In the course of the private placement discussion many or perhaps even all of us have expressed their disappointment about this step and the dilution. Some have accused the POET management to be liars, because they stated before that no more capital would be needed.

However, I don't think they are liars. But perhaps I am wrong and other here can shed more light on this issue. My reasoning is two-fold:

First, a statement about future capital needs is clearly a forward-looking statement. For forward-looking statements certain restrictions apply. For example, POET used the following wording in the 20-F form:

The forward-looking statements and information in this Registration Statement are subject to various risks and uncertainties, including those described in “ITEM 3.D. Risk 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 time lines 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 stock will be volatile; and
• the risk that shareholders’ interests will be diluted through future stock offerings or options exercises.

Second, when the management says that the company won't need any more money, I wonder what the word "more" refers to. More than what? More than the money that is currently in POET's bank account? Or more than the authorized capital?

I don't know the Canadian law, but it would find it surprising if management could create shares out of the blue. I guess in past AGM minutes we would find resolutions authorizing the management to do what they did last week, i.e. create a certain amount of equity capital by issuing shares (and options), and excluding shareholders from taking part in placements.

Could it be that management meant they don't see any need to create any additional authorized capital? By the way, what is the current authorized capital? How much dilution could it cause?

If my assumptions are true, you might not particularly like the recent private placement, but it would be what you resp. the majority of votes have agreed to. It would thus be unfair to call management liars.

Andrea ("Powered by POET")