Packaging” (or “WLCSP”) to describe similar approaches within the semiconductor industry. POET’s Optical Interposer eliminates costly components and labor-intensive assembly, alignment, and testing methods employed in conventional photonics. We believe the cost-efficient integration scheme and scalability of the POET Optical Interposer brings value to devices or systems that integrate electronics and photonics, including high-growth areas of communications and computing. The emergence of Artificial Intelligence (AI) systems over the past year has placed extraordinary demands on cloud-based AI service providers and hyperscale data centers for increases in network speeds and bandwidth. We believe that chip-scale integration is essential to developing hardware that can meet such demands and that POET is on the forefront of providing scalable solutions for current and future AI systems.

POET targeted as the first application of the Optical Interposer the development of optical engines for optical transceivers used in internet-based data centers. Optical Engines include all the passive and active components related to the production, manipulation, and detection of light within an Optical Transceiver. Optical Transceivers plug into switches and servers within the data center and allow these network devices to send and receive data over fiber-optic cables. We chose this market because it is large in size, has established standards for device performance, and the unit volumes of devices shipped annually are exceptionally high. It is a market in which our advantages of cost, power consumption and ability to scale rapidly allow us to be competitive with other suppliers.

The rapid growth of AI software systems represents a profound opportunity for POET. We believe that the rapid growth of software services can only be sustained with hardware that meets the challenges of increasing speed and bandwidth, lower power consumption, lower cost, and the ability to scale to the volumes that will be required by data centers globally. POET meets these challenges in two ways: first, by providing to the market integrated, chip-scale Optical Engines that perform at the levels that are now being deployed in the most advanced AI clusters at speeds of 800Gbs (gigabits per second); and second, by offering what we believe is currently the only viable path to increasing the speeds and bandwidth of Optical Transceivers to 1.6Tbs (terabits per second) and 3.2Tbs in industry-standard pluggable form factors. In addition, we have used our Optical Interposer technology to develop Light Source products that address newly emerging architectures in data centers that are based on chip-to-chip data transfer using light, rather than electrons, which resolves speed, bandwidth, heat-generation and cost issues at a fundamental level. The combination of POET’s focus on leading-edge Optical Transceivers and Light Source products for next generation data center architectures essentially places POET among a small number of suppliers globally that are truly “pure play” AI hardware companies.

Research & Development

Beginning in 2017, POET began designing lasers for data communications applications and directed DenseLight Semiconductors, Pte. Ltd., a former subsidiary of the Company, to build such lasers to be compatible with the Optical Interposer platform. In 2019, the Company decided to adopt a “fab light” strategy, common among semiconductor companies, and divested its fabrication operations through the sale of DenseLight in November of that year. From 2018 - 2020, virtually all the R&D spending in the Company was dedicated to design & development of the Optical Interposer as a versatile platform technology, replete with features that enhance its utility across a variety of application spaces.

During the second half of 2021, the Company transitioned to product development by investing more than $2 million in the design & development of 100G and 200G optical engines in several configurations, including customized designs for specific customers and applications. Samples of optical engines at various stages of development were made available and delivered to customers in 2022 for initial evaluation and in 2023 for design-in and customer qualification. SPX is forecasted to produce Optical Engines in high volumes for several customers in 2024. POET’s effort in lower speed Optical Engine design and production was intended primarily as a way for POET to demonstrate the viability and market acceptance of its unique approach to integration and fabrication and to establish an initial presence in the market. However, the Company’s primary strategy is to offer Optical Engines at the highest speeds at which customers are deploying Optical Transceivers. In 2024, we expect that we will be primarily in 800G, and heavily focused on those hyperscale data centers actively implementing AI services. Consistent with this strategy, the Company has invested approximately $20 million in design, development and engineering programs related to its 400G transmit chiplets (combined in multiples of 400G to achieve 800G, 1.6T and 3.2T speeds), in 800G receive optical engines, and in light source products, and fabrication techniques.

The Company has designed, tested and sampled the current version of its 400G transmit (Tx) engine, and its 800G receive (Rx) engine with various customers. The Company intends to revise its 400G Tx product and to introduce a new version later this year. The 800G Rx has been well received, fully qualified and is expected to be incorporated in the optical transceiver modules of several customers this year. So long as the Company provides Optical Engines to optical transceiver module customers, there will always be customer centric adjustments to these products to fit their specific needs. The cost to make these adjustments will vary depending on the customer requirements.

The Company is expected to invest an additional $11 million in 2024 in ongoing development of the 400G Tx chiplet for inclusion in 800G and 1.6T optical tranceivers. POET is also committed to the development of its own optical transceiver modules, a critical next phase in the Company’s growth plan, with investments in that program beginning this year. At the present time, the Company expects to have a functional module by 2025 with sales of modules ramping in late 2025.

Target Markets

Data Center AI Market

To support the substantial increase in bandwidth consumption, internet data center operators are increasing the scale of their internet data centers and deploying infrastructure capable of higher data transmission rates. At the present time, much of the industry is moving from 100G to 400G and higher. With the growth of AI clusters, interest in acquiring 800G capable optical transceivers has literally skyrocketed. LightCounting estimates¹ that AI services will add $17 billion in revenue over the next five years to the existing nearly $5 billion in annual shipments of ethernet transceivers in 2022. As transceiver speeds have increased the cost and complexity of assembling optical modules has also increased, few module makers have the ability to achieve economies of scale with conventional, non-semiconductor-based approaches. We believe that products incorporating the Company’s unique technology will enable POET to capture a significant share of this large market, especially at the cutting edge of higher speeds, particularly as AI-driven data centers increasingly deploy 800G optical transceivers and are actively looking for 1.6T capabilities.

Light Source Markets

There are numerous established companies and start-ups addressing the need to lower power consumption and increase the efficiency of the GPUs and memory devices typically used in AI systems. To date, these bandwidth and efficiency issues have been addressed by increasing the capabilities and protocols at which electronic data network systems operate. To achieve lower power, several device makers are beginning design systems to utilize light, instead of electrons to either perform certain computations, or to manage data traveling in and out of the processor and memory chips. Using light offers significant advantages of speed and lower heat generation than comparable electronic-only devices. There are currently no reliable sources that the Company has been able to find that estimate the current or future size of this market. However, we expect that when the hardware is fully developed and the market emerges, it is bound to be very large, and could eclipse the market for optical transceivers.

¹LightCounting. “July 2023 Mega Data Center Optics Market Report”, July 2023 and “LightCounting Quarterly Market Update September 2023.”

Other Potential Photonics Markets

Other markets for POET’s integrated photonics solutions include 5G interconnect markets, such as PON and GPON, edge computing for machine-to-machine communications, and selected sensing markets, including LIDAR, Optical Coherence Tomography for medical devices, and certain consumer products, such as virtual reality systems.

Manufacturing

To address the challenge of producing devices in the large quantities that are needed by customers in the high-volume data communications industry, POET entered into an agreement in late 2020 with Xiamen Sanan Integrated Circuit Co. Ltd. (“Sanan IC”), a unique, proprietary process that addressessubsidiary of Sanan Optoelectronics Xiamen Co. Ltd. to form a joint venture to assemble, test and sell POET-designed optical engines in high volumes. Sanan is the deficienciesworld’s largest manufacturer of size, integration, power and cost efficiency associated with current opto-electronic semiconductor manufacturing technologies. The novel process can be accommodated in existing compound semiconductor fabsdevices, producing over 25 million eight-inch wafers per year across a variety of substrate types and applications. The objective of the joint venture company, which is named “Super Photonics Xiamen” (“SPX”) is to assemble, test and sell optical engines based on the POET Optical Interposer, along with minimum re-tooling, thus potentially reducing capital expenditures requireddevices procured from various suppliers, including Sanan IC, into finished products. Except for specific customers as agreed between the parties, optical engines for 100G and 200G applications will be sold exclusively world-wide by SPX. 400G optical engines will be sold by SPX in the China territory while the Company will sell 400G and 800G optical engines to adopt POET’s process technologies.customers in the United States, Europe and elsewhere outside the China territory. Volume production of optical engines designed for specific customers with high volumes is expected to ramp in mid-2024.

Our Strategy

Our vision for the Company is to become a global leader in chip-scale photonic solutions by deploying products based on our Optical Interposer technology and optical engine designs over a broad range of vertical market applications. Our Mission for the Company is to establish an industry leadership position based on the full “semiconductorization” of the photonics industry, producing validated, disruptive, IP protected products globally.

We recently refined our strategy to reflect our current thinking about how best to achieve our vision and mission for the Company:

² PitchBook Data Inc., “Emerging Tech Research” and “Q1 and Q3 2022 Artificial Intelligence & Machine Learning Reports”, Brendan Burke, Senior Analyst.

³ “Celestial AI Raises $56 Million Series A to Disrupt the Artificial Intelligence Chipset Industry with Novel Photonic-Electronic Technology Platform”, February 4, 2022, Businesswire.

Our Products

POET Optical Engine Products currently include the following:

● 100G LR4 Tx and Rx

● 200G FR4 Tx and Rx

● 400G/800G FR4 Rx with integrated TIA

● 400G/800G FR4 Tx with integrated Driver

● 1.6T 4xFR4 Rx with integrated TIA

● 200G/Lane Tx & Rx for 1.6T and 3.2T

● LightBar: C-Band External Light Source

● LightBar: O-Band External Light Source

Competition

The Company currently hasphotonics market is intensely competitive and we expect experience intense competition from a number of manufacturers with alternative technologies. Many of our competitors will be larger than we are and have significantly greater financial, marketing and other resources.

In addition, several of our competitors, especially in the datacom markets, have large market capitalizations or cash reserves and are much better positioned to acquire other companies to gain new technologies or products that may displace our products. Data center equipment providers, who we expect to become our customers, and data center service providers, who are supplied by our customers, may decide to manufacture the optical subsystems that we plan to provide. We may also encounter potential customers that, because of existing relationships, are committed to the products offered by these competitors.

We believe the principal competitive factors in our target markets include the following:

We believe that we can compete favorably with respect to the above factors based on processes, the projected performance, anticipated inherent reliability of our products, our technical expertise in photonic engine design and manufacture and cost.

Intellectual Property

We have 69 issued patents and 19 patent applications pending, including three provisional patent applications. Of the 69 issued patents, pending30 are directly related to the semiconductor Planar Opto-Electronic Technology (“POET”).Optical Interposer and include fundamental design and process patents. All 19 applications pending are Optical Interposer-related. Multiple additional applications are in various stages of preparation. The Company’s focus ispatents cover device structures, underlying technology related to the Optical Interposer, applications of the technology, and fabrication processes. We intend to continue to apply for additional patents in the future. We believe these patents provide a significant barrier to entry against competition along with company trade secrets and know-how. Currently, we are working on the design of III-V semiconductorintegrated devices, manufacturing processes, assembly and packaging processes, and products currently for data communication applications in the consumer, data center and high performance computing segments. The POET platform also enables applications in adjacent segments in military, industrial and mobility.market.

The Company is positioned as an opto-electronic product and IP Company, with an aim to leverage existing and potential relationships in establishing a POET design and manufacturing value chain, and in commercializing POET IP.

The POET platform allows the simultaneous fabrication of electronic and optical devices on a single integrated circuit, an achievement that has not been accomplished using the silicon-based technologies currently dominating the market. Key benefits of the ability to integrate electronic and optical devices are anticipated to include: (i) faster semiconductor device speeds; (ii) increased device output power; (iii) decreased need for device cooling; (iv) greater reliability; and (v) total system cost reductions. With POET’s materials system incorporating periodic table element groups III, IV and V (“Group III-V”), we expect that active optical elements and high- performance electronic elements can be packed in a single integrated circuit built around a GaAs wafer.

POET is being developed to be differentiated from competing semiconductor processes such as silicon, GaAs, or indium phosphide, however, by its more comprehensive set of functional capabilities and its ability to integrate them. Existing processes require the use of multiple chips, circuit boards or sub-systems being linked together by either physical snap connections or multiple cable connections that:

Unlike these processes, we anticipate that POET will be able to integrate lasers, modulators, photoreceivers and passive optics as well as high-speed, low-power electronics on one monolithically-fabricated die. This would allow POET ICs, when fully developed, to demonstrate a lower cost structure, increased power savings and increased reliability.

The fabrication of integrated circuits made of GaAs, however, is a more highly complex and precise process. Compared to the manufacturing of silicon integrated circuits, GaAs technology is less mature and more difficult to design and manufacture within specifications in large volume. In addition, the more brittle nature of GaAs wafers can result in lower manufacturing yields than with silicon wafers. During manufacturing, each wafer is processed to contain numerous integrated circuits, which may also result in lower manufacturing yields.

Adopters of our POET technology in the market will face difficulties in adapting to the larger semiconductor wafer sizes required for volume production of devices. Although GaAs has many advantages over silicon and the integration resulting from our POET technology is expected to provide advantages over the current, silicon-based, multi-circuit semiconductor model, device manufacturers may need to reconfigure how they embed semiconductors using our POET technology in their products. This could delay semiconductor manufacturers in adopting and deter adoption of the POET technology.

The Company has patents issued and patents pending for its semiconductor POET platform, which is currently being developed through ODIS. The Company has licensed the intellectual property portfolio, developed by our Founder and Chief Scientist, Dr. Geoff Taylor, at UCONN. We believe that our patent and trade secret protection on POET, together with ODIS’s specific design knowledge using POET elements, will provided us with a large, defensible barrier to outside competition.

We expect to incur additional losses and require additional financial resources to complete development. The continuation of the Company’s research and development activities and the commercialization of its products are dependent upon the Company’s ability to successfully complete its research programs, protect its intellectual property and finance its cash requirements on an ongoing basis. It is not possible to predict the outcome of future research and development activities or the financing thereof.

Research and Development Activities

The Company is conducting research and development related to expansion of the POET platform by adding processes to the POET IP portfolio. It is also engaged in developmental work related to existing POET processes for data communications applications in potential consumer, data center, high performance computing, industrial, military and mobility segments. The Company continues to develop gallium arsenide-based processes having several potential market applications, including: (i) infrared sensor arrays for defense as well as domestic monitoring and imaging applications, (ii) the unique combination of analog, mixed-signal, digital and optical functions on the same chip for potential use in high volume short reach and very short reach data communication transceivers and (iii) exploring the use of POET’s unique VCSEL technology as smart pixels for application in display applications for Augmented Reality. The Company believes that the POET process has the potential to fundamentally alter the landscape of optical data communications for a broad range of applications by offering unique integrated optical and electronic components with dramatically lower solutions cost together with increased density, reliability and lower power consumption through integration.

The Company:

Industry Outlook

Social networking, cloud computing and growth in mobile computing are driving a continuous need for improvements in bandwidth and data handling capacity. This has driven and continues to drive a significant growth in data centers. Cloud data center traffic compound annual growth has been over 25%^[1] compound annual growth rate (“CAGR “) and is expected to continue to grow at this rate for the next few years.

Power consumption in data centers has now become a significant issue, thus creating a need to proliferate low power computing and communications technology in data centers – to enable the conversion of power-hungry copper based communication links to fiber optics.

POET is applicable to a large portion of the opto-electronic semiconductor market as it represents an integrated comprehensive solution to increasing the performance potential of semiconductors in an economical and functional manner. The technology is particularly capable of addressing the power challenges currently faced in Data Centers. POET’s innovation potentially enables devices to manage more data at the performance of optical devices but at near the cost points of copper-based solutions. Based on the Company’s interactions with potential customers, we believe that POET may provide significant value in applications where it addresses the need for lower power consumption, solution size, and cost efficiency.

Data centers today are enduring an excruciating pain point in terms of power. Energy management costs for US data centers alone had approached US$9 billion in 2013 according to the National Resources Defense Council and are forecast to rise to $13.7 Billion by 2020. Each watt of heat that does not have to be rejected from the rack could be worth savings in outright direct energy but also in indirect energy related to cooling costs. A single copper direct attach cable consumes about 3W of power per end. Let’s take a single mega datacenter with between 10,000-100,000 servers and a rough estimate of potentially 100,000 copper links. If you can save 5W of power per copper link used in this one Data Center, this can easily translate into 0.5 million Watts of saved energy translating into significant savings in operating expenses for a single mega data center. We believe data communications, is primed for an integrated opto-electronic device and process platform that can enable low power, minimized size and component cost. This is the opportunity that POET is targeting to address, with its patented process that integrates digital, high-speed analog and optical devices on the same chip. We believe that the process can enable managing data at the speed of light and the cost of copper.

The POET platform may provide the following advantages to the data center industry:

The Company’s strategy is to complete development of its VCSEL based integrated optical platform and monetize this technology with a mix of product and licensing revenue, while continuing research towards the expansion of its IP portfolio.

The disruptive potential of POET’s technology was first recognized within the military community, and this recognition has remained strong. Applications in this market include infra-red sensor arrays and high frequency RF monolithic microwave integrated circuits.

POET is currently under development and has not yet been utilized in production environments, and there are no assurances that our development and marketing efforts will ever result in POET being utilized by any manufacturer or otherwise commercialized.

Military

POET’s platform for opto-electronic integration is designed to exploit the opto-electronic and electronic behaviors of GaAs semiconductor material. One of the benefits of this material, from a space electronics perspective, is that GaAs is significantly less susceptible to x-ray and gamma-ray total integrated dose radiation. GaAs has been a long-standing choice for high-frequency devices and circuits, though GaAs digital devices do not provide the performance that metal oxide semiconductor field effect transistor devices provide.

Important to military applications are the electronic devices that can be integrated into the POET design architecture, including both complementary heterostructure field effect transistors and complementary HBTs. These transistors will enable both analog and digital functions in POET hybrid opto-electronic devices. The technology also provides a number of key, integrable opto-electronic devices: resonant vertical cavity lasers, detectors, amplifiers and modulators for out-of-plane operation. In addition, POET innovation enables in-plane waveguide and traveling wave operation for lasers, detectors, modulators, amplifiers and directional coupler switches.

Important to the military is POET’s potential to integrate digital, radio frequency and optical technologies in a single device, which is designed to satisfy the documented high-performance capability needs for multiple space systems of all military departments and agency technology areas.

POET’s architecture, which incorporates a dense mix of active optical elements and optical waveguides together with logic and mixed signal elements, is designed to enable a wide variety of space-system components. These components, when developed, could be combined to enable a number of applications including high speed transceivers for laser communications, radio frequency transceivers, radio frequency and optical phased arrays, opto-electronic interconnects, analog-to-digital and digital-to-analog converters, uncooled visible, mid-wavelength infrared and long-wave infrared imagers, optical memory, opto-electronic and radio frequency apertures, ultra- wide-band sources and receivers, low-light-level sensors, single photon counters and optical correlators.

POET could have the ability to offer a low-cost monolithic solution to multi-spectral imaging. The compact array could provide:

(i) detection, readout and analog-to-digital conversion on a single chip; (ii) a common axis for ultraviolet, visible and infrared imaging;

(iii) wavelength scanning; and (iv) 300K operation with no cooling required. The Space Foundation has indicated that this technology

______________________

¹Source: Cisco Global Cloud Index 2014

satisfies Space Situational Awareness (“SSA”) sensor requirements by providing required capability with significantly reduced size, weight and power. In addition, the Air Force Communications Command and Control Division (“C3”) Tech Area Plan identifies mid- and long-term space communication and C3 technology challenges that can be addressed by the photonic applications that POET technology is potentially able to provide.

Marketing Plan

Military Segment

Our initial fundamental business strategy is to continue our directed focus on the military market through licensing arrangements and by pursuing projects which meet the POET platform product design goals of the transition process, which may lead to the subsequent volume production and license revenue generation. Our intent is also to foster prime contractor involvement that will lead to either a licensing or other form of partnership relationship based on long term demand for the POET platform, and to develop that demand into a potential partner’s strategic plans for meeting government requirements. Training, supporting and energizing prime contractor sales teams will be a key ingredient to POET’s success in generating military and agency revenue.

Commercial Segment

Our commercial sales and marketing activity will be based on direct contact with target corporations by senior management or industry consultants hired by the Company. Such contact will focus on developing successful relationships within the product areas. We believe that relationship leveraging is required to first gain entrance and then acceptance of a new company with new technology. Marketing and product development activity is expected to continue throughout the POET development and transition process in order to anticipate and adapt commercially directed devices, as well as commercial applications discovered going forward, during the development phase, thus offering well-designed, well-supported, market-focused products capitalizing on the potential advantages of POET.

The release of test or prototype devices to both market segments for testing and acceptance of the POET process is important to the Company’s marketing plan. The availability of prototypes will be necessary to solicit early design wins with the potential to lead to volume production at such time as the Company can commence the POET transition.

The Company believes that the most expedient way to scale its sales efforts in both the military and commercial market segments will be to work with and through the marketing, sales and engineering teams of those firms who are respected, proven product and solution providers, already holding a significant market share within their industry.

Competition

The Company’s competitive environment encompasses current state of the art semiconductor device fabrication technologies, principally silicon photonics and Indium Phosphide technology, which have been the primary technology for developing and manufacturing integrated opto-electronic circuits utilized in the photonics markets. The Company believes that novel technological developments proprietary to it implemented on GaAs substrates provide advantages with respect to power utilization, speed and device size compared to silicon photonics technology, enabling it to provide optical communications capabilities to silicon chips which are approaching physical barriers to increasing speed and energy efficiency. Any success for POET adoption will require substantial education and marketing efforts by the Company. In addition, the incremental cost of utilizing GaAs substrates, the variations in processing steps and the limitations on wafer size and of wafer fragility will serve as hurdles to POET adoption. Adopters of our POET technology in the market will face difficulties in adapting to the larger semiconductor wafer sizes required for volume production of devices.

However, POET has the potential advantages of being, in some cases, (i) easier to implement in a manufacturing environment, (ii) more energy efficient, and (iii) more flexible in its potential applications. Consequently, we believe that if we are able to develop and commercialize POET, our technology should be able to compete effectively with other current technologies. As the semiconductor market is large and subject to rapid technological development, other technologies or improvements to existing technologies may emerge that could surpass the Company’s expectations for POET, in which case the Company would suffer competitive harm.

Some of our potential competitors have longer operating histories, significantly greater resources and name recognition and a larger base of customers. As a result, these competitors may have greater credibility with our potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and licensing of their technologies than we would be able to. In addition, some of our potential competitors have likely already established licensing or joint development relationships with the decision makers at our potential customers. In addition, many we perceive as potential customers have the capabilities to develop technology competitive to ours internally. These competitors may be able to leverage their existing relationships to discourage their customers from licensing or otherwise utilizing our technology. These competitors may elect not to support our technology which could complicate and impede our sales efforts. These and other competitive pressures may prevent us from competing successfully against current or future competitors, and may materially harm our business.

Our target markets are intensely competitive and characterized by rapid technological change. We cannot assure you that we will have the financial resources, technical expertise or marketing or support capabilities to compete successfully in the future. Competition is based on a variety of factors including price, performance, features, software availability, marketing, customer support, name recognition and financial strength. Further, given our contemplated reliance on semiconductor manufacturers, our competitive position is dependent on their competitive position. In addition, semiconductor manufacturers are not expected to license our architecture exclusively, and several of them also design, develop, manufacture and market semiconductor devices based on their own architectures or on other non-POET technologies.

The Company currently has two subsidiaries with the following corporate structure:

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Geographic Distribution of Revenue

Revenue and geographic markets in 2023, 2022 and 2021 were approximately as follows:

The following graphically displays the organizational structure of the Company:

The Company’s head Canadian office is located in a 1,400-sq.400 sq. ft. leased office space in Toronto, Ontario, Canada. The Company has itsUS based operations officeare in a leased 9,043sq.3,883 sq. ft. space in San Jose, California.Allentown, Pennsylvania. Our testing operations are located in a 4,669 sq. ft leased facility in Singapore. Our product development operation is located in a 2,830 sq. ft leased facility in Shenzhen, China.

ITEMItem 4A. UNRESOLVED STAFF COMMENTSUnresolved Staff Comments

Not Applicable.applicable.

ITEMItem 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTSOperating and Financial Review and Prospects

The following discussion should be read in conjunction with the audited consolidated financial statements of the Company and the related notes for the years ended December 31, 2015, 20142023, 2022 and 20132021 and the accompanying notes thereto included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. See “Cautionary Statements Regarding Forward-Looking Statements” discussed above. Actual results could differ materially from those anticipated by forward-looking information due to factors discussed under “ITEM“Item 3.D. Risk Factors” and “ITEM“Item 4.B. Business Overview.”

The information in this section should be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2023, 2022 and 2021 and related notes and the information contained elsewhere in this report.

Cash and cash equivalents

Cash and cash equivalents consist of cash in current accounts of $1,249,116 (2022 - $1,981,765, 2021 - $4,216,911) and funds invested in US and Canadian Term Deposits of $1,769,953 (2022 - $7,248,080, 2021 - $10,724,864) earning interest at rates ranging from 0.20% - 0.25% and maturing in less than 90 days. The decrease was primarily due to a lack of revenue and limited equity raises during the year.

Short-term investments

The short-term investments of nil (2022 – nil, 2021 - $6,366,828); in 2021, the Company’s short term investments consisted of guaranteed investment certificates (GICs) held with one Canadian chartered bank and earn interest at rates ranging from 0.75 to 1.44%.

Selected Annual Data

The selected financial data of the Company for the years ended December 31, 2023, 2022 and 2021 was derived from the audited annual consolidated financial statements of the Company, which have been audited by Marcum LLP, independent registered public accounting firm, as described in their report which is included in this Annual Report.

The information contained in the selected financial data for the 2023, 2022 and 2021 years is qualified in its entirety by reference to the Company’s consolidated financial statements and related notes included under the heading ITEM 17. “Financial Statements” and should be read in conjunction with such financial statements and with the information appearing under the heading ITEM 5 “Operating and Financial Review and Prospects”. Except where otherwise indicated, all amounts are presented in accordance with IFRS as issued by IASB.

The selected annual information for continuing operations for 2023, 2022 and 2021 can be further analyzed as follows:

Research and development can be analyzed as follows:

Selling, marketing and administration costs can be analyzed as follows:

Factors Affecting Our Results of Operations

Analysis of Continuing Operations

Year Ended December 31, 2023 compared to Year Ended December 31, 2022

Net loss was $20,267,365 for the year ended December 31, 2023 compared to a net loss of $21,036,690 for the same period for 2022, a decrease of $769,325 (4%). The following discusses the significant variances between the period and 2022:

Total R&D decreased by $668,813 (6%) to $10,077,930 for the year ended December 31, 2023 from $10,746,743 for the same period in 2022. For the purposes of the following analysis, non-cash stock-based compensation of $1,539,235 has been excluded and is included with the analysis of non-cash stock-based compensation below.

Depreciation and amortization increased by $628,982 (49%) to $1,922,140 for the year ended December 31, 2023 from $1,293,158 for the same period in 2022. Subsequent to the sale of DenseLight, the Company embarked on a “fab-light” strategy with a required test facility situated in Singapore and product development facility in China. The increase in depreciation and amortization was a result of assets acquired for these new facilities.

Professional fees increased by $571,028 (49%) to $1,744,771 for the year ended December 31, 2023 from $1,173,743 for the same period in 2022. During the period, the Company incurred legal fees related to certain unsuccessful financing arrangements that it was engaged in. Additionally, the Company incurred fees related to the preparation of regulatory documents to support multiple at-the-market financing programs.

Impact of joint venture was nil for the year ended December 31, 2023 compared to a net loss of $1,465,006 for the same period in 2022. The impact of joint venture relates to the Company’s activity related to its investment in SPX. During 2023, the Company recorded a non cash gain on its contribution of IP to SPX of $1,031,807 compared to $1,746,987 in 2022. The Company recognized its share of SPX’s losses using the equity method. On a weighted average bases, the Company incurred approximately 78.9% or $(3,026,408) of the net operating loss of SPX for 2023 compared to $(3,614,211) or 83.7% in 2022. Although the Company’s equity ownership of SPX approximated 76.1% at December 31, 2023, the Company only recognized $(1,031,807) of its share of loss in SPX in 2023, compared to $(3,211,993) in 2022 because the value of its investment is carried at nil on the consolidated statements of financial position precluding further loss recognition under the standards.

General expenses and rent decreased by $201,826 (10%) to $1,816,265 for the year ended December 31, 2023 from $2,018,091 for the same period in 2022. In 2022, the Company engaged with a research and development company that does not have any revenue sources. We are developingfirm to assist with a technological process that demands significant investmentsnew shareholder outreach program at a cost of cash and other resources.$73,280. Additionally, the Company paid $30,000 to the transfer agent in annual fees to manage to various trust agreements related to debenture warrants outstanding in 2022, there were no debentures outstanding in 2023. The Company has not earned a profit since its inception. Duealso reduced the services of certain investor relations advisers in 2023.

Non-cash stock-based compensation decreased by $235,160 (5%) to $4,201,444 for the current stage ofyear ended December 31, 2023 from $4,436,604 for the process development, the Company’s most significant expenses are subcontract fees and human resources related, either directly as wages and benefits or through thesame period in 2022. The valuation of stock options is driven by a number of factors including the number of options granted, the strike price and the volatility of the Company’s stock. The stock option expense is dependent on the timing of the stock option grant and the amortization of the options as they vest. The stock options vest in accordance with the policies determined by the Board of Directors at the time of the grant consistent with the provisions of the Plan.

The Company issued warrants in USD during 2023. The issuance of those warrants created a derivative liability which is periodically remeasured and adjusted to reflect the fair value of the warrants. The Company had a non-cash adjustment of $24,865 for the year ended December 31, 2023 related to the fair value adjustment of the derivative liability.

Other (income), including interest increased by $46,670 (25%) to $234,990 for the year ended December 31, 2023 from $188,320 for the same period in 2022. The increase in other (income), including interest was a result of interest income earned from short-term investments and cash equivalents during 2023.

Year Ended December 31, 2022 compared to Year Ended December 31, 2021

Net loss for the year ended December 31, 2022 was $21,036,690 compared to a net loss of $15,669,093 for the same period in 2021, an increase of $5,367,597 (34%). The following discusses the significant variances between the period and 2021.

During the year, NRE revenue increased by $343,648 (164%) to $552,748 for the year ended December 31, 2022 from $209,100 for the same period in 2021. 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.

Total R&D increased by $2,581,615 (32%) to $10,746,743 for the year ended December 31, 2022 from $8,165,128 for the same period in 2021. For the purposes of the following analysis, non-cash stock-based compensation of $2,054,187 during the year ended December 31, 2022 has been excluded and is included with the analysis of non-cash stock-based compensation below.

R&D, excluding non-cash stock-based compensation, increased by $2,297,379 (36%) to $8,692,556 for the year ended December 31, 2022 from $6,395,177 for the same period in 2021. The increase in R&D is a result of the new stage of the Company’s development where it is transitioning from technology development to product development. As the transition occurs, qualified engineers are needed to fill roles related to new production introduction and quality control. R&D wages increased by $997,409 (30%) to $4,267,937 for the year ended December 31, 2022 from $3,270,528 for the same period in 2021. The Company has also engaged with new suppliers, through non-recurring engineering and qualification programs, to ensure that the supply of required products and services will meet the Company’s standards and will be available as needed. These programs resulted in an increase in R&D supplies and subcontract fees of $1,299,970 (42%) to $4,424,619 for the year ended December 31, 2022 from $3,124,649 for the same period in 2021.

Interest expense was $49,738 for the year ended December 31, 2022 from $364,619 for the same period in 2021, a decrease of $314,881 (86%). The Company raised $3,729,921 in convertible debentures between April 2019 and September 2019 with two-year maturities. The Company was required to pay monthly interest on the convertible debentures. As the convertible debentures reached maturity during 2021, interest cost was reduced. All convertible debenture were either converted or matured in 2021. Interest in the year is non-cash.

Depreciation and amortization increased by $192,636 (18%) to $1,293,158 for the year ended December 31, 2022 from $1,100,522 for the same period in 2021. With the sale of DenseLight, the Company embarked on a “fab-light” strategy with a required test facility situated in Singapore and product development facility in China. The increase in depreciation and amortization was a result of assets acquired for these new facilities.

Impact of joint venture decreased by $2,910,257 (201%) to a net loss of $1,465,006 for the year ended December 31, 2022 from a net gain of $1,445,251 for the same period in 2021. The impact of joint venture relates to the Company’s activity related to its investment in SPX. During the year, the Company recognized its share of SPX’s losses using the equity method. On a weighted average basis, the Company’s share of the net operating loss was 83.7% or $3,614,211 for the year ended December 31, 2022, however the Company only recognized $3,211,993 of the net operating loss of SPX for the year ended December 31, 2022, because the investment is carried at nil (2021 - $1,445,251) on the consolidated statements of financial position. On a weighted average bases the net operating loss was 95.3% or $1,142,249 for the same period in 2021. The loss for the year ended December 31, 2022 was offset by a recognized gain of $1,746,987 related to the Company’s contribution of intellectual property to SPX in accordance with IAS 28. The Company recognized a gain of $2,587,500 during the same period in 2021.

General expenses and rent increased by $626,271 (45%) to $2,018,091 for the year ended December 31, 2022 from $1,391,820 for the same period in 2021. The increase was primarily a result of the increase in D&O insurance subsequent to the Company’s listing on Nasdaq. D&O insurance is substantially higher for US listed Companies than for Canadian listed Companies. The Company was only listed on the TSXV in 2021. Additionally, the Company’s lease for its Singapore facility was renewed in Q2 2022. The lease term is currently one year, accordingly the accounting rules relating to leases permits the Company to record rent expense. Some lease related costs in 2021 were charged to interest expense and amortization because the lease term exceeded one year. Other drivers for the increase over 2021 were the fees associated with listing on Nasdaq, costs associated with the new shareholder outreach program and costs related to the Company’s presentation at the Optical Fiber Conference. The Company did not have similar costs in 2021.

Other (income), including interest decreased by $73,511 (28%) to $188,320 for the year ended December 31, 2022 from $261,831 for the same period in 2021. During 2021, the Company received notice from the Small Business Administration of Washington, DC that its Covid-related PPP loan of $186,747 was forgiven in full. The Company did not have a similar forgiveness in the prior year. Other (income) including interest was all interest income in the year. Interest income for the year ended December 31, 2021 was $75,084.

Exchange Rate Risk

The functional currency of each of the entities included in the accompanying consolidated financial statements is the local currency where the entity is domiciled. Functional currencies include the Chinese Yuan, US, Singapore and Canadian dollar. Most transactions within the entities are conducted in functional currencies. As such, none of the entities included in the consolidated financial statements engage in hedging activities. The Company is exposed to a foreign currency risk when its subsidiaries hold current assets or current liabilities in currencies other than its functional currency. A 10% change in foreign currencies held would increase or decrease other comprehensive loss by $198,000.

Liquidity Risk

The Company currently does not maintain credit facilities. The Company’s existing cash and cash resources are considered sufficient to fund operating and investing activities beyond one year from the issuance of these consolidated financial statements. The Company may, however, need to seek additional financing in the future.

The Company had working capital of $716,881 on December 31, 2023 compared to $5,751,101 on December 31, 2022. The Company’s statement of financial position as of December 31, 2023 reflects assets with a book value of $8,777,417 compared to $15,390,453 as of December 31, 2022. 36% of the book value at December 31, 2023 was in current assets consisting primarily of cash and cash equivalents of $3,019,069 compared to 62% of the book value as of December 31, 2022, which consisted primarily of cash and cash equivalents of $9,229,845.

During the year ended December 31, 2023, the Company had negative cash flows from operations of $(15,407,462). The Company has prepared a cash flow forecast for one year from December 31, 2023 which indicates that it does not have sufficient cash to meet its minimum expenditure commitments and therefore needs to raise additional funds to continue as a going concern. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.

To address the future funding requirements, management has undertaken the following initiatives:

The Company’s financial statements do not include any adjustments to the assets’ carrying amount, to the expenses presented and to the reclassification of the balance sheets items that could be necessary should the Company be unable to continue its operations.

The following is a summary of Company’s cash flows and working capital: