Second Quarter and Recent Highlights:

• Revenue was US$648,382
• Product revenue, which excludes non-recurring engineering (NRE) revenue, increased 39% year-over-year
• Gross profit was US$327,525, or 50.5% of sales, compared to 51.4% in the second quarter of 2016, after taking into account a reclassification of certain costs from cost of sales to operating expenses                                                                                                                                                                                                       - my comments- 50.5% margin of sales, compared to 51.4% in the second quarter of 2016, after taking into account a reclassification of certain costs from cost of sales to operating expenses - shows a robust margin. Now imagine this on the projected $10 - $14 million in sales for 2018! It will help the share price because meeting such a target makes the $50 million (probably at similar or better margins) believable for 2019. So sometime in 2018 POET might get a serious look at by credible analysts and awarded an expectation growth multiple that typically looks ahead 12 months to 2 years. That is what I would refer to as the "Credible Sustainable Pump for POET" that has nothing to do with what we prognosticate here on this forum.

• Ended the quarter with cash and short-term investments of US$9.8 million
• Held 2017 AGM in July, where all proposals were approved
  ° Delivered detailed presentation and business update covering strategy, technology and products
  ° Highlighted strategy to address rapidly growing InP market
  ° Announced industry-leading performance of new Narrow Linewidth Laser products
• Sponsored and previewed new products at Conference on Lasers and Electro-Optics (CLEO-Pacific Rim) in Singapore, with a formal product announcement planned in conjunction with the world’s largest optoelectronic expo in Shenzhen, China (CIOE)                                                                                                                                                                                                                                                                                         - my comments- I speculate that POET thought they might be ready for the Industrial Press Release in Singapore. Certainly, they informally announced new products on Lasers and Electro-Optics at CLEO. It would seem that something might have been still probably unfinalized or finishing off a work-in- progress where the Industrial Press Release could not take place. Now, with a larger venue in China and more eyes on are the marketst in September than they are during the summer, and perhaps, everything is now set in stone to present, they can go ahead with that Industrial Press Release ---- if they end up not doing this at that time, I would be very disappointed and credibility would be compromised. I do not feel they will let us down as momentum is starting to roll now more positively for this company than ever before. Also, rather than respond to individual enquries regarding the "industrial Press Release", they saved their response for this news release (NR). Looking back, I think Suresh made a mistake in setting up the expection with shareholders during the AGM presentation regarding CLEO as the venue for that Industrial News Release. I am not happy with the knee-jerk comments made at the oral presentations since the THM event of 2015. Many will remember: "one or two weeks, not one or two months; up and to the right; Industrial Press Release during CLEO between Aug. 1 - 3 in Singapore."  POET, as a company, must learn that they should not say anything on what they plan to be concrete for a certain time or event until they are sure they are 110% confident and ready to do so. Following that mantra, more will believe in POET and not have to hang on their every word for the purpose of 'hope' on the stock. When you are good at something, you must be coinfident that you are that good and need few words to justify your greatness, in my opinion.

Revenue in the second quarter of 2017 was US$648,382, compared to US$712,550 in the first quarter of 2017 and US$576,741 in the second quarter of 2016. Revenue primarily reflects the sale of DenseLight photonic sensors for test & measurement applications. Gross margin remained strong year-over-year at 50.5% during the second quarter of 2017, compared to 59.6% in the first quarter of 2017 and 51.4% in the second quarter of 2016. In the second quarter of 2017, management performed a detailed review of the Company’s cost structure and determined that certain product costs historically included in cost of sales should be more appropriately categorized in selling, marketing and administration expenses. As a result, gross margin for comparative periods have been adjusted to reflect this determination. Second quarter 2017 net loss was US$2.8 million, or ($0.01) per share, compared to a loss of US$3.5 million, or ($0.01) per share, in the first quarter of 2017 and a loss of US$3.4 million, or ($0.02) per share, in the second quarter of 2016. The second quarter 2017 loss included non-cash stock-based compensation of US$159,783 and depreciation & amortization of US$558,919. Non-cash stock-based compensation and depreciation & amortization in the first quarter of 2017 were US$894,813 and US$540,393, respectively, and US$887,990 and US$239,958 in the first quarter of 2016.

Management Comments
Dr. Suresh Venkatesan, Chief Executive Officer of POET, commented, “Our second quarter results reflect a year-over-year increase in product revenue attributable to our continued shipment of DenseLight photonic sensors, primarily for test & measurement applications. Gross margin was over 50% in the quarter, and we continued to diligently manage operating expenses. Our collective reductions in wages, professional fees, as well as management and consulting fees, resulted in a meaningful year-over-year improvement in net loss during the second quarter.

“As outlined at the 2017 Annual General Meeting (AGM) in July, we are focusing our design and engineering resources on further development of our Indium Phosphide (InP)-based hybrid dielectric photonics platform to introduce disruptive new solutions with lower cost and higher performance. Also, as discussed at the AGM, we are focused on securing a strategic partner to assist with further developing and commercializing our monolithic gallium arsenide (GaAs) optical engine. InP-based solutions for 100G applications have emerged as one of the largest and fastest growing segments in the data communications market. We believe our recently introduced hybrid dielectric photonics platform based on InP, which leverages a combination of POET’s integrated photonics expertise and proprietary dielectric waveguide technology, provides a compelling and differentiated solution in the multi-billion-dollar transceiver market. Reinforcing our strategic decision to focus on an InP-based hybrid platform is the ability to leverage the Company’s established InP fabrication and manufacturing facility in Singapore, which provides a number of operational and economic benefits.

“As we make progress toward developing a transceiver optical engine, we also expect to introduce photonic transceiver components for the data communications market. As an example, we recently introduced multiplexing and de-multiplexing devices that are based on our proprietary dielectric waveguide technology. We also expect to introduce distributed feedback (DFB) lasers with wavelengths spanning the O-band and C-band, with delivery of engineering samples to customers expected during the third quarter. Additionally, we are making solid progress on incorporating our Hybrid Integrated Photonics Packaging (HiPP) into new high-performance packaged solutions, such as narrow linewidth lasers, that will expand DenseLight’s existing line of sensor products beginning in 2018.

“In conclusion, our fundamental vision continues to be enabling disruptive solutions by leveraging innovative photonics integration to lower cost and increase performance for the data communications and sensing markets. POET’s strategic direction fully capitalizes on our core competencies and assets and is also well aligned with the trends and substantial growth opportunities within our targeted end markets, which is critical to realizing the highest return on investment for POET’s shareholders.”

- my comments- for what it's worth, POET has turned the corner and will only get better and better from here on. Now, I am skeptical about R&R's target price for the stock as hype and premature, but should POET not falter or be delayed on any keypoints roadmapped in their execution, then this stock will probably exceed even R&R's projections. In the short term, if North Korea holds the world markets hostage, then the markets in general not be in our favour. Let's hope that Trump gets the Korea situation right. It would be better for planet Earth in the long run.

Monolithic