A sampling of highlights from the MD&A

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.

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 transmit and receive optical engines, 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 800G Rx has been well received, fully qualified and is expected to be incorporated in the optical transceiver modules of several customers this year. 

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 transceivers. The Company is also committed to the development and sale of POET optical transceiver modules this year, representing a critical next phase of its growth plan.  

At the present time, much of the industry is moving from 100G to 400G and higher. With the growth of AI networks, interest in acquiring 800G capable optical transceivers has literally skyrocketed.

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 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.

As SPX builds a revenue base it becomes an asset for generating cash in the form of dividends or becomes a potential source of non-equity capital for POET to support its own growth. POET has no capital commitment requirements for the advancement of SPX to a revenue-generating entity. Prior to a future planned exit (I think this should be read  as an entry) on the Shanghai Exchange, opportunities to sell a portion of POET’s equity interest in SPX are also being actively pursued.

Establish additional fabrication and sales operations for advanced, high-speed transceiver modules and light source products. Internally, we refer to this our “China plus One” strategy, which is only partially dictated by the current international political climate. We are planning to develop our advanced products as modules and packaged products that we will sell directly to end-users, which will require additional fabrication, assembly, marketing and sales operations. In addition, we expect that as we approach other vertical market applications outside of optical transceivers and packaged light sources, our strategy may include the formation additional partnerships in those market segments in order to develop appropriate strategies for the fabrication of devices whose functions will be materially different from those of transceivers and with correspondingly different distribution and sales. The form of such partnerships may also be different than what was established for transceivers.  

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 

Anticipated Key Milestones for 2024 The following sets out the key milestones, estimated timing and costs of product development on the Company’s main projects in 2024, based on the Company’s reasonable expectations and intended courses of action and current assumptions and judgement. The Company’s main objective is to advance the below products to its next milestone and the successful development and roll out of these key products and projects in 2024.  

Key Milestones Stage Timing Expected Expenditures

Research & Development Programs:

Module Development Development Q1 – Q2 2024 $2,600,000

Prototype Q3 2024 $2,000,000

Production Q4 2024 $2,000,000

Total $6,600,000

Light Sources for

Artificial Intelligence

Prototypes Q1 – Q4 2024 $800,000

Total $800,000

400G Tx Development Q1 – Q3 2024 $2,000,000

Prototypes Q4 2023 $1,600,000

Total $3,600,000

Total Research & Development: $11,000,000 

ME: The question of how this will be funded is hinted at in the financial summary NR

January, 2024, we raised $6.2-million (U.S.) in cash through equity offerings to serve as a bridge to other funding opportunities