I have just spent some time writing to a friend who wanted to know about the recent POET news.

She invested, on my recommendation back in 2011 and we have lived the POET dream together since. She is non-technical, has never owned shares and refuses to follow the daily share price fluctuations based on her lack of understanding and the stress the movements cause.

I try to keep her up to speed with news and explain developments as they occur albeit in my most layman of terms.

I appreciate it is a long post but thought it may be helpful to the more "amature / newer" readers of the forum.

Hi,

So on to the POET front, there has been a huge amount going on so this may take some time to cover properly.

As we know the POET story has been constantly evolving. Initially back in 2012, 2013 the business plan had always been, we have this genius scientist working in a lab in a university with a bunch of PHD students to help and a small exec staff who planned to sell his ideas or IP, to the biggest bidder.

It soon became clear that potential customers wanted more than just ideas proved in a lab but specific industry recognised items which could be manufactured in a 3rd party lab to validate the POET improvements and fact that other labs can prove the build process. This became the focus of 2014 and when it was achieved believed these customers would then potentially license the IP to continue its development into actual end products or that someone would buy up POET.

In late 2014 early 2015 we’re not sure what happened, but as I understand it, potential customers saw the results of these 3rd party lab validated items and liked what they saw. We have had NDA’s signed with these customers since late 2014 but of course no money yet. The new focus seemed to be –“ok the results are great but now you need to prove that these can be mass manufactured in a proper foundry” – (Apple has been badly burnt in the past buying tech which is great in the lab but couldn’t be mass produced, hence the caution).

In order to help this process the then CEO Peter Copetti, recruited Ajit Manocha (Ex CEO of Global Fonudries, 2nd largest chip manufacturer in the world) to help. Once Ajit came on board and he saw the potential of POET, he questioned why would we sell these ideas / IP to clients when we can make these ourselves and make a lot more money in the process (albeit over a longer time frame)?

So to set this up Ajit/Peter recruited Subash Venkatesen (Ex COO Global Foundries) who is now the POET CEO. The first thing he did was to focus POET on a single product. Part of the excitement of POET is that it can be used in so many different markets and hence has such potential, but he recognised the need to focus this very small team, now 13 people, and picked out the data centre market and specifically the connections that are used in these centres.

The majority of these use copper wires (cheap but slow) but POET wants to offer optical connections (Expensive but fast). To tackle this market they are looking to build an AOC (Active Optical Cable) and this has 3 parts: a detector, a VCSEL and some Electronic Transistors, all of these parts are built from a wafer.

So what has happened over the last 12 months? POET signed a deal with Anadigics to make the wafers, but they got bought out in the middle of the set up which has caused a 2 month delay. Since then they have moved to a company called Epiworks. Epiworks makes the wafer and then sends it to Wavetek a foundry in Taiwan who are a mass production foundry.

To date Wavetek have produced sample detectors and VSCELs and we are waiting to hear about the transistors. The results from the detectors are 20x better than anything else in the market. (V Good so far). Once they have completed all three parts separately, they will then re-run the process to put all three parts together on 1 wafer. This is due to be completed by end of June. They will then spend the rest of the year tweaking these, so that by q4 2016 they will have market ready prototypes ready for sales to the market.

This brings us up to date and there we all are waiting for a client to go “based on the early results of the individual parts we want in now and here’s a bunch of money up front to have exclusive access”. We were hoping that this was going to be the result of the recent “hold” that was put on the shares. However it turned out this wasn’t the case and they have bought another company instead.

On Tuesday the POET exec held a public meeting to discuss the acquisition and the impact on their plans going forward. There is a lot I could say here but the long and short of it is, that they have an acquired an existing revenue generating business. The purchased company (Denselight) is based in Singapore, produces a range of products, supplies and distributes these to a selection of global clients (they won’t tell us who). They have a factory and around 35 engineers all developing their R&D. The products they produce will be enhanced by using the POET process and Poet will benefit by getting access to products which are used in new markets.

So from 13 employees and 2 offices this time last year – POET as a company, now has offices in Silicon Valley, New Jersey and Singapore, a staff of 50, including lots of highly qualified engineers, a factory in Singapore and laboratory in San Jose, a set up sales and distribution division, multiple clients based globally currently procuring actual products, a bunch of new IP, patents and a significantly increased readily available market to grow into.

This in my view is an incredible achievement in the course of a year. POET is now a real company significantly more valuable than it was a year ago and physically capable of operating from Concept R&D to end user product and sales. What this means is that the POET exec have no intention of selling out early, they are clearly creating an end-to-end company that will grow and expand into clearly defined and rapidly growing markets. The early results of what has produced has confirmed the disruptive nature of what POET will do. Ultimately I have never been surer that POET will grow into a behemoth and be a global leading company.

The down side to this, is the hopes of a get rich quick result are unlikely, as POET have stretched out their ambitions so has our requirement for patience. The wait so far has been frustrating and POET has now given q4 2016 as a date when they will release revenue forecast projections with the aim to be profitable by H2 2018.

This certainly doesn’t mean we will not see share price growth before then, but it will be these revenue forecasts the analysts will use to measure share price value. The market has responded negatively to this news as the expectations were for immediate revenues and client contracts and the result was additional time to grow into something bigger. This is the right result for a long term share holder, but not what I know we were excited about.

So I apologise for writing such a long commentary to answer your simple question

“Just wondered if you thought it was getting closer to the shares going up?”

And the short answer is yes, only more slowly but up a much much bigger hill.

I do understand if you have to sell some share now, but the longer you can hold out the better. I do expect the market to be volatile in the meantime but the trend is up. Someone earlier described a man walking a dog. The man walks steadily while the dog runs back and forth. The share price is and will go up and down particularly on the venture exchange but the trend is “up and to the right” – CEO Quote from Tuesday, who also said “he didn’t expect the line to be linear”.

All the best for now. Take care