Submission Data File
Form Type*
Contact Name
Contact Phone
Filer Accelerated Status*
Filer File Number
Filer CIK*
Filer CCC*
Filer is Shell Company*
Filer is Voluntary Filer*
Filer is Well Known Seasoned Issuer*
Confirming Copy
Notify via Website only
Return Copy
SROS*
Period*
Emerging Growth Company
Elected not to use extended transition period
File Count*
Document Name 1*
Document Type 1*
Document Description 1
Document Name 2*
Document Type 2*
Document Description 2
Document Name 3*
Document Type 3*
Document Description 3
Document Name 4*
Document Type 4*
Document Description 4
Document Name 5*
Document Type 5*
Document Description 5
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Document Description 6
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Document Type 10*
Document Description 10
Document Name 11*
Document Type 11*
Document Description 11
Document Name 12*
Document Type 12*
Document Description 12
Document Name 13*
Document Type 13*
Document Description 13
General Information
20-F
M2 Compliance
754-243-5120
Accelerated Filer
0001437424 (POET TECHNOLOGIES INC.)
**********
N
N
N
No
No
Yes
NONE
12-31-2023
No
No
(End General Information)
Document Information
194
form20-f.htm
20-F
ex4-16.htm
EX-4.16
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EX-4.18
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EX-4.20
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ex4-23.htm
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EX-4.24
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ex12-2.htm
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EX-97.1
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Notify via Website only
E-mail 1
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(End Document Information)
Notifications
No
filing@m2compliance.com
(End Notifications)
form20-f.htm
20-F
1 of 114
03/28/2024 04:02 PM
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number: 001-41319
For the transition period from to
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
1107 – 120 Eglinton Avenue East
Toronto, Ontario, M4P 1E2, Canada
Telephone No.: 416 368 9411
Email: 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:
Title of each class
Common Shares, no par value
Common Shares, no par value
Trading Symbol(s)
PTK
POET
Name of each exchange on which registered
TSX Venture Exchange
Nasdaq Capital Market
Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: 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 every Interactive Data File required to be submitted 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 such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated 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.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Emerging growth company
☐
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:
U.S GAAP ☐
International Financial Reporting Standards as issued by the
International Accounting Standards Board ☒
Other ☐
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
Introduction
Item 1.
Item 2.
Item 3.
Item 4.
Item 4A.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
Identity of Directors, Senior Management and Advisers
Offer Statistics and Expected Timetable
Key Information
Information on the Company
Unresolved Staff Comments
Operating and Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures About Market Risk
Description of Securities Other than Equity Securities
PART I
Part II
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
Reserved
Item 13.
Item 14.
Item 15.
Item 16.
Item 16A. Audit committee financial expert
Code of Ethics
Item 16B.
Item 16C.
Principal Accounting Fees and Services
Exemptions from the Listing Standards for Audit Committees
Item 16D.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16E.
Change in Registrant’s Certifying Accountant
Item 16F.
Item 16G.
Corporate Governance
Item 16H. Mine Safety Disclosure
Item 16I.
Item 16J.
Item 16K.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Insider Trading Policies
Cybersecurity
Item 17.
Item 18.
Item 19.
Financial Statements
Financial Statements
Exhibits
PART III
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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 1107, 120 Eglinton Avenue East, Toronto,
Ontario M4P 1E2, Canada. Our U.S office is located at 1605 N. Cedar Crest Boulevard, Allentown, PA, 18104. Our telephone number in Toronto is (416) 368-9411.
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.
Page 1
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 InterposerTM, 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 world-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 Sanan Optoelectronics Co., Ltd. (Shanghai Stock Exchange, SSE: 600703), the leading
manufacturer of advanced ultra-high brightness LED epitaxial wafers and chips in the world.
Significant progress on SPX included the registration of SPX, appointment of the board 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 Sanan IC to
cover initial operating and capital expenditures to be 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 management 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 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 reduced. 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 the year ended December 31, 2023 was $20,267,365. The net loss included $10,077,930 incurred for research and development activities directly related
to the development and commercialization of the POET Optical Interposer and POET Optical Engine products. Research and development included non-cash costs
of $1,539,235 related to stock-based compensation. $10,795,155 was incurred for selling, marketing and administration expenses which included non-cash costs of
$2,662,209 related to stock-based compensation and $1,922,140 related to depreciation and amortization.
The Company incurred $70,182 of interest expense, of which $53,614 was non-cash.
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The Company recorded a gain on contribution of intellectual property to joint venture of $1,031,807. Additionally, the Company’s share of loss in joint venture was
limited to $1,031,807 as required by IFRS standards.
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. Thirty six percent (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 sixty two percent (62%) of the book value as of December 31, 2022, which consisted primarily of cash and cash equivalents of $9,229,845.
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in United States Dollars (“US$”, “USD” or “$”).
Cautionary Statements Regarding Forward-Looking Statements
Financial and Other Information
This Annual Report on Form 20-F and other publicly available documents, including the documents incorporated herein and therein by reference contain forward-
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- 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.
Our 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 as a result of various risks, uncertainties and other factors, many of which are difficult to predict and generally beyond the control of the
Company, including without limitation:
○ we have a limited operating history;
○ our need for additional financing, which may not be available on acceptable terms or at all;
○ the possibility that we will not be able to compete in the highly competitive semiconductor market;
○ the risk that our objectives will not be met within the timelines we expect or at all;
○ research and development risks;
○ the risks associated with successfully protecting patents and trademarks and other intellectual property;
○ the need to control costs and the possibility of unanticipated expenses;
○ manufacturing and development risks;
○ the risk that the price of our common shares will be volatile;
Page 3
○ the risk that geopolitical uncertainties may negatively impact our business venture in China;
○ the risk that shareholders’ interests will be diluted through future stock offerings, option and warrant exercises; and
○ other risks and uncertainties described in Item 3.D. “Risk Factors”.
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. However, the Company has not independently verified the accuracy and
completeness of this data.
Item 1. Identity of Directors, Senior Management and Advisers
A. Not required.
Item 2. Offer Statistics and Expected Timetable
PART I
Not required.
Item 3. Key Information
A.
[Reserved]
B. Capitalization and Indebtedness.
Not required.
C. Reasons for the Offer and Use of Proceeds.
Not required.
D. Risk Factors.
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 us or that we currently believe to be immaterial may also adversely affect our
business, financial condition and results 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 Factors that might cause such differences include those discussed. 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.”
Page 4
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 history of large operating losses. We may not be able to achieve or sustain profitability in the future and as a result we may not be able to maintain
sufficient levels of liquidity.
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 cover operating expenses. We can give
no assurance that we will be profitable even if we successfully commercialize or products. Failure to become and remain profitable may adversely affect the market
price of our 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 had working capital of $716,881.
We divested our major operating asset, adopted a new “fab-light” strategy, and we plan to focus on the Optical 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 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 new approach to operating a company with our chosen strategy will be successful. Further, our strategy will be solely
dependent on the future market 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 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 we will be successful in addressing these or any other significant risks we may encounter 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 and to fund working capital for anticipated growth. If we do not generate sufficient cash flow from operations or
otherwise have the capital resources to meet our future capital needs, we may need additional financing to implement our business strategy.
Page 5
The 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 unanticipated opportunities, and it may seek to do so through public or private financing, strategic
relationships or other arrangements. The ability of the Company to secure any required financing will depend in part upon prevailing capital market conditions and
business success. There can be no assurance that the Company will be successful in its 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 fund working capital and capital expenditures, increase the Company’s vulnerability to general adverse economic and
industry conditions, place the Company at a competitive disadvantage compared to its competitors that have less debt, limit the Company’s ability to borrow
additional funds, and otherwise subject the Company to the risks discussed under “Indebtedness” below and heighten the possible effects of the other risks discussed
in these risk factors. In connection with any such future capital raising transaction, whether involving the issuance of equity securities or the incurrence of
indebtedness, the Company may be required to accept terms that restrict its ability to raise additional capital for a period of time, which may limit or prevent 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 photonics products is highly complex and uncertain,
and we cannot guarantee a positive result.
The development of new, technologically advanced products is a complex and uncertain process requiring frequent innovation, highly-skilled engineering and
development personnel and significant capital, as well as the accurate anticipation of technological and market trends. We cannot assure you that we will be able 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 respond effectively to product introductions by competitors, technological changes or emerging industry
standards. We also may not be able to develop the underlying core technologies necessary to create new products and enhancements, license these technologies from
third parties, or remain competitive in our markets.
Page 6
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 that may be purchased, if at
all, long after we have incurred such costs. In addition, the rapidly changing industry in which we operate, the length of time between developing and introducing a
product to market, frequent changing customer specifications for products, customer cancellations of products and general down cycles in the industry, among other
things, make our prospects difficult to evaluate. As a result of these factors, it is possible 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 several 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 single 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.
Page 7
The Company’s investment into “Super Photonics Xiamen” (“SPX”) is into an independent company operating as a true joint venture under the laws of 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 guarantee 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.
Page 8
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 resumption of production.
Any supply deficiencies relating to the quality or quantities of materials or equipment we use to manufacture our products 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:
● periodic changes in a specific country’s or region’s economic conditions, such as recession;
● licenses and other trade barriers;
● the provision of services may require export licenses;
● environmental regulations;
● certification requirements;
● fluctuations in foreign currency exchange rates;
● inadequate protection of intellectual property rights in some countries;
● preferences of certain customers for locally produced products;
● potential political, legal and economic instability, foreign conflicts, and the impact of regional and global infectious illnesses in the countries in which we
and our customers, suppliers and contract manufacturers are located;
● Canadian and U. S. and foreign anticorruption laws;
● seasonal reductions in business activities in certain countries or regions; and
● fluctuations in freight rates and transportation disruptions.
Page 9
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 could be
materially harmed.
Our success depends on our ability to protect our intellectual property and other proprietary rights. We rely on a combination of patent, trademark, copyright, trade
secret and unfair competition laws, as well as license agreements and other 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 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, including our trade secrets and know-how, through the use 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 technologies 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 have adequate remedies in the event of unauthorized use or
disclosure of proprietary information. Unauthorized third parties may try to copy or reverse engineer our products or portions of our products, otherwise obtain and
use our intellectual property, or may independently develop similar or equivalent trade secrets or know-how. If we fail to protect our intellectual property and other
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 the future, we may need to take legal actions to prevent third parties from infringing upon or misappropriating our intellectual property or from otherwise gaining
access to our technology. Protecting and enforcing our intellectual property rights 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.
Page 10
We may be involved in intellectual property disputes in the future, which could divert management’s attention, cause us to incur significant costs and prevent us
from selling or using the challenged technology.
Participants in the markets in which we sell our products have experienced frequent litigation regarding patent and other intellectual property rights. There can be no
assurance that third parties will not assert infringement claims against us, and we cannot be certain that our products would not be found infringing on the intellectual
property rights of others. Regardless of their merit, responding to such claims can be time consuming, divert management’s attention and resources and may cause us
to incur significant expenses. Intellectual property claims against us could result in a requirement to license technology from others, discontinue manufacturing or
selling the infringing products, or pay substantial monetary damages, each of could result in a substantial reduction in our revenue and could result in losses over an
extended period of time.
If we fail to obtain the right to use the intellectual property rights of others that are necessary to operate our business, and to protect their intellectual property,
our business and results of operations will be adversely affected.
From time to time, we may choose 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 infringement 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 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.
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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 material 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 divert our management’s attention from other matters that are important to our business. In connection with the implementation
of the 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 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 conclude on an ongoing basis that we have effective internal control over financial reporting or our
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 ability to use our net operating losses and certain other tax attributes may be 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 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.
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We 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.
Page 13
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 arrange for third parties to manufacture our
products. We may not be able to obtain alternate capacity on favorable terms or at all. 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 of these circumstances may adversely affect our financial condition and results of operation.
We may be subject to disruptions or failures in information technology systems and network infrastructures that could have a material adverse effect on our
business and financial condition.
We rely on the 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 sales 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 number, 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 be under constant attack.
Accordingly, despite our security measures or those of our third-party service providers, a security breach may occur, including breaches that we may not be able to
detect. 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.
Page 14
Outbreaks of diseases and public health crises could delay our development activities and adversely affect our results of operations.
The Company 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 ultimate geographic spread of the virus,
governmental limitations, the duration of the outbreak, travel restrictions and business closures.
The Company continues to monitor the developments and impacts of any health crises and pandemic 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 of such public health crises also include risks to employee health and safety, a
slowdown or temporary suspension of operations in geographic locations impacted by an outbreak, increased labor costs, regulatory changes, political or economic
instabilities or civil unrest as well as the Company’s ability to service its obligations as they arise. As such, the impacts of such crises may have a material adverse
effect on the Company’s business, results of operations and financial condition and the market price of the Common Shares. There can be no assurance that the
Company’s personnel or its contractors’ personnel will not be impacted by these pandemic diseases and ultimately see its workforce productivity reduced or incur
increased safety and medical costs / insurance premiums as a result of these health risks.
Risks Related to Our Common shares
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 shares on the TSXV has been and is likely to continue to be highly volatile. Although we have registered our stock with the 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-stage technology companies have historically been highly volatile.
Page 15
Factors that could adversely affect our stock price include:
● fluctuations in our operating results and our financial condition;
● announcements of new products, partnerships or technological collaborations and announcements of the results or further actions in respect of any products,
partnerships or collaborations, including termination of same;
● innovations by us or our competitors;
● governmental regulation;
● developments in patent or other proprietary rights;
● the results of technology and product development testing by us, our partners or our competitors;
● litigation;
● general stock market and economic conditions;
● number of shares available for trading (float); and
● inclusion in or dropping from stock indexes.
As of March 15, 2024, our 52-week high and low closing market prices for our common shares on the TSXV were CA$7.15 and CA$1.01. 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 TSXV and Nasdaq. We cannot predict the effect of listing our common shares on multiple exchanges on the 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 the Company’s ability to finance operations is chiefly dependent on equity financings. Funds raised through 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
Company’s business has resulted in significant shareholder dilution. Further equity financings will also result in dilution to existing shareholders, and such dilution
could be significant.
Future sales of common 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 common shares, or the perception that sales could occur, could adversely affect the market price of our common shares.
Additionally, as of March 15, 2024, there were outstanding options to purchase up to 7,918,358 of our common shares. As of March 15, 2024, there were outstanding
warrants to purchase 7,285,907 of our common shares. The holders of these options and warrants have an opportunity to profit from a rise in the market price of our
common shares 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$4.82, the weighted average
exercise price of warrants is CAD$1.79, which compares to the CAD$1.75 market price at closing on March 15, 2024. If all of these securities were exercised, an
additional 15,265,764 common shares would become issued and outstanding. This represents an increase of 31.68% in the number of shares issued and outstanding
and would result in significant dilution to current shareholders
Page 16
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.
Neither Canadian law nor our Articles or By-laws limit the right of a non-resident to hold or vote common 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 of net benefit to Canada. An investment in the 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 the
assets of the Company were CA$5.0 million or 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 to
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 person or entity from a member of the WTO; (b) a state-owned
enterprise (SOE); or (c) from a country considered a “Trade Agreement Investor” under the Investment Act. 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 CA$528 million based on the book value of the Canadian
business’ assets, up from CA$512 million in 2023. The 2023 thresholds for review 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 “enterprise value” of the Canadian business
being acquired.
Page 17
A non-Canadian, whether a WTO Investor 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 the common shares of the Company. The acquisition of less than a majority, but at least one-third of the shares, would be presumed to be an
acquisition of control of the Company, unless it could be established that the Company is not controlled in fact by the acquirer through the ownership of the shares. In
general, an individual is a WTO Investor 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:
● an acquisition of our common shares if the acquisition were made in connection with the person’s business as a trader or dealer in securities;
● an acquisition of control of the Company in connection with the realization of a security interest granted for a loan or other financial assistance and not for
any purpose related to the provisions of the Investment Act; and
● an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate
direct or indirect control of the Company, through the ownership of voting interests, remains unchanged. Under U.S. law, except in limited circumstances,
restrictions generally are not imposed on the ability of non- residents to hold a controlling interest in a U.S. corporation.
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
information 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
the proxy statement rules that are applicable to domestic U.S. issuers. The Company submits its proxy materials and annual meeting of shareholder information
(which are prepared in accordance with Canadian standards) by filing a Form 6-K with the SEC, although those documents typically have more limited information
than the corresponding documents required to be filed by U.S. domestic issuers, which 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. In addition, in 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. The foregoing
exemption results in our shareholders having less data in that regard than is made available by U.S. domestic issuers.
Page 18
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 Item 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.
Page 19
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:
●
●
●
●
●
●
●
changes in the overall market for the warrants;
changes in the Corporation’s financial performance or prospects;
changes or perceived changes in the Corporation’s creditworthiness;
the prospects for companies in the industry generally;
the number of holders of the warrants;
the interest of securities dealers in making a market for the warrants; and
prevailing interest rates.
Item 4. Information on the Company
A. History and Development of 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 issued 1,361,115 common shares to the former shareholders of DenseLight.
Page 20
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, 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 a wholly owned subsidiary of OPEL Solar, Inc. 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.
Page 21
POET Technologies Pte Ltd. (“PTS”)
PTS is a wholly owned subsidiary of POET Technologies Inc. Situated in Singapore, PTS designs and tests variations of the POET Optical Interposer for specific
applications. PTS also develops the assembly and test methodologies for the production of optical 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 works 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 United States, Canada, Singapore and 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:
Period
Fiscal 2023
Fiscal 2022
Fiscal 2021
Capital Expenditure
Purpose
$
$
$
1,247,064
3,074,037
930,882
Instruments, equipment and patents
Instruments, equipment and patents
Instruments, equipment and patents
The Company’s registered office is located at Suite 1107, 120 Eglinton Avenue East, Toronto, Ontario, Canada M4P 1E2 and its phone number is (416) 368-9411.
The Company has operations at Suite 308, 1605 N. Cedar Crest Boulevard, Allentown, PA, 18104, 21 Changi North Way, #04-06, Singapore, 498774 and Unit 02,
10th Floor, A4 Building, Kexing Science Park, No.15 Keyuan Road, Science Park Middle District, Nanshan District, Shenzhen, 518057
B. Business Overview.
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.
Page 22
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.
Page 23
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.”
Page 24
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 subsidiary 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 world’s largest manufacturer of compound semiconductor devices,
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 devices 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 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:
● Support Super Photonics Xiamen (SPX), a joint venture between POET and Sanan IC, as an independent company to drive growth in optical
transceivers and deliver maximum cash flow to partners. POET’s designs for Optical Engines are assembled by SPX into samples that customers can test
and are designed-in to modules supplied to end-users, such as network equipment companies and data center operators. POET’s shortest path to commercial
success is the deployment of its Optical Engines that are designed into the optical modules of its customers. This activity provides validation for the
technical feasibility, market acceptance and scalability of POET’s Optical Engines. SPX has matured to the point where it can provide design support and
deliver samples and production devices to in China, where virtually all optical transceiver module manufacturers are located. 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 on the Shanghai
Exchange, opportunities to sell a portion of POET’s equity interest in SPX are also being actively pursued.
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.
Page 25
● Engage with industry leaders and incumbents. We will continue to promote the potential of the Optical Interposer and POET-designed Optical Engines to
solve critical challenges with current approaches to data transfer in data center and telecom applications, especially to those hyperscale data centers
implementing large-scale AI applications. We believe that the size, performance and design flexibility of POET’s chiplet approach to integration and to the
rapid introduction of successive product generations is an enabling technology that will allow POET to enter markets where relatively few competitors will
have the requisite technology to succeed.
● Transition to making Optical Transceiver Modules for direct sales to end-users In addition to adding features to the Optical Interposer, we have added
essential electronic components, such as Trans Impedance Amplifiers (TIAs) and laser drivers to the interposer platform, which improves performance and
lowers the cost of module assembly. We intend to add the necessary capabilities for design and development optical transceiver modules to our existent
capabilities in Optical Interposer and Optical Engine design. Being most familiar with the unique capabilities of our technology, we believe that we are in a
position to rapidly extend our expertise to complete optical modules. Doing so has the advantage of avoiding a lengthy sales and qualification cycle (i.e.,
selling to module makers who then sell to end users) and being able to sell directly to end users, showcasing our own branded products to network
equipment suppliers and data center operators..
● Establish additional fabrication and sales operations for advanced, high-speed transceiver modules and packaged 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.
● Pursue complementary strategic alliance or acquisition opportunities for inorganic growth. We intend to evaluate and selectively pursue strategic
alliances or acquisition opportunities for growth and vertical integration that we believe will accelerate our penetration of specific applications or vertical
markets with our technology or products.
● Explore technology licensing opportunities for growth in non-target sectors. It is not possible for the Company to pursue all potential applications for the
POET Optical Interposer. We will carefully consider opportunities to license our technology to others when and if appropriate.
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
Page 26
● LightBar: C-Band External Light Source
● LightBar: O-Band External Light Source
Competition
The photonics 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:
● use of internally manufactured components;
● product breadth and functionality;
● timing and pace of new product development;
● breadth of customer base;
● technological expertise;
● reliability of products;
● product pricing; and
● manufacturing efficiency.
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, 30 are directly related to the
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 patents 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 integrated devices, manufacturing processes, assembly and
packaging processes, and products for data communication applications in the data center market.
Page 27
Geographic Distribution of Revenue
Revenue and geographic markets in 2023, 2022 and 2021 were approximately as follows:
Region
Europe
North & South America
C. Organizational Structure.
2023
2022
2021
$
$
191,225
274,552
$
$
58,998
493,750
$
$
-
209,100
The following graphically displays the organizational structure of the Company:
(1) There are 28,374,000 Class A Common Shares of OPEL Solar, Inc. issued and outstanding, all of which are held by the Company. There are no other
outstanding securities of OPEL Solar, Inc. other than the Class A Common Shares.
(2) There are 5 Common Shares of ODIS Inc. issued and outstanding, held by OPEL Solar, Inc.
(3) There is 1 Ordinary share of POET Technologies Pte Ltd. issued and outstanding, held by POET Technologies Inc.
(4) There are 1,000,000 Preferred Shares and 1,050,100 Common shares of BB Photonics Inc. issued and outstanding, all of which are held by the Company. There
are no other outstanding securities of BB Photonics Inc.
(5) POET Optoelectronics Co, Ltd. is a wholly owned subsidiary of POET Technologies Pte. Ltd with a registered capital of RMB1,168,833.
(6) Super Photonics Xiamen Co., Ltd is joint venture located in Xiamen, China. The Company currently has an 76.1% interest in the joint venture with Sanan
Integrated Circuit Co., Ltd, the other joint venturer, holding the remaining 23.9% interest in the joint venture.
D. Property, Plants and Equipment.
The Company’s head Canadian office is located in a 400 sq. ft. leased office space in Toronto, Ontario, Canada. The US based operations are in a leased 3,883 sq. ft.
space in 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.
Page 28
Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. Operating 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, 2023, 2022 and 2021 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 3.D. Risk Factors” and “Item 4.B. Business Overview.”
A. Operating Results.
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.
Page 29
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:
Wages and benefits
Subcontract fees
Stock-based compensation
Supplies
$
$
Selling, marketing and administration costs can be analyzed as follows:
Stock-based compensation
Wages and benefits
Professional fees
General expenses
Depreciation and amortization
Rent and facility costs
$
$
2023
2022
2021
4,298,207
1,864,122
1,539,235
2,376,366
10,077,930
2,662,209
2,649,770
1,744,771
1,681,899
1,922,140
134,366
10,795,155
$
$
$
$
4,267,937
2,946,729
2,054,187
1,477,890
10,746,743
2,382,417
2,648,862
1,173,743
1,860,762
1,293,158
157,329
9,516,271
$
$
$
$
3,270,528
1,516,343
1,769,951
1,608,306
8,165,128
2,764,419
2,643,451
1,155,316
1,304,690
1,100,522
87,130
9,055,528
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.
Page 30
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 firm to assist with a new shareholder outreach program at a cost of $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 also 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 year ended December 31, 2023 from $4,436,604 for the same 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.
Page 31
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.
Page 32
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.
B. Liquidity and Capital Resources.
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:
1.
2.
3.
4.
Raised CA$6,219,667 (US$4,607,161) in gross funding from a private placement on January 24, 2024.The financing included the issuance of warrants at an
exercise price of CA$1.52. These warrants are currently in- the- money and will be exercisable after May 25, 2024.
Raised $1,607,400 in gross funding from a public offering on December 4, 2023. The financing included the issuance of warrants at an exercise price of
$1.12. These warrants are currently in- the- money and holders of these warrants are encouraged to exercise them.
Raised $983,194 in gross proceeds from its at-the-market programs which were raised between June 30, 2023 and December 31, 2023.
Established a strict budgetary process with a focus on maintaining an appropriate level of corporate overheads in line with the Company’s available cash
resources.
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.
Page 33
The following is a summary of Company’s cash flows and working capital:
Net cash used in operating activities
Net cash from investing activities
Net cash from financing activities
Effect of exchange rate changes on cash
Change in cash
Opening cash
Ending cash
Operating Activities
2023
$
(15,407,462)
(1,247,064)
10,195,500
248,250
(6,210,776)
9,229,845
3,019,069
2022
$
(12,325,910)
3,292,791)
3,435,204
(114,015)
(5,711,930)
14,941,775
9,229,845
2021
$
(11,233,293)
(7,297,710)
26,553,677
46,207
8,068,881
6,872,894
14,941,775
During 2023, the Company recorded consolidated losses of $20,267,365 (2022 - $21,036,690, 2021 - $15,669,093).
The operating activities of the included the following non-cash items: non-cash stock-based compensation of $4,201,444 (2022 - $4,436,604, 2021 - $4,534,370),
depreciation and amortization of $1,922,161 (2022 - $1,293,158, 2021 - $1,100,522), accretion of debt discount on convertible debentures and non-cash interest of
$53,614 (2022 - $49,738, 2021 - $213,843). Gain on contribution of intellectual property to joint venture was $1,031,807 (2022 - $1,746,987, 2021 - $2,587,500)
while the Company had a share of loss in joint venture of $1,031,807 (2022 - $3,211,993, 2021 - $1,142,249). The Company had a non-cash adjustment of $24,865
(2022 – nil, 2021 – nil) related to the fair value adjustment of the derivative liability. Other non-cash operating costs (income) was nil (2022 - $40,029, 2021 -
$(172,933)).
The Company will regularly have high non-cash stock-based compensation as it uses stock options as method of attracting, retaining and motivating directors,
employees and consultants of the Company and any of its subsidiaries and to closely align the personal interests of such directors, employees and consultants with
those of the shareholders by providing them with the opportunity, through options, to acquire common shares in the capital of the Company while managing
compensation through cash.
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.
In 2019, the Company raised $7,729,921 in convertible debentures issued at a discount. The discount on the convertible debentures was accreted over the life of the
convertible debentures. The convertible debentures either matured or were converted in 2021, therefore in 2023 and 2022, non-cash cost of accretion of debt discount
on convertible debentures was nil (2021 - $213,843). Non-cash interest in 2023 and 2022 related to the interest costs attributed the Company’s property leases.
The Company recognized a gain of $1,031,807 for the year ended December 31, 2023 (2022 - $1,746,987, 2021 - $2,587,500) related to its contribution of
intellectual property to SPX in accordance with IAS 28. The Company only recognizes a gain on the contribution of the intellectual property equivalent to SAIC’s
interest in SPX. Additionally, the Company recognizes 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 78.9% or $3,026,408, however, the Company only recognized $1,031,807 of the net operating loss of SPX for the year ended 2023, which was
equivalent to the gain in the year. No further loss is recorded because the carrying value is nil. In 2022, the Company incurred a loss of 83.7% or $3,614,211,
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 was carried at
nil (2021 - $1,445,251) on the consolidated statements of financial position.
Page 34
Consolidated negative cash flow from operations was $15,407,462 for the year ended December 31, 2023 (2022 - $12,325,910, 2021 - $11,233,293).
Investing Activities
The Company had consolidated cash flows from investing activities of $(1,247,064) for the year ended December 31, 2023 (2022 - $3,292,791, (2021 -
$(7,297,710)). The Company purchased $6,366,828 of short-term investments in 2021 due to the excess cash it had on hand. These investments matured in 2022. The
funds were invested in interest bearing facilities in accordance with the Company’s investment policy. No such investments were either purchased or matured in
2023. In 2023, $1,247,064 (2022 - $3,074,037, 2021 - $930,882) was used to purchase new equipment and patents.
Financing Activities
During the year ended December 31, 2023, the Company raised gross proceeds of $983,194 from the issuance of 227,673 common shares at an average price of
$4.32 through an Equity Distribution Agreement, (“EDA”) with multiple agents. Pursuant to the EDA, the Company established an at-the-market (“ATM”) equity
offering program whereby the Company may, at its discretion, during the term of the ATM agreement issue and sell, through the agents such number of common
shares of the Company as would result in aggregate gross proceeds to the Company of up to $30 million. The agents were paid a commission of 3% or $29,486 of the
gross proceeds raised through the ATM. The Company incurred additional financing costs including legal and filing fees of $291,226.
On December 4, 2023, the Company raised gross proceeds of $1,607,400 from the issuance of 1,786,000 units through an underwritten public offering in the United
States (the “Offering”). The Offering consisted of 1,600,000 common shares of the Company and warrants to purchase up to 1,600,000 common shares of the
Company at a combined public offering price of $0.90 per common share and accompanying warrant. Each warrant has an exercise price of $1.12 per common share
and is exercisable for five years from the date of issuance. In addition, the Company granted the underwriter a 45-day option to purchase up to an additional 240,000
common shares and/or warrants to purchase up to an additional 240,000 common shares at the public offering price in any combination, less underwriting discounts
and commissions, which the underwriter has partially exercised to purchase 186,000 additional common shares and additional warrants to purchase up to 186,000
common shares. The agents were paid a commission of 7% or $112,518 of the gross proceeds raised. The Company incurred additional financing costs including
legal and filing fees of $145,089.
The fair value of the share purchase warrants was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
dividend yield of 0%, risk-free interest rate of 3.54%, volatility of 75.66%, and estimated life of 5 years. The estimated fair value assigned to the warrants was
$954,537.
On December 2, 2022, the Company completed a non-brokered private placement offering of 1,126,635 units at a price of $2.78 (CAD$3.81) per unit for gross
proceeds of $3,184,332 (CAD$4,292,479). Each unit consists of one common share and one-half common share purchase warrant. Each whole warrant entitles the
holder to purchase one common share of the Company at a price of $3.61 (CAD$4.95) per share until December 2, 2025. The Company paid finders’ fees
aggregating to $42,090 (CAD$57,897) to four firms. The Company paid other share issue costs of $205,802 related to this private placement offering.
One director subscribed for 10,000 units of this private placement offering for gross proceeds of $27,800 (CAD$38,100).
On February 11, 2021, the Company completed a brokered private placement offering of 1,764,720 units at a price of $6.70 (CAD$8.50) per unit for gross proceeds
of $11,815,595 (CAD$15,000,120). Each unit consists of one common share and one common share purchase warrant. Each whole warrant entitles the holder to
purchase one common share of the Company at a price of $9.00 (CAD$11.50) per share until February 11, 2023. At any time after June 12, 2021, the Company
reserves the right to accelerate the expiry of the warrants if the Company’s average stock price exceeds $18.10 (CAD$23.00) for a period of 10 consecutive trading
days. The broker was paid a cash commission of $708,667 (CAD$900,007) equating to 6% of the gross proceeds and received 1,058,832 broker warrants. Each
broker warrant is exercisable into one common share of the Company at a price of $6.70 (CAD$8.50) per broker warrant until February 11, 2023. The Company
incurred additional share issuance costs of $434,367 directly related to the private placement and fees to induce certain warrant holders to exercise their warrants.
Page 35
In addition to funds received from the brokered private placement, the Company received $16,118,750 from the exercise of stock options and warrants. The
Company also improved its liquidity by $3,571,342 through the conversion of convertible debentures into units of the Company.
Capital Expenditures
The Company has an approved capital budget of $610,000 for the 2024 fiscal year related to research and development equipment, manufacturing equipment and
patent registration. In 2023, $1,247,064 (2022 - $3,074,037, 2021 - $930,882) was either spent in cash or accrued for acquiring development and manufacturing
equipment and new patents.
C. Research and 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
transceivers. 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.
Page 36
Internally generated research costs, including the costs of developing intellectual property and maintaining patents are expensed as incurred. Internal development
costs are expensed as incurred unless such costs meet the criteria for capitalization and amortization under IFRS, which to date has not occurred.
We incurred a cumulative $10,077,930, $10,746,743 and $8,165,128 of research and development expenses during the years ended December 31, 2023, 2022 and
2021 which includes non-cash stock-based compensation of $1,539,235, $2,054,187 and $1,769,951 respectively. Other expenses related to research and
development expenditures in the semiconductor business include costs associated with salaries, material costs, license fees, consulting services and third-party
contract manufacturing. The expenses in all years presented can be analyzed for continuing and discontinuing operations as follows:
R&D for Continuing Operations
Wages and benefits
Subcontract fees
Stock-based compensation
Supplies
D. Trend Information.
For the Years Ended December 31,
2023
2022
2021
$
$
4,298,207
1,864,122
1,539,235
2,376,366
10,077,930
$
$
4,267,937
2,946,729
2,054,187
1,477,890
10,746,743
$
$
3,270,528
1,516,343
1,769,951
1,608,306
8,165,128
Other than as may be disclosed elsewhere in this annual report and specifically in Item 4.B. “Business Overview,” we are not aware of any trends, uncertainties,
demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from operations, profitability, liquidity or capital
resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.
E. Critical Accounting Estimates.
The Company prepares its audited consolidated financial statements in accordance with IFRS as issued by the IASB, which differs from U.S. GAAP. The preparation
of financial statements in accordance with IFRS requires the use of certain critical accounting assumptions and estimates. These assumptions are limited by the
availability of reliable comparable data and the uncertainty of predictions concerning future events. It also requires management to exercise judgment in applying the
Company’s accounting policies. The Company believes that the estimates and assumptions upon which it relies are reasonable based upon information available at
the time that these estimates and assumptions are made. Actual results could differ from these estimates. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below.
Basis of presentation
These consolidated financial statements include the accounts of POET Technologies Inc. and its subsidiaries. All intercompany balances and transactions have been
eliminated on consolidation.
Page 37
The Company’s financial instruments consist of cash and cash equivalents, short-term investments, covid-19 government support loans, contract liabilities and
accounts payable and accrued liabilities. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest risk arising from
these financial instruments. The Company estimates that carrying value of these instruments approximates fair value due to their short-term nature.
The following table outlines the classification of financial instruments under IFRS 9:
Financial Assets
Cash and cash equivalents
Short-term investments
Accounts receivable
Financial Liabilities
Accounts payable and accrued liabilities
Derivative warrant liability
Covid-19 government support loans
Contract liabilities
Debt and Debt Instruments
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value through profit and loss
Amortized cost
Amortized cost
Convertible debentures are accounted for as a compound financial instrument with a debt component and a separate equity component. The debt component of these
compound financial instruments is measured at fair value on initial recognition by discounting the stream of future interest and principal payments at the rate of
interest prevailing at the date of issue for instruments of similar term and risk. The debt component is subsequently deducted from the total carrying value of the
compound instrument to derive the equity component. The debt component is subsequently measured at amortized cost using the effective interest rate method.
Interest expense based on the coupon rate of the debenture and the accretion of the liability component to the amount that will be payable on redemption are
recognized through profit or loss as a finance cost.
Joint venture
A joint arrangement is an arrangement among two or more parties where the parties are bound by a contractual arrangement and the contractual arrangement gives
the parties joint control of the arrangement. A joint venture is a form of joint arrangement where an entity is independently formed and the parties jointly have rights
to the net assets of the arrangement and therefore account for their interests under the equity method.
Share consolidation
On February 24, 2022, the Company filed Articles of Amendment to consolidate its common shares on a ten-for-one basis. For further clarity, for every ten (10) pre-
consolidated common shares, shareholders received one (1) post-consolidated common share. On February 28, 2022 the Company’s common shares began trading on
the TSXV on a post consolidation basis. The Company’s name and trading symbol remained unchanged. All references to share and per share amounts in these
consolidated financial statements and accompanying notes to the consolidated financial statements have been retroactively restated to reflect the ten-for-one share
consolidation.
Property and equipment
Property and equipment are recorded at cost. Depreciation is calculated based on the estimated useful life of the asset using the following method and useful lives:
Machinery and equipment
Leasehold improvements
Office equipment
Straight Line, 5 years
Straight Line, 5 years or life of the lease, whichever is less
Straight Line, 3 – 5 years
Page 38
Patents and licenses
Patents and licenses are recorded at cost and amortized on a straight-line basis over 12 years. Ongoing maintenance costs are expensed as incurred.
Stock-based Compensation
Stock options and warrants awarded to non-employees are accounted for using the fair value of the instrument awarded or service provided, whichever is considered
more reliable. Stock options and warrants awarded to employees are accounted for using the fair value method. The fair value of such stock options and warrants
granted is recognized as an expense on a proportionate basis consistent with the vesting features of each tranche of the grant. The fair value is calculated using the
Black-Scholes option-pricing model with assumptions applicable at the date of grant.
Other stock-based payments
The Company accounts for other stock-based payments based on the fair value of the equity instruments issued or service provided, whichever is more reliable.
Cumulative Translation Adjustment
IFRS requires certain gains and losses such as certain exchange gains and losses arising from the translation of the financial statements of a self-sustaining foreign
operation to be included in comprehensive income.
Impairment of long-lived assets
The Company’s tangible and intangible assets are reviewed for indications of impairment whenever events or changes in circumstances indicate that the carrying
amounts of the assets may not be recoverable. An assessment is made at each reporting date whether there is any indication that an asset may be impaired.
An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss for the
year. The recoverable amount is the greater of the asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit (“CGU”) to which the asset
belongs.
An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized. No impairment loss has been reported for the years ended December 31, 2023, 2022 and 2021.
Income taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income taxes are provided on differences between the
financial reporting and income tax bases of assets and liabilities and on income tax losses available to be carried forward to future years for tax purposes. Deferred
income taxes are measured using the substantively enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred
tax assets are only recognized if the amount is expected to be realized in the future.
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Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Company
recognizes revenue when it transfers control over a product or service to a customer.
Sale of goods
Revenue from the sale of goods is recognized, net of discounts and customer rebates, at the point in time the transfer of control of the related products has taken place
as specified in the sales contract and collectability is reasonably assured.
Service revenue
The Company provides contract services, primarily in the form of non-recurring revenue (“NRE”) where control is passed to the customer over time. The contracts
generally provide agreed upon milestones for customer payment which include but are not limited to the delivery of sample products, design reports and test reports.
The customer makes payment when it has approved the delivery of the milestone. The Company must determine if the contract is made up of a series of independent
performance obligations or a single performance obligation. Where NRE contracts contain multiple performance obligations for which a standalone transaction price
can be assessed, revenue is recognized as each performance obligation is satisfied. Where NRE contracts contain a single performance obligation to be settled over
time, revenue is recognized progressively based on the output method.
Other income
Interest income
Interest income on cash is recognized as earned using the effective interest method.
Government Grants
Loans received exclusively from governmental agencies to support the Company throughout the COVID-19 pandemic qualify to be forgiven if certain conditions are
met. Forgiveness of COVID-19 related loans will be recognized as other income on the consolidated statements of operations and deficit.
Wage subsidies
Wages subsidies received from the Singaporean government are netted against R&D related wages and benefits on the consolidated statements of operations and
deficit.
Intangible assets
Research and development costs
Research costs are expensed in the year incurred. Development costs are also expensed in the year incurred unless the Company believes a development project
meets IFRS criteria as set out in IAS 38, Intangible Assets, for deferral and amortization. IAS 38 requires all research costs be charged to expense while development
costs are capitalized only after technical and commercial feasibility of the asset for sale or use have been established. This means that the entity must intend and be
able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits. Development costs
are tested for impairment whenever events or changes indicate that its carrying amount may not be recoverable.
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In-process research and development
Under IFRS, in-process research and development (“IPR&D”) acquired in a business combination that meets the definition of an intangible asset is capitalized with
amortization commencing when the asset is ready for use (i.e., when development is complete). The Company does not capitalize its IPR&D.
Loss per share
Basic loss per share, net of taxes is calculated by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted loss per
share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period after giving effect to potentially dilutive
financial instruments. The dilutive effect of stock options and warrants is determined using the treasury stock method.
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.
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management.
The following table sets forth information regarding our Directors and Senior Management for the most recent fiscal year.
Name
Jean-Louis Malinge (1)(4)
Peter Charbonneau (1)(3)(5)
Dr. Suresh Venkatesan (4)
Kevin Barnes
Thomas R. Mika
Vivek Rajgarhia
Chris Tsiofas (1)(2)
Glen Riley (2)(3)(4)
Michal Lipson (3)(4)
Theresa Ende (2)(4)
Raju Kankipati
Dr. Mo Jinyu
Dr. Robert Ditizio
Dan Meerovich
Yong Meng (James) Lee
Positions
Director
Lead Independent Director
Corporate Governance and Nominating Committee Chair
Chief Executive Officer and Chairman
Chair of Ad Hoc Strategy Committee
VP Finance & Administration, Corporate Controller and Treasurer
EVP & Chief Financial Officer
President & General Manager
Director
Audit Committee Chair
Director
Compensation Committee Chair
Director
Director
SVP – Product Line Management & GM USA
SVP, GM of Asia
VP – Intellectual Property
VP – Product Engineering
VP & GM POET Technologies Pte. Ltd.
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Corporate Governance and Nominating Committee
(4) Member of Ad Hoc Strategy Committee
(5) Resigned from the Board on March 14, 2024
Date First Elected or
Appointed a
Director or Officer
September 5, 2017
March 28, 2018
June 11, 2015
December 1, 2012
November 2, 2016
November 4, 2019
August 21, 2012
December 7, 2020
October 14, 2022
October 14, 2022
May 1, 2022
January 1, 2022
December 1, 2021
March 2, 2020
September 2, 2019
Age
70
70
57
52
72
56
56
61
53
67
45
49
61
64
52
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Dr. Suresh Venkatesan as CEO. Prior to joining POET in 2015 as CEO, Dr. Venkatesan was the Senior Vice President, Technology Development at GlobalFoundries
and was responsible for the Company’s Technology Research and Development. He joined GlobalFoundries in 2009, where he led the development and ramp of the
28nm node and was instrumental in the technology transfer and qualification of 14nm. In addition, he was responsible for the qualification and ramp up of multiple
mainstream value-added technology nodes. Dr. Venkatesan is an industry veteran with over 22 years of experience in semiconductor technology development. Prior
to joining GlobalFoundries, he held various leadership positions with Freescale Semiconductor in Austin, Texas. He holds over 25 US patents, and has co-authored
over 50 technical papers. He earned a Bachelor of Technology degree in Electrical Engineering from the Indian Institute of Technology and a Master of Science and
PhD degrees in Electrical Engineering from Purdue University.
Vivek Rajgarhia serves as President and General Manager. Before joining POET, Mr. Rajgarhia served as Senior Vice President & General Manager of the
Lightwave Business Unit of MACOM (NASDAQ: MTSI). Mr. Rajgarhia joined MACOM through the acquisition of Optomai Inc., where he was the Co-Founder
and CEO, to start MACOM’s first optical business. He was then instrumental in identifying and leading several strategic acquisitions to build an extensive portfolio
of optical and photonic businesses, which formed MACOM’s Lightwave Business Unit. Mr. Rajgarhia has held several senior management positions during his 30
years in the optical communications industry. He was Director of Sales & Marketing (Asia) for Lucent Technologies’ (now Nokia) optical components, where he
started Lucent’s Asia business; Vice President of Product Marketing and Business Development for OpNext (formerly Hitachi’s Fiber Optics Division), now
Lumentum, where he was part of the team to spin-off the optical business from Hitachi; Director of Product Management & Marketing for JDS Uniphase (now
Lumentum), and VP of Global Sales for GigOptix. Mr. Rajgarhia has been a successful entrepreneur, founding two optical companies, and has held international
assignments in Hong Kong, Germany and India. He holds a Bachelor of Engineering (Electrical) degree from Stevens Institute of Technology in New Jersey.
Mr. Thomas Mika serves as EVP & CFO. Prior to joining POET, Mika served for one year as the Executive Chairman of Rennova Health, Inc., the successor
company to CollabRx and its predecessor, Tegal Corporation, a semiconductor capital equipment company (NASDAQ: TGAL). On the Board of Directors of Tegal
since its spin-out from Motorola in 1989, Mika assumed the roles of Chief Financial Officer in 2002, CEO in 2005 and Chairman & CEO in 2006, positions which he
held until 2015. In 2015, Tegal merged with Rennova Health with Mika retaining the position of Chairman until joining POET in November 2016. In 1980, Mika co-
founded IMTEC, a boutique M&A, investment and consulting firm, serving clients in the U.S., Europe and Japan over a period of 20 years, taking on the role of
CEO in several ventures. Earlier in his career, Mika was a managing consultant with Cresap, McCormick & Paget and a policy analyst for the National Science
Foundation. He holds a Bachelor of Science in Microbiology from the University of Illinois at Urbana-Champaign and a Master of Business Administration from the
Harvard Graduate School of Business.
Mr. Kevin Barnes has been serving as Corporate Controller and Treasurer since 2008 and briefly as Chief Financial Officer (2012 – 2016). Mr. Barnes holds a Master
of Business Administration and is a member of the Institute of the Certified Management Accountants of Australia and an Accredited Chartered Secretary. Mr.
Barnes served as a Corporate Controller and Business Performance Manager for EC English, one of the world’s largest language training institutes between 2006 and
2014. Mr. Barnes also serves as Chief Financial Officer of VVC Exploration Corporation, a minerals exploration company since 2006. From 2000 to 2006, he was a
reporting manager with Duguay and Ringler Corporate Services, which specializes in financial reporting for publicly traded companies.
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Dr. Mo Jinyu is a highly experienced technical and business veteran of the photonics and optoelectronics industries. Her expertise covers optical transmission system,
advanced optical modulation format, tunable semiconductor lasers, DFB and FP lasers and PD/APD, optical transceiver modules and high-speed integrated
packaging. Dr. Mo has more than 22 years of experience spanning several companies, including MACOM Technology Solutions, Bookham/Oclaro, Huawei, I2R in
Singapore and Nexvave Photonics Technology Co., which she founded and served as Chief Technology Officer. Dr. Mo was most recently with MACOM as the
Senior Director and Chief Scientist of the Lightwave business unit in Asia and site leader in Shenzhen. Dr. Mo received her PhD degree in Optical Communications
from Nanyang Technological University (NTU) Singapore. She is a senior member of IEEE and has been a member of IEEE’s Technical Committees for several
international conferences. She has over 11 patents and more than 40 papers published in tier one journals and conferences.
Mr. Raju Kankipati brings over 20 years of experience in Optical transceivers, Optical components, Cloud data center and networks to POET. He was a Senior
Director of Product Management at MACOM, focused on optical components and photonic solutions. Prior to that, Raju worked at Arista Networks as a Senior
Product Manager and Engineering Manager. During this time he collaborated closely with data center customers to bring unique switching products as well as
Optical transceivers to market, that helped customers deploy 40G and 100Gbps products for highly scalable and efficient networks. Raju worked as a Product
Manager at Cisco prior to joining Arista. Raju started his career as an Optics Engineer at Opnext and later held various roles in sales and marketing at the company.
Raju received his MBA degree from UC Berkeley (Haas School of Business) and completed his Bachelor of Engineering in Electronics from BITS, Pilani in India.
Mr. Chris Tsiofas, CA, CPA, earned a Bachelor’s of Commerce Degree from the University of Toronto and is a member of the Chartered Professional Accountants of
Canada and the Canadian Tax Foundation. He has been on the Board of Directors since August of 2012 and has served as the Chair of the Audit Committee during
his entire tenure In February 2024 he was appointed to the Board of Directors of Andrew Peller Limited (TSE:ADW) and serves as the Chair of the Audit and
Pension Committees. Andrew Peller Ltd. is a leading producer and marketer of quality wines and craft beverage alcohol products in Canada. With wineries in British
Columbia, Ontario, and Nova Scotia, the Company markets wines produced from grapes grown in Ontario’s Niagara Peninsula, British Columbia’s Okanagan and
Similkameen Valleys, and from vineyards around the world. He is the president of MTN Chartered Professional Accountant Professional Corporation, a public
accountancy firm. He sits on various private company boards. He has also served in a principal capacity in various entrepreneurial ventures resulting in successful
divestitures
Mr. Jean-Louis Malinge recently retired as partner with ARCH Venture Partners, an early-stage venture capital firm with nearly $2 billion under management.
Additionally, he is a board member of EGIDE SA, CAILabs and Aeponyx. EGIDE SA is a public French company which designs, manufactures and sells hermetic
packages for the protection and interconnection of several types of electronic and photonic chips. CAIlabs is a venture-backed French innovative start-up founded in
2013 which has developed a unique spatial multiplexing platform. Aeponyx is a venture-backed Canadian innovative start-up which develops a platform combining
Silicon Nitride waveguides with planar MEMS for photonics components. From 2004 to 2013 Jean-Louis was President and CEO of Kotura, a Silicon Photonics
pioneer which was acquired in 2013 by Mellanox Technologies. Prior to Kotura, Mr. Malinge was an executive with Corning Inc for 15 years. Jean-Louis hold an
Executive M.B.A. from MIT Sloan School in Boston, Massachusetts. He also holds an engineering degree from the Institut National des Sciences Appliquées in
Rennes, France.
Mr. Peter Charbonneau was a general partner at Skypoint Capital Corporation for almost 15 years, where he was jointly responsible for the placement of $100
million of capital in early-stage telecommunications and data communication companies Mr. Charbonneau currently serves on the board of Surgical Safety
Technologies Inc. an early stage start up that uses clinically trained deep learning systems to perform advanced analytics on hospital data. He recently served on the
Board of Mitel Networks Corporation, a leading global provider of cloud and on-site business communications until November 2018 when it was sold to a private
equity firm. He previously served as Chairman of the Board of Trustees for the CBC Pension Board and a director on the board of the Canadian Broadcasting
Corporation as well as many technology and networking companies, including March Networks Corporation, TELUS Corporation, Breconridge Corporation and
Dragonwave Incorporated.
Page 43
Mr. Yong Meng (James Lee) is General Manager of the Company’s Singapore subsidiary. Prior to his appointment in 2019, Mr. Lee was Vice President of Logic
Technology at IMEC where he was responsible for defining the logic roadmap and developing the technology elements necessary to extend scaling with ultra-scaled
FinFET, GAA devices, advanced metallization as well novel materials for emerging devices and quantum computing. Mr. Lee joined IMEC in 2015 where he was
instrumental in driving collaborations with the foundries in China and was responsible for bringing in >100M euros of research partnership. Prior to IMEC, Mr. Lee
had a 19-year career with GLOBALFOUNDRIES where he held various technical and management positions spanning the US and Singapore focused on developing,
qualifying and ramping leading edge CMOS technology in the foundry. He has over 60 patents and holds a Bachelor of Engineering degree from the University of
Illinois at Champaign-Urbana.
Mr. Glen Riley has more than 30 years’ experience in leadership roles spanning both the semiconductor and optoelectronics industries. He most recently served as
General Manager of the Filter Solutions Business Unit at Qorvo, where he was responsible for developing highly integrated RF modules used in flagship
smartphones. Prior to the merger of RFMD and TriQuint that formed Qorvo, he held multiple leadership roles at TriQuint, including Managing Director of
international headquarters in Singapore, General Manager of the GaAs foundry business, and General Manager of Optoelectronics. Riley was previously the Chief
Executive Officer of Opticalis, an early stage optoelectronics company focused on the development of high-density wavelength division multiplexing products. He
also held prior roles as Vice President and General Manager of the Optoelectronic business at Agere Systems, and President of Asia-Pacific Sales and Marketing at
Lucent Technologies Microelectronics Group. He graduated as valedictorian with a B.S. degree in Electrical Engineering from the School of Engineering at the
University of Maine and completed the General Manager Program at Harvard Business School.
Ms. Theresa Ende serves as Chief Procurement Director of Arista Networks. Prior to her appointment as Chief Procurement Director in 2019, Ms. Ende served for 10
years as its Senior Director of Global Supply Chain Management. Prior to Arista, she held senior positions at JDSU Optical Division and Force10 Networks. At
Cisco Systems and ROLM Telecommunications, Ms. Ende held various program management and planning management positions over a 20-year period. In 2019,
she was honored as one of the “Top 100 Women of Influence” by Silicon Valley Business Journal.
Professor Michal Lipson currently serves as a Eugene Higgins Professor of Electrical Engineering and Professor of Applied Physics at Columbia University. Her
research focus is on Nanophotonics and includes the investigation of novel phenomena, as well as the development of novel devices and applications. Professor
Lipson pioneered critical building blocks in the field of Silicon Photonics, which today is recognized as one of the most promising directions for solving the major
bottlenecks in microelectronics. She is the inventor of over 45 issued patents and has co-authored more than 250 scientific publications. In recognition of her work in
silicon photonics, she was elected as a member of the National Academy of Sciences and the American Academy of Arts and Sciences. She was also awarded the
NAS Comstock Prize in Physics, the MacArthur Fellowship, the Blavatnik Award, the Optical Society’s R. W. Wood Prize, the IEEE Photonics Award, and has
received an honorary degree from Trinity College, University of Dublin. In 2020, she was elected the 2021 Vice President of The Optical Society and will serve as
OSA President in 2023. Since 2014, every year, she has been named by Thomson Reuters as a top 1% highly cited researcher in the field of Physics.
Dr. Robert Ditizio joined POET Technologies Inc. as a consultant in 2017, assisting with the development of the Company’s Intellectual Property portfolio for the
Optical Interposer platform. Dr. Ditizio was appointed Vice President in December 2021. He brings to POET over 20 years of IP portfolio management expertise and
an expansive knowledge of materials and semiconductor processing technology.
Prior to his work with POET Technologies, Dr. Ditizio played an instrumental role in the development of manufacturing and processing equipment for companies in
the semiconductor industry, including plasma reactors and cluster tool platforms for advanced etching and deposition processes in a range of engineering positions,
culminating as Chief Technologist of Tegal Corporation. In addition to equipment development, he also led the development of numerous semiconductor patterning
applications including non-volatile memory etch applications, through silicon via applications, and compound semiconductor etch applications, among many others,
and the development of deposition applications including CVD of polymeric films and pulsed CVD and ALD of barrier layers and complex stoichiometric films. Dr.
Ditizio holds 10 patents in these areas and has published numerous technical papers. He holds BS, MS, and PhD degrees in Engineering Science from Pennsylvania
State University and an MBA from the Sonoma State University.
Page 44
Mr. Dan Meerovich brings to POET more than 30 years of experience in developing and manufacturing innovative photonics products at MACOM, Apogee (now
Broadcom), Oclaro, Multiplex (now Hisense) and JDS Uniphase. As the Director of Product Engineering for MACOM’s Lightwave Business Unit, he led the test,
product and process engineering for lasers, photodetectors, AWG waveguides, optical engines and silicon photonic PICs. Dan developed the low-cost and scalable
process of laser integration onto silicon photonic integrated circuits.
Dan has set up wafer fabrication facilities, run manufacturing operations at Multiplex and Xtellus (acquired by Oclaro) and built and managed a China-based
manufacturing subsidiary acquired by Hisense. In addition, Dan set up and managed contract manufacturers to scale production of both high performance and low-
cost optical modules. Earlier in his career, Dan led the development of photonic engines incorporating high speed lasers and EMLs, including the first uncooled EML
module in a low cost TO platform. The company, Apogee, was later acquired by Cyoptics which was then acquired by Broadcom. Dan holds BSEE and MBA
degrees from Rutgers University.
The Directors, unless otherwise noted above, have served in their respective capacities since their election and/or appointment, and will serve until the next
Company’s annual general meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles of Continuance.
The Board has adopted a written Code of Business Conduct and Ethics to promote a culture of ethical business conduct and relies upon the selection of persons as
directors, senior management and employees who they consider to meet the highest ethical standards. The Company’s Code of Business Ethics can be found on the
Company’s web site at: www.poet-technologies.com.
There are no family relationships between any of our Directors or senior management. There are no arrangements or understandings with major shareholders,
customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.
B. Compensation.
Fixed Stock Option Plan
On September 21, 2007, the Directors approved a fixed 20% vesting Stock Option Plan (the “Plan”) to replace the Rolling Stock Option Plan that had been in effect
since May 4, 2005. The Plan was approved by the disinterested shareholders of the Company at the Shareholders’ Meeting of June 19, 2008 and accepted for filing
by the TSXV. Under the Plan, the maximum number of shares (the “Maximum Number”) which may be issued pursuant to options granted under the Plan or
otherwise granted cannot exceed 20% of the issued and outstanding shares. The shareholders fixed the Maximum Number at 1,193,000. Thereafter, the Plan has been
amended by the Directors, and such amendments have been approved by the shareholders in 2009, 2011, 2013, 2014, 2015, 2016, 2018, 2020 and 2021.
Omnibus Plan
On June 30, 2023, shareholders of the Company approved a fixed 20% omnibus equity incentive plan (the “Omnibus Plan”). The Omnibus Plan replaces the 2021
stock option plan. The Omnibus Plan provides flexibility to the Company to grant different forms of equity-based incentive awards to directors, officers, employees
and consultants. The Omnibus plan provides the Company with the choice of granting stock options, share units and deferred share units.
The purpose of the Omnibus Plan is to assist the Company in attracting, retaining and motivating directors, employees and consultants of the Company and any of its
subsidiaries and to closely align the personal interests of such directors, employees and consultants with those of the shareholders by providing them with the
opportunity, through options, to acquire common shares in the capital of the Company.
Page 45
The Omnibus Plan provides that the maximum number of common shares issuable pursuant to awards granted under the Omnibus Plan and pursuant to other
previously granted awards is limited to 8,056,055. Any subsequent increase in the Number Reserved must be approved by shareholders of the Company and cannot,
at the time of the increase, exceed 20% of the number of issued and outstanding shares. Awards vest in accordance with the policies determined by the Board of
Directors from time to time consistent with the provisions of the Omnibus Plan which grants discretion to the Board of Directors. There is no other limit to the
number of options granted to any individual, except for:
(i) 2% on a yearly basis to any one consultant and (ii) 2% on a yearly basis to any employee providing “Investor Relations Activities.”
The following paragraphs summarize some of the terms of the Omnibus Plan:
Options
An Option is an option granted by the Corporation to a Participant entitling such Participant to acquire a designated number of Shares from treasury at an exercise
price set at the time of grant (the “Option Price”). Options are exercisable, subject to vesting criteria established by the Board at the time of grant as set out in the
Participant’s option agreement (“Option Agreement”). Each Option shall be exercisable at such time or times and/or pursuant to the achievement of such
Performance Criteria and/or other vesting conditions as the Board at the time of granting the particular Option, may determine in its sole discretion. The Board shall
determine, at the time of granting the particular Option, the period during which the Option is exercisable, which shall not be more than ten (10) years from the date
the Option is granted. Notwithstanding the expiration provisions hereof, if the date on which an Option Term expires falls within a Blackout Period or within nine
Business Days after a Blackout Period Expiry Date, the expiration date of the Option will be the date that is ten Business Days after the Blackout Period Expiry Date.
The Blackout Period must expire following the general disclosure of the undisclosed material information; provided that if an additional Blackout Period is
subsequently imposed by the Corporation during the ten Business Days after the initial Blackout Period, then Blackout Period Expiry Date shall be such the tenth
trading day following the end of the last imposed Blackout Period. The Omnibus Plan also permits the Board to grant an option holder, at any time, the right to deal
with such Option on a cashless exercise basis, in whole or in part by notice in writing to the Corporation, where the Corporation has an arrangement with a brokerage
firm that certain procedures must take place. The Omnibus Plan also permits the Board to grant an Option holder, at any time the right to deal with such Option on a
net exercise mechanism, in whole or in part by notice in writing to the Corporation. The grant of an Option by the Board shall be evidenced by an Option Agreement.
Share Units
A Share Unit is an Award in the nature of a bonus for services rendered, or for future services to be rendered, and that, upon settlement, entitles the recipient
Participant to acquire to receive a cash payment equal to the Market Value of a Share or at the discretion of the Corporation (or applicable Subsidiary) one Share or
any combination of cash and Shares as the Corporation (or applicable Subsidiary) in its sole discretion may determine, pursuant and subject to such restrictions and
conditions on vesting as the Board may determine at the time of grant, unless such Share Unit expires prior to being settled. Restrictions and conditions on vesting
conditions may, without limitation, be based on the passage of time during continued employment (or other service relationship), in which case the Award is what is
commonly referred to as a “Restricted Share Unit” or “RSU”, or the achievement of specified Performance Criteria, in which case the Award is what is commonly
referred to as a “Performance Share Unit” or “PSU”, or both. The grant of a Share Unit by the Board shall be evidenced by a Share Unit Agreement. 22 The Board
shall have sole discretion to determine if any Performance Criteria and/or other vesting conditions with respect to a Share Unit, and as contained in the Share Unit
Agreement governing such Share Unit, have been met and shall communicate to a Participant as soon as reasonably practicable when any such applicable vesting
conditions or Performance Criteria have been satisfied and the Share Units have vested. Notwithstanding the foregoing, if the date on which any Share Units have
vested falls within a Blackout Period (as defined in the Omnibus Plan) or within nine Business Days (as defined in the Omnibus Plan) after a Blackout Period Expiry
Date (as defined in the Omnibus Plan), the vesting of such Share Units will be deemed to occur on the date that is ten Business Days after the Blackout Period Expiry
Date. The Blackout Period must expire following the general disclosure of the undisclosed material information; provided that if an additional Blackout Period is
subsequently imposed by the Corporation during the ten Business Days after the initial Blackout Period, then Blackout Period Expiry Date shall be such the tenth
trading day following the end of the last imposed Blackout Period. Subject to the vesting and other conditions and provisions in the Plan and in the Share Unit
Agreement, each Share Unit awarded to a Participant shall entitle the Participant to receive on settlement, a cash payment equal to the Market Value of a Share or at
the discretion of the Corporation (or applicable Subsidiary) one Share or any combination of cash and Shares as the Corporation (or applicable Subsidiary) in its sole
discretion may determine, in each case less any applicable withholding taxes. Dividend Equivalents may, as determined by the Board in its sole discretion, be
awarded in respect of unvested Share Units in a Participant’s Account on the same basis as cash dividends declared and paid on Shares as if the Participant was a
Shareholder of record of Shares on the relevant record date. In the event that the Participant’s applicable Share Units do not vest, all Dividend Equivalents, if any,
associated with such Share Units will be forfeited by the Participant and returned to the Corporation’s account.
Page 46
Deferred Share Units
A deferred share unit (“DSU”) is an Award in the nature of a deferral of payment for services rendered, or for future services to be rendered, and that, upon
settlement, entitles the recipient Participant to receive cash or acquire Shares, as determined by the Corporation in its sole discretion, unless such DSU expires prior
to being settled. Subject to adjustments and amendments in the Plan, DSUs shall only vest, and a Participant is only entitled to redemption of a DSU, when the
Participant ceases to be a director, officer or employee of the Corporation for any reason, including termination, retirement or death. The grant of a DSU by the
Board shall be evidenced by a DSU Agreement. DSUs will be fully vested on the Termination Date of the applicable Participant. Notwithstanding the foregoing, if
the date on which any DSUs have vested falls within a Blackout Period or within nine Business Days after a Blackout Period Expiry Date, the vesting of such DSUs
will be deemed to occur on the date that is ten Business Days after the Blackout Period Expiry Date. The Blackout Period must expire following the general
disclosure of the undisclosed material information; provided that if an additional Blackout Period is subsequently imposed by the Corporation during the ten Business
Days after the initial Blackout Period, then Blackout Period Expiry Date shall be such the tenth trading day following the end of the last imposed Blackout Period.
Subject to the vesting and other conditions and provisions in the Plan and in any DSU Agreement, each DSU awarded to a Participant the Participant to receive on
settlement a cash payment equal to the Market Value of a Share, or at the discretion of the Corporation, one Share or any combination of cash and Shares as the
Corporation in its sole discretion may determine. DSUs shall be redeemed and settled by the Corporation as soon as reasonably practicable following the Participant
ceasing to be a director, officer or employee of the Corporation but in any event not later than December 15 of the year following the calendar year in which the
Participant ceases to be any of a director, officer or employee. On redemption and settlement, the Corporation shall deliver the applicable number of Shares, or, in the
sole discretion of the Corporation, cash equal to the redemption amount of such DSU specified in the applicable DSU Agreement, subject to the satisfaction of any
applicable withholding tax.
Eligibility.
Awards may be granted under the Omnibus Plan to directors, employees, consultants and consultant companies of the Company and any of its subsidiaries. Stock
Options may also be granted to individuals referred to as “Management Company Employees” which are employed by a company providing management services to
the Company, except for services involving “Investor Relations Activities.”
Omnibus Plan Administration.
The Plan shall be administered and interpreted by the board of directors of the Corporation (the “Board”) or, if the Board by resolution so decides, by a committee or
plan administrator appointed by the Board. Subject to the terms of the Plan, applicable law and the rules of the Exchanges, the Board (or its delegate) will have the
power and authority to: (i) designate the Eligible Participants who will receive Awards (an Eligible Participant who receives an Award, a “Participant”), (ii) fix the
number of Awards, if any, to be granted to each Eligible Participant and the date or dates on which such Awards shall be granted, (iii) determine the terms and
conditions of any Award, including any vesting conditions or conditions based on performance of the Corporation or of an individual (“Performance Criteria”); and
(iv) and make such amendments to the Plan and Awards made under the Plan as are permitted by the Plan and the rules of the Exchanges
Page 47
Exercise Price.
The exercise price subject to an award shall be determined by the Board and set forth in the option agreement, but shall be either (i) not less than the last closing price
of the Company’s common shares as traded on the TSXV, unless discounted by the Board or (ii) such other price agreed by the Board and accepted by the TSXV.
Amendment
The Board may suspend or terminate the Omnibus Plan at any time, or from time to time amend or revise the terms of the Plan or any granted Award without the
consent of the Participants provided that such suspension, termination, amendment or revision shall:
(a) not adversely alter or impair the rights of any Participant, without the consent of such Participant except as permitted by the provisions of the Omnibus Plan;
and
(b) be in compliance with applicable law and with the prior approval, if required, of the shareholders of the Corporation, the Exchanges, or any other regulatory
body having authority over the Corporation.
Subject to the terms of the Omnibus Plan, the Board may, from time to time, in its absolute discretion and without approval of the shareholders of the Corporation
make the following amendments to the Omnibus Plan, unless where required by law or the requirements of the Exchanges:
(a) any amendment to the vesting provision, if applicable, of Options or Share Units, or assignability provisions of the Awards;
(b) any amendment to the expiration date of an Award that does not extend the terms of the Award past the original date of expiration of such Award;
(c) any amendment regarding the effect of termination of a Participant’s employment or engagement;
(d) any amendment which accelerates the date on which any Option may be exercised under the Plan;
(e) any amendment necessary to comply with applicable law or the requirements of the Exchanges or any other regulatory body;
(f) any amendment to clarify the meaning of an existing provision of the Omnibus Plan, correct or supplement any provision of the Omnibus Plan that is
inconsistent with any other provision of the Plan, correct any grammatical or typographical errors or amend the definitions in the Plan;
(g) any amendment regarding the administration of the Omnibus Plan;
(h) any amendment to add provisions permitting the grant of Awards settled otherwise than with Shares issued from treasury, or adopt a clawback provision
applicable to equity compensation; and
(i) any other amendment that does not require the approval of the shareholders of the Corporation as outlined in the paragraph below.
Page 48
The Board shall be required to obtain disinterested shareholder approval, if required under the rules of the Exchanges, to make the following amendments:
(a) an increase in the maximum number of Shares issuable under the Plan, except in the event of an adjustment pursuant to the Omnibus Plan;
(b) except in accordance with the terms of the Omnibus Plan, any amendment which reduces the exercise price of an Option or any cancellation of an Option and
replacement of such Option with an Option with a lower exercise price;
(c) any amendment reduction in the price of an Option or extension of the term of an Option if the
Participant is an Insider of the Corporation at the time of the proposed amendment;
(d) any amendment which extends the expiry date of any Award, or the Restriction Period of any Share Unit beyond the original expiry date or Restriction
Period;
(e) any amendment which increases the maximum number of Shares that may be issuable under the Plan and any other proposed or established Share
Compensation Arrangement; and;
(f) any amendment to the definition of Eligible Participant under the Plan, provided that Shares held directly or indirectly by Insiders benefiting from the
amendments shall be excluded when obtaining such shareholder approval.
Term of the Awards. At the meeting of the Board of Directors held on February 25, 2016, based on the report of Compensia, it was determined that stock options
should generally have a term of 10 years.
Vesting Schedule. In general, options granted under the Omnibus Plan vest 25% immediately and 25% every six months from the date of issue, until fully vested. The
directors may, at their discretion, specify a different vesting period, provided that options granted to consultants performing “Investor Relations Activities” must vest
in stages over 12 months with no more than 25% of the options vesting in any three-month period. At the meeting of the Board of Directors held on February 25,
2016, based on the report of Compensia, it was determined that stock options should vest 25% at the end of one year from the date of issue with the remaining 75%
vesting equally on a quarterly basis over the remaining 3 years for a total vesting period of 4 years. At a meeting of the Board of Directors held on March 30, 2017,
the board approved a revised one-year vesting schedule for options granted for service on the board to conform to the term for which a director is elected. Such
options will vest 25% at the end of each quarter served in office.
Assignment
Each Award granted under the Omnibus Plan is personal to the Participant and shall not be assignable or transferable by the Participant, whether voluntarily or by
operation of law, except by will or by the laws of succession of the domicile of the deceased Participant. No Award granted hereunder shall be pledged,
hypothecated, charged, transferred, assigned or otherwise encumbered or disposed of on pain of nullity.
Change of Control
In the event of a potential Change of Control (as described in the Omnibus Plan) the Board will have the power, in its sole discretion, to modify the terms of the Plan
and/or the Awards to assist the Participants to tender into a take-over bid or participating in any other transaction leading to a Change of Control. For greater
certainty, in the event of a take-over bid or any other transaction leading to a Change of Control, the Board shall have the power, in its sole discretion, subject to any
required approval of the Exchanges to (i) provide that any or all Awards shall thereupon terminate, provided that any such outstanding Awards that have vested shall
remain exercisable until consummation of such Change of Control, and (ii) permit Participants to conditionally exercise their vested Options, such conditional
exercise to be conditional upon the take-up by such offeror of the Shares or other securities tendered to such take-over bid in accordance with the terms of such take-
over bid (or the effectiveness of such other transaction leading to a Change of Control). If the Corporation completes a transaction constituting a Change of Control
and within twelve (12) months following the Change of Control a Participant who was also an Officer or Employee of, or Consultant to, the Corporation prior to the
Change of Control has their position, employment or consulting agreement terminated, or the Participant is constructively dismissed, then all unvested Awards of the
Participant shall immediately vest and become exercisable, and remain open for exercise until the earlier of their expiry date as set out in the Award Agreement and
the date that is twelve (12) months after such termination or dismissal.
Page 49
Termination of Options.
In the event that the award recipient ceases employment with us or ceases to provide services to us, the options will terminate after a period of time following the
termination of employment. Our Board of Directors has the authority to amend or terminate the plan subject to shareholder approval with respect to certain
amendments. However, no such action may adversely affect in any material way any awards previously granted unless agreed upon by the recipient.
Officer Compensation
Total cash compensation accrued and/or paid (directly and/or indirectly) to all of our Officers during fiscal year 2023 was $2,083,669 (refer to Item 7. “Major
Shareholders and Related Party Transactions” for information regarding indirect payments)
In order to assist the Board of Directors in fulfilling its oversight responsibilities with respect to human resources matters, the Board established a Compensation
Committee. The Compensation Committee reviews and makes determinations with respect to senior officer compensation on a regular basis with any discretionary
compensation used only for extraordinary projects or significant milestone results that advance the Company’s growth potential. When determining Executive
Officers’ compensation, the Compensation Committee receives input and guidance from the Executive Chairman of the Board and the Chief Executive Officer of the
Company. In the past, the Compensation Committee has engaged an outside consultant to conduct a peer group review to provide guidance to the Compensation
Committee with respect to appropriate comparative terms for executive compensation and stock option grants. The Company also utilizes peer group comparisons
from subsidiary locations to assist in its salary review of various positions in those locations. The Compensation Committee utilizes such comparative reviews to
assist it in making appropriate recommendations to the Board.
In addition to his or her fixed base salary, each officer may be eligible to receive variable pay compensation or bonus meant to motivate him or her to achieve short-
term goals. Currently, the Company does not have in place established procedures for determining variable pay compensation. Stock options are an important
element of the variable pay compensation and do not require cash disbursement from the Company. Stock options are also generally awarded to officers, qualifying
employees and consultants at the time of hire and are used as a recruitment tool to attract highly qualified and experienced executives, employees and consultants to
the Company. Stock options are also granted at other times during the year. As the Company is continuing to develop its Optical Interposer technology, it must
conserve its limited financial resources and control costs to ensure that funds are available when needed to complete its scheduled developments. As a result, the
Compensation Committee generally considers not only the financial situation of the Company at the time of the determination of the compensation, but also the
estimated financial situation in the mid- and long-term. The use of stock options encourages and rewards performance by aligning an increase in each officer’s
compensation with increases in the Company’s performance and in shareholder value.
The following table sets forth all annual and long-term compensation for services in all capacities to the Company for fiscal year 2023 of the Company.
Options Based
Awards (1)(2)
Non-Equity Incentive Plan
Compensation
Name and Principal Position
Dr. Suresh Venkatesan
Thomas Mika
Vivek Rajgarhia
Mo Jinyu
Raju Kankipati
James Lee
Dan Meerovich
Kevin Barnes
Robert Ditizio
Fiscal
Year
2023
2023
2023
2023
2023
2023
2023
2023
2023
Salary (2)
$ 462,000
$ 330,000
$ 325,762
$ 261,667
$ 240,000
$ 225,750
$ 211,909
$ 199,740
$ 225,761
Share-
Based
Awards
(1) (2)
-
-
-
-
-
-
-
-
-
No. of
Options
100,000
75,000
50,000
50,000
50,000
50,000
40,000
40,000
15,000
Value of
Options
(1) (2)
$ 341,441
$ 256,081
$ 170,720
$ 170,720
$ 170,720
$ 170,720
$ 136,576
$ 136,576
$ 51,216
Annual
Incentive
Plans
Long-
term
Incentive
Plans
Pension
Value
All
other
Comp.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Comp.
$ 803,441
$ 586,081
$ 496,482
$ 432,387
$ 410,720
$ 396,470
$ 348,485
$ 336,316
$ 276,977
-
-
-
-
-
-
-
-
-
(1) The Company used the Black-Scholes model as the methodology to calculate the grant date fair value. The fair value will be recorded as an operating
expense as the options vest based on the stock options vesting schedule from the date of grant.
(2) The exchange rate used in these calculations to convert CAD to USD is based on the average exchange rate for the year ended December 31, 2023 being
0.7408.
Page 50
The following table sets forth information concerning all awards outstanding under a stock option plan to each of the current officers, as of December 31, 2023:
Option-based Awards
Share-based Awards
Number of
Securities
Underlying
Unexercised
Options
First Name
Last Name
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Mo
Mo
Mo
Raju
Raju
Raju
Yong Meng
Yong Meng
Yong Meng
Yong Meng
Yong Meng
Thomas
Thomas
Thomas
Thomas
Thomas
Thomas
Thomas
Thomas
Thomas
Vivek
Vivek
Vivek
Vivek
Vivek
Suresh
Suresh
Suresh
Suresh
Suresh
Suresh
Suresh
Suresh
Dan
Dan
Dan
Dan
Robert
Robert
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Jinyu
Jinyu
Jinyu
Kankipati
Kankipati
Kankipati
Lee
Lee
Lee
Lee
Lee
Mika
Mika
Mika
Mika
Mika
Mika
Mika
Mika
Mika
Rajgarhia
Rajgarhia
Rajgarhia
Rajgarhia
Rajgarhia
Venkatesan
Venkatesan
Venkatesan
Venkatesan
Venkatesan
Venkatesan
Venkatesan
Venkatesan
Meerovich
Meerovich
Meerovich
Meerovich
Ditizio
Ditizio
24,500
23,400
50,000
50,000
50,000
2,000
30,000
40,000
25,000
100,000
50,000
100,000
100,000
50,000
100,000
100,000
55,000
20,000
50,000
25,000
80,000
100,000
50,000
100,000
95,000
60,000
75,000
100,000
45,000
102,400
100,000
115,000
50,000
45,000
280,000
450,000
200,000
390,000
250,000
100,000
30,000
65,000
100,000
50,000
40,000
25,000
100,000
15,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Value of
Unexercised
in-the-money
Options (1)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Number of
Shares or
Units of
Shares that
have not
Vested
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Option
Expiration
Date
13-Dec-2028
13-Jul-2027
15-Jan-2030
29-May-2029
11-Nov-2032
28-Mar-2028
11-Jun-2030
08-Aug-2033
06-Apr-2031
11-Nov-2032
08-Aug-2033
08-Jan-2031
11-Nov-2032
08-Aug-2033
06-Apr-2032
04-Nov-2029
11-Nov-2032
11-Jun-2030
08-Aug-2033
06-Apr-2031
13-Jul-2027
29-May-2029
16-Jan-2027
11-Nov-2032
28-Mar-2028
11-Jun-2030
08-Aug-2033
02-Nov-2026
06-Apr-2031
04-Nov-2029
11-Nov-2032
11-Jun-2030
08-Aug-2033
06-Apr-2031
13-Jul-2027
29-May-2029
11-Nov-2032
28-Mar-2028
11-Jun-2030
08-Aug-2033
07-Jul-2026
06-Apr-2031
17-Mar-2030
11-Nov-2032
08-Aug-2033
06-Apr-2031
01-Dec-2031
08-Aug-2033
Market or
Payout
Value of
Shares or
Units of
Shares that
have not
Vested
Market or
Payout
Value of
Vested
Shares or
Units of
Shares that
have not
Paid Out or
Distributed
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Option
Exercise
Price
2.65 CAD
2.80 CAD
3.70 CAD
3.80 CAD
4.00 CAD
5.20 CAD
5.30 CAD
5.50 CAD
11.90 CAD
3.54 CAD
5.50 CAD
8.10 CAD
3.54 CAD
5.50 CAD
8.73 CAD
3.30 CAD
3.54 CAD
5.30 CAD
5.50 CAD
11.90 CAD
2.80 CAD
3.80 CAD
3.85 CAD
4.00 CAD
5.20 CAD
5.30 CAD
5.50 CAD
6.20 CAD
11.90 CAD
3.30 CAD
4.00 CAD
5.30 CAD
5.50 CAD
11.90 CAD
2.80 CAD
3.80 CAD
4.00 CAD
5.20 CAD
5.30 CAD
5.50 CAD
8.60 CAD
11.90 CAD
2.95 CAD
3.54 CAD
5.50 CAD
11.90 CAD
8.20 CAD
5.50 CAD
(1) This amount is calculated based on the difference between the market value of the shares underlying the options as of December 31, 2023, being CAD$1.25
(US$0.94), and the exercise or base price of the option. The exchange rate used in these calculations to convert CAD to USD was 0.755, being the closing
exchange rate at December 31, 2023.
Page 51
The value vested or earned during fiscal year 2023 of incentive plan awards granted to NEOs are as follows:
First Name
Last Name
Kevin
Mo
Raju
Yong Meng
Thomas
Vivek
Suresh
Dan
Barnes
Jinyu
Kankipati
Lee
Mika
Rajgarhia
Venkatesan
Meerovich
Option-based Awards
Share-based Awards
Number of
Securities
Underlying
Options
Vested
Value
Vested
During the
Year
45,002
50,000
62,500
50,002
63,752
148,749
185,002
43,752
37,636.48
$
32,826.62
$
32,826.62
$
54,835.87
$
47,512.94
$
$ 149,915.71
$ 146,400.22
53,267.83
$
USD
USD
USD
USD
USD
USD
USD
USD
Number of
Shares or
Units of
Shares
Vested
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Value
Vested
During the
Year
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Non-equity
Incentive Plan
Compensation –
Value
Earned
During The
Year
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1) This amount is the dollar value that would have been realized and is computed by obtaining the difference between the market price of the underlying securities
on the vesting date and the exercise or base price of the options under the option-based award. For the named executive officers to realize this value, they would
have had to exercise their options and sell the shares on the day of vesting. The exchange rate used in these calculations to convert CAD to USD is based on the
average exchange rate for the year ended December 31, 2023 being 0.7408.
Director Compensation
The following table details compensation paid/accrued for fiscal year 2023 for each director who is not also an officer.
Name and Principal Position
Peter Charbonneau
Chris Tsiofas
Glen Riley
Jean-Louis Malinge
Theresa Ende
Michal Lipson
Fiscal
Year
2023
2023
2023
2023
2023
2023
Salary (2)
55,000
40,000
40,000
30,000
30,000
30,000
Share-
Based
Awards
(1) (2)
Options Based Awards
(1)(2)
No. of
Options
31,879
27,722
27,722
24,949
24,949
24,949
-
-
-
-
-
-
Value of
Options
(1) (2)
$ 112,678
$ 97,985
$ 97,985
$ 88,183
$ 88,183
$ 88,183
Non-Equity Incentive Plan Compensation
Annual
Incentive
Plans
Long-
term
Incentive
Plans
Pension
Value
All
other
Comp.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Comp.
167,678
137,985
137,985
118,183
118,183
118,183
-
-
-
-
-
-
(1) The Company used the Black-Scholes model as the methodology to calculate the grant date fair value. The fair value will be recorded as an operating expense as
the stock options vest from the date of grant.
(2) The exchange rate used in these calculations to convert CAD to USD is based on the average exchange rate for the year ended December 31, 2023 being 0.7408
Page 52
The following table sets forth information concerning all awards outstanding under the stock option plans to each of the current Directors who are not also named
executive officers as of December 31, 2023:
Option-based Awards
Share-based Awards
First Name
Peter
Peter
Peter
Peter
Peter
Peter
Peter
Peter
Theresa
Theresa
Theresa
Michal
Michal
Michal
Jean-Louis
Jean-Louis
Jean-Louis
Jean-Louis
Jean-Louis
Jean-Louis
Jean-Louis
Glen
Glen
Glen
Glen
Chris
Chris
Chris
Chris
Chris
Chris
Chris
Chris
Last Name
Charbonneau
Charbonneau
Charbonneau
Charbonneau
Charbonneau
Charbonneau
Charbonneau
Charbonneau
Ende
Ende
Ende
Lipson
Lipson
Lipson
Malinge
Malinge
Malinge
Malinge
Malinge
Malinge
Malinge
Riley
Riley
Riley
Riley
Tsiofas
Tsiofas
Tsiofas
Tsiofas
Tsiofas
Tsiofas
Tsiofas
Tsiofas
Number of
Securities
Underlying
Unexercised
Options
39,900
40,059
52,860
3,549
15,473
33,711
31,879
14,375
41,368
24,949
4,745
41,368
24,949
5,194
52,500
39,900
36,053
41,368
26,382
24,949
11,250
45,965
22,460
27,722
11,250
68,750
48,767
44,065
45,965
29,314
27,722
15,000
12,500
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Option
Exercise
Price
3.30 CAD
3.80 CAD
4.00 CAD
4.20 CAD
5.20 CAD
5.30 CAD
5.70 CAD
11.90 CAD
4.00 CAD
5.70 CAD
7.16 CAD
4.00 CAD
5.70 CAD
6.59 CAD
3.00 CAD
3.30 CAD
3.80 CAD
4.00 CAD
5.30 CAD
5.70 CAD
11.90 CAD
4.00 CAD
5.00 CAD
5.70 CAD
11.90 CAD
2.80 CAD
3.30 CAD
3.80 CAD
4.00 CAD
5.30 CAD
5.70 CAD
8.60 CAD
11.90 CAD
Option
Expiration
Date
21-Jun-2028
29-May-2029
11-Nov-2032
06-Feb-2030
28-Mar-2028
11-Jun-2030
14-Jul-2033
06-Apr-2031
11-Nov-2032
14-Jul-2033
01-Jun-2032
11-Nov-2032
14-Jul-2033
21-Jun-2032
05-Sep-2027
21-Jun-2028
29-May-2029
11-Nov-2032
11-Jun-2030
14-Jul-2033
06-Apr-2031
11-Nov-2032
04-Dec-2030
14-Jul-2033
06-Apr-2031
13-Jul-2027
21-Jun-2028
29-May-2029
11-Nov-2032
11-Jun-2030
14-Jul-2033
07-Jul-2026
06-Apr-2031
Value of
Unexercised
in-the-money
Options (1)
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
0.00 USD
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Number of
Shares or
Units of
Shares
that
have not
Vested
Market or
Payout
Value of
Shares or
Units of
Shares that
have not
Vested
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Market or
Payout
Value of
Vested
Shares or
Units of
Shares that
have not
Paid Out or
Distributed
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1) This amount is calculated based on the difference between the market value of the shares underlying the options as of December 31, 2023, being CAD$1.25
(US$0.94), and the exercise or base price of the option. The exchange rate used in these calculations to convert CAD to USD was 0.755, being the closing
exchange rate at December 31, 2023.
The value vested or earned during fiscal year 2023 of incentive plan awards granted to Directors who are not also named executive officers are as follows:
First Name
Last Name
Peter
Theresa
Michal
Jean-Louis
Glen
Chris
Charbonneau
Ende
Lipson
Malinge
Riley
Tsiofas
Option-based Awards
Share-based Awards
Number of
Securities
Underlying
Options
Vested
Value
Vested
During
the Year
55,585
43,501
43,501
43,501
48,335
48,335
$
$
$
$
$
$
56,016.97
43,838.62
43,838.62
43,838.62
48,710.67
48,710.67
USD
USD
USD
USD
USD
USD
Number of
Shares or
Units of
Shares
Vested
Value
Vested
During
the Year
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Non-equity
Incentive Plan
Compensation –
Value Earned
During
The Year
N/A
N/A
N/A
N/A
N/A
N/A
(1) This amount is the dollar value that would have been realized and is computed by obtaining the difference between the market price of the underlying securities
on the vesting date and the exercise or base price of the options under the option- based award.
Termination and Change of Control Benefits
Other than as described in their individual management agreements, the Company has no plans or arrangements in respect of remuneration received or that may be
received by the Officers the Company to compensate such Officers, in the event of termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control.
Page 53
Pension Plan Benefits
The Company does not provide a defined benefit plan to the Officers or any of its employees.
The Company offers a defined contribution plan that is a 401k Plan but does not contribute toward such plan. The Company does not have any deferred
compensation plans other than that described above.
The following individuals were senior management of the Company in 2023:
Name
Suresh Venkatesan
Vivek Rajgarhia
Thomas Mika
Mo Jinyu
Raju Kankipati
C. Board Practices.
Title
CEO
President & General Manager
Executive Vice President and CFO
SVP, GM of Asia
SVP, Product Line Management & GM USA
Our Board of Directors currently consists of seven (7) directors, all of whom are independent, except for Suresh Venkatesan, our CEO who also currently serves on
the Board of Directors. Each director holds office until the next annual general meeting of the Company or until his successor is elected or appointed, unless his
office is earlier vacated in accordance with the Articles of Amalgamation and all amendments thereto (the “Articles”), or with the provisions of the OBCA. The
Company’s Officers are appointed to serve at the discretion of the Board, subject to the terms of the employment agreements described above.
Lead independent director
Our independent directors have selected Peter Charbonneau to serve as the lead independent director. The lead independent director’s primary role is to facilitate the
functioning of the board, and to maintain and enhance the quality of our corporate governance practices. The lead independent director presides over the private
sessions of our independent directors that take place following each meeting of the board and conveys the results of these meetings to the chair of the board.
The Board and committees of the Board schedule regular meetings over the course of the year.
During fiscal 2023, the Board held 17 regularly scheduled meetings, including committee meetings. If for various reasons, Board members may not be able to attend
a Board meeting, all Board members are provided information related to each of the agenda items before each meeting, and, therefore, can provide counsel outside
the confines of regularly scheduled meetings.
The Board has adopted standards for determining whether a director is independent from management. The Board reviews, consistent with the Company’s corporate
governance guidelines, whether a director has any material relationship with the Company that would impair the director’s independent judgment. The Board has
affirmatively determined, that as of the filing of this Form 20-F, based on its standards, that the following directors are independent: Chris Tsiofas, Jean-Louis
Malinge, Peter Charbonneau, Glen Riley, Theresa Lan Ende and Michal Lipson.
Directors’ Service Contracts
As CEO, Mr. Venkatesan has an employment contract with the Company which allows him to receive a severance of twelve months on termination of employment
by the Company, other than for cause. Unvested stock options will be cancelled. He will have one year to exercise vested stock options.
Page 54
No other director has a service contract with the Company.
Audit and Compensation Committees of the Board of Directors
We currently have four board committees; (1) an Audit Committee; (2) a Compensation Committee, (3) a Corporate Governance & Nominating Committee, and (4)
an Ad Hoc Strategy Committee. Committee charters for the Audit, Compensation and Corporate Governance & Nominating Committees can be found on the
Company’s website (poet-technologies.com). The Strategy Committee is an ad-hoc committee and therefore does not have a charter. The names of the members and
a summary of the terms of the charter for each the Audit Committee and the Compensation Committee is provided below.
Audit Committee
The Audit Committee is currently comprised of three members: Chris Tsiofas (Chair), Peter Charbonneau and Jean-Louis Malinge. All three members are
independent directors of the Company. Mr. Tsiofas was appointed chair of the Audit Committee on August 21, 2012. The Board has determined that Mr. Tsiofas
satisfies the criteria of “audit committee financial expert” within the meaning of Item 401(h) of Regulation S-K and is independent in accordance with Rule 4200 of
the Nasdaq Marketplace Rules. All members of the audit committee are financially literate, meaning they have the ability to read and understand a set of financial
statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can
reasonably be expected to be raised by the Company’s financial statements.
The Audit Committee is responsible for reviewing the Company’s financial reporting procedures, internal controls and the performance of the Company’s external
auditors. The Audit Committee is also responsible for reviewing the annual and quarterly financial statements and accompanying Management’s Discussion and
Analysis prior to their approval by the full Board. The Audit Committee also reviews the Company’s financial controls with the auditors of the Company on an
annual basis.
The Company’s independent auditor is accountable to the Board and to the Audit Committee. The Board, through the Audit Committee, has the ultimate
responsibility to evaluate the performance of the independent auditor, and through the shareholders, to appoint, replace and compensate the independent auditor. Any
non-audit services must be pre- approved by the Audit Committee.
Compensation Committee
The Compensation Committee is currently comprised of three members: Glen Riley (Chair), Chris Tsiofas and Theresa Ende. Mr. Riley was appointed chair of the
Compensation Committee on October 14, 2022. All three members are independent directors. The Board has determined that all members of the Compensation
Committee are qualified as members based on the following:
Mr. Riley has more than 30 years’ experience in leadership roles spanning both the semiconductor and optoelectronics industries. He most recently served as General
Manager of the Filter Solutions Business Unit at Qorvo, where he was responsible for developing highly integrated RF modules used in flagship smartphones. Prior
to the merger of RFMD and TriQuint that formed Qorvo, he held multiple leadership roles at TriQuint, including Managing Director of international headquarters in
Singapore, General Manager of the GaAs foundry business, and General Manager of Optoelectronics. Riley was previously the Chief Executive Officer of Opticalis,
an early stage optoelectronics company focused on the development of high-density wavelength division multiplexing products. He also held prior roles as Vice
President and General Manager of the Optoelectronic business at Agere Systems, and President of Asia-Pacific Sales and Marketing at Lucent Technologies
Microelectronics Group. He graduated as valedictorian with a B.S. degree in Electrical Engineering from the School of Engineering at the University of Maine and
completed the General Manager Program at Harvard Business School.
Page 55
Mr. Chris Tsiofas, CA, CPA, earned a Bachelor’s of Commerce Degree from the University of Toronto and is a member of the Institute of Chartered Accountants of
Canada and the Canadian Tax Foundation. He has been on the Board of Directors of the Company since August of 2012 2012 and has served as the Chair of the
Audit Committee during his entire tenure. In February 2024 he was appointed to the Board of Directors of Andrew Peller Limited (TSE:ADW) and serves as the
Chair of the Audit and Pension Committees. Andrew Peller Ltd. is a leading producer and marketer of quality wines and craft beverage alcohol products in Canada.
With wineries in British Columbia, Ontario, and Nova Scotia, the Company markets wines produced from grapes grown in Ontario’s Niagara Peninsula, British
Columbia’s Okanagan and Similkameen Valleys, and from vineyards around the world. Mr. Tsiofas is the president of MTN Chartered Professional Accountant
Professional Corporation, a public accountancy firm. He sits on various private company boards. He has also served in a principal capacity in various entrepreneurial
ventures resulting in successful divestitures. Tsiofas formerly served as Chairman of the Company’s Compensation Committee and has directed past engagements
with the Company’s outside executive compensation consultants. Mr. Tsiofas is also the Chairman of the Audit Committee of the Board of Directors. He brings to the
Compensation Committee specialized knowledge regarding the tax impact of certain compensation policies and practices on individuals and on the Company.
Ms. Lan Ende serves as Chief Procurement Director of Arista Networks. Prior to her appointment as Chief Procurement Director in 2019, Ms. Ende served for 10
years as its Senior Director of Global Supply Chain Management. Prior to Arista, she held senior positions at JDSU Optical Division and Force10 Networks. At
Cisco Systems and ROLM Telecommunications, Ms. Ende held various program management and planning management positions over a 20-year period. In 2019,
she was honored as one of the “Top 100 Women of Influence” by Silicon Valley Business Journal.
The Compensation Committee has extensive direct relevant experience in determining executive compensation policies and practices on behalf of the Company. In
addition to being supported by outside compensation consultants on a periodic basis for peer group review, the members of the Committee are professional
executives familiar with best practices associated with executive compensation, are knowledgeable about the tax implications to the Company and its executive
officers of changes in the tax laws pertaining to executive compensation and have direct relevant experience with the incentives used throughout the Company’s
industry to align the interests of executive management with company and shareholder interests. This gives these individuals strong insight as to the incentive
structures and programs appropriate for companies of a comparable size. The seniority, experience and level of achievement of the three current members of the
Compensation Committee speak to the independent judgement exercised in making decisions about the suitability of the Company’s compensation policies and
practices.
The Compensation Committee discusses and makes recommendations to the Board for approval of compensation issues that pertain to the senior executives of the
Company, and on issues involving employment company-wide compensation policies and practices. In general, the compensation programs of the Company are
designed to reward performance and to be competitive with the compensation agreements of other comparable semiconductor companies. The Compensation
Committee is responsible for evaluating the compensation of the senior management of the Company and assuring that they are compensated effectively in a manner
consistent with the Company’s business, stage of development, financial condition and prospects, and the competitive environment. Specifically, the Compensation
Committee is responsible for: (i) reviewing the compensation practices and policies of the Company to ensure that they are competitive and that they provide
appropriate motivation for corporate performance and increased shareholder value; (ii) overseeing the administration of the Company’s compensation programs, and
reviewing and approving the employees who receive compensation and the nature of the compensation provided under such programs, and ensuring that all
management compensation programs are linked to meaningful and measurable performance targets; (iii) making recommendations to the Board regarding the
adoption, amendment or termination of compensation programs and the approval of the adoption, amendment and termination of compensation programs of the
Company, including for greater certainty, ensuring that if any equity- based compensation plan is subject to shareholder approval, and that such approval is sought;
(iv) periodically surveying the executive compensation practices of other comparable companies; (v) establishing and ensuring the satisfaction of performance goals
for performance-based compensation; (vi) annually reviewing and approving the annual base salary and bonus targets for the senior executives of the Company, other
than the Chief Executive Officer (the “CEO”); (vii) reviewing and approving annual corporate goals and objectives for the CEO and evaluating the CEO’s
performance against such goals and objectives; (viii) annually reviewing and approving, based on the Compensation Committee’s evaluation of the CEO, the CEO’s
annual base salary, the CEO’s bonus, and any stock option grants and other awards to the CEO under the Company’s compensation programs (in determining the
CEO’s compensation, the Compensation Committee will consider the Company’s performance and relative shareholder return, the compensation of CEOs at other
companies, and the CEO’s compensation in past years); and (ix) reviewing the annual report on executive compensation required to be prepared under applicable
corporate and securities legislation and regulation including the disclosure concerning members of the Compensation Committee and settling the reports required to
be made by the Compensation Committee in any document required to be filed with a regulatory authority and/or distributed to shareholders.
Page 56
Code of Ethics
The Board has adopted a written code of business conduct and ethics. All transgressions of the code of business conduct and ethics are required to be promptly
reported to the Chair of the Board or of any committee, who in turn, reports them to the Corporate Governance and Nominating Committee. The Corporate
Governance and Nominating Committee is charged with investigating alleged violations of the code of business conduct and ethics. Any findings of the Corporate
Governance and Nominating Committee are then reported to the full Board, which will take such action as it deems appropriate. The Company’s Code of Ethics may
be inspected on the Company’s website (poet-technologies.com) and is filed as an Exhibit to this Annual Report.
Corporate Governance
As a foreign private issuer, we are exempt from certain requirements of the Nasdaq listing rules that are applicable to U.S. listed companies. Please see “Item 16G.
Corporate Governance” for additional information.
Nasdaq’s Board Diversity Rule
Nasdaq’s Board Diversity Rule, which was approved by the SEC on August 6, 2021, is a disclosure standard designed to encourage minimum board diversity for
companies and provide stakeholders with consistent, comparable disclosures concerning a company’s current board composition. The director diversity matrix
required by Nasdaq Marketplace Rule 5606 is available on the Company’s website, https://poet-technologies.com, in the “Board Diversity Matrix” section under the
“Investor Relations” tab.
D. Employees.
As of December 31, 2023, the Company had fifty-six (56) full-time employees and four (4) consultants. Sixteen (16) employees and three (3) consultants work at our
lab facility either as support staff or are engaged in research and development initiatives; four (4) employees are employed at the Canadian office; twenty (28)
employees are employed at our fabrication facility in Singapore; eight (8) employees are employed at our product development facility in China; one (1) consultant is
located in Italy. None of the Company’s employees are covered by collective bargaining agreements.
E. Share Ownership.
The following table sets forth certain information regarding the beneficial ownership of our outstanding common shares for: (i) each of our Directors and Officers
individually; (ii) all of our Directors and Officers as a group; and (iii) each other person known to us to own beneficially more than 5% of our common shares as of
March 15, 2024. Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared
voting or investment power. The table also includes the number of shares underlying options that are exercisable within sixty (60) days of March 15, 2024. Common
shares subject to these options are deemed to be outstanding for the purpose of computing the ownership percentage of the person holding these options, but are not
deemed to be outstanding for the purpose of computing the ownership percentage of any other person.
Page 57
The shareholders listed below do not have any different voting rights from our other shareholders.
Directors and Officers:
Chris Tsiofas
Thomas Mika
Kevin Barnes
Suresh Venkatesan
Raju Kankipati
Peter Charbonneau
Jean-Louis Malinge
Vivek Rajgarhia
Glen Riley
Michal Lipson
Directors and Officers Subtotal
Major Shareholders:
None that we are aware of.
* Less than one percent (1%).
Number of Shares
Beneficially Owned
(1)
Percent of Class
64,467
138,611
54,746
158,611
11,111
63,729
33,892
1,500
40,129
8,196
574,992
*
*
*
*
*
*
*
*
*
*
*
(1) The number of shares set forth for each Director, Officer and Major Shareholder, if any, was determined in accordance with Rule 13d-3 of the General Rules
and Regulations under the Exchange Act.
See “Item 6.B. Compensation” for the exercise prices of options.
The following table presents the options exercisable for Directors and Officers within the next 60 days:
First Name
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Kevin
Peter
Peter
Peter
Last Name
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Barnes
Charbonneau
Charbonneau
Charbonneau
Expiry
11-Jul-2027
25-Mar-2028
11-Jul-2027
11-Jul-2027
08-Nov-2032
04-Apr-2031
12-Jan-2030
10-Dec-2028
12-Jan-2030
09-Jun-2030
26-May-2029
03-Feb-2030
04-Apr-2031
25-Mar-2028
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Grant Price
Exercisable
2.80
5.20
2.80
2.80
4.00
11.90
3.70
2.65
3.70
5.30
3.80
4.20
11.90
5.20
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
1,400
2,000
10,000
12,000
15,625
17,189
20,314
24,500
25,000
26,250
50,000
3,549
14,375
15,473
Page 58
Peter
Peter
Peter
Peter
Peter
Theresa
Theresa
Theresa
Mo
Mo
Raju
Raju
Yong Meng
Yong Meng
Yong Meng
Yong Meng
Michal
Michal
Michal
Jean-Louis
Jean-Louis
Jean-Louis
Jean-Louis
Jean-Louis
Jean-Louis
Jean-Louis
Thomas
Thomas
Thomas
Thomas
Thomas
Thomas
Thomas
Thomas
Vivek
Vivek
Vivek
Vivek
Glen
Glen
Glen
Glen
Chris
Chris
Chris
Chris
Chris
Charbonneau
Charbonneau
Charbonneau
Charbonneau
Charbonneau
Ende
Ende
Ende
Jinyu
Jinyu
Kankipati
Kankipati
Lee
Lee
Lee
Lee
Lipson
Lipson
Lipson
Malinge
Malinge
Malinge
Malinge
Malinge
Malinge
Malinge
Mika
Mika
Mika
Mika
Mika
Mika
Mika
Mika
Rajgarhia
Rajgarhia
Rajgarhia
Rajgarhia
Riley
Riley
Riley
Riley
Tsiofas
Tsiofas
Tsiofas
Tsiofas
Tsiofas
11-Jul-2033
09-Jun-2030
18-Jun-2028
26-May-2029
08-Nov-2032
29-May-2032
11-Jul-2033
08-Nov-2032
08-Nov-2032
06-Jan-2031
08-Nov-2032
03-Apr-2032
08-Nov-2032
04-Apr-2031
09-Jun-2030
01-Nov-2029
18-Jun-2032
11-Jul-2033
08-Nov-2032
04-Apr-2031
11-Jul-2033
09-Jun-2030
26-May-2029
18-Jun-2028
08-Nov-2032
03-Sep-2027
04-Apr-2031
08-Nov-2032
14-Jan-2027
09-Jun-2030
11-Jul-2027
25-Mar-2028
31-Oct-2026
26-May-2029
04-Apr-2031
08-Nov-2032
09-Jun-2030
01-Nov-2029
04-Apr-2031
11-Jul-2033
02-Dec-2030
08-Nov-2032
04-Apr-2031
05-Jul-2026
11-Jul-2033
09-Jun-2030
26-May-2029
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
5.70
5.30
3.30
3.80
4.00
7.16
5.70
4.00
3.54
8.10
3.54
8.73
3.54
11.90
5.30
3.30
6.59
5.70
4.00
11.90
5.70
5.30
3.80
3.30
4.00
3.00
11.90
4.00
3.85
5.30
2.80
5.20
6.20
3.80
11.90
4.00
5.30
3.30
11.90
5.70
5.00
4.00
11.90
8.60
5.70
5.30
3.80
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
23,909
33,711
39,900
40,059
52,860
4,745
18,712
41,368
31,250
75,000
31,250
43,750
17,188
17,189
17,500
100,000
5,194
18,712
41,368
11,250
18,712
26,382
36,053
39,900
41,368
52,500
30,939
31,250
50,000
52,500
80,000
95,000
100,000
100,000
30,939
31,250
99,376
102,400
11,250
20,792
22,460
45,965
12,500
15,000
20,792
29,314
44,065
Page 59
Chris
Chris
Chris
Suresh
Suresh
Suresh
Suresh
Suresh
Suresh
Suresh
Tsiofas
Tsiofas
Tsiofas
Venkatesan
Venkatesan
Venkatesan
Venkatesan
Venkatesan
Venkatesan
Venkatesan
08-Nov-2032
18-Jun-2028
11-Jul-2027
05-Jul-2026
04-Apr-2031
08-Nov-2032
09-Jun-2030
11-Jul-2027
25-Mar-2028
26-May-2029
$
$
$
$
$
$
$
$
$
$
4.00
3.30
2.80
8.60
11.90
4.00
5.30
2.80
5.20
3.80
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
45,965
48,767
68,750
30,000
44,689
62,500
218,750
280,000
390,000
450,000
3,782,718
Glen Riley
5,000
5.00
Number of Warrants exercisable within 60 days
Exercise price CA$
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation.
In 2023, the Company adopted a compensation recovery policy (the “Compensation Recovery Policy”) in compliance with Nasdaq listing standards and Rule 10D-1
of the Exchange Act, a copy of which is filed as Exhibit 97.1 to this Annual Report on Form 20-F.
We were not required to prepare an accounting restatement during the year ended December 31, 2023. As of December 31, 2023, there was no outstanding balance of
erroneously awarded compensation to be recovered pursuant to the Compensation Recovery Policy.
Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders.
Holdings by Major Shareholders
Please refer to Item 6.E. “Share Ownership” for details regarding securities held by Directors, Officers and Major Shareholders. The Company’s major shareholders
do not have any different or special voting rights.
U.S. Share Ownership
As of March 15, 2024, there were a total of 405 holders of record of our common shares with addresses in the U.S. We believe that the number of U.S beneficial
owners is substantially greater than the number of U.S record holders, because a large portion of our common shares are held in broker “street names.” As of March
15, 2024, U.S. holders of record held approximately 17% of our outstanding common shares.
Control of Company
The Company is a publicly owned Ontario corporation, the common shares of which are owned by Canadian residents, U.S. residents and other foreign residents.
The Company is not controlled by any foreign government or other person(s) except as described in “Item 4.A. History and Progress of the Company” and “Item 6.E.
Share Ownership.”
Change of Control of Company Arrangements
None
Page 60
B. Related Party Transactions.
No shareholder beneficially owns 5% or more of the Company’s common shares.
Compensation to key management personnel (CEO, CFO, President, GM POET Technologies Pte Ltd, VP Finance and Treasurer, VP Product Line Management,
SVP, GM Asia) was as follows:
Salaries
Share-based payments (1)
Total
2023
2022
2021
$
$
2,044,920
1,771,078
3,815,998
$
$
2,010,479
1,711,716
3,722,195
$
$
1,782,297
2,077,333
3,859,630
(D) Share-based payments are the fair value of options granted to key management personnel and expensed during the various years as calculated using the
Black-Scholes model.
C.
Interests of Experts and Counsel.
Not applicable.
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information.
The Company’s financial statements are stated in U.S. dollars and are prepared in accordance with IFRS as issued by the IASB.
The financial statements as required under “Item 17. Financial Statements” are attached hereto and found immediately following the text of this Annual Report. The
audit report of Marcum LLP, independent registered public accounting firm, is included herein immediately preceding the consolidated financial statements.
Legal Proceedings
The directors and the senior management of the Company do not know of any material, either active or pending, legal proceedings against them, nor is the Company
involved as a plaintiff in any material proceeding or pending litigation.
The directors and the senior management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest
in the Company.
Dividend Policy
The Company has not paid, and has no current plans to pay, dividends on its common shares. We currently intend to retain future earnings, if any, to finance the
development of our business. Any future dividend policy will be determined by the Board, and will depend upon, among other factors, our earnings, if any, financial
condition, capital requirements, any contractual restrictions with respect to the payment of dividends, the impact of the distribution of dividends on our financial
condition, tax liabilities, and such economic and other conditions as the Board may deem relevant.
Page 61
B. Significant Changes.
On February 24, 2022, the Company filed Articles of Amendment to consolidate its common shares on a ten-for-one basis. For further clarity, for every ten (10) pre-
consolidated common shares, shareholders received one (1) post-consolidated common share. On February 28, 2022 the Company’s common shares began trading on
the TSXV on a post consolidation basis. The Company’s name and trading symbol remained unchanged. All references to share and per share amounts in these
consolidated financial statements and accompanying notes to the consolidated financial statements have been retroactively restated to reflect the ten-for-one share
consolidation.
On March 14, 2022 the Company’s common shares began trading on Nasdaq under the trading symbol “POET”.
Item 9. The Offer and Listing
A. Offer and Listing Details.
The Company’s common shares began trading on the TSXV in Toronto, Ontario, Canada, on June 25, 2007. The current Stock symbol is “PTK”. The CUSIP/ISN
numbers are 73044W104 / 73044W1041. The Company received new CUSIP/ISN numbers on the consolidation of the common shares on February 24, 2022. The
new CUSIP/ISN numbers are 73044W302/73044W3021.
The following table lists the high and low sales price on the TSXV for the Company’s common shares for: the last six months; the last ten fiscal quarters; and the last
five fiscal years.
Period Ended
MONTHLY
28-Feb-24
31-Jan-24
31-Dec-23
30-Nov-23
31-Oct-23
30-Sep-23
QUARTERLY
28-Feb-24
30-Nov-23
31-Aug-23
31-May-23
28-Feb-23
30-Nov-22
31-Aug-22
31-May-22
28-Feb-22
30-Nov-21
YEARLY
31-Dec-23
31-Dec-22
31-Dec-21
31-Dec-20
31-Dec-19
High (CA$)
Low (CA$)
2.04
1.79
1.54
3.83
4.49
5.50
2.04
5.50
7.75
6.90
8.31
5.41
7.39
13.65
11.25
12.90
8.31
13.65
15.80
7.10
4.60
1.75
1.18
1.02
1.01
3.72
4.17
1.06
1.01
4.84
4.80
3.60
3.26
4.13
7.04
7.60
7.70
1.01
3.26
7.10
2.20
2.70
Page 62
B. Plan of Distribution.
Not required.
C. Markets.
The Company’s common shares trade on (i) the TSXV in Canada under the symbol “PTK” and (ii) Nasdaq in the United Stated under the symbol “POET” (since
March 14, 2022).
D. Selling Shareholders.
Not required.
E. Dilution
Not required.
F. Expenses of the Issue
Not required.
Item 10. Additional Information
A. Share Capital
Not required.
B. Memorandum and Articles of Association.
The Company was originally formed under the British Columbia Company Act on February 9, 1972 as Tandem Resources Ltd. (“Tandem”). The Company took its
current form after Tandem amalgamated with Stanmar Resources Ltd. and Keezic Resources Ltd. pursuant to Articles of Amalgamation on November 14, 1985.
Tandem moved to Ontario by Articles of Continuance on January 3, 1997. Tandem changed its name to OPEL International Inc. by Articles of Amendment on
September 26, 2006. OPEL International Inc. was continued under the New Brunswick Business Corporations Act on January 30, 2007, then back to Ontario by
Articles of Continuance on November 30, 2010, changing its name to OPEL Solar International Inc. By Articles of Amendment on August 25, 2011, OPEL Solar
International Inc. changed its name to OPEL Technologies, Inc. By Articles of Amendment on July 23, 2013, OPEL Technologies Inc. changed its name to POET
Technologies Inc. Today, the Company is an Ontario corporation governed by the OBCA. The following are summaries of material provisions of our Articles of
Continuance, as amended from time to time (the “Articles”), in effect as of the date of this Annual Report insofar as they relate to the material terms of our common
shares.
Register, Entry Number and Purposes
Our Articles of Continuance became effective on November 30, 2010. Our corporation number in Ontario is 641402. The Articles of Continuance do not contain a
statement of the Company’s objects and purposes. However, the Articles of Continuance provide that there are no restrictions on business that the Company may
carry on or the powers the Company may exercise as permitted under the OBCA.
Page 63
Board of Directors
Pursuant to our By-laws and the OBCA, a director or officer who is a party to, or who is a director or officer of, or has a material interest in, any person who is a
party to, a material contract or proposed material contract with the Company, shall disclose the nature and extent of his interest at the time and in the manner
provided by the OBCA. Any such contract or proposed contract shall be referred to the Board or shareholders for approval even if such contract is one that in the
ordinary course of the Company’s business would not require approval by the Board or shareholders, and a director interested in a contract so referred to the Board
shall not vote on any resolution to approve the same unless the contract or transaction: (i) relates primarily to his or her remuneration as a director of the Company or
an affiliate; (ii) is for indemnity or insurance of or for the director or officer as permitted by the OBCA; or (iii) is with an affiliate.
Directors shall be paid such remuneration for their services as the Board may determine by resolution from time to time, and will be entitled to reimbursement for
traveling and other expenses properly incurred by them in attending meetings of the Board or any committee thereof. Neither the Company’s Articles nor By-laws
require an independent quorum for voting on director compensation. Directors are not precluded from serving the Company in any other capacity and receiving
remuneration therefor. A director is not required to hold shares of the Company. There is no age limit requirement respecting the retirement or non-retirement of
directors.
The directors may sign the name and on behalf of the Company, or appoint any officer or officers or any other person or persons on behalf of the Corporation either
to sign on behalf of the Company, all instruments in writing and any instruments in writing so signed shall be binding upon the Company without further
authorization or formality. The term “instruments in writing” includes contracts, documents, powers of attorney, deeds, mortgages, hypothecs, charges, conveyances,
transfers and assignments of property (real or personal, immovable or movable), agreements, tenders, releases, receipts and discharges for the payment of money or
other obligations, conveyances, transfers and assignments of shares, stocks, bonds, debentures or other securities, instruments of proxy and all paper writing.
Nothing in the Company’s By-laws limits or restricts the borrowing of money by the Company on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Company.
Rights, Preferences and Restrictions Attaching to Common Shares
The holders of common shares are entitled to vote at all meetings of the shareholders, except meetings at which only holders of a specified class of shares are entitled
to vote. Each common share carries with it the right to one vote. Subject to the rights, privileges, restrictions and conditions attaching to any other class or series of
shares of the Company, the holders of the common shares are entitled to receive any dividends declared and payable by the Company on the common shares.
Dividends may be paid in money or property or by issuing fully paid shares of the Company. Subject to the rights, privileges, restrictions and conditions attaching to
any other class or series of shares of the Company, the holders of the common shares are entitled to receive the remaining property of the Company upon dissolution.
No shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights and no provisions for redemption or purchase for
cancellation, surrender, or sinking or purchase funds. The common shares must be issued as fully-paid and non-assessable, and are not subject to further capital calls
by the Company. The common shares are without par value. All of the common shares rank equally as to voting rights, participation in a distribution of the assets of
the Company on a liquidation, dissolution or winding-up of the Company and the entitlement to dividends.
The Company does not currently have any preferred shares outstanding.
Page 64
Ordinary and Special Shareholders’ Meetings
The OBCA provides that the directors of a corporation shall call an annual meeting of shareholders not later than 15 months after holding the last preceding annual
meeting. The OBCA also provides that, in the case of an offering corporation, the directors shall place before each annual meeting of shareholders, the financial
statements required to be filed under the Ontario Securities Act and the regulation thereunder relating to the period that began immediately after the end of the last
completed financial year and ended not more than six months before the annual meeting and the immediately preceding financial year, if any.
The Board has the power to call a special meeting of shareholders at any time.
Notice of the date, time and location of each meeting of shareholders must be given not less than 21 days or more than 50 days before the date of each meeting to
each director, to the auditor of the Company and to each shareholder who at the close of business on the record date for notice is entered in the securities register as
the holder of one or more shares carrying the right to vote at the meeting.
Notice of a meeting of shareholders called for any other purpose other than consideration of the minutes of an earlier meeting, financial statements, reports of the
directors or auditor, setting or changing the number of directors, the election of directors and reappointment of the incumbent auditor, must state the general nature of
the special business in sufficient detail to permit the shareholder to form a reasoned judgment on such business, must state the text of any special resolution to be
submitted to the meeting, and must, if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or
giving of effect to any document, have attached to it, a copy of the document or state that a copy of the document will be available for inspection by shareholders at
the Company’s records office or another accessible location.
The only persons entitled to be present at a meeting of shareholders are those entitled to vote, the directors of the Company and the auditor of the Company. Any
other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting. In circumstances where a court orders a
meeting of shareholders, the court may direct how the meeting may be held, including who may attend the meeting.
Limitations on Rights to Own Securities
No share may be issued until it is fully paid.
Neither Canadian law nor our Articles or By-laws limit the right of a non-resident to hold or vote common 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 of net benefit to Canada. An investment in the 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 the
assets of the Company were CA$5.0 million or 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 to
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 person or entity from a member of the WTO; (b) a state-
owned enterprise (SOE); or (c) from a country considered a “Trade Agreement Investor” under the Investment Act. 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 $528 million based on the book value of the Canadian business’
assets, up from $512 million in 2023. The 2024 thresholds for review 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 “enterprise value” of the Canadian business being
acquired.
Page 65
A non-Canadian, whether a WTO Investor 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 the common shares of the Company. The acquisition of less than a majority, but at least one-third of the shares, would be presumed to be an
acquisition of control of the Company, unless it could be established that the Company is not controlled in fact by the acquirer through the ownership of the shares. In
general, an individual is a WTO Investor 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:
● an acquisition of the shares if the acquisition were made in the ordinary course of that person’s business as a trader or dealer in securities;
● an acquisition of control of the Company in connection with the realization of a security interest granted for a loan or other financial assistance and not for
any purpose related to the provisions of the Investment Act; and
● an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate
direct or indirect control in fact of the Company, through the ownership of voting interests, remains unchanged.
Procedures to Change the Rights of Shareholders
In order to change the rights of our shareholders with respect to certain fundamental changes as described in Section 168 of the OBCA, the Company would need to
amend our Articles to effect the change. Such an amendment would require the approval of holders of two-thirds of the votes of the Company’s common shares, and
any other shares carrying the right to vote at any general meeting of the shareholders of the Company, cast at a duly called special meeting. The OBCA also provides
that a sale, lease or exchange of all or substantially all of the property of a corporation other than in the ordinary course of business of the corporation likewise
requires the approval of the shareholders at a duly called special meeting. For such fundamental changes and sale, lease and exchange, a shareholder is entitled under
the OBCA to dissent in respect of such a resolution amending the Articles and, if the resolution is adopted and the Company implements such changes, demand
payment of the fair value of the shareholder’s common shares.
Impediments to Change of Control
In 2016, the Canadian Securities Administrators (the “CSA”) enacted amendments (the “Bid Amendments”) to the Take-Over Bid Regime. The Bid Amendments,
which are very significant, are contained in National Instrument (NI) 62-104.
The Bid Amendments were intended to enhance the quality and integrity of the take-over bid regime and rebalance the current dynamics among offerors, offeree
issuer boards of directors (“Offeree Boards”), and offeree issuer security holders by (i) facilitating the ability of offeree issuer security holders to make voluntary,
informed and coordinated tender decisions, and (ii) providing the Offeree Board with additional time and discretion when responding to a take-over bid.
Specifically, the Bid Amendments require that all non-exempt take-over bids
(D) receive tenders of more than 50% of the outstanding securities of the class that are subject to the bid, excluding securities beneficially owned, or over which
control or direction is exercised, by the offeror or by any person acting jointly or in concert with the offeror (the Minimum Tender Requirement);
Page 66
(2) be extended by the offeror for an additional 10 days after the Minimum Tender Requirement has been achieved and all other terms and conditions of the bid have
been complied with or waived (the 10 Day Extension Requirement); and
(3) remain open for a minimum deposit period of 105 days (the Minimum 105 Day Bid Period) unless
(D) the offeree board states in a news release a shorter deposit period for the bid of not less than 35 days, in which case all contemporaneous take-over bids must
remain open for at least the stated shorter deposit period, or
(b) the issuer issues a news release that it intends to effect, pursuant to an agreement or otherwise, a specified alternative transaction, in which case all
contemporaneous take-over bids must remain open for a deposit period of at least 35 days.
The Bid Amendments involved fundamental changes to the bid regime to establish a majority acceptance standard for all non-exempt take-over bids, a mandatory
extension period to alleviate offeree security holder coercion concerns, and a 105 day minimum deposit period to address concerns that offeree boards did not have
enough time to respond to an unsolicited take-over bid. The CSA determined not to amend National Policy 62-202 Defensive Tactics (NP 62-202) in connection with
these amendments. They reminded participants in the capital markets of the continued applicability of NP 62-202, which means that securities regulators will be
prepared to examine the actions of offeree boards in specific cases, and in light of the amended bid regime, to determine whether they are abusive of security holder
rights.
After canvassing several commentaries concerning the new regime, we have concluded that:
● It will be much more difficult for hostile bidders as a result of target issuers having a much longer period of time to respond, concurrent with the added risk and
cost to such bidders.
● There is good reason to expect that, except in unusual circumstances, regulators will not permit SRPs to remain in effect after a 105 day bidding period.
● A significant number of reporting issuers have not sought re-approval of their SRPs since the amendments were introduced and those that have sought to renew
their SRPs have been required to amend the plans to comply with the new rules.
● A large part of the traditional rationale for adopting SRPs has now been eliminated.
We believe that the amended take-over bid rules provide adequate protection against hostile bids. Having said that, it has been suggested that the new rules do not
protect against creeping take-over bids for control which are exempt from the rules (such as the accumulation of 20% or more of the issuer’s shares through market
transactions or the acquisition of a control block through private agreements with a few large shareholders). These activities would however be identifiable through
the early warning filing requirements. If, prior to making a determination that the Company ought to adopt a “strategic” SRP at an annual or special meeting of
shareholders, the Company were faced with a hostile bid that we believed was not in the best interests of the Company and its shareholders, the directors could adopt
a “tactical” plan which we could take to the shareholders for approval. Nevertheless, at this point in time, we are of the opinion that such action is not necessary and
the shareholders should be the best arbiters of when “the pill must go”.
Stockholder Ownership Disclosure Threshold in Bylaws
Neither our Articles nor By-laws contain a provision governing the ownership threshold above which shareholder ownership must be disclosed. Pursuant to securities
legislation, an Early Warning Report and an Insider Report must be filed if a shareholder obtains ownership on a partially diluted basis of 10% or greater of the
Company.
Page 67
Special Conditions for Changes in Capital
The conditions imposed by the Company’s Articles are not more stringent than required under the OBCA.
C. Material Contracts.
In addition to any contracts described in “Item 7.B. Related Party Transactions” or “Item 4. Business Overview”, below is a summary of material contracts, other
than those entered into by the Company in the ordinary course of business, to which we are or have been a party during the two years immediately preceding the date
of this document. Other than contracts entered into in the ordinary course of business, we have not been a party to any other material contract within such two-year
period.
None
D. Exchange Controls.
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-
resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-
resident holders of the Company’s securities, except as discussed in “Item 10.E. Taxation” below.
E. Taxation.
The following summary discusses certain material U.S. and Canadian tax considerations related to the holding and disposition of common shares as of the hereof.
Prospective purchasers of our common shares are advised to consult their own tax advisers concerning the consequences under the tax laws of the country of which
they are resident or in which they are otherwise subject to tax of making an investment in our common shares.
Canadian Federal Income Tax Considerations
The Company believes the following is a brief summary of the material principal Canadian federal income tax consequences to a U.S. Holder (as defined below) of
common shares of the Company who deals at arm’s length with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act
(Canada) (the “Tax Act”) and the Canada — U.S. Income Tax Convention (1980) (the “Treaty”), is at all relevant times resident in the U.S., is not and is not deemed
to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not
discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere. U.S. Holders are urged to consult their own tax
advisors with respect to their particular circumstances.
This summary is based upon the current provisions of the Tax Act, the regulations thereunder in force at the date hereof, all specific proposals to amend such
regulations and the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof and the current provisions of the
Convention and the current administrative practices of the Canada Revenue Agency published in writing prior to the date hereof. This summary does not otherwise
take into account or anticipate any changes in law or administrative practices whether by legislative, governmental or judicial decision or action, nor does it take into
account tax laws of any province or territory of Canada or of the U.S. or of any other jurisdiction outside Canada.
For the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of the common shares must be converted into Canadian dollars based
on the relevant exchange rate applicable thereto.
This summary does not address all aspects of Canadian federal income taxation that may be relevant to any particular U.S. Holder in light of such holder’s individual
circumstances. Accordingly, U.S. Holders should consult with their own tax advisors for advice with respect to their own particular circumstances.
Page 68
Under the Tax Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 15% withholding tax on dividends paid or credited or deemed by
the Tax Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10%
of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and
charities.
A U.S. Holder will generally not be subject to tax under the Tax Act on any capital gain realized on a disposition of common shares, provided that the shares do not
constitute “taxable Canadian property” to the U.S. Holder at the time of disposition. Generally, common shares will not constitute taxable Canadian property to a
U.S. Holder provided that such shares are listed on a designated stock exchange (which currently includes the TSXV) at the time of the disposition and, during the
60- month period immediately preceding the disposition, the U.S. Holder, persons with whom the U.S. Holder does not deal at arm’s length, or the U.S. Holder
together with all such persons has not owned 25% or more of the issued shares of any series or class of the Company’s capital stock. If the common shares constitute
taxable Canadian property to a particular U.S. Holder, any capital gain arising on their disposition may be exempt from Canadian tax under the Convention if at the
time of disposition the common shares do not derive their value principally from real property situated in Canada.
U.S. Federal Income Tax Considerations
Subject to the limitations described herein, the following discussion summarizes certain U.S. federal income tax consequences to a U.S. Holder of our common
shares. A “U.S. Holder” means a holder of our common shares who is:
● an individual who is a citizen or resident of the U.S. for U.S. federal income tax purposes;
● a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the U.S. or under the laws of the
U.S. or any political subdivision thereof, or the District of Columbia;
● an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
● a trust (i) if, in general, a court within the U.S. is able to exercise primary supervision over its administration and one or more U.S. persons have the
authority to control all of its substantial decisions, or (ii) that has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a
U.S. person.
Unless otherwise specifically indicated, this discussion does not consider the U.S. tax consequences to a person that is not a U.S. Holder (a “Non-U.S. Holder”). This
discussion considers only U.S. Holders that will own our common shares as capital assets (generally, for investment) and does not purport to be a comprehensive
description of all of the tax considerations that may be relevant to each U.S. Holder’s decision to purchase our common shares.
This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), current and proposed Treasury Regulations
promulgated thereunder, and administrative and judicial decisions as of the date hereof, all of which are subject to change, possibly on a retroactive basis. This
discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular U.S. Holder in light of such holder’s individual
circumstances. In particular, this discussion does not address the potential application of the alternative minimum tax or the U.S. federal income tax consequences to
U.S. Holders that are subject to special treatment, including U.S. Holders that:
● are broker-dealers or insurance companies;
● have elected market-to-market accounting;
● are tax-exempt organizations or retirement plans;
● are financial institutions or “financial services entities”;
● hold our common shares as part of a straddle, “hedge” or “conversion transaction” with other investments;
● acquired our common shares upon the exercise of employee stock options or otherwise as compensation;
● own directly, indirectly or by attribution at least 10% of our voting power;
Page 69
● have a functional currency that is not the U.S. Dollar;
● are grantor trusts;
● are certain former citizens or long-term residents of the U.S.; or
● are real estate trusts or regulated investment companies.
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds our common shares, the tax treatment of the partnership and a
partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own
tax advisor as to its tax consequences.
In addition, this discussion does not address any aspect of state, local or non-U.S. laws or the possible application of U.S. federal gift or estate taxes.
Each potential U.S Holder of our common shares is advised to consult its own tax advisor with respect to the specific tax consequences to it of purchasing, holding or
disposing of our common shares, including the applicability and effect of federal, state, local and foreign income tax and other laws to its particular circumstances.
Distributions
Subject to the discussion below under “Passive Foreign Investment Company Status,” a U.S. Holder will be required to include in gross income as ordinary dividend
income the amount of any distribution paid on our common shares, including any non-U.S. taxes withheld from the amount paid, to the extent the distribution is paid
out of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Distributions in excess of such earnings and profits will be
applied against and will reduce the U.S. Holder’s basis in our common shares and, to the extent in excess of such basis, will be treated as gain from the sale or
exchange of our common shares. The dividend portion of such distributions generally will not qualify for the dividends received deduction available to corporations.
U.S. Holders which are individuals, estates and trusts and whose income exceeds certain thresholds will be required to pay a 3.8% surtax on “net investment income”
including, among other things, dividends (if any) and net gain realized from our common shares. U.S. Holders should consult with their own tax advisors regarding
the application of this tax.
Subject to the discussion below under “Passive Foreign Investment Company Status,” dividends that are received by U.S. Holders that are individuals, estates or
trusts may qualify for taxation at the rate applicable to long-term capital gains (a maximum marginal federal income tax rate of 20%), provided that such U.S.
Holders satisfy certain holding period requirements and such dividends meet the requirements of “qualified dividend income.” For this purpose, dividends paid by a
non-U.S. corporation may qualify if the non-U.S. corporation is eligible for benefits of a comprehensive income tax treaty with the U.S., which benefits include an
information exchange program and is determined to be satisfactory by the U.S. Secretary of the Treasury. The IRS has determined that the U.S.- Canada Tax Treaty is
satisfactory for this purpose. Dividends that fail to meet such requirements, and dividends received by corporate U.S. Holders, are taxed at ordinary income rates.
Distributions of current or accumulated earnings and profits paid in foreign currency to a U.S. Holder (including any non-U.S. taxes withheld therefrom) will be
includible in the income of a U.S. Holder in a U.S. Dollar amount calculated by reference to the exchange rate on the day the distribution is received. A U.S. Holder
that receives a foreign currency distribution and converts the foreign currency into U.S. dollars subsequent to receipt may have foreign exchange gain or loss based
on any appreciation or depreciation in the value of the foreign currency against the U.S. dollar, €h will generally be U.S. source ordinary income or loss. A loss might
not be deductible due to certain limitations.
Page 70
U.S. Holders will have the option of claiming the amount of any non-U.S. income taxes withheld at source either as a deduction from gross income or as a dollar-for-
dollar credit against their U.S. federal income tax liability. Individuals who do not claim itemized deductions, but instead utilize the standard deduction, may not
claim a deduction for the amount of the non-U.S. income taxes withheld, but such amount may be claimed as a credit against the individual’s U.S. federal income tax
liability. The amount of non-U.S. income taxes which may be claimed as a credit in any taxable year is subject to complex limitations and restrictions, which must be
determined on an individual basis by each shareholder. These limitations include, among others, rules that limit foreign tax credits allowable with respect to specific
classes of income to the U.S. federal income taxes otherwise payable with respect to each such class of income. A U.S. Holder will be denied a foreign tax credit
with respect to non-U.S. income tax withheld from a dividend received on the common shares if such U.S. Holder does not satisfy certain holding period
requirements.
Distributions of current or accumulated earnings and profits generally will be foreign source income for U.S. foreign tax credit purposes.
Disposition of Common Shares
Subject to the discussion below under “Passive Foreign Investment Company Status,” upon the sale, exchange or other taxable disposition of our common shares, a
U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s basis in such common shares, which is usually the
cost of such shares, and the amount realized on the disposition. Capital gain from the sale, exchange or other disposition of common shares held more than one year
is long-term capital gain, and is eligible for a reduced rate of taxation for individuals (currently a maximum marginal federal income tax rate of 20%, plus the 3.8%
net investment income tax discussed above, if applicable). Gains recognized by a U.S. Holder on a sale, exchange or other disposition of common shares generally
will be treated as U.S. source income for U.S. foreign tax credit purposes. A loss recognized by a U.S. Holder on the sale, exchange or other taxable disposition of
common shares generally is allocated to U.S. source income. The deductibility of capital losses recognized on the sale, exchange or other taxable disposition of
common shares is subject to limitations. A U.S. Holder that receives foreign currency upon disposition of common shares and converts the foreign currency into U.S.
dollars subsequent to the settlement date or trade date (whichever date the taxpayer was required to use to calculate the value of the proceeds of sale) may have
foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. Dollar, which will generally be U.S.
source ordinary income or loss. Such loss may not be deductible due to certain limitations.
Passive Foreign Investment Company Status
We would be a passive foreign investment company (a “PFIC”) if (taking into account certain “look-through” rules with respect to the income and assets of our
corporate subsidiaries in which we own 25 percent (by value) of the stock) either (i) 75 percent or more of our gross income for the taxable year was passive income
or (ii) the average percentage (by value) of our total assets that are passive assets during the taxable year was at least 50 percent.
If we were a PFIC, each U.S. Holder would (unless it made one of the elections discussed below on a timely basis) be taxable on gains recognized from the
disposition of our common shares (including gain deemed recognized if the common shares are used as security for a loan) and upon receipt of certain “excess
distributions” (generally, distributions that exceed 125% of the average amount of distributions in respect to such common shares received during the preceding three
taxable years or, if shorter, during the U.S. Holder’s holding period prior to the distribution year) with respect to our common shares as if such income had been
recognized ratably over the U.S. Holder’s holding period for the common shares. The U.S. Holder’s income for the current taxable year would include (as ordinary
income) amounts allocated to the current taxable year and to any taxable year period prior to the first day of the first taxable year for which we were a PFIC. Tax
would also be computed at the highest ordinary income tax rate in effect for each other taxable year period to which income is allocated, and an interest charge on the
tax as so computed would also apply. Additionally, if we were a PFIC, U.S. Holders who acquire our common shares from decedents (other than non resident aliens)
would be denied the normally available step-up in basis for such shares to fair market value at the date of death and, instead, would have a tax basis in such shares
equal to the decedent’s basis, if lower.
Page 71
As an alternative to the tax treatment described above, a U.S. Holder could elect to treat us as a “qualified electing fund” (a “QEF”), in which case the U.S. Holder
would be taxed currently, for each taxable year that we are a PFIC, on its pro rata share of our ordinary earnings and net capital gain (subject to a separate election to
defer payment of taxes, which deferral is subject to an interest charge). Special rules apply if a U.S. Holder makes a QEF election after the first taxable year in its
holding period in which we are a PFIC. In the event that we conclude that we will be classified as a PFIC, we will make a determination at such time as to whether
we will be able to provide U.S. Holders with the information that is necessary to make a QEF election. Amounts includable in income as a result of a QEF election
will be determined without regard to our prior year losses or the amount of cash distributions, if any, received from us. A U.S. Holder’s basis in its common shares
will increase by any amount included in income and decrease by any amounts not included in income when distributed because such amounts were previously taxed
under the QEF rules. So long as a U.S. Holder’s QEF election is in effect with respect to the entire holding period for its common shares, any gain or loss realized by
such holder on the disposition of its common shares held as a capital asset ordinarily will be capital gain or loss.
As an alternative to making the QEF election, a U.S. Holder of PFIC stock which is regularly traded on a qualified exchange may avoid the negative effects of the
PFIC rules by electing to mark the stock to market and recognizing as ordinary income or loss, each taxable year that we are a PFIC, an amount equal to the
difference as of the close of the taxable year between the fair market value of the PFIC stock and the U.S. Holder’s adjusted tax basis in the PFIC stock. Losses
would be allowed only to the extent of net mark-to-market gain previously included by the U.S. Holder under the election for prior taxable years. This election is
available for so long as the Company’s common shares constitute “marketable stock,” which includes stock of a PFIC that is “regularly traded” on a “qualified
exchange or other market.” Generally, a “qualified exchange or other market” includes a national market system established pursuant to Section 11A of the Exchange
Act, or a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located and that has certain
characteristics. A class of stock that is traded on one or more qualified exchanges or other markets is “regularly traded” on an exchange or market for any calendar
year during which that class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter, subject to special rules relating to
an initial public offering. It is not entirely clear whether either Nasdaq or TSXV are qualified exchanges or other markets, or whether there will be sufficient trading
volume with respect to the Company’s common shares, and accordingly, whether the common shares will be “marketable stock” for these purposes. Furthermore,
there can be no assurances that the Company’s common shares will continue to trade on any of the exchanges listed above.
We believe we were not a PFIC for the year ending December 31, 2022 and do not expect to be classified as a PFIC for the year ending December 31, 2023.
However, PFIC status is determined as of the end of each taxable year and is dependent on a number of factors, including the value of our passive assets, the amount
and type of our gross income, and our market capitalization. Therefore, there can be no assurance that we will not be classified as a PFIC for the current taxable year
or in a future taxable year. We will notify U.S. Holders in the event we conclude that we will be treated as a PFIC for any taxable year.
Information Reporting and Backup Withholding
U.S. Holders (other than exempt recipients, such as corporations) generally are subject to information reporting requirements with respect to dividends paid on, or
proceeds from the disposition of, our common shares. U.S. Holders are also generally subject to backup withholding (currently at a rate of 24%) on dividends paid
on, or proceeds from the disposition of, our common shares unless the U.S. Holder provides IRS Form W-9 or otherwise establishes an exemption.
The amount of any backup withholding will be allowed as a credit against a U.S. or Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder
to a refund, provided that certain required information is furnished to the IRS.
F. Dividends and Paying Agents.
Not required.
Page 72
G. Statements by Experts.
The consolidated financial statements of POET Technologies Inc. as of December 31, 2023, 2022 and 2021 included herein, have been audited by Marcum LLP, our
independent registered accounting firm for that period, 555 Long Wharf Drive, 8th Floor, New Haven, CT 06511, USA, as stated in their report appearing herein, and
are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
H. Documents on Display.
The Company’s documents can be viewed at its Canadian office, located at: Suite 1107, 120 Eglinton Avenue East, Toronto, Ontario M4P 1E2, Canada. Further, we
file reports under Canadian regulatory requirements on SEDAR; you may access our reports filed on SEDAR by accessing their website at www.sedar.com. The
Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), and files reports, Annual Reports and
other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC at www.sec.gov. The Company’s reports, Annual Reports and other information can be inspected on the SEC’s website.
As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors
and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are
not required under the Exchange Act to file annual, and other reports and financial statements with the SEC as frequently or as promptly as United States domestic
companies whose securities are registered under the Exchange Act.
We maintain a corporate website at www.poet-technologies.com. Information contained on, or that can be accessed through, our website does not constitute a part of
this Annual Report on Form 20-F. We have included our website address in this Annual Report on Form 20-F solely as an inactive textual reference.
I.
Subsidiary Information.
Not applicable.
J. Annual Report to Security Holders.
If we are required to furnish an annual report to security holders on Form 6-K, we will submit such annual report in electronic format in accordance with the EDGAR
Filer Manual.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
Market risk arises from the possibility that changes in market prices will affect the value of the financial instruments of the Company. The Company is exposed to
fair value fluctuations on its cash equivalents. The Company’s other financial instruments (cash and accounts payable and accrued liabilities) are not subject to
market risk, due to the short- term nature of these instruments. The Company manages market risk through its investment policy where surplus funds are only
invested in a manner that will provide the optimal blend of investment returns and principal protection while meeting its daily cash flow and liquidity demands.
Interest Rate Risk
Short-term investments bear interest at fixed rates, and as such, are subject to interest rate risk resulting from changes in fair value from market fluctuations in
interest rates. The Company does not depend on interest from its investments to fund its operations.
Page 73
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.
The following table shows exchange rates, from CAD to USD, for the past six months:
Period
February 2024
January 2024
December 2023
November 2023
October 2023
September 2023
September 2023 — February 2024
(1) Bank of Canada monthly average rates
(2) Bank of Canada daily closing average rates
The following table shows exchange rates, from SGD to USD, for the past six months:
Period
February 2024
January 2024
December 2023
November 2023
October 2023
September 2023
September 2023 — February 2024
(1) Bank of Singapore monthly average rates
(2) Bank of Singapore daily closing average rates
The following table shows exchange rates, from CNY to USD, for the past six months:
Period
February 2024
January 2024
December 2023
November 2023
October 2023
September 2023
September 2023 — February 2024
(1) Bank of China monthly average rates
(2) Bank of China daily closing average rates
High (1)
Low (1)
Average (2)
0.7471
0.7506
0.7575
0.7373
0.7362
0.7437
0.7575
0.7363
0.7394
0.7354
0.7218
0.7207
0.7308
0.7207
0.7411
0.7451
0.7460
0.7296
0.7289
0.7375
0.7381
High (1)
Low (1)
Average (2)
0.7479
0.7537
0.7576
0.7509
0.7338
0.7386
0.7576
0.7399
0.7434
0.7437
0.7306
0.7279
0.7285
0.7279
0.7434
0.7482
0.7510
0.7414
0.7302
0.7333
0.7413
High (1)
Low (1)
Average (2)
0.1395
0.1400
0.1408
0.1402
0.1371
0.1377
0.1408
0.1389
0.1390
0.1393
0.1367
0.1366
0.1361
0.1361
0.1390
0.1394
0.1400
0.1383
0.1368
0.1370
0.1384
Page 74
Item 12. Description Of Securities Other Than Equity Securities
A. Debt Securities.
Not required.
B. Warrants and Rights
Not required.
C. Other Securities
Not required.
D. American Depositary Shares.
Not applicable.
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
PART II
Not applicable.
Item 15. Controls and Procedures
Disclosure Controls and Procedures.
Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act as controls and other procedures that are designed to
ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure
that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation
of the effectiveness of our disclosure controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as
of December 31, 2023, our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting. A
material weakness, as defined in the Sarbanes Oxley Act of 2002 (“SOX”), is a control deficiency, or combination of control deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material misstatement of the annual consolidated financial statements will not be prevented or
detected on a timely basis. The material weakness resulted from a cybersecurity event in which the Company, late in the year, received a fraudulent request to pay an
amount owing to a single vendor. The Company’s controls over the validity of such requests were not effective and as a result an immaterial amount was paid to an
unauthorized party. Management identified the fraud and recovered the amount through its pre-existing insurance coverage. Management immediately put in place
additional cyber controls to ensure that the Company’s assets are appropriately safe guarded. However, because there was not sufficient time to test those additional
controls prior to year-end, the Chief Executive Officer and the Chief Financial Officer determined that a material weakness existed at December 31, 2023 (the
“Cybersecurity Material Weakness”).
Page 75
Management’s Annual Report on Internal Control Over Financial Reporting.
Our management, under the oversight of our Board of Directors (in particular its audit committee), is responsible for establishing and maintaining adequate internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and as set forth in Section 404 of SOX). The
Company’s internal control over financial reporting is designed to provide reasonable assurance to management and the Board of Directors regarding the reliability
of financial reporting and the preparation and fair presentation of its published consolidated financial statements. Under the SOX framework, our internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of consolidated financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on our consolidated financial statements.
All internal controls over financial reporting, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may
not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, it used the
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on that assessment and those criteria, management concluded that we did not maintain effective internal controls over financial reporting as of December 31,
2023 as a result of the Cybersecurity Material Weakness.
The Cybersecurity Material Weakness did not result in a material misstatement of our consolidated financial statements for the fiscal year ended December 31, 2023
or any prior annual or interim periods nor has it resulted in any material failure to safeguard our assets, including our cash and fixed assets. However, if the
Cybersecurity Material Weakness is not remediated, a material misstatement of account balances or disclosures may not be prevented, and may go undetected, which
could result in a material misstatement of future annual or interim consolidated financial statements.
Following the identification of the Cybersecurity Material Weakness, management has taken steps to remediate that material weakness. Specifically, management
has:
● Added a procedure that requires vendors to provide on letterhead both the original bank information and the changed bank information.
Page 76
● Put in place a call back procedure to contact the vendor to get verbal confirmation of the change, including confirming pertinent transactions related to prior
business activity.
● Upgraded email security and monitoring to more effectively identify phishing and spoofing events; and .
● Initiated training programs to help staff more quickly identify spoofing and phishing events.
Although management has taken immediate remedial steps, the Cybersecurity Material Weakness will not be considered remediated until the applicable remedial
controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Further, our independent
registered accounting firm has not performed an audit of our internal control over financial reporting subsequent to December 31, 2023 and we cannot give
assurances that the measures we have thus far taken to remediate the aforementioned material weakness were sufficient or that they will prevent future material
weaknesses. As management continues to evaluate and work to improve our internal control over financial reporting, we may determine it necessary to take
additional measures or modify the remediation measures we have taken to date.
Attestation Report of the Registered Public Accounting Firm.
Marcum LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on
Form 20-F, and has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.
Changes in Internal Controls Over Financial Reporting.
We have undertaken the remediation efforts described. Except for those efforts, there were no other changes in our internal control over financial reporting during
year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our Board of Directors has determined that Chris Tsiofas is an audit committee financial expert. The Board has determined that Mr. Tsiofas satisfies the criteria of
“audit committee financial expert” set forth in Item 16A of Form 20-F and is independent in accordance with Rule 4200 of the Nasdaq Marketplace Rules.
Item 16B. Code of Ethics
As amended in February 2023, our Board of Directors adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all our employees, including
without limitation our chief executive officer, chief financial officer and principal accounting officer. Our Code may be viewed on our website at www.poet-
technologies.com and is filed as an Exhibit to this Annual Report. A copy of our Code may be obtained, without charge, upon a written request addressed to our
office at, 120 Eglinton Avenue East, Suite 1107, Toronto, Ontario M4P 1E2, Canada.
Page 77
Item 16C. Principal Accountant Fees and Services
The following table sets forth, for each of the years indicated, the fees billed by our independent registered public accounting firm, Marcum LLP.
Services Rendered
Audit Fees (1)
Audit-Related Fees (2)
Tax Fees (3)
All Other Fees (4)
Total
Year Ended December 31,
2023
2022
$
$
$
470,455
-
16,715
-
487,170
340,000
-
14,440
-
354,440
(1) Audit Fees included fees for the audit of the Company’s annual consolidated financial statements, SOX 404(b) audit and professional services rendered in
connection with filing of registration statements.
(2) Audit-Related Fees include fees for assurance and related services that are reasonably related to the performance of the audit and are not reported under audit
fees. These fees primarily include accounting consultations regarding the accounting treatment of matters that occur in the regular course of business,
implications of new accounting pronouncements, acquisitions and other accounting issues that occur from time to time.
(3) Tax Fees include fees for professional services rendered by our independent registered public accounting firm for tax compliance and tax advice on actual or
contemplated transactions.
(4) All Other Fees include fees for services rendered by our independent registered public accounting firm with respect to government incentives and other matters.
Our Audit Committee, in accordance with its charter, reviews and pre-approves all audit services and permitted non-audit services (including the fees and other
terms) to be provided by our independent auditors. All of the services provided by Marcum LLP over the past two years were pre-approved by the Audit Committee.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
Item 16F. Change in Registrant’s Certifying Accountant.
Not applicable.
Item 16G. Corporate Governance
A foreign private issuer that follows home country practices in lieu of certain provisions of the Nasdaq rules must disclose the ways in which its corporate
governance practices differ from those followed by U.S. domestic companies. As required by Nasdaq Rule 5615(a)(3), the Company discloses on its website,
www.poet-technologies.com, each requirement of the Nasdaq rules that it does not follow and describes the home country practice it follows in lieu of such
requirements.
Item 16H. Mine Safety Disclosure
Not applicable.
Page 78
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 16J. Insider Trading Policies
The Company has adopted an Insider Trading Policy governing the purchase, sale and other dispositions of the Company’s securities by directors, senior
management and employees that is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and all applicable listing
standards. A copy of the policy is filed as Exhibit 11.2 hereto.
Item 16K. Cybersecurity
We believe cybersecurity is key to the Company achieving its strategic goals and objectives. Based on the nature of our business and the industry in which we
operate, we are faced with a variety of cybersecurity threats including phishing emails, ransomware attacks, malicious attachments, social engineering attacks and
denial of service attacks, among others. Our customers, suppliers, subcontractors and partners face similar cybersecurity threats, and a cybersecurity incident
impacting us or any of these entities could materially adversely affect our operations, performance and results of operations.
Our information security organization has implemented a governance structure and processes to assess, identify, manage and report cybersecurity risks. We engage
third-party service providers to conduct evaluations of our security controls, including testing both the design and operational effectiveness of security controls.
In the event of an incident, we intend to follow our incident management procedures, which outline the steps to be followed from incident detection to mitigation,
recovery and notification, including notifying functional areas (e.g., legal, compliance and internal audit), as well as senior leadership and the Board, as appropriate.
On a regular basis, the Company analyzes its internet-based services to identify vulnerabilities and assesses the protection and the detection capabilities. The
cybersecurity compliance status of assets is centrally evaluated across the Company’s global sites and business and operational functions. Results are shared within
the Company’s relevant business units and across global functions. The Company implements corrective measures and improvement actions in response to these
processes, as appropriate. Data classification and protection tools are in place, such as the implementation of a specific process and technology aimed at detecting
and responding to abnormal data flows.
Cybersecurity risks and threats, including as a result of any previous cybersecurity incidents, have not materially impacted and are not reasonably expected to
materially impact us or our operations to date. However, we recognize the ever-evolving cyber risk landscape and cannot provide any assurances that we will not be
subject to a material cybersecurity incident in the future.
Governance
The Board of Directors and our Audit Committee oversee management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align
our risk exposure with our strategic objectives. Senior leadership have developed a process to regularly brief the Audit Committee and Board of Directors on our
cybersecurity and information security policies and procedures, and the Board of Directors will be apprised of cybersecurity incidents deemed to have a potential
material impact on the Company.
We use an outsourced IT firm, to manage our overall information security strategy, policy, cyber threat detection and response, cyber architecture and processes for
the security of our network and intellectual property. Various technologies and techniques are used to monitor and manage cybersecurity risks. Policies and processes
are regularly updated.
Page 79
Item 17. Financial Statements
PART III
The Company’s consolidated financial statements are stated in U.S. dollars and are prepared in accordance with IFRS as issued by the International Accounting
Standards Board.
The consolidated financial statements required under Item 17 are attached hereto and found immediately following the text of this Annual Report and are
incorporated by reference herein. The audit report of Marcum LLP, independent registered public accounting firm, is included herein immediately preceding the
audited consolidated financial statements.
a. Audited Financial Statements — for the years ended December 31, 2023, 2022 and 2021 and as of December 31, 2023, 2022 and 2021
Item 18. Financial Statements
The Company has elected to provide financial statements pursuant to Item 17.
Item 19. Exhibits
1.1
1.2
1.3
2.0
4.1
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.15
4.16
4.18
4.20
4.22
4.23
4.24
4.27
4.28
4.29
4.30
4.31
4.32
8.1
11.1
12.1
12.2
13.1
13.2
23.1
97.1
101. INS(*)
101.SCH(*)
101. AL(*)
101.DEF(*)
101.LAB(*)
101.PRE(*)
104(*)
Certificate and Articles of Continuance (1)
Amended and Restated Bylaws (2)
Articles of Amendment, dated February 24, 2022 (8)
Description of Securities (6)
License Agreement with the University of Connecticut, dated April 28, 2003, as amended April 15, 2014 (1)
Shareholder Rights Plan Agreement between the Company and TMX Equity Transfer Services, Inc.(2)
Employment Agreement with Suresh Venkatesan, dated June 10, 2015 (3)
Employment Agreement with Vivek Rajgarhia, dated November 4, 2019 (6)
Employment Agreement with Thomas Mika, dated November 2, 2016 (4)
Definitive agreement with San’an Integrated Circuit Co., Ltd dated October 21, 2020 (7)
Sale and Purchase Agreement for DenseLight Semiconductors PTE, LTD, dated April 27, 2016 (4)
Sale and Purchase Agreement for BB Photonics Inc. dated May 16, 2016 (4)
2021 Stock Option Plan (8)
Form of Option Agreement(1)
Form of Warrant for Purchase of Common Shares (1)
Stock Specimen Certificate (1)
Share Sale Agreement for DenseLight Semiconductors PTE, Ltd dated August 20, 2019 (6)
Omnibus Incentive Plan (10)
Underwriting Agreement with Maxim Group LLC (10)
Form of Warrant Certificate, December 4, 2023 (10)
Securities Trading Policy (10)
Equity Distribution Agreement Dated June 29, 2023 (10)
Equity Distribution Agreement Dated September 1, 2023 (10)
Warrant indenture with TSX Trust Company, dated February 11, 2021 (7)
Engagement letter with Cormark Securities Inc, dated January 25, 2021 (7)
Upsize letter with Cormark Securities Inc, dated January 26, 2021 (7)
Form of Subscription for Units of Private Placement, dated February 11, 2021 (7)
Form of Subscription for Units of Private Placement, dated December 2, 2022 (9)
Form of Warrant Certificate, dated December 2, 2022 (9)
List of Subsidiaries (10)
Code of Business Conduct and Ethics (7)
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (10)
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (10)
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (10)
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(10)
Consent of Marcum LLP, independent registered accounting firm (10)
POET Technologies Inc. Clawback Policy (10)
Inline XBRL Instance Document (10)
Inline XBRL Taxonomy Extension Schema Linkbase Document (10)
Inline XBRL Taxonomy Extension Calculation Linkbase Document (10)
Inline XBRL Taxonomy Extension Definition Linkbase Document (10)
Inline XBRL Taxonomy Extension Label Linkbase Document (10)
Inline XBRL Taxonomy Extension Presentation Linkbase Document (10)
Cover Page Interactive Data File (embedded within Inline XBRL document) (10)
(1) Filed as an exhibit to the Company’s registration statement under the Securities and Exchange Act on Form 20-F on May 15, 2014 and incorporated herein by
reference.
(2) Filed as an exhibit to the Company’s annual Form 20-F on April 13, 2015 and incorporated herein by reference.
(3) Filed as an exhibit to the Company’s annual Form 20-F on March 18, 2016 and incorporated herein by reference.
(4) Filed as an exhibit to the Company’s annual Form 20-F on April 18, 2017 and incorporated herein by reference.
(5) Filed as an exhibit to the Company’s annual Form 20-F on April 30, 2019 and incorporated herein by reference
(6) Filed as an exhibit to the Company’s annual Form 20-F on April 29, 2020 and incorporated herein by reference.
(7) Filed as an exhibit to the Company’s annual Form 20-F on April 9, 2021 and incorporated herein by reference
(8) Filed as an exhibit to the Company’s annual Form 20-F on April 26, 2022 and incorporated herein by reference
(9) Filed as an exhibit to the Company’s annual Form 20-F on March 31, 2023 and incorporated herein by reference
(10) Filed as an exhibit to this Form 20-F.
(*) In accordance with Rule 402 of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange
Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the
Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Page 80
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this
Annual Report on its behalf.
SIGNATURES
POET TECHNOLOGIES INC.
/s/ Suresh Venkatesan
Suresh Venkatesan
Chief Executive Officer
Date: March 28, 2024
Page 81
We file reports and other information with the Securities and Exchange Commission; you may obtain copies of our filings with the SEC by accessing their website
located at www.sec.gov. Further, we file reports under Canadian regulatory requirements on SEDAR; you may access our reports filed on SEDAR by accessing their
website at www.sedar.com.
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION
The accompanying consolidated financial statements of the Company and other financial information contained in this Annual Report are the responsibility of
management. The consolidated financial statements have been prepared in conformity with IFRS, using management’s best estimates and judgments, where
appropriate. In the opinion of management, these consolidated financial statements reflect fairly the financial position and the results of operations and cash flows of
the Company within reasonable limits of materiality. The financial information contained elsewhere in this Annual Report has been reviewed to ensure consistency
with that in the consolidated financial statements.
To assist management in discharging these responsibilities, the Company maintains a system of procedures and internal control which is designed to provide
reasonable assurance that its assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with
management’s authorization and that the financial records form a reliable base for the preparation of accurate and reliable financial information.
The Board of Directors endeavors to ensure that management fulfills its responsibilities for the financial reporting and internal control. The Board of Directors
exercises this responsibility through its independent Audit Committee comprising a majority of unrelated and outside directors. The Audit Committee meets
periodically with management and annually with the external auditors to review audit recommendations and any matters that the auditors believe should be brought
to the attention of the Board of Directors. The Audit Committee also reviews the consolidated financial statements and recommends to the Board of Directors that the
statements be approved for issuance to the shareholders.
The consolidated financial statements for the years ended December 31, 2023, 2022 and 2021 have been audited by Marcum LLP, independent registered public
accounting firm, which has full and unrestricted access to the Audit Committee. Marcum’s report on the consolidated financial statements is presented herein.
Page 82
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
POET Technologies Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of POET Technologies Inc. (the “Company”) as of December 31, 2023, 2022 and
2021, the related consolidated statements of operations and deficit, comprehensive loss, changes in shareholders’ equity and cash flows for each of the three years in
the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2023, 2022 and 2021, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal
control over financial reporting as of December 31, 2023, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 15, 2024, expressed an adverse opinion on the effectiveness of
the Company’s internal control over financial reporting because of the existence of a material weakness.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in
Note 1, the Company has a incurred significant losses over the past few years and needs to raise additional funds to meet its future obligations and sustain its
operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission, Ontario Securities Commission and the
PCAOB.
Page 1
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the
audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. We determined that there are no critical audit matters.
/(cid:3468)/ M(cid:3450)(cid:3467)(cid:3452)(cid:3470)(cid:3462) LLP
Marcum (cid:3461)(cid:3461)(cid:3465)
We have served as the Company’s auditor since 2009, such date takes into account the acquisition of a portion of UHY LLP by Marcum LLP in April 2010.
Hartford, CT
March 15, 2024
PCAOB ID 668
Page 2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Shareholders and Board of Directors of
POET Technologies Inc.
Adverse Opinion on Internal Control Over Financial Reporting
We have audited POET Technologies Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the
effect of the material weakness described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained
effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material
weakness has been identified and included in “Management’s Annual Report on Internal Control Over Financial Reporting”. The Company’s controls responsible for
verification of changes to payment instructions from the Company’s vendors was not effective.
This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the fiscal December 31, 2023 consolidated
financial statements, and this report does not affect our report dated March 15, 2024 on those financial statements.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements
of financial position as of December 31, 2023, 2022 and 2021 and the related consolidated statements of operations and deficit, comprehensive loss, changes in
shareholders’ equity, and cash flows and the related notes for each of the three years in the period ended December 31, 2023 of the Company and our report dated
March 15, 2024 expressed an unqualified opinion, which includes an explanatory paragraph regarding the Company’s ability to continue as a going concern, on those
financial statements.
Page 3
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying “Management Annual Report on Internal Control Over Financial Reporting”. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission, the Ontario Securities Commission, and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the
policies or procedures may deteriorate.
/s/ Marcum LLP
Marcum (cid:3461)(cid:3461)(cid:3465)
Hartford, CT
March 15, 2024
Page 4
POET TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in US Dollars)
December 31,
2023
2022
2021
Current
Cash and cash equivalents (Note 2)
Short-term investments (Note 2)
Accounts receivable (Notes 3)
Prepaids and other current assets (Note 4)
Investment in joint venture (Note 5)
Property and equipment (Note 6)
Patents and licenses (Note 7)
Right of use asset (Note 8)
Current
Accounts payable and accrued liabilities (Note 9)
Covid-19 government support loans (Note 23)
Lease liability (Note 8)
Contract liabilities (Note 3)
Non-current lease liability (Note 8)
Derivative warrant liability (Note 10 and 11(b))
Share capital (Note 11(b))
Warrants and compensation options (Note 12)
Contributed surplus (Note 13)
Accumulated other comprehensive loss
Deficit
Commitments and contingencies (Note 15)
On behalf of the Board of Directors
Assets
Liabilities
$
$
$
$
3,019,069
-
-
150,676
3,169,745
-
4,623,228
502,055
482,389
$
9,229,845
-
62,842
275,507
9,568,194
-
5,070,507
510,705
241,047
14,941,775
6,366,828
-
480,523
21,789,126
1,445,251
3,064,234
528,476
326,890
8,777,417
$
15,390,453
$
27,153,977
2,301,457
30,200
204,939
-
2,536,596
307,141
1,002,264
$
$
3,362,430
29,520
150,951
274,192
1,791,222
31,660
101,074
-
3,817,093
1,923,956
128,312
-
258,274
-
3,846,001
3,945,405
2,182,230
Shareholders’ Equity
165,705,423
670,115
55,447,961
(2,601,058)
(214,291,025)
151,206,539
5,905,642
51,016,808
(2,660,281)
(194,023,660)
147,729,846
5,328,455
46,954,333
(2,053,917)
(172,986,970)
4,931,416
11,445,048
24,971,747
$
8,777,417
$
15,390,453
$
27,153,977
Director
Director
The accompanying notes are an integral part of these consolidated financial statements.
Page 5
POET TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Expressed in US Dollars)
For the Years Ended December 31,
2023
2022
2021
Revenue (Note 21)
Operating expenses
Selling, marketing and administration (Note 20)
Research and development (Note 20)
Operating expenses
Operating loss before the following
Interest expense (Notes 8)
Other income, including interest
Forgiveness of Covid-19 government support loans (Note 23)
Gain on contribution of intellectual property to joint venture (Note 5)
Share of loss in joint venture (Note 5)
Fair value adjustment to derivative warrant liability (Note 10 and 11(b))
Net loss
Deficit, beginning of year
Net loss
Deficit, end of year
Basic and diluted net loss per share (Note 14)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in US Dollars)
$
465,777
$
552,748
$
209,100
10,795,155
10,077,930
9,516,271
10,746,743
9,055,528
8,165,128
20,873,085
20,263,014
17,220,656
(20,407,308)
(70,182)
234,990
-
1,031,807
(1,031,807)
(24,865)
(19,710,266)
(49,738)
188,320
-
1,746,987
(3,211,993)
-
(17,011,556)
(364,619)
75,084
186,747
2,587,500
(1,142,249)
-
(20,267,365)
(21,036,690)
(15,669,093)
(194,023,660)
(172,986,970)
(157,317,877)
(20,267,365)
(21,036,690)
(15,669,093)
$
$
(214,291,025)
(0.51)
$
$
(194,023,660)
(0.57)
$
$
(172,986,970)
(0.45)
For the Years Ended December 31,
2023
2022
2021
Net loss
$
(20,267,365)
$
(21,036,690)
$
(15,669,093)
Other comprehensive (loss) - net of income taxes Items that may in the future be
reclassified to profit (loss):
Exchange differences on translating foreign operations
59,223
(606,364)
(70,705)
Comprehensive loss
$
(20,208,142)
$
(21,643,054)
$
(15,739,798)
The accompanying notes are an integral part of these consolidated financial statements.
Page 6
POET TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in US Dollars)
For the Years Ended December 31,
Share Capital
Beginning balance
Funds from the exercise of stock options
Fair value of stock options exercised
Funds from the exercise of warrants and compensation warrants
Fair value of warrants and compensation warrants exercised
Conversion of convertible debentures
Fair value of warrants issued on conversion of convertible debentures
Funds from common shares issued through ATM Financing
Funds from common shares issued on public or private offerings
Share issue costs
Common shares issued to settle accounts payable
Fair value of warrants issued on public or private offering
Fair value of broker warrant issued as share issue costs
$
2023
2022
2021
$
151,206,539
668,259
587,035
7,767,067
4,418,783
-
-
983,194
1,607,400
(578,317)
-
(954,537)
-
$
147,729,846
418,845
374,129
284,437
79,547
-
-
-
3,184,332
(247,892)
40,029
(656,734)
-
114,586,260
3,124,392
2,699,042
12,994,358
5,351,586
3,571,342
(1,229,305)
-
11,815,595
(1,143,034)
13,814
(3,766,007)
(288,197)
December 31,
165,705,423
151,206,539
147,729,846
Equity Component of convertible debentures
Beginning balance
Fair value of equity component of convertible debentures
December 31,
Warrants and Compensation Options
Beginning balance
Fair value of warrants and compensation warrants exercised
Fair value of expired warrants and compensation options
Fair value of warrants issued on the exercise of convertible debentures
Fair value of warrants issued on private placement
Fair value of broker warrants issued as share issue costs
-
-
-
5,905,642
(4,418,783)
(816,744)
-
-
-
-
-
-
5,328,455
(79,547)
-
-
656,734
-
565,121
(565,121)
-
5,557,002
(5,351,586)
(160,470)
1,229,305
3,766,007
288,197
December 31,
670,115
5,905,642
5,328,455
Contributed Surplus
Beginning balance
Stock-based compensation
Fair value of stock options exercised
Fair value of expired warrants and compensation options
Fair value effect of conversion of convertible debentures
51,016,808
4,201,444
(587,035)
816,744
-
46,954,333
4,436,604
(374,129)
-
-
44,407,679
4,534,370
(2,699,042)
160,470
550,856
December 31,
55,447,961
51,016,808
46,954,333
Accumulated Other Comprehensive Loss
Beginning balance
Other comprehensive (loss) attributable to common shareholders - translation adjustment
December 31,
Deficit
Beginning balance
Net loss
December 31,
(2,660,281)
59,223
(2,053,917)
(606,364)
(1,983,212)
(70,705)
(2,601,058)
(2,660,281)
(2,053,917)
(194,023,660)
(20,267,365)
(172,986,970)
(21,036,690)
(157,317,877)
(15,669,093)
(214,291,025)
(194,023,660)
(172,986,970)
Total Shareholders’ Equity
$
4,931,416
$
11,445,048$
24,971,747
The accompanying notes are an integral part of these consolidated financial statements.
Page 7
POET TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in US Dollars)
For the Years Ended December 31,
2023
2022
2021
CASH AND CASH EQUIVALENTS (USED IN) PROVIDED BY:
OPERATING ACTIVITIES
Net loss
Adjustments for:
Depreciation of property and equipment (Note 6)
Amortization of patents and licenses (Note 7)
Amortization of right of use asset (Note 8)
Fair value adjustment to derivative warrant liability (Note 10)
Accretion of debt discount on convertible debentures and non-cash interest (Notes 8)
Stock-based compensation (Note 13)
Non-cash settled operating costs (Notes 6 and 11)
Gain on contribution of intellectual property to joint venture (Note 5)
Share of loss in joint venture (Note 5)
Forgiveness of covid-19 government support loans (Note 23)
Net change in non-cash working capital accounts:
Accounts receivable
Prepaid and other current assets
Accounts payable and accrued liabilities
Contract liabilities
$
(20,267,365)
$
(21,036,690)
$
(15,669,093)
1,653,798
87,761
180,602
24,865
53,614
4,201,444
-
(1,031,807)
1,031,807
-
1,054,264
80,246
158,648
-
49,738
4,436,604
40,029
(1,746,987)
3,211,993
-
840,366
69,560
190,596
-
213,843
4,534,370
13,814
(2,587,500)
1,142,249
(186,747)
(14,065,281)
(13,752,155)
(11,438,542)
62,000
126,936
(1,256,925)
(274,192)
(61,099)
(356,199)
1,596,690
246,853
-
134,926
70,323
-
Cash flows from operating activities
(15,407,462)
(12,325,910)
(11,233,293)
INVESTING ACTIVITIES
Maturity (purchase) of short-term investments (Note 2)
Purchase of property and equipment (Note 6)
Purchase of patents and licenses (Note 7)
-
(1,167,953)
(79,111)
6,366,828
(3,011,562)
(62,475)
(6,366,828)
(771,523)
(159,359)
Cash flows from investing activities
(1,247,064)
3,292,791
(7,297,710)
FINANCING ACTIVITIES
Issue of common shares for cash, net of issue costs (Note 11)
Payment of lease liability (Note 8)
Cash flows from financing activities
Effect of exchange rate on cash
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
10,447,603
(252,103)
3,639,722
(204,518)
26,791,311
(237,634)
10,195,500
3,435,204
26,553,677
248,250
(114,015)
46,207
(6,210,776)
9,229,845
(5,711,930)
14,941,775
8,068,881
6,872,894
Cash and cash equivalents, end of year
$
3,019,069
$
9,229,845
$
14,941,775
Page 8
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
1. DESCRIPTION OF BUSINESS
POET Technologies Inc. is incorporated in the Province of Ontario. POET Technologies Inc. and its subsidiaries (the “Company”) design and develop the
POET Optical Interposer and Photonic Integrated Circuits for the data center and tele-communications markets. The Company’s head office is located at
120 Eglinton Avenue East, Suite 1107, Toronto, Ontario, Canada M4P 1E2. These audited consolidated financial statements of the Company were approved
by the Board of Directors of the Company on March 15, 2024.
These financial statements have been prepared on the going concern basis which assumes that the Company will have sufficient cash to pay its debts, as and
when they become payable, for a period of at least 12 months from the date the financial report was authorised for issue.
As of December 31, 2023, the Company has accumulated losses of $(214,291,025) and working capital of $633,149. 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:
1. Raised CA$6,219,667 (US$4,607,161) in gross funding from a private placement on January 24, 2024.The financing included the issuance of warrants
at an exercise price of CA$1.52. These warrants are currently in- the- money and will be exercisable after May 25, 2024.
2. Raised $1,607,400 in gross funding from a public offering on December 4, 2023. The financing included the issuance of warrants at an exercise price of
$1.12. These warrants are currently in- the- money and holders of these warrants are encouraged to exercise them.
3. Established a strict budgetary process with a focus on maintaining an appropriate level of corporate overheads in line with the Company’s available
cash resources.
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements of the Company and its subsidiaries were prepared in accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to
exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial statements are disclosed below:
Basis of presentation
These consolidated financial statements include the accounts of POET Technologies Inc. and its subsidiaries; ODIS Inc. (“ODIS”), Opel Solar Inc.
(“OPEL”), BB Photonics Inc. (“BB Photonics”), POET Technologies Pte Ltd. (“PTS”) and POET Optoelectronics Shenzhen Co., Ltd (“POET Shenzhen”).
All intercompany balances and transactions have been eliminated on consolidation.
Page 9
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The acquisition cost is measured at the acquisition date at the fair value of the
consideration transferred, including all contingent consideration.
Subsequent changes in contingent consideration are accounted for through the consolidated statements of operations and deficit and consolidated statements
of comprehensive loss in accordance with the applicable standards.
Goodwill arising on acquisition is initially measured at cost, being the difference between the fair value of the consideration transferred including the
recognized amount of any non-controlling interest in the acquiree and the net recognized amount (generally fair value) of the identifiable assets and
liabilities assumed at the acquisition date. If the net of the amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the
acquiree (if any), the excess is recognized immediately in the consolidated statements of operations and deficit as a bargain purchase gain.
Acquisition-related costs, other than those that are associated with the issue of debt or equity securities that the Company incurs in connection with a
business combination, are expensed as incurred.
Foreign currency translation
These consolidated financial statements are presented in U.S. dollars (“USD”), which is the Company’s presentation currency.
Items included in the financial statements of each of the Company’s subsidiaries are measured using the currency of the primary economic environment in
which the entity operates (the “functional currency”). Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of
monetary assets and liabilities not denominated in the functional currency of an entity are recognized in the statement of operations and deficit.
Assets and liabilities of entities with functional currencies other than U.S. dollars are translated into the presentation currency at the year end rates of
exchange, and the results of their operations are translated at average rates of exchange for the year. The resulting translation adjustments are included in
accumulated other comprehensive loss in shareholders’ equity. Additionally, foreign exchange gains and losses related to certain intercompany loans that are
permanent in nature are included in accumulated other comprehensive loss. Elements of equity are translated at historical rates.
Financial instruments
Financial assets held with an objective to hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and
interest are measured at amortised cost using the effective interest method. Debt investments held with an objective to hold both assets in order to collect
contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of fair value are measured
at FVTOCI. All other financial assets are classified and measured at fair value through profit or loss (“FVTPL”). Financial liabilities are classified as either
FVTPL or other financial liabilities, and the portion of the change in fair value that relates to the Company’s credit risk is presented in other comprehensive
income (loss). Instruments classified as FVTPL are measured at fair value with unrealized gains and losses recognized in net income (loss). Other financial
liabilities are subsequently measured at amortised cost using the effective interest method.
Page 10
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities, other than financial assets and
financial liabilities classified as FVTPL, are added to or deducted from the fair value on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities classified as FVTPL are recognized immediately in consolidated net income (loss).
Derecognition
Financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive
the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which
the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. Any
interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability.
Financial liabilities
A financial liability is derecognized from the balance sheet when it is extinguished, that is, when the obligation specified in the contract is either discharged,
cancelled or expires. Where there has been an exchange between an existing borrower and lender of debt instruments with substantially different terms, or
there has been a substantial modification of the terms of an existing financial liability, this transaction is accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. A gain or loss from extinguishment of the original financial liability is recognized in profit
or loss.
The Company’s financial instruments include cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued
liabilities.
The following table outlines the classification of financial instruments under IFRS 9:
Financial Assets
Cash and cash equivalents
Short-term investments
Accounts receivable
Financial Liabilities
Accounts payable and accrued liabilities
Contract liabilities
Covid-19 government support loans
Derivative warrant liability
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value through profit and loss (FVTPL)
Convertible debentures are accounted for as a compound financial instrument with a debt component and a separate equity component. The debt component
of these compound financial instruments is measured at fair value on initial recognition by discounting the stream of future interest and principal payments
at the rate of interest prevailing at the date of issue for instruments of similar term and risk. The debt component is subsequently deducted from the total
carrying value of the compound instrument to derive the equity component. The debt component is subsequently measured at amortized cost using the
effective interest rate method. Interest expense based on the coupon rate of the debenture and the accretion of the liability component to the amount that will
be payable on redemption are recognized through profit or loss as a finance cost.
Page 11
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Short-term investments
The short-term investments of nil (2022 - nil, 2021 - $6,366,828) consist of guaranteed investment certificates (GICs) held with one Canadian chartered
bank and earn interest at rates ranging from 0.75 to 1.44%.
Property and equipment
Property and equipment are recorded at cost. Depreciation is calculated based on the estimated useful life of the asset using the following method and useful
lives:
Machinery and equipment
Leasehold improvements
Office equipment
Patents and licenses
Straight Line, 5 years
Straight Line, 5 years or life of the lease, whichever is less
Straight Line, 3 - 5 years
Patents and licenses are recorded at cost and amortized on a straight line basis over 12 years. Ongoing maintenance costs are expensed as incurred.
Impairment of long-lived assets
The Company’s tangible and intangible assets are reviewed for indications of impairment whenever events or changes in circumstances indicate that the
carrying amounts of the assets may not be recoverable. An assessment is made at each reporting date whether there is any indication that an asset may be
impaired.
An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss
for the year. The recoverable amount is the greater of the asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating
unit (“CGU”) to which the asset belongs.
An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized. No impairment loss has been reported for the years ended December 31, 2023,
2022 and 2021.
Page 12
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income taxes are provided on differences between
the financial reporting and income tax bases of assets and liabilities and on income tax losses available to be carried forward to future years for tax purposes.
Deferred income taxes are measured using the substantively enacted tax rates and laws that are expected to be in effect when the differences are expected to
reverse. Deferred tax assets are only recognized if the amount is expected to be realized in the future.
Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The
Company recognizes revenue when it transfers control over a product or service to a customer.
Sale of goods
Revenue from the sale of goods is recognized, net of discounts and customer rebates, at the point in time the transfer of control of the related products
has taken place as specified in the sales contract and collectability is reasonably assured.
Service revenue
The Company provides contract services, primarily in the form of non-recurring revenue (“NRE”) where control is passed to the customer over time.
The contracts generally provide agreed upon milestones for customer payment which include but are not limited to the delivery of sample products,
design reports and test reports. The customer makes payment when it has approved the delivery of the milestone. The Company must determine if the
contract is made up of a series of independent performance obligations or a single performance obligation. Where NRE contracts contain multiple
performance obligations for which a standalone transaction price can be assessed, revenue is recognized as each performance obligation is satisfied.
Where NRE contracts contain a single performance obligation to be settled over time, revenue is recognized progressively based on the output method.
Other income
Interest income
Interest income on cash is recognized as earned using the effective interest method.
Wage subsidies
Wages subsidies received from the Singaporean government are netted against R&D related wages and benefits on the consolidated statements of
operations and deficit.
Government Grants
Loans received exclusively from governmental agencies to support the Company throughout the COVID-19 pandemic qualify to be forgiven if certain
conditions are met. Forgiveness of COVID-19 related loans will be recognized as other income on the consolidated statements of operations and deficit.
Page 13
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible assets
Research and development costs
Research costs are expensed in the year incurred. Development costs are also expensed in the year incurred unless the Company believes a development
project meets IFRS criteria as set out in IAS 38, Intangible Assets, for deferral and amortization. IAS 38 requires all research costs be charged to
expense while development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. This
means that the entity must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will
generate future economic benefits. Development costs are tested for impairment whenever events or changes indicate that its carrying amount may not
be recoverable.
In-Process Research and Development
Under IFRS, in-process research and development (“IPR&D”) acquired in a business combination that meets the definition of an intangible asset is
capitalized with amortization commencing when the asset is ready for use (i.e., when development is complete). The Company does not capitalize its
IPR&D.
Stock-based compensation
Stock options and warrants awarded to non employees are measured using the fair value of the goods or services received unless that fair value cannot be
estimated reliably, in which case measurement is based on the fair value of the stock options. Stock options and warrants awarded to employees are
accounted for using the fair value method. The fair value of such stock options and warrants granted is recognized as an expense on a proportionate basis
consistent with the vesting features of each tranche of the grant. The fair value is calculated using the Black-Scholes option pricing model with assumptions
applicable at the date of grant.
Loss per share
Basic loss per share, net of taxes is calculated by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted
loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period after giving effect to
potentially dilutive financial instruments. The dilutive effect of stock options and warrants is determined using the treasury stock method.
Joint Venture
A joint arrangement is an arrangement among two or more parties where the parties are bound by a contractual arrangement and the contractual arrangement
gives the parties joint control of the arrangement. A joint venture is a form of joint arrangement where an entity is independently formed and the parties
jointly have rights to the net assets of the arrangement and therefore account for their interests under the equity method. The Company has a joint venture in
China and uses the equity method to account for its share of the joint venture’s operations.
Share Consolidation
On February 24, 2022, the Company filed Articles of Amendment to consolidate its common shares on a ten-for-one basis. For further clarity, for every ten
(10) pre-consolidated common shares, shareholders received one (1) post-consolidated common share. On February 28, 2022 the Company’s common
shares began trading on the TSX Venture Exchange on a post consolidation basis. The Company’s name and trading symbol remained unchanged. All
references to share and per share amounts in these consolidated financial statements and accompanying notes to the consolidated financial statements have
been retroactively restated to reflect the ten-for-one share consolidation.
Page 14
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
3. ACCOUNTS RECEIVABLE AND CONTRACT LIABILITIES
Revenue Contract Balances
Opening balance, January 1, 2022
Customer deposits
Changes due to payment, fulfillment of performance obligations or
revenues recognized
Effect of changes in foreign exchange rates
Balance, December 31, 2022
Changes due to payment, fulfillment of performance obligations or revenues recognized
Effect of changes in foreign exchange rates
Balance, December 31, 2023
4. PREPAIDS AND OTHER CURRENT ASSETS
The following table reflects the details of prepaids and other current assets at December 31:
Contract
Receivables
Liabilities
$
$
-
-
62,842
-
62,842
(62,842)
-
-
$
-
(779,870)
489,906
15,772
(274,192)
271,069
3,123
-
$
$
$
Sales tax recoverable and other current assets
Deposits on equipment
Prepaid expenses
5. JOINT VENTURE
2023
2022
2021
$
57,200
-
93,476
$
128,321
-
147,186
141,568
288,287
50,668
150,676
$
275,507
$
480,523
$
$
On October 20, 2020, the Company signed a Joint Venture Agreement (“JVA”) establishing a joint venture, Super Photonics Xiamen Co., Ltd (“SPX”) in
Xiamen China, with Xiamen Sanan Integrated Circuit Co. Ltd. (“Sanan IC”) whose purpose is to design, develop, manufacture and sell 100G, 200G and
400G optical engines based on POET’s proprietary Optical Interposer platform technology. SPX was registered on March 12, 2021. SPX will be
subsequently capitalized through a combination of committed cash, capital equipment and intellectual property from Sanan IC and intellectual property and
know-how from the Company.
The Company’s contribution of intellectual property to SPX was independently valued at $22,500,000 at the time of its contribution. During the year ended
December 31, 2023, the Company recognized a gain of $1,031,807 (2022 - $1,746,987, 2021 - $2,587,500) related to its contribution of intellectual property
to SPX in accordance with IAS 28. The Company only recognized a gain on the contribution of the intellectual property equivalent to the Sanan IC’s interest
in SPX, the unrecognized gain of $17,133,706 (2022 - $18,159,632, 2021 - $19,912,500) will be applied against the investment and periodically realized as
the Company’s ownership interest in SPX is reduced. As at December 31, 2023, Sanan IC’s and the Company’s ownership interests were approximately
23.9% and 76.1% respectively (2022 - 19.3% and 80.7%, 2021 - 11.5% and 88.5%).
SPX was determined to be a joint venture as both Sanan IC and POET exercise joint control over SPX. All relevant activity of SPX require unanimous
consent.
Page 15
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
5.
JOINT VENTURE (Continued)
The Company’s investment in joint venture during the year can be summarized as follows:
Balance, January 1, 2021
Contribution of intellectual property
Unrecognized gain on contribution of intellectual property
Share of loss in joint venture for the year ended December 31, 2021
Investment balance, December 31, 2021
Recognized gain on contribution of intellectual property
Share of loss in joint venture for the year ended December 31, 2022
Effect of changes in foreign exchange rates
Investment balance, December 31, 2022
Recognized gain on contribution of intellectual property
Share of loss in joint venture for the year ended December 31, 2023
Effect of changes in foreign exchange rates
Investment balance, December 31, 2023
Summarized financial information of the joint venture is as follows:
December 31,
Current assets
Intangible assets
Liabilities
Owners Equity
Net loss
$
$
-
22,500,000
(19,912,500)
(1,142,249)
1,445,251
1,746,987
(3,211,993)
19,755
-
1,031,807
(1,031,807)
-
-
2023
2022
2021
$
$
$
1,758,587
16,155,786
(149,306)
(17,765,067)
$
1,951,654
18,708,065
(180,897)
(20,478,822)
2,287,252
22,500,000
(44,683)
(24,742,569)
3,830,962
$
4,319,857
$
1,212,417
The Company recognizes its share of SPX’s profits or losses using the equity method. On a weighted average basis, the Company’s share of the net
operating loss was 78.9% or $(3,026,408), however the Company recognized $(1,031,807) of the net operating loss of SPX for the year ended December 31,
2023 (2022 - 83.7% or $(3,211,993), 2021 - $95.3% or $(1,142,249)). In accordance with IAS 28, the Company can only account for a loss to the extent that
it carries a net investment in the joint venture on the statement of financial position. The Company’s current share of the operating loss is a result of the high
value of the Company’s initial contribution. The Company’s share of the loss will reduce as Sanan IC periodically contributes cash and other assets to SPX.
6. PROPERTY AND EQUIPMENT
Cost
Balance, January 1, 2021
Additions,net of returns
Reclassification
Effect of changes in foreign exchange rates
Balance,December 31, 2021
Additions, net of returns (1)
Reclassification
Effect of changes in foreign exchange rates
Balance, December 31, 2022
Additions
Reclassification
Effect of changes in foreign exchange rates
Equipment not
ready for use
Leasehold
improvements
Machinery and
equipment
Office
equipment
Total
$
$
227,147
(128,575)
(96,334)
(2,238)
$
71,928
-
47,393
(2,206)
3,994,657
842,877
48,941
(56,455)
$
-
1,902,713
(141,702)
54,898
1,815,909
206,018
(2,013,090)
(8,837)
117,115
-
-
6,544
123,659
-
-
597
4,830,020
1,087,414
162,917
11,270
6,091,621
949,551
2,013,090
41,246
128,185
57,221
-
(2,137)
183,269
21,435
(21,215)
(5,587)
177,902
12,384
-
5,560
$
4,421,917
771,523
-
(63,036)
5,130,404
3,011,562
-
67,125
8,209,091
1,167,953
-
38,566
Balance, December 31, 2023
-
124,256
9,095,508
195,846
9,415,610
Page 16
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
6.
PROPERTY AND EQUIPMENT (Continued)
Accumulated Depreciation
Balance, January 1, 2021
Depreciation for the year
Effect of changes in foreign exchange rates
Balance, December 31, 2021
Depreciation for the year
Effect of changes in foreign exchange rates
Balance, December 31, 2022
Depreciation for the year
Balance, December 31, 2023
Carrying Amounts
At December 31, 2021
At December 31, 2022
At December 31, 2023
Property and equipment, carrying amounts
Equipment not
ready for use
Leasehold
improvements
Machinery and
equipment
Office
equipment
Total
-
-
-
-
-
-
-
-
-
10,777
18,891
(142)
29,526
24,079
2,529
56,134
24,684
1,146,014
794,834
(10,122)
1,930,726
1,000,085
27,727
2,958,538
1,600,981
79,372
26,641
(95)
105,918
30,100
(12,106)
123,912
28,133
1,236,163
840,366
(10,359)
2,066,170
1,054,264
18,150
3,138,584
1,653,798
80,818
4,559,519
152,045
4,792,382
$
$
$
$
-
1,815,909
-
-
$
$
$
$
87,589$
67,525$
43,438$
43,438$
2,899,294
3,133,083
4,535,989
4,535,989
$
$
$
$
77,351
53,990
43,801
43,801
$
$
$
$
3,064,234
5,070,507
4,623,228
4,623,228
(1) During 2022, the Company returned $196,490 in equipment to a vendor. The equipment was not needed as the Company had alternatives. The
equipment was returned without penalty to the Company.
7. PATENTS AND LICENSES
Cost
Balance, January 1, 2021
Additions
Balance, December 31, 2021
Additions
Balance, December 31, 2022
Additions
Balance, December 31, 2023
Accumulated Amortization
Balance, January 1, 2021
Amortization
Balance, December 31, 2021
Amortization
Balance, December 31, 2022
Amortization
Balance, December 31, 2023
Carrying Amounts
At December 31, 2021
At December 31, 2022
At December 31, 2023
$
$
$
$
837,102
159,359
996,461
62,475
1,058,936
79,111
1,138,047
398,425
69,560
467,985
80,246
548,231
87,761
635,992
528,476
510,705
502,055
Page 17
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
8. RIGHT OF USE ASSET AND LEASE LIABILITY
The Company recognizes a lease liability and right of use asset relating to its commercial leases. The lease liability is measured at the present value of the
remaining lease payments, discounted using the Company’s incremental borrowing rate of 12%.
Right of use asset
Cost
Balance, January 1, 2021
Effect of changes in foreign exchange rates
Balance, December 31, 2021
Lease modification
Balance, December 31, 2022
Addition
Balance, December 31, 2023
653,232
(4,122)
649,110
81,542
730,652
420,806
1,151,458
Building
$
Accumulated Amortization
Balance, January 1, 2021
Amortization
Effect of changes in foreign exchange rates
Balance, December 31, 2021
Amortization
Effect of changes in foreign exchange rates
Balance, December 31, 2022
Amortization
Effect of changes in foreign exchange rates
Balance, December 31, 2023
Carrying Amounts
At December 31, 2021
At December 31, 2022
At December 31, 2023
132,546
190,596
(922)
322,220
158,648
8,737
489,605
180,602
(1,138)
669,069
326,890
241,047
482,389
Page 18
$
$
$
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
8.
RIGHT OF USE ASSET AND LEASE LIABILITY (Continued)
Lease liability
Balance, January 1, 2021
Interest expense
Lease payments
Effect of changes in foreign exchange rates
Balance, December 31, 2021
Interest expense
Lease modification
Lease payments
Effect of changes in foreign exchange rates
Balance, December 31, 2022
Interest expense
Lease modification
Additions
Lease payments
Effect of changes in foreign exchange rates
Balance, December 31, 2023
$
$
531,997
67,675
(237,634)
(2,690)
359,348
49,738
81,542
(204,518)
(6,847)
279,263
53,613
-
424,021
(252,103)
7,286
512,080
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31 was as follows:
Trade payables
Payroll related liabilities
Accrued liabilities
10. DERIVATIVE WARRANT LIABILITY
2023
2022
2021
$
$
$
1,370,658
563,588
367,211
$
2,723,531
452,751
186,148
987,498
521,692
282,032
2,301,457
$
3,362,430
$
1,791,222
On December 4, 2023, the Company raised gross proceeds of $1,607,400 from the issuance of 1,786,000 units through an underwritten public offering in
the United States (the “Offering”). The Offering consisted of 1,786,000 common shares of the Company and warrants to purchase up to 1,786,000 warrants.
The warrants are exercisable into common shares of the Company at a price of $1.12 until December 4, 2028.
Because the functional currency of the entity issuing the warrant is Canadian dollars but the warrants are exercisable in United States dollars, the Company
may receive a variable amount in Canadian dollars when the warrants are exercised as the foriegn exchange may vary over the warrant exercise period. The
variability in potential future cashflows resulted in a derivative warrant liability which will be periodically remeasured with any gains or losses charged to
the consolidated statements of operations and deficit.
The fair value of the share purchase warrants was estimated on the date of issuance using the Black-Scholes option pricing model with the following
weighted average assumptions: dividend yield of 0%, risk-free interest rate of 3.54%, volatility of 75.66%, and estimated life of 5 years. The estimated fair
value assigned to the warrants and recognized as a derivative liability on the date of issuance was $954,537. The derivative liability was remeasured on
December 31, 2023. The remeasurement resulted in a loss of $24,865.
Page 19
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
10.
DERIVATIVE WARRANT LIABILITY (continued)
The following table presents the details of the derivative warrant liability:
Stock price ($CA)
Exercise price ($CA)
Expected life in years
Volatility
Dividend yield
Risk free interest rate
Fair value of derivative warrant liability
11. SHARE CAPITAL
(a)
AUTHORIZED
Unlimited number of common shares
One special voting share
(b)
COMMON SHARES ISSUED
Balance, January 1, 2021
Funds from the exercise of stock options
Fair value of stock options exercised
Issued on the conversion of convertible debentures (Note 10)
Fair value of warrants issued upon conversion of convertible debentures
Funds from the exercise of warrants
Fair value of warrants exercised
Funds from Common shares issued on private placement
Fair value of warrants issued on private placement
Share issue costs
Fair value of broker warrants issued as share issue costs
Shares issued to settle accounts payable
Balance, December 31, 2021
Funds from Common shares issued on private placement
Fair value of warrants issued on private placement
Share issue costs
Shares issued to settle accounts payable
Funds from the exercise of stock options
Fair value of stock options exercised
Funds from the exercise of warrants and compensation warrants
Fair value of warrants and compensation warrants exercised
Adjustment for 10 for 1 share consolidation
Balance, December 31, 2022
Funds from common shares issued through ATM financing
Funds from Common shares issued on private placement
Fair value of warrants issued on private placement
Share issue costs
Funds from the exercise of stock options
Fair value of stock options exercised
Funds from the exercise of warrants and compensation warrants
Fair value of warrants and compensation warrants exercised
Balance, December 31, 2023
December 31,
2023
December 4,
2023
$
$
1.25
1.52
5.00
75.66%
0%
3.54%
1.22
1.52
5.00
75.66%
0%
3.54%
1,002,264
$
954,537
$
$
$
Number of Shares
Amount
29,461,811
1,001,519
-
1,119,750
-
3,144,750
-
1,764,720
-
-
-
1,678
36,494,228
1,126,635
-
-
5,422
143,437
-
72,500
-
(272)
37,841,950
227,673
1,786,000
-
-
268,356
-
2,364,066
-
42,488,045
$
$
114,586,260
3,124,392
2,699,042
3,571,342
(1,229,305)
12,994,358
5,351,586
11,815,595
(3,766,007)
(1,143,034)
(288,197)
13,814
147,729,846
3,184,332
(656,734)
(247,892)
40,029
418,845
374,129
284,437
79,547
-
151,206,539
983,194
1,607,400
(954,537)
(578,317)
668,259
587,035
7,767,067
4,418,783
165,705,423
Page 20
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
11.
SHARE CAPITAL (Continued)
2021
On February 11, 2021, the Company completed a brokered private placement offering of 1,764,720 units at a price of $6.70 (CAD$8.50) per unit for gross
proceeds of $11,815,595 (CAD$15,000,120). Each unit consists of one common share and one common share purchase warrant. Each whole warrant entitles
the holder to purchase one common share of the Company at a price of $9.00 (CAD$11.50) per share until February 11, 2023. At any time after June 12,
2021, the Company reserves the right to accelerate the expiry of the warrants if the Company’s average stock price exceeds $18.10 (CAD$23.00) for a
period of 10 consecutive trading days. The broker was paid a cash commission of $708,667 (CAD$900,007) equating to 6% of the gross proceeds and
received 105,883 broker warrants. Each broker warrant is exercisable into one common share of the Company at a price of $6.70 (CAD$8.50) per broker
warrant until February 11, 2023. The Company incurred additional share issuance costs of $434,367 directly related to the private placement and warrant
exercises.
The fair value of the share purchase warrants and broker warrants was estimated using the Black-Scholes option pricing model with the following weighted
average assumptions: dividend yield of 0%, risk-free interest rate of 0.19%, volatility of 75.26%, and estimated life of 2 years. The estimated fair value
assigned to the warrants and broker warrants was $3,766,007 and $288,197, respectively.
2022
In 2020, the Company engaged with a firm to assist with its shareholder communications strategy. The terms of the agreement require the Company to issue
common shares at certain pre-determined dates in satisfaction of past services rendered. During the year ended December 31, 2022, the Company settled
$40,029 (2021 - $13,814) in accounts payable related to services rendered in 2022 under this agreement by issuing 5,422 (2021 - 1,678) common shares at a
price of $7.38 (CAD$9.38) (2021 - $8.20 (CAD$10.10)) per share to the firm.
On December 2, 2022, the Company completed a non-brokered private placement offering of 1,126,635 units at a price of $2.78 (CAD$3.81) per unit for
gross proceeds of $3,184,332 (CAD$4,292,479). Each unit consists of one common share and one half common share purchase warrant. Each whole
warrant entitles the holder to purchase one common share of the Company at a price of $3.61 (CAD$4.95) per share until December 2, 2025. The Company
paid finders’ fees aggregating to $42,090 (CAD$57,897) to four firms. The Company paid other share issue costs of $205,802 related to this private
placement offering.
One director subscribed for 10,000 units of this private placement offering for gross proceeds of $27,800 (CAD$38,100).
The fair value of the share purchase warrants and broker warrants was estimated using the Black-Scholes option pricing model with the following weighted
average assumptions: dividend yield of 0%, risk-free interest rate of 3.48%, volatility of 69.93%, and estimated life of 3 years. The estimated fair value
assigned to the warrants was $656,734.
2023
During the year ended December 31, 2023, the Company raised gross proceeds of $983,194 from the issuance of 227,673 common shares through an Equity
Distribution Agreement, (“EDA”) with multiple agents. Pursuant to the EDA, the Company established an at-the-market (“ATM”) equity offering program
whereby the Company may, at its discretion, during the term of the ATM agreement issue and sell, through the agents such number of common shares of the
Company as would result in aggregate gross proceeds to the Company of up to US$30 million. The agents were paid a commission of 3% or $29,486 of the
gross proceeds raised through the ATM. The Company incurred additional financing costs including legal and filing fees of $291,226.
Page 21
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
11.
SHARE CAPITAL (Continued)
On December 4, 2023, the Company raised gross proceeds of $1,607,400 from the issuance of 1,786,000 units through an underwritten public offering in
the United States (the “Offering”). The Offering consisted of 1,600,000 common shares of the Company and warrants to purchase up to 1,600,000 common
shares of the Company at a combined public offering price of US$0.90 per common share and accompanying warrant. Each warrant has an exercise price of
US$1.12 per common share and is exercisable for five years from the date of issuance. In addition, the Company granted the underwriter a 45 day option to
purchase up to an additional 240,000 common shares and/or warrants to purchase up to an additional 240,000 common shares at the public offering price in
any combination, less underwriting discounts and commissions, which the underwriter has partially exercised to purchase 186,000 additional common
shares and additional warrants to purchase up to 186,000 common shares. The agents were paid a commission of 7% or $112,518 of the gross proceeds
raised. The Company incurred additional financing costs including legal and filing fees of $145,089.
The fair value of the share purchase warrants was estimated using the Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0%, risk-free interest rate of 3.54%, volatility of 75.66%, and estimated life of 5 years. The estimated fair value assigned to
the warrants was $954,537 (Note 10).
Share Consolidation
On February 24, 2022, the Company filed Articles of Amendment to consolidate its common shares on a ten-for-one basis. For further clarity, for every ten
(10) pre-consolidated common shares, shareholders received one (1) post-consolidated common share. On February 28, 2022, the Company’s common
shares began trading on the TSX Venture Exchange on a post consolidation basis. The Company’s name and trading symbol remained unchanged. All
references to share and per share amounts in these consolidated financial statements and accompanying notes to the consolidated financial statements have
been retroactively restated to reflect the ten-for-one share consolidation.
12. WARRANTS AND COMPENSATION OPTIONS
The following table reflects the continuity of warrants and compensation options:
Balance, January 1, 2021
Fair value of warrant issued on private placement (Note 11)
Fair value of broker warrants issued on private placement
Fair value of warrants issued on conversion of
convertible debentures
Historical fair value assigned to warrants exercised
Fair value of expired warrants
Balance, December 31, 2021
Fair value of warrant issued on private placement
Historical fair value assigned to warrants exercised
Balance, December 31, 2022
Historical fair value assigned to warrants exercised
Fair value of expired warrants
Fair value of warrant issued on public offering
Balance, December 31, 2023
$
$
Historical
Average Exercise
Price
3.90
9.00
6.70
3.80
3.90
3.90
7.10
1.17
3.90
6.15
3.27
4.50
-
1.77
Number of
Warrants/
Compensation options
3,269,050
1,764,720
105,883
1,119,750
(3,144,750)
(93,300)
3,021,353
563,318
(72,500)
3,512,171
(2,364,066)
(584,787)
1,786,000
2,349,318
$
$
Historical
Fair value
5,557,002
3,766,007
288,197
1,229,305
(5,351,586)
(160,470)
5,328,455
656,734
(79,547)
5,905,642
(4,418,783)
(816,744)
-
670,115
Page 22
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
13. STOCK OPTIONS AND CONTRIBUTED SURPLUS
Stock Options
On June 30, 2023, shareholders of the Company approved a fixed 20% omnibus equity incentive plan (the “Omnibus Plan”). The Omnibus Plan replaces the
2021 stock option plan. The Omnibus Plan provides flexibility to the Company to grant different forms of equity-based incentive awards to directors,
officers, employees and consultants. The Omnibus plan provides the Company with the choice of granting stock options (“Options”), share units (“Share
Units”) and deferred share units (“DSUs”). The Omnibus Plan provides that the maximum number of common shares issuable pursuant to awards granted
under the Omnibus Plan and pursuant to other previously granted awards is limited to 8,056,055 (the “Number Reserved”). Any subsequent increase in the
Number Reserved must be approved by shareholders of the Company and cannot, at the time of the increase, exceed 20% of the number of issued and
outstanding shares. Awards vest in accordance with the policies determined by the Board of Directors from time to time consistent with the provisions of the
Omnibus Plan which grants discretion to the Board of Directors.
Stock option transactions and the number of stock options outstanding were as follows:
Balance, January 1, 2021
Expired/cancelled
Exercised
Granted
Balance, December 31, 2021
Expired/cancelled
Exercised
Granted
Balance, December 31, 2022
Expired/cancelled
Exercised
Granted
Balance, December 31, 2023
Number of
Options
Historical Weighted
Average Exercise Price
5,114,449
(166,438)
(1,001,519)
1,013,125
4,959,617
(117,438)
(143,437)
2,043,083
6,741,825
(182,750)
(268,356)
1,002,170
7,292,889
$
$
3.30
3.40
3.00
8.50
4.40
6.02
2.85
3.32
4.10
4.66
2.49
4.11
3.92
During the year ended December 31, 2023, the Company recorded stock-based compensation of $4,201,444 (2022 - $4,436,604, 2021 - $4,534,370) relating
to stock options that vested during the year.
The stock options granted were valued using the Black-Scholes option pricing model using the following assumptions:
Weighted average exercise price
Weighted average risk-free interest rate
Weighted average dividend yield
Weighted average volatility
Weighted average estimated life
Weighted average share price
Share price on the various grant dates:
Weighted average fair value
2023
4.11
2.88% - 3.48%
0%
82.17% - 82.45%
10 years
4.11
$4.05 - $4.63
3.42
$
$
$
$
$
$
2022
3.32
1.80% - 3.48%
0%
83.51%
10 years
3.32
$2.72 - $6.71
2.70
$
$
$
2021
8.50
0.80% - 1.48%
0%
90.68%
10 years
8.50
$6.20 - $9.50
7.50
Page 23
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
13.
STOCK OPTIONS AND CONTRIBUTED SURPLUS (Continued)
The underlying expected volatility was determined by reference to the Company’s historical share price movements, its dividend policy and dividend yield
and past experience relating to the expected life of granted stock options.
The weighted average remaining contractual life and weighted average exercise price of options outstanding and of options exercisable as at December 31,
2023 are as follows:
Options Outstanding
Options Exercisable
Exercise
Range
$0.83 - $1.97
$1.98 - $2.80
$2.81 - $9.02
Number
Outstanding
7,000
1,851,073
5,434,816
7,292,889
14. LOSS PER SHARE
Numerator
Net loss
Denominator
Weighted average number of common shares outstanding
Weighted average number of common shares outstanding - diluted
Basic and diluted loss per share
Historical
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual Life
(years)
1.97
2.45
4.44
3.92
4.59
6.17
7.21
6.95
Historical
Weighted
Average
Exercise
Price
1.97
2.36
4.38
3.81
Number
Exercisable
7,000
1,328,577
3,373,128
4,708,705
$
$
$
$
2023
2022
2021
(20,267,365)
$
(21,036,690)
$
(15,669,093)
40,099,752
40,099,752
(0.51)
$
36,739,857
36,739,857
(0.57)
$
34,545,752
34,545,752
(0.45)
$
$
$
$
$
$
The effect of common share purchase options, warrants, compensation warrants and shares to be issued on the net loss in 2023, 2022 and 2021 is not
reflected as they are anti-dilutive.
15. COMMITMENTS AND CONTINGENCIES
The Company has operating leases on four facilities; head office located in Toronto, Canada, design and testing operations located in Allentown,
Pennsylvania (formerly in San Jose, California) and operating facilities located in Singapore and China. The Company’s design and testing operations was
initiated on April 1, 2021 and expires on September 30, 2025. The lease on the Company’s operating facilities in Singapore terminated on May 31, 2023.
The lease was renewed on June 1, 2023 and expires on March 31, 2027. The lease on the Company’s operating facilities in China was initiated in November
19, 2021 and expired on November 18, 2023. The lease on the operating facility in China was renewed for another three year term, expiring on November
18, 2026. As of December 31, 2023, the Company’s head office was on a month to month lease term.
Remaining annual lease payments to the lease expiration dates are as follows:
2024
2025 and beyond
$
$
281,048
390,873
671,921
Page 24
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
16. RELATED PARTY TRANSACTIONS
Compensation to key management personnel were as follows:
Salaries
Share-based payments (1)
Total
2023
2022
2021
$
$
2,044,920
1,771,078
3,815,998
$
$
2,010,479
1,711,716
3,722,195
$
$
1,782,297
2,077,333
3,859,630
(1)Share-based payments are the fair value of options granted to key management personnel and expensed during the various years as calculated using the Black-
Scholes model.
All transactions with related parties have occurred in the normal course of operations and are measured at the exchange amounts, which are the amounts of
consideration established and agreed to by the related parties.
17. SEGMENT INFORMATION
The Company and its subsidiaries operate in a single segment; the design, manufacture and sale of semi-conductor products and services for commercial
applications. The Company’s operating and reporting segment reflects the management reporting structure of the organization and the manner in which the
chief operating decision maker regularly assesses information for decision making purposes, including the allocation of resources. A summary of the
Company’s operations is below:
OPEL, ODIS, POET Shenzhen and PTS
OPEL, ODIS, POET Shenzhen and PTS are the designers and developers of the POET Optical Interposer platform and optical engines based on the POET
Optical Interposer platform.
BB Photonics
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.
On a consolidated basis, the Company operates geographically in Singapore, China (collectively “Asia”), the United States and Canada. Geographical
information is as follows:
As of December 31,
Current assets
Property and equipment
Patents and licenses
Right of use asset
Total Assets
2023
Asia
326,926
4,089,653
-
379,462
$
US
Canada
Consolidated
$
149,227
533,575
502,055
102,927
$
2,693,592
-
-
-
3,169,745
4,623,228
502,055
482,389
4,796,041
$
1,287,784
$
2,693,592
$
8,777,417
$
$
Page 25
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
17.
SEGMENT INFORMATION (Continued)
Year Ended December 31,
Revenue
Asia
US
Canada
Consolidated
$
465,777
$
-
$
-
$
465,777
Selling, marketing and administration
Research and development
Gain on contribution of intellectual property to
joint venture
Interest expense
Loss on fair value of derivative warrant liability
Other income, including interest
Share of loss in joint venture
Net loss
As of December 31,
Current assets
Investment in joint venture
Property and equipment
Patents and licenses
Right of use asset
Total Assets
The Year Ended December 31,
Revenue
Selling, marketing and administration
Research and development
Gain on contribution of intellectual property to joint
venture
Interest expense
Forgiveness of Covid-19 government support loans
Other income, including interest
Share of loss in joint venture
Net loss
As of December 31,
Current assets
Investment in joint venture
Property and equipment
Patents and licenses
Right of use asset
Total Assets
(2,753,484)
(6,249,120)
1,031,807
(27,906)
-
-
(1,031,807)
(6,226,291)
(3,662,418)
(1,815,380)
(166,392)
-
(42,276)
-
-
-
-
-
(24,865)
234,990
-
(10,795,155)
(10,077,930)
1,031,807
(70,182)
(24,865)
234,990
(1,031,807)
(8,564,733)
$
(9,930,985)
$
(1,771,647)
$
(20,267,365)
$
$
$
2022
Asia
664,658
-
4,496,734
-
55,775
5,217,167
Asia
552,748
(2,121,596)
(6,344,016)
1,746,987
(17,701)
-
-
(3,211,993)
US
Canada
Consolidated
$
$
$
133,501
-
573,773
510,705
185,272
1,403,251
US
-
(5,885,970)
(4,205,177)
-
(32,037)
-
-
-
8,770,035
-
-
-
-
8,770,035
Canada
-
(1,508,705)
(197,550)
-
-
-
188,320
-
$
$
$
9,568,194
-
5,070,507
510,705
241,047
15,390,453
Consolidated
552,748
(9,516,271)
(10,746,743)
1,746,987
(49,738)
-
188,320
(3,211,993)
(9,395,571)
$
(10,123,184)
$
(1,517,935)
$
(21,036,690)
2021
Asia
537,647
1,445,251
2,787,273
-
150,134
$
US
Canada
Consolidated
$
291,772
-
276,961
528,476
176,756
$
20,959,707
-
-
-
-
21,789,126
1,445,251
3,064,234
528,476
326,890
4,920,305
$
1,273,965
$
20,959,707
$
27,153,977
Page 26
$
$
$
$
$
$
$
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
17.
SEGMENT INFORMATION (Continued)
The Year Ended December 31,
Revenue
Selling, marketing and administration
Research and development
Forgiveness of Covid-19 government support loans
Interest expense
Gain on contribution of intellectual to joint venture
Other income, including interest
Share of loss in joint venture
$
$
$
$
Asia
209,100
(1,563,829)
(4,849,553)
-
(35,043)
2,587,500
-
(1,142,249)
US
Canada
Consolidated
$
$
-
(5,460,917)
(2,679,452)
186,747
(32,632)
-
-
-
$
$
-
(2,030,784)
(636,123)
-
(296,944)
-
75,084
-
209,100
(9,055,530)
(8,165,128)
186,747
(364,619)
2,587,500
75,084
(1,142,249)
Net loss
$
(4,794,074)
$
(7,986,254)
$
(2,888,767)
$
(15,669,095)
18. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s financial instruments consist of cash and cash equivalents, short-term investments, covid-19 government support loans, derivative warrant
liability and accounts payable and accrued liabilities. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant
interest risk arising from these financial instruments. The Company estimates that carrying value of these instruments approximates fair value due to their
short term nature.
The Company has classified financial assets and (liabilities) as follows at December 31:
Financial assets, measured at amortized cost:
Cash and cash equivalents
Short-term investments
Accounts receivable, measured at amortized cost:
Accounts receivable
Other liabilities, measured at amortized cost:
Accounts payable and accrued liabilities
Covid-19 government support loans
Contract liabilities
Fair value through profit or loss (FVTPL):
Derivative warrant liability
Exchange Rate Risk
2023
2022
2021
$
$
$
$
$
$
$
3,019,069
-
-
(2,301,457)
(30,200)
-
(1,002,264)
$
$
$
$
$
$
$
9,229,845
-
62,842
(3,362,430)
(29,520)
(274,192)
-
$
$
$
$
$
$
$
14,941,775
6,366,828
-
(1,791,222)
(31,660)
-
-
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 not considered sufficient to fund operating
and investing activities beyond one year from the date of these consolidated financial statements. The Company may, however, need to seek additional
financing in the future.
Page 27
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
19. CAPITAL MANAGEMENT
In the management of capital, the Company includes shareholders’ equity (excluding accumulated other compehensive loss and deficit) and cash. The
components of capital on December 31, 2023 were:
Cash and cash equivalents
Shareholders’ equity
$
$
3,019,069
221,823,499
The Company’s objective in managing capital is to ensure that financial flexibility is present to increase shareholder value through growth and responding to
changes in economic and/or market conditions; to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business and to safeguard the Company’s ability to obtain financing should the need arise.
In maintaining its capital, the Company has a strict investment policy which includes investing its surplus capital only in highly liquid, highly rated financial
instruments.
The Company reviews its capital management approach on an ongoing basis.
20. EXPENSES
Research and development costs can be analysed as follows:
Wages and benefits
Subcontract fees
Stock-based compensation
Supplies
Selling, marketing and administration costs can be analysed as follows:
Stock-based compensation
Wages and benefits
Professional fees
General expenses
Depreciation and amortization
Rent and facility costs
21. REVENUE
Disaggregated Revenues
2023
2022
2021
$
4,298,207
1,864,122
1,539,235
2,376,366
$
4,267,937
2,946,729
2,054,187
1,477,890
3,270,528
1,516,343
1,769,951
1,608,306
10,077,930
$
10,746,743
$
8,165,128
$
2,662,209
2,649,770
1,744,771
1,681,899
1,922,140
134,366
$
2,382,417
2,648,862
1,173,743
1,860,762
1,293,158
157,329
2,764,419
2,643,451
1,155,316
1,304,690
1,100,522
87,130
10,795,155
$
9,516,271
$
9,055,528
$
$
$
$
The Company disaggregates revenue by timing of revenue recognition, that is, at a point in time and revenue over time. During the year ended December
31, 2023, the Company recognized $465,777 (2022 - $552,748, 2021 - $209,100) from non-recurring engineering services. The revenue is recognized over
time.
Page 28
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
22. INCOME TAXES
The following table reconciles the expected income tax recovery at the Canadian statutory income tax rate of 26.5% for 2023 (2022 - 26.5%, 2021 - 26.5%)
to the amounts recognized in operations.
For the Year Ended December 31,
2023
2022
2021
Net loss before taxes
$
(20,267,365)
$
(21,036,690)
$
(15,669,093)
Expected current income tax recovery
5,370,852
5,574,723
4,152,310
Adjustments to income tax recovery:
For the Year Ended December 31,
Amounts not deductible for tax purposes
Other non-deductible items
Other deductible items
Non-taxable gain (loss)
Non-taxable loan forgiveness
Deferred R&D expenses, net
Foreign tax differential
Unrecognized tax recovered (losses)
Income tax recovery recognized
The following table reflects future income tax assets at December 31:
Resource assets
Gross unamortized share issue costs
Capitalized S.174 expenses
Canadian non-capital losses
Canadian capital losses
US non-capital losses
Singapore non-capital losses
Unrecognized deferred tax assets
Deferred income tax assets recognized
$
$
$
$
2023
2022
2021
$
(1,113,000)
(69,000)
191,000
-
-
(459,000)
(905,538)
(3,015,314)
$
(1,177,000)
(66,000)
161,000
(388,000)
-
(627,000)
(828,000)
(2,649,723)
(1,201,600)
(111,000)
157,000
383,000
49,000
-
(508,000)
(2,920,710)
-
$
-
$
-
2023
2022
2021
$
1,024,271
810,000
5,900,000
22,585,000
5,300,000
95,300,000
19,300,000
$
1,024,271
1,081,250
2,368,000
21,955,000
5,156,000
93,000,000
13,800,000
1,024,271
1,114,604
-
21,404,000
5,565,125
86,073,000
9,180,000
150,219,271
(150,219,271)
138,384,521
(138,384,521)
124,361,000
(124,361,000)
-
$
-
$
-
Page 29
POET TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
23. COVID-19 GOVERNMENT SUPPORT LOANS
In March 2020, the United States Congress passed the Paycheck Protection Program (“PPP”), authorizing loans to small businesses for use in paying
employees that they continue to employ throughout the COVID-19 pandemic and for rent, utilities and interest on mortgages. Loans obtained through the
PPP are eligible to be forgiven as long as the proceeds are used for qualifying purposes and certain other conditions are met. On May 3, 2020, the Company
received a loan in the amount of $186,747 through the PPP. During the year, the Company received notice from the Small Business Administration of
Washington, DC that the PPP loan was forgiven in full. The forgiven loan was reclassified to the consolidated statements of operations and deficit and
recognized as income for the year ended December 31, 2021.
On April 9, 2020, the Canadian government launched the Canada Emergency Business Account (“CEBA”) which is intended to support businesses during
COVID-19 by providing interest free financing of up to $30,200 (CA$40,000) until December 31, 2023. If 75% of the loan is repaid by December 31, 2023
(extended to January 18, 2024), the loan recipient will be eligible for a loan forgiveness of the remaining 25% of the amount loaned. On April 15, 2020, the
Company received a loan in the amount of $30,200 through the CEBA. If the loan has not been repaid by January 18, 2024, the outstanding amount will be
automatically extended for an additional two years at 5% interest per annum payable monthly and maturing on December 31, 2025. The Company repaid
75% of the amount borrowed on January 15, 2024.
24. SUBSEQUENT EVENTS
On January 24, 2024, the Company raised gross proceeds of CA$6,219,667 (US$4,607,161) from the issuance of 5,098,088 units through a private
placement financing facility (the “Offering”) at an offering price CA$1.22 (US$0.90). Each unit consisted of one common share of the Company and one
common share purchase warrant to purchase up to 5,098,088 common shares for a period of five (5) years from the date of closing at a price of CA$1.52
(US$1.12) per share. The Company paid finder’s fees of CA$43,829 (US$32,466) to certain parties that were instrumental of introducing some of the
subscribers to the Company.
Directors, management and employees acquired 459,522 units of the offering for gross proceeds of CA$560,617 (US$415,272).
Page 30
ex4-16.htm
EX-4.16
1 of 40
03/28/2024 04:02 PM
Exhibit 4.16
POET TEchnologies inc.
(THE “CORPORATION”)
OMNIBUS INCENTIVE PLAN
ARTICLE 1 INTERPRETATION
1.1
1.2
Definitions
Interpretation
TABLE OF CONTENTS
ARTICLE 2 PURPOSE AND ADMINISTRATION OF THE PLAN; GRANTING OF AWARDS
2.1
2.2
2.3
2.4
2.5
2.6
Purpose of the Plan
Implementation and Administration of the Plan
Participation in this Plan
Shares Subject to the Plan
Limits with Respect to Insiders, Individual Limits, Annual Grant Limits, Consultant Limits and Investor Relations Service Providers
Granting of Awards
ARTICLE 3 OPTIONS
3.1
3.2
3.3
3.4
3.5
3.6
3.7
Nature of Options
Option Awards
Option Price
Option Term
Exercise of Options
Method of Exercise and Payment of Purchase Price
Option Agreements
ARTICLE 4 RESTRICTED AND PERFORMANCE SHARE UNITS
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Nature of Share Units
Share Unit Awards
Share Unit Agreements
Vesting of Share Units
Redemption / Settlement of Share Units
Determination of Amounts
Award of Dividend Equivalents
ARTICLE 5 DEFERRED SHARE UNITS
5.1
5.2
5.3
5.4
5.5
5.6
Nature of Deferred Share Units
Market Fluctuation
DSU Awards
DSU Agreements
Vesting of DSUs
Redemption / Settlement of DSUs
ARTICLE 6 GENERAL CONDITIONS
6.1
6.2
6.3
General Conditions Applicable to Awards
General Conditions Applicable to Options
General Conditions Applicable to Share Units
ARTICLE 7 ADJUSTMENTS AND AMENDMENTS
7.1
7.2
7.3
Adjustment to Shares Subject to Outstanding Awards
Change of Control
Amendment or Discontinuance of the Plan
ARTICLE 8 MISCELLANEOUS
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
8.10
Use of an Administrative Agent and Trustee
Tax Withholding
Clawback
Securities Law Compliance
Reorganization of the Corporation
Quotation of Shares
No Fractional Shares
Governing Laws
Severability
Section 409A of the Tax Code
1
1
6
7
7
7
8
8
9
10
11
11
11
11
11
11
12
13
13
13
13
14
14
14
16
16
17
17
17
17
17
18
18
19
19
20
21
22
22
23
23
25
25
25
25
26
26
26
27
27
27
27
POET TECHNOLOGIES INC.
OMNIBUS INCENTIVE PLAN
POET Technologies Inc. (the “Corporation”) hereby establishes an omnibus incentive plan for certain qualified directors, executive officers, employees or
Consultants (as defined herein) of the Corporation or any of its Subsidiaries (as defined herein).
ARTICLE 1
INTERPRETATION
1.1
Definitions
Where used herein or in any amendments hereto or in any communication required or permitted to be given hereunder, the following terms shall have the following
meanings, respectively, unless the context otherwise requires:
“Account” means an account maintained for each Participant on the books of the Corporation which will be credited with Awards in accordance with the terms of
this Plan;
“Affiliates” has the meaning ascribed thereto in the TSXV Corporate Finance Policies;
“Associate” has the meaning ascribed thereto in the TSXV Corporate Finance Policies;
“Award” means any of an Option, Share Unit or DSU granted to a Participant pursuant to the terms of the Plan;
“Award Agreement” means any of an Option Agreement, Share Unit Agreement or DSU Agreement governing an Option, Share Unit or DSU, respectively, granted
to a Participant;
“Blackout Period” means the period during which Participants cannot trade securities of the Corporation pursuant to the Corporation’s policy respecting restrictions
on trading which is in effect at that time (which, for greater certainty, does not include the period during which a cease trade order is in effect to which the
Corporation or in respect of an insider, that insider, is subject);
“Blackout Period Expiry Date” means the date on which a Blackout Period expires;
“Board” has the meaning ascribed thereto in Section 2.2(1) hereof;
“Business Day” means a day other than a Saturday, Sunday or statutory holiday, when banks are generally open for business in Toronto, Ontario for the transaction
of banking business;
“Cashless Exercise Right” has the meaning ascribed thereto in Section 3.6(3) hereof;
“Cause” has the meaning ascribed thereto in Section 6.2(1) hereof;
“Change of Control” means, unless the Board determines otherwise, the happening, in a single transaction or in a series of related transactions, of any of the
following events:
(a)
any transaction (other than a transaction described in clause (c) below) pursuant to which any Person or group of Persons acting jointly or in
concert acquires the direct or indirect beneficial ownership of securities of the Corporation representing 50% or more of the aggregate voting power
of all of the Corporation’s then issued and outstanding securities entitled to vote in the election of directors of the Corporation;
- 2 -
(b)
(c)
(d)
(e)
there is consummated an arrangement, amalgamation, merger, consolidation or similar transaction involving (directly or indirectly) the Corporation
and, immediately after the consummation of such arrangement, amalgamation, merger, consolidation or similar transaction, the shareholders of the
Corporation immediately prior thereto do not beneficially own, directly or indirectly, either (A) outstanding voting securities representing more
than 50% of the combined outstanding voting power of the surviving or resulting entity in such amalgamation, merger, consolidation or similar
transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving or resulting entity in such arrangement,
amalgamation, merger, consolidation or similar transaction, in each case in substantially the same proportions as their beneficial ownership of the
outstanding voting securities of the Corporation immediately prior to such transaction;
the sale, lease, exchange, license or other disposition, in a single transaction or a series of related transactions, of assets, rights or properties of the
Corporation or any of its subsidiaries which have an aggregate book value greater than 50% of the book value of the assets, rights and properties of
the Corporation and its Subsidiaries on a consolidated basis to any other person or entity, other than a disposition to a wholly-owned Subsidiary of
the Corporation in the course of a reorganization of the assets of the Corporation and its wholly-owned Subsidiaries;
the passing of a resolution by the Board or shareholders of the Corporation to substantially liquidate the assets of the Corporation or wind up the
Corporation’s business or significantly rearrange its affairs in one or more transactions or series of transactions or the commencement of
proceedings for such a liquidation, winding-up or re-arrangement (except where such re-arrangement is part of a bona fide reorganization of the
Corporation in circumstances where the business of the Corporation is continued and the shareholdings remain substantially the same following the
re-arrangement); or
individuals who, on the Effective Date, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority
of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was
approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of
this Plan, be considered as a member of the Incumbent Board;
“Charitable Option” means any Option granted by the Corporation to an Eligible Charitable Organization;
“Consultant” means in relation to the Corporation, an individual (other than a Director, Officer or Employee of the Corporation or of any of its Subsidiaries) or a
company that:
(a)
(b)
is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Corporation or to any of its
Subsidiaries, other than services provided in relation to a distribution;
provides the services under a written contract between the Corporation or any of its Subsidiaries and the individual or company, as the case may be;
and
- 3 -
(c)
in the reasonable opinion of the Corporation, spends or will spend a significant amount of time and attention on the affairs and business of the
Corporation or of any of its Subsidiaries;
“Consulting Agreement” means, with respect to any Participant, any written consulting agreement between the Corporation or a Subsidiary and such Participant;
“Corporation” means POET Technologies Inc., a corporation existing under the Business Corporations Act (Ontario) as amended from time to time;
“Designated Broker” means a broker who is independent of, and deals at arm’s length with, the Corporation and its Subsidiaries, and is designated by the
Corporation or its Subsidiaries;
“Dividend Equivalent” means additional Share Units credited to a Participant’s Account as a dividend equivalent pursuant to Section 4.6(1);
“Director” means a director (as defined under Securities Laws) of the Corporation or of any of its Subsidiaries;
“DSU” has the meaning ascribed thereto in Section 5.1 hereof;
“DSU Agreement” means a written agreement between the Corporation and a Participant evidencing the grant of DSUs and the terms and conditions thereof, a form
of which is attached hereto as Exhibit “D”;
“DSU Redemption Date” means, with respect to a particular DSU, the date on which such DSU is redeemed in accordance with the provisions of this Plan;
“Effective Date” means the effective date of this Plan;
“Eligible Charitable Organization” has the meaning ascribed thereto in the TSXV Corporate Finance Policies;
“Eligibility Date” means the effective date on which a Participant becomes eligible to receive long-term disability benefits (provided that, for greater certainty, such
effective date shall be confirmed in writing to the Corporation by the insurance company providing such long-term disability benefits);
“Eligible Participants” means: (i) in respect of a grant of Options, any Director, Officer, Employee, Consultant or Investor Relations Service Provider of the
Corporation or any of its Subsidiaries; (ii) in respect of a grant of Share Units, any Director, Officer, Employee, or Consultant of the Corporation or any of its
Subsidiaries; and (iii) in respect of a grant of DSUs, any Director, Officer or Employee of the Corporation or any of its Subsidiaries;
“Employee” means an individual who is considered an employee of the Corporation or its Subsidiary under the Tax Act;
“Employment Agreement” means, with respect to any Participant, any written employment agreement between the Corporation or a Subsidiary and such
Participant;
“Exchange Hold Period” has the meaning ascribed thereto in the TSXV Corporate Finance Policies;
“Exchanges” means the TSXV, NASDAQ or such other stock exchange or quotation system upon which the Shares may be listed or posted for trading from time to
time;
- 4 -
“Exercise Notice” means a notice in writing signed by a Participant and stating the Participant’s intention to exercise a particular Option, if applicable;
“Existing Option Plan” means the fixed stock option plan of the Corporation, which was last approved by shareholders of the Corporation on August 27, 2021;
“Existing Option” means an option grant made under the Existing Option Plan;
“Grant Agreement” means an agreement evidencing the grant to a Participant of an Award, including an Option Agreement, a Share Unit Agreement, a DSU
Agreement, an Employment Agreement or a Consulting Agreement;
“Insider” means a “reporting insider” as defined in National Instrument 55-104 – Insider Reporting Requirements and Exemptions and includes Associates and
Affiliates (as such term is defined under the policies of the TSXV) of such “reporting insider”;
“Market Value” means at any date when the market value of Shares is to be determined, (i) if the Shares are listed on the Exchanges, the closing price of the Shares
on the Exchanges for the Trading Session on the day prior to the relevant time as it relates to an Award; (ii) if the Shares are not listed on the Exchanges, then as
calculated in paragraph (i) by reference to the price on any other stock exchange on which the Shares are listed (if more than one, then using the exchange on which a
majority of trading in the Shares occurs); or (iii) if the Shares are not listed on any stock exchange, the value as is determined solely by the Board, acting reasonably
and in good faith and such determination shall be conclusive and binding on all Persons;
“Net Exercise Right” has the meaning ascribed thereto in Section 3.6(4) hereof;
“Officer” means an officer (as defined under Securities Laws) of the Corporation or of any of its Subsidiaries;
“Option” means an option granted by the Corporation to a Participant entitling such Participant to acquire a designated number of Shares from treasury at the Option
Price, but subject to the provisions hereof;
“Option Agreement” means a written agreement between the Corporation and a Participant evidencing the grant of Options and the terms and conditions thereof, a
form of which is attached hereto as Exhibit “A”;
“Option Price” has the meaning ascribed thereto in Section 3.2 hereof;
“Option Term” has the meaning ascribed thereto in Section 3.4 hereof;
“Outstanding Issue” means the number of Shares that are outstanding as at a specified time, on a non- diluted basis;
“Participants” means Eligible Participants that are granted Awards under the Plan;
“Performance Criteria” means specified criteria, other than the mere continuation of employment or the mere passage of time, the satisfaction of which is a
condition for the grant, exercisability, vesting or full enjoyment of an Option or Share Unit.
“Performance Period” means the period determined by the Board at the time any Option or Share Unit is granted or at any time thereafter during which any
Performance Criteria and any other vesting conditions specified by the Board with respect to such Option or Share Unit are to be measured;
- 5 -
“Person” means an individual, corporation, company, cooperative, partnership, trust, unincorporated association, entity with juridical personality or governmental
authority or body, and pronouns which refer to a Person shall have a similarly extended meaning;
“Plan” means this POET Technologies Inc. Omnibus Incentive Plan, including the exhibits hereto and any amendments or supplements hereto made after the
effective date hereof;
“Restriction Period” means the period determined by the Board pursuant to Section 4.4 hereof;
“Securities Laws” means securities legislation, securities regulation and securities rules, as amended, and the policies, notices, instruments and blanket orders in
force from time to time that are applicable to the Corporation;
“Shares” means the common shares in the share capital of the Corporation;
“Share Compensation Arrangement” means a stock option, stock option plan, employee stock purchase plan, long-term incentive plan or any other compensation
or incentive mechanism involving the issuance or potential issuance of Shares from treasury, including a share purchase from treasury by a full-time Employee,
Director, Officer, Insider, or Consultant which is financially assisted by the Corporation or a Subsidiary by way of a loan, guarantee or otherwise;
“Share Unit” means a right awarded to a Participant to receive a payment in the form of Shares as provided in Article 4 hereof and subject to the terms and
conditions of this Plan;
“Share Unit Agreement” means a written agreement between the Corporation and a Participant evidencing the grant of Share Units and the terms and conditions
thereof, a form of which is attached hereto as Exhibit “C”;
“Subsidiary” means a corporation, company or partnership that is controlled, directly or indirectly, by the Corporation;
“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder, as amended from time to time;
“Tax Obligations” means the aggregate amount of all withholdings, source deductions and similar amounts required under any governing tax law with respect to
either (i) the redemption of a Share Unit, or (ii) the exercise or cancellation of an Option (including pursuant to a Cashless Exercise Right or Net Exercise Right), as
the context requires, including amounts funded by the Corporation on behalf of previous withholding tax, source deduction or similar payments and owed by the
Participant to the Corporation, as applicable (which Tax Obligations are to be determined by the Corporation in its sole discretion);
“Termination Date” means (i) in the event of a Participant’s resignation, the date on which such Participant ceases to be a Director, Officer, Employee or Consultant
of the Corporation or one of its Subsidiaries, (ii) in the event of the termination of the Participant’s employment, or position as Director, or Officer of the Corporation
or a Subsidiary, or Consultant, the effective date of the termination as specified in the notice of termination provided to the Participant by the Corporation or the
Subsidiary, as the case may be, and (iii) in the event of a Participant’s death, on the date of death;
“Termination of Service” means that a Participant has ceased to be an Eligible Participant;
“Trading Session” means a trading session on a day which the applicable Exchange is open for trading;
“TSXV” means the TSX Venture Exchange;
“US Tax Code” means the United States’ Internal Revenue Code of 1986, as amended;
- 6 -
“US Taxpayer” means a Participant who is a US citizen, US permanent resident or other person who is subject to taxation on their income under the US Tax Code;
“Vested Awards” has the meaning described thereto in Section 6.2(5) hereof; and
“VWAP” means the volume weighted average trading price of the Shares on the Exchanges calculated by dividing the total value by the total volume of such
securities traded for the five trading days immediately preceding the reference date or if the Shares are not listed on any stock exchange, “VWAP” of Shares means
the VWAP on the over-the-counter market determined by dividing the aggregate sale price of the Shares sold by the total number of such Shares so sold on the
applicable market for the five days immediately preceding the reference date.
1.2
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Interpretation
Whenever the Board is to exercise discretion or authority in the administration of the terms and conditions of this Plan, the term “discretion” or “authority”
means the sole and absolute discretion of the Board.
The provision of a table of contents, the division of this Plan into Articles, Sections and other subdivisions and the insertion of headings are for convenient
reference only and do not affect the interpretation of this Plan.
In this Plan, words importing the singular shall include the plural, and vice versa and words importing any gender include any other gender.
The words “including”, “includes” and “include” and any derivatives of such words mean “including (or includes or include) without limitation”. As used
herein, the expressions “Article”, “Section” and other subdivision followed by a number, mean and refer to the specified Article, Section or other
subdivision of this Plan, respectively.
Unless otherwise specified in the Participant’s Grant Agreement, all references to money amounts are to Canadian currency, and where any amount is
required to be converted to or from a currency other than Canadian currency, such conversion shall be based on the exchange rate as quoted by the Bank of
Canada on the particular date.
For purposes of this Plan, the legal representatives of a Participant shall only include the administrator, the executor or the liquidator of the Participant’s
estate or will.
If any action may be taken within, or any right or obligation is to expire at the end of, a period of days under this Plan, then the first day of the period is not
counted, but the day of its expiry is counted.
- 7 -
ARTICLE 2
PURPOSE AND ADMINISTRATION OF THE PLAN; GRANTING OF AWARDS
2.1
Purpose of the Plan
The purpose of the Plan is to permit the Corporation to grant Awards to Eligible Participants, subject to certain conditions as hereinafter set forth, for the following
purposes:
(a)
(b)
(c)
(d)
to increase the interest in the Corporation’s welfare of those Eligible Participants, who share responsibility for the management, growth and
protection of the business of the Corporation or a Subsidiary;
to provide an incentive to such Eligible Participants to continue their services for the Corporation or a Subsidiary and to encourage such Eligible
Participants whose skills, performance and loyalty to the objectives and interests of the Corporation or a Subsidiary are necessary or essential to its
success, image, reputation or activities;
to reward Participants for their performance of services while working for the Corporation or a Subsidiary; and
to provide a means through which the Corporation or a Subsidiary may attract and retain able Persons to enter its employment or service.
Implementation and Administration of the Plan
The Plan shall be administered and interpreted by the board of directors of the Corporation (the “Board”) or, if the Board by resolution so decides, by a
committee or plan administrator appointed by the Board. If such committee or plan administrator is appointed for this purpose, all references to the “Board”
herein will be deemed references to such committee or plan administrator. Nothing contained herein shall prevent the Board from adopting other or
additional Share Compensation Arrangements or other compensation arrangements, subject to any required approval.
Subject to Article 7 and any applicable rules of an Exchange, the Board may, from time to time, as it may deem expedient, adopt, amend and rescind rules
and regulations or vary the terms of this Plan and/or any Award hereunder for carrying out the provisions and purposes of the Plan and/or to address tax or
other requirements of any applicable jurisdiction.
Subject to the provisions of this Plan, the Board is authorized, in its sole discretion, to make such determinations under, and such interpretations of, and take
such steps and actions in connection with, the proper administration and operations of the Plan as it may deem necessary or advisable. The Board may
delegate to officers or managers of the Corporation, or committees thereof, the authority, subject to such terms as the Board shall determine, to perform such
functions, in whole or in part. Any such delegation by the Board may be revoked at any time at the Board’s sole discretion. The interpretation,
administration, construction and application of the Plan and any provisions hereof made by the Board, or by any officer, manager, committee or any other
Person to which the Board delegated authority to perform such functions, shall be final and binding on the Corporation, its Subsidiaries and all Eligible
Participants.
No member of the Board or any Person acting pursuant to authority delegated by the Board hereunder shall be liable for any action or determination taken or
made in good faith in the administration, interpretation, construction or application of the Plan or any Award granted hereunder. Members of the Board or
and any person acting at the direction or on behalf of the Board, shall, to the extent permitted by law, be fully indemnified and protected by the Corporation
with respect to any such action or determination.
2.2
(1)
(2)
(3)
(4)
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(5)
2.3
(1)
(2)
(3)
2.4
(1)
(2)
The Plan shall not in any way fetter, limit, obligate, restrict or constrain the Board with regard to the allotment or issuance of any Shares or any other
securities in the capital of the Corporation. For greater clarity, the Corporation shall not by virtue of this Plan be in any way restricted from declaring and
paying stock dividends, repurchasing Shares or varying or amending its share capital or corporate structure.
Participation in this Plan
The Corporation makes no representation or warranty as to the future market value of the Shares or with respect to any income tax matters affecting any
Participant resulting from the grant of an Award, the exercise or cancellation of an Option, the redemption of a Share Unit or transactions in the Shares or
otherwise in respect of participation under the Plan. Neither the Corporation, nor any of its directors, officers, employees, shareholders or agents shall be
liable for anything done or omitted to be done by such Person or any other Person with respect to the price, time, quantity or other conditions and
circumstances of the issuance of Shares hereunder, or in any other manner related to the Plan. For greater certainty, no amount will be paid to, or in respect
of, a Participant (or a Person with whom the Participant does not deal at arm’s length) under the Plan or pursuant to any other arrangement, and no
additional Awards will be granted to such Participant (or Person with whom the Participant does not deal at arm’s length) to compensate for a downward
fluctuation in the price of the Shares, nor will any other form of benefit be conferred upon, or in respect of, a Participant (or a Person with whom the
Participant does not deal at arm’s length) for such purpose. The Corporation and its Subsidiaries do not assume and shall not have responsibility for the
income or other tax consequences resulting to any Participant and each Participant is advised to consult with his or her own tax advisors.
Participants (and their legal representatives) shall have no legal or equitable right, claim, or interest in any specific property or asset of the Corporation or
any of its Subsidiaries. No asset of the Corporation or any of its Subsidiaries shall be held in any way as collateral security for the fulfillment of the
obligations of the Corporation or any of its Subsidiaries under this Plan. Unless otherwise determined by the Board, this Plan shall be unfunded. To the
extent any Participant or his or her estate holds any rights by virtue of a grant of Awards under this Plan, such rights (unless otherwise determined by the
Board) shall be no greater than the rights of an unsecured creditor of the Corporation.
Unless otherwise determined by the Board, the Corporation shall not offer financial assistance to any Participant in regards to the exercise of any Award
granted under this Plan.
Shares Subject to the Plan
Subject to adjustment pursuant to Article 7 hereof, the securities that may be acquired by Participants pursuant to Awards under this Plan shall consist of
authorized but unissued Shares.
The maximum number of Shares reserved for issuance, in the aggregate, under this Plan shall be [●] Shares and, for greater certainty, shall not exceed 20%
of the Outstanding Issue as at the date of implementation of the Plan by the Corporation, less any Shares underlying Options granted under the Existing
Option Plan or other Share Compensation Arrangement of the Corporation, if any. For the purposes of calculating the number of Shares reserved for
issuance under this Plan, each Share subject to a Share Unit shall be counted as reserving one Share under the Plan, each Share subject to a DSU shall be
counted as reserving one Share under the Plan and each Share subject to an Option shall be counted as reserving one Share under the Plan.
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(3)
(4)
(5)
(6)
2.5
(1)
(2)
(3)
(4)
No Award that can be settled in Shares issued from treasury may be granted if such grant would have the effect of causing the total number of Shares
available for issuance under this Plan to exceed the above noted total numbers of Shares reserved for issuance pursuant to the settlement of Awards.
No new grants of Options will be made under the Existing Option Plan.
If an outstanding Award or Existing Option (or portion thereof) expires or is forfeited, surrendered, cancelled or otherwise terminated for any reason without
having been exercised or settled in full, or if Shares acquired pursuant to an Award or Existing Option, as applicable, subject to forfeiture are forfeited, the
Shares covered by such Award or Existing Option, if any, will again be available for issuance under the Plan. Shares will not be deemed to have been issued
pursuant to the Plan with respect to any portion of an Award that is settled in cash. For greater certainty, any Shares acquired by a Participant under an
Award or an Existing Option shall not continue to be issuable under the Plan.
All Awards are subject to applicable limitations on sale or resale under Securities Laws and the policies of the Exchanges. If an Exchange Hold Period is
applicable, all such Options and any Shares issued thereunder exercised prior to the expiry of the Exchange Hold Period must be legended with the
Exchange Hold Period commencing on the date the Options were granted.
Limits with Respect to Insiders, Individual Limits, Annual Grant Limits, Consultant Limits and Investor Relations Service Providers
The maximum number of Shares that are issuable to Insiders, at any time pursuant to Awards granted under the Plan, or when combined with all of the
Corporation’s other Share Compensation Arrangement (including the Existing Option Plan), cannot exceed ten percent (10%) of the Corporation’s total
issued and outstanding Shares.
The maximum number of Shares that are issuable to Insiders, within any 12 month period, pursuant to Awards granted under the Plan, or when combined
with all of the Corporation’s other Share Compensation Arrangement (including the Existing Option Plan), cannot exceed ten percent (10%) of the
Corporation’s total issued and outstanding Shares.
The maximum number of Shares that are issuable pursuant to all Awards granted under the Plan, or when combined with all the Corporation’s other Share
Compensation Arrangement (including the Existing Option Plan), granted or issued in any 12 month period to any one Person, cannot exceed five percent
(5%) of the Outstanding Issue as of the date of grant or issue, unless the requisite disinterested shareholder approval has been obtained by the Corporation in
accordance with the policies of the Exchanges.
The maximum number of Shares that are issuable to any one Consultant, pursuant to all Awards granted under the Plan, or when combined with all the
Corporation’s other Share Compensation Arrangement (including the Existing Option Plan), cannot exceed two percent (2%) of the Outstanding Issue as of
the date of grant or issue, unless the requisite disinterested shareholder approval has been obtained by the Corporation in accordance with the policies of the
Exchanges.
(5)
The maximum number of Shares that are issuable to all Investor Relations Service Providers, pursuant to Options granted under the Plan or when combined
with all the Corporation’s other Share Compensation Arrangement (including the Existing Option Plan), cannot exceed two percent (2%) of the Outstanding
Issue as of the date of grant or issue.
(6)
Options granted to any Investor Relations Service Provider must vest in stages over a period of not less than 12 months such that:
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(a)
(b)
(c)
(d)
no more than ¼ of the Options vest no sooner than three months after the Options were granted;
no more than another ¼ of the Options vest no sooner than six months after the Options were granted;
no more than another ¼ of the Options vest no sooner than nine months after the Options were granted; and
the remainder of the Options vest no sooner than 12 months after the Options were granted.
(7)
The maximum number of Shares that are issuable to Eligible Charitable Organizations, pursuant to all outstanding Charitable Options must not exceed one
percent (1%) of the Outstanding Issue as of the date of grant.
(8)
A Charitable Option must expire on or before the earlier of:
(a)
(b)
the date that is 10 years from the date of grant of the Charitable Option; and
the 90th day following the date that the holder of the Charitable Option ceases to be an Eligible Charitable Organization.
(9)
Any Award granted pursuant to the Plan, or securities issued under the Existing Option Plan or any other Share Compensation Arrangement, prior to a
Participant becoming an Insider, shall be excluded from the purposes of the limits set out in Section 2.5(1) and Section 2.5(2).
2.6
Granting of Awards
Any Award granted under the Plan shall be subject to the requirement that, if at any time counsel to the Corporation shall determine that the listing, registration or
qualification of the Shares subject to such Award, if applicable, upon any stock exchange or under any law or regulation of any jurisdiction, or the consent or
approval of any stock exchange or any governmental or regulatory body, is necessary as a condition of, or in connection with, the grant of such Awards or exercise of
any Option or the issuance or purchase of Shares thereunder, if applicable, such Award may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board. Nothing herein shall be deemed to require
the Corporation to apply for or to obtain such listing, registration, qualification, consent or approval.
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ARTICLE 3
OPTIONS
3.1
Nature of Options
An Option is an option granted by the Corporation to a Participant entitling such Participant to acquire a designated number of Shares from treasury at the Option
Price, but subject to the provisions hereof. For the avoidance of doubt, no Dividend Equivalents shall be granted in connection with an Option.
3.2
Option Awards
Subject to the provisions set forth in this Plan and any shareholder or regulatory approval which may be required, the Board shall, from time to time by resolution, in
its sole discretion, (i) designate the Eligible Participants who may receive Options under the Plan, (ii) fix the number of Options, if any, to be granted to each Eligible
Participant and the date or dates on which such Options shall be granted, (iii) determine the price per Share to be payable upon the exercise of each such Option (the
“Option Price”) and the relevant vesting provisions (including Performance Criteria, if applicable) and the Option Term, the whole subject to the terms and
conditions prescribed in this Plan or in any Option Agreement, and any applicable rules of an Exchange.
3.3
Option Price
The Option Price for Shares that are the subject of any Option shall be determined and approved by the Board when such Option is granted, but shall not be less than
the Market Value of such Shares at the time of the grant.
3.4
Option Term
The Board shall determine, at the time of granting the particular Option, the period during which the Option is exercisable, which shall not be more than ten (10)
years from the date the Option is granted (“Option Term”). Unless otherwise determined by the Board, all unexercised Options shall be cancelled at the expiry of
such Options. Notwithstanding the expiration provisions hereof, if the date on which an Option Term expires falls within a Blackout Period or within nine Business
Days after a Blackout Period Expiry Date, the expiration date of the Option will be the date that is ten Business Days after the Blackout Period Expiry Date. The
Blackout Period must expire following the general disclosure of the undisclosed material information; provided that if an additional Blackout Period is subsequently
imposed by the Corporation during the ten Business Days after the initial Blackout Period, then Blackout Period Expiry Date shall be such the tenth trading day
following the end of the last imposed Blackout Period.
3.5
Exercise of Options
Prior to its expiration or earlier termination in accordance with the Plan, each Option shall be exercisable at such time or times and/or pursuant to the achievement of
such Performance Criteria and/or other vesting conditions as the Board at the time of granting the particular Option, may determine in its sole discretion. For greater
certainty, any exercise of Options by a Participant shall be made in accordance with the Corporation’s insider trading policy. The Corporation shall not issue any
Shares to a Participant prior to the Corporation being satisfied in its sole discretion that all applicable taxes under Section 8.2 will be timely withheld or received and
remitted to the appropriate taxation authorities in respect of any particular Participant and any particular Option.
3.6
(1)
Method of Exercise and Payment of Purchase Price
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Subject to the provisions of the Plan, an Option granted under the Plan shall be exercisable (from time to time as provided in Section 3.5 hereof) by the
Participant (or by the liquidator, executor or administrator, as the case may be, of the estate of the Participant) by delivering a fully completed Exercise
Notice, a form of which is attached hereto as Exhibit “B”, to the Corporation at its registered office to the attention of the Chief Financial Officer of the
Corporation (or the individual that the Chief Financial Officer of the Corporation may from time to time designate) or give notice in such other manner as
the Corporation may from time to time designate, which notice shall specify the number of Shares in respect of which the Option is being exercised and
shall be accompanied by full payment, by cash, certified cheque, bank draft or any other form of payment deemed acceptable by the Board of the purchase
price for the number of Shares specified therein and, if required by Section 8.2, the amount necessary to satisfy any taxes.
(2)
Upon the exercise, the Corporation shall, as soon as practicable after such exercise but no later than ten (10) Business Days following such exercise,
forthwith cause the transfer agent and registrar of the Shares either to:
(a)
(b)
deliver to the Participant (or to the liquidator, executor or administrator, as the case may be, of the estate of the Participant) a certificate in the name
of the Participant representing in the aggregate such number of Shares as the Participant (or to the liquidator, executor or administrator, as the case
may be, of the estate of the Participant) shall have then paid for and as are specified in such Exercise Notice; or
in the case of Shares issued in uncertificated form, cause the issuance of the aggregate number of Shares as the Participant (or the liquidator,
executor or administrator, as the case may be, of the estate of the Participant) shall have then paid for and as are specified in such Exercise Notice
to be evidenced by a book position on the register of the shareholders of the Corporation to be maintained by the transfer agent and registrar of the
Shares.
(3)
The Board may, in its discretion and at any time, determine to grant a Participant the alternative right (the “Cashless Exercise Right”), when entitled to
exercise an Option, to elect to deal with such Option on a “cashless exercise” basis, in whole or in part by notice in writing to the Corporation, where the
Corporation has an arrangement with a brokerage firm pursuant to which the following events shall occur in the order specified below:
(a)
(b)
(c)
(d)
the brokerage firm agrees to loan money to the Participant equal to the amount of the Option Price of the Options to be exercised;
the Participant exercises the Option using the proceeds of the loan referred to in (a) above;
the brokerage firm receives such number of Shares underlying the Options to sell, at the direction of and on behalf of the Participant, the aggregate
proceeds of which are sufficient to cover the Option Price in order to permit the Participant to repay the loan made to the Participant; and
the Participant receives the balance of the Shares underlying the Options pursuant to such exercise, or cash proceeds from the sale of the balance of
the Shares underlying the Options.
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(4)
The Board may, in its discretion and at any time, determine to permit a Participant (other than an Investor Relations Service Provider) to, when entitled to
exercise an Option, elect to exercise such Option through a net exercise mechanism (the “Net Exercise Right”), in whole or in part by notice in writing to
the Corporation, such that the Corporation does not receive any cash from the exercise of such Option and the Participant receives, disregarding fractions,
only the number of Shares from the exercise of the Option that is equal to the quotient obtained by dividing: (A) the product of the number of Options being
exercised and the difference between the VWAP of the underlying Shares and the Option Price of the subject Options; by (B) the VWAP of the underlying
Shares.
3.7
Option Agreements
Options shall be evidenced by an Option Agreement, in such form not inconsistent with the Plan as the Board may from time to time determine with reference to the
form attached as Exhibit “A”. The Option Agreement shall contain such terms that may be considered necessary in order that the Option will comply with any
provisions respecting options in the income tax or other laws in force in any country or jurisdiction of which the Participant may from time to time be a resident or
citizen or the rules of any regulatory body having jurisdiction over the Corporation.
4.1
Nature of Share Units
ARTICLE 4
RESTRICTED AND PERFORMANCE SHARE UNITS
A Share Unit is an Award in the nature of a bonus for services rendered, or for future services to be rendered, and that, upon settlement, entitles the recipient
Participant to receive a cash payment equal to the Market Value of a Share or at the discretion of the Corporation (or applicable Subsidiary) one Share or any
combination of cash and Shares as the Corporation (or applicable Subsidiary) in its sole discretion may determine, pursuant and subject to such restrictions and
conditions on vesting as the Board may determine at the time of grant, unless such Share Unit expires prior to being settled. Restrictions and conditions on vesting
conditions may, without limitation, be based on the passage of time during continued employment (or other service relationship), in which case the Award is what is
commonly referred to as a “Restricted Share Unit” or “RSU”, or the achievement of specified Performance Criteria, in which case the Award is what is commonly
referred to as a “Performance Share Unit” or “PSU”, or both.
4.2
(1)
(2)
Share Unit Awards
The Board shall, from time to time by resolution, in its sole discretion, (i) designate the Eligible Participants who may receive Share Units under the Plan,
(ii) fix the number of Share Units, if any, to be granted to each Eligible Participant and the date or dates on which such Share Units shall be granted, (iii)
determine the relevant conditions, vesting provisions (including the applicable Performance Period and Performance Criteria, if any) and Restriction Period
of such Share Units, and (iv) any other terms and conditions applicable to the granted Share Units, which need not be identical and which, without
limitation, may include non-competition provisions, subject to the terms and conditions prescribed in this Plan and in any Share Unit Agreement.
Subject to the vesting and other conditions and provisions in this Plan and in the Share Unit Agreement, each Share Unit awarded to a Participant shall
entitle the Participant to receive on settlement, a cash payment equal to the Market Value of a Share or at the discretion of the Corporation (or applicable
Subsidiary) one Share or any combination of cash and Shares as the Corporation (or applicable Subsidiary) in its sole discretion may determine, in each case
less any applicable withholding taxes. For greater certainty, no Participant shall have the right to demand to be paid in, or receive, Shares in respect of any
Share Unit, and, notwithstanding any discretion exercised by the Corporation (or applicable Subsidiary) to settle any Share Unit, or portion thereof, in the
form of Shares, the Corporation (and each Subsidiary) reserves the right to change such form of payment at any time until the payment is actually made.
4.3
(1)
(2)
Share Unit Agreements
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The grant of a Share Unit by the Board shall be evidenced by a Share Unit Agreement in such form not inconsistent with the Plan as the Board may from
time to time determine with reference to the form attached as Exhibit “C”. Such Share Unit Agreement shall be subject to all applicable terms and
conditions of this Plan and may be subject to any other terms and conditions (including without limitation any recoupment, reimbursement or claw-back
compensation policy as may be adopted by the Board from time to time) which are not inconsistent with this Plan and which the Board deems appropriate
for inclusion in a Share Unit Agreement. The provisions of the various Share Unit Agreements issued under this Plan need not be identical.
The Share Unit Agreement shall contain such terms that the Corporation considers necessary in order that the Share Unit will comply with any provisions
respecting restricted share units in the income tax or other laws in force in any country or jurisdiction of which the Participant may from time to time be a
resident or citizen or the rules of any regulatory body having jurisdiction over the Corporation.
4.4
Vesting of Share Units
The Board shall have sole discretion to determine if any Performance Criteria and/or other vesting conditions with respect to a Share Unit, and as contained in the
Share Unit Agreement governing such Share Unit, have been met and shall communicate to a Participant as soon as reasonably practicable when any such applicable
vesting conditions or Performance Criteria have been satisfied and the Share Units have vested (the “Vesting Date”). Notwithstanding the foregoing, if the date on
which any Share Units have vested falls within a Blackout Period or within nine Business Days after a Blackout Period Expiry Date, the vesting of such Share Units
will be deemed to occur on the date that is ten Business Days after the Blackout Period Expiry Date. The Blackout Period must expire following the general
disclosure of the undisclosed material information; provided that if an additional Blackout Period is subsequently imposed by the Corporation during the ten Business
Days after the initial Blackout Period, then Blackout Period Expiry Date shall be such the tenth trading day following the end of the last imposed Blackout Period.
The period between the date of the grant of Share Units and the last Vesting Date in respect of the last portion of such Share Units is referred to as the “Restriction
Period.”
4.5
(1)
(2)
Redemption / Settlement of Share Units
Subject to the terms of the applicable Share Unit Agreement (including confirmation of satisfaction of any vesting conditions or Performance Criteria,
which shall be at the sole discretion of the Corporation), vested Share Units shall be redeemed by the Corporation on the 15th day following the Vesting
Date (the “Redemption Date”).
Subject to the provisions of this Section 4.5 and Section 4.6, during the period between the Vesting Date and the Redemption Date in respect of a
Participant’s vested Share Units, the Corporation (or any Subsidiary that is a party to an Employment Agreement or Consulting Agreement with the
Participant whose vested Share Units are to be redeemed) shall, at its sole discretion, be entitled to elect to settle all or any portion of the cash payment
obligation otherwise arising in respect of the Participant’s vested Share Units either (i) by the issuance of Shares to the Participant (or the legal
representative of the Participant, if applicable) on the Redemption Date, or (ii) by paying all or a portion of such cash payment obligation to the Designated
Broker, who shall use the funds received to purchase Shares in the open market, which Shares shall be registered in the name of the Designated Broker in a
separate account for the Participant’s benefit.
(3)
Settlement of a Participant’s vested Share Units shall take place on the Redemption Date as follows:
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(a)
where the Corporation (or applicable Subsidiary) has elected to settle all or a portion of the Participant’s vested Share Units in Shares issued from
treasury:
(i)
(ii)
in the case of Shares issued in certificated form, by delivery to the Participant (or to the legal representative of the Participant, if
applicable) of a certificate in the name of the Participant (or the legal representative of the Participant, if applicable) representing the
aggregate number of Shares that the Participant is entitled to receive, subject to satisfaction of any applicable withholding in accordance
with Section 8.2; or
in the case of Shares issued in uncertificated form, by the issuance to the Participant (or to the legal representative of the Participant, if
applicable) of the aggregate number of Shares that the Participant is entitled to receive, subject to satisfaction of any applicable
withholding tax under Section 8.2, which Shares shall be evidenced by a book position on the register of the shareholders of the
Corporation to be maintained by the transfer agent and registrar of the Shares;
where the Corporation or a Subsidiary has elected to settle all or a portion of the Participant’s vested Share Units in Shares purchased in the open
market, by delivery to the Designated Broker of readily available funds in an amount equal to the Market Value of a Share as of the Redemption
Date multiplied by the number of vested Share Units to be settled in Shares purchased in the open market, less the amount of any applicable
withholding tax under Section 8.2, along with directions instructing the Designated Broker to use such funds to purchase Shares in the open market
for the benefit of the Participant and to be evidenced by a confirmation from the Designated Broker of such purchase;
any cash payment to which the Participant is entitled (excluding, for the avoidance of doubt, any amount payable in respect of the Participant’s
Share Units that the Corporation or a Subsidiary has elected to settle in Shares) shall, subject to satisfaction of any applicable withholding tax under
Section 8.2, be paid to the Participant (or to the legal representative of the Participant, if applicable) by the Corporation or Subsidiary of which the
Participant is a Director, Employee, Officer or Consultant, in cash, by cheque or by such other payment method as the Corporation and Participant
may agree; and
where the Corporation or a Subsidiary has elected to settle a portion, but not all, of the Participant’s vested Share Units in Shares, the Participant
shall be deemed to have instructed the Corporation or Subsidiary, as applicable, to withhold from the cash portion of the payment to which the
Participant is otherwise entitled such amount as may be required in accordance with Section 8.2 and to remit such withheld amount to the
applicable taxation authorities on account of any withholding tax obligations, and the Corporation or Subsidiary, as applicable, shall deliver any
remaining cash payable, after making any such remittance, to the Participant (or to the legal representative of the Participant, if applicable) as soon
as reasonable practicable. In the event that the cash portion payable to settle a Participant’s Share Units in the foregoing circumstances is not
sufficient to satisfy the withholding obligations of the Corporation or a Subsidiary pursuant to Section 8.2, the Corporation or Subsidiary, as
applicable, shall be entitled to satisfy any remaining withholding obligation by any other mechanism as may be required or determined by the
Corporation or Subsidiary as appropriate.
(b)
(c)
(d)
(4)
Notwithstanding any other provision in this Article 4, no payment, whether in cash or in Shares, shall be made in respect of the settlement of any Share
Units later than December 15 of the third (3rd) calendar year following the end of the calendar year in respect of which such Share Unit is granted.
4.6
(1)
(2)
Determination of Amounts
- 16 -
If the Corporation (or applicable Subsidiary), in its sole discretion, elects to settle all or a portion of the Participant’s vested Share Units in cash, the cash
payment obligation arising in respect of the redemption and settlement of a vested Share Unit pursuant to Section 4.5 shall be equal to the Market Value of a
Share as of the applicable Redemption Date. For the avoidance of doubt, the aggregate cash amount to be paid to a Participant (or the legal representative of
the Participant, if applicable) in respect of a particular redemption of the Participant’s vested Share Units shall, subject to any adjustments in accordance
with Section 7.1 and any withholding required pursuant to Section 8.2, be equal to the Market Value of a Share as of the Redemption Date for such vested
Share Units multiplied by the number of vested Share Units in the Participant’s Account at the commencement of the Redemption Date.
If the Corporation (or applicable Subsidiary), in its sole discretion, elects to settle all or a portion of the Participant’s vested Share Units by the issuance of
Shares, the Corporation shall, subject to any adjustments in accordance with Section 7.1 and any withholding required pursuant to Section 8.2, issue to the
Participant (or the legal representative of the Participant, if applicable), for each vested Share Unit which the Corporation (or applicable Subsidiary) elects to
settle in Shares, one Share. Where, as a result of any adjustment in accordance with Section 7.1 and/or any withholding required pursuant to Section 8.2, the
aggregate number of Shares to be received by a Participant upon an election by the Corporation (or applicable Subsidiary) to settle all or a portion of the
Participant’s vested Share Units in Shares includes a fractional Share, the aggregate number of Shares to be received by the Participant shall be rounded
down to the nearest whole number of Shares.
4.7
Award of Dividend Equivalents
Dividend Equivalents may, as determined by the Board in its sole discretion, be awarded in respect of unvested Share Units in a Participant’s Account on the same
basis as cash dividends declared and paid on Shares as if the Participant was a shareholder of record of Shares on the relevant record date, subject to the permitted
limits on participation as outlined in Section 2.5. Dividend Equivalents, if any, will be credited to the Participant’s Account in additional Share Units, the number of
which shall be equal to a fraction where the numerator is the product of (i) the number of Share Units in such Participant’s Account on the date that dividends are
paid multiplied by (ii) the dividend paid per Share and the denominator of which is the Market Value of one Share calculated as of the date that dividends are paid.
Any additional Share Units credited to a Participant’s Account as a Dividend Equivalent shall be subject to the same terms and conditions (including vesting and
Restriction Periods) as the Share Units in respect of which such additional Share Units are credited and shall be deemed to have been awarded on the same date and
subject to the same expiry date as the Share Units of which such additional Share Units are credited.
In the event that the Participant’s applicable Share Units do not vest, all Dividend Equivalents, if any, associated with such Share Units will be forfeited by the
Participant and returned to the Corporation’s account.
- 17 -
ARTICLE 5
DEFERRED SHARE UNITS
5.1
Nature of Deferred Share Units
A deferred share unit (“DSU”) is an Award in the nature of a deferral of payment for services rendered, or for future services to be rendered, and that, upon
settlement, entitles the recipient Participant to receive cash or acquire Shares, as determined by the Corporation in its sole discretion, unless such DSU expires prior
to being settled. Subject to Article 7, DSUs shall only vest, and a Participant is only entitled to redemption of a DSU, when the Participant ceases to be any of a
Director, Officer or Employee of the Corporation for any reason, including termination, retirement or death.
5.2
Market Fluctuation
For greater certainty, no amount will be paid or benefit provided to, or in respect of, a Participant, or to any person who does not deal at arm’s length with a
Participant for the purposes of the Tax Act, under the Plan or pursuant to any other arrangement, and no additional Awards will be granted to such Participant for the
purpose of reducing the impact, in whole or in part, of any reduction in the fair market value of the shares of the Corporation or any corporation related thereto.
5.3
(1)
(2)
5.4
(1)
DSU Awards
The Board shall, from time to time by resolution, in its sole discretion, (i) designate the Eligible Participants who may receive DSUs under the Plan, (ii) fix
the number of DSUs, if any, to be granted to each Eligible Participant and the date or dates on which such DSUs shall be granted, and (iii) any other terms
and conditions applicable to the granted DSUs.
Subject to the vesting and other conditions and provisions in this Plan and in any DSU Agreement, each DSU awarded to a Participant shall entitle the
Participant to receive on settlement a cash payment equal to the Market Value of a Share, or at the discretion of the Corporation, one Share or any
combination of cash and Shares as the Corporation in its sole discretion may determine. For greater certainty, no Participant shall have any right to demand
to be paid in, or receive, Shares in respect of any DSU, and, notwithstanding any discretion exercised by the Corporation to settle any DSU, or portion
thereof, in the form of Shares, the Corporation reserves the right to change such form of payment at any time until payment is actually made.
DSU Agreements
The grant of a DSU by the Board shall be evidenced by a DSU Agreement in such form not inconsistent with the Plan as the Board may from time to time
determine with reference to the form attached as Exhibit “D”. Such DSU Agreement shall be subject to all applicable terms and conditions of this Plan and
may be subject to any other terms and conditions (including without limitation any recoupment, reimbursement or claw-back compensation policy as may
be adopted by the Board from time to time) which are not inconsistent with this Plan and which the Board deems appropriate for inclusion in a DSU
Agreement. The provisions of the various DSU Agreements issued under this Plan need not be identical.
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(2)
The DSU Agreement shall contain such terms that the Corporation considers necessary in order that the DSU will comply with any provisions respecting
restricted share units in the income tax or other laws in force in any country or jurisdiction of which the Participant may from time to time be a resident or
citizen or the rules of any regulatory body having jurisdiction over the Corporation.
5.5
Vesting of DSUs
DSUs will be fully vested on the Termination Date of the applicable Participant. Notwithstanding the foregoing, if the date on which any DSUs have vested falls
within a Blackout Period or within nine Business Days after a Blackout Period Expiry Date, the vesting of such DSUs will be deemed to occur on the date that is ten
Business Days after the Blackout Period Expiry Date. The Blackout Period must expire following the general disclosure of the undisclosed material information;
provided that if an additional Blackout Period is subsequently imposed by the Corporation during the ten Business Days after the initial Blackout Period, then
Blackout Period Expiry Date shall be such the tenth trading day following the end of the last imposed Blackout Period.
5.6
(1)
Redemption / Settlement of DSUs
DSUs shall be redeemed and settled by the Corporation as soon as reasonably practicable following the Participant ceasing to be any of a Director, Officer
or Employee of the Corporation but in any event not later than December 15 of the year following the calendar year in which the Participant ceases to be
any of a Director, Officer or Employee. On redemption and settlement, the Corporation shall deliver the applicable number of Shares, or, in the sole
discretion of the Corporation, cash equal to the redemption amount of such DSU specified in the applicable DSU Agreement, subject to the satisfaction of
any applicable withholding tax under Section 8.2.
(2)
The Corporation, will have, at its sole discretion, the ability to elect to settle all or any portion of the cash payment obligation arising in respect of the
redemption and settlement of the Participant’s DSUs by issuance of Shares.
(3)
The redemption and settlement of a Participant’s DSUs shall occur on the applicable DSU Redemption Date as follows:
(a)
where the Corporation has elected to settle all or a portion of the Participant’s DSUs in Shares,
(i)
(ii)
in the case of Shares issued in certificated form, delivery to the Participant (or to the liquidator, executor or administrator, as the case may
be, of the estate of the Participant) of a certificate in the name of the Participant representing in the aggregate such number of Shares as
the Participant (or to the liquidator, executor or administrator, as the case may be, of the estate of the Participant) shall be entitled to
receive, subject to satisfaction of any applicable withholding tax under Section 8.2; or
in the case of Shares issued in uncertificated form, issuance of the aggregate number of Shares as the Participant (or the liquidator,
executor or administrator, as the case may be, of the estate of the Participant) shall be entitled to receive, subject to satisfaction of any
applicable withholding tax under Section 8.2, to be evidenced by a book position on the register of the shareholders of the Corporation to
be maintained by the transfer agent and registrar of the Shares;
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(b)
(c)
any cash payment to which the Participant is entitled (excluding, for the avoidance of doubt, any amount payable in respect of the Participant’s
DSUs that the Corporation has elected to pay in Shares) shall, subject to satisfaction of any applicable withholding tax under Section 8.2, be paid to
the Participant (or to the legal representative of the Participant, if applicable) by the Corporation in cash, by cheque or by such other payment
method as the Corporation and Participant may agree; and
where the Corporation has elected to settle a portion, but not all, of the Participant’s DSUs in Shares, the Participant shall be deemed to have
instructed the Corporation to withhold from the cash portion of the payment to which the Participant is otherwise entitled such amount as may be
required in accordance with Section 8.2 and to remit such withheld amount to the applicable taxation authorities on account of any withholding
obligations of the Corporation, and the Corporation shall deliver any remaining cash payable, after making any such remittance, to the Participant
(or to the legal representative of the Participant, if applicable) as soon as reasonable practicable. In the event that the cash portion elected by the
Corporation to settle the Participant’s Share Units is not sufficient to satisfy the withholding obligations of the Corporation pursuant to Section 8.2,
any remaining amounts shall be satisfied by the Corporation by any other mechanism as may be required or determined by the Corporation as
appropriate.
6.1
General Conditions Applicable to Awards
Each Award, as applicable, shall be subject to the following conditions:
ARTICLE 6
GENERAL CONDITIONS
(1)
(2)
(3)
Vesting Period. Each Award granted hereunder shall vest in accordance with the terms of this Plan and the Grant Agreement entered into in respect of such
Award. Subject to policies and vesting limits of the Exchanges, the Board has the right, in its sole discretion, to waive any vesting conditions or accelerate
the vesting of any Award (other than the date upon which DSUs become exercisable), or to deem any Performance Criteria or other vesting conditions to be
satisfied, notwithstanding the vesting schedule set forth for such Award.
Employment. Notwithstanding any express or implied term of this Plan to the contrary, the granting of an Award pursuant to the Plan shall in no way be
construed as a guarantee by the Corporation or a Subsidiary to the Participant of employment or another service relationship with the Corporation or a
Subsidiary. The granting of an Award to a Participant shall not impose upon the Corporation or a Subsidiary any obligation to retain the Participant in its
employ or service in any capacity. Nothing contained in this Plan or in any Award granted under this Plan shall interfere in any way with the rights of the
Corporation or any of its Subsidiaries in connection with the employment, retention or termination of any such Participant. The loss of existing or potential
profit in Shares underlying Awards granted under this Plan shall not constitute an element of damages in the event of termination of a Participant’s
employment or service in any office or otherwise.
Grant of Awards. Eligibility to participate in this Plan does not confer upon any Eligible Participant any right to be granted Awards pursuant to this Plan.
Granting Awards to any Eligible Participant does not confer upon any Eligible Participant the right to receive nor preclude such Eligible Participant from
receiving any additional Awards at any time. The extent to which any Eligible Participant is entitled to be granted Awards pursuant to this Plan will be
determined in the sole discretion of the Board. Participation in the Plan shall be entirely voluntary and any decision not to participate shall not affect an
Eligible Participant’s relationship or employment with the Corporation or any Subsidiary.
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(4)
(5)
(6)
(7)
Rights as a Shareholder. Neither the Participant nor such Participant’s personal representatives or legatees shall have any rights whatsoever as shareholder
in respect of any Shares covered by such Participant’s Awards by reason of the grant of such Award until such Award has been duly exercised, as applicable,
and settled and Shares have been issued in respect thereof. Without in any way limiting the generality of the foregoing, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date such Shares have been issued.
Conformity to Plan. In the event that an Award is granted or a Grant Agreement is executed which does not conform in all particulars with the provisions
of the Plan, or purports to grant Awards on terms different from those set out in the Plan, the Award or the grant of such Award shall not be in any way void
or invalidated, but the Award so granted will be adjusted to become, in all respects, in conformity with the Plan.
Non-Transferrable Awards. Except as specifically provided in a Grant Agreement approved by the Board, each Award granted under the Plan is personal
to the Participant and shall not be assignable or transferable by the Participant, whether voluntarily or by operation of law, except by will or by the laws of
succession of the domicile of the deceased Participant. No Award granted hereunder shall be pledged, hypothecated, charged, transferred, assigned or
otherwise encumbered or disposed of on pain of nullity.
Participant’s Entitlement. Except as otherwise provided in this Plan or unless the Board permits otherwise, upon any Subsidiary of the Corporation
ceasing to be a Subsidiary of the Corporation, Awards previously granted under this Plan that, at the time of such change, are held by a Person who is a
Director, Officer, Employee or Consultant of such Subsidiary of the Corporation and not of the Corporation itself, whether or not then exercisable, shall
automatically terminate on the date of such change.
6.2
General Conditions Applicable to Options
Each Option shall be subject to the following conditions:
(1)
(2)
Termination for Cause. Upon a Participant ceasing to be an Eligible Participant for Cause, any vested or unvested Option granted to such Participant shall
terminate automatically and become void immediately. For the purposes of the Plan, the determination by the Corporation that the Participant was
discharged for Cause shall be binding on the Participant. “Cause” shall include, among other things, gross misconduct, theft, fraud, breach of confidentiality
or breach of the Corporation’s codes of conduct and any other reason determined by the Corporation to be cause for termination.
Termination not for Cause. Upon a Participant ceasing to be an Eligible Participant as a result of his or her employment or service relationship with the
Corporation or a Subsidiary being terminated without Cause, (i) any unvested Option granted to such Participant shall terminate and become void
immediately and (ii) any vested Option granted to such Participant may be exercised by such Participant. Unless otherwise determined by the Board, in its
sole discretion, such Option shall only be exercisable within the earlier of ninety (90) days after the Termination Date, or the expiry date of the Award set
forth in the Grant Agreement, after which the Option will expire.
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(3)
(4)
(5)
(6)
Resignation. Upon a Participant ceasing to be an Eligible Participant as a result of his or her resignation from the Corporation or a Subsidiary, (i) each
unvested Option granted to such Participant shall terminate and become void immediately upon resignation and (ii) each vested Option granted to such
Participant will cease to be exercisable on the earlier of ninety (90) days following the Termination Date and the expiry date of the Option set forth in the
Grant Agreement, after which the Option will expire.
Permanent Disability/Retirement. Upon a Participant ceasing to be an Eligible Participant by reason of retirement or permanent disability, (i) any
unvested Option shall terminate and become void immediately, and (ii) any vested Option will cease to be exercisable on the earlier of the ninety (90) days
from the date of retirement or the date on which the Participant ceases his or her employment or service relationship with the Corporation or any Subsidiary
by reason of permanent disability, and the expiry date of the Award set forth in the Grant Agreement, after which the Option will expire.
Death. Upon a Participant ceasing to be an Eligible Participant by reason of death, any vested Option granted to such Participant may be exercised by the
liquidator, executor or administrator, as the case may be, of the estate of the Participant for that number of Shares only which such Participant was entitled to
acquire under the respective Options (the “Vested Awards”) on the date of such Participant’s death. Such Vested Awards shall only be exercisable within
twelve (12) months after the Participant’s death or prior to the expiration of the original term of the Options whichever occurs earlier.
Leave of Absence. Upon a Participant electing a voluntary leave of absence of more than twelve (12) months, including maternity and paternity leaves, the
Board may determine, at its sole discretion but subject to applicable laws, that such Participant’s participation in the Plan shall be terminated, provided that
all vested Options in the Participant’s Account shall remain outstanding and in effect until the applicable exercise date, or an earlier date determined by the
Board at its sole discretion.
6.3
General Conditions Applicable to Share Units
Each Share Unit shall be subject to the following conditions:
(1)
(2)
Termination for Cause and Resignation. Upon a Participant ceasing to be an Eligible Participant for Cause or as a result of his or her resignation from the
Corporation or a Subsidiary, the Participant’s participation in the Plan shall be terminated immediately, all Share Units credited to such Participant’s
Account that have not vested shall be forfeited and cancelled, and the Participant’s rights that relate to such Participant’s unvested Share Units shall be
forfeited and cancelled on the Termination Date.
Death, Leave of Absence or Termination of Service. Except as otherwise determined by the Board from time to time, at its sole discretion, upon a
Participant electing a voluntary leave of absence of more than twelve (12) months, including maternity and paternity leaves, or upon a Participant ceasing to
be Eligible Participant as a result of (i) death, (ii) retirement, (iii) Termination of Service for reasons other than for Cause, (iv) his or her employment or
service relationship with the Corporation or a Subsidiary being terminated by reason of injury or disability or (v) becoming eligible to receive long-term
disability benefits, all unvested Share Units in the Participant’s Account as of such date relating to a Restriction Period in progress shall remain outstanding
and in effect pursuant to the terms of the applicable Share Unit Agreement, and
- 22 -
(a)
(b)
If the Board determines that the vesting conditions are not met for such Share Units, then all unvested Share Units credited to such Participant’s
Account shall be forfeited and cancelled and the Participant’s rights that relate to such unvested Share Units shall be forfeited and cancelled; and
If the Board determines that the vesting conditions are met for such Share Units, the Participant shall be entitled to receive pursuant to Section 4.5
that number of cash or Shares or combination thereof, as the case may be, equal to the number of Share Units outstanding in the Participant’s
Account in respect of such Restriction Period multiplied by a fraction, the numerator of which shall be the number of completed months of service
of the Participant with the Corporation or a Subsidiary during the applicable Restriction Period as of the date of the Participant’s death, retirement,
termination or Eligibility Date and the denominator of which shall be equal to the total number of months included in the applicable Restriction
Period (which calculation shall be made as of the date that the applicable Share Units are to be settled) and the Corporation shall (i) pay the amount
of cash or issue such number of Shares or provide a combination thereof, as determined in its sole discretion, to the Participant or the liquidator,
executor or administrator, as the case may be, of the estate of the Participant, as soon as practicable thereafter, but no later than the end of the
Restriction Period, and (ii) debit the corresponding number of Share Units from the Account of such Participant’s or such deceased Participants’, as
the case may be, and the Participant’s rights to all other cash or Shares that relate to such Participant’s Share Units shall be forfeited and cancelled.
(3)
General. For greater certainty, where (i) a Participant’s employment or service relationship with the Corporation or a Subsidiary is terminated pursuant to
Section 6.3(1) or Section 6.3(2) hereof or (ii) a Participant elects for a voluntary leave of absence pursuant to Section 6.3(2) hereof following the satisfaction
of all vesting conditions in respect of particular Share Units but before receipt of the corresponding distribution or payment in respect of such Share Units,
the Participant shall remain entitled to such distribution or payment.
7.1
Adjustment to Shares Subject to Outstanding Awards
ARTICLE 7
ADJUSTMENTS AND AMENDMENTS
At any time after the grant of an Award to a Participant and prior to the expiration of the term of such Award or the forfeiture or cancellation of such Award, in the
event of (i) any subdivision of the Shares into a greater number of Shares, (ii) any consolidation of Shares into a lesser number of Shares, (iii) any reclassification,
reorganization or other change affecting the Shares, (iv) any merger, amalgamation or consolidation of the Corporation with or into another corporation, or (v) any
distribution to all holders of Shares or other securities in the capital of the Corporation, of cash, evidences of indebtedness or other assets of the Corporation
(excluding an ordinary course dividend in cash or shares, but including for greater certainty shares or equity interests in a subsidiary or business unit of the
Corporation or one of its subsidiaries or cash proceeds of the disposition of such a subsidiary or business unit) or any transaction or change having a similar effect,
then the Board shall in its sole discretion, subject to the required approval of any Exchange, determine the appropriate adjustments or substitutions to be made in such
circumstances in order to maintain the economic rights of the Participant in respect of such Award in connection with such occurrence or change, including, without
limitation:
(a)
adjustments to the exercise price of such Award without any change in the total price applicable to the unexercised portion of the Award;
7.2
(1)
(2)
7.3
(1)
(b)
(c)
adjustments to the number of Shares to which the Participant is entitled upon exercise of such Award; or
adjustments to the number of kind of Shares reserved for issuance pursuant to the Plan.
Change of Control
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In the event of a potential Change of Control, the Board shall have the power, in its sole discretion, to modify the terms of this Plan and/or the Awards to
assist the Participants to tender into a takeover bid or participating in any other transaction leading to a Change of Control. For greater certainty, in the event
of a take-over bid or any other transaction leading to a Change of Control, the Board shall have the power, in its sole discretion, subject to any required
approval of the Exchanges, to (i) provide that any or all Awards shall thereupon terminate, provided that any such outstanding Awards that have vested shall
remain exercisable until consummation of such Change of Control, and (ii) permit Participants to conditionally exercise their vested Options, such
conditional exercise to be conditional upon the take-up by such offeror of the Shares or other securities tendered to such take-over bid in accordance with
the terms of such take-over bid (or the effectiveness of such other transaction leading to a Change of Control).
If the Corporation completes a transaction constituting a Change of Control and within twelve (12) months following the Change of Control a Participant
who was also an Officer or Employee of, or Consultant to, the Corporation prior to the Change of Control has their position, employment or consulting
agreement terminated, or the Participant is constructively dismissed, then all unvested Awards of the Participant shall immediately vest and become
exercisable, and remain open for exercise until the earlier of their expiry date as set out in the Award Agreement and for certainty in the case of Options, the
date that is 90 days after such termination or dismissal.
Amendment or Discontinuance of the Plan
The Board may suspend or terminate the Plan at any time, or from time to time amend or revise the terms of the Plan or any granted Award without the
consent of the Participants provided that such suspension, termination, amendment or revision shall:
(a)
(b)
not adversely alter or impair the rights of any Participant, without the consent of such Participant except as permitted by the provisions of the Plan;
and
be in compliance with applicable law and with the prior approval, if required, of the shareholders of the Corporation, the Exchanges, or any other
regulatory body having authority over the Corporation.
(2)
Subject to Sections 7.3(1) and 7.3(3), the Board may, from time to time, in its absolute discretion and without approval of the shareholders of the
Corporation make the following amendments to this Plan, unless where required by law or the requirements of the Exchanges:
(a)
(b)
any amendment to the vesting provisions, if applicable, of Options and Share Units, or assignability provisions of the Awards;
any amendment to the expiration date of an Award that does not extend the terms of the Award past the original date of expiration of such Award;
(c)
(d)
(e)
(f)
(g)
(h)
any amendment regarding the effect of termination of a Participant’s employment or engagement;
any amendment which accelerates the date on which any Option may be exercised under the Plan;
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any amendment necessary to comply with applicable law or the requirements of the Exchanges or any other regulatory body;
any amendment of a “housekeeping” nature, including to clarify the meaning of an existing provision of the Plan, correct or supplement any
provision of the Plan that is inconsistent with any other provision of the Plan, correct any grammatical or typographical errors or amend the
definitions in the Plan;
any amendment regarding the administration of the Plan;
any amendment to add provisions permitting the grant of Awards settled otherwise than with Shares issued from treasury, or adopt a clawback
provision applicable to equity compensation; and
(i)
any other amendment that does not require the approval of the shareholders of the Corporation under Section 7.3(3).
(3)
Notwithstanding Section 7.3(2), the Board shall be required to obtain disinterested shareholder approval, if required under the rules of the Exchanges, to
make the following amendments:
(a)
(b)
(c)
(d)
(e)
any increase to the maximum number of Shares issuable under the Plan, except in the event of an adjustment pursuant to Article 7;
except in the case of an adjustment pursuant to Article 7, any amendment which reduces the exercise price of an Option or any cancellation of an
Option and replacement of such Option with an Option with a lower exercise price;
any amendment reduction in the price of an Option or extension of the term of an Option if the Participant is an Insider of the Corporation at the
time of the proposed amendment;
any amendment which extends the expiry date of any Award, or the Restriction Period of any Share Unit beyond the original expiry date or
Restriction Period;
any amendment which increases the maximum number of Shares that may be issuable under the Plan and any other proposed or established Share
Compensation Arrangement pursuant to Section 2.5(3) and 2.5(4); and
(f)
any amendment to the definition of an Eligible Participant under the Plan;
provided that Shares held directly or indirectly by Insiders benefiting from the amendments shall be excluded when obtaining such shareholder approval.
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ARTICLE 8
MISCELLANEOUS
8.1
Use of an Administrative Agent and Trustee
The Board may in its sole discretion appoint from time to time one or more entities to act as administrative agent or trustee to administer the Awards granted under
the Plan and to act as trustee to hold and administer the assets that may be held in respect of Awards granted under the Plan, the whole in accordance with the terms
and conditions determined by the Board in its sole discretion. The Corporation and the administrative agent will maintain records showing the number of Awards
granted to each Participant under the Plan.
8.2
(1)
Tax Withholding
Notwithstanding any other provision of this Plan, all distributions, delivery of Shares or payments to a Participant (or to the liquidator, executor or
administrator, as the case may be, of the estate of the Participant) under this Plan shall be made net of any applicable withholdings, including in respect of
applicable withholding taxes required to be withheld at source and other source deductions, as the Corporation determines. If the event giving rise to the
withholding obligation involves an issuance or delivery of Shares, then, the withholding may be satisfied in such manner as the Corporation determines,
including by (a) the sale of a portion of such Shares sold by the Corporation, the Corporation’s transfer agent and registrar or any trustee appointed by the
Corporation pursuant to Section 8.1 hereof, on behalf of and as agent for the Participant as soon as permissible and practicable, with the proceeds of such
sale delivered to the Corporation, which in turn will remit such amounts to the appropriate governmental authorities, or (b) any other mechanism as may be
required or determined by the Corporation as appropriate.
(2)
Notwithstanding Section 8.2(1), the applicable tax withholdings may be waived where a Participant directs in writing that a payment be made directly to the
Participant’s registered retirement savings plan in circumstances to which subsection 100(3) of the regulations made under the Tax Act apply.
8.3
Clawback
Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange listing
requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing
requirement (or any policy adopted by the Corporation pursuant to any such law, government regulation or stock exchange listing requirement) or any policy adopted
by the Corporation. Without limiting the generality of the foregoing, the Board may provide in any case that outstanding Awards (whether or not vested or
exercisable) and the proceeds from the exercise or disposition of Awards or Shares acquired under Awards will be subject to forfeiture and disgorgement to the
Corporation, with interest and other related earnings, if the Participant to whom the Award was granted violates (i) a non-competition, non- solicitation,
confidentiality or other restrictive covenant by which he or she is bound, or (ii) any policy adopted by the Corporation applicable to the Participant that provides for
forfeiture or disgorgement with respect to incentive compensation that includes Awards under the Plan. In addition, the Board may require forfeiture and
disgorgement to the Corporation of outstanding Awards and the proceeds from the exercise or disposition of Awards or Shares acquired under Awards, with interest
and other related earnings, to the extent required by law or applicable stock exchange listing standards, including any related policy adopted by the Corporation. Each
Participant, by accepting or being deemed to have accepted an Award under the Plan, agrees to cooperate fully with the Board, and to cause any and all permitted
transferees of the Participant to cooperate fully with the Board, to effectuate any forfeiture or disgorgement required hereunder. Neither the Board nor the
Corporation nor any other person, other than the Participant and his or her permitted transferees, if any, will be responsible for any adverse tax or other consequences
to a Participant or his or her permitted transferees, if any, that may arise in connection with this Section 8.3.
8.4
(1)
(2)
(3)
(4)
Securities Law Compliance
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The Plan (including any amendments to it), the terms of the grant of any Award under the Plan, the grant of any Award, the exercise of any Option, the
delivery of Shares upon exercise of any Option, and the Corporation’s obligation to sell and deliver Shares in respect of any Awards, shall be subject to all
applicable federal, provincial, state and foreign laws, rules and regulations, the rules and regulations of applicable Exchanges and to such approvals by any
regulatory or governmental agency as may, as determined by the Corporation, be required. The Corporation shall not be obliged by any provision of the Plan
or the grant of any Award or exercise of any Option hereunder to issue, sell or deliver Shares in violation of such laws, rules and regulations or any
condition of such approvals.
No Awards shall be granted, and no Shares shall be issued, sold or delivered hereunder, where such grant, issue, sale or delivery would require registration
of the Plan or of the Shares under the securities laws of any jurisdiction or the filing of any prospectus for the qualification of same thereunder, and any
purported grant of any Award or purported issue or sale of Shares hereunder in violation of this provision shall be void.
The Corporation shall have no obligation to issue any Shares pursuant to this Plan unless upon official notice of issuance such Shares shall have been duly
listed with an Exchange. Shares issued, sold or delivered to Participants under the Plan may be subject to limitations on sale or resale under applicable
securities laws.
If Shares cannot be issued to a Participant upon the exercise of an Option due to legal or regulatory restrictions, the obligation of the Corporation to issue
such Shares shall terminate and any funds paid to the Corporation in connection with the exercise of such Option will be returned to the applicable
Participant as soon as practicable.
8.5
Reorganization of the Corporation
The existence of any Awards shall not affect in any way the right or power of the Corporation or its shareholders to make or authorize any adjustment,
reclassification, recapitalization, reorganization or other change in the Corporation’s capital structure or its business, or any amalgamation, combination, merger or
consolidation involving the Corporation or to create or issue any bonds, debentures, shares or other securities of the Corporation or the rights and conditions
attaching thereto or to affect the dissolution or liquidation of the Corporation or any sale or transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar nature or otherwise.
8.6
Quotation of Shares
So long as the Shares are listed on one or more Exchanges, the Corporation must apply to such Exchange or Exchanges for the listing or quotation, as applicable, of
the Shares underlying the Awards granted under the Plan, however, the Corporation cannot guarantee that such Shares will be listed or quoted on any Exchange.
8.7
No Fractional Shares
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No fractional Shares shall be issued upon the exercise of any Option granted under the Plan and, accordingly, if a Participant would become entitled to a fractional
Share upon the exercise of such Option, or from an adjustment permitted by the terms of this Plan, such Participant shall only have the right to purchase the next
lowest whole number of Shares, and no payment or other adjustment will be made with respect to the fractional interest so disregarded.
8.8
Governing Laws
The Plan and all matters to which reference is made herein shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the laws
of Canada applicable therein.
8.9
Severability
The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision and any invalid or unenforceable
provision shall be severed from the Plan.
8.10
Section 409A of the Tax Code
It is intended that any payments under the Plan to US Taxpayers shall be exempt from or comply with Section 409A of the Code, and all provisions of the Plan shall
be construed and interpreted in a manner consistent with the requirements for avoiding taxes and penalties under Section 409A of the Code.
- 28 -
EXHIBIT “A”
TO OMNIBUS INCENTIVE PLAN OF POET TECHNOLOGIES INC.
FORM OF OPTION AGREEMENT
This Option Agreement is entered into between POET Technologies Inc. (the “Corporation”) and the Participant named below, pursuant to the Corporation’s
Omnibus Incentive Plan (the “Plan”), a copy of which is attached hereto, and confirms that on:
1.
2.
3.
4.
5.
___________________ (the “Grant Date”),
___________________ (the “Participant”)
was granted options (“Options”) to purchase ___________________ common shares of the Corporation (each, a “Share”), in accordance with the terms of
the Plan, which Options will bear the following terms:
(a)
Exercise Price and Expiry. Subject to the vesting conditions specified below, the Options will be exercisable by the Participant at a price of $
____________ per Share (the “Option Price”) at any time prior to expiry on ____________ (the “Expiration Date”).
(b)
Vesting; Time of Exercise. Subject to the terms of the Plan, the Options shall vest and become exercisable as follows:
Number of Options
Vested On
If the aggregate number of Shares vesting in a tranche set forth above includes a fractional common share, the aggregate number of Shares will be
rounded down to the nearest whole number of Shares. Notwithstanding anything to the contrary herein, the Options shall expire on the Expiration
Date set forth above and must be exercised, if at all, on or before the Expiration Date. The Option Price is denominated in Canadian dollars (C$).
The Options shall be exercisable only by delivery to the Corporation of a duly completed and executed notice in the form attached to this Option Agreement
(the “Exercise Notice”), together with payment of the Option Price for each Share covered by the Exercise Notice (plus an amount equal to any applicable
Tax Obligations, as defined in the Plan) and/or, if applicable, a notice that the Participant intends to utilize the Participant’s Cashless Exercise Right as set
out in the Plan or terminate the Options in lieu of exercise, pursuant to the Participant’s Net Exercise Right as set out in the Plan.
Subject to the terms of the Plan, unless otherwise specified in the Exercise Notice, the Options shall be deemed to be: (i) exercised upon receipt by the
Corporation of such written Exercise Notice accompanied by (a) the aggregate Option Price (plus an amount equal to any applicable Tax Obligations), or (b)
notice of exercise of the Participant’s Cashless Exercise Right and receipt (from the broker on behalf of the Participant) of the aggregate Option Price, or (ii)
terminated upon election by the Participant in lieu of exercise, pursuant to the Participant’s Net Exercise Right.
6.
The Participant hereby represents and warrants (on the date of this Option Agreement and upon each exercise or termination of Options) that:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
the Participant has not received any offering memorandum, or any other documents (other than annual financial statements, interim financial
statements or any other document the content of which is prescribed by statute or regulation, other than an offering memorandum) describing the
business and affairs of the Corporation that has been prepared for delivery to, and review by, a prospective purchaser in order to assist it in making
an investment decision in respect of the Shares;
the Participant is acquiring the Shares without the requirement for the delivery of a prospectus or offering memorandum, pursuant to an exemption
under applicable securities legislation and, as a consequence, is restricted from relying upon the civil remedies otherwise available under applicable
securities legislation and may not receive information that would otherwise be required to be provided to it;
the Participant has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an
investment in the Corporation and does not desire to utilize a registrant in connection with evaluating such merits and risks;
the Participant acknowledges that an investment in the Shares involves a high degree of risk, and represents that it understands the economic risks
of such investment and is able to bear the economic risks of this investment;
the Participant acknowledges that he or she is responsible for paying any applicable taxes and withholding taxes arising from the exercise or
termination (including upon exercise of the Cashless Exercise Right or Net Exercise Right) of any Options, as provided in Section 8.2 of the Plan;
this Option Agreement constitutes a legal, valid and binding obligation of the Participant, enforceable against him in accordance with its terms; and
the execution and delivery of this Option Agreement and the performance of the obligations of the Participant hereunder will not result in the
creation or imposition of any lien, charge or encumbrance upon the common shares.
The Participant acknowledges that the Corporation is relying upon such representations and warranties in granting the Options and issuing any common shares upon
exercise thereof.
7.
The Participant’s delivery of the signed Exercise Notice to exercise the Options (in whole or in part) shall be accompanied by full payment of the aggregate
Option Price for the Shares being purchased (plus an amount equal to the Tax Obligations) and/or a notice that the Participant intends to exercise the
Participant’s Cashless Exercise Right or Net Exercise Right as set out in the Plan. Payment for the Shares may be made by certified cheque or wire transfer
in readily available funds.
8.
9.
The Participant acknowledges and represents that: (a) the Participant fully understands and agrees to be bound by the terms and provisions of this Option
Agreement and the Plan; (b) agrees and acknowledges that the Participant has received a copy of the Plan and that the terms of the Plan form part of this
Option Agreement, and (c) hereby accepts these Options subject to all of the terms and provisions hereof and of the Plan. To the extent of any inconsistency
between the terms of this Option Agreement and those of the Plan, the terms of the Plan shall govern. The Participant has reviewed this Option Agreement
and the Plan, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement.
This Option Agreement and the terms of the Plan incorporated herein (with the Exercise Notice, if the Option is exercised) constitutes the entire agreement
of the Corporation and the Participant (collectively the “Parties”) with respect to the Options and supersedes in its entirety all prior undertakings and
agreements of the Parties with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a
writing signed by the Parties. This Option Agreement and the terms of the Plan incorporated herein are to be construed in accordance with and governed by
the laws of the Province of Ontario. Should any provision of this Option Agreement or the Plan be determined by a court of law to be illegal or
unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall
remain enforceable.
All capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Plan.
[Remainder of page left intentionally blank]
IN WITNESS WHEREOF the Corporation and the Participant have executed this Option Agreement as of ______________________, 20__.
If the Participant is an individual:
EXECUTED by [●] in the presence of:
Signature
Print Name
Address
Occupation
If the Participant is not an individual:
Note to Plan Participants
)
)
)
)
)
)
)
)
)
)
)
)
)
)
POET TECHNOLOGIES INC.
Per:
Authorized Signatory
[NAME OF PARTICIPANT]
[NAME OF PARTICIPANT]
Per:
Authorized Signatory
This Agreement must be signed where indicated and returned to the Corporation within 30 days of receipt. Failure to acknowledge acceptance of this grant will result
in the cancellation of your Options.
EXHIBIT “B”
TO OMNIBUS INCENTIVE PLAN OF POET TECHNOLOGIES INC.
FORM OF OPTION EXERCISE NOTICE
TO:
POET TECHNOLOGIES INC.
This Exercise Notice is made in reference to stock options (“Options”) granted under the Omnibus Incentive Plan (the “Plan”) of POET Technologies Inc. (the
“Corporation”).
The undersigned (the “Participant”) holds options (“Options”) under the Plan to purchase [●] common shares of the Corporation (each, a “Share”) at a price per
Share of $[●] (the “Option Price”) pursuant to the terms and conditions set out in that certain option agreement between the Participant and the Corporation dated
[●] (the “Option Agreement”). The Participant confirms the representations and warranties contained in the Option Agreement.
The Participant hereby:
irrevocably gives notice of the exercise of ___ Options held by the Participant pursuant to the Option Agreement at the Option Price for an aggregate
exercise price of $________ (the “Aggregate Option Price”) on the terms specified in the Option Agreement and encloses herewith a certified cheque
payable to the Corporation or evidence of wire transfer to the Corporation in full satisfaction of the Aggregate Option Price.
The Participant acknowledges that, in addition to the Aggregate Option Price, the Corporation will require that the Participant also provide to the
Corporation a certified cheque or evidence of wire transfer equal to the amount of any Tax Obligations (as defined in the Plan) associated with the exercise
of such Options before the Corporation will issue any Shares to the Participant in settlement of the Options. The Corporation shall have the sole discretion to
determine the amount of any such Tax Obligations and shall inform the Participant of this amount as soon as reasonably practicable upon receipt of this
completed Exercise Notice.
☐
- or -
irrevocably gives notice of the Participant’s exercise of the Cashless Exercise Right (as defined in the Plan) with respect to ___ Options held by the
Participant pursuant to the Option Agreement, and agrees to receive that number of common shares of the Corporation equal to the following (with the
remaining Shares subject to the Options to be sold by the broker on its behalf as provided in the Plan):
((A – B) x C) - D
A
☐
where A is the price per Share at which the underlying Shares are being sold by the brokerage firm, B is the Option Price, C is the number of Options being
exercised in this Exercise Notice, and D is the amount of Tax Obligations (as defined in the Plan) applicable to the Options subject to exercise of the
Cashless Exercise Right pursuant to this Exercise Notice.
For greater certainty, where a Participant elects to exercise his/her Cashless Exercise Right, the amount of any Tax Obligation determined pursuant to the
above formula will be deemed to have been directed by the Participant to be paid in cash by the broker on its behalf to the Corporation out of the proceeds
of the Shares, which cash will be withheld by the Corporation and remitted to the applicable taxation authorities as may be required.
- or -
irrevocably gives notice of the Participant’s exercise of the Net Exercise Right (as defined in the Plan) with respect to ___ Options held by the Participant
pursuant to the Option Agreement, and agrees to receive that number of Shares of the Corporation equal to the following:
((A – B) x C) - D
A
☐
where A is the VWAP (as defined in the Plan) per Share on the date prior to the date of this Exercise Notice, B is the Option Price, C is the number of
Options being exercised in this Exercise Notice, and D is the amount of Tax Obligations (as defined in the Plan) applicable to the Options terminated at the
election of the Participant pursuant to this Exercise Notice.
For greater certainty, where a Participant elects to exercise his/her Net Exercise Right, the amount of any Tax Obligation determined pursuant to the above
formula will be deemed to have been paid in cash by the Corporation to the Participant as partial consideration for the termination of the Options, which
cash will be withheld by the Corporation and remitted to the applicable taxation authorities as may be required.
Registration:
The Shares issued pursuant to this Exercise Notice (other than any Shares to be sold by a broker pursuant to the Cashless Exercise Right) are to be
registered in the name of the undersigned and are to be delivered, as directed below:
Name:
Address:
Date
Date
Name of Participant
Signature of Participant or Authorized Signatory
EXHIBIT “C”
TO OMNIBUS INCENTIVE PLAN OF POET TECHNOLOGIES INC.
FORM OF SHARE UNIT AGREEMENT
This Share Unit Agreement is entered into between POET Technologies Inc. (the “Corporation”) and the Participant named below, pursuant to the Corporation’s
Omnibus Incentive Plan (the “Plan”), a copy of which is attached hereto, and confirms that on:
1.
2.
3.
4.
___________________ (the “Grant Date”)
___________________ (the “Participant”)
was granted
Share Units (“Share Units”), in accordance with the terms of the Plan, which Share Units will vest as follows:
Number of Share Units
Time Vesting
Conditions
Performance Vesting
Conditions
all on the terms and subject to the conditions set out in the Plan.
Subject to the terms and conditions of the Plan, including provisions governing the vesting of Awards while the Corporation is in a Blackout Period, the
performance period for this grant of Share Units commences on the Grant Date and ends at the close of business on [●] (the “Performance Period”). The
restriction period for this grant of Share Units commences on the Grant Date and ends at the close of business on [●] (the “Restriction Period”). Subject to
the terms and conditions of the Plan, Shares Units will be redeemed and settled fifteen days after the applicable Vesting Date, all in accordance with the
terms of the Plan.
5.
By signing this agreement, the Participant:
(a)
(b)
acknowledges that he or she has read and understands the Plan, agrees with the terms and conditions thereof which shall be deemed to be
incorporated into and form part of this Share Unit Agreement (subject to any specific variations contained in this Share Unit Agreement);
acknowledges that, subject to the vesting and other conditions and provisions in this Share Unit Agreement, each Share Unit awarded to the
Participant shall entitle the Participant to receive on settlement an aggregate cash payment equal to Market Value of a Share or, at the election of
the Corporation and in its sole discretion, one Share of the Company. For greater certainty, no Participant shall have any right to demand to be paid
in, or receive, Shares in respect of any Share Unit, and, notwithstanding any discretion exercised by the Company to settle any Share Unit, or
portion thereof, in the form of Shares, the Company reserves the right to change such form of payment at any time until payment is actually made;
(c)
(d)
(e)
(f)
acknowledges that he or she is responsible for paying any applicable taxes and withholding taxes arising from the vesting and redemption of any
Share Unit, as determined by the Corporation in its sole discretion;
agrees that a Share Unit does not carry any voting rights;
acknowledges that the value of the Share Units granted herein are denominated in Canadian dollars (C$), and such value is not guaranteed;
recognizes that, at the sole discretion of the Corporation, the Plan can be administered by a designee of the Corporation by virtue of Section 2.2 of
the Plan and any communication from or to the designee shall be deemed to be from or to the Corporation.
6.
7.
The Participant acknowledges and represents that: (a) the Participant fully understands and agrees to be bound by the terms and provisions of this Share Unit
Agreement and the Plan; (b) agrees and acknowledges that the Participant has received a copy of the Plan and that the terms of the Plan form part of this
Share Unit Agreement, and (c) hereby accepts these Share Units subject to all of the terms and provisions hereof and of the Plan. To the extent of any
inconsistency between the terms of this Share Unit Agreement and those of the Plan, the terms of the Plan shall govern. The Participant has reviewed this
Share Unit Agreement and the Plan, has had an opportunity to obtain the advice of counsel prior to executing this Share Unit Agreement.
This Share Unit Agreement and the terms of the Plan incorporated herein constitutes the entire agreement of the Corporation and the Participant
(collectively the “Parties”) with respect to the Share Units and supersedes in its entirety all prior undertakings and agreements of the Parties with respect to
the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Parties. This Share Unit
Agreement and the terms of the Plan incorporated herein are to be construed in accordance with and governed by the laws of the Province of Ontario.
Should any provision of this Share Unit Agreement or the Plan be determined by a court of law to be illegal or unenforceable, such provision shall be
enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
All capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Plan.
[Remainder of page left intentionally blank]
IN WITNESS WHEREOF the Corporation and the Participant have executed this Share Unit Agreement as of _____________________, 20__.
If the Participant is an individual:
EXECUTED by [●] in the presence of:
Signature
Print Name
Address
Occupation
If the Participant is not an individual:
Note to Plan Participants
)
)
)
)
)
)
)
)
)
)
)
)
)
)
POET TECHNOLOGIES INC.
Per:
Authorized Signatory
[NAME OF PARTICIPANT]
[NAME OF PARTICIPANT]
Per:
Authorized Signatory
This Agreement must be signed where indicated and returned to the Corporation within 30 days of receipt. Failure to acknowledge acceptance of this grant will result
in the cancellation of your Share Units.
EXHIBIT “D”
TO OMNIBUS INCENTIVE PLAN OF POET TECHNOLOGIES INC.
FORM OF DSU AGREEMENT
This DSU Agreement is entered into between POET Technologies Inc. (the “Corporation”) and the Participant named below, pursuant to the Corporation’s Omnibus
Incentive Plan (the “Plan”), a copy of which is attached hereto, and confirms that on:
1.
2.
3.
4.
5.
6.
7.
8.
___________________ (the “Grant Date”),
___________________ (the “Participant”)
was
granted deferred share units (“DSUs”), in accordance with the terms of the Plan.
The DSUs subject to this DSU Agreement will be fully vested on the Termination Date of the Participant.
The settlement of the DSUs, either in common shares of the Corporation, a lump sum cash payment or a combination of the foregoing, shall be payable to
you net of any applicable withholding taxes in accordance with the Plan not later than December 15 of the year following the end of the calendar year in
which the Termination Date occurs.
By signing this agreement, the Participant:
(a)
(b)
(c)
(d)
(e)
acknowledges that he or she has read and understands the Plan, agrees with the terms and conditions thereof which shall be deemed to be
incorporated into and form part of this DSU Agreement (subject to any specific variations contained in this DSU Agreement);
acknowledges that he or she is responsible for paying any applicable taxes and withholding taxes arising from the vesting and redemption of any
DSU, as determined by the Corporation in its sole discretion;
agrees that a DSU does not carry any voting rights;
acknowledges that the value of the DSUs granted herein are denominated in Canadian dollars (C$), and such value is not guaranteed;
recognizes that, at the sole discretion of the Corporation, the Plan can be administered by a designee of the Corporation by virtue of Section 2.2 of
the Plan and any communication from or to the designee shall be deemed to be from or to the Corporation.
The Participant acknowledges and represents that: (a) the Participant fully understands and agrees to be bound by the terms and provisions of this DSU
Agreement and the Plan; (b) agrees and acknowledges that the Participant has received a copy of the Plan and that the terms of the Plan form part of this
DSU Agreement, and (c) hereby accepts these DSUs subject to all of the terms and provisions hereof and of the Plan. To the extent of any inconsistency
between the terms of this DSU Agreement and those of the Plan, the terms of the Plan shall govern. The Participant has reviewed this DSU Agreement and
the Plan, has had an opportunity to obtain the advice of counsel prior to executing this DSU Agreement.
This DSU Agreement and the terms of the Plan incorporated herein constitutes the entire agreement of the Corporation and the Participant (collectively the
“Parties”) with respect to the DSUs and supersedes in its entirety all prior undertakings and agreements of the Parties with respect to the subject matter
hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Parties. This DSU Agreement and the
terms of the Plan incorporated herein are to be construed in accordance with and governed by the laws of the Province of Ontario. Should any provision of
this DSU Agreement or the Plan be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed
by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
All capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Plan.
[Remainder of page left intentionally blank]
IN WITNESS WHEREOF the Corporation and the Participant have executed this DSU Agreement as of ________________, 20__.
If the Participant is an individual:
EXECUTED by [●] in the presence of:
Signature
Print Name
Address
Occupation
If the Participant is not an individual:
Note to Plan Participants
)
)
)
)
)
)
)
)
)
)
)
)
)
)
POET TECHNOLOGIES INC.
Per:
Authorized Signatory
[NAME OF PARTICIPANT]
[NAME OF PARTICIPANT]
Per:
Authorized Signatory
This Agreement must be signed where indicated and returned to the Corporation within 30 days of receipt. Failure to acknowledge acceptance of this grant will result
in the cancellation of your DSUs.
ex4-18.htm
EX-4.18
1 of 51
03/28/2024 04:02 PM
Exhibit 4.18
ex4-20.htm
EX-4.20
1 of 20
03/28/2024 04:02 PM
Exhibit 4.20
ex4-22.htm
EX-4.22
1 of 7
03/28/2024 04:02 PM
Exhibit 4.22
ex4-23.htm
EX-4.23
1 of 51
03/28/2024 04:02 PM
Exhibit 4.23
ex4-24.htm
EX-4.24
1 of 42
03/28/2024 04:02 PM
Exhibit 4.24
ex8-1.htm
EX-8.1
1 of 1
03/28/2024 04:02 PM
Exhibit 8.1
ex12-1.htm
EX-12.1
1 of 1
03/28/2024 04:02 PM
Exhibit 12.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Suresh Venkatesan, certify that:
1.
I have reviewed this annual report on Form 20-F of POET Technologies Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s
auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over
financial reporting.
Date: March 28, 2024
By:
/s/ Suresh Venkatesan
Suresh Venkatesan
Chief Executive Officer
ex12-2.htm
EX-12.2
1 of 1
03/28/2024 04:02 PM
Exhibit 12.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas Mika, certify that:
1.
I have reviewed this annual report on Form 20-F of POET Technologies Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s
auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over
financial reporting.
Date: March 28, 2024
By:
/s/ Thomas Mika
Thomas Mika
Chief Financial Officer
ex13-1.htm
EX-13.1
1 of 1
03/28/2024 04:02 PM
Exhibit 13.1
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Suresh Venkatesan, the Chief Executive Officer of
POET Technologies Inc. (the “Company”), hereby certify, that, to my knowledge:
1. The Annual Report on Form 20-F for the year ended December 31, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
The foregoing certification is provided solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act of 2002 and is not intended to
be used or relied upon for any other purpose.
Date: March 28, 2024
/s/ Suresh Venkatesan
Name: Suresh Venkatesan
Title: Chief Executive Officer
ex13-2.htm
EX-13.2
1 of 1
03/28/2024 04:02 PM
Exhibit 13.2
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Thomas Mika, the Chief Financial Officer of POET
Technologies Inc. (the “Company”), hereby certify, that, to my knowledge:
1. The Annual Report on Form 20-F for the year ended December 31, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
The foregoing certification is provided solely for purposes of complying with the provisions of Section 906 of the Sarbanes- Oxley Act of 2002 and is not intended to
be used or relied upon for any other purpose.
Date: March 28, 2024
/s/ Thomas Mika
Name: Thomas Mika
Title: Chief Financial Officer
ex23-1.htm
EX-23.1
1 of 1
03/28/2024 04:02 PM
Exhibit 23.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statement of POET Technologies Inc. on Form F-10 (File Nos. 333-255631, 333-227873 and
333-213422) of our report dated March 15, 2024 which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, with respect to
our audits of the consolidated financial statements of POET Technologies Inc. as of December 31, 2023, 2022 and 2021 and for the years ended December 31, 2023,
2022 and 2021 and our report dated March 15, 2024 with respect to our audit of internal control over financial reporting of POET Technologies Inc. as of December
31, 2023. Our report on the effectiveness of internal control over financial reporting expressed an adverse opinion because of the existence of a material weakness.
These reports are included in this Annual Report on Form 20-F of POET Technologies Inc. for the year ended December 31, 2023
/s/ Marcum LLP
Marcum (cid:3461)(cid:3461)(cid:3465)
Hartford, CT
March 28, 2024
ex97-1.htm
EX-97.1
1 of 6
03/28/2024 04:02 PM
Exhibit 97.1