just in case... I have copied and pasted Suresh speech here from their website....

Cheers and Happy Friday!

libran

Suresh Venkatesan

Thanks, Rich. My comments will be segmented into sections for comprehension as we go through this update. Before we discuss the Optical Interposer platform, I would like to spend a few minutes on our sensing business.

As you know, this business has been our primary source of revenue for the past two years since our acquisition of DenseLight semiconductors in June of 2016. In the business, we continued to gain momentum in the third quarter growing our sensing business revenue 27% year-over-year and we expect to continue with similar growth trajectory 2019.

New markets and GaAs sensing and the autonomous vehicles like drones are driving demand for our 16XX class of distributed feedback DFB lasers and our super luminescent light emitting diode also called FLED and these will be key contributors to our growth in 2019.

We have continued to focus on expanding the reach of our products to a broad group of customers and diversifying our customer base. We're pleased with the progress we continue to make on this front. Our recent and anticipated growth is primarily centered in China and we have added a new distribution relationship with Wuhannet[indiscernible]to sell and promote our product. Additionally, we have added new customers for both our edge emitting LED also called ELED and our Narrow Line Width lasers.

Finally, by incorporating the packaging innovations developed for the Optical Interposer we expect that in mid-to-late 2019 we will be in a position to introduce an additional highly differentiated sensing product line at lower cost and higher performance.

Now moving onto the Optical Interposer. I would first like to recap the benefits and merits of the Optical Interposer platform technology. The Optical Interposer platform consists of two parts. First, the silicon based Optical Interposer incorporating our passive dielectric waveguide. And second, the Interposer compatible active indium phosphate devices like lasers, detectors, modulators, semiconductor optical amplifiers and [indiscernible]. When combined on a single platform the Optical Interposer provides our customers the flexibility to integrate optical and electrical components into a single chip scale package.

We believe the Optical Interposer represent the first practical implementation of a platonic tips scale package. As with the microelectronics industry, integration drives down form factor, size, power consumption and most importantly cost, port Optical Interposer technology has driven drawn interest from multiple Tier 1 customers for applications spanning from component level integration to subassemblies to pull the integration of optics and control electronics for transceivers. We're also seeing high interest for future applications of our Optical Interposer to enable direct optical interconnect into ASICs.

We talk a little bit about our recent orders. On November 12, 2018, court made a landmark announcement that we had received our first orders for Optical Interposer based solutions from leading global communications companies targeting data communications application. These orders include both sale contract and development contract with a value in excess of US $3 million to purchase current device prototypes, to develop and provide increasingly integrated optical engine components and to systematically address the specific customer integration requirements.

Cumulatively, these orders constitute the single largest order for products and services in the company's history. We expect to fulfill these orders beginning now through mid-2019. This is nothing short of a watershed moment for this company and one which has the potential to trigger a meaningful inflection point for growth. Equally important, these orders represent the first commercial validation of the Optical Interposer technology and it merits from leading global companies. Our ability to deliver disruptive cost reduction to our customers enabled by our innovative Optical Interposer platform was critical to winning these orders.

We believe that we're working with more highly strategic and influential customers than ever before positioning us for growth and the realization of our strategic business objective. Over the course of the next -- or so month, we will be working cooperatively with the customers to address the specific technical integration requirements that will enable our Optical Interposer solutions to be incorporated into the product being offered by these companies.

For example, the core integration of optics with electronic. In order to implement the capabilities, the Interposer has to be specifically designed to accommodate customer specific electronic such as Trans Impedance Amplifiers and laser drive. Likewise the waveguide culture designed to be compatible with the product specific obstacle power budget of our customers and device.

The advantage of the POET Interposer platform is such -- is that such customization can be done with minimal incremental development. This allows us to leverage our Optical Interposes solutions by increasing the level of integration for our customer’s existing or planned data communication product.

We have already aligned with our customers on that production volumes and pricing requirements, so that once we successfully demonstrate the platform capabilities and qualified we expect to receive production volume orders for Optical Interposer base components and subassemblies for inclusion of customers products beginning in the second half of 2019.

A few words about the qualification process. All new devices are components and data and telecommunications must demonstrate adherence to both customer specifications and industry standards. Parts of the qualification process are done by both the supplier and by its individual customers. The time period over which device testing occurs varies, but often extend three to six months or longer depending on the device or the subassembly, the qualification test required and the particular customer.

We have estimated that the qualification of active devices or light producing or detecting subassemblies such as our lasers, modulators and detectors on the Interposer platform should average approximately six month. However, with any particular device, tests or customer the qualification period may be shorter or longer. Some testing continues even after devices are shipped, so that the data on device reliability can be measured and potentially used as a selling point with other customers.

Fortunately, the qualification process often runs parallel to the customer's engineering activities to design in the device and to work through changes that may be required for the manufacturing process, so that these devices can ultimately be incorporated into products quickly thereafter.

I will spend a little bit of time now on the market and our product roadmap. The data center market is -- has an explosion of Internet traffic and it has resulted in a rapid expansion of data centers around the globe and as required generation-upon-generation of infrastructure components including servers, switchers and transceivers to continuously improve their ability to handle higher speeds and higher density of data.

100G capable transceivers began volume adoption in 2017 replacing prior 40G devices. In the United States, data center operators decided to adopt the standard which did not require the multiplexing of signals onto a single fiber, so-called PSM4 stands for Parallel Single Mode 4 channel.

The existing market for these first generation 100G devices are now saturated. Data center operators in China began adopting 100G transceivers this year, but have largely been demanding a transceiver protocol that can handle multiplexing. So the industry is now at the beginning of the introduction of a second generation of 100G adoption based on this course wavelength division multiplexing also called the CWDM standard.

Market adoption of the first, second and any subsequent generation of 100G transceivers is projected to continue through 2026. As a result, 100G represents the largest near-term market opportunity for transceiver manufacturers and therefore POET as well.

Starting in 2019 and likely continuing through 2020, many transceiver manufacturers will also begin designing their first generation of 400G transceivers, which are expected to be delivered in volume beginning sometime after 2020 entering a high growth phase in 2022 and beyond, eventually replacing 100G device.

This is typically how speed transitions occur in the industry and there is an industry term for it called the [indiscernible]. There is a period of designing and adoption, a period of growth and finally the period of saturation and decline. The market for second generation 100G CWDM devices is just now beginning a period of sustained growth. With a forecast to grow from 1 million units the year in 2017 to 9 million units per year in 2023, this period is typically characterized by intense competition, falling prices and declining margins.

The 400G market is still in an initial design and in an adoption phase, a phase where early movers lock in their architectures. This period is typically characterized by high margins and low volume prior to entering the main stream growth phase.

In 2019, POET will intersect the market for transceivers with optical engines on two vectors. One, the second generation 100G CWDM delivering a significant cost advantage to manufacturers who are already experiencing margin pressure and two, the first generation of 400G VR4 and FR4 devices where we can be designed in and provide the benefits of both lower cost and higher performance from the very outset.

The recent customer orders for products and services have resulted in an acceleration of our plan to develop lasers that will be incorporated in pole transmitter and receive optical engine and to furthermore address the requirements of 400G implementations. As a result from now through the first two quarters of 2019, we expect to devote a substantial amount of our development and operational resource to customers who want to design in all or portions of the Optical Interposer for 400G applications.

We believe that this process will lead them to understand the substantial benefits that a full optical Interposer implementation will provide. Moreover, there is no better way to introduce technology to market than with substantial financial and engineering support of the leading companies in these markets. Simply Optical Interposers and laser platform are speed diagnostic a single solution supports the requirements for both 100G and 400 G and an acceleration of 400G is completely synergistic with the deployment of 100G and within our development and product roadmap.

Therefore, in addition to our immediate focus on securing follow on business with our lead customers, POET strategic plan continues to include the expected release of our own optical engines for qualification during the year as previously announced.

We could further expand our customer base and [indiscernible]. Another point to note is that the total addressable market size for a complete transmit receive solution is at least four times larger that data for receive solution only. Therefore, acceleration of the laser development roadmap is critical to accessing the larger market sooner, particularly given the long qualification time for laser solutions in Datacom and telecom application.

A word on Silicon Photonics which is another competing integration platform for photonics integration. The optical interposer platform not only provides a versatile chip care assembly platform for photonics in general, but it is also compatible with more conventional silicon photonics solution. This has opened up a new opportunity for silicon photonics compatible components integrated waveguide solutions in addition to fully integrated optical engine solutions.

Our waveguide integrated active indium phosphide devices that has detectors or lasers which are a critical component of the optical interposer platform are also directly compatible with conventional silicon photonics technology. The vast majority of today's silicon photonic solutions do not integrate lasers at wafer scale, relegated to a diet scale assembly the true merits and cost advantages of vapor scale integration are loss.

POET’s waveguide integrated active indium phosphide component that are developed as part of its optical interposer platform solutions provider light source that can be integrated into silicon photonics devices, enabling cost advantages of wafer scale integration.

Moving onto our milestone and some operational update. Relative to our roadmap published in July this year at the Annual General Meeting, we have achieved the following. We have successfully completed our internal qualification testing on our 100G Quad 10 device through 3000 hours. Additional qualification including the assembled the receive optical engines will incorporate an enhanced version of our 100G Quad pin that we believe will be capable of achieving the performance requirements of the 400G market. This development is underway and is expected to be completed in Q1 2019 and represent one quarter of pooling relative to our original plans.

We have accelerator or laser development timeline for 400G applications and as a consequence expect to have interposer compatible laser platform ready for qualification in Q1 2019. This is again a one quarter pooling of our laser development activities. We have maintained are schedule 100 gig transceiver optical engines and have accelerated our scheduled for 400 gig of transmit receive optical engine into 2019.

We have aligned our roadmap with Almae, our strategic partner in developing the high speed modulator technology required for our transmit optical engine. We have successfully transferred the optical interposer technology to [indiscernible]. This includes installing and qualifying confined to and also establishing the manufacturing process for the optical interposer.

We also continue to make progress innovating across our interposers platform. We believe our platform is proprietary manufacturing process and the vertical integration of compatible optical components are keys to our success in the market and we remain focused on building a solid foundation. To that end, we have initiated design activity on Interposer platform to demonstrate [group] of feasibility for the large and growing 10 gig passive optical networks for telecom. Expansion to [indiscernible] and telecom remains a strategic priority for the company.

Operationally, in recent quarters, we have taken major steps to advance our development of optical interposer base new products including through the purchase of equipment, improvement of facilities and strengthening of our engineering team with more highly qualified talent and larger staff. All these changes are reflected in our financial statement through additions to fix assets, an increased operating expenses. We may need additional capital equipment to enhance our development production capabilities such as an additional [indiscernible] system that we have on order for increased labor production capacity. But we expect only marginal increases in operating expenses over the next three to four quarters.

Importantly, we're fully capable to address the needs of our new customers with our existing engineering staff and production facilities. So much of our NRE revenue will result in relatively high gross margins. The next few quarters will be devoted to the successful completion of funded development programs, the introduction of new devices into qualification cycle with customers resulting from the prototype ordered and preparation for high production volumes in subsequent quarters.

Moving on the business outlook. Apart from the orders we have for product developments with our industry leading customers from 400 gig solutions and offering up 100 gig CWDM transmit receive optical engine could have the biggest impact on the company's data communications revenue once qualified and for two to three years thereafter because of the size of the market and the need for transceiver module suppliers to address their margin pressures.

The total addressable market for 100G CWDM transceivers is over 30 million units between 2020 and 2023 for data centers alone, representing a market potential of over $4.5 billion in the same period. POET expects to have a 100G transmit receive optical engines and qualification early Q3 2019. Typical qualification periods for photonic devices and Datacom and telecom applications range from six months to a year including design in period with our customers.

Given the qualification period, POET believes that substantial growth through sale of 100G interposer base optical engines will occur in 2020. Despite the 2020 market entry, the disruptive cost and performance benefits of the interposer remain and what will be an extremely competitive 100G market. We believe that POET optical interposer base transceivers solutions will continue to provide an architectural superiority over more conventionally assembled modules which will be saddled with higher fundamental cost structures.

We continue to be bullish about our ability to generate design wins in 2019 based on our current customer engagement and garner a share of the competitive market starting 2020 by delivering up to 100% increase in gross margins for our customers enabled by disruptive cost structure.

Specific to 2019, we expect the material increase in revenue to a range between approximately $8 to $10 million. This revenue level will be driven by a combination of the expectation of 27% growth on our $4 million base of sensing business. The recently secured orders for optical interposer, an up sight potential for our additional interposer prototype orders.

We believe that a focused execution on our current customers orders and priorities will unlock a very large business opportunity for POET thereafter, especially given the size, scale and stature of the customers we're working with.

In closing, we are extremely excited about the opportunities resulting from our recently announced orders from leading data and telecommunications equipment providers, as they represent customer engagements of the largest near-term and long-term growth potential.

I've said this before and I will repeat it again, this represents a watershed moment for the company and places the company at the inflection point between development and business growth. You build the business by winning with the winners. We are allied with winners in the communication industry and our products and development represent a sizable addressable market value over the next four years. We could not be working with a more highly strategic customer to drive growth and the realization of our business objective than we are today.

I will now turn this call back to the operator for any questions that you may have.