Poet Technologies Inc (POET)

[prototype_101]

NR's: the next 4-6 weeks? In this current quarter, there are multiple anticipated, news-worthy developments that should demonstrate and solidify the 'deterministic' new phase of POET's existence. Given that dates for NR's are not possible to predict, I am suggesting that the news flow below may happen at some point in the next 4-6 weeks...so heading into early Q4.

POET PRODUCTS

"The first products are scalable 100/200G CWDM4 optical engines made for the joint venture and they are the furthest along. The design was completed and they are already in alpha even before the deal has closed. The joint venture partner is eager to make progress and the company hopes to reach beta testing by Q2 2021. The second two designs finished are 400G light engines for the same company. It is expected that some version of the newer of the two designs will be picked to go into production and the former could be used for a different client. The fourth design is for a small 400G FR4 receiver that is moving to alpha stage soon."

This, from the Zacks report, seems meaningful. Alpha products are "in" progress (?), as the customer is 'pulling' - to use a Suresh term. The same reference in the AGM Presentation is less clear, noting that Q4 will include Pre-Alpha products, but this is blended language that includes the Light source products: "Pre-Alpha Product Prototypes for 100G/200G scalable optical engines and multiplexed Light Source products for 400G DR and FR applications"

1) We may conclude reasonably that the 100G/200G Alpha products are going to generate an NR.

"In addition to these products, the company is designing an interposer based light engine to be used in an AI processor, and expects to sign a customer for that product soon. It also hopes to sign a development and supply agreement this quarter. That product has not yet been placed on the roadmap above, as the deal has not closed."

The AGM presentation again correlates this above from the Zacks report, stating that Q3 will realize a:

"Proposed Development and Supply agreement for Interposer based light source for AI applications"

2) We may conclude that we get an NR based on the AI applications Dev and Supply agreement, which could also shed light on that product, and add it to the roadmap.

NRE

"POET expects that it will book NRE revenues starting in Q3. These NREs should be less that those previously earned as the company is now in the product development stage and fees earned would only be for product customization rather than basic technology development. It is still uncertain how these revenues will be accounted for with the two choices being milestone payments or flat monthly fees over the contract duration. These contracts should be from six to twelve months in length each, but until they are signed there is no way to know. We expect the company will issue press releases whenever any deals are sign."

At the AGM, Suresh and Vivek downplayed the NRE in one way, but also clearly tied it to viable commercial contracts. Either way, it's not really reflected in the AGM PPT, but in the above Zacks report, it is clearly indicated as a Q3 activity, worth of an NR. Maybe associated with the Tier-1 (light-bars), or maybe with the AI customer (new product, no indication of customer), or both.

The evidence for this is also in the report:

"POET has presented NRE proposals to numerous companies targeting a variety of markets and we await news on at least three agreements in 2020."

3) We may conclude we get an NR on NRE in Q3, and possibly others this year as well.

WARRANTS AND OPTIONS

Fairchij has alluded to the fact that as per the Zack's report, many warrants and importantly, options, are in the money now. The report states:

"POET is also expecting that the outstanding warrants and exercisable options that are already in the money to add $23.3 million in potentially available cash. As of today, there are 57.0 million warrants outstanding and 44.4 million are already in the money. Warrants already in the money could raise $17.1 million dollars. There are also 52.8 million options outstanding of which, 22.0 million are exercisable and in the money and could raise $6.2 million. So that totals to $23.3 million."

All of the options are listed as "Employee", so it is feasible we see these exercised shortly - I do not know if quarterly reporting impacts the timing for such events? For the warrants, this one is obviously continuing to happen in a small way given our relatively flat SP.

The AGM remarks about the extension of the 75 cent warrants leads to a more unclear possible NR on the timing of those. The Zacks report incorrectly states those expire on July 20. It may be worth POET informing their paid analyst to update this information with the Sept 30 expiry date.

4) It is possible, but not certain, that we get an NR on the status of the 75 cent warrants, due to expire on Sept 30, and currently not in the money.

SANAN IC JOINT VENTURE

Obviously, the big catalyst, and the most prominent part of the POET story in terms of forecasting future revenues, is the Sanan IC JV. The Zack's report states:

"The major event in Q3 should be the signing of the joint venture agreement, which we expect to happen by the end of September".

5) It is highly likely that within the next 4-6 weeks we get an NR about the JV agreement.

VIRTUAL FINANCIAL CONFERENCES

POET is participating in the Sept 3 LD Micro 500 conference, and, for reasons I do not understand except perhaps due to legal implications, the Sept 14 Wainwright conference.

6) It is likely one or both of these conferences realizes an NR, given that "live and archived webcasts of POET’s presentations will be made available on the Presentations and Events page of the Company’s website"

So, this is my personal analysis and summary of what the expect from POET between now and mid October. Beyond that will look even better, and clearer, based on the above. One key event for Q4, which is already in progress, is the details on the POET Shenzhen office. Might that yield information on a partner, or be more along the lines of how we are operating in Allentown? The report is unclear on all this, but states:

"In its second full quarter without DenseLight, POET spent $3.5 million, the same amount as in Q1 2020. However in that number was $328,000 one-time costs for expenses associated with POET s expansion into China. While spending could be down in Q3, we expect expenses to increase again in Q4 as the company adds more staff."

So, we can also anticipate, as noted by Suresh on the call, that new high-profile hires will be coming onboard this year - he noted an offer has gone out to a candidate. He wouldn't note that unless this person was a big deal, in my view, for a big role. I expect that person is heading up China operations. I will not note that as an anticipated Q3 NR, however, given that the AGM PPT notes the incorporation of POET Shenzhen in Q4.

Some on this board have discounted my posts and gone as far as to remove them, but I encourage you to keep an open mind and view the investment with an objective lens. My views on the risks associated with POET were clearly answered by Suresh and Vivek, so my investment thesis here has not changed in that I believe the company is undervalued only due to a lack of outside interest to date. That should change with the ability to communicate 'deterministically' with potential investors.

https://agoracom.com/ir/POETTechnologies/forums/discussion/topics/745656-nr-s-the-next-4-6-weeks/messages/2280022#message

nice effort here, hopefully some news releases do come of it all