UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 20-F/A

Amendment No. 1



(Mark One)

| | ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------------



OR



| | ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
        For the fiscal year ended December 31, 2019
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



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: 000-55135



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





Email: svv@poet-technologies.com

(Name, Telephone, Email and Address of Company Contact Person)













Securities registered or to be registered pursuant to Section 12(b) of the
Act: None.



Securities registered or to be registered pursuant to Section 12(g) of the
Act: Common Stock, no par value.



Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: Not Required.



The number of outstanding shares of common stock, no par value, as of December
31, 2019 was 288,363,553



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 during the preceding 12 months (or
for such shorter period that the registrant was required to submit such files). ☒



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 the Exchange Act.



| | Large accelerated filer ☐ | Accelerated filer ☒ | Emerging Growth Company ☒ | Non-accelerated filer ☐ | 
| | ------------------------- | ------------------- | ------------------------- | ----------------------- | 



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. ☐



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 ☒

















Explanatory Note





This Amendment No. 1 (“Amendment No. 1”) to the Annual Report on Form 20-F
of POET Technologies Inc. (the “Company”) for the fiscal year ended December 31, 2019, originally filed with the Securities
and Exchange Commission (the “SEC”) on April 30, 2020 (the “Original 20-F”), is being filed solely to
revise:



1) The certifications of the Company’s chief executive officer
and chief financial officer that were filed as Exhibits 12.1 and 12.2 to the Original 20-F in order to include information previously
omitted from the certifications and to amend the exhibit index accordingly.



2) To update page 30 of the Original 20-F under the sub-heading “Sale
of DenseLight Subsidiary”, in this Amendment No. 1, to include information related to material events that occurred between
April 30, 2020, the filing date of the Original 20-F, and July 17, 2020.



3) To update page 53 of the Original 20-F under the sub-heading
“Financing Activities”, in this Amendment No. 1, to include information related to material events that occurred between
April 30, 2020, the filing date of the Original 20-F, and July 17, 2020.



4) To update Note 26 (Subsequent Events) to the audited consolidated
financial statements of the Original 20-F, in this Amendment No. 1, to include information related to material events that occurred
between April 30, 2020, the filing date of the Original 20-F, and July 17, 2020. In connection therewith, the audit report of Marcum
LLP, independent registered public accounting firm, concerning such financial statements has been updated and included in this
Amendment No. 1 along with the consent of Marcum LLP, which is filed as Exhibit 23.1 hereto.



Except as described above, this Amendment No. 1 speaks as of the original filing date
of April 30, 2020, and no other changes have been made to the Original 20-F. The filing of this Amendment No. 1 does not, and
does not purport to, amend, update or restate the information in any other item, or exhibit to, the Original 20-F. This Amendment
No. 1 should be read in conjunction with the Company’s filings made with the SEC subsequent to the filing date of the Original
20-F.





















POET TECHNOLOGIES INC.
FORM 20-F ANNUAL REPORT
TABLE OF CONTENTS



|             |                                                                              | Page
|------------ | ---------------------------------------------------------------------------- | ----
|             |                                                                              |     
|Introduction | 1                                                                           
|PART I      
|             |                                                                             
|ITEM 1.      | Identity of Directors, Senior Management and Advisors                        | 4   
|ITEM 2.      | Offer Statistics and Expected Timetable                                      | 4   
|ITEM 3.      | Key Information                                                              | 4   
|ITEM 4.      | Information on the Company                                                   | 23  
|ITEM 4A.     | Unresolved Staff Comments                                                    | 33  
|ITEM 5.      | Operating and Financial Review and Prospects                                 | 33  
|ITEM 6.      | Directors, Senior Management, and Employees                                  | 57  
|ITEM 7.      | Major Shareholders and Related Party Transactions                            | 76  
|ITEM 8.      | Financial Information                                                        | 77  
|ITEM 9.      | The Offer and Listing                                                        | 78  
|ITEM 10.     | Additional Information                                                       | 79  
|ITEM 11.     | Quantitative and Qualitative Disclosures About Market Risk                   | 90  
|ITEM 12.     | Description of Securities Other Than Equity Securities                       | 91  
|             |                                                                              |     
|PART II     
|             |                                                                              |     
|ITEM 13.     | Defaults, Dividend Arrearages and Delinquencies                              | 91  
|ITEM 14.     | Material Modifications to the Rights of Security Holders and Use of Proceeds | 91  
|ITEM 15.     | Controls and Procedures                                                      | 91  
|ITEM 16.     | Reserved                                                                     | 93  
|ITEM 16A.    | Audit Committee Financial Expert                                             | 93  
|ITEM 16B.    | Code Of Ethics                                                               | 93  
|ITEM 16C.    | Principal Accounting Fees and Services                                       | 93  
|ITEM 16D.    | Exemptions from the Listing Standards for Audit Committees                   | 94  
|ITEM 16E.    | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       | 94  
|ITEM 16F.    | Changes in Registrant’s Certifying Accountants                               | 94  
|ITEM 16G.    | Corporate Governance                                                         | 94  
|ITEM 16H.    | Mine Safety Disclosure                                                       | 94  
|             |                                                                              |     
|PART III    
|             |                                                                              |     
|ITEM 17.     | Financial Statements                                                         | 94  
|ITEM 18.     | Financial Statements                                                         | 94  
|ITEM 19.     | Exhibits                                                                     | 95  















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 in the U.S. 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, 2019, 2018 and 2017 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.













1









Business of POET Technologies Inc.



POET designs, develops, manufactures and sells integrated opto-electronic
solutions for data communications and telecommunications markets. POET has developed and is marketing its proprietary POET Optical
InterposerÔ platform which utilizes a novel waveguide technology that allows the
integration of electronic and photonic devices into a single multi-chip module. The integration of devices into a single package
is achieved by applying advanced wafer-level semiconductor manufacturing techniques and novel packaging methods developed by POET.
POET’s Optical Interposer eliminates costly components, assembly and testing methods employed in conventional photonics solutions.
In addition to lowering costs compared to conventional devices, POET’s Optical Interposer provides a flexible and scalable
platform for a variety of photonics applications ranging from data centers to consumer products.



On November 8, 2019, the Company closed on the sale of its wholly owned subsidiary, DenseLight Semiconductors Pte. Ltd., to
a consortium of investors organized under DenseLight Semiconductor Technology (Shanghai) Ltd. (“DL Shanghai”)
for $26,000,000. POET shareholders approved the sale with 99% of votes submitted at a Special Meeting held on October 24,
2019, ratifying the Share Sale Agreement (“SSA”) signed by the Company on August 20, 2019. The buyer assumed control
of DenseLight upon closing. The sale proceeds are being paid over multiple tranches. The first tranche payment was received
on November 8, 2019 in the amount of US$8 million. Shares of DenseLight were placed in escrow in the Buyer’s name, to
be released by the escrow agent to the Buyer upon receipt of the remaining payments. The second tranche payment was made in
two installments, with the first paid on February 19, 2020 consisting of US$4.75 million and the second on March 30, 2020
of US$8.25 million for a total paid to date of US$21.0 million. The remaining payment of US$5 million is expected to be made
on or before May 31, 2020. Upon closing, the Company recognized a gain on the sale of $8,707,280. The Company received an
additional $2,000,000, in excess of the sale proceeds, with the most recently paid two tranches which was immediately paid
to Oak Capital on behalf of the Buyer for due diligence, legal and other expenses.



Although the Company continued to operate as a single entity
until the sale was closed, to meet financial reporting standards, the Company was required to report DenseLight as “discontinued
operations” separate from the remainder of the Company from January 1, 2020 and until Friday, November 8, 2019. Revenue and
expenses, and gains and losses relating to the discontinued operations have been removed from the results of continuing operations
and are shown as a single line item on the face of the consolidated statement of comprehensive loss.



During the year ended December 31, 2019, the Company reported
net loss from continuing operations, before taxes of $11,727,372.



The net loss from continuing operations included $2,083,815 spent on research
and development activities directly related to the development and commercialization of the POET Optical Interposer Platform. Research
and development included $237,311 of non-cash fair value stock-based compensation. $6,697,387 was spent on selling, marketing and
administration expenses which included non-cash operating costs of $2,650,830 related to the fair value of stock-based compensation
and $243,674 related to depreciation and amortization.



The Company incurred $819,911 of interest expense and $372,340 of debt
issuance costs related to $7,729,921 borrowed at various dates and from various lenders during 2019. The Company repaid $4,000,000
of the borrowed funds on November 8, 2019.



During 2019, the Company performed an impairment analysis on its goodwill
and intangible assets related to the acquisition of BB Photonics in 2016. The Company determined that these assets were impaired
and consequently recognized an impairment loss of $1,764,459.





2







Net income from discontinued operations, net of taxes was $5,481,757.
Discontinued operations generated revenue of $4,426,355 from the sale of sensing products and non-recurring engineering (“NRE”).
Gross profit was $3,224,982 or 73%. Included in the net income from discontinued operations, net of taxes was $5,677,222 spent
on research and development and $1,950,526 spent on selling, marketing and administration. Discontinued operations had other income
of $1,251,737 resulting primarily from cash credits either collected or recoverable from the Economic Development Board (“EDB”)
of Singapore. The income from discontinued operations, net of taxes included a gain on the sale of discontinued operations, net
of taxes of $8,707,280.



The Company’s balance sheet as of December 31, 2019 reflects assets
with a book value of $24,077,355 compared to $25,137,903 as of December 31, 2018. Eighty-four percent (84%) of the book value at
December 31, 2019 was in current assets consisting primarily of receivable from the sale of discontinued operations of $18,000,000
compared to twenty-seven percent (27%) of the book value as of December 31, 2018, or $6,888,264, was in current assets consisting
primarily of cash and other current assets.



As at December 31, 2019, the Company had a working capital balance of
$15,354,149. The Company is satisfied that it will have sufficient funds meet its operating requirements over the next 12 months.





Financial and Other Information



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



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 material 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:



| | o | we have a limited operating history;
| | - | ------------------------------------



| | o | our need for additional financing, which may not be available on acceptable terms or at all;
| | - | --------------------------------------------------------------------------------------------



| | o | the possibility that we will not be able to compete in the highly competitive semiconductor market;
| | - | ---------------------------------------------------------------------------------------------------



| | o | the risk that our objectives will not be met within the timelines we expect or at all;
| | - | --------------------------------------------------------------------------------------



| | o | research and development risks;
| | - | -------------------------------



| | o | the risks associated with successfully protecting patents and trademarks and other intellectual property;
| | - | ---------------------------------------------------------------------------------------------------------



| | o | the need to control costs and the possibility of unanticipated expenses;
| | - | ------------------------------------------------------------------------



| | o | manufacturing and development risks;
| | - | ------------------------------------



| | o | the risk that the price of our common stock will be volatile;
| | - | -------------------------------------------------------------



| | o | the risk that shareholders’ interests will be diluted through future stock offerings, option and warrant exercises; and
| | - | -----------------------------------------------------------------------------------------------------------------------



| | o | other risks and uncertainties described in ITEM 3.D. “Risk Factors”.
| | - | --------------------------------------------------------------------





3









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.



PART I



ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS



A. Not Required.



ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE



Not Required.



ITEM 3. KEY INFORMATION



| | A. | Selected Financial Data
| | -- | -----------------------



The selected financial data of the Company for the years ended
December 31, 2019, 2018 and 2017 was derived from the audited annual consolidated financial statements of the Company, which have
been audited by Marcum LLP, independent registered public accounting firm. Selected financial data of the Company for the years
ended December 31, 2016 and 2015 was derived from the consolidated financial statements of the Company, which are not included
in this Annual Report.



The information contained in the selected financial
data for the 2019, 2018 and 2017 years is qualified in its entirety by reference to the Company’s audited 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 related notes 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 International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”).



Since its formation, the Company has financed its
operations from public and private sales of equity securities, proceeds received upon the exercise of warrants and stock options,
research and development contracts from U.S. government agencies, sales of the Company’s photonic products and, prior to
2012, by sales of solar energy equipment products. The Company has never been profitable, so its ability to finance operations
has been dependent on equity financings. Since 2016, through its former subsidiary, DenseLight, the Company generated cash flow
from the sale of its photonic sensing products and NRE. We believe, however, that it will need to rely on the sale of equity securities,
debt securities or a combination of both to provide funds for its activities on an ongoing basis until we have concluded the development
of the Optical Inter-poser. See ITEM 3.D. “Risk Factors.”



The Company has not declared any dividends since incorporation
and does not anticipate that it will do so in the foreseeable future.





4









Consolidated Statements of Operations Under

International Financial Reporting Standards

(US$)



|                                                                   |  |   |              | Reclassified (1) |  |  
|------------------------------------------------------------------ |  | - | ------------ | ---------------- |  | -
|                                                                   |  |   | 2019         |                  |  |  
|                                                                   |  |   |              |                  |  |  
|Operating Expenses                                                 |  |   |              |                  |  |  
|Selling, marketing and administrative                              |  | $ | 6,697,387    |                  |  | $
|Research and development                                           |  |   | 2,083,815    |                  |  |  
|Impairment loss                                                    |  |   | 1,764,459    |                  |  |  
|Interest expense                                                   |  |   | 819,911      |                  |  |  
|Amortization of debt issuance costs                                |  |   | 372,340      |                  |  |  
|Loss on disposal of property and equipment                         |  |   | -            |                  |  |  
|Other income, including interest                                   |  |   | (10,540      | )                |  |  
|Operating Expenses                                                 |  |   | 11,727,372   |                  |  |  
|Income tax recovery                                                |  |   | (292,740     | )                |  |  
|Net loss from continuing operations                                |  |   | (11,434,632  | )                |  |  
|Income (loss) from discontinued operations, net of taxes           |  |   | 5,481,757    |                  |  |  
|Net loss                                                           |  |   | (5,952,875   | )                |  |  
|Deficit, beginning of year                                         |  |   | (133,195,932 | )                |  |  
|Deficit, end of year                                               |  | $ | (139,148,807 | )                |  | $
|                                                                   |  |   |              |                  |  |  
|Basic and diluted loss per share, continuing operations            |  | $ | (0.04        | )                |  | $
|Basic and diluted income (loss) per share, discontinued operations |  | $ | 0.02         |                  |  | $
|Basic and diluted loss per share                                   |  | $ | (0.02        | )                |  | $



(1) The information above has been reclassified to present DenseLight results as discontinued operations for the years 2016
– 2018.







5









Consolidated Statements of Discontinued Operations Under

International Financial Reporting Standards

(US$)







|                                                                |  |   | For
                                         the Period from
                                                                                                                                                                                                                                       January
                                         1,
                                                                                                                                                                                                                                       2019
                                                                                                                                                                                                                                       to
                                                                                November
                                         8, |   |  |   | For the Years Ended December 31, |  
|--------------------------------------------------------------- |  | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - |  | - | -------------------------------- | -
|                                                                |  |   | 2019                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |  |   | 2018                             |  
|                                                                |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |  |   |                                  |  
|Revenue                                                         |  | $ | 4,426,355                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  | $ | 3,888,185                        |  
|Cost of Revenue                                                 |  |   | 1,201,373                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  |   | 1,475,969                        |  
|Gross Margin                                                    |  |   | 3,224,982                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  |   | 2,412,216                        |  
|Operating Expenses                                              |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |  |   |                                  |  
|Selling, marketing and administrative                           |  |   | 1,950,526                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  |   | 5,515,329                        |  
|Research and development                                        |  |   | 5,677,222                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  |   | 6,430,328                        |  
|Interest expense                                                |  |   | 74,494                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |  |   | -                                |  
|Impairment loss                                                 |  |   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |  |   | 156,717                          |  
|Other income                                                    |  |   | (1,251,737                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | ) |  |   | (1,491,556                       | )
|Operating Expenses                                              |  |   | 6,450,505                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  |   | 10,610,818                       |  
|Net loss from operations                                        |  |   | (3,225,523                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | ) |  |   | (8,198,602                       | )
|Change in fair value contingent consideration                   |  |   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |  |   | -                                |  
|Gain on sale of discontinued operations, net of taxes           |  |   | 8,707,280                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  |   | -                                |  
|Net income (loss) from discontinued operations                  |  |   | 5,481,757                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  |   | (8,198,602                       | )
|Income tax recovery                                             |  |   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |  |   | 297,940                          |  
|Income (loss) from discontinued operations, net of income taxes |  | $ | 5,481,757                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |  | $ | (7,900,662                       | )























6







Consolidated Statements of
Financial Position
Under International Financial Reporting Standards
(US$)





|                                                    |  | December 31,
|--------------------------------------------------- |  | ------------
|                                                    |  |             
|Assets                                              |  |             
|Cash and cash equivalents                           |  | $           
|Short-term investments                              |  |             
|Accounts receivable                                 |  |             
|Receivable from the sale of discontinued operations |  |             
|Prepaids and other current assets                   |  |             
|Inventory                                           |  |             
|Property and equipment                              |  |             
|Patents and licenses                                |  |             
|Right of use asset                                  |  |             
|Intangible assets                                   |  |             
|Goodwill                                            |  |             
|Total Assets                                        |  | $           
|Liabilities                                         |  |             
|Accounts payable and accrued liabilities            |  | $           
|Convertible debentures                              |  |             
|Lease liability                                     |  |             
|Deferred tax liability                              |  |             
|Deferred rent                                       |  |             
|Total Liabilities                                   |  |             
|Shareholders’ Equity                                |  |             
|Share capital                                       |  |             
|Equity component of loan payable                    |  |             
|Warrants                                            |  |             
|Contributed surplus                                 |  |             
|Accumulated other comprehensive loss                |  |             
|Deficit                                             |  |             
|Total Equity                                        |  |             
|Total Liabilities and Equity                        |  | $           





7









| | B. | Capitalization and Indebtedness
| | -- | -------------------------------



During 2019 the Company closed five tranches of a private placement of
the Convertible Debentures that raised gross proceeds of $3,729,921. The Convertible Debentures, bear interest at 12% per annum,
compounded annually with 1% payable at the beginning of each month and mature two years from the date of issue. $3,429,105 was
owed on convertible debentures at April 22, 2020.



A summary of the Company’s indebtedness at April
22, 2020 is as follows:



|Issue Date |  | Maturity Date |  | Loan |           | Repayment/Conversion |  | Balance
|---------- |  | ------------- |  | ---- | --------- | -------------------- |  | -------
|03-Apr-19  |  | 03-Apr-21     |  | $    | 1,449,752 |                      |  | $      
|03-May-19  |  | 03-May-21     |  |      | 1,087,408 |                      |  |        
|03-Jun-19  |  | 03-Jun-21     |  |      | 641,328   |                      |  |        
|02-Aug-19  |  | 02-Aug-21     |  |      | 414,205   |                      |  |        
|06-Sep-19  |  | 06-Sep-21     |  |      | 137,228   |                      |  |        
|Balance    |  |               |  | $    | 3,729,921 |                      |  | $      





| | 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.”



Risks Related to Our Business



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 immediate loss of all or a substantial part of our revenue, 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.





8







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 are either not fully
developed or are in qualification stages, and which no customer has yet fully committed to adopting in 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 DenseLight engineering personnel. We conducted development of component devices separately 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. Following divestment, we will have little or no control over any leakage of certain proprietary information
or know-how and additional development with the DenseLight operation on component devices may expose our intellectual property
to parties that we cannot control. Further, 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 generate sufficient cash to
service our debt obligations.



Throughout 2019, we sold unsecured convertible debentures.
Our ability to make continued payments on our debt will depend on our financial and operating performance, which may fluctuate
significantly from quarter to quarter, and is subject to prevailing economic conditions and financial, business and other factors,
many of which are beyond our control. We cannot assure you that we will be able to generate sufficient cash flow or that we will
be able to borrow funds from another source in amounts sufficient to enable us to service our debt. If we are not able to generate
sufficient cash flow from operations or to borrow sufficient funds to service our debt, we may be required to sell equity or assets,
reduce expenditures, refinance all or a portion of our existing debt or obtain additional financing. We cannot assure you that
we will be able to refinance our debt, sell assets or equity or borrow more funds on terms acceptable to us, if at all.



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.





9







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.



Customer demand for paid non-recurring engineering
work (NRE) is difficult to forecast accurately and, as a result, we may be unable to match our engineering resources with customer
engagements.



Much of our revenue during the coming years will be for non-recurring
engineering work (NRE) related to demonstrating the functionality of the POET Optical Interposer in various applications. At any
given time, we have multiple discussions with potential customers ongoing, some of which mature into proposals and a portion of
those into paid development work. It is not possible to estimate in advance which of the multiple discussions is likely to convert
into a paid project. Nevertheless, we make planning and spending decisions, including determining the levels of NRE that we will
seek and accept based on a variety of factors, including the market position and prestige of the customer, our determination of
the likelihood of success of applying our solution and the size and likely success of any products that may result. Our decisions
involve internal staffing levels, contracts with vendors and co-development partners, sub-component procurement, capital expenditures,
commitments to production schedules and other resource requirements. While our customers may provide us with forecasts of their
potential needs, they are typically not contractually committed to more than initial phases of design work, with subsequent work
dependent on both the success of our efforts and theirs. Orders for additional engineering work may increase, decrease, cancel
or delay at any time without significant penalty. The short-term nature of commitments by our customers and the possibility of
unexpected changes in demand reduces our ability to accurately estimate future NRE revenues and our own resource levels. If any
of our estimates of the number and scope of projects undertaken for customers is incorrect, or customers decrease, stop or delay
purchasing our services or products for any reason, our business and results of our 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 optical component products, including LEDs, lasers, pluggable components, modules
and subsystems, among others, that compete (or may in the future compete) directly with our current and proposed product offerings.



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







10









We have limited operating history in the datacom
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 datacom market and we have no 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 datacom market are not realized, our financial condition or results of operations may be adversely affected.



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”) and Optical Interposer development and 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 shut downs due to circumstances beyond their control such as 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 prevents us from being able to respond immediately
to adverse events affecting our suppliers.

































11







Our international business and operations expose
us to additional risks.



We have significant tangible assets located outside
Canada and the United States. We have operating facilities are located in Singapore. 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.
| | - | -------------------------------------------------------------



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.





12











Our predecessor company received subsidies
and other types of funding from government agencies in the locations in which we operate. The funding agreements stipulate that
if we do not comply with various covenants, including eligibility requirements, and/or do not achieve certain pre-defined objectives,
those government agencies may reclaim all or a portion of the funding provided. If this were to occur, we would either not be in
a position to repay the claimed amounts or would have to borrow large sums in order to do so or refinance with dilutive financing,
which could adversely affect our financial condition.



Our predecessor company, Opel Solar and its wholly-owned subsidiary
ODIS, received research and development grants from the United States Air Force and from NASA. We cannot guarantee that one or
more agencies will not seek repayment of all or a portion of the funds provided, and if this were to occur, we could have to borrow
large sums or refinance with dilutive financing in order to make the repayments, which would adversely affect our 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.





13









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, 2019,
we had an accumulated deficit of $139,148,807. For the years ended December 31, 2019 and December 31, 2018, we incurred net
losses of $5,952,875 and $16,322,779 respectively.



The Company had working capital of $15,354,149 on December 31, 2019 compared
to $3,847,842 on December 31, 2018. The Company’s balance sheet as of December 31, 2019 reflects assets with a book value
of $24,077,355 compared to $25,137,903 as of December 31, 2018. Eighty-four percent (84%) of the book value at December 31, 2019
was in current assets consisting primarily of receivable from the sale of discontinued operations of $18,000,000 compared to twenty-seven
percent (27%) of the book value as of December 31, 2018, or $6,888,264, was in current assets consisting primarily of cash and
other current assets.



The Company is satisfied that it has sufficient working capital to meet
its operating requirements over the next 12 months.

















14









The optical communications industry is subject to
significant operational fluctuations. In order to remain competitive, we incur substantial costs associated with research and development,
qualification, 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.



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 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.



If we raise additional funds through the issuance
of our common stock or convertible securities, the ownership interests of our stockholders could be significantly diluted. These
newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. Additional financing
may not, however, be available on terms favorable to us, or at all, if and when needed, and our ability to fund our operations,
take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could
be significantly limited. If we cannot raise required capital when needed, including under our Short Form Prospectus filed with
the Canadian Securities Exchange and the SEC in October 2016 and refiled in November 2018, we may be unable to continue technology
and product development, meet the demands of existing and prospective customers, adversely affecting our sales and market opportunities
and consequently our business, financial condition and results of operations.



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.



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 Canada, the U.S. and other 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 Canada, the U.S. or other countries may limit our ability to protect the intellectual property rights that
these applications and registrations intended to cover.





15









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.



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.



If we fail to maintain effective internal control
over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.



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. As long as we qualify as an “emerging growth company” under the JOBS Act, we will not have to provide
an auditor’s attestation report on our internal controls. During the course of any evaluation, documentation or attestation,
we or our independent registered public accounting firm may identify weaknesses and deficiencies that we may not otherwise identify
in a timely manner or at all as a result of the deferred implementation of this additional level of review.





16









Our internal controls 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 Canadian Securities Act and the Securities Exchange Act of 1934, or the Exchange Act, restatements of our consolidated
financial statements, a decline in our stock price, suspension or delisting of our common stock by the TSX Venture Exchange, or
other material adverse effects on our business, reputation, results of operations or financial condition.



Our ability to use our net operating losses and
certain other tax attributes may be limited.



As of December 31, 2019, we had accumulated net operating
losses (NOLs), of approximately $92 million. Varying jurisdictional tax codes have restrictions on the use of NOLs, if a corporation
undergoes an “ownership change,” the corporation’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 the annual utilization of our NOLs may not be subject to such limitation at this time. However,
should we experience additional ownership changes, our NOL carry forwards may be limited.



We are subject to governmental export and import
controls that could subject us to liability or impair our ability to compete in international markets.



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.



We are exposed to risks and increased expenses and business risk as a result
of Restriction on Hazardous Substances, or RoHS directives.



Following the lead of the European Union (“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. 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.





17









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 and Singapore
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 wafer fabrication facility
in Singapore is in an area that is susceptible to hurricanes. Any disruption in our manufacturing facilities 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 have closed the sale of our DenseLight subsidiary and received
$21 million of the $26 million due on the sale. The remaining tranche of $5 million is scheduled to be paid on or before May 31,
2020. If for any reason the holders or our convertible debentures decide to redeem rather than convert their debentures at the
time we receive the final payment and provide notice to holders that they are entitled to redeem, we could experience a significant
outflow of cash that could interrupt our operating plans, delay new product introduction and cause significant harm to the Company.





We have planned our operation based on receiving the full consideration
for the sale of DenseLight, we have decided not to declare the sale “completed” until we receive the final payment.
Given the environment that COVID-19 has produced and the likely losses that have been incurred by the holders of our convertible
debentures in other investments, we are concerned that once those holders are entitled to redeem that substantial numbers of them
may do so, resulting in a significant outflow of cash during a critical period of time for the Company. While we intend to contact
all the convertible debentures holders to explain the burden that redemptions would place on the Company, we cannot guarantee that
our appeals for restraint in redemptions would be successful.



The outstanding amount owed in connection with the convertible debentures
is $3,429,105. If we do not receive the final payment from the Buyer, and if all or a majority of the purchasers of the convertible
debentures request redemption, the Company may have to divert its limited cash to these repayments rather than into its operations



The coronavirus outbreak could adversely affect our results
of operations.



The global outbreak of COVID-19 has resulted in Canada, the United States,
Singapore and other countries halting or sharply curtailing the movement of people, goods and services. The curtailed activity
has negatively affected many businesses, including 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. Given the rapidly
changing developments we cannot accurately predict what effects these conditions will have on our business, which will depend on,
among other factors, the ultimate geographic spread of the virus, the duration of the outbreak, travel restrictions and business
closures imposed globally by various governments.





18









Risks Related to Our Common Stock



Our stock price has been and may continue to be
volatile.



The trading price for our common stock on the TSX
Venture Exchange (“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.



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 April 22, 2020, our 52-week high and low closing
market prices for our common stock on the TSXV were CA$0.56 and CA$0.23.





19









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. Since 2012 we raised approximately US$60.6 million (net of share
issue costs) in equity public offerings, financing through private placements or the exercise of stock options and warrants in
support of the Company’s business, which has resulted in significant dilution to existing shareholders. Further equity financings
will also result in dilution to existing shareholders, and such dilution could be significant.



Future sales of common stock or warrants, 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 shares of common
stock or warrants, or the perception that sales could occur, could adversely affect the market price of our common stock. Additionally,
as of April 22, 2020, there were outstanding options to purchase up to 29,539,155 shares of our common stock that are currently
exercisable and additional outstanding options to purchase up to 25,047,296 shares of common stock that are exercisable over the
next several years. As of April 22, 2020, there were outstanding warrants to purchase 45,729,850 shares of our stock. The holders
of these options and warrants have an opportunity to profit from a rise in the market price of our common stock 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$0.65, the weighted average exercise price of warrants is CAD$0.57, which compares to the CAD$0.52 market price at closing on
April 22, 2020. If all of these securities were exercised, an additional 99,331,301 common shares would become issued and outstanding.
This represents an increase of 34.2% in the number of shares issued and outstanding and would result in significant dilution to
current shareholders





The risks associated with penny stock classification
could affect the marketability of the Company’s common shares and shareholders could find it difficult to sell their shares.



The Company’s common shares are subject to
“penny stock” rules as defined in Exchange Act Rule 3a51-1. The SEC adopted rules that regulate broker-dealer practices
in connection with transactions in penny stocks. Transaction costs associated with purchases and sales of penny stocks are likely
to be higher than those for other securities. Penny stocks generally are equity securities with a price of less than $5.00 (other
than securities listed on certain U.S. national securities exchanges, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange).



The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information
about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer
with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.



In addition, the penny stock rules require that prior
to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the Company’s
common shares in the United States and shareholders may find it more difficult to sell their shares.





20











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 2020 threshold for WTO investors that are SOEs will be $428 million based on the book value of the Canadian business'
assets, up from $416 million in 2019. The 2020 thresholds for review for direct acquisitions of control of Canadian businesses
by private sector investor WTO investors ($1 billion) and private sector trade- agreement investors ($1.5 billion) remain the same
and are both based on the "enterprise value" of the Canadian business being acquired.





21











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 data 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 Section
14 proxy rules that are applicable to domestic U.S. issuers. The submission of proxy and annual meeting of shareholder information
(prepared to Canadian standards) on Form 6-K has typically been more limited than the submissions required of U.S. issuers and
results in 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, due to 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 shareholders having less data in this regard than is available with respect to U.S. issuers.



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.



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.







22











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 13,611,150 common shares to the former shareholders of DenseLight.



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 1,996,090 common shares of the
Company to the former shareholders of BB Photonics.





23











The following is a graphic description of the Company
and its subsidiaries:















24









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 developer of
the POET platform semiconductor process IP for fabrication of integrated circuit devices containing both electronic and optical
elements in a single package ("hybrid integration").





BB Photonics Inc. and BB Photonics UK Ltd.





BB Photonics develops photonic integrated components
for the datacenter market utilizing embedded waveguide technology that is intended to enable on-chip athermal wavelength control
which lowers the total solution cost of datacenter photonic integrated circuits.



POET Technologies Pte Ltd. (“PTS”)



PTS is a wholly owned subsidiary of POET Technologies
Inc. Situated in Singapore, PTS tests and validates the designs of ODIS



The Company operates geographically in the United
States, Canada and Singapore



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          |  |   | Capital Expenditure |  | Purpose
|--------------- |  | - | ------------------- |  | -------
|Fiscal 2019 (1) |  | $ | 2,121,987           |  |        
|Fiscal 2018     |  | $ | 3,785,760           |  |        
|Fiscal 2017     |  | $ | 1,030,340           |  |        



| | (1) | Prior to the sale of DenseLight, the Company spent $1,610,503 in capital
expenditures at DenseLight and $511,484 on capital expenditures at POET. The capital items acquired at DenseLight were sold as
part of the sale.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 and 21 Changi North Way, #04-06, Singapore, 498774.



| | B. | Business Overview
| | -- | -----------------



Corporate Overview



Overview



We design, develop, manufacture and sell both discrete and integrated opto-electronic
solutions for data communications and telecommunications markets. POET has developed and is marketing its proprietary POET Optical
InterposerÔ platform. The POET Optical Interposer utilizes a novel waveguide technology
that allows the integration of electronic and photonic devices into a single multi-chip module. The integration of devices into
a single package is achieved by applying advanced wafer-level semiconductor manufacturing techniques and novel packaging methods
developed by POET. POET’s Optical Interposer eliminates costly components, assembly and testing methods employed in conventional
photonics solutions. In addition to lowering costs compared to conventional devices, POET’s Optical Interposer provides a
flexible and scalable platform for a variety of photonics applications ranging from data centers to consumer products.





25









POET’s Optical Interposer is a platform technology upon which multiple
applications can be based, including transceivers for data- and tele-communications, integrated photonics on electronic switching
devices, low-cost components for the networking and cellular markets, automotive LIDAR and a plethora of sensing and other applications
using light as a medium for data transmission. In each case, devices traditionally associated with photonics, such as laser diodes,
light emitting diodes, detectors, amplifiers and the associated waveguides and other passive devices are designed specifically
in the context of the Optical Interposer to meet the needs and functions of specific applications.



POET has targeted as the first application of the Optical Interposer the development
of Optical Engines for transceivers used in data centers. Transceivers are used to convert digital electronic signals into light
signals and to transmit and receive those light signals via fiber optic cables within datacenters and between datacenters and metropolitan
centers in a vast data and tele-communications network. In 2019 we delivered prototypes of certain components designed for our
Optical Engines and we expect to continue to do so throughout 2020. These prototypes address the emerging high-growth segment of
the current market for Optical Engines. Continued development of our Optical Engine prototypes is intended to add several commonly
used communication protocols and data speeds to increase the functionality of our Optical Engines and to address broader markets.



Virtually all of POET's R&D expenditures in recent years have been in some
way connected to the Optical Interposer. We expect to continue to spend the majority of our R&D resources for the foreseeable
future on Optical Interposer-based components across a variety of potential applications. DenseLight has also incurred R&D
expenditures for conventional non-interposer-based products, primarily in the area of photonic sensing that represent the majority
of the Company’s current product sales.



As a platform technology, Optical Interposer development does not have a specific
end point. Each application of the Optical Interposer requires development specific to the application. POET’s product roadmap
is currently focused on the development of Optical Engines for optical transceivers. Optical Engines include all of the photonics-related
components of a transceiver but do not include several of the electronic devices needed for a functioning transceiver module. Nor
does it include the external packaging and optical fibers. Nevertheless, Optical Engines represent the majority of the cost and
value of most optical transceivers.



The “active” components that are included in a POET Optical Engine
include lasers, detectors and modulators fabricated on InP or Silicon substrate and specifically designed to be integrated into
the Optical Interposer fabric. We have supplemented our active component device development with co-development partners and license
agreements, including for certain types of lasers and modulators. This not only reduces the risk to internal development and accelerates
time to market, but it also ensures second sources of Optical Interposer-compatible active components, a critical part of our strategy
going forward.



In parallel to these activities, POET also directed development programs in two
other areas for the Optical Interposer platform outside of DenseLight, including Passive Component design and development and Core
Integration process development. Passive devices include filters, mux-demux devices, waveguides and spot size converters, all designed
and fabricated using POET’s proprietary materials and processes. The Optical Interposer devices are fabricated at a third-party
foundry. We transferred the basic processes for producing our Optical Interposers to our foundry partner in 2018 and since then
we have continued to improve those processes in order to make them suitable for high volume manufacturing.



Core Integration Process Development relates primarily to advanced packaging
methods that, combined with the unique design of the Optical Interposer, allows true wafer-scale assembly and test. We do not believe
that such true wafer-scale integration has yet been demonstrated by any other approach in the photonics industry. We are able to
achieve chip-level integration and wafer-scale assembly, test and packaging because all of the active devices are designed to be
placed and “matched” to passive device interfaces on the foundational Optical Interposer wafer using pick-and-place
assembly techniques. We eliminate the high cost and cumbersome process of testing each component following placement. Once placed
and tested at wafer scale, each Optical Interposer device is sealed, the wafer is separated into hundreds of individual die, and
the final Optical Engine is ready for shipment to the customer. Each of these process steps, from flip-chipping of devices onto
the Optical Interposer, pick and place assembly, hermetic sealing and singulation required substantial innovation and development,
including several techniques that are unique in the photonics and compound semiconductor industries.



We are working with leading industry partners on optical engines and other components
for 400G transceivers, which is the next generation of transceiver modules that are expected to be introduced into data centers
in the coming months and years. We believe that the Optical Interposer platform is very relevant to markets beyond data communications,
such as telecommunications, Automotive LIDAR, and integration with Application Specific Integrated Circuits (ASICs), including
switches and graphics generators.



___________________________________



“G” is an abbreviation for “Giga bits per second”,
the rate at which the device transmits or receives data.





26









Industry Background



The explosion in data, storage and information distribution is driving
extraordinary growth in internet traffic and cloud services. The expected growth in the networking and data communication market
is the result of many factors, among them being, the growth of wireless and mobile traffic (which will account for 71% of total
Internet Provider (IP) traffic by 20221), social media activity, the progression of video transmission, the emergence
of imaging such as virtual/augmented/mixed reality and 3D video, the continued migration to cloud storage, the propagation of sensors
feeding the Internet of Things, and the evolution of big data analytics and machine learning/artificial intelligence. These factors
will continue to drive a long-term increased demand for more capacity and higher speeds.



Photonics has traditionally been employed to transmit and receive data
over long distances because light can carry considerably more content and data at faster speeds than other means of transmission,
such as radio waves or copper wires. Optical transmission becomes more energy efficient as compared to electronic alternatives
when the transmission length and speed increase. As a natural consequence, optics are systematically replacing copper in many of
the data center communication links where speed, bandwidth and energy are at a premium.



Data center operators are increasing the size and scale of their facilities,
while simultaneously looking to component suppliers for solutions capable of providing higher data transmission rates. Within data
centers, data communications over distances 500 m to 2 km have already been transitioned from inherently lower speed copper cable
to optical fibers. Furthermore, short reach communications, either rack-to-rack or within the rack as well as those requiring speeds
of up to 100G, are now increasingly being converted from copper to optical cables.



Outside the Data Centers, future 5G build-out of mobile communications
will drive speed and capacity requirements closer to the user with significant reduction in latency. Compared to 4G, 5G technology
standard offers much faster download and upload speed, minimum delay in data communication and processing, as well as much higher
density in device connections. 5G will enable advances in virtual reality, augmented reality, autonomous driving, high-definition
video, and the Internet of Things, among other applications. All of these applications require advanced photonics devices to provide
higher speeds and more bandwidth.



___________________________________



1 Cisco Visual Networking Index: Forecast and Methodology,
2017-2022, White Paper,Executive Summary, Feb. 27, 2019





27









Photonics Markets



POET’s primary intent is to sell its Optical Interposer-based
solutions in the Optical Data Communications market.



The Optical Communications Market (which includes optical
switching equipment, fiber optic transmission systems, transceivers, etc. for all industries) is forecasted to grow at about 9%
CAGR over the period from 2017 to 2023, to US$24 billion from a current US$15 billion.2 System and component growth
is driven largely by global Internet Provider (IP) traffic, which is expected to nearly triple from 2017 to 2022, representing
a 26% CAGR.3Within the overall Data Communications market, photonic transceivers will represent a $25 billion market
opportunity in 2025, according to Oculi, llc.4 The primary segments for photonic transceivers are Ethernet,
wide area network (WAN) and dense wavelength division multiplexing (DWDM), all of which are predominantly addressed by InP-based
optical technologies. Ethernet transceivers are forecasted to grow to $7.4 billion by 2025 with 100G driving a majority of the
growth. Within Ethernet, single mode transceivers based on InP devices are forecasted to outgrow multimode transceivers based
on GaAs devices by a factor of 6:1. Segmented by distance, the majority of growth is expected in the <10km segment ($4.3 billion
by 2025).5



Integrated photonic transceivers, incorporating approaches
comparable to that of POET, are expected to overtake those using discrete components by 2021, growing from a current $3.2 billion
to $20 billion in 20256. Within this market, POET is focused on the highest growth segments, including Wavelength
Division Multiplexing (WDM) for medium-reach (500m – 2km) Ethernet datacom connections and Wide Area Network protocols for
long-reach or metro applications (2km – 10km). The majority of today’s discrete transceiver suppliers are shipping
100G transceivers in a 4x25G format, having developed assembly methods for placing multiple laser chips on one substrate and coupling
the output into one fiber using micro-optic filters and other elements. POET’s approach is to use the Optical Interposer
to combine multiple active and passive devices into a single device, or “Optical Engine”, which when combined with
control electronics and an outer housing, constitutes a pluggable optical transceiver. We plan to sell our optical engines to
manufacturers and assemblers of optical transceiver modules. We believe our Optical Engine solution will be cost competitive with
conventional modules as well as silicon photonics in the <2km data center market, and it should be scalable to 10km, and support
200G and 400G datacom speeds.



While the growth curve for photonics products has flattened
in 2019, especially in 100G datacom applications, we believe that margin pressures on module makers will create large opportunities
for a low or lowest cost provider. In addition, in datacom, the overall slowing of growth has the advantage of providing more
time for the design and introduction of first generation 400G transceivers, which we have prioritized for our first Optical Interposer
prototypes.



___________________________________



2 Market Research Future Optical Communications
Market Research Report – Global Forecast to 2023, January 2019

3 Cisco VNI,Forecast Overview, Feb.
27, 2019

4 Oculi, llc, Estimates for 2025 commissioned
by POET Technologies, Inc., March 2017

5 Ibid

6 Ibid







28









Our Products



| | · | POET is currently engaged in the development of 400G Optical Engines and components for 400G transceiver
assemblies.
| | - | --------------------------------------------------------------------------------------------------------------------



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 65 issued patents and 11 patent applications pending and three provisionals
in process. The patents cover device structures, underlying technology, applications of the technology and fabrication processes.
We believe these patents provide a significant barrier to entry against competition, along with trade secrets and know-how. We
intend to continue to apply for additional patents in the future. 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.







29









Sale of DenseLight Subsidiary



On February 3, 2019, management committed to a plan to
sell its subsidiary, DenseLight. The decision was taken in line with a strategy to focus on the Company's opportunities related
to its Optical Interposer. Management determined that the divestiture of DenseLight would immediately reduce the Company's operating
losses and cash burn, while allowing the Company to pursue a "fab-light" strategy with a less capital-intensive business
model that is focused on growing the Optical Interposer business through targeted investments in the design, development and sale
of vertical market solutions. Consequently, all saleable assets and liabilities relating to DenseLight were classified as "Non-current
assets held for sale" or "disposal group liabilities". An impairment assessment was done on the assets that are
held for sale. It was determined that no assets were impaired either on the date management committed to a plan of sale or on November
8, 2019 when the sale was consummated.



On November 8, 2019, the Company closed on the sale of its wholly owned subsidiary, DenseLight Semiconductors Pte. Ltd., to
a consortium of investors organized under DenseLight Semiconductor Technology (Shanghai) Ltd. (“DL Shanghai”)
for $26,000,000. POET shareholders approved the sale with 99% of votes submitted at a Special Meeting held on October 24,
2019, ratifying the Share Sale Agreement (“SSA”) signed by the Company on August 20, 2019. The buyer assumed control
of DenseLight upon closing. The sale proceeds are being paid over multiple tranches. The first tranche payment was received
on November 8, 2019 in the amount of US$8 million. Shares of DenseLight were placed in escrow in the Buyer’s name, to
be released by the escrow agent to the Buyer upon receipt of the remaining payments. The second tranche payment was made in
two installments, with the first paid on February 19, 2020 consisting of US$4.75 million and the second on March 30, 2020
of US$8.25 million for a total paid to date of US$21.0 million. The remaining payment of US$5 million is expected to be made
on or before May 31, 2020. Upon closing, the Company recognized a gain on the sale of $8,707,280. The Company received an
additional $2,000,000, in excess of the sale proceeds, with the most recently paid two tranches which was immediately paid
to Oak Capital on behalf of the Buyer for due diligence, legal and other expenses.



On June 29, 2020 and July 3, 2020, the Company received payments in the cumulative amount
of $2,500,000 from the Buyer of DenseLight for a total received of $23,500,000. Taking into consideration the length of time it
had taken the Buyer to make the foregoing payments and the Company’s expectations regarding the likelihood of receiving an
additional payment, the Company determined, and the Buyer accepted, that it was in the Company’s best interest to accept
the partial payments as final payment on the Company’s receivable and to restructure its relationship with DenseLight to
better accommodate the Company’s current supply needs.



Our Strategy



Our vision for the company is to become the global leader in chip-scale photonic
solutions by deploying our Optical Interposer technology to enable the seamless integration of electronics and photonics for a
broad range of vertical market applications.



Our strategy includes the following key elements:



· Introduce the Optical Interposer concept to suppliers of transceivers
and data center operators and form commercial partnerships for product development.Because of the magnitude of the cost savings
and performance advantages that may be derived from the use of POET’s Optical Engines for transceiver applications, we expect
to generate significant interest among both the suppliers of transceiver modules and their ultimate customers, the data center
operators. In addition, the POET Optical Interposer provides a straightforward and cost-effective path to higher speed transceivers,
including up to 400G and higher, providing a single platform that can span several device generations. We anticipate that several
companies will be interested in pursuing commercial partnerships with POET in order to qualify and design-in our Optical Engines.



· Promote the POET Optical Interposer as a true platform technology
across several photonic applications and markets.The POET Optical Interposer is designed to be a flexible platform for the
combination or integration of various photonic and electronic components. The anticipated low cost makes it suitable for applications
like automotive LIDAR. The compatibility of the Optical Interposer manufacturing process with standard silicon CMOS processing
opens up a wide variety of other applications where high-speed data communications is needed, such as integration with ASICs, graphics
generators and high-speed switches.





30







· Pursue multiple potential sources of non-product revenue and strategic
partnerships. In addition to product sales, we have been pursuing Non-Recurring Engineering (“NRE”) revenues from
end-use customers and/or from strategic partners. In particular, we believe our 400G transceiver components represent a uniquely
attractive opportunity for collaborative development with a strategic partner(s).



· Pursue a “fab-light” strategy. “Fab-light”
is a common business model in the semiconductor industry. Such a strategy allows the Company to invest more in design and development
of Optical Interposer-based solutions, expand its marketing and sales presence globally and spend less on capital equipment and
maintenance of facilities, enabling a faster path to profitability.



· Pursue complementary strategic alliance or acquisition opportunities.
We intend to evaluate and selectively pursue strategic alliances or acquisition opportunities that we believe will accelerate our
penetration of specific applications or vertical markets with our technology or products.



Geographic Distribution of Revenue



Revenue and geographic markets for 2019, 2018 and 2017
were approximately as follows:



|Region                |  |   | 2019      |  |  |   | 2018      | 2017      | 
|--------------------- |  | - | --------- |  |  | - | --------- | --------- | 
|Asia – Pacific        |  | $ | 1,271,000 |  |  | $ | 1,971,000 | 1,593,000 | 
|Europe                |  | $ | 744,000   |  |  | $ | 1,191,000 | 866,000   | 
|North & South America |  | $ | 2,411,000 |  |  | $ | 726,000   | 335,000   | 





“Fab-light” does not mean “fab-less”, as
significant portions of our Intellectual Property are embedded in the processes that we have developed that are themselves integral
to the equipment and functioning of the Optical Interposer. By purchasing our own equipment and placing the equipment in a foundry,
for example, we are able to preserve confidentiality and ownership of such critical IP. As a result, even with a “fab-light”
strategy, we expect to continue to invest in capital equipment, but not at the same level as owning and supporting an entire InP
wafer fabrication facility.





31











| | C. | Organizational Structure
| | -- | ------------------------



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 is 1 Ordinary Share of BB Photonics UK Ltd. issued and outstanding, held by BB Photonics Inc.
| | --- | ---------------------------------------------------------------------------------------------------



| | (5) | 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.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.





32









ITEM 4A. UNRESOLVED STAFF COMMENTS



Not Required.



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, 2019,
2018 and 2017 and the accompanying notes thereto included elsewhere in this Annual Report. This discussion contains forward-looking
statements that involve risks and uncertainties. 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.”















































33













| | A. | Operating Results
| | -- | -----------------



Critical Accounting Policies and 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.



Financial Instruments



IFRS 9 introduced new classification and measurement
models for financial assets. The investment classifications held-to-maturity and available-for-sale are no longer used and financial
assets at fair value through other comprehensive income ("FVTOCI") were introduced. 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 amortized 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 amortized cost using the effective interest method.



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
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.





34







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 IAS 39 and the revised classification on the adoption of IFRS 9:



|                                         |  | Original classification |  | New classification
|---------------------------------------- |  | ----------------------- |  | ------------------
|                                         |  | under IAS 39            |  | under IFRS 9      
|Financial Assets                         |  |                         |  |                   
|Cash and cash equivalents                |  | Loans and receivables   |  | Amortized cost    
|Short-term investments                   |  | FVTPL                   |  | Amortized cost    
|Accounts receivable                      |  | Loans and receivables   |  | Amortized cost    
|                                         |  |                         |  |                   
|Financial Liabilities                    |  |                         |  |                   
|Accounts payable and accrued liabilities |  | Amortized costs         |  | 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.









35











Cash and cash equivalents



Cash and cash equivalents consist of cash in current accounts of $1,278,129
and funds invested in US Term Deposits of $150,000 earning interest at 1.31% and maturing in less than 90 days.



Cash and cash equivalents include restricted funds of
$93,800 which serves as a bank guarantee for the purchase of certain equipment. The bank guarantee is reduced on a monthly basis
by $10,424 which is amount paid monthly in settlement of the outstanding balance on the equipment.



Accounts receivable



Accounts receivable are amounts due from customers from
the sale of products or services in the ordinary course of business. Accounts receivables are classified as current (on the consolidated
statements of financial position) if payment is due within one year of the reporting period date, and are initially recognized
at fair value and subsequently measured at amortized cost.

In determining a default provision, the Company utilizes
a provision matrix, as permitted under the simplified approach to measure expected credit losses. In doing so management considered
historical credit losses, forward-looking factors specific to the Company's debtors and other macro-economic factors to arrive
at expected default rates. The default rates are then applied to the Company's aging to determine expected credit losses. The carrying
amount of trade receivables is reduced by the expected credit losses. If the financial conditions of these customers were to deteriorate
and the Company determines that no recovery of a trade receivable is possible, the amount is deemed irrecoverable and subsequently
written-off. Accounts receivable at December 31, 2018 and 2017 related to revenue earned by DenseLight. DenseLight was sold on
November 8, 2019.



Inventory



Inventory consists of raw material inventory, work in process, and finished
goods and are recorded at the lower of cost and net realizable value. Cost is determined on a first in first out basis and includes
all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to its present condition.

An assessment is made of the net realizable value of inventory at each reporting
period. Net realizable value is the estimated selling price less the estimated cost of completion and the estimated costs necessary
to make the sale. When circumstances that previously caused inventories to be written down no longer exist or when there is clear
evidence of an increase in net realizable value because of changed economic circumstances, the amount of any write down previously
recorded is reversed so that the new carrying amount is the lower of the cost and the revised net realizable value. Raw materials
are not written down unless the goods in which they are incorporated are expected to be sold for less than cost, in which case,
they are written down by reference to replacement cost of the raw materials, as this is the best indicator of net realizable value.
Inventory at December 31, 2018 and 2017 related to inventory held by DenseLight. DenseLight was sold on November 8, 2019.





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 |  | Straight Line, 5 years                                        
|----------------------- |  | --------------------------------------------------------------
|Leasehold improvements  |  | Straight Line, 5 years or life of the lease, whichever is less
|Office equipment        |  | Straight Line, 5 years                                        





36







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.



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. The Company reported an impairment loss of $714,000 for the year ended
December 31, 2019.











37











Goodwill



Goodwill represents the excess of the cost of an acquired business over the fair value
of the identifiable assets acquired net of liabilities assumed. Goodwill is measured at cost less accumulated impairment losses
and is not amortized. Goodwill is tested for impairment on an annual basis or whenever facts or circumstances indicate that the
carrying amount may exceed its recoverable amount.



The Company performed its annual test for goodwill impairment at December 31, 2019. The
Company utilized a five-year cash flow forecast using the annual budget approved by the Board of Directors as a basis for such
forecasts. Cash flow forecasts beyond that of the budget were prepared using a stable growth rate for future periods. These forecasts
were based on historical data and future trends expected by the Company. The Company's valuation model also takes into account
working capital and capital investments required to maintain the condition of the assets. Forecasted cash flows were discounted
using an after-tax rate of 30%.



Based on the impairment tests, the value in-use of the CGU to which
goodwill is applicable is less than the carrying amount. As a result, goodwill of $1,050,459 was impaired in the current year.
No provision for impairment of goodwill was made in 2018 or 2017.



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.



Recently Enacted U.S. Federal Tax Legislation



Introduced initially as the Tax Cuts and Jobs Act, the
Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (the
“Act”) was enacted on December 22, 2017. The Act applies to corporations generally beginning with taxable years starting
after December 31, 2017 and reduces the corporate tax rate from a graduated set of rates with a maximum 35% tax rate to a flat
21% tax rate. Additionally, the Act introduces other changes that impact corporations, including a net operating loss (“NOL”)
deduction annual limitation, an interest expense deduction annual limitation, elimination of the alternative minimum tax, and immediate
expensing of the full cost of qualified property. The Act also introduces an international tax reform that moves the U.S. toward
a territorial system, in which income earned in other countries will generally not be subject to U.S. taxation. However, the accumulated
foreign earnings of certain foreign corporations will be subject to a one-time transition tax, which can be elected to be paid
over an eight-year tax transition period, using specified percentages, or in one lump sum. NOL and foreign tax credit (“FTC”)
carryforwards can be used to offset the transition tax liability. As a result of this new regulation, the Company reduced its deferred
tax assets by $9,472,000 in 2017.



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.





38









Interest income



Interest income on cash and cash equivalents classified
as fair value through profit or loss is recognized as earned using the effective interest method.



Research and Development Credits



Through DenseLight, the Company was eligible to receive
cash credits for certain qualifying research and development expenses based on actual spending over a three year period, with an
expectation that the credits will not exceed a certain dollar value over a three year period. Recoverable amounts at December 31,
2018 and 2017 related to expenditures at DenseLight. Recoverable amount at December 31, 2019 was nil because the Company sold DenseLight
on November 8, 2019.



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.



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 acquired $714,000 of IPR&D when it acquired BB Photonics
Inc. in 2016. During 2019, management observed indicators that suggested that IPR&D may be impaired. IPR&D acquired with
BB Photonics was no longer useable with novel POET Interposer platform. BB Photonics IPR&D would not generate sufficient cash
flow to support its value in use. Management completed an assessment of IPR&D and determined that the amount of $714,000 was
impaired. An impairment loss of $714,000 was recorded during the year ended December 31, 2019. No impairment was recorded in 2018
or 2017.



Customer relationships



Intangible assets include customer relationships
acquired with the acquisition of DenseLight. Customer relationships is an externally acquired intangible asset and is measured
at cost less accumulated amortization and any accumulated impairment losses. Customer relationships are amortized on a straight-line
basis over their estimated useful lives and is tested for impairment whenever events or changes indicate that their carrying amount
may not be recoverable. The useful life of customer relationships was determined to be 5 years. Customer relations was nil at December
31, 2019 as because the asset was disposed of with the sale of DenseLight on November 8, 2019.



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.



Loss per share



Basic loss per share 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 year after giving effect to potentially dilutive financial
instruments. The dilutive effect of stock options and warrants is determined using the treasury stock method.





39









Recently adopted accounting policy



IFRS 16, Leases (“IFRS 16”) sets out the principles
for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, the customer (lessee) and
the supplier (lessor). This replaces IAS 17, Leases (“IAS 17”) and related Interpretations. IFRS 16 provides revised
guidance on identifying a lease and for separating lease and non-lease components of a contract. IFRS 16 introduces a single accounting
model for all lessees and requires a lessee to recognize right of use assets and lease liabilities for leases with terms of more
than 12 months, unless the underlying asset is of low value, and depreciation of lease assets is reported separately from interest
on lease liabilities in the income statement. Under IFRS 16, lessor accounting for operating and finance leases will remain substantially
unchanged. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with earlier application permitted for
entities that apply IFRS 15, Revenue from Contracts with Customers. The Company adopted this new standard using the modified retrospective
method on January 1, 2019. The adoption of IFRS 16, resulted in a right of use asset and liability of $1,127,534. The carrying
value of the right of use asset and lease liability relating to Denselight were disposed of upon the sale of DenseLight on November
8, 2019























40









Selected Annual Data



The selected financial data of the Company for the
years ended December 31, 2019, 2018 and 2017 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 2019, 2018 and 2017 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.



The following table relates to the operating results of
the Company.



Consolidated Statements of Operations Under International
Financial Reporting Standards

(US$)





|Years Ended December 31.                                           |  |   |              |   |  |  
|------------------------------------------------------------------ |  | - | ------------ | - |  | -
|                                                                   |  |   |              |   |  |  
|                                                                   |  |   | 2019         |   |  |  
|                                                                   |  |   |              |   |  |  
|Operating Expenses                                                 |  |   |              |   |  |  
|Selling, marketing and administrative                              |  | $ | 6,697,387    |   |  | $
|Research and development                                           |  |   | 2,083,815    |   |  |  
|Impairment loss                                                    |  |   | 1,764,459    |   |  |  
|Interest expense                                                   |  |   | 819,911      |   |  |  
|Amortization of debt issuance costs                                |  |   | 372,340      |   |  |  
|Other income, including interest                                   |  |   | (10,540      | ) |  |  
|Operating Expenses                                                 |  |   | 11,727,372   |   |  |  
|Income tax recovery                                                |  |   | (292,740     | ) |  |  
|Net loss from continuing operations                                |  |   | (11,434,632  | ) |  |  
|Income (loss) from discontinued operations, net of taxes(1)        |  |   | 5,481,757    |   |  |  
|Net loss                                                           |  |   | (5,952,875   | ) |  |  
|Deficit, beginning of year                                         |  |   | (133,195,932 | ) |  |  
|Deficit, end of year                                               |  | $ | (139,148,807 | ) |  | $
|                                                                   |  |   |              |   |  |  
|Basic and diluted loss per share, continuing operations            |  | $ | (0.04        | ) |  | $
|Basic and diluted income (loss) per share, discontinued operations |  | $ | 0.02         |   |  | $
|Basic and diluted loss per share                                   |  | $ | (0.02        | ) |  | $















41









(1) Discontinued operations Under International Financial Reporting
Standards







|Years Ended December 31,                                        |  |   | 2019       |   |  |   | 2018       |   |  |   | 2017       |  
|--------------------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                |  |   |            |   |  |   |            |   |  |   |            |  
|Revenue                                                         |  | $ | 4,426,355  |   |  | $ | 3,888,185  |   |  | $ | 2,794,044  |  
|Cost of Revenue                                                 |  |   | 1,201,373  |   |  |   | 1,475,969  |   |  |   | 1,342,691  |  
|Gross profit                                                    |  |   | 3,224,982  |   |  |   | 2,412,216  |   |  |   | 1,451,353  |  
|Operating Expenses                                              |  |   |            |   |  |   |            |   |  |   |            |  
|Selling, marketing and administrative                           |  |   | 1,950,526  |   |  |   | 5,515,329  |   |  |   | 4,983,032  |  
|Research and development                                        |  |   | 5,677,222  |   |  |   | 6,430,328  |   |  |   | 3,403,452  |  
|Interest expense                                                |  |   | 74,494     |   |  |   | -          |   |  |   | -          |  
|Impairment loss                                                 |  |   | -          |   |  |   | 156,717    |   |  |   | -          |  
|Other income                                                    |  |   | (1,251,737 | ) |  |   | (1,491,556 | ) |  |   | (1,748,245 | )
|Operating Expenses                                              |  |   | 6,450,505  |   |  |   | 10,610,818 |   |  |   | 6,638,239  |  
|Net loss from operations                                        |  |   | (3,225,523 | ) |  |   | (8,198,602 | ) |  |   | (5,186,886 | )
|Gain on sale of discontinued operations, net of taxes           |  |   | 8,707,280  |   |  |   | -          |   |  |   | -          |  
|Net income (loss) from discontinued operations                  |  |   | 5,481,757  |   |  |   | (8,198,602 | ) |  |   | (5,186,886 | )
|Income tax recovery                                             |  |   | -          |   |  |   | 297,940    |   |  |   | 297,940    |  
|Income (loss) from discontinued operations, net of income taxes |  | $ | 5,481,757  |   |  | $ | (7,900,662 | ) |  | $ | (4,888,946 | )













42











The selected annual information for continuing operations for 2019, 2018 and
2017 can be further analyzed as follows:



Research and development can be analysed as follows:



|                         |  |   | For the Years Ended December 31, | 
|------------------------ |  | - | -------------------------------- | 
|                         |  |   | 2019                             | 
|Wages and benefits       |  | $ | 874,673                          | 
|Subcontract fees         |  |   | 834,598                          | 
|Stock-based compensation |  |   | 237,311                          | 
|Supplies                 |  |   | 137,233                          | 
|                         |  | $ | 2,083,815                        | 



Selling, marketing and administration costs can be analysed as follows:



|Stock-based compensation       |  | $ | 2,650,830 |  |  | $ | 3,207,411 |  |  | $ | 2,739,462 | 
|------------------------------ |  | - | --------- |  |  | - | --------- |  |  | - | --------- | 
|Wages and benefits             |  |   | 1,619,719 |  |  |   | 1,433,286 |  |  |   | 1,443,656 | 
|Professional fees              |  |   | 1,120,805 |  |  |   | 735,604   |  |  |   | 597,865   | 
|General expenses               |  |   | 813,951   |  |  |   | 392,901   |  |  |   | 598,600   | 
|Depreciation and amortization  |  |   | 243,674   |  |  |   | 153,244   |  |  |   | 182,252   | 
|Management and consulting fees |  |   | 154,357   |  |  |   | 155,169   |  |  |   | 229,577   | 
|Rent and facility costs        |  |   | 94,051    |  |  |   | 96,260    |  |  |   | 96,297    | 
|                               |  | $ | 6,697,387 |  |  | $ | 6,173,875 |  |  | $ | 5,887,709 | 





Factors Affecting Our Results of Operations



Due to the sale of DenseLight on November 8, 2019,
the Company’s operating activities were re-stated to reflect the activities of the continuing operation. A discussion of
the







Analysis of Continuing Operations



Year Ended December 31, 2019 compared to Year Ended December
31, 2018



In 2019, the Company had a net loss from continuing
operations of $11,727,372. The net loss from continuing operations included $2,083,815 spent on research and development activities
directly related to the development and commercialization of the POET Optical Interposer Platform (“POIP”). Research
and development included $237,311 of non-cash fair value stock-based compensation. $6,697,387 was spent on selling, marketing and
administration expenses which included non-cash operating costs of $2,650,830 related to the fair value of stock-based compensation
and $243,674 related to depreciation and amortization.



The Company incurred $819,911 of interest expense
and $372,340 of debt issuance costs related to $7,729,921 borrowed at various dates and from various lenders during 2019. The Company
repaid $4,000,000 of the borrowed funds on November 8, 2019.



The Company is not exposed to hyperinflationary risks as the
Company’s investments and operations are occur in geographic regions with stable economies.





43









R&D



Total R&D decreased by $178,661 from $2,262,476
in 2018 to $2,083,815 in 2019. For the purposes of the following R&D analysis, non-cash stock-based compensation of $237,311
(2018 - $395,468) has been excluded and is included with the analysis of non-cash stock-based compensation below.



R&D, net of stock-based compensation decreased by
$20,504 from $1,867,008 in 2018 to $1,846,504 in 2019. The decrease in R&D was the result of a temporary reduction in certain
Optical Interposer development programs in favor of component design taking place through the Company’s discontinued operations.
R&D efforts in 2018 included consulting and outsourced services directed at developing the Company’s proprietary waveguides.
Variances from year to year reflect individual project emphases between the Company and its discontinued operations rather than
any implications for the direction of the overall R&D program. The minor change in R&D year over year reflect the consistency
of expenses that were accounted for geographically. Most R&D activity was captured in the Company’s discontinued operations.



Wages and benefits



Wages and benefits increased by $186,433 (13%) to $1,619,719 for 2019 from
$1,433,286 in 2018. In late 2019, the Company recruited and hired three senior individuals for roles for which there was a gap.
These roles included a President & General Manager of the Company, a Vice President & General Manager for the new Singapore
testing facility and a Vice President of Product Marketing & Business Development. Additionally, the Company hired a Senior
Vice President of Strategic Marketing in late 2018. The Company reported a full years’ wages for the Senior Vice President
of Strategic Marketing in 2019 while only a partial years’ wages were recorded in 2018.



Professional fees



Professional fees increased by $385,201 (52%) to $1,120,805 in 2019 from $735,604
in 2018. The increase in professional fees was a result of legal and other professional fees incurred relating to the sale of the
Company’s DenseLight subsidiary. The services professionals in multiple jurisdictions were required during the due diligence
process, drafting the SSA and to assist with negotiations.



General expenses and rent



General expenses and rent increased by $418,841 (86%) to $908,002 in 2019 from
$489,161 in 2018. The increase was primarily a result of ancillary costs incurred related to the various financings that occurred
in 2019 and certain indenture fees related to maintaining the warrants of a previous equity financing that occurred in 2018. The
Company also incurred substantial travel and related costs due to the time and effort required in negotiating and addressing due
diligence matters respecting the sale of DenseLight. Additionally, the Company incurred $49,274 of unrealized foreign exchange
loss due the weakening of the Canadian dollar in 2019. The Company had an unrealized foreign exchange gain of $142,104 in 2018.
The unrealized gains and losses are a result of currency translation for financial reporting purposes.



Interest expense and debt issuance cost



Interest expense was $819,911 for 2019 as compared to nil in 2018. The Company
raised $7,729,921 of debt financing from various lenders at varying times throughout 2019, net of directly related issue costs.
The Company is required to pay monthly interest on the debt raised during the period. The Company did not have debt obligations
in 2018.



Related to the issuance of debt in 2019 is the amortization of debt issuance
cost of $372,340 compared to nil in 2018. The Company paid $147,077 in costs related to a bridge loan of $3,100,000 from Espresso
Capital Ltd. Additionally, the Company issued 3,289,500 warrants to the lender to purchase common shares at a price of CAD$0.35
per share. The warrants expire on April 18, 2020. The fair value of the warrants was estimated on the date of issue using the Black-Scholes
option pricing model with the following assumptions: volatility of 78.91%, interest rate of 1.62% and an expected life of 1 year.
The estimated fair value assigned to the warrants was $221,620. There was no debt issuance cost in 2018.





44







Non-cash stock-based compensation



Non-cash stock-based compensation decreased by $714,738 (20%) to $2,888,141
in 2019 from $3,602,879 in 2018. 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.



Impairment loss



During 2019, the Company performed an impairment analysis on its goodwill and
intangible assets related to the acquisition of BB Photonics in 2016. The Company determined that these assets were impaired and
consequently recognized an impairment loss of $1,764,459. No impairment was recognized in 2018.



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 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
with the Canadian and Singapore dollar. A 10% change in the Canadian and Singapore dollar would increase or decrease other comprehensive
loss by $290,950.





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.



Year Ended December 31, 2018 compared to Year Ended December
31, 2017



Net loss from continuing operations was $8,422,117 for
2018 compared to $7,908,851 for 2017. The following explains the $513,266 (6%) variance in net loss between 2018 and December 31,
2017.





R&D



Total R&D increased by $223,055 from $2,039,421
in 2017 to $2,262,476 in 2018. For the purposes of the following R&D analysis, non-cash stock-based compensation of $395,468
(2017 - $218,896) has been excluded and is included with the analysis of non-cash stock-based compensation below.



R&D, net of stock-based compensation had a marginal
increase of $46,483 (3%), increasing from $1,820,525 in 2017 to $1,867,008 in 2018. The minor change in R&D from 2017 to 2018
reflects the consistency of expenses that were accounted for geographically. Most R&D activity was captured in the Company’s
discontinued operations.



Professional fees



Professional fees in 2018 increased by $137,739 (23%)
to $735,604 from $597,865 in 2017. Professional fees, including legal fees, were required as the Company reviewed internal policies
for best practices and initiated co-development partnerships and agreements with several counterparties as disclosed in 2018. The
Company also incurred professional fees related to the filing of its final short form prospectus filed in November 2018.





45







General expenses and rent



General expenses and rent in 2018 decreased by $205,736
(29%) from $694,897 in 2017 to $489,161 in 2018. The Company incurred $6,197 of unrealized foreign exchange loss due the weakening
of the Canadian dollar in 2017, conversely, the Company reported a foreign exchange gain of $142,104 in 2018. The unrealized gains
and losses are a result of currency translation for financial reporting purposes.



Management and consulting fees



Management and consulting fees decreased by $74,408 (32%)
to $155,169 in 2018 from $229,577 in 2017. The decrease was a result of the resignation of the former Executive Chairman of Board
in 2017, whose compensation was included in management and consulting fees. Management and consulting fees did not include fees
for the newly appointed Executive Chairman in 2018, which were instead charged to wages and benefits.



Non-cash stock-based compensation



Non-cash stock-based compensation increased by $644,521
(22%) to $3,602,879 in 2018 from $2,958,358 in 2017. 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 Stock Option
Plan, as amended (the “Plan”).



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 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
with the Canadian and Singapore dollar. A 10% change in the Canadian and Singapore dollar would increase or decrease other comprehensive
loss by $386,391.



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 issuance
of these consolidated financial statements. The Company will need to seek additional financing to continue as a going concern.





46









Analysis of Discontinued Operations



The selected annual information for discontinued operations for 2019, 2018
and 2017 can be further analyzed as follows:



Research and development can be analysed as follows:





|                         |  |   | For the Period from
                                                                                January 1,
                                                                                2019
                                                                                to
                                                                                November 8, |   |  |   | For the Years Ended December 31, | 
|------------------------ |  | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - |  | - | -------------------------------- | 
|                         |  |   | 2019                                                                                                                                                                                                                                                                                                                                                                               |   |  |   | 2018                             | 
|Wages and benefits       |  | $ | 3,565,076                                                                                                                                                                                                                                                                                                                                                                          |   |  | $ | 3,818,980                        | 
|Supplies                 |  |   | 1,412,572                                                                                                                                                                                                                                                                                                                                                                          |   |  |   | 2,070,495                        | 
|Subcontract fees         |  |   | 728,457                                                                                                                                                                                                                                                                                                                                                                            |   |  |   | 400,000                          | 
|Stock-based compensation |  |   | (28,883                                                                                                                                                                                                                                                                                                                                                                            | ) |  |   | 140,853                          | 
|                         |  | $ | 5,677,222                                                                                                                                                                                                                                                                                                                                                                          |   |  | $ | 6,430,328                        | 



Selling, marketing and administration costs can be analysed as follows:



|Wages and benefits            |  | $ | 887,860   |   |  | $ | 1,034,715 |  |  | $ | 1,131,322 | 
|----------------------------- |  | - | --------- | - |  | - | --------- |  |  | - | --------- | 
|Rent and facility costs       |  |   | 604,442   |   |  |   | 975,467   |  |  |   | 1,079,635 | 
|General expenses              |  |   | 458,465   |   |  |   | 785,635   |  |  |   | 585,637   | 
|Stock-based compensation      |  |   | (46,725   | ) |  |   | 278,385   |  |  |   | 66,454    | 
|Professional fees             |  |   | 46,484    |   |  |   | 31,747    |  |  |   | 27,076    | 
|Depreciation and amortization |  |   | -         |   |  |   | 2,409,380 |  |  |   | 2,092,908 | 
|                              |  | $ | 1,950,526 |   |  | $ | 5,515,329 |  |  | $ | 4,983,032 | 





For the Period from January 1, 2019 to November 8, 2019
compared to the Twelve Months Ended December 31, 2018



Effective January 1, 2019, the Company is reporting the activities of DenseLight
as a discontinued operation. The activities of DenseLight have been consolidated and reported as discontinued operations from January
1, 2019 to November 8, 2019.



Net income from discontinued operations, net of taxes for 2019 was $5,481,757
compared to a net loss from discontinued operations net of taxes of $7,900,662 in 2018. The following discussion analyses the $13,382,419
variance from 2018 to 2019.



Gain on sale of discontinued operations



The net income in 2019 includes a gain on the sale of discontinued operations
of $8,707,280. On November 8, 2019, the Company sold all the issued and outstanding shares of DenseLight for $26,000,000. The sale
resulted in the reported gain in 2019 of $8,707,280.



Revenue



Even with a stub period reporting (January 1, 2019 – November 8, 2019),
revenue increased by $538,170 (14%) to $4,426,355 in 2019 compared to revenue of $3,888,185 in 2018. The increase resulted primarily
from an increase in NRE revenue that DenseLight started to report in late 2018. The increased NRE contributed to higher gross margin
in 2019. Gross margin was $3,224,982 or 73% in 2019 compared to $2,412,216 or 62% in 2018.





47







R&D



Total R&D was $5,677,222 in 2019 compared to
$6,430,328 in 2018, a decreased of $753,106 (12$%). For the purposes of the following R&D analysis, non-cash stock-based compensation
of $(28,883) (2018 - $140,853) has been excluded and is included with the analysis of non-cash stock-based compensation below.



R&D, net of stock-based compensation decreased by $583,370 (9%) to $5,706,105
in 2019 from $6,289,475 in 2018. The decrease in R&D does not reflect reduced activity but rather the fact that only 10 months
of R&D activity are reflected in 2019 compared to 12 months of activity in reported 2018. Had the comparative periods been
the same it is estimated that 2019 R&D would have increased marginally due to the effort expended to accelerate certain component
developments, and to reach other technical milestones, including the launch of the advanced Integrated Light Module (ILM), designed
specifically for high-performance wind LIDAR and other environmentally-stressed applications. The Company also launched a new 1653
DFB laser for targeting the methane gas sensing markets and the 1650nm Fabry-Perot (FP) laser for test and measurement applications,
targeting the OTDR (Optical Time-Domain Reflectometer) market where the equipment is used to detect faults and understand the losses
along a given length of fiber-optic cable in networking and data communications systems.



Wages and benefits



Wages and benefits decreased by $146,855 (14%) to $887,860 in 2019 from $1,034,715
in 2018. The decrease is related to the stub period reported in 2019 compared to the 12 months in 2018. Had 12 months of wages
and benefits been reported for both years, the variance would have been negligible.



Depreciation and amortization



IFRS accounting requires that depreciation and amortization cease when reporting
discontinued operations. As a consequence, no depreciation and amortization was reported in 2019 for discontinued operations. Depreciation
and amortization was $2,409,380 in 2018.



General expenses and rent



General expenses and rent decreased by $698,195 (40%) to $1,062,907 in 2019
from $1,761,102 in 2018. The decrease is related to the stub period reported in 2019 compared to the 12 months in 2018. Additionally,
the application of the new IFRS 16 standard in January 2019 resulted in the re-characterization of rent. Rent expense has now been
replaced with interest cost related to a lease liability and amortization related to a right of use asset. Rental payments are
now applied against the newly established lease liability. There was a corresponding reduction in rent expense during the year
and an increase in interest cost. Due to the cessation of amortization, no amortization was recorded against the right of use asset.
All rental payments were charged to rent expense in 2018.



Interest expense



During the 2019, the Company recorded non-cash interest expense of $74,494
relating to the afore-mentioned lease liability. The Company did not have an interest expense in 2018.



Impairment



Non-cash impairment was nil in 2019 compared to $156,717 recorded in 2018.
In 2018, management determined that certain property and equipment would no longer be used to generate future cash flows and committed
to plan to dispose of such property and equipment. The Company disposed of assets that were no longer in use. The assets were impaired
prior to their disposal. The fair value was less cost to sell was determined to be $3,000 which was greater than its value in use.





48







Credit Risk



The Company is exposed to credit risk associated with
its accounts receivable. The Company has accounts receivable from both governmental and non-governmental agencies. Credit risk
is minimized substantially by ensuring the credit worthiness of the entities with which it carries on business. Credit terms are
provided on a case by case basis. The Company has not experienced any significant instances of non-payment from its customers.



The Company's accounts receivable ageing at December 31
was as follows:



|                           |  |   | 2019 |  |  |   | 2018    |   |  |   | 2017    | 
|-------------------------- |  | - | ---- |  |  | - | ------- | - |  | - | ------- | 
|Current                    |  | $ | -    |  |  | $ | 892,343 |   |  | $ | 330,731 | 
|31 - 60 days               |  |   | -    |  |  |   | 34,331  |   |  |   | 56,094  | 
|61 - 90 days               |  |   | -    |  |  |   | 60,885  |   |  |   | -       | 
|> 90 days                  |  |   | -    |  |  |   | -       |   |  |   | 107,100 | 
|Expected credit losses (1) |  |   | -    |  |  |   | (40,615 | ) |  |   | -       | 
|                           |  | $ | -    |  |  | $ | 946,944 |   |  | $ | 493,925 | 





(1) The Company applies IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss allowance for trade receivables.



The allowance is included in selling, general and administrative expenses in
the consolidated statements of operations and deficit. Amounts charged to the loss allowance account are generally written off
when there is no reasonable expectation of recovery.



In prior years, the impairment of trade receivables was assessed based on the
incurred loss model and determined by management in accordance with its assessment of recoverability. Receivables for which an
impairment provision was recognized were written off against the provision when there was no expectation of recovering additional
cash.



Year Ended December 31, 2018 compared to Year Ended December
31, 2017



Revenue



During 2018, DenseLight reported revenue of $3,888,185
compared to $2,794,044 in 2017, a 39% increase driven primarily by an increase in product sales and non-recurring engineering (NRE)
revenue. In November 2018 the Company received its first orders for POET Optical Interposer-based solutions from leading global
networking companies targeting data communication applications, which represented entry into a new served market for the Company’s
products. The increase in sales of $1,094,141 contributed to an increase in gross margin from 52% to 62%.



R&D



Total R&D increased by $3,026,876 from $3,403,452
in 2017 to $6,430,328 in 2018. For the purposes of the following R&D analysis, non-cash stock-based compensation of $140,853
(2017 - $150,112) has been excluded and is included with the analysis of non-cash stock-based compensation below.



The largest increase for the comparative periods was R&D
which increased by $3,036,135 (93%) to $6,289,475 in 2018 from $3,253,340 in 2017. Since May of 2016, DenseLight has systematically
increased its R&D activities in an effort to bring new products to market and expand its product portfolio. The increased R&D
activity has contributed to the development of the POET Optical Interposer platform utilizing the Company’s proprietary waveguides.
As a result of increased R&D spending in the period, the Company successfully demonstrated the functionality of PIN photodetectors
targeting 100G to 400G optical transceivers. New skilled technical human resources, especially in optics and photonics device testing,
represent the largest area of increase in R&D. The increase is consistent with the Company’s budgeted R&D activity.
Our expectation is that the R&D activity conducted in 2018 will lead to sales of new products in 2019.



Non-cash stock-based compensation



Non-cash stock-based compensation increased by $202,672
(94%) to $419,238 during 2018 from $216,566 in 2017. 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 Stock Option
Plan, as amended (the “Plan”).





49









Depreciation and amortization



Non-cash depreciation and amortization increased by $316,472
(15%) to $2,409,380 in 2018 from $2,092,908 in 2017. The Company has committed to improving its fabrication facilities in Singapore,
and its overall manufacturing capabilities, which includes acquiring new equipment for the Optical Interposer program. The addition
of new equipment will result in increased depreciation charges.





Other income



Other income in 2018 decreased by $256,689 (15%) to $1,491,556
in 2018 from $1,748,245 in 2017. The Company is entitled to a recovery of certain qualifying expenses from the EDB in Singapore.
The recoverable amount in 2017 was higher than the amount in 2018 in part due to a reduction adjustment in 2018 related to the
over accrued recovery for 2017. If the adjustment had not been done, the recovery would have been more comparable year over year.





Impairment



During the year ended December 31, 2018, management determined
that certain property and equipment would not be used to generate future cash flows and committed to a plan to dispose of the property
and equipment by December 31, 2018. Management used a market approach to determine the property and equipment's fair value less
cost to sell. Key assumptions included the cost of similar assets, the impact of customization and unique use. The fair value less
cost to sell was determined to be $3,000 which is greater than its value in use. The Company recorded an impairment loss of $156,717
on the property and equipment and reclassified $3,000 from property and equipment to non-current assets held for sale. The property
and equipment was sold in December 2018.



Credit Risk



The Company is exposed to credit risk associated with
its accounts receivable. The Company has accounts receivable from both governmental and non-governmental agencies. Credit risk
is minimized substantially by ensuring the credit worthiness of the entities with which it carries on business. Credit terms are
provided on a case by case basis. The Company has not experienced any significant instances of non-payment from its customers.



The Company's accounts receivable ageing at December 31
was as follows:



|                           |  |   | 2018    |   |  |   | 2017    | 
|-------------------------- |  | - | ------- | - |  | - | ------- | 
|Current                    |  | $ | 892,343 |   |  | $ | 330,731 | 
|31 - 60 days               |  |   | 34,331  |   |  |   | 56,094  | 
|61 - 90 days               |  |   | 60,885  |   |  |   | -       | 
|> 90 days                  |  |   | -       |   |  |   | 107,100 | 
|Expected credit losses (1) |  |   | (40,615 | ) |  |   | -       | 
|                           |  | $ | 946,944 |   |  | $ | 493,925 | 





(1) The Company applies IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss allowance for trade receivables.



The allowance is included in selling, general and administrative expenses in
the consolidated statements of operations and deficit. Amounts charged to the loss allowance account are generally written off
when there is no reasonable expectation of recovery.



In prior years, the impairment of trade receivables was assessed based on the
incurred loss model and determined by management in accordance with its assessment of recoverability. Receivables for which an
impairment provision was recognized were written off against the provision when there was no expectation of recovering additional
cash.







50







| | B. | Liquidity and Capital Resources
| | -- | -------------------------------



The Company had working capital of $15,354,149 on December 31, 2019 compared
to $3,847,842 on December 31, 2018. The Company’s balance sheet as of December 31, 2019 reflects assets with a book value
of $24,077,355 compared to $25,137,903 as of December 31, 2018. Eighty-four percent (84%) of the book value at December 31, 2019
was in current assets consisting primarily of receivable from the sale of discontinued operations of $18,000,000 compared to twenty-seven
percent (27%) of the book value as of December 31, 2018, or $6,888,264, was in current assets consisting primarily of cash and
other current assets.



The Company is satisfied that it has sufficient working capital to meet its
operating requirements over the next 12 months.



The following is a summary of Company’s cash flows
and working capital:



|                                        |  |  | 2019       |   |  |  | 2018       |   |  |  | 2017       |  
|--------------------------------------- |  |  | ---------- | - |  |  | ---------- | - |  |  | ---------- | -
|                                        |  |  | $          |   |  |  | $          |   |  |  | $          |  
|Net cash used in operating activities   |  |  | (9,394,221 | ) |  |  | (9,288,588 | ) |  |  | (9,163,689 | )
|Net cash from investing activities      |  |  | 5,397,139  |   |  |  | (3,535,600 | ) |  |  | (441,065   | )
|Net cash from financing activities      |  |  | 3,135,255  |   |  |  | 10,648,003 |   |  |  | 123,528    |  
|Effect of exchange rate changes on cash |  |  | (277,912   | ) |  |  | (230,425   |   |  |  | 79,422     |  
|Change in cash                          |  |  | (1,139,739 | ) |  |  | (2,406,610 | ) |  |  | (9,401,804 | )
|Opening cash                            |  |  | 2,567,868  |   |  |  | 4,974,478  |   |  |  | 14,376,282 |  
|Ending cash                             |  |  | 1,428,129  |   |  |  | 2,567,868  |   |  |  | 4,974,478  |  

























51











Operating Activities



During 2019, the Company had consolidated losses
of $5,952,875 (2018 - $16,322,779, 2017 - $12,797,797). Included in the consolidated loss was income from discontinued operations
of $5,481,757 in 2019. (2018 – loss of $7,900,662, 2017 – loss of $4,888,946).



The operating activities of the continuing operation
included the following non-cash items: non-cash stock-based compensation of $2,888,141 (2018 – $3,602,879, 2017 - $2,958,358),
depreciation and amortization of $243,674 (2018 - $153,244, 2017 - $182,252), impairment of long lived assets and goodwill of $1,764,459,
amortization of debt issuance cost of $372,340 (2018 and 2017 – nil) and accretion of debt discount on convertible debentures
of $280,829 (2018 and 2017 – nil).



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.



The Company raised $7,729,921 of debt financing from various
lenders at varying times throughout 2019, net of directly related issue costs. The issuance cost of debt in 2019 was amortized
over the life of the related debt resulting in the amortization of debt issuance cost of $372,340.



Included in the debt raised in 2019 were convertible debentures
issued at a discount. The discount on the convertible debentures are accreted over the life of the convertible debentures. This
non-cash cost of accretion of debt discount on convertible debentures was $280,829. There were no such costs in the prior years
because 2019 was the first time the Company issued such debt instruments.



Accounts receivable decreased from $946,944 in 2018 to
nil in 2019. All sales in the Company were reported through DenseLight as a result all receivables were also collectible in DenseLight.
Due the sale of DenseLight and all its assets, the Company had no receivables at December 31, 2019.



Prepaids and other current assets also decreased from
2018 to 2019. The Company had $2,936,619 of prepaid and other current assets in 2018 and $831,265 in 2019. 98% of the 2018 prepaid
and other current assets were recoverable in DenseLight including a recoverable amount of $1,905,593 due from the Economic Development
Board of Singapore. With sale of DenseLight, the Company no longer has high prepaid and other current assets.



With the sale of DenseLight, the Company had a substantial
reduction in accounts payable and accrued liabilities which was reduced from $3,040,422 in 2018 to $1,725,708 in 2019.

While discontinued operations reported income from
discontinued operations of $5,481,757, (2018 – loss of $7,900,662) it had negative cash flows of $2,951,104 (2018 - $4,790,793).
The loss was due primarily to the add back of the gain from the sale of discontinued operations of $8,707,280.



Consolidated negative cash flow from operations was
$9,394,221 in 2019 compared to $9,288,588 in 2018.



Investing Activities



In 2019, the Company had consolidated cash flow from
investing activities of $5,397,139 of which $7,007,642 was from the continuing operations while discontinued operations spent $1,610,503
on investing activities.





52







The Company received 8,000,000 on November 8, 2019
from the sale of DenseLight. The Company has a receivable of $18,000,000 that remained outstanding from the sale on December 31,
2019, $4,750,000 of which was paid on February 14, 2020 and $8,250,000 was paid on March 30, 2020.



The Company spent a cumulative $2,121,987 on capital
purchases in 2019 with $511,484 spent in the continuing operations and $1,610,503 spent on capital purchases at DenseLight. Comparatively,
in 2018, the Company either spent cash or accrued $3,718,152 on certain critical equipment, primarily consisting of; die pick tool,
Omega etch, APM PECVD and C2L Transport. Almost all capital expenditure was incurred at DenseLight in 2018.



Financing Activities



During 2019 the Company closed five tranches of a private placement of
the Convertible Debentures that raised gross proceeds of $3,729,921. The Convertible Debentures, bear interest at 12% per annum,
compounded annually with 1% payable at the beginning of each month and mature two years from the date of issue. The Company paid
$373,502 in brokerage fees and other costs related to the closing of these five tranches.



The Convertible Debentures are convertible at the option of the holders
thereof into units at any time after October 31, 2019 at a conversion price of CAD$0.40 per unit for a total 12,470,730 units of
the Company. Each unit will consist of one common share and one common share purchase warrant. Each common share purchase warrant
will entitle the holder to purchase one common share of the Company at a price of CAD$0.50 per share for a period of two years
from the date upon which the convertible debenture is converted into units. Upon completing the sale of DenseLight and receiving
the full sale proceeds of $26,000,000, holders of Convertible Debentures have the right to cause the Company to repurchase the
Convertible Debentures at face value, subject to certain restrictions. The Convertible Debentures are governed by a trust indenture
between the Company and TSX Trust Company as trustee. The Company has not notified the trustee or the holders of the debentures
that the sale of DenseLight has been completed and will not do so until the final payment of $5,000,000 is received from the Buyers,
which is expected on or before May 31, 2020.



On June 29, 2020 and July 3, 2020, the Company received payments in the cumulative amount
of $2,500,000 from the Buyer of DenseLight for a total received of $23,500,000. Taking into consideration the length of time it
had taken the Buyer to make the foregoing payments and the Company’s expectations regarding the likelihood of receiving an
additional payment, the Company determined, and the Buyer accepted, that it was in the Company’s best interest to accept
the partial payments as final payment on the Company’s receivable and to restructure its relationship with DenseLight to
better accommodate the Company’s current supply needs.



Insiders of the Company subscribed for 14.3% or $535,000 of the Convertible
Debentures, including the Company’s board of directors and senior management team. Insiders of IBK Capital subscribed for
4% or $146,000 of the Convertible Debentures.



In addition to issuing convertible debentures, the Company was advanced
$3,100,000 in various increments from Espresso Capital Ltd as part of a $5,000,000 credit facility. The Company paid 19.25% in
interest on the funds advanced from the date of each advance until November 8, 2019 when the advance was repaid. The Company paid
$147,077 in costs related to the Bridge Loan. Additionally, the Company issued to Espresso Capital Ltd, warrants for the purchase
of 3,289,500 common shares at a price of CAD$0.35 per share. The Warrants expire on April 18, 2020. The fair value of the warrants
was estimated on the date of issue using the Black-Scholes option pricing model with the following assumptions: volatility of 78.91%,
interest rate of 1.62% and an expected life of 1 year. The estimated fair value assigned to the warrants was $221,620. The total
cost of $368,697 along with the foreign exchange impact of $3,543 was deferred and charged against the Bridge Loan and subsequently
amortized over the life of the Bridge Loan. The Bridge loan was repaid on November 8, 2019.



The Company was also advanced $900,000 of a $1,000,000 promissory note
on August 30, 2019 at 15% interest per annum. The $900,000 advance and accrued interest were repaid on November 8, 2019.



The financing in 2018 was through the issuance of common shares when
the Company completed a brokered "bought deal" public offering of 25,090,700 units at a price of $0.425 (CAD$0.55) per
unit for gross proceeds of $10,663,548 (CAD$13,799,885). 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 $0.58 (CAD$0.75) per
share until March 21, 2020. The broker was paid a cash commission of $639,813 (6%) of the gross proceeds and received 1,505,442
compensation options. Each compensation option is exercisable into one compensation unit of the Company at a price of $0.425 (CAD$0.55)
per compensation unit until March 21, 2020 with each compensation unit comprising one common share and one-half compensation share
purchase warrant. Each whole compensation share purchase warrant entitles the broker to purchase one common share of the Company
at a price of $0.425 (CAD$0.55) per share until March 21, 2020. The Company paid an additional $492,177 in other costs related
to this financing.



Capital Expenditures



The Company has an approved capital budget of $1,044,926 for
the 2020 fiscal year related to research and development equipment, manufacturing equipment and patent registration. In 2019, $2,121,987
(2018 - $3,785,760, 2017 - $1,030,340 was either spent in cash or accrued for acquiring development and manufacturing equipment
and new patents.





53











| | C. | Research and Development
| | -- | ------------------------



Virtually all of POET's R&D expenditures in recent years have been in some way connected
to the Optical Interposer. We expect to continue to spend the majority of our R&D resources for the foreseeable future on Optical
Interposer-based components across a variety of potential applications. DenseLight has also incurred R&D expenditures for conventional
non-interposer-based products, primarily in the area of photonic sensing that represent the majority of the Company’s current
product sales.



As a platform technology, Optical Interposer development does not have a specific end
point. Each application of the Optical Interposer requires development specific to the application. POET’s product roadmap
is currently focused on the development of Optical Engines for optical transceivers. Optical Engines include all of the photonics-related
components of a transceiver but do not include several of the electronic devices needed for a functioning transceiver module. Nor
does it include the external packaging and optical fibers. Nevertheless, Optical Engines represent the majority of the cost and
value of most optical transceivers.



The “active” components that are included in a POET Optical Engine include
lasers, detectors and modulators fabricated on InP or Silicon substrate and specifically designed to be integrated into the Optical
Interposer fabric. We have supplemented our active component device development with co-development partners and license agreements,
including for certain types of lasers and modulators. This not only reduces the risk to internal development and accelerates time
to market, but it also ensures second sources of Optical Interposer-compatible active components, a critical part of our strategy
going forward.



In parallel to these activities, POET also directed development programs in two other
areas for the Optical Interposer platform outside of DenseLight, including Passive Component design and development and Core Integration
process development. Passive devices include filters, mux-demux devices, waveguides and spot size converters, all designed and
fabricated using POET’s proprietary materials and processes. The Optical Interposer devices are fabricated at a third-party
foundry. We transferred the basic processes for producing our Optical Interposers to our foundry partner in 2018 and since then
we have continued to improve those processes in order to make them suitable for high volume manufacturing.



Core Integration Process Development relates primarily to advanced packaging methods
that, combined with the unique design of the Optical Interposer, allows true wafer-scale assembly and test. We do not believe that
such true wafer-scale integration has yet been demonstrated by any other approach in the photonics industry. We are able to achieve
chip-level integration and wafer-scale assembly, test and packaging because all of the active devices are designed to be placed
and “matched” to passive device interfaces on the foundational Optical Interposer wafer using pick-and-place assembly
techniques. We eliminate the high cost and cumbersome process of testing each component following placement. Once placed and tested
at wafer scale, each Optical Interposer device is sealed, the wafer is separated into hundreds of individual die, and the final
Optical Engine is ready for shipment to the customer. Each of these process steps, from flip-chipping of devices onto the Optical
Interposer, pick and place assembly, hermetic sealing and singulation required substantial innovation and development, including
several techniques that are unique in the photonics and compound semiconductor industries.



We are working with leading industry partners on optical engines and other components
for 400G transceivers, which is the next generation of transceiver modules that are expected to be introduced into data centers
in the coming months and years. We believe that the Optical Interposer platform is very relevant to markets beyond data communications,
such as telecommunications, Automotive LIDAR, and integration with Application Specific Integrated Circuits (ASICs), including
switches and graphics generators.





54







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 deferral and amortization under IFRS, which to date has not occurred.



We incurred a cumulative $7,761,037, $8,692,804 and
$5,442,873 of research and development expenses in 2019, 2018 and 2017, which includes non-cash stock-based compensation of $208,421,
$536,321 and $369,007 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



|                         |  |   | For the Years Ended December 31, | 
|------------------------ |  | - | -------------------------------- | 
|                         |  |   | 2019                             | 
|Wages and benefits       |  | $ | 874,673                          | 
|Subcontract fees         |  |   | 834,598                          | 
|Stock-based compensation |  |   | 237,311                          | 
|Supplies                 |  |   | 137,233                          | 
|                         |  | $ | 2,083,815                        | 





R&D for Discontinued Operations





|                         |  |   | For the Period from
                                                                                                                                                                 January 1, 2019
                                                                                to
                                                                                November 8, |   |  |   | For the Years Ended December 31, | 
|------------------------ |  | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - |  | - | -------------------------------- | 
|                         |  |   | 2019                                                                                                                                                                                                                                                                                                                                                                                |   |  |   | 2018                             | 
|Wages and benefits       |  | $ | 3,565,076                                                                                                                                                                                                                                                                                                                                                                           |   |  | $ | 3,818,980                        | 
|Supplies                 |  |   | 1,412,572                                                                                                                                                                                                                                                                                                                                                                           |   |  |   | 2,070,495                        | 
|Subcontract fees         |  |   | 728,457                                                                                                                                                                                                                                                                                                                                                                             |   |  |   | 400,000                          | 
|Stock-based compensation |  |   | (28,883                                                                                                                                                                                                                                                                                                                                                                             | ) |  |   | 140,853                          | 
|                         |  | $ | 5,677,222                                                                                                                                                                                                                                                                                                                                                                           |   |  | $ | 6,430,328                        | 





| | D. | Trend Information
| | -- | -----------------



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. | Off-Balance Sheet Arrangements
| | -- | ------------------------------



The Company has no material off-balance sheet arrangements
in place at this time.





55







| | F. | Tabular Disclosures of Contractual Obligations
| | -- | ----------------------------------------------



The following table sets forth our contractual obligations
and commercial commitments as of December 31, 2019:





|                        |  |   | Payments due by period (US$) | 
|----------------------- |  | - | ---------------------------- | 
|Contractual Obligations |  |   | Total                        | 
|Lease Obligations       |  | $ | 665,491                      | 



| | G. | Safe Harbor
| | -- | -----------



See “Forward Looking Statements” on page 1 of this Annual Report.















56











ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



| | A. | Directors and Senior Management
| | -- | -------------------------------



The following table sets forth information regarding our Directors and Officers
for the most recent financial year.



|Name                     |  | Positions                                                          |  | Age |    | Date First Elected or Appointed a Director or Officer
|------------------------ |  | ------------------------------------------------------------------ |  | --- | -- | -----------------------------------------------------
|Jean-Louis Malinge (3)   |  | Director                                                           |  |     | 66 |                                                      
|Peter Charbonneau (1)(3) |  | Corporate Governance and Nominating Committee Chair and Director   |  |     | 66 |                                                      
|Dr. Suresh Venkatesan    |  | Chief Executive Officer and Chairman                               |  |     | 53 |                                                      
|Kevin Barnes             |  | Corporate Controller and Treasurer                                 |  |     | 48 |                                                      
|Thomas R. Mika           |  | Chief Financial Officer                                            |  |     | 68 |                                                      
|Don Listwin (2)          |  | Chair of Compensation Committee and Director,                      |  |     | 61 |                                                      
|Vivek Rajgarhia          |  | President and General Manager                                      |  |     | 52 |                                                      
|Chris Tsiofas (1)(2)     |  | Audit Committee Chair and Director                                 |  |     | 52 |                                                      
|James Lee                |  | General Manager – POET Technologies  Pte Ltd.                      |  |     | 48 |                                                      
|David E. Lazovsky (2)(5) |  | Director                                                           |  |     | 48 |                                                      
|Mohandas Warrior (1)     |  | Director                                                           |  |     | 59 |                                                      
|Rajan Rajgopal (4)       |  | President – DenseLight Semiconductor Pte. Ltd.                     |  |     | 55 |                                                      
|Richard Zoccolillo       |  | Senior Vice President – Strategic Marketing and Product Management |  |     | 57 |                                                      





| | (1) | Member of Audit Committee
| | --- | -------------------------



| | (2) | Member of Compensation Committee
| | --- | --------------------------------



| | (3) | Member of Corporate Governance and Nominating Committee           
| | --- | ------------------------------------------------------------------
| |     |                                                                   
| | (4) | Transferred as part of Sale of DenseLight.                        
| |     |                                                                   
| | (5) | Resigned as Executive Chairman during 2019 but remained a director







57







Dr. Suresh Venkatesan as CEO. Dr. Venkatesan was
most recently Senior Vice President, Technology Development at Global Foundries and was responsible for the Company's Technology
Research and Development. Dr. Venkatesan joined Global Foundries in 2009, where he led the development and ramp up 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.





Mr. Thomas Mika 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 (2016 – 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.











58











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. He is the president of MTN Chartered Professional Accountant
Professional Corporation, a public accountancy firm.



David E. Lazovsky is the founder of Intermolecular and served
as that company’s President and Chief Executive Officer and as a member of the board of directors from September 2004 to
October 2014. Mr. Lazovsky has an in-depth knowledge of the semiconductor industry, technology and markets. Prior to founding Intermolecular,
Mr. Lazovsky held several senior management positions at Applied Materials (NASDAQ: AMAT). From 1996 through August 2004, Mr. Lazovsky
held management positions in the Metal Deposition and Thin Films Product Business Group where he was responsible for managing more
than $1 billion in Applied Materials’ semiconductor manufacturing equipment business. Mr. Lazovsky holds a B.S. in mechanical
engineering from Ohio University and, as of March 31, 2014, held 41 pending or issued U.S. patents. Mr. Lazovsky was appointed
as the Chairman of the Board on February 1, 2017.



Mr. Mohan Warrior has been an Angel Investor for early stage technology companies
since Jan 2017 and serves as an Adviser to many of them. Mr. Warrior was president and chief executive officer (CEO) of Alfalight
Inc. (“Alfalight”) from February 2004 to Sep 2016. Alfalight is a GaAs based high power diode laser manufacturing company
with headquarters in Madison, Wisconsin. Alfalight serves military, telecom and industrial customers. Mr. Warrior established Alfalight
as a leading provider of high-powered laser diode solutions in both commercial and defense segments. Alfalight was sold to Gooch
and Housego in 2016. Prior to joining Alfalight, Mr. Warrior's career included 15 years at Motorola Semiconductors (now Freescale)
where he led the test and assembly operations, a group of 3500 employees, in the US, Scotland and Korea. Mr Warrior earned his
Bachelor’s degree in Chemical Engineering from Indian Institute of Technology, Delhi, a Master’s degree in Chemical
Engineering from Syracuse University, New York and an MBA from the Kellogg School of Management at Northwestern University



Mr. Jean-Louis Malinge serves 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. Don Listwin has over 30 years of technology investing and
management experience, highlighted by a decade at Cisco Systems, where he served as executive vice president. During his tenure
at Cisco, he built several multi-billion-dollar lines of business, including the company's Service Provider line of business that
underpins much of today's global Internet infrastructure. More recently, Listwin served as chief executive officer of both Sana
Security and Openwave Systems. In addition, Listwin founded and holds the role of chief executive officer of the Canary Foundation,
a non-profit research organization focused on the early detection of cancer. He also serves as a director on the boards of AwareX,
Calix, iSchemaView, Robin Systems and Teradici. Previously, he also served on the boards or was an advisor to JDS Uniphase, PLUMgrid,
Redback Networks, E-TEK Dynamics, the Cellular Telecommunications & Internet Association (CTIA) and the Business Development
Bank of Canada (BDC).





59







Mr. 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. Charbonneau currently serves on the board of directors of Teradici Corporation,
a collaboration solutions Company and the creator of PCoIP protocol technology and Cloud Access Software. 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 served as Lead Director, Chair of the Nominating and Governance Committee and
Chair of the Audit Committee. 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.



Mr. Zoccolillo joined the Company with extensive experience in the photonics
industry, including senior management roles at Infinera, Opnext and Lucent Technology’s optical networking business. 
He has held senior management roles in Operations as well as General Management roles executing on growth-oriented business strategies. 
Mr. Zoccolillo has served on the Advisory Board for Kaiam Corporation and the School of Science and Technology of Monmouth University.



Mr. Rajgarhia was Senior Vice President & General Manager of the Lightwave
Business Unit of MACOM. Mr. Rajgarhia joined MACOM through the acquisition of Optomai Inc., where he was the Co-Founder and CEO,
representing MACOM’s initial entry into the 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 senior management positions during his 30 years in the optical communications industry. He
was the Director of Sales & Marketing (Asia) for Lucent Technologies’ (now Nokia) optical components, where he started
its Asia business; Vice President of Product Marketing and Business Development for OpNext (formerly Hitachi’s Fiber Optics
Division), where he was part of the team to spin-off the optical business from Hitachi; Director of Product Management & Marketing
for JDS Uniphase (now Viavi), 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. 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.



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.





60









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 11,930,000. 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 and 2018. The Maximum Number is currently 57,611,360
shares.



The purpose of the 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.



The Plan provides that the number of common shares
issuable pursuant to options granted under the Plan and pursuant to other previously granted options is limited to the Maximum
Number, currently fixed at 57,611,360. Any subsequent increase in the Maximum Number must be approved by shareholders of the Company
and cannot exceed 20% of the issued and outstanding shares of the Company at the time of the shareholders’ approval. 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 Plan:



Eligibility. Options may be granted under the Plan
to directors, employees, consultants and consultant companies of the Company and any of its subsidiaries. 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.”



Plan Administration. The Board of Directors is the plan administrator,
subject to the advice and recommendations of our Compensation Committee. The plan administrator will determine the provisions and
terms and conditions of each grant.





61









Exercise Price. The exercise price subject to an
option 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. Except in certain circumstance, the Company can amend the other terms of a stock option
only where prior TSXV acceptance is obtained and where the following requirements are met:



| | (i) | if the amendment is in respect of an option held by an insider of the Company, but excluding amendments to extend the length of the stock option term, the Company obtains disinterested shareholder approval;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | if the option exercise price is amended, at least six months have elapsed since the later of the date of commencement of the term, the date the Company’s shares commenced trading, or the date the option exercise price was last amended;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | if the option price is amended to the discounted market price, the exchange hold period is applied from the date of the amendment (and for more certainty where the option price is amended to the market price, the exchange hold period will not apply); and
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | if the length of the stock option term is amended, any extension of the length of the term of the stock option is treated as a grant of a new option, and therefore the amended option must comply with the pricing and other requirements of the policy as if it were a newly granted option. The term of an option cannot be extended so that the effective term of the option exceeds 10 years in total. An option must be outstanding for at least one year before the Company can extend its term.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The TSXV must accept a proposed amendment before the
option may be exercised as amended. If the Company cancels a stock option and within one year grants new options to the same individual,
the new options will be subject to the requirements in sections (i) to (iv) above.

















62











Option Agreement. Options granted under the plan are evidenced
by an option agreement that sets forth the terms, conditions and limitations for each grant.



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 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.



Transfer Restrictions. Options granted under the Plan may not
be transferred in any manner by the option holder other than by will or the laws of succession and may be exercised during the
lifetime of the option holder only by the option holder. Securities that are subject to restrictions may not be transferred during
the period of restriction.



Change of Control and Alteration of Capital. The Plan provides
that if a Change of Control, as defined herein, occurs, the shares subject to option shall immediately become vested and may thereupon
be exercised in whole or in part by the option holder. The Plan also provides for automatic adjustments in the number of optioned
shares and/or the exercised price, in the event of an alteration in the share capital of the Company.



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 2019 was $1,595,551 (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.





63









The following table sets forth all annual and long-term compensation for services
in all capacities to the Company for fiscal year 2019 of the Company.



|                            |  |             |      |            |  |                            |         | Options
    Based Awards (1)(2) |  |                          |   | Non-Equity Incentive
    Plan Compensation |  |                           |           |               |  |                
|--------------------------- |  | ----------- | ---- | ---------- |  | -------------------------- | ------- | ------------------------------- |  | ------------------------ | - | ------------------------------------------ |  | ------------------------- | --------- | ------------- |  | ---------------
|Name and Principal Position |  | Fiscal Year |      | Salary (2) |  | Share-Based Awards (1) (2) |         | No. of Options                  |  | Value of Options (1) (2) |   | Annual Incentive Plans                     |  | Long-term Incentive Plans |           | Pension Value |  | All other Comp.
|David Lazovsky              |  |             | 2019 |            |  |                            | 166,667 |                                 |  |                          | - |                                            |  |                           | 900,000   |               |  |                
|Dr. Suresh Venkatesan       |  |             | 2019 |            |  |                            | 440,000 |                                 |  |                          | - |                                            |  |                           | 4,500,000 |               |  |                
|Richard Zoccolillo          |  |             | 2019 |            |  |                            | 250,000 |                                 |  |                          | - |                                            |  |                           | 500,000   |               |  |                
|Kevin Barnes                |  |             | 2019 |            |  |                            | 124,357 |                                 |  |                          | - |                                            |  |                           | 500,000   |               |  |                
|Thomas Mika                 |  |             | 2019 |            |  |                            | 300,000 |                                 |  |                          | - |                                            |  |                           | 1,000,000 |               |  |                
|Rajan Rajgopal              |  |             | 2019 |            |  |                            | 219,917 |                                 |  |                          | - |                                            |  |                           | -         |               |  |                
|Vivek Rajgarhia             |  |             | 2019 |            |  |                            | 60,833  |                                 |  |                          | - |                                            |  |                           | 3,200,000 |               |  |                
|James Lee                   |  |             | 2019 |            |  |                            | 33,777  |                                 |  |                          | - |                                            |  |                           | 1,000,000 |               |  |                





| | (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 exchange rate applicable at the date of grant.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------















64











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, 2019:



|                   |  |                                             |           |                                   |  |                        |       |                                                     |  |                                                          |  |                                                                        
|------------------ |  | ------------------------------------------- | --------- | --------------------------------- |  | ---------------------- | ----- | --------------------------------------------------- |  | -------------------------------------------------------- |  | -----------------------------------------------------------------------
|                   |  | Option-Based Awards                         |           |                                   |  | Share-Based Awards    
|Name               |  | No. of Shares Underlying Unexercised Shares |           | Option Exercise Price (CA$/share) |  | Option Expiration Date |       | Value of Unexercised in-the Money Options (1) (US$) |  | Number of Shares or Units of Shares That Have Not Vested |  | Market or Payout Value of Share-Based Awards That Have Not Vested (US$)
|David Lazovsky     |  |                                             | 250,000   |                                   |  | $                      | 1.99  |                                                     |  | 08-Apr-2020                                              |  |                                                                        
|                   |  |                                             | 25,000    |                                   |  | $                      | 1.54  |                                                     |  | 12-Jun-2020                                              |  |                                                                        
|                   |  |                                             | 150,000   |                                   |  | $                      | 0.86  |                                                     |  | 07-Jul-2026                                              |  |                                                                        
|                   |  |                                             | 3,000,000 |                                   |  | $                      | 0.39  |                                                     |  | 01-Feb-2027                                              |  |                                                                        
|                   |  |                                             | 950,000   |                                   |  | $                      | 0.52  |                                                     |  | 28-Mar-2028                                              |  |                                                                        
|                   |  |                                             | 900,000   |                                   |  | $                      | 0.38  |                                                     |  | 29-May-2029                                              |  |                                                                        
|Kevin Barnes       |  |                                             | 50,000    |                                   |  | $                      | 0.76  |                                                     |  | 28-Feb-2021                                              |  |                                                                        
|                   |  |                                             | 25,000    |                                   |  | $                      | 0.51  |                                                     |  | 28-Sep-2021                                              |  |                                                                        
|                   |  |                                             | 25,000    |                                   |  | $                      | 0.23  |                                                     |  | 16-Feb-2022                                              |  |                                                                        
|                   |  |                                             | 50,000    |                                   |  | $                      | 1.54  |                                                     |  | 12-Jun-2020                                              |  |                                                                        
|                   |  |                                             | 25,000    |                                   |  | $                      | 1.08  |                                                     |  | 13-Aug-2020                                              |  |                                                                        
|                   |  |                                             | 100,000   |                                   |  | $                      | 0.86  |                                                     |  | 07-Jul-2026                                              |  |                                                                        
|                   |  |                                             | 250,000   |                                   |  | $                      | 0.28  |                                                     |  | 13-Jul-2027                                              |  |                                                                        
|                   |  |                                             | 150,000   |                                   |  | $                      | 0.52  |                                                     |  | 28-Mar-2028                                              |  |                                                                        
|                   |  |                                             | 500,000   |                                   |  | $                      | 0.38  |                                                     |  | 29-May-2029                                              |  |                                                                        
|Rajan Rajgopal     |  |                                             | 343,750   |                                   |  | $                      | 0.36  |                                                     |  | 23-Jan-2027                                              |  |                                                                        
|                   |  |                                             | 281,250   |                                   |  | $                      | 0.28  |                                                     |  | 13-Jul-2027                                              |  |                                                                        
|                   |  |                                             | 93,750    |                                   |  | $                      | 0.52  |                                                     |  | 28-Mar-2028                                              |  |                                                                        
|Richard Zoccolillo |  |                                             | 1,750,000 |                                   |  | $                      | 0.39  |                                                     |  | 24-Sep-2028                                              |  |                                                                        
|                   |  |                                             | 500,000   |                                   |  | $                      | 0.38  |                                                     |  | 29-May-2029                                              |  |                                                                        
|Suresh Venkatesan  |  |                                             | 6,357,000 |                                   |  | $                      | 1.40  |                                                     |  | 10-Jun-2020                                              |  |                                                                        
|                   |  |                                             | 300,000   |                                   |  | $                      | 0.86  |                                                     |  | 07-Jul-2026                                              |  |                                                                        
|                   |  |                                             | 3,000,000 |                                   |  | $                      | 0.28  |                                                     |  | 13-Jul-2027                                              |  |                                                                        
|                   |  |                                             | 3,900,000 |                                   |  | $                      | 0.52  |                                                     |  | 28-Mar-2028                                              |  |                                                                        
|                   |  |                                             | 4,500,000 |                                   |  | $                      | 0.38  |                                                     |  | 29-May-2029                                              |  |                                                                        
|Thomas Mika        |  |                                             | 1,000,000 |                                   |  | $                      | 0.62  |                                                     |  | 02-Nov-2026                                              |  |                                                                        
|                   |  |                                             | 500,000   |                                   |  | $                      | 0.385 |                                                     |  | 16-Jan-2027                                              |  |                                                                        
|                   |  |                                             | 1,000,000 |                                   |  | $                      | 0.28  |                                                     |  | 13-Jul-2027                                              |  |                                                                        
|                   |  |                                             | 950,000   |                                   |  | $                      | 0.52  |                                                     |  | 28-Mar-2028                                              |  |                                                                        
|                   |  |                                             | 1,000,000 |                                   |  | $                      | 0.38  |                                                     |  | 29-May-2029                                              |  |                                                                        
|Vivek Rajgarhia    |  |                                             | 3,250,000 |                                   |  | $                      | 0.33  |                                                     |  | 04-Nov-2029                                              |  |                                                                        
|Yong Lee           |  |                                             | 1,000,000 |                                   |  | $                      | 0.33  |                                                     |  | 04-Nov-2029                                              |  |                                                                        





(1) This amount is calculated
based on the difference between the market value of the shares underlying the options as of December 31, 2019, being CAD $0.375
(US$0.29), and the exercise or base price of the option. The exchange rate used in these calculations to convert CAD to USD was
0.7682, being the closing exchange rate at December 31, 2019.





65







The value vested or earned during fiscal year 2019 of incentive plan awards
granted to NEOs are as follows:



|                   |  | Option-Based Awards – Value      |  | Share-Based Awards – Value Vested |  | Non-Equity Incentive Plan Compensation – Value Earned | 
|------------------ |  | -------------------------------- |  | --------------------------------- |  | ----------------------------------------------------- | 
|                   |  |                                  |  |                                   |  |                                                       | 
|NEO Name           |  | Vested During the Year (1) (US$) |  | During the Year (US$)             |  | During the Year (US$)                                 | 
|Richard Zoccolillo |  | -                                |  | N/A                               |  | N/A                                                   | 
|Kevin Barnes       |  | 3,606                            |  | N/A                               |  | N/A                                                   | 
|Suresh Venkatesan  |  | 43,269                           |  | N/A                               |  | N/A                                                   | 
|Thomas Mika        |  | 15,024                           |  | N/A                               |  | N/A                                                   | 
|Rajan Rajgopal     |  | 7,452                            |  | N/A                               |  | N/A                                                   | 
|David Lazovsky     |  | 3,606                            |  | 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 rates
used in these calculations to convert CAD to USD were the rates applicable on the vesting dates.











66











Director Compensation



The following table details compensation paid/accrued for fiscal year 2019
for each director who is not also an officer.



|                            |  |              |      |                           |  |                             |        | Options-Based |  | Non-Equity Incentive Plan |   |                   |  |           |         |        
|--------------------------- |  | ------------ | ---- | ------------------------- |  | --------------------------- | ------ | ------------- |  | ------------------------- | - | ----------------- |  | --------- | ------- | -------
|                            |  |              |      |                           |  |                             |        | Awards(1)(2)  |  | Compensation              |   |                   |  | All       |         |        
|Name and Principal Position |  | Fiscal  Year |      | Salary (cash)  (2)  (US$) |  | Share-Based Awards (1)(US$) |        | No. of Shares |  | (US$)                     |   | Annual  Incentive |  | Long-term |         | Pension
|Don Listwin                 |  |              | 2019 |                           |  |                             | 32,500 |               |  |                           | — |                   |  |           | 383,356 |        
|Chris Tsiofas               |  |              | 2019 |                           |  |                             | 47,500 |               |  |                           | — |                   |  |           | 440,653 |        
|Mohan Warrior               |  |              | 2019 |                           |  |                             | 30,000 |               |  |                           | — |                   |  |           | 360,534 |        
|Peter Charbonneau           |  |              | 2019 |                           |  |                             | 40,000 |               |  |                           | — |                   |  |           | 400,593 |        
|Jean-Louis Malinge          |  |              | 2019 |                           |  |                             | 30,000 |               |  |                           | — |                   |  |           | 360,534 |        







| | (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 was the rate of exchange applicable on the date of grant.
| | --- | ----------------------------------------------------------------------------------------------------------------------------





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, 2019:













67









|                   |  |  | Option-Based Awards                         |  |  |   |                                   |  |  |                        |  | Share-Based Awards
|------------------ |  |  | ------------------------------------------- |  |  | - | --------------------------------- |  |  | ---------------------- |  | ------------------
|Name               |  |  | No. of Shares Underlying Unexercised Shares |  |  |   | Option Exercise Price (CA$/share) |  |  | Option Expiration Date |  |                   
|Chris Tsiofas      |  |  | 300,000                                     |  |  | $ | 1.54                              |  |  | 12-Jun-2020            |  |                   
|                   |  |  | 150,000                                     |  |  | $ | 0.86                              |  |  | 07-Jul-2026            |  |                   
|                   |  |  | 687,500                                     |  |  | $ | 0.28                              |  |  | 13-Jul-2027            |  |                   
|                   |  |  | 487,666                                     |  |  | $ | 0.33                              |  |  | 21-Jun-2028            |  |                   
|                   |  |  | 440,653                                     |  |  | $ | 0.38                              |  |  | 29-May-2029            |  |                   
|Don Listwin        |  |  | 468,750                                     |  |  | $ | 0.22                              |  |  | 22-Jan-2028            |  |                   
|                   |  |  | 399,000                                     |  |  | $ | 0.33                              |  |  | 21-Jun-2028            |  |                   
|                   |  |  | 360,534                                     |  |  | $ | 0.38                              |  |  | 29-May-2029            |  |                   
|                   |  |  | 22,822                                      |  |  | $ | 0.33                              |  |  | 04-Nov-2029            |  |                   
|Jean-Louis Malinge |  |  | 525,000                                     |  |  | $ | 0.30                              |  |  | 05-Sep-2027            |  |                   
|                   |  |  | 399,000                                     |  |  | $ | 0.33                              |  |  | 21-Jun-2028            |  |                   
|                   |  |  | 360,534                                     |  |  | $ | 0.38                              |  |  | 29-May-2029            |  |                   
|Mohandas Warrior   |  |  | 250,000                                     |  |  | $ | 1.54                              |  |  | 12-Jun-2020            |  |                   
|                   |  |  | 150,000                                     |  |  | $ | 0.86                              |  |  | 07-Jul-2026            |  |                   
|                   |  |  | 562,500                                     |  |  | $ | 0.28                              |  |  | 13-Jul-2027            |  |                   
|                   |  |  | 399,000                                     |  |  | $ | 0.33                              |  |  | 21-Jun-2028            |  |                   
|                   |  |  | 360,534                                     |  |  | $ | 0.38                              |  |  | 29-May-2029            |  |                   
|Peter Charbonneau  |  |  | 154,730                                     |  |  | $ | 0.52                              |  |  | 28-Mar-2028            |  |                   
|                   |  |  | 399,000                                     |  |  | $ | 0.33                              |  |  | 21-Jun-2028            |  |                   
|                   |  |  | 400,593                                     |  |  | $ | 0.38                              |  |  | 29-May-2029            |  |                   





| | (1) | This amount is calculated based on the difference between the market value of the shares underlying the options as of December
31, 2019, being CAD $0.375 (US$0.29), and the exercise or base price of the option. The exchange rate used in these calculations
to convert CAD to USD was 0.7682, being the closing exchange rate at December 31, 2019
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







68











The value vested or earned during fiscal year 2019 of incentive plan awards
granted to Directors who are not also named executive officers are as follows:



|                   |  | Option-Based Awards – Value      |        | Share-Based Awards – Value Vested |  | Non-Equity Incentive Plan Compensation – Value Earned
|------------------ |  | -------------------------------- | ------ | --------------------------------- |  | -----------------------------------------------------
|Director Name      |  | Vested During the Year (1) (US$) |        | During the Year (US$)             |  | During the Year (US$)                                
|                   |  |                                  |        |                                   |  |                                                      
|Peter Charbonneau  |  |                                  | 6,138  |                                   |  | N/A                                                  
|Jean-Louis Malinge |  |                                  | 6,138  |                                   |  | N/A                                                  
|Chris Tsiofas      |  |                                  | 7,503  |                                   |  | N/A                                                  
|Don Listwin        |  |                                  | 12,449 |                                   |  | N/A                                                  
|Mohan Warrior      |  |                                  | 6,138  |                                   |  | 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 disclosed below in “Written 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.













69











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.



Written Management Agreements



The Company and/or its subsidiaries have employment contracts
with the following current and former Officers as follows:



Dr. Venkatesan entered into an Executive Employment
Agreement with an effective date of June 10, 2015 wherein (i) he will be paid US$550,000 per year under at- will terms of employment;
(ii) he will be eligible for annual and special bonuses as determined by the Board of Directors; (iii) he was granted 6,357,000
stock options vesting over 4 years; (iv) he became eligible for a signing bonus of US $450,000 payable on the first anniversary
of the effective date; (v) he will receive a severance of twelve months on termination of employment by the Company, other than
for cause. Mr. Venkatesan agreed to a permanent reduction of his cash compensation by 20% effective October 2016, reducing his
compensation from US$550,000 to US$440,000 per year.



Mr. Mika entered into an Executive Employment Agreement
with an effective date of November 2, 2016 wherein (i) he will be paid US$250,000 per year under at- will terms of employment (ii)
he will be eligible for annual and special bonuses as determined by the Board of Directors; (iii) he was granted 1,000,000 stock
options vesting over 4 years; (iv) he will receive an additional 500,000 stock options vesting over 4 years in Q1 2017 (v) he will
be entitled to compensation of three months’ salary on termination of employment by the Company, if termination is other
than for cause. Mr. Mika’s compensation was adjusted to US$300,000 on May 1, 2018.



On July 1, 2016, Mr. Lazovsky entered into a Consulting Agreement
with the Company to provide strategic, technological, integration and other general consulting services. For his services, Mr.
Lazovsky was paid $150,000 for the term from July 1, 2016 to December 31, 2016.



Mr. Lazovsky entered into an Executive Employment
Agreement to provide services as the Executive Chairman of the Board, with an effective date of February 1, 2017. He will (i) be
paid US$200,000 per year under at-will terms of employment (ii) be eligible for annual and special bonuses as determined by the
Board of Directors; (iii) granted 3,000,000 stock options vesting over 4 years; (iv) be entitled to compensation of six months’
salary on termination prior to 2 years of employment by the Company, if termination is other than for cause. Mr. Lazovsky resigned
as Executive Chairman of the Board on November 6, 2019.



Mr. Barnes had an arrangement with the Company to
provide consulting services starting January 1, 2013 for a period of one year with an automatic one-year renewal. His consulting
agreement was converted to an employment agreement and is paid CA$190,000 annually.



Effective December 30, 2016, Mr. Rajan Rajgopal entered into
an employment agreement with DenseLight to provide services as the President and General Manager of DenseLight. As per the agreement,
Mr. Rajgopal will (i) be paid be paid US$220,000 per year (ii) be eligible for annual and special bonuses as determined by the
Board of Directors; (iii) be granted 500,000 stock options vesting over 4 years; (iv) be granted an additional 500,000 stock options
no later than June 30, 2017 (v) be entitled to compensation of one month salary on termination of employment by the Company, if
termination is other than for cause.



Effective September 10, 2018, Mr. Zoccolillo entered into an
employment agreement to provide services as the Senior Vice President Strategic Marketing and Product Management. As per the agreement,
Mr. Zoccolillo will (i) be paid be paid US$250,000 per year (ii) be eligible for annual and special bonuses as determined by the
Board of Directors; and (iii) be granted 1,750,000 stock options vesting over 4 years.



Mr. Rajgarhia entered into an Executive Employment
Agreement with an effective date of November 4, 2019 wherein (i) he will be paid US$365,000 per year under at- will terms of employment
(ii) he will be eligible for annual and special bonuses as determined by the Board of Directors; (iii) he was granted 3,250,000
stock options vesting over 4 years.



Effective September 2, 2019, Mr. Lee entered into an employment
agreement with POET Technologies Pte. Ltd. to provide services as the Vice President and General Manager of POET Technologies Pte.
Ltd. As per the agreement, Mr. Lee will (i) be paid be paid US$240,000 per year (ii) be eligible for annual and special bonuses
as determined by the Board of Directors; (iii) be granted 1,000,000 stock options vesting over 4 years; (iv) be entitled to compensation
of one month salary on termination of employment by the Company, if termination is other than for cause.







70











| | C. | Board Practices
| | -- | ---------------



Our Board of Directors currently consists of seven (7) directors including the CEO, of which, six (6) are independent 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.



The Board and committees of the Board schedule regular
meetings over the course of the year.



During fiscal 2019, the Board held 12 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 Messrs. Tsiofas, Malinge, Charbonneau,
Listwin, Lazovsky and Warrior are independent.



Directors’ Service Contracts



Mr. Venkatesan entered into an employment contract as
explained above in “Written Management Agreements.”



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 Strategy Committee and (4) a Corporate Governance and Nominating Committee. Committee
charters can be found on the Company’s website (poet-technologies.com). 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 Mohandas Warrior. 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.





71







Compensation Committee



The Compensation Committee is currently comprised of three members:
Don Listwin (Chair), Chris Tsiofas and David Lazovsky. Mr. Listwin was appointed chair of the Compensation Committee on August
8, 2019. 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. Don Listwin, Chairman of the Compensation Committee has over 30 years of technology
investing and management experience, highlighted by a decade at Cisco Systems, where he served as its Executive Vice President.
Mr. Listwin currently serves as chief executive officer of iSchema View and in the recent past served as chief executive officer
of both Sana Security and Openwave Systems. Mr. Listwin also currently serves as a director on the boards of AwareX, Calix, Robin
Systems and Teradici. Previously, he also served on the boards or was an advisor to JDS Uniphase, PLUMgrid, Redback Networks, E-TEK
Dynamics, the Cellular Telecommunications & Internet Association (CTIA) and the Business Development Bank of Canada (BDC).
In these capacities, Mr. Listwin had extensive direct experience with executive compensation matters as both a chief executive
and board member of an assortment of companies, large and small, including companies within industries directly relevant to the
Company.



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. Mr. Tsiofas is the president of MTN Chartered Professional
Accountant Professional Corporation, a public accountancy firm. 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.













72











Mr. David E. Lazovsky is the founder of Intermolecular
and served as that company’s President and Chief Executive Officer and as a member of the board of directors from September
2004 to October 2014. Mr. Lazovsky has an in-depth knowledge of the semiconductor industry, technology and markets. Prior to founding
Intermolecular, Mr. Lazovsky held several senior management positions at Applied Materials (NASDAQ: AMAT). From 1996 through August
2004, Mr. Lazovsky held management positions in the Metal Deposition and Thin Films Product Business Group where he was responsible
for managing more than $1 billion in Applied Materials’ semiconductor manufacturing equipment business. Mr. Lazovsky holds
a B.S. in mechanical engineering from Ohio University and, as of March 31, 2014, held 41 pending or issued U.S. patents.



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.



In 2016, the Compensation Committee contracted with
Compensia to perform an executive compensation review (the “Review”) of certain senior positions within the then-current
executive management team. Base salaries and annual and long-term incentives were benchmarked against a group of public companies
in the communications equipment, semiconductor, and electronic component industries. The data provided was one of the elements
considered by the Compensation Committee, with adjustments made for the differences in stage of development, revenues, profitability
and other characteristics that distinguished the Company from the benchmarks.





73







The benchmarks comprised the following companies:
Alliance Fiber Optic Product, Amtech Systems, Applied Optoelectronics, Clearfield, CyberOptics, Dynasil, EMCORE, Exar, GigPeak,
GSI Technology, Intermolecular, LightPath Technologies, Micropac Industries, Nanometrics, PDF Solutions, QuickLogic and Ultratech.
The data came from each company’s public filings available as of April 2016. The positions benchmarked were CEO, COO, CTO,
VP-Product Development and VP-Design Enablement. Due to cost and relevance, the Company elected not to repeat the Review with Compensia
for its consideration of executive compensation for fiscal years subsequent to December 31, 2016.



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.



| | D. | Employees
| | -- | ---------



As of December 31, 2019, the Company had sixteen
(16) full-time employees, one (1) part-time employee and three (3) consultants, including one (1) in a senior management position.
Eight (8) employees and one (1) consultant work at our lab facility either as support staff or are engaged in research and development
initiatives; two (2) employees and one (1) consultant are employed at the Canadian office; Seven (7) employees are employed at
our fabrication facility in Singapore. None of the Company’s employees are covered by collective bargaining agreements.



As of December 31, 2018, the Company had ninety-nine
(99) full-time employees and four (4) consultants, including one (1) in a senior management position. Seven (7) employees and one
(1) consultant work at our lab facility either as support staff or are engaged in research and development initiatives; one (1)
employee and three (3) consultants are employed at the Canadian office; ninety-one (91) employees are employed at our fabrication
facility in Singapore. None of the Company’s employees are covered by collective bargaining agreements.



As of December 31, 2017, the Company had sixty-eight (68)
full-time employees and five (5) consultants, including senior management. Five (5) employees and one (1) consultant worked at
our lab facility either as support staff or were engaged in research and development initiatives; One (1) employee and three (3)
consultants were employed at the Canadian office; sixty-three (63) employees were employed at our fabrication facility in Singapore.
None of the Company’s employees were 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 April 22, 2020. 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 April 22, 2020. Ordinary 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.





74











The shareholders listed below do not have any different voting rights from
our other shareholders.



|                                |  | Number of Shares Beneficially Owned (1) |           | Percent of Class
|------------------------------- |  | --------------------------------------- | --------- | ----------------
|Directors and Officers:         |  |                                         |           |                 
|Chris Tsiofas                   |  |                                         | 25,000    |                 
|Thomas Mika                     |  |                                         | 100,000   |                 
|Kevin Barnes                    |  |                                         | 17,463    |                 
|David Lazovsky                  |  |                                         | 181,000   |                 
|Suresh Venkatesan               |  |                                         | 115,000   |                 
|Don Listwin                     |  |                                         | 632,250   |                 
|Directors and Officers Subtotal |  |                                         | 1,070,713 |                 
|Major Shareholders:             |  |                                         |           |                 
|None that we are aware of.      |  |                                         |           |                 



| | (1) | The number of shares set forth for each Director, Officer and Major Shareholder is 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.



|                    |  | Number of Options exercisable
                                                                within 60 days |            | Percent of class
|------------------- |  | ------------------------------------------------------------------------------------------------------------ | ---------- | ----------------
|Kevin Barnes        |  |                                                                                                              | 484,375    |                 
|Peter Charbonneau   |  |                                                                                                              | 854,175    |                 
|David Lazovsky      |  |                                                                                                              | 3,071,875  |                 
|Don Listwin         |  |                                                                                                              | 1,149,562  |                 
|Jean- Louis Malinge |  |                                                                                                              | 1,194,401  |                 
|Thomas Mika         |  |                                                                                                              | 2,228,125  |                 
|Chris Tsiofas       |  |                                                                                                              | 1,936,906  |                 
|Suresh Venkatesan   |  |                                                                                                              | 10,200,750 |                 
|Mohandas Warrior    |  |                                                                                                              | 1,613,151  |                 
|Richard Zoccolillo  |  |                                                                                                              | 546,875    |                 
|                    |  |                                                                                                              | 24,008,945 |                 





|                  |  | Number of Warrants exercisable
                                                                within 60 days |         | Exercise price CA$ |  | Percent of class
|----------------- |  | ------------------------------------------------------------------------------------------------------------- | ------- | ------------------ |  | ----------------
|Suresh Venkatesan |  |                                                                                                               | 37,500  |                    |  |                 
|David Lazovsky    |  |                                                                                                               | 90,500  |                    |  |                 
|                  |  |                                                                                                               | 128,000 |                    |  |                 







75











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 April 22, 2020, there were a total of 445 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
April 22, 2020, U.S. holders of record held approximately 0.65% of our outstanding common shares.



Control of Company



The Company is a publicly owned Ontario corporation,
the 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



| | B. | Major Shareholders and Related Party Transactions
| | -- | -------------------------------------------------



No shareholder beneficially owns 5% or more of the Company’s
common shares.



Compensation to key management personnel (Executive Chairman,
CEO, CFO, President and General Manager of POET and POET Technologies Pte Ltd) was as follows:



|                         |  | 2019 |           | 2018 |  | 2017
|------------------------ |  | ---- | --------- | ---- |  | ----
|                         |  |      |           |      |  |     
|Salaries                 |  | $    | 1,251,277 |      |  | $   
|Share-based payments (1) |  |      | 2,135,579 |      |  |     
|                         |  |      |           |      |  |     
|Total                    |  | $    | 3,386,856 |      |  | $   



(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.





C. Interests of Experts and Counsel



Not applicable.





76







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.





77









| | B. | Significant Changes
| | -- | -------------------



On February 14, 2020 and March 30, 2020 the Company
collected $4,750,000 and $8,250,000 respectively for a cumulative $13,000,000 representing two tranches of an agreed three tranche
payment plan for the outstanding balance due from DL Shanghai from the sale of DenseLight. The Company collected an additional
$2,000,000 which was immediately paid to Oak Capital on behalf of the DL Shanghai for due diligence, legal and other expenses.



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 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       |  | High (CA$) |       | Low (CA$)
|------------------ |  | ---------- | ----- | ---------
|MONTHLY            |  |            |       |          
|March 31, 2020     |  |            | 0.56  |          
|February 28, 2020  |  |            | 0.54  |          
|January 31, 2020   |  |            | 0.415 |          
|December 31, 2019  |  |            | 0.435 |          
|November 30, 2019  |  |            | 0.34  |          
|October 31, 2019   |  |            | 0.345 |          
|QUARTERLY          |  |            |       |          
|March 31, 2020     |  |            | 0.56  |          
|December 31, 2019  |  |            | 0.44  |          
|September 30, 2019 |  |            | 0.46  |          
|June 30, 2019      |  |            | 0.42  |          
|March 31, 2019     |  |            | 0.46  |          
|December 31, 2018  |  |            | 0.40  |          
|September 30, 2018 |  |            | 0.44  |          
|June 30, 2018      |  |            | 0.44  |          
|March 31, 2018     |  |            | 0.79  |          
|December 31, 2017  |  |            | 0.36  |          
|YEARLY             |  |            |       |          
|December 31, 2019  |  |            | 0.46  |          
|December 31, 2018  |  |            | 0.79  |          
|December 31, 2017  |  |            | 0.51  |          
|December 31, 2016  |  |            | 1.44  |          
|December 31, 2015  |  |            | 2.00  |          



| | B. | Plan of Distribution
| | -- | --------------------



Not Required.



| | C. | Markets
| | -- | -------



The Company’s common shares trade on the TSXV in Canada under the
symbol “PTK”. The Company’s common shares also trade on the OTCQX International Marketplace under the symbol
“POETF”.



| | D. | Selling Shareholders
| | -- | --------------------



Not Required.





78











| | 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 ordinary 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.



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.





79







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.





















80









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.



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.





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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 2020 threshold for WTO investors that are SOEs will be
$428 million based on the book value of the Canadian business' assets, up from $416 million in 2019. The 2020 thresholds for review
for direct acquisitions of control of Canadian businesses by private sector investor WTO investors ($1 billion) and private sector
trade- agreement investors ($1.5 billion) remain the same and are both based on the "enterprise value" of the Canadian
business being acquired.



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

(1)  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);

(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





82











| | (3) | remain open for a minimum deposit period of 105 days (the Minimum 105 Day Bid Period) unless
| | --- | --------------------------------------------------------------------------------------------



(a)  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.



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.









83











| | 1. | On May 11, 2016 the Company acquired all the issued and outstanding shares of DenseLight Semiconductor Pte. Ltd. in an all-stock acquisition for $10,500,000 satisfied through the issuance of 13,611,150 common shares.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | On June 22, 2016, the Company acquired all the issued and outstanding shares of BB Photonics, a New Jersey company and its subsidiary BB Photonics UK Ltd, collectively BB Photonics, a designer of integrated photonic solutions for the data communications market for consideration of $1,550,000. The all-stock purchase was accomplished with the issuance of 1,996,090 common share of the Company at a price of $0.777 per share.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | On October 19, 2016, the Company announced that it had entered into an agreement with Singapore’s Economic Development Board (EDB) to expand the Company’s research and development operations in Singapore. Under this agreement, the Company is eligible to receive support up to a maximum of S$10.7 million (US$7.7 million) over five years subject to certain expenditure, capital acquisition and head count thresholds.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | On April 18, 2019, the Company signed loan and security agreements for a senior secured credit facility (the “Bridge Loan”) to be provided by Espresso Capital Ltd which grants the Company access to a maximum US$5,000,000. On April 23, 2019 the Company received the initial advance against the credit facility in the amount of US$2,000,000. In partial consideration of the US$5,000,000 gross credit facility available to the Company, and in connection with the initial advance, the Company issued to Espresso Capital warrants for the purchase of 3,289,500 common shares at a price of C$0.35 per share. The Warrants expire on April 18, 2020.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 5. | On August 20, 2019, the
Company signed a definitive agreement with respect to the sale of DenseLight for $26,000,000. The Share Sale Agreement was signed
on November 8, 2019 when the sale was consummated.                                                                                                                                                                                                                                                                                                                                                                                                                                                   







| | 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
| | -- | --------



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.





84











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.



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.





85







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;

• 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.















86









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.



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, which will generally be U.S. source ordinary income or loss. A loss might not be deductible due to certain limitation.



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.





87









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%). 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 gain 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.



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.





88









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 the
OTCBB 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, 2018 and do not expect to be classified as a PFIC for the year ending December 31, 2019. 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 become a PFIC
for the current taxable year ending December 31, 2019 or in a future taxable year. U.S. Holders which are individuals, estates
and trusts and whose income exceeds certain thresholds will be required to pay a 38% 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. 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 28%)
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.



| | G. | Statements by Experts
| | -- | ---------------------



The consolidated financial statements of POET Technologies Inc.
as of December 31, 2019, 2018 and 2017 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.



89









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 Required.



ITEM 11. Quantitative and Qualitative Disclosures About
Market Risk



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.



Exchange Rate Risk



The Company is exposed to foreign currency risk with
the Canadian and Singapore dollar. The Company maintains bank accounts and cash reserves in US, Canadian and Singapore dollars
with the majority of reserves currently split between Canadian and US dollars. The Canadian dollar reserves are exposed to currency
fluctuations. Most of the company’s operations are transacted in US and Singapore dollars. A 10% change in the Canadian and
Singapore dollar would have increased or decreased other comprehensive loss by $290,950.



The following table shows exchange rates, from CAD to USD, for the past six months:



|Period                        |  | High (1) |        | Low (1) |  | Average (2)
|----------------------------- |  | -------- | ------ | ------- |  | -----------
|March 2020                    |  |          | 0.7501 |         |  |            
|February 2020                 |  |          | 0.7573 |         |  |            
|January 2020                  |  |          | 0.7714 |         |  |            
|December 2019                 |  |          | 0.7655 |         |  |            
|November 2019                 |  |          | 0.7620 |         |  |            
|October 2019                  |  |          | 0.7667 |         |  |            
|October 2019 — March 31, 2020 |  |          | 0.8163 |         |  |            



|(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                        |  | High (1) |        | Low (1) |  | Average (2)
|----------------------------- |  | -------- | ------ | ------- |  | -----------
|March 2020                    |  |          | 0.7254 |         |  |            
|February 2020                 |  |          | 0.7324 |         |  |            
|January 2020                  |  |          | 0.7432 |         |  |            
|December 2019                 |  |          | 0.7399 |         |  |            
|November 2019                 |  |          | 0.7369 |         |  |            
|October 2019                  |  |          | 0.7346 |         |  |            
|October 2019 — March 31, 2020 |  |          | 0.7432 |         |  |            



|(1)    Bank of Singapore monthly average
        rates
        (2)    Bank of Singapore daily closing
        average rates |  |  | 
|--------------------------------------------------------------------------------------------------------------------------- |  |  | 





90









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.



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 Required.



PART II



ITEM 13. Defaults, Dividend Arrearages and Delinquencies



Not Required.



ITEM 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds



Not Required.



ITEM 15. Controls and Procedures



| | (a) | Disclosure Controls and Procedures
| | --- | ----------------------------------



We carried out an evaluation, under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as
of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that, as of the end of such period, our disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported accurately and within the time frames specified in the SEC's rules and forms and accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure. Notwithstanding the foregoing, there can be no assurance that our disclosure controls
and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required
to be set forth in our reports.





91









| | (b) | Management’s Annual Report on Internal Control over Financial Reporting
| | --- | -----------------------------------------------------------------------



The Company’s Board of Directors and management
are responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal
control system was 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.



All internal control systems, 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.



















92











Management assessed the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2019. 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, as of December 31, 2019, the Company’s internal
control over financial reporting was effective.



| | (c) | Attestation Report of Registered Public Accounting Firm
| | --- | -------------------------------------------------------



Not applicable.



| | (d) | Changes in Internal Controls over Financial Reporting
| | --- | -----------------------------------------------------



There were no changes in our internal control over
financial reporting that occurred during the year ended December 31, 2019 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



In December 2007, 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.



ITEM 16C. Principal Accountant Fees and Services Fees Paid to Independent Registered
Public Accounting Firm



The following table sets forth, for each of the years indicated, the fees billed
by our independent registered public accounting firm, Marcum LLP.



|                  |  |          | Year Ended December 31, | 
|----------------- |  | -------- | ----------------------- | 
|Services Rendered |  |          | 2019                    | 
|                  |  | (in US$) |                        
|Audit Fees (1)    |  | $        | 175,000                 | 
|Tax Fees (2)      |  |          | 17,200                  | 
|Total             |  | $        | 192,200                 | 





| | (1) | Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements, including services that generally only the independent accountant can reasonably provide.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Tax fees relate to tax compliance, planning and advice.
| | --- | -------------------------------------------------------





93









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 Required.



ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers



Not Required.



ITEM 16F. Change in Registrant’s Certifying Accountants



Not Required.



ITEM 16G. Corporate Governance



Not Required.



ITEM 16H. Mine Safety Disclosure



Not Required.



PART III



ITEM 17. Financial Statements



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, 2019, 2018 and 2017 and as of December 31, 2019, 2018 and 2017
| | -- | -----------------------------------------------------------------------------------------------------------------------------



ITEM 18. Financial Statements



The Company has elected to provide financial statements pursuant to ITEM 17.





94









ITEM 19. Exhibits



|1.1          | Certificate and Articles of Continuance (1)                                                                                                                                                                              
|------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.2          | Amended and Restated Bylaws (2)                                                                                                                                                                                          
|2.0          | Description of Securities (6)                                                                                                                                                                                            
|4.1          | License Agreement with the University of Connecticut, dated April 28, 2003, as amended April 15, 2014 (1)                                                                                                                
|4.2          | Agency Agreement with IBK Capital Corp., dated February 14, 2013 (1)                                                                                                                                                     
|4.3          | Shareholder Rights Plan Agreement between the Company and TMX Equity Transfer Services, Inc.(2)                                                                                                                          
|4.4          | Employment Agreement with Suresh Venkatesan, dated June 10, 2015 (3)                                                                                                                                                     
|4.5          | Employment Agreement with Rajan Rajgopal, dated December 27, 2016 (4)                                                                                                                                                    
|4.6          | Employment Agreement with Thomas Mika, dated November 2, 2016 (4)                                                                                                                                                        
|4.7          | Employment Agreement with Dave Lazovsky, dated February 1, 2017 (4)                                                                                                                                                      
|4.8          | Sale and Purchase Agreement for DenseLight Semiconductors PTE, LTD, dated April 27, 2016 (4)                                                                                                                             
|4.9          | Sale and Purchase Agreement for BB Photonics Inc. dated May 16, 2016 (4)                                                                                                                                                 
|4.10         | 2018
    Stock Option Plan (5)                                                                                                                                                                                           
|4.11         | Form of Option Agreement(1)                                                                                                                                                                                              
|4.12         | Form of Warrant for Purchase of Common Shares (1)                                                                                                                                                                        
|4.13         | Stock Specimen Certificate (1)                                                                                                                                                                                           
|4.14         | Credit Facility Agreement
    (5)                                                                                                                                                                                        
|4.15         | Share Sale Agreement for DenseLight Semiconductors PTE, Ltd dated August 20, 2019 (6)                                                                                                                                    
|4.16         | Employment agreement with Vivek Rajgarhia, dated November 4, 2019 (6)                                                                                                                                                    
|4.17         | Convertible Debenture Indenture, dated April 3, 2019 (6)                                                                                                                                                                 
|4.18         | Warrant Indenture with TSX Trust Company, dated April 3, 2019 (6)                                                                                                                                                        
|4.19         | Convertible Debenture Indenture, dated May 3, 2019 (6)                                                                                                                                                                   
|4.20         | Warrant Indenture with TSX Trust Company, dated May 3, 2019 (6)                                                                                                                                                          
|4.21         | Convertible Debenture Indenture, dated June 3, 2019 (6)                                                                                                                                                                  
|4.22         | Warrant Indenture with TSX Trust Company, dated June 3, 2019 (6)                                                                                                                                                         
|4.23         | Convertible Debenture Indenture, dated August 2, 2019 (6)                                                                                                                                                                
|4.24         | Warrant Indenture with TSX Trust Company, dated August 2, 2019 (6)                                                                                                                                                       
|4.25         | Convertible Debenture Indenture, dated September 19, 2019 (6)                                                                                                                                                            
|4.26         | Warrant Indenture with TSX Trust Company, dated September 19, 2019 (6)                                                                                                                                                   
|8.1          | List of Subsidiaries: See ITEM 4.C.                                                                                                                                                                                      
|11.1         | Code of Business Conduct and Ethics (2)                                                                                                                                                                                  
|12.1         | 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 (7)
|12.2         | 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 (7)
|13.1         | 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 (6)                                                            
|13.2         | 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 (6)                                                            
|23.1         | Consent of Marcum LLP, independent registered accounting firm (7)                                                                                                                                                        
|101. INS(**) | XBRL Instance Document (6)                                                                                                                                                                                               
|101.SCH(**)  | XBRL Taxonomy Extension Schema Linkbase Document (6)                                                                                                                                                                     
|101. AL(**)  | XBRL Taxonomy Extension Calculation Linkbase Document (6)                                                                                                                                                                
|101.DEF(**)  | XBRL Taxonomy Extension Definition Linkbase
    Document (6)                                                                                                                                                             
|101.LAB(**)  | XBRL Taxonomy Extension Label Linkbase Document (6)                                                                                                                                                                      
|101.PRE(**)  | XBRL Taxonomy Extension Presentation Linkbase Document (6)                                                                                                                                                               





(1) Filed as an exhibit to the Company’s registration statement
under the Securities and Exchange Act on Form 20-F/A 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 Original Form 20-F and incorporated herein by reference.



(7) Filed herewith.



(**) 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.



WHERE TO FIND ADDITIONAL INFORMATION



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.





95









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, 2019, 2018 and 2017 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.



SIGNATURES





The Registrant hereby certifies that it meets all of the requirements for filing on Form
20-F/A and that it has duly caused and authorized the undersigned to sign this Amendment No. 1 to the Annual Report on its behalf.





| | POET TECHNOLOGIES INC.  | 
| | ----------------------- | 
| |                         | 
| | /s/ Suresh Venkatesan   | 
| | Suresh Venkatesan       | 
| | Chief Executive Officer | 





Date: July 17, 2020









96















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, 2019, 2018 and 2017,
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, 2019, 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, 2019, 2018 and 2017, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2019, in conformity with International Financial Reporting Standards
as issued by the International Accounting Standards Board.



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 Public Company Accounting Oversight Board (United States) ("PCAOB")
and the Canadian Public Accounting Board (“CPAB”) and are required to be independent with respect to the Company in
accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.



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. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.









97











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.





/s/ Marcum llp



Marcum llp



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.



New Haven, Connecticut

April 29, 2020, except for the last paragraph of Note 26, as to which the date is July 17, 2020



















98











POET TECHNOLOGIES INC.



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in US Dollars)



December 31,
    2019
    2018
    2017AssetsCurrentCash and cash equivalents
    $1,428,129
    $2,567,868
    $4,974,478Accounts receivable (Notes 2 and 4)
    -
    946,944
    493,925Receivable from the sale of discontinued operations (Note 23)
    18,000,000
    -
    -Prepaids and other current assets (Note 5)
    831,265
    2,936,619
    1,957,727Inventory (Note 6)
    -
    436,833
    524,58220,259,394
    6,888,264
    7,950,712Property and equipment (Note 7)
    3,143,060
    9,299,513
    8,278,170Patents and licenses (Note 8)
    452,384
    466,714
    456,250Right of use asset (Note 9)
    222,517
    -
    -Intangible assets (Note 10)
    -
    802,409
    839,637Goodwill (Note 24)
    -
    7,681,003
    7,681,003$24,077,355
    $25,137,903
    $25,205,772LiabilitiesCurrentAccounts payable and accrued liabilities (Note 11)
    $1,725,708
    $3,040,422
    $810,593Lease liability (Note 9)
    90,504
    -
    -Convertible debentures (Note 12)
    3,089,033
    -
    -4,905,245
    3,040,422
    810,593Lease liability (Note 9)
    133,254
    -
    -Deferred tax liability (Note 24)
    -
    1,000,427
    1,298,367Deferred rent
    -
    1,814
    24,0315,038,499
    4,042,663
    2,132,991Shareholders' EquityShare capital (Note 13(b))
    112,144,172
    112,028,194
    103,616,221Equity component of convertible debentures (Note 12)
    627,511
    -
    -Warrants (Note 14)
    8,525,358
    8,303,738
    5,985,378Contributed surplus (Note 15)
    38,799,337
    36,042,754
    32,102,967Accumulated other comprehensive loss
    (1,908,715)
    (2,083,514)
    (1,758,632)Deficit
    (139,148,807)
    (133,195,932)
    (116,873,153)19,038,856
    21,095,240
    23,072,781$24,077,355
    $25,137,903
    $25,205,772Commitments and contingencies (Note 17)








On behalf of the Board of Directors







|/s/ Suresh Venkatesan |  | /s/ Chris Tsiofas | 
|--------------------- |  | ----------------- | 
|Director              |  | Director          | 

The accompanying notes are an integral part of these consolidated financial statements.Page 2







POET TECHNOLOGIES INC.



CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT(Expressed in US Dollars)For the Years Ended December 31,
    2019
    2018
    2017Operating expensesSelling, marketing and administration (Note 22)
    6,697,387
    6,173,875
    5,887,709Research and development (Note 22)
    2,083,815
    2,262,476
    2,039,421Impairment of long lived assets (Notes 10 and 24)
    1,764,459
    -
    -Interest expense (Notes 9 and 12)
    819,911
    -
    -Amortization of debt issuance costs (Note 12)
    372,340
    -
    -Other income, including interest
    (10,540)
    (14,234)
    (18,279)Operating expenses
    11,727,372
    8,422,117
    7,908,851Net loss from continuing operations, before taxes
    (11,727,372)
    (8,422,117)
    (7,908,851)Income tax recovery (Note 25)
    (292,740)
    -
    -Net loss from continuing operations
    (11,434,632)
    (8,422,117)
    (7,908,851)Income (loss) from discontinued operations, net of taxes (Notes 23 and 25)
    5,481,757
    (7,900,662)
    (4,888,946)Net loss
    (5,952,875)
    (16,322,779)
    (12,797,797)Deficit, beginning of year
    (133,195,932)
    (116,873,153)
    (104,075,356)Net loss
    (5,952,875)
    (16,322,779)
    (12,797,797)Deficit, end of year
    $(139,148,807)
    $(133,195,932)
    $(116,873,153)Basic and diluted loss per share, continuing operations (Note 16)
    $(0.04)
    $(0.03)
    $(0.03)Basic and diluted income (loss) per share, discontinued operations (Note 16)
    $0.02
    $(0.03)
    $(0.02)Basic and diluted net loss per share (Note 16)
    $(0.02)
    $(0.06)
    $(0.05)












CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(Expressed in US Dollars)For the Years Ended December 31,
    2019
    2018
    2017Net loss
    $(5,952,875)
    $(16,322,779)
    $(12,797,797)Other comprehensive income (loss) - net of income taxesExchange differences on translating foreign operations, continuing operations
    3,109
    (543,557)
    362,679Exchange differences on translating foreign operations, discontinued operations
    171,690
    218,675
    (33,194)Comprehensive loss
    $(5,778,076)
    $(16,647,661)
    $(12,468,312)




The accompanying notes are an integral part of these consolidated financial statements.Page 3







POET TECHNOLOGIES INC.



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(Expressed in US Dollars)For the Years Ended December 31,
    2019
    2018
    2017Share CapitalBeginning balance
    $112,028,194
    $103,616,221
    $103,357,862Funds from the exercise of stock options
    60,028
    87,974
    123,528Fair value of stock options exercised
    55,950
    82,330
    134,831Funds from the exercise of warrants and compensation warrants
    -
    1,028,471
    -Fair value of warrants and compensation warrants exercised
    -
    447,270
    -Common shares issued on public offering
    -
    10,663,548
    -Share issue costs
    -
    (1,131,990)
    -Fair value of warrants issued on public offering
    -
    (2,286,426)
    -Fair value of compensation options issued to brokers
    -
    (479,204)
    -December 31,
    112,144,172
    112,028,194
    103,616,221Equity Component of convertible debenturesBeginning balance
    -
    -
    -Fair value of equity component of convertible debentures
    627,511
    -
    -December 31,
    627,511
    -
    -WarrantsBeginning balance
    8,303,738
    5,985,378
    2,013,747Fair value of warrants issued in conjunction with of debt financing
    221,620
    -
    -Fair value of warrants issued on public offering
    -
    2,286,426
    5,985,378Fair value of compensation options issued to brokers
    -
    479,204
    -Fair value of warrants and compensation warrants exercised
    -
    (447,270)
    (901,417)Fair value of expired warrants
    -
    -
    (1,112,330)December 31,
    8,525,358
    8,303,738
    5,985,378Contributed SurplusBeginning balance
    36,042,754
    32,102,967
    29,062,874Stock-based compensation
    2,812,533
    4,022,117
    3,174,924Fair value of stock options exercised
    (55,950)
    (82,330)
    (134,831)December 31,
    38,799,337
    36,042,754
    32,102,967Accumulated Other Comprehensive LossBeginning balance
    (2,083,514)
    (1,758,632)
    (2,088,117)Other comprehensive income (loss) attributable to common shareholders - translation adjustment
    174,799
    (324,882)
    329,485December 31,
    (1,908,715)
    (2,083,514)
    (1,758,632)DeficitBeginning balance
    (133,195,932)
    (116,873,153)
    (104,075,356)Net loss
    (5,952,875)
    (16,322,779)
    (12,797,797)December 31,
    (139,148,807)
    (133,195,932)
    (116,873,153)Total Shareholders' Equity
    $19,038,856
    $21,095,240
    $23,072,781




The accompanying notes are an integral part of these consolidated financial statements.Page 4







POET TECHNOLOGIES INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in US Dollars)For the Years Ended December 31,
    2019
    2018
    2017CASH AND CASH EQUIVALENTS (USED IN) PROVIDED BY:OPERATING ACTIVITIESNet loss
    $(5,952,875)
    $(16,322,779)
    $(12,797,797)Discontinued operations, net of tax
    (5,481,757)
    7,900,662
    4,888,946Net loss, continuing operations
    (11,434,632)
    (8,422,117)
    (7,908,851)Adjustments for:Depreciation of property and equipment (Note 7)
    166,342
    96,452
    128,283Amortization of patents and licenses (Note 8)
    61,671
    56,792
    53,969Amortization of debt issuance cost (Note 12)
    372,340
    -
    -Amortization of right of use asset (Note 9)
    15,683
    -
    -Impairment of long lived assets (Notes 10 and 24)
    1,764,459
    -
    -Accretion of debt discount on convertible debentures (Note 12)
    280,829
    -
    -Stock-based compensation (Note 15)
    2,888,141
    3,602,879
    2,958,358Income tax recovery (Notes 25)
    (292,740)
    -
    -(6,177,907)
    (4,665,994)
    (4,768,241)Net change in non-cash working capital accounts:Prepaid and other current assets (Note 5)
    (685,667)
    (75,855)
    78,011Accounts payable and accrued liabilities (Note 11)
    420,457
    244,054
    (544,809)Cash flows from operating activities, continuing operations
    (6,443,117)
    (4,497,795)
    (5,235,039)Cash flows from operating activities, discontinued operations
    (2,951,104)
    (4,790,793)
    (3,928,651)(9,394,221)
    (9,288,588)
    (9,163,690)INVESTING ACTIVITIESPurchase of property and equipment (Note 7)
    (445,678)
    -
    (57,023)Purchase of patents and licenses (Note 8)
    (65,806)
    (67,608)
    (41,728)Proceeds from the sale of short-term investments
    -
    -
    589,275Cash flows from investing activities, continuing operations
    (511,484)
    (67,608)
    490,524Cash flow from investing activities, discontinued operations
    5,908,623
    (3,467,992)
    (931,589)5,397,139
    (3,535,600)
    (441,065)FINANCING ACTIVITIESProceeds from convertible debentures, net of issue costs paid in cash (Note 12)
    3,352,849
    -
    -Proceeds from loan payable and promissory note (Note 12)
    4,000,000
    -
    -Repayment of loan payable and promissory note (Note 12)
    (4,000,000)
    -
    -Issue of common shares for cash, net of issue costs (Note 13)
    60,028
    10,648,003
    123,528Payment of lease liability (Note 9)
    (19,162)
    -
    -Cash flows from financing activities, continuing operations
    3,393,715
    10,648,003
    123,528Cash flow from financing activities, discontinued operations
    (258,460)
    -
    -3,135,255
    10,648,003
    123,528Effect of exchange rate on cash, continuing operations
    (263,902)
    (256,915)
    144,761Effect of exchange rate on cash, discontinued operations
    (14,010)
    26,490
    (65,338)Effect of exchange rate on cash
    (277,912)
    (230,425)
    79,423Net change in cash and cash equivalents, continuing operations
    (3,824,788)
    5,825,685
    (4,476,226)Net change in cash and cash equivalents, discontinued operations
    2,685,049
    (8,232,295)
    (4,925,578)Cash and cash equivalents, beginning of year
    2,567,868
    4,974,478
    14,376,282Cash and cash equivalents, end of year
    $1,428,129
    $2,567,868
    $4,974,478SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIESPurchase of property and equipment financed through accounts payable
    $-
    $250,160
    $-




The accompanying notes are an integral part of these consolidated financial statements.Page 5


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") are developers and manufacturers
of optical source products and photonic integrated devices for the sensing, datacom and telecom markets. The Company's head office
is located at 120 Eglinton Avenue East, Suite 1107, Toronto, Ontario, Canada M4P 1E2. These consolidated financial statements of
the Company were approved by the Board of Directors of the Company on April 28, 2020.






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 UK Limited (collectively "BB Photonics") and POET Technologies Pte Ltd. ("PTS").
They also include the accounts of DenseLight Semiconductor Pte Ltd. ("DenseLight") up-to November 8, 2019. All intercompany
balances and transactions have been eliminated on consolidation.  On November 8, 2019, the Company sold 100% of the issued and outstanding shares of DenseLight for $26,000,000. The Company
received $8,000,000 upon the consummation of the sale. The Company expects to receive the remaining $18,000,000 over three
tranches, with $4,750,000 received on February 14, 2020 and $8,250,000 received on March 30, 2020. The remaining $5,000,000
is expected to be received on or before May 31, 2020. Shares were placed into escrow in the name of the Buyer, to be released
to the Buyer upon receipt of the remaining payments. The Buyer assumed control of DenseLight on November 8, 2019 and will
be responsible for all operations of DenseLight thence-forth. Upon closing, the Company recognized a gain on the sale of $8,707,280.
The Company received an additional $2,000,000, in excess of the sale proceeds, with the most recently paid two tranches which
was immediately paid to Oak Capital on behalf of the Buyer for due diligence, legal and other expenses.  Page 6
 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 IFRS 9 introduced new classification
and measurement models for financial assets. The investment classifications held-to-maturity and available-for-sale are no longer
used and financial assets at fair value through other comprehensive income ("FVTOCI") were introduced. 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 7
 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 IAS 39 and the revised classification on the adoption of IFRS 9:  Original classification
    New classificationunder IAS 39
    under IFRS 9Financial AssetsCash and cash equivalents
    Loans and receivables
    Amortized costShort-term investments
    FVTPL
    Amortized costAccounts receivable
    Loans and receivables
    Amortized cost  Financial LiabilitiesAccounts payable and accrued liabilities
    Amortized costs
    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. Page 8
 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 $1,278,129 (2018 - $2,267,868, 2017- $4,974,478) and funds invested in US Term Deposits of $150,000
(2018 - $300,000, 2017 - nil) earning interest at 1.31% and maturing in less than 90 days.  Cash and cash equivalents include
restricted funds of $93,800 (2018 - $218,888, 2017 - nil) which serves as a bank guarantee for the purchase of certain equipment.
The bank guarantee is reduced on a monthly basis by $10,424 which is amount paid monthly in settlement of the outstanding balance
on the equipment.  Accounts receivable Accounts receivable are amounts
due from customers from the sale of products or services in the ordinary course of business. Accounts receivables are classified
as current (on the consolidated statements of financial position) if payment is due within one year of the reporting period date,
and are initially recognized at fair value and subsequently measured at amortized cost.  In determining a default provision,
the Company utilizes a provision matrix, as permitted under the simplified approach to measure expected credit losses. In doing
so management considered historical credit losses, forward-looking factors specific to the Company's debtors and other macro-economic
factors to arrive at expected default rates. The default rates are then applied to the Company's aging to determine expected credit
losses. The carrying amount of trade receivables is reduced by the expected credit losses. If the financial conditions of these
customers were to deteriorate and the Company determines that no recovery of a trade receivable is possible, the amount is deemed
irrecoverable and subsequently written-off. Accounts receivable at December 31, 2018 and 2017 related to revenue earned by DenseLight.
DenseLight was sold on November 8, 2019 (see Note 23).  Inventory Inventory consists of raw material
inventory, work in process, and finished goods and are recorded at the lower of cost and net realizable value. Cost is determined
on a first in first out basis and includes all costs of purchase, costs of conversion and other costs incurred in bringing the
inventory to its present condition.  An assessment is made of the
net realizable value of inventory at each reporting period. Net realizable value is the estimated selling price less the estimated
cost of completion and the estimated costs necessary to make the sale. When circumstances that previously caused inventories to
be written down no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic
circumstances, the amount of any write down previously recorded is reversed so that the new carrying amount is the lower of the
cost and the revised net realizable value. Raw materials are not written down unless the goods in which they are incorporated are
expected to be sold for less than cost, in which case, they are written down by reference to replacement cost of the raw materials,
as this is the best indicator of net realizable value. Inventory at December 31, 2018 and 2017 related to inventory held by DenseLight.
DenseLight was sold on November 8, 2019 (see Note 23).  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
    Straight Line, 5 yearsLeasehold improvements
    Straight Line, 5 years or life of the lease, whichever is lessOffice equipment
    Straight Line, 3 - 5 years Page 9
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)  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.  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. The Company reported an impairment
loss of $714,000 for the year ended December 31, 2019 (2018 - nil, 2017 - nil) (Note 10).  Goodwill Goodwill represents the excess
of the cost of an acquired business over the fair value of the identifiable assets acquired net of liabilities assumed. Goodwill
is measured at cost less accumulated impairment losses and is not amortized. Goodwill is tested for impairment on an annual basis
or whenever facts or circumstances indicate that the carrying amount may exceed its recoverable amount.  The Company performed its annual
test for goodwill impairment at December 31, 2019. The Company utilized a five-year cash flow forecast using the annual budget
approved by the Board of Directors as a basis for such forecasts. Cash flow forecasts beyond that of the budget were prepared using
a stable growth rate for future periods. These forecasts were based on historical data and future trends expected by the Company.
The Company's valuation model also takes into account working capital and capital investments required to maintain the condition
of the assets. Forecasted cash flows were discounted using an after-tax rate of 30%.  Based on the impairment tests,
the value in-use of the CGU to which goodwill is applicable is less than the carrying amount. As a result goodwill of $1,050,459
was impaired in the current year. No provision for impairment of goodwill was made in 2018 or 2017 (Note 24).  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. Page 10
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)  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.  Research and Development
Credits Through DenseLight, the Company
was eligible to receive cash credits for certain qualifying research and development expenses based on actual spending over a three
year period, with an expectation that the credits will not exceed a certain dollar value over a three year period. Recoverable
amounts at December 31, 2018 and 2017 related to expenditures at DenseLight. Recoverable amount at December 31, 2019 was nil because
the Company sold DenseLight on November 8, 2019.  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 acquired $714,000
of IPR&D when it acquired BB Photonics Inc. in 2016. During 2019, management observed indicators that suggested that IPR&D
may be impaired. IPR&D acquired with BB Photonics was no longer useable with the novel POET Interposer platform. BB Photonics
IPR&D would not generate sufficient cash flow to support its value in use. Management completed an assessment of IPR&D
and determined that the amount of $714,000 was impaired. An impairment loss of $714,000 was recorded during the year ended December
31, 2019. No impairment was recorded in 2018 or 2017 (Note 10). Page 11
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)  Customer relationships Intangible assets include customer
relationships acquired with the acquisition of DenseLight. Customer relationships is an externally acquired intangible asset and
is measured at cost less accumulated amortization and any accumulated impairment losses. Customer relationships are amortized on
a straight-line basis over their estimated useful lives and is tested for impairment whenever events or changes indicate that their
carrying amount may not be recoverable. The useful life of customer relationships was determined to be 5 years. Customer relations
was nil at December 31, 2019 as because the asset was disposed of with the sale of DenseLight on November 8, 2019.  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.  Income (loss) per share Basic income (loss) per share
is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted
income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding
during the year after giving effect to potentially dilutive financial instruments. The dilutive effect of stock options and warrants
is determined using the treasury stock method.






3.RECENT ACCOUNTING PRONOUNCEMENTS  Recently adopted accounting
policy IFRS 16, Leases (“IFRS
16”) sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to
a contract, the customer (lessee) and the supplier (lessor). This replaces IAS 17, Leases (“IAS 17”) and related Interpretations.
IFRS 16 provides revised guidance on identifying a lease and for separating lease and non-lease components of a contract. IFRS
16 introduces a single accounting model for all lessees and requires a lessee to recognize right of use assets and lease liabilities
for leases with terms of more than 12 months, unless the underlying asset is of low value, and depreciation of lease assets is
reported separately from interest on lease liabilities in the income statement. Under IFRS 16, lessor accounting for operating
and finance leases will remain substantially unchanged. IFRS 16 is effective for annual periods beginning on or after January 1,
2019, with earlier application permitted for entities that apply IFRS 15, Revenue from Contracts with Customers. The Company adopted
this new standard using the modified retrospective method on January 1, 2019. The adoption of IFRS 16, resulted in a right of use
asset and liability of $1,127,534. The carrying value of the right of use asset and lease liability relating to Denselight were
disposed of upon the sale of DenseLight on November 8, 2019 (notes 9 and 23).






|
|

4.ACCOUNTS RECEIVABLE  The carrying amounts of accounts
receivable approximate their fair value and are originally denominated in Singapore dollars before conversion to US dollars at
December 31:  2019
    2018
    2017Product sales
    United States dollar
    $-
    $713,744
    $493,925Product sales
    Singapore dollar
    -
    273,815
    -Loss allowance
    
    -
    (40,615)
    -$-
    $946,944
    $493,925
 Page 12
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  4.ACCOUNTS RECEIVABLE (Continued)  In determining the recoverability
of a trade receivable, the Company considers any change in the credit quality of the trade receivable from the date credit was
initially granted up to the reporting date. The trade receivables that are neither past due nor impaired relates to customers that
the company has assessed to be creditworthy based on the credit evaluation process performed by management which considers both
customers' overall credit profile and its payment history with the Company. The loss allowance is determined in accordance IFRS
9 (Note 18). Trade receivables at December 31, 2018 and 2017 related to DenseLight. Trade receivable is nil at December 31, 2019
because DenseLight was sold on November 8, 2019.






5.PREPAIDS AND OTHER CURRENT ASSETS  The following table reflects
the details of prepaids and other current assets at December 31:  2019
    2018
    2017Sales tax recoverable and other current assets
    $81,265
    $85,658
    $119,482Research and development credit
    -
    1,905,593
    1,287,539Security deposits on leased properties
    -
    233,983
    228,170Prepaid expenses
    750,000
    711,385
    322,536$831,265
    $2,936,619
    $1,957,727
  Research and development credit, security deposit
on leased properties and certain prepaid expenses were disposed of during the year upon the sale of DenseLight.






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|

6.INVENTORY  The following table reflects the details
of inventory at December 31:  2019
    2018
    2017Raw materials
    $-
    $98,370
    $112,768Finished goods
    -
    212,361
    260,105Work in process
    -
    126,102
    151,709$-
    $436,833
    $524,582
  In 2017, the Company recorded an inventory write-down
of $353,476. Raw materials related to products under development represented the most significant portion of the write-down.  The Company disposed of its
inventory upon the sale of DenseLight on November 8, 2019.






7.PROPERTY AND EQUIPMENT  Equipment not
    Leasehold
    Machinery and
    Officeready for use
    improvements
    equipment
    equipment
    TotalCostBalance, January 1, 2017
    $602,830
    $667,342
    $9,734,885
    $314,817
    $11,319,874Additions
    806,182
    -
    113,433
    50,182
    969,797Reclassification
    (874,371)
    -
    874,371
    -
    -Effect of changes in foreign exchange rates
    46,433
    -
    72,779
    8,914
    128,126Balance, December 31, 2017
    581,074
    667,342
    10,795,468
    373,913
    12,417,797Additions
    3,667,894
    -
    -
    50,258
    3,718,152Reclassification (1)
    (1,086,895)
    -
    881,221
    202,674
    (3,000)Impairment and disposals (1)
    -
    -
    (611,875)
    (3,665)
    (615,540)Effect of changes in foreign exchange rates
    (19,920)
    -
    (46,829)
    (1,739)
    (68,488)Balance,December 31, 2018
    3,142,153
    667,342
    11,017,985
    621,441
    15,448,921Additions
    1,986,210
    -
    39,260
    19,480
    2,044,950Disposals (2)
    (4,388,762)
    (667,342)
    (8,198,519)
    (555,688)
    (13,810,311)Effect of changes in foreign exchange rates
    24,741
    -
    14,529
    -
    39,270Balance, December 31, 2019
    $764,342
    $-
    $2,873,255
    $85,233
    $3,722,830
 Page 13
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  7.PROPERTY AND EQUIPMENT (Continued)  Accumulated DepreciationBalance, January 1, 2017
    -
    83,189
    1,808,308
    64,167
    1,955,664Depreciation for the year
    -
    133,499
    1,857,474
    192,990
    2,183,963Balance, December 31, 2017
    -
    216,688
    3,665,782
    257,157
    4,139,627Depreciation for the year
    -
    133,809
    2,201,133
    133,662
    2,468,604Impairment and disposals (1)
    -
    -
    (455,158)
    (3,665)
    (458,823)Balance, December 31, 2018
    -
    350,497
    5,411,757
    387,154
    6,149,408Depreciation for the year
    -
    -
    144,337
    22,005
    166,342Disposals (2)
    -
    (350,497)
    (5,044,288)
    (341,195)
    (5,735,980)Balance, December 31, 2019
    -
    -
    511,806
    67,964
    579,770Carrying AmountsAt December 31, 2017
    $581,074
    $450,654
    $7,129,686
    $116,756
    $8,278,170At December 31, 2018
    $3,142,153
    $316,845
    $5,606,228
    $234,287
    $9,299,513At December 31, 2019
    $764,342
    $-
    $2,361,449
    $17,269
    $3,143,060
  (1)During 2018, $3,000 relating to certain property and equipment were reclassified to
non-current assets held for sale and was sold in December 2018 while $156,717 was recorded as an impairment loss and was included
in discontinued operations.  (2)On November 8, 2019, the Company disposed of property and equipment used in the operations
DenseLight.


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|



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|

8.PATENTS AND LICENSES  CostBalance, January 1, 2017
    $609,887Additions
    60,543Balance, December 31, 2017
    670,430Additions
    67,608Effect of changes in foreign exchange rates
    (352)Balance, December 31, 2018
    737,686Additions
    77,037Disposals (1)
    (29,696)Balance, December 31, 2019
    785,027Accumulated AmortizationBalance, January 1, 2017
    160,211Amortization
    53,969Balance, December 31, 2017
    214,180Amortization
    56,792Balance, December 31, 2018
    270,972Amortization
    61,671Balance, December 31, 2019
    332,643Carrying AmountsAt December 31, 2017
    $456,250At December 31, 2018
    $466,714At December 31, 2019
    $452,384
  (1)On November 8, 2019, the Company disposed of certain patents unrelated to the Company's
technology on the sale of DenseLight.


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Page 14


POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)




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|

9.RIGHT OF USE ASSET AND LEASE LIABILITY  On January 1, 2019, the Company
adopted IFRS, 16 Leases. Upon adoption of IFRS 16, the Company recognized a lease liability and right of use asset relating to
new leases entered into on February 15, 2019 related to DenseLight, and November 1, 2019 related to PTS. The lease liability was
measured at the present value of the remaining lease payments, discounted using the Company's incremental borrowing rate of 12%.  Right of use asset
    BuildingCostBalance, January 1, 2019
    $-Additions
    1,127,534Disposal (1)
    (892,300)Effect of changes in foreign exchange rates
    2,966Balance, December 31, 2019
    238,200Accumulated AmortizationBalance, January 1, 2019
    -Amortization
    15,683Balance, December 31, 2019
    15,683Carrying AmountsAt December 31, 2019
    $222,517Lease liabilityBalance, January 1, 2019
    $-Additions
    1,127,534Interest expense
    4,705Interest included in discontinued operations
    74,494Lease payments
    (19,162)Lease payments included in discontinued operations
    (258,460)Disposal (1)
    (695,733)Effect of changes in foreign exchange rates
    (9,620)Balance, December 31, 2019
    $223,758
  (1)The Company disposed of $892,000 of right of use asset and $695,733 of lease liability
on November 8, 2019 with the sale of DenseLight (Note 23).


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10.INTANGIBLE ASSETS  CustomerTechnology
    Relationships
    TotalCostBalance, December 31, 2017 and 2018
    $714,000
    $186,131
    $900,131Impairment
    (714,000)
    -
    (714,000)Disposals (1)
    -
    (186,131)
    (186,131)Balance, December 31, 2019
    -
    -
    -Accumulated AmortizationBalance, January 1, 2017
    -
    23,266
    23,266Amortization for the year
    -
    37,228
    37,228Balance, December 31, 2017
    -
    60,494
    60,494Amortization for the year
    -
    37,228
    37,228Balance, December 31, 2018
    -
    97,722
    97,722Disposals (1)
    -
    (97,722)
    (97,722)Balance, December 31, 2019
    -
    -
    -
 Page 15
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  10.INTANGIBLE ASSETS (Continued)  Carrying AmountsAt December 31, 2017
    $714,000
    $125,637
    $839,637At December 31, 2018
    $714,000
    $88,409
    $802,409At December 31, 2019
    $-
    $-
    $-
  (1)The Company disposed of its customer relationships intangible assets and related amortization
on November 8, 2019 with the sale of DenseLight (Note 23).


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|

11.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES  Accounts payable and
accrued liabilities at December 31 was as follows:  2019
    2018
    2017Trade payables
    $1,507,644
    $2,269,845
    $504,229Payroll related liabilities
    44,677
    595,720
    112,913Accrued liabilities
    173,387
    174,857
    193,451$1,725,708
    $3,040,422
    $810,593




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12.CONVERTIBLE DEBENTURES, LOAN PAYABLE AND PROMISSORY NOTE  On April 1, 2019 the Company
announced that it arranged for certain financing required to bridge the Company up to the sale of its DenseLight subsidiary.  Convertible Debentures The first component of the
financing consists of the issuance of up to $10.5 million (CAD$14 million) of unsecured convertible debentures (the “Convertible
Debentures”) of the Company. The Convertible Debentures were sold in multiple tranches, on a brokered private placement basis
through the Company’s financial advisors, IBK Capital. During the year the Company closed five tranches of the private placement
of the Convertible Debentures that raised gross proceeds of $3,729,921 (CAD$4,988,292). The Convertible Debentures, bear interest
at 12% per annum, compounded annually with 1% payable at the beginning of each month and mature two years from the date of issue.
The Company paid $377,072 (CAD$499,462) in brokerage fees and other costs related to the closing of these five tranches.  The Convertible Debentures
are convertible at the option of the holders thereof into units at any time after October 31, 2019 at a conversion price of CAD$0.40
per unit for a total 12,470,730 units of the Company. Each unit will consist of one common share and one common share purchase
warrant. Each common share purchase warrant will entitle the holder to purchase one common share of the Company at a price of CAD$0.50
per share for a period of two years from the date upon which the convertible debenture is converted into units. Upon completing
the sale of DenseLight, holders of Convertible Debentures will have the right to cause the Company to repurchase the Convertible
Debentures at face value, subject to certain restrictions. The Convertible Debentures are governed by a trust indenture between
the Company and TSX Trust Company as trustee.  Insiders of the Company subscribed
for 14.3% or $535,000 (CAD$710,000) of the Convertible Debentures, including the Company’s board of directors and senior
management team. Insiders of IBK Capital subscribed for 4% or $146,000 (CAD$200,000) of the Convertible Debentures.  IAS 32 Financial Instruments:
Presentation define these debt securities as compound financial instruments made up of both a liability component and an equity
component. The debt components of the Convertible Debentures were fair valued using effective discount rates ranging from 28.74%
to 29.71% which the Company determined would be the interest rate of the debts without a conversion feature. The difference between
the fair value of the debt component and the loan is allocated to the equity component and is included in shareholders' equity. Page 16
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  12.CONVERTIBLE DEBENTURES, LOAN PAYABLE AND PROMISSORY NOTE (Continued)  Because the Convertible Debentures
are denominated in Canadian dollars and the conversion price is also denominated in Canadian dollars, the number of equity instruments
that would be issued upon exercise of the convertible debentures are fixed. As a result, the equity component of the convertible
debentures will not be periodically remeasured.  The following table reflects
the details of convertible debentures:  Convertible Debentures
    Loan
    Equity Component
    Accretion
    Debt ComponentIssued April 3, 2019 (net of issue costs)
    $1,293,519
    $(242,004)
    $128,240
    $1,179,755Issued May 3, 2019 (net of issue costs)
    979,256
    (183,317)
    84,708
    880,647Issued June 3, 2019 (net of issue costs)
    582,356
    (109,017)
    42,855
    516,194Issued August 2, 2019 (net of issue costs)
    374,753
    (70,154)
    19,690
    324,289Issued September 19, 2019 (net of issue costs)
    122,965
    (23,019)
    5,336
    105,282Effect of foreign exchange rate changes
    -
    -
    -
    82,866Balance December 31, 2019
    $3,352,849
    $(627,511)
    $280,829
    $3,089,033
  Loan Payable and Promissory
Note The second component of the
financing consisted of a credit facility (the “Bridge Loan”) provided by Espresso Capital Ltd which granted the Company
access to a maximum $5,000,000. The Company signed the loan documents on April 18, 2019 and was advanced $3,100,000 shortly thereafter.  Funds drawn on the Credit Facility
bear interest at a rate of 17.25% per annum (the "Interest Rate"), calculated daily from the date of each advance until
the earlier of the due date of each such advance, if any, and December 31, 2019 (the "Maturity Date"). The Interest Rate
is comprised of 15% cash interest and 2.25% deferred interest. Per the agreement, the interest rate was retroactively increased
to 19.25% because the Company did not consummate the sale of Denselight by October 15, 2019.  The Company paid $147,077 in
costs related to the Bridge Loan. Additionally, the Company issued to Espresso Capital Ltd, warrants for the purchase of 3,289,500
common shares at a price of CAD$0.35 per share. The Warrants expire on April 18, 2020. The fair value of the warrants was estimated
on the date of issue using the Black-Scholes option pricing model with the following assumptions: volatility of 78.91%, interest
rate of 1.62% and an expected life of 1 year. The estimated fair value assigned to the warrants was $221,620. The total cost of
$368,697 along with the foreign exchange impact of $3,543 was deferred and charged against the Bridge Loan and subsequently amortized
over the life of the Bridge Loan. The Bridge loan was repaid on November 8, 2019.  Additionally, on August 30,
2019, the Company signed a term promissory note (the "Promissory Note") for up-to $1,000,000 with Century Prosper Investment
Corporation (the "Lender"). The Promissory Note bears interest at 15% per annum. The Promissory Note and accrued interest
are repayable on the six-month anniversary of each advance. At the option of the Lender, the advances and accrued interest may
be repaid in full five days after the sale of the Company's DenseLight subsidiary. The Company was advanced $900,000 on this Promissory
Note. The $900,000 advance and related interest of $17,160 were repaid on November 8, 2019.






Page 17


POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)




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13.SHARE CAPITAL  (a)AUTHORIZED  Unlimited
number of common shares One special
voting share  (b)COMMON SHARES ISSUED  Number ofShares
    AmountBalance, January 1, 2017
    259,333,853
    $103,357,862Funds from the exercise of stock options
    685,000
    123,528Fair value of stock options exercised
    -
    134,831Balance, December 31, 2017
    260,018,853
    103,616,221Common shares issued on public offering
    25,090,700
    10,663,548Share issue costs
    -
    (1,131,990)Fair value of warrants issued on public offering
    -
    (2,286,426)Fair value of compensation options issued to brokers
    -
    (479,204)Funds from the exercise of stock options
    372,250
    87,974Fair value of stock options exercised
    -
    82,330Funds from the exercise of warrants and compensation warrants
    2,600,500
    1,028,471Fair value of warrants and compensation warrants exercised
    -
    447,270Balance, December 31, 2018
    288,082,303
    112,028,194Funds from the exercise of stock options
    281,250
    60,028Fair value of stock options exercised
    -
    55,950Balance, December 31, 2019
    288,363,553
    $112,144,172
  On March 21, 2018, the Company
completed a brokered "bought deal" public offering of 25,090,700 units at a price of $0.425 (CAD$0.55) per unit for gross
proceeds of $10,663,548 (CAD$13,799,885). 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 $0.58 (CAD$0.75) per share until March
21, 2020. The broker was paid a cash commission of $639,813 (6%) of the gross proceeds and received 1,505,442 compensation options.
Each compensation option is exercisable into one compensation unit of the Company at a price of $0.425 (CAD$0.55) per compensation
unit until March 21, 2020 with each compensation unit comprising one common share and one-half compensation share purchase warrant.
Each whole compensation share purchase warrant entitles the broker to purchase one common share of the Company at a price of $0.425
(CAD$0.55) per share until March 21, 2020. The Company paid an additional $492,177 in other costs related to this financing.  Certain management participated
in the “bought-deal” public offering, by acquiring 281,000 units at a price of $0.425 (CAD$0.55) per unit for gross
proceeds of $119,425 (CAD$154,550).  The fair value of the share
purchase warrants and compensation options was estimated using the Black-Scholes option pricing model with the following weighted
average assumptions: dividend yield of 0%, risk-free interest rate of 1.86%, volatility of 94.77%, and estimated life of 2 years.
The estimated fair values assigned to the warrants and compensation options were $2,286,426 and $479,204, respectively.






Page 18


POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)




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14.WARRANTS  The following table reflects the continuity of warrants:  Historical
    Number ofAverage Exercise
    Warrants/
    HistoricalPrice
    Compensation options
    Fair valueBalance, January 1, 2017
    $0.79
    8,369,233
    $2,013,747Warrants issued
    0.39
    34,800,000
    5,985,378Warrants and compensation warrants exercised
    (0.51)
    (3,794,412)
    (901,417)Expired
    (1.02)
    (4,574,821)
    (1,112,330)Balance, December 31, 2017
    0.39
    34,800,000
    5,985,378Fair value of warrants issued on public offering
    0.58
    12,545,350
    2,286,426Historical fair value assigned to warrants exercised
    0.39
    (2,600,500)
    (447,270)Fair value of compensation options issued to brokers
    0.43
    1,505,442
    479,204Balance, December 31, 2018
    0.44
    46,250,292
    8,303,738Fair value of warrants issued as cost of debt financing
    0.27
    3,289,500
    221,620Balance, December 31, 2019
    $0.43
    49,539,792
    $8,525,358




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15.STOCK OPTIONS AND CONTRIBUTED SURPLUS  Stock Options On June 21, 2018, shareholders
of the Company approved amendments to the Company's fixed 20% stock option plan (as amended, previously referred to as the "2016
plan", now referred to as the "2018 Plan"). Under the 2018 Plan, the board of directors may grant options to acquire
common shares of the Company to qualified directors, officers, employees and consultants. The 2018 Plan provides that the number
of common shares issuable pursuant to options granted under the 2018 Plan and pursuant to other previously granted options is limited
to 57,611,360 (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. The stock options
vest in accordance with the policies determined by the Board of Directors from time to time consistent with the provisions of the
2018 Plan which grants discretion to the Board of Directors.  Stock option transactions and the number of stock
options outstanding were as follows:  HistoricalWeighted AverageNumber of
    ExerciseOptions
    PriceBalance, January 1, 2017
    23,805,500
    $0.96Expired/cancelled
    (5,455,209)
    0.73Exercised
    (685,000)
    0.19Granted
    15,425,000
    0.24Balance, December 31, 2017
    33,090,291
    0.68Expired/cancelled
    (1,944,791)
    0.74Exercised
    (372,250)
    0.26Granted
    13,690,479
    0.34Balance, December 31, 2018
    44,463,729
    0.58Expired/cancelled (1)
    (8,707,811)
    0.90Exercised
    (281,250)
    0.22Granted
    17,785,670
    0.27Balance, December 31, 2019
    53,260,338
    $0.43
  (1)2,277,186 cancelled options related to staff employed at DenseLight Page 19
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  15.STOCK OPTIONS AND CONTRIBUTED SURPLUS (Continued)  During the year ended December
31, 2019, the Company recorded stock-based compensation of $2,888,141 (2018 - $3,602,879, 2017 - $2,958,358) relating to stock
options that vested during the year. The stock-based compensation applicable to employees of DenseLight in the amount of $(75,608)
(2018 - $419,238, 2017 - 216,566) has been allocated to discontinued operations (see note 23).  The stock options granted were
valued using the Black-Scholes option pricing model using the following assumptions:  2019
    2018
    2017Weighted average exercise price
    $0.27
    $0.34
    $0.24Weighted average risk-free interest rate
    1.57%
    2.17%
    1.87%Weighted average dividend yield
    0%
    0%
    0%Weighted average volatility
    95.48%
    103.47%
    102.73%Weighted average estimated life (in years)
    10
    10
    10Weighted average share price
    $0.27
    $0.34
    $0.24Share price on the various grant dates:
    $0.24-$0.28
    $0.18-$0.40
    $0.21-$0.32Weighted average fair value
    $0.24
    $0.30
    $0.22
  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, 2019 are as follows:  Options Outstanding
    Options ExercisableHistorical
    Weighted
    
    HistoricalWeighted
    Average
    
    WeightedAverage
    Remaining
    
    AverageExercise
    Number
    Exercise
    Contractual
    Number
    ExerciseRange
    Outstanding
    Price
    Life (years)
    Exercisable
    Price$0.11
    -
    $0.20
    693,750
    $0.19
    6.14
    693,750
    $0.19$0.21
    -
    $0.24
    9,020,313
    $0.22
    7.63
    6,887,501
    $0.22$0.25
    -
    $0.29
    10,888,259
    $0.25
    9.18
    3,504,188
    $0.25$0.30
    -
    $0.86
    24,844,766
    $0.35
    8.38
    9,542,718
    $0.40$0.87
    -
    $1.64
    7,813,250
    $1.13
    0.57
    7,789,813
    $1.1353,260,338
    $0.43
    7.24
    28,417,970
    $0.53
  Contributed Surplus  The following table reflects the continuity
of contributed surplus:  AmountBalance, January 1, 2017
    $29,062,874Stock-based compensation
    3,174,924Fair value of stock options exercised
    (134,831)Balance, December 31, 2017
    32,102,967Stock-based compensation
    4,022,117Fair value of stock options exercised
    (82,330)Balance, December 31, 2018
    36,042,754Stock-based compensation
    2,812,533Fair value of stock options exercised
    (55,950)Balance, December 31, 2019
    $38,799,337


Page 20


POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)




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16.INCOME (LOSS) PER SHARE  2019
    2018
    2017NumeratorNet loss from continuing operations
    $(11,434,632)
    $(8,422,117)
    $(7,908,851)Net income (loss) from discontinued operations
    $5,481,757
    $(7,900,662)
    $(4,888,946)Net loss
    $(5,952,875)
    $(16,322,779)
    $(12,797,797)DenominatorWeighted average number of common shares outstanding
    288,216,378
    282,098,432
    259,771,793Weighted average number of common shares outstanding - diluted
    288,216,378
    282,098,432
    259,771,793Basic and diluted loss per share, continuing operations
    $(0.04)
    $(0.03)
    $(0.03)Basic and diluted income (loss) per share, discontinued operations
    $0.02
    $(0.03)
    $(0.02)Basic and diluted loss per share
    $(0.02)
    $(0.06)
    $(0.05)
  The effect of common share purchase options, warrants,
compensation warrants and shares to be issued on the net loss in 2019, 2018 and 2017 is not reflected as they are anti-dilutive.






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17.COMMITMENTS AND CONTINGENCIES  The Company has operating leases
on three facilities; head office located in Toronto, Canada, design and testing operations located in San Jose, California and
operating facilities located in Singapore. The Company's design and testing operations terminated a lease on January 31, 2020.
A new lease was initiated on April 1, 2020 and expires on March 31, 2025. The lease on the Company's operating facilities was initiated
on November 1, 2019 and expires April 30, 2022. As at December 31, 2019, 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:  2020
    $170,7592021 and beyond
    494,732$665,491




18.RELATED PARTY TRANSACTIONS  Compensation to key management
personnel were as follows:  2019
    2018
    2017Salaries
    $1,251,277
    $1,216,250
    $932,133Share-based payments (1)
    2,135,579
    2,449,683
    2,110,773Total
    $3,386,856
    $3,665,933
    $3,042,906
  (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.




Page 21


POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)




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19.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 and PTS OPEL, ODIS and PTS are the developers
of the POET platform semiconductor process IP for monolithic fabrication of integrated circuit devices containing both electronic
and optical elements on a single die.  BB Photonics BB Photonics develops photonic integrated components
for the datacom and telecom markets utilizing embedded dielectric technology that enables the low-cost integration of active and
passive devices into photonic integrated circuits.  On
a consolidated basis, the Company operates geographically in Singapore, the United States and Canada. Geographical information
is as follows:  2019As of December 31,
    Singapore
    US
    Canada
    ConsolidatedCurrent assets
    $86,849
    $22,523
    $20,150,022
    $20,259,394Property and equipment
    3,055,906
    87,154
    -
    3,143,060Patents and licenses
    -
    452,384
    -
    452,384Right of use asset
    222,517
    -
    -
    222,517Total Assets
    $3,365,272
    $562,061
    $20,150,022
    $24,077,355
  Year Ended December 31,
    Singapore
    US
    Canada
    ConsolidateSelling, marketing and administration
    $217,416
    $5,126,260
    $1,353,711
    $6,697,387Research and development
    218,900
    107,161
    1,757,754
    2,083,815Impairment of long lived assets
    -
    -
    1,764,459
    1,764,459Interest expense
    4,705
    -
    815,206
    819,911Amortization of debt issuance costs
    -
    -
    372,340
    372,340Other income including interest income
    -
    -
    (10,540)
    (10,540)Income taxes
    -
    (292,740)
    -
    (292,740)Net loss from continuing operations, net of taxes
    (441,021)
    (4,940,681)
    (4,288,471)
    (11,434,632)Income from discontinued operations, net of taxes
    5,481,757
    -
    -
    5,481,757Net income (loss)
    $5,040,736
    $(4,940,681)
    $(4,288,471)
    $(5,952,875)
  2018As of December 31,
    Singapore
    US
    Canada
    ConsolidatedCurrent assets
    $4,283,008
    $302,405
    $2,302,851
    $6,888,264Property and equipment
    9,136,694
    162,819
    -
    9,299,513Patents and licenses
    18,464
    448,250
    -
    466,714Goodwill and intangible assets
    6,718,953
    1,764,459
    -
    8,483,412Total Assets
    $20,157,119
    $2,677,933
    $2,302,851
    $25,137,903
 Page 22
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  19.SEGMENT INFORMATION (Continued)  Year Ended December 31,
    Singapore
    US
    Canada
    ConsolidatedSelling, marketing and administration
    $-
    $5,169,619
    $1,004,256
    $6,173,875Research and development
    -
    1,715,154
    547,322
    2,262,476Other income including interest
    -
    -
    (14,234)
    (14,234)Net loss from continuing operations
    -
    (6,884,773)
    (1,537,344)
    (8,422,117)Loss from discontinued operations, net of taxes
    (7,900,662)
    -
    -
    (7,900,662)Net loss
    $(7,900,662)
    $(6,884,773)
    $(1,537,344)
    $(16,322,779)
  2017As of December 31,
    Singapore
    US
    Canada
    ConsolidatedCurrent assets
    $3,190,298
    $4,621,318
    $139,096
    $7,950,712Property and equipment
    8,018,900
    259,270
    -
    8,278,170Patents and licenses
    18,816
    437,434
    -
    456,250Goodwill and intangible assets
    6,756,181
    1,764,459
    -
    8,520,640Total Assets
    $17,984,195
    $7,082,481
    $139,096
    $25,205,772
  The Year Ended December 31,
    Singapore
    US
    Canada
    ConsolidatedSelling, marketing and administration
    $-
    $4,837,859
    $1,049,850
    $5,887,709Research and development
    -
    1,719,734
    319,687
    2,039,421Other income including interest
    -
    -
    (18,279)
    (18,279)Net loss from continuing operations
    -
    (6,557,593)
    (1,351,258)
    (7,908,851)Loss from discontinued operations, net of taxes
    (4,888,946)
    -
    -
    (4,888,946)Net loss
    $(4,888,946)
    $(6,557,593)
    $(1,351,258)
    $(12,797,797)




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20.FINANCIAL INSTRUMENTS AND RISK MANAGEMENT  The Company's financial instruments
consist of cash and cash equivalents, accounts receivable, receivable from the sale of discontinued operations, convertible debentures,
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 the fair 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:  2019
    2018
    2017Fair value through profit or loss, measured at amortized cost:Cash and cash equivalents
    $1,428,129
    $2,567,868
    $4,974,478Accounts receivable, measured at amortized cost:Accounts receivable
    $-
    $946,944
    $493,925Receivable from the sale of discontinued operations
    $18,000,000
    -
    $-Other liabilities, measured at amortized cost:Accounts payable and accrued liabilities
    $(1,725,708)
    $(3,040,422)
    $(810,593)Convertible debentures
    $(3,089,033)
    $-
    $-
 Page 23
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  20.FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)  Credit Risk The Company is exposed to credit
risk associated with its accounts receivable. The Company has accounts receivable from both governmental and non-governmental agencies.
Credit risk is minimized substantially by ensuring the credit worthiness of the entities with which it carries on business. Credit
terms are provided on a case by case basis. The Company has not experienced any significant instances of non-payment from its customers.  The Company's accounts receivable
ageing at December 31 was as follows:  2019
    2018
    2017Current
    $-
    $892,343
    $330,73131 - 60 days
    -
    34,331
    56,09461 - 90 days
    -
    60,885
    -> 90 days
    -
    -
    107,100Expected credit losses (1)
    -
    (40,615)
    -$-
    $946,944
    $493,925
  (1)The Company applies IFRS 9 simplified approach to measuring expected credit losses
using a lifetime expected credit loss allowance for trade receivables.  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 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 with the Canadian and Singapore dollar. A 10% change in the Canadian and Singapore dollar
would increase or decrease other comprehensive loss by $290,950.  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.






21.CAPITAL MANAGEMENT  In the management of capital,
the Company includes shareholders' equity (excluding accumulated other comprehensive loss and deficit) and cash. The components
of capital on December 31, 2019 were:  Cash and cash equivalents and receivable from the sale of discontinued operations
    $19,428,129Shareholders' equity
    $160,096,378
  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.




Page 24


POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)




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22.EXPENSES  Research and development
costs can be analysed as follows:  2019
    2018
    2017Wages and benefits
    $874,673
    $822,258
    $703,759Subcontract fees
    834,598
    888,566
    1,044,936Stock-based compensation
    237,311
    395,468
    218,896Supplies
    137,233
    156,184
    71,830$2,083,815
    $2,262,476
    $2,039,421
  Selling, marketing and administration
costs can be analysed as follows:  Stock-based compensation
    $2,650,830
    $3,207,411
    $2,739,462Wages and benefits
    1,619,719
    1,433,286
    1,443,656Professional fees
    1,120,805
    735,604
    597,865General expenses
    813,951
    392,901
    598,600Depreciation and amortization
    243,674
    153,244
    182,252Management and consulting fees
    154,357
    155,169
    229,577Rent and facility costs
    94,051
    96,260
    96,297$6,697,387
    $6,173,875
    $5,887,709




23.DISCONTINUED OPERATIONS  On February 3, 2019, management
committed to a plan to sell its subsidiary, DenseLight. The decision was taken in line with a strategy to focus on the Company's
opportunities related to its Optical Interposer. Management determined that the divestiture of DenseLight would immediately reduce
the Company's operating losses and cash burn, while allowing the Company to pursue a "fab-light" strategy with a less
capital-intensive business model that is focused on growing the Optical Interposer business through targeted investments in the
design, development and sale of vertical market solutions. Consequently, after the plan and prior to the actual sale, all saleable
assets and liabilities relating to DenseLight were classified as "Non-current assets held for sale" or "disposal
group liabilities". An impairment assessment was done on the assets that were held for sale. It was determined that no assets
were impaired either on the date management committed to a plan of sale or on November 8, 2019 when the sale was consummated.  On November 8, 2019, the Company sold 100% of the issued and outstanding shares of DenseLight for $26,000,000. The Company
received $8,000,000 upon the consummation of the sale. The Company expects to receive the remaining $18,000,000 over three
tranches, with $4,750,000 received on February 14, 2020 and $8,250,000 received on March 30, 2020. The remaining $5,000,000
is expected to be received on or before May 31, 2020. Shares were placed into escrow in the name of the Buyer, to be released
to the Buyer upon receipt of the remaining payments. The Buyer assumed control of DenseLight on November 8, 2019 and will
be responsible for all operations of DenseLight thence-forth. Upon closing, the Company recognized a gain on the sale of $8,707,280.
The Company received an additional $2,000,000, in excess of the sale proceeds, with the most recently paid two tranches which
was immediately paid to Oak Capital on behalf of the Buyer for due diligence, legal and other expenses.  Revenue and expenses, and gains
and losses relating to the discontinued operations have been removed from the results of continuing operations and are shown as
a single line item on the face of the consolidated statement of comprehensive loss. The operating results of the discontinued operations
can be analysed as follows:  Page 25
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  23.DISCONTINUED OPERATION (Continued)  Results of discontinued
operations  For the Period From
    For the Year EndedJanuary 1 to November 8,
    December 31,2019
    2018
    2017Revenue
    $4,426,355
    $3,888,185
    $2,794,044Cost of revenue
    1,201,373
    1,475,969
    1,342,691Gross margin
    3,224,982
    2,412,216
    1,451,353Operating expensesResearch and development
    5,677,222
    6,430,328
    3,403,452Selling, marketing and administration
    1,950,526
    5,515,329
    4,983,032Interest expense
    74,494
    -
    -Impairment loss
    -
    156,717
    -Other income
    (1,251,737)
    (1,491,556)
    (1,748,245)Operating expenses
    6,450,505
    10,610,818
    6,638,239Loss from discontinued operations
    (3,225,523)
    (8,198,602)
    (5,186,886)Gain on sale of discontinued operations, net of taxes
    8,707,280
    -
    -Income tax recovery
    -
    (297,940)
    (297,940)Net income (loss), net of taxes
    $5,481,757
    $(7,900,662)
    $(4,888,946)
  Disaggregated Revenues The Company disaggregates revenue
by timing of revenue recognition, that is, at a point in time and revenue over time. Disaggregated revenue is as follows:  For the Period From
    For the Year EndedJanuary 1 to November 8,
    December 31,2019
    2018
    2017Non-contract revenue (at a point in time)(1)(3)
    $2,092,426
    $3,261,518
    $2,714,044Contract revenue (revenue over time)(2)(3)
    2,221,429
    441,667
    80,000Contract revenue (at a point in time)(2)(3)
    112,500
    185,000
    -$4,426,355
    $3,888,185
    $2,794,044
  (1)Revenue from the sale of products. (2)Revenue from long-term projects or non-recurring engineering (NRE). (3)All revenue was generated from the Singapore geographic region.  Revenue Contract Balances  ContractReceivables
    LiabilitiesOpening balance, January 1, 2017
    $-
    $(20,000)Revenues recognized
    80,000
    (60,000)Changes due to payment, fulfillment of performance obligations or other
    (40,000)
    80,000Balance, December 31, 2017
    $40,000
    $-Revenues recognized
    626,667
    (626,667)Changes due to payment, fulfillment of performance obligations or other
    (606,667)
    626,667
 Page 26
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  23.DISCONTINUED OPERATION (Continued)  ContractReceivables
    LiabilitiesBalance, December 31, 2018
    60,000
    -Revenues recognized
    2,333,929
    (2,333,929)Changes due to payment, fulfillment of performance obligations or other
    (1,293,929)
    2,333,929Balance, November 8, 2019
    $1,100,000
    $-
  Research and development
costs included in discontinued operations can be analysed as follows:  For the Period From
    For the Year EndedJanuary 1 to November 8,
    December 31,2019
    2018
    2017Wages and benefits
    $3,565,076
    $3,818,980
    $2,135,329Supplies
    1,412,572
    2,070,495
    1,118,011Subcontract fees
    728,457
    400,000
    -Stock-based compensation
    (28,883)
    140,853
    150,112$5,677,222
    $6,430,328
    $3,403,452
  Selling, marketing and administration
costs included in discontinued operations can be analysed as follows:  Wages and benefits
    $887,860
    $1,034,715
    $1,131,322Rent and facility costs
    604,442
    975,467
    1,079,635General expenses
    458,465
    785,635
    585,637Stock-based compensation
    (46,725)
    278,385
    66,454Professional fees
    46,484
    31,747
    27,076Depreciation and amortization
    -
    2,409,380
    2,092,908$1,950,526
    $5,515,329
    $4,983,032
  Cash flows from (used in)
discontinued operations   2019
    2018
    2017CASH (USED IN) PROVIDED BY:OPERATING ACTIVITIESNet loss
    $5,481,757
    $(7,900,662)
    $(4,888,946)Adjustments for:Depreciation of property and equipment
    -
    2,372,152
    2,055,680Gain on sale of discontinued operations
    (8,707,280)
    -
    -Amortization of intangibles
    -
    37,228
    37,228Interest expense
    74,494
    -
    -Impairment loss
    -
    156,717
    -Stock-based compensation
    (75,608)
    419,238
    216,566Income tax recovery
    -
    (297,940)
    (297,940)Deferred rent
    (1,825)
    (21,992)
    -Expected credit loss
    -
    40,615
    -(3,228,462)
    (5,194,644)
    (2,877,412)
   Page 27
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  23.DISCONTINUED OPERATION (Continued)  Net change in non-cash working capital accounts:Accounts receivable
    584,902
    (508,093)
    (171,257)Prepaid and other current assets
    497,259
    (949,401)
    (927,685)Inventory
    (334,425)
    78,733
    663,992Accounts payable and accrued liabilities
    (470,378)
    1,782,612
    (616,289)Cash flows from operating activities
    (2,951,104)
    (4,790,793)
    (3,928,651)INVESTING ACTIVITIESProceeds from the sale of discontinued operations, net of cash given up (1)
    7,519,126
    -
    -Purchase of property and equipment (Note 7)
    (1,599,272)
    (3,467,992)
    (912,774)Purchase of patents and licenses (Note 8)
    (11,231)
    -
    (18,815)Cash flows from investing activities
    5,908,623
    (3,467,992)
    (931,589)FINANCING ACTIVITIESPayment of lease liability (Note 9)
    (258,460)
    -
    -Cash flows from financing activities
    (258,460)
    -
    -EFFECT OF EXCHANGE RATE CHANGES ON CASH
    (14,010)
    26,490
    (65,338)NET CHANGE IN CASH
    $2,685,049
    $(8,232,295)
    $(4,925,578)
   Effect of Disposal on the Financial Position
of the Group  Accounts receivable
    $396,037Prepaid and other current assets
    2,303,014Inventory
    774,404Property and equipment
    8,424,638Right of use asset
    880,577Patents
    29,696Goodwill and customer list
    6,718,953Trade payables
    (1,312,053)Lease Liability
    (695,733)Deferred tax liability
    (707,687)Net assets disposed
    $16,811,846(1) Consideration received in cash
    $8,000,000(1) Cash given up
    (480,874)Consideration receivable
    18,000,000Net inflows
    $25,519,126


Page 28


POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)




24.GOODWILL AND DEFERRED TAX LIABILITY  On May 11 and June 22, 2016 the
Company acquired DenseLight and BB photonics for $10,500,000 and $1,550,000 respectively. The all stock purchases were accomplished
with the issuance of 13,611,150 common shares and 1,996,090 common shares of the Company at a price of $0.7714 and $0.777 per share,
respectively. The purchase price in both acquisitions exceeded the net assets acquired which resulted in the difference being accounted
for as goodwill on the consolidated statements of financial position.  The continuity of goodwill is
as follows:  DenseLight
    BB Photonics
    TotalBalance, December 31, 2017 and 2018
    $6,630,544
    $1,050,459
    $7,681,003Impairment
    -
    (1,050,459)
    (1,050,459)Disposed on the sale of DenseLight
    (6,630,544)
    -
    (6,630,544)Balance, December 31, 2019
    $-
    $-
    $-
  Deferred tax liability was created
on the date of purchase for both DenseLight and BB Photonics. The following is a continuity of deferred tax liability.  DenseLight
    BB Photonics
    TotalBalance, January 1, 2017
    $1,303,567
    $292,740
    $1,596,307Tax effect of amortization
    (297,940)
    -
    (297,940)Balance, December 31, 2017
    1,005,627
    292,740
    1,298,367Tax effect of amortization
    (297,940)
    -
    (297,940)Balance, December 31, 2018
    707,687
    292,740
    1,000,427Tax effect of Impairment
    -
    (292,740)
    (292,740)Disposed on the sale of DenseLight
    (707,687)
    -
    (707,687)Balance, December 31, 2019
    $-
    $-
    $-
  Included in the sale of DenseLight on November 8, 2019
was $6,630,544 of goodwill and $707,687 of deferred liability.






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25.INCOME TAXES  The following table reconciles
the expected income tax recovery at the Canadian statutory income tax rate of 26.5% for 2019 (2018 - 26.5%, 2017 - 26.5%) to the
amounts recognized in operations.  For the Year Ended December 31,
    2019
    2018
    2017Net loss, continuing operations
    $(11,727,372)
    $(8,422,117)
    $(7,908,851)Net income (loss), discontinued operations
    5,481,757
    (8,198,602)
    (5,186,886)Net loss before taxes
    $(6,245,615)
    $(16,620,719)
    $(13,095,737)Expected current income tax recovery
    1,655,088
    4,404,491
    3,470,370Deferred tax recovery (2)
    292,740
    297,940
    297,9401,947,828
    4,702,431
    3,768,310
 Page 29
 POET TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in US Dollars)
  25.INCOME TAXES (Continued)  For the Year Ended December 31,
    2019
    2018
    2017Adjustments to income tax recovery:Amounts not deductible for tax purposes
    $(1,212,900)
    $(1,065,900)
    $(841,000)Other non-deductible items
    (173,000)
    (509,900)
    (463,000)Deductible share and debt issuance costs
    216,000
    77,000
    94,000Non-taxable gain
    2,307,000
    -
    -Impact of US statutory income tax rate change (1)
    -
    -
    (9,472,000)Foreign tax differential
    591,000
    (592,000)
    (69,000)Non-recognizable permanent capital loss
    (1,175,000)
    -
    -Unusable foreign tax recoveries (3)
    (7,040,081)
    -
    -Unrecognized tax recovered (losses)
    4,831,893
    (2,313,691)
    7,280,630Income tax recovery recognized (2)
    $292,740
    $297,940
    $297,940
  (1)Due to the reduction of US corporate tax rates from 35% to 21%, the Company will not
be able to apply $9,472,000 against any future US taxes payable.  (2)Deferred tax recovery and income tax recovery recognized for 2018 and 2017 are included
Income (loss) from discontinued operations, net of taxes on the consolidated statements of operations and deficit.  (3)Deferred tax assets applicable to DenseLight and no longer available to the Company.  The following table reflects future income tax assets
at December 31:  2019
    2018
    2017Resource assets
    $1,024,271
    $1,024,271
    $1,024,271Gross unamortized share issue costs
    385,000
    669,000
    705,351Canadian non-capital losses
    16,545,000
    12,431,000
    11,100,672Canadian capital losses
    4,432,500
    -
    -US non-capital losses
    75,060,000
    71,594,000
    67,654,438Singapore non-capital losses
    378,000
    46,894,000
    43,671,20097,824,771
    132,612,271
    124,155,932Unrecognized deferred tax assets
    (97,824,771)
    (132,612,271)
    (124,155,932)Deferred income tax assets recognized
    $-
    $-
    $-
  In accordance with Section
382 of the Internal Revenue Code, the usage of the Company’s net operating loss carry forward related to the BB Photonics
acquisition in 2016 of approximately $928,000 could be subject to annual limitation since there was greater than 50% ownership
change.






26.SUBSEQUENT EVENTS  On February 14, 2020 and March
30, 2020 the Company collected $4,750,000 and $8,250,000 respectively for a cumulative $13,000,000 representing two tranches of
an agreed three tranche payment plan for the outstanding balance due from DL Shanghai from the sale of DenseLight. The escrow agent
transferred additional shares from escrow to the Buyer. The Buyer now directly holds a cumulative 81% of the shares of DenseLight.
The Company collected an additional $2,000,000, in excess of the sale proceeds, which was immediately paid to Oak Capital on behalf
of the DL Shanghai for due diligence, legal and other expenses.






On June 29, 2020 and July 3, 2020, the Company received payments in the cumulative amount
of $2,500,000 from the Buyer of DenseLight for a total received of $23,500,000. Taking into consideration the length of time it
had taken the Buyer to make the foregoing payments and the Company’s expectations regarding the likelihood of receiving an
additional payment, the Company determined, and the Buyer accepted, that it was in the Company’s best interest to accept
the partial payments as final payment on the Company’s receivable and to restructure its relationship with DenseLight to
better accommodate the Company’s current supply needs.



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