We will be highly dependent upon collaborative partners to develop and commercialize products using our POET Technology.

A key part of our strategy is to form collaborations with semiconductor, defense and electronics companies that will assist us in developing, testing, and commercializing the POET platform. We currently have a collaborative agreement for process development with BAE Systems, Nashua, New Hampshire (“BAE”), which provides for a potential joint development program of the Company’s POET technology and undivided 50% joint interest in process development intellectual property, only in circumstances where such intellectual property is jointly developed at BAE Systems facilities thereunder (subject to the Company’s and its subsidiaries’ obligations to UCONN), with royalties running from each to the other in connection with revenues generated from the intellectual property. To date, we have engaged with BAE in such a manner that BAE does not participate in the development of our core POET process technology, and we intend to maintain that separation of activities in the future. We have recently entered into a supplement to our agreement with BAE which provides for incremental development work to be performed by BAE in connection with the commercial development of the POET technology. BAE is not exclusive in this development program. If we are required to engage a new company to undertake development work due to BAE’s inability to do so, we may be delayed in one or all stages of our progress, which could prove costly both operationally and strategically.

We expect to negotiate specific ownership rights with respect to the intellectual property developed as a result of the collaboration with each partner. While ownership rights will likely vary from program to program, in general we will seek to retain ownership rights to developments directly relating to POET and our partner will retain rights specific to the application under development.