Document:

Exhibit 4.2

 

POET TECHNOLOGIES INC.
(the “Company”) 

Suite 1107, 120 Eglinton Avenue
East, Toronto, Ontario, Canada M4P 1E2

USA Office: 780 Montague Expressway, San Jose, CA 95131, USA

Facsimile: (416) 322-5075             Telephone:
(416) 368-9411

 

INFORMATION CIRCULAR

(As at May 7, 2018 except as indicated)

 

The Company is providing this Information Circular in connection with the solicitation of proxies by the management (“Management”)
of the Company for use at the annual and special meeting (the "Meeting") of the shareholders of the Company to be held
at 10:00 a.m. (PDT) on June 21, 2018 and for the purposes set forth in the Notice of Annual and Special Meeting. It is expected
that the solicitation of proxies will be primarily by mail or by “Notice and Access” to electronic materials available
on the internet; however, proxies may also be solicited by directors, officers and certain employees of the Company, without receiving
special compensation, by telephone, facsimile (“fax”) or by other personal contact. The cost of solicitation of proxies
by Management will be borne by the Company.

 

The Company may pay the reasonable costs incurred by persons who
are shareholders but not the beneficial owners of common shares of the Company (“Shares”) (such as brokers, dealers
and other registrants under applicable securities law and nominees and custodians) in sending or delivering copies of the Notice
of Meeting, the Management Information Circular, the form of proxy (the “Proxy”) and/or the voting instruction form
(the “VIF”) to the beneficial owners. However, any such payments must be pre-approved by the Company. The Company will
furnish to such persons, upon request to the Secretary of the Company, and without additional cost, additional copies of the Notice
of Meeting, the Management Information Circular, and the Proxy and/or the VIF.

 

NOTICE AND ACCESS

 

In accordance with the Notice and Access rules adopted by the Ontario
Securities Commission under NI 54-101, the Company is sending its proxy-related materials (the “Proxy Materials”) to
shareholders using the Notice and Access method. Therefore, although shareholders will still receive the Proxy and/or VIF in paper
copy, the additional Proxy Materials, including this Management Information Circular, the Notice of Meeting, the Annual Report
(containing the annual audited consolidated financial statements and related MD&A) will not be physically delivered. Instead,
shareholders may access or download the Proxy Materials from the Company’s registrar and transfer agent’s website http://docs.tsxtrust.com/2042
or may also access them from SEDAR at www.sedar.com under the Company's filed documents. The Company believes that this delivery
method will expedite the receipt of the Proxy Materials by shareholders, reduce its printing and mailing expenses and reduce the
environmental impact of disposing of the Proxy Materials after they are no longer useful.

 

Registered holders or beneficial owners may request paper copies
of the Notice and Management Information Circular booklet be sent to them by postal delivery at no cost to them. Requests may be
made up to one year from the date the Proxy Materials are posted on the Company's website. In order to receive a paper copy of
the Proxy Materials or if you have questions concerning Notice and Access, please contact the Secretary of the Company, by telephone
at 416-862-7330 or by e-mail at agm@poet-technologies.com or call the Company’s registrar and transfer agent, TSX Trust Company
(“TSX Trust”) at 1-866-600-5869.

 

The purpose of the Proxy and/or VIF which were mailed to shareholders
is to designate persons who will vote the Proxy on a shareholder’s behalf in accordance with the instructions given by the
shareholder in the said form.

 

     

     

    

 

VOTING PROCESS – REGISTERED SHAREHOLDERS

 

Appointment of Proxies

 

The persons named in the Proxy are officers and/or directors of
the Company (the “Management Proxyholders”). A registered shareholder can appoint a person other than the Management
Proxyholders, who need not be a shareholder, to represent him or her at the Meeting by inserting such person’s name in the
blank space provided in the Proxy or by completing another form of proxy.

 

A registered shareholder appointing a proxyholder may indicate the
manner in which the appointed proxyholder can vote with respect to any specific item by checking the space opposite the item on
the Proxy. If the shareholder giving the Proxy wishes to confer a discretionary authority with respect to any item of business,
then the space opposite the item should be left blank. The Shares represented by the Proxy submitted by a shareholder will be voted
or withheld from voting in accordance with the directions, if any, given in the Proxy.

If a shareholder does not specify a choice and the shareholder
has appointed one of the Management Proxyholders as proxyholder, the Management Proxyholders will vote in favour of the matters
specified in the Notice of Meeting and in favour of all other matters proposed by Management at the Meeting.

Voting Shares by Proxy

 

Registered shareholders at the close of business on May 10, 2018
may vote their proxies as follows:

 

Internet voting: Go to the website indicated on the
Proxy (http://www.voteproxyonline.com) and follow the instructions on the screen. To appoint a proxyholder, other than Management
Proxyholders, to represent you at the Meeting, inserting such person’s name in the blank space provided on the online Proxy.
Then complete your voting instructions and submit the form. The time and date submitted will automatically be recorded.

 

Voting by mail or fax: Complete the Proxy in a legible
manner. To appoint a proxyholder, other than the Management Proxyholders, to represent you at the Meeting, insert such person’s
name in the blank space provided in the Proxy. Complete your voting instructions by checking the appropriate boxes on the Proxy,
date and sign the form. You may either send the completed Proxy to TSX Trust by mail or by fax. Do not send by both methods.
The address is Suite 301, 100 Adelaide Street West, Toronto, Ontario M5H 4H1 and the fax number is 416-595-9593.

 

Deadline for Receipt of Proxies

 

The deadline for receiving duly completed and executed forms of
proxy or submitting your proxy by fax or over the internet is 10:00 a.m. (PDT) on June 19, 2018, or no later than 48 hours (excluding
Saturdays, Sundays and holidays) before the time of any adjourned or postponed Meeting. A registered shareholder attending
the Meeting has the right to vote in person, but he must, before the start of the Meeting, register with the scrutineer of the
Meeting. If he had previously submitted a Proxy, he must specifically request that his proxy be nullified with respect to the matters
and any subsequent matters thereafter to be voted upon at the Meeting or any adjournment or postponement thereof, thereby permitting
him to vote in person. Notwithstanding the foregoing, the Chair of the Meeting has the sole discretion to accept proxies received
after such deadline but is under no obligation to do so.

 

Revocation of Proxies

 

A proxy submitted pursuant to this solicitation may be revoked in
any manner permitted by law and by written notice, signed by the shareholder or by the shareholder’s attorney authorized
in writing (or, if the shareholder is a corporation, by a duly authorized officer or attorney), and deposited with the Company’s
transfer agent, TSX Trust Company, Suite 301, 100 Adelaide Street West, Toronto, Ontario M5H 4H1, at any time up to and including
the last business day preceding the date of the Meeting, or any adjournment or postponement thereof, at which the proxy is to be
used.

 

    	 	- 2 -	 

     

    

 

A proxy submitted pursuant to this solicitation may also be revoked
prior to the commencement of voting by attending the Meeting in person and registering with the scrutineer as a registered shareholder
personally present and requesting to nullify his proxy to allow him to vote in person.

 

A revocation of proxy does not affect any matter on which a vote
has been taken before the revocation.

Exercise of Discretion by Proxies

 

The persons named in the enclosed Proxy will vote the Shares in
respect of which they are appointed in accordance with the direction of the shareholders appointing them. In the absence of such
direction, the relevant Shares will be voted in favour of the passing of all the resolutions described below.

 

The enclosed Proxy confers discretionary authority on the persons
named in the Proxy with respect to amendments or variations to matters identified in the Notice of Meeting and with respect to
other matters which may properly come before the Meeting. At the time of printing of this Circular, Management knows of no such
amendments, variations or other matters to come before the Meeting. However, if amendments or variations to any other matters which
are not now known to Management should properly come before the Meeting, the Proxy will be voted on such matters in accordance
with the best judgment of the named proxyholder.

 

VOTING PROCESS – NON-REGISTERED SHAREHOLDERS 

 

Only registered shareholders of the Company or the persons they
appoint as their proxyholders are permitted to vote at the Meeting. Many shareholders of the Company are referred to as “non-registered”
shareholders (“Non-Registered Shareholders”) because the Shares they own are not registered in their names but are
instead registered in the name of the brokerage firm, bank or trust company through which they purchased the Shares. Shares held
by brokers or their agents or nominees can only be voted (for or against resolutions) upon the instructions of the Non-Registered
Shareholder. Without specific instructions, a broker and its agents and nominees are prohibited from voting Shares for their clients.
Therefore, Non-Registered Shareholders should ensure that instructions respecting the voting of their Shares are communicated to
the appropriate person or that the Shares are duly registered in their name.

 

Applicable regulatory policy requires
intermediaries/brokers to seek voting instructions from Non-Registered Shareholders in advance of shareholders’ meetings.
Every intermediary/broker has its own mailing procedures and provides its own forms and voting instructions to clients, which should
be carefully followed by Non-Registered Shareholders in order to ensure that their Shares are voted at the Meeting. Shares beneficially
owned by a Non-Registered Shareholder are registered either:

		i)	in the name of an intermediary (“Intermediary”) that
the Non-Registered Shareholder deals with in respect of the Shares of the Company (Intermediaries include, amongst others, banks,
trust companies, securities dealers or brokers, and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar
plans); or

 

		ii)	in the name of a clearing agency (such as CDS Clearing and Depository
Services Inc. in Canada or The Depository Trust & Clearing Corporation in the United States) of which the Intermediary is a
participant.

 

Unless you have previously informed
your Intermediary/broker that you do not wish to receive material relating to the Meeting, you should have received a Proxy or
a VIF. In either case you have the right to exercise voting rights attached to the Company’s Shares beneficially owned by
you, including the right to attend and vote the Shares directly at the Meeting, assuming that you follow the instructions
contained in the said Proxy or VIF.

The documents that you receive
and from whom you receive them will vary depending upon whether you are a "non-objecting beneficial owner" ("NOBO")
residing in Canada, which means you have provided instructions to your Intermediary that you do not object to the disclosure of
the beneficial ownership information about you to the Company, or an "objecting beneficial owner" ("OBO") residing
in Canada, which means that you have objected to the disclosure of such beneficial ownership information about you to the Company,
or a non-registered shareholder residing outside of Canada (the “Other Non-Registered Shareholders”).

 

    	 	- 3 -	 

     

    

 

NOBO Shareholders

 

TSX Trust is handling the mailing
to NOBO’s in addition to mailing to the Registered Shareholders. All NOBO Shareholders of the Company will receive a VIF
from TSX Trust.

 

If you are a NOBO shareholder
of the Company, and TSX Trust has sent a VIF directly to you, your name and address and information about your holdings of Shares
of the Company have been obtained in accordance with applicable securities regulatory requirements from the intermediary/broker
holding Shares on your behalf. By choosing to send the VIF to you directly, the Company has assumed responsibility for (i) delivering
the VIF to you, and (ii) executing your proper voting instructions.

Therefore a NOBO Shareholder of
the Company can vote the Shares represented by his VIF in a similar manner as registered shareholders. The process to vote a VIF
or to appoint a proxyholder are the same as that described under “Voting Process – Registered Shareholders”,
except that:

 

		·	the form received by such person is a VIF instead of a Proxy;
and

 

		·	a NOBO shareholder cannot attend the Meeting to vote in person
unless, at least 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting, he appoints himself as a proxyholder
according to the instructions provided on the VIF and registers with the scrutineer upon arriving at the Meeting.

 

OBO Shareholders

 

In accordance with applicable
securities law requirements, the Company will upon request distribute copies of the Proxy Materials to the clearing agencies and
intermediaries for distribution to OBO Shareholders and to the Other Non-Registered Shareholders. Intermediaries are required to
forward the Proxy Materials to Non-Registered Shareholders unless a Non-Registered Shareholder has waived the right to receive
them. Intermediaries often use service companies to forward the Proxy Materials to Non-Registered Shareholders. Generally, Non-Registered
Shareholders who have not waived the right to receive Proxy Materials will either:

 

		i)	be given a VIF which is not signed by the Intermediary and which,
when properly completed and signed by the Non-Registered Shareholder and returned to the Intermediary or its service company, will
constitute voting instructions which the Intermediary must follow. Typically, this VIF will consist of a one page pre-printed form;
or

 

		ii)	be given a Proxy which has already been signed by the Intermediary
(typically by a facsimile, stamped signature), which is restricted as to the number of Shares beneficially owned by the OBO shareholder
but which is otherwise not completed by the Intermediary. Because the Intermediary has already signed the Proxy, the signature
of the OBO shareholder is not required when submitting the Proxy. 

 

In either case, the purpose of
these procedures is to permit Non-Registered Shareholders to direct the voting of the Shares of the Company that they beneficially
own. Since only registered shareholders and their proxyholders may attend and vote at the Meeting, if a Non-Registered Shareholder
attends the Meeting, the Company will have no record of the Non-Registered Shareholder’s shareholding or of his/her or its
entitlement to vote unless the Non-Registered Shareholder’s nominee has appointed the Non-Registered Shareholder as proxyholder.
Therefore, a Non-Registered Shareholder who receives one of the above forms and wishes to vote at the Meeting in person (or have
another person attend and vote on behalf of the Non-Registered Shareholder), the Non-Registered Shareholder should insert the Non-Registered
Shareholder’s name or such other person’s name in the blank space provided, and depending on the design of the VIF,
may need to strike out the names of the Management Proxyholders listed therein. The voting instructions given to the Non-Registered
Shareholder, may provide for voting by telephone, on the Internet, by mail or by fax. In either case, Non-Registered Shareholders
should carefully follow the instructions of their Intermediary, including those regarding when and where the Proxy or VIF is to
be delivered.

 

A Non-Registered Shareholder,
who has submitted a Proxy, may revoke it by contacting the Intermediary through which the Non-Registered Shareholder’s Shares
are held and following the instructions of the Intermediary respecting the revocation of proxies. This procedure should be initiated
sufficiently in advance of the Meeting to ensure there is sufficient time to implement your instructions.

 

    	 	- 4 -	 

     

    

 

In all cases it is important that the Proxy or VIF be received by
the Intermediary or its agent sufficiently in advance of the deadline set forth in the Notice of Meeting to enable the Intermediary
or its agent to provide voting instructions on your behalf before the deadline.

Failing to follow the proper voting instructions described in the
VIF may invalidate your vote and/or not allow you attend and vote in person at the Meeting.

VOTING SHARES AND PRINCIPAL HOLDERS THEREOF

 

The Company is authorized to issue unlimited Shares without par
value, of which 288,056,802 shares are issued and outstanding as at May 7, 2018. The Company has fixed the close of business on
May 10, 2018 as the record date (the “Record Date”) for the purpose of determining shareholders entitled to receive
notice of and vote at the Meeting. In accordance with the provisions of the Business Corporations Act (Ontario), the Company
has prepared a list of shareholders on the Record Date. Each shareholder is entitled to one vote for each share held in respect
to each matter to be voted at the Meeting. Only shareholders of record on the Record Date are entitled to vote at the Meeting.

 

To the knowledge of the directors and officers of the Company, no
person beneficially owns, directly or indirectly, or controls or directs shares carrying 10% or more of the voting rights attached
to all shares of the Company.

ELECTION OF DIRECTORS

 

The directors of the Company are elected at each annual general
meeting and hold office until the next annual general meeting or until their successors are appointed. In the absence of instructions
to the contrary, the enclosed Proxy will be voted for the nominees herein listed.

 

The Company is required to have an audit committee. Members of the
audit committee and other committees of the Board of Directors of the Company (the “Board”) are as set out in the table
below.

 

The number of directors of the Company to be elected at the Meeting
is eight. Management of the Company proposes to nominate each of the following persons for election as a director. Information
concerning such persons, as furnished by the individual nominees, is as follows:

 

	Name, Jurisdiction of Residence and Position 	Principal Occupation or employment and, if not a previously elected Director, occupation during the past 5 years	Date First Elected or Appointed

as a Director	Number of Common Shares beneficially owned, directly or indirectly, or controlled or directed (6)
	
        David E. Lazovsky (3)

        Los Gatos, CA, USA
	Executive Chairman of the Board of the Company since February 1, 2017; President and Chief Executive Officer of Intermolecular (NASDAQ: IMI) from September 2004 to October 2014.	April 8, 2015	181,000
	
        Jean-Louis Malinge

        Paris, France
	Partner with ARCH Venture Partners, managing director of YADAIS. 	September 5, 2017	Nil
	
        John F. O’Donnell (2) (3)

        Toronto, ON, Canada
	Independent lawyer practising in Toronto, Ontario since 1973 (currently counsel to Stikeman Keeley Spiegel LLP).	February 13, 2012	30,000
	
        Chris Tsiofas (1) (2) (3)

        Toronto, ON, Canada
	Partner with Chartered Accountancy firm of Myers Tsiofas Norheim LLP since 1994.	August 21, 2012	25,000 (4)
	Suresh Venkatesan

Los Gatos, CA, U.S.A.	
        CEO of the Company since June 11, 2015.

         
	June 12, 2015	115,000
	Mohandas Warrior (1)

Palo Alto, CA, U.S.A.	President and CEO of Alfalight Inc. from February 2004 to July 2016.	June 12, 2015	Nil
	Don Listwin (2)

Woodside, CA, U.S.A.	CEO of Canary Foundation	January 19, 2018	531,250 (5)
	Peter Dominic Charbonneau (1)

Ottawa, ON, Canada	Director of Mitel Networks and Teradici Corporation	March 27, 2018	Nil

 

    	 	- 5 -	 

     

    

 

		NOTES:	

		(1)	Current
                                         Member of the Audit Committee.

		(2)	Current
                                         Member of Compensation Committee.

		(3)	Current
                                         Member of Corporate Governance and Nominating Committee.

		(4)	Mr.
                                         Tsiofas beneficially owned 25,000 common shares under RRSP.

		(5)	These
                                         shares are held by The Donald J. Listwin Trust.

		(6)	Shares
                                         beneficially owned, directly or indirectly, or over which control or direction is exercised,
                                         as at May 10, 2018, based upon information filed on SEDI by the individual directors
                                         or furnished to the Company by them. Unless otherwise indicated, such shares are held
                                         directly.

 

The following briefly describes the qualification and experience
of the nominees to the Board:

 

Peter Dominic Charbonneau - 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. Prior to Skypoint, he held a number of executive
and operational roles at various networking companies including March Networks and Newbridge Networks, where he was president and
chief operating officer. In 2000, representing Sir Terence Matthews, he facilitated the purchase of the communications business
systems division of Mitel Corporation, which has operated as Mitel Networks since the acquisition.

 

David E. Lazovsky – Mr. Lazovsky is the founder
of Intermolecular, Inc. (NASDAQ: IMI) and served as the 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 Inc. (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.

 

Don Listwin - 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, D-wave, 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).

 

Jean-Louis Malinge - 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 also serves as a managing director for YADAIS, a leading consulting firm in the photonics and telecommunications industries,
and is a board member of EGIDE SA and CAILabs. EGIDE SA designs, manufactures and sells hermetic packages for the protection and
interconnection of several types of electronic and photonic chips and CAIlabs is a venture-backed French innovative start-up founded
in 2013 which has developed a unique spatial multiplexing platform. 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.

 

    	 	- 6 -	 

     

    

 

John F. O’Donnell – Mr. O’Donnell
has a B.A. (Economics) and an LLB. He has practiced law in the City of Toronto since 1973 and has been on the Board of Directors
of the Company since February 2012. He is currently counsel to Stikeman Keeley Spiegel LLP. His practice is primarily in the field
of corporate and securities law and, as such, he is and has been counsel to several publicly traded companies. Mr. O’Donnell
is currently Chairman of the Board of Peloton Minerals Corporation (CSE: PMC) and a director of African Metals Corporation (NEX:
AFR.H). 

Chris Tsiofas – Mr. Tsiofas is a Chartered Accountant (CA), Chartered Professional Accountant (CPA). He earned
a Bachelor of Commerce Degree from the University of Toronto in 1991 and has been a member of the Institute of Chartered Accountants
of Ontario since 1993. He has been on the Board of Directors since August 2012. He is a partner with the Toronto Chartered Professional
Accountancy firm of Myers Tsiofas Norheim LLP, a position he has held since 1994.

 

Dr. Suresh Venkatesan – 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.

Mohandas Warrior – Mr. Warrior was the President & CEO of Alfalight, Inc. from February 2004 to July
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. 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 3,500 employees, in the U.S.,
Scotland and Korea. Mr. Warrior successfully led the transactions to sell Alfalight’s commercial business to Compound Photonics
in 2013 and its defense business to Gooch & Housego in 2016.

 

No proposed director is to be elected under any arrangement or understanding between the proposed director and any other person
or company, except the directors and executive officers of the company acting solely in such capacity.

To the knowledge of the Company, except as noted below, no proposed director:

 

		(a)	is, as at the date of the Information Circular, or has been, within 10 years before the date of
the Information Circular, a director, chief executive officer ("CEO") or chief financial officer ("CFO")
of any company (including the Company) that:

 

		(i)	was the subject, while the proposed director was acting in the capacity as director, CEO or CFO
of such company, of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities
legislation, that was in effect for a period of more than 30 consecutive days; or

 

		(ii)	was subject to a cease trade or similar order or an order that denied the relevant company access
to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued
after the proposed director ceased to be a director, CEO or CFO but which resulted from an event that occurred while the proposed
director was acting in the capacity as director, CEO or CFO of such company; or

 

		(b)	is, as at the date of this Information Circular, or has been within 10 years before the date of
the Information Circular, a director or executive officer of any company (including the Company) that, while that person was acting
in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors
or had a receiver, receiver manager or trustee appointed to hold its assets; or

 

    	 	- 7 -	 

     

    

 

		(c)	has, within the 10 years before the date of this Information Circular, become bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement
or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director;

 

		(d)	has been subject to any penalties or sanctions imposed by a court relating to securities legislation
or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

 

		(e)	has been subject to any penalties or sanctions imposed by a court or regulatory body that would
likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director.

 

The following directors of the Company hold directorships in other reporting issuers as set out below:

 

	Name of Director	Name of Other Reporting Issuer
	Peter Dominic Charbonneau 	Telus Corporation (TSX: T)

CounterPath Corporation (TSX: PATH)

Mitel Networks Corporation (TSX: MNW)

March Networks Corporation (TSX: MN)
	John F. O’Donnell (1)	Peloton Minerals Corporation (CSE: PMC)

African Metals Corporation (NEX: AFR.H)
	Don Listwin	Calix Inc. (NYSE: CALX)
	Jean-Louis Malinge	EGIDE Group: (EURONEXT: GID)

 

NOTE:

 

		(1)	Mr.
                                         O’Donnell is currently a director of African Metals Corporation (“AMC”)
                                         (NEX: AFR.H) for which a cease trade order was issued by reason of its failure to file
                                         its latest annual financial statements. AMC did not have sufficient funds to pay its
                                         auditors as well as other creditors. This financial situation existed prior to Mr. O’Donnell
                                         becoming a director in 2016 and he agreed to become a director to assist AMC to resolve
                                         its difficulties and on the understanding that a financing be completed. Mr. O’Donnell
                                         continues to act for AMC on a pro bono basis and negotiations are ongoing.

 

If there are more nominees for election as directors than there
are vacancies to fill, those nominees receiving the greatest number of votes will be elected or appointed, as the case may be,
until all such vacancies have been filled.  If the number of nominees for election or appointment is equal to the number of
vacancies to be filled, all such nominees will be declared elected or appointed by acclamation.

The Board has adopted a policy for majority voting for individual
directors (“Majority Voting Policy”). Under the Majority Voting Policy, the Proxy for any shareholders meeting where
directors are to be elected will enable each shareholder to vote for, or withhold from voting on, each director nominee (the “Nominee”
or collectively the “Nominees”) separately. If votes “for” the election of a Nominee are fewer than the
number voted “withheld”, the Nominee is expected to submit his or her resignation promptly after the meeting of shareholders
for the consideration of the Corporate Governance and Nomination Committee (the “CGN Committee”). The CGN Committee
will make a recommendation to the Board after reviewing the matter, and the Board will then decide whether to accept or reject
the resignation. The Board’s decision to accept or reject the resignation will be disclosed to shareholders. The Nominee
will not participate in any CGN Committee or Board deliberations as to whether to accept or reject the resignation. The Majority
Voting Policy does not apply in circumstances involving contested director elections.

 

EXECUTIVE COMPENSATION

 

		A)	Compensation Discussion and Analysis

 

The purpose of this Compensation Discussion and Analysis
(“CD&A”) is to provide information about the Company’s executive compensation objectives and processes and
to discuss compensation decisions relating to the Company’s senior officers in 2017.

 

    	 	- 8 -	 

     

    

 

Description and
Explanation of Elements of Compensation Program

 

		(i)	The objectives of the Company’s executive compensation program are:

 

		·	to attract, retain and motivate quality executives;

 

		·	to align the interests of executives with those of the Company’s shareholders;

 

		·	to provide total compensation to executives that is competitive with that paid by other companies
of comparable size engaged in similar business in appropriate regions;

 

		·	to evaluate executive performance on the basis of targets determined by the Board;

 

		·	to be cognizant of expense management in determination of compensation rewards.

 

		(ii)	The executive compensation program has been designed to reward executives for:

 

		·	the reinforcement of the Company’s business objectives and values;

 

		·	the attainment of key development and financial milestones dependant on the executive; and their
individual performance and significant achievements.

 

		(iii)	The executive compensation program consists of the following elements: base salary, variable pay
compensation and stock option incentives.

 

		(iv)	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 a very important element of the variable pay compensation
and do not require cash disbursement from the Company. Stock options are also generally awarded to officers and consultants at
the time of hire and are used as a recruitment tool to attract highly qualified and experienced executives and consultants to the
Company. Stock options are also granted at other times during the year. The Company currently operates at a loss so the Company
uses stock option grants as a means of managing its cash flow. As a result, the Board has to consider 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. Also the granting of stock options aligns officers’ rewards with an increase in shareholder value over the 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 the value of the shareholders’ investments.

 

		(v)	Determination of the Amount of Each Compensation Program Element - In order to assist the Board
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 officer’s compensation, the Compensation Committee receives input from the Chairmen of
the Board, and the Chief Executive Officer of the Company. From time to time, the Compensation Committee has engaged Compensia
to conduct a Peer Group review. Compensia has given guidance to the Compensation Committee with respect to appropriate comparative
terms for its incentive stock option plan and a salary review of various positions relative to the Peer Group. The Compensation
Committee utilizes the comparative reviews to assist in making appropriate recommendations.

 

Base Salary
- The base salary for officers, is reviewed by the Compensation Committee of the Board, within a reasonable time prior to the expiry
of the current employment or consulting agreement, with input and direction being provided by the Chairman of the Board, and the
Chief Executive Officer of the Company. The base salary review takes into consideration the current competitive market conditions,
experience, proven and/or expected performance, and the particular skills of the officer.

 

For more information on salaries
paid to the executives, refer to the Summary Compensation Table.

Variable Pay Compensation – The Company has no current procedure to assess each officer’s role in adding
to the Company’s growth. However, there are occasions when there can be significant officer achievements that further the
business potential of the Company or create vital successes to the Company. Therefore, there are times when a discretionary variable
pay award may be made to an officer. This type of payment is done after presenting the achievement to the Compensation Committee.
If deemed important to the success of POET’s business, the Committee can approve such an ad hoc variable payment. Stock Options
are a non-cash component of the Variable Pay Compensation and are discussed below.

 

    	 	- 9 -	 

     

    

 

Stock Options - The Board, based on recommendations
of the Compensation Committee where appropriate, makes the following determinations:

 

		·	it selects officers and other persons who are entitled to participate in the Stock Option Plan;

 

		·	it determines, after assessing recommendations by management when appropriate, the number of options
granted to such individuals;

 

		·	it determines the date on which each option is granted and the corresponding exercise price; and

 

		·	it determines the vesting schedule for the stock options granted.

 

The Board makes these determinations subject to the provisions of the existing Stock Option Plan. For more information refer to
the section entitled “B) Option-Based Awards”.

 

(vi)     
Each element of the compensation program has been designed to meet one or more objectives of the overall executive
compensation plan. The fixed base salary of each officer, combined with the variable pay compensation and stock options, has been
designed to provide the total compensation package which the Board believes is reasonably competitive with that provided by other
companies in the peer group and others of comparable size engaged in similar business in appropriate regions. In addition, the
variable pay compensation has been designed to align the interests of executives with those of the Company’s shareholders
and to evaluate financial performance on basis of relevant technical or financial milestones. Option grants are designed to align
executives’ and shareholders’ interests and to provide longer term compensation incentives.

 

Review
and Approval

The Compensation Committee of the Board is responsible
for making recommendations for approval by the Board with respect to remuneration of executives of the Company including the Chief
Executive Officer of the Company and senior officers of the Company. All executive compensation components are reviewed by the
Compensation Committee as needed and its recommendations are subject to approval of the Board, as appropriate.

 

		B)	Option-Based Awards

 

The Company’s stock option plan has been and will
be used to provide share purchase options which are granted in consideration of the level of responsibility of the executive as
well as his or her impact or contribution to the longer-term operating performance of the Company. In determining the number of
options to be granted to the executive officers, the Compensation Committee and the Board take into account the number of options,
if any, previously granted to each executive officer, and the exercise price of any outstanding options. With these guidelines,
the Board ensures that such new grants are in accordance with the policies of the TSX Venture Exchange (“TSXV”), and
closely align the interests of the executive officers with the interests of shareholders.

The exercise of options by an Optionee, who is an officer,
employee or director of the Company, will generally create an immediate tax liability to the Optionee as follows:

 

		·	If the said Optionee resides in Canada, he will be deemed, whether or not
the shares were sold, to have received an employment income equal to the value of the option exercised and will be required to
pay the Company, in addition to the cost of exercise, an amount equal to the tax liability of the deemed employment income, in
order for the Company to remit withholding taxes to Canada Revenue Agency following the exercise. Subsequent capital gains or losses
will be calculated based on the market price on the day of exercise, but capital losses cannot offset the deemed employment income.

 

    	 	- 10 -	 

     

    

 

		·	If the said Optionee resides in the USA, he will be required, for the tax
year of the exercise, to pay income tax on the value of the option exercised, equal to the amount of short-term or long-term Capital
Gain tax rates when the shares are sold, or if applicable, according to Alternative Minimum Tax rates. Depending on the circumstances,
the Company may be required to collect from the said Optionee, a withholding tax in order for the Company to remit to the IRS following
the exercise.

 

Optionees can exercise their options at any time at their
discretion, and, except for times when the officers, directors and employees are prohibited from trading under the corporate governance
policies of the Company (when the “Trading Window” is closed), are also free to sell their shares acquired through
exercising their options at any time at their discretion, subject to notification to Management. Options exercised while the Trading
Window is closed can only be sold after the Trading Window reopens. The Company has entered into an agreement with Solium Capital
Inc. to provide a broker assisted exercise program for Optionees under the Company’s Stock Option Plan.

 

		C)	Summary Compensation Table 

 

The following table (presented in accordance with National
Instrument Form 51-102F6 - Statement of Executive Compensation ("Form 51-102F6") sets forth all annual and long
term compensation for services in all capacities to the Company for the three most recently completed financial years of the Company
(to the extent required by Form 51-102F6) earned by each Named Executive Officers (“NEO”). Form 51-102F6 defines “NEO”
or “named executive officer” to mean each of the following individuals: (a) a CEO; (b) a CFO; (c) each of the three
most highly compensated executive officers of the company, including any of its subsidiaries, or the three most highly compensated
individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year
whose total compensation was, individually, more than $150,000 for that financial year; and (d) each individual who would be an
NEO but for the fact that the individual was neither an executive officer of the Company or its subsidiaries, nor acting in a similar
capacity, at the end of that financial year.

 

	 NEO Name and 

Principal Position	Year	
        Salary

        (US$)
	
        Share-

Based 

Awards (1)

        (US$)
	Option-Based Awards (1) (2)	
        Non-Equity Incentive Plan Compensation

        (US$) (2)
	
        Pension 

Value

        (US$)
	
        All Other 

Compensation

        (US$) (2)
	
        Total 

Compen-

sation

        (US$) (2)

	No. of 

Options	(US$)	Annual 

Incentive 

Plans	Long-

term 

Incentive 

Plans
	
        Ajit Manocha (3)

        Executive Co-Chairman
	2017

2016

2015

2014	35,417

481,250

500,000

250,000	N/A

N/A

N/A

N/A	562,500

200,000

200,000

2,100,000	111,902

132,320

188,885

2,469,164	Nil

Nil

Nil

Nil	Nil

Nil

Nil

Nil	Nil

Nil

Nil

Nil	Nil

Nil

Nil

Nil	147,319

613,570

688,885

2,719,164
	
        Kevin Barnes (4)

        Corporate Controller and Treasurer
	2017

2016

2015

2014	146,509

88,335

84,596

76,087	N/A

N/A

N/A

N/A	250,000

100,000

75,000

50,000	49,734

66,159

60,444

42,623	Nil

Nil

Nil

Nil	Nil

Nil

Nil

Nil	Nil

Nil

Nil

Nil	Nil

Nil

Nil

Nil	196,243

154,494

145,040

118,710
	Suresh Venkatesan (5)

Chief Executive Officer	2017

2016

2015	440,000

522,500

306,378	N/A

N/A

N/A	3,000,000

300,000

6,357,000	596,813

198,479

5,421,577	Nil

Nil

Nil	Nil

Nil

Nil	Nil

Nil

Nil	Nil

450,000

Nil	1,036,813

1,170,979

5,727,955
	Subhash Deshmukh (6)

Chief Operating Officer	2017

2016

2015	27,384

310,000

141,186	N/A

N/A

N/A	-

550,000

1,500,000	-

383,170

1,508,884	Nil

Nil

Nil	Nil

Nil

Nil	Nil

Nil

Nil	Nil

Nil

Nil	27,384

693,170

1,650,070
	Rajan Rajgopal (8)

President of “DenseLight	2017	220,000	N/A	1,000,000	214,967	Nil	Nil	Nil	Nil	434,967
	Thomas R. Mika (7)

Chief Financial Officer	2017

2016	250,000

50,685	N/A

N/A	1,500,000

1,000,000	320,430

462,954	Nil

Nil	Nil

Nil	Nil

Nil	Nil

Nil	570,430

513,639
	David Lazovsky (9)

Executive Chairman	2017	183,333	N/A	3,000,000	760,847	Nil	Nil	Nil	Nil	944,180

		NOTES:	

 

    	 	- 11 -	 

     

    

 

		(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 is based on the exchange
                                         rate applicable on the date of grant.

		(3)	Mr.
                                         Manocha was served as Executive Vice-Chairman from July 7, 2014 to November 17, 2014.
                                         He served as Executive Co-Chairman of the Board from November 17, 2014 to April 30, 2016.
                                         He served as Executive Chairman of the Board from May 1, 2016 to February 1, 2017.

		(4)	Mr.
                                         Barnes has served as Controller of the Company since May 9, 2008. He served as Chief
                                         Financial Officer from December 1, 2012 to November 2, 2016. He has served as Treasurer
                                         since December 1, 2012.

		(5)	Dr.
                                         Suresh Venkatesan was appointed Chief Executive Officer since June 11, 2015.

		(6)	Dr.
                                         Subhash Deshmukh served as Chief Operating Officer from June 8, 2015 to January 13, 2017.

		(7)	Mr.
                                         Thomas R. Mika was appointed Chief Financial Officer since November 2, 2016.

		(8)	Mr.
                                         Rajan Rajgopal was appointed President of DenseLight Semiconductor Pte. Ltd. since January
                                         23, 2017.

		(9)	Mr.
                                         Lazovsky was appointed Executive Chairman since February 1, 2017.

 

 

D)       Incentive Plan Awards 

 

(i)       Incentive Plan Awards

 

The following table sets forth information concerning
all awards outstanding under the Stock Option Plan of the Company at the end of the most recently completed financial year, including
awards granted before the most recently completed financial year, to each of the Named Executive Officers:

 

	NEO Name	Option-Based Awards	Share-Based Awards
	No. of Shares 

Underlying 

Unexercised 

Options

(#)	Option 

Exercise 

Price

($/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	25,000	CA$1.54	12-Jun-2020	-	N/A	N/A
	250,000	CA$1.99	08-Apr-2020	-	N/A	N/A
	150,000	CA$0.86	07-Jul-2026	-	N/A	N/A
	3,000,000	CA$0.39	01-Feb-2027	-	N/A	N/A
	Ajit Manocha	2,000,000	CA$1.75	03-Jul-2019	-	N/A	N/A
	100,000	CA$1.24	12-Aug-2019	-	N/A	N/A
	200,000	CA$1.54	12-Jun-2020	-	N/A	N/A
	200,000	CA$0.86	07-Jul-2026	-	N/A	N/A
	562,500	CA$0.28	13-Jul-2027	-	N/A	N/A
	 Kevin Barnes	25,000	CA$0.23	16-Feb-2022	1,860	N/A	N/A 
	100,000	CA$0.44	14-Nov-2018	-	N/A	N/A
	100,000	CA$0.49	13-Aug-2018	-	N/A	N/A
	25,000	CA$0.51	28-Sep-2021	-	N/A	N/A 
	50,000	CA$0.76	28-Feb-2021	-	N/A	N/A
	50,000	CA$1.24	12-Aug-2019	-	N/A	N/A
	50,000	CA$1.54	12-Jun-2020	-	N/A	N/A
	25,000	CA$1.08	13-Aug-2020	-	N/A	N/A
	100,000	CA$0.86	07-Jul-2026	-	N/A	N/A
	250,000	CA$0.28	31-Jul-2027	-	N/A	N/A

 

    	 	- 12 -	 

     

    

 

	NEO Name	Option-Based Awards	Share-Based Awards
	No. of Shares 

Underlying 

Unexercised 

Options

(#)	Option 

Exercise 

Price

($/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$)

	Thomas Mika	1,000,000	CA$0.62	02-Nov-2026	-	N/A	N/A
	500,000	CA$0.385	16-Jan-2027	-	N/A	N/A
	1,000,000	CA$0.28	113-Jul-2027	-	N/A	N/A
	Dr. Suresh Venkatesan	6,357,000	CA$1.40	15-Jun-2020	-	N/A	N/A
	300,000	CA$0.86	07-Jul-2026	-	N/A	N/A
	3,000,000	CA$0.28	13-Jul-2027	-	N/A	N/A
	Dr. Subhash Deshmukh	666,666	CA$1.62	30-Jun-2018	-	N/A	N/A
	78,125	CA$0.96	30-Jun-2018	-	N/A	N/A
	Rajan Rajgopal	500,000	CA$0.36	23-Jan-2027	-	N/A	N/A
	500,000	CA$0.28	13-Jul-2027	-	N/A	N/A

 

		1)	This
                                         amount is calculated based on the difference between the market value of the shares underlying
                                         the vested and unvested options at the end of the most recently completed financial year,
                                         being CA$0.21 (US$0.17), and the exercise or base price of the option. The exchange rate
                                         used in these calculations to convert CAD to USD was 0.7953, being the rate on December
                                         31, 2017.

 

 

(ii)Outstanding Share-Based Awards and option-Based Awards –
Value Vested or Earned During the Year

 

The value vested or earned during the most recently completed
financial year of incentive plan awards granted to Named Executive Officers are as follows:

 

	NEO Name	Option-Based Awards - 

Value Vested 

During The Year (1) 

(US$)	Share-Based Awards - 

Value Vested 

During The Year (2)

(US$)	Non-Equity Incentive Plan 

Compensation - Value 

Earned 

During The Year 

(US$)
	Ajit Manocha	-	N/A	N/A
	Kevin Barnes 	-	N/A	N/A
	Dr. Suresh Venkatesan	-	N/A	N/A
	Dr. Subhash Deshmukh	-	N/A	N/A
	Rajan Rajgopal	-	N/A	N/A
	David Lazovsky	-	N/A	N/A

 

NOTES:

		(1)	This
                                         amount is the dollar value that would have been realized 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 NEOs to have realized
                                         this value, they would have had to exercise their options and sell the shares on the
                                         day of vesting. The exchange rate used in these calculations to convert CAD to USD was
                                         0.7953, being the rate on December 31, 2017.

		(2)	This
                                         amount is the dollar value realized computed by multiplying the number of shares or units
                                         by the market value of the underlying shares on the vesting date.

 

    	 	- 13 -	 

     

    

 

(iii) Narrative Discussion

 

The current stock option plan of the Company is the 2016
Fixed Stock Option Plan (the "2016 Plan") which was approved by the disinterested shareholders of the Company on July
7, 2016 and accepted for filing by the TSXV). Under the 2016 Plan, the Company is required to reserve a number of shares eligible
for granting under the Plan, which needs to be approved by shareholders and cannot exceed 20% of the issued and outstanding shares.
The 2016 Plan reserved 44,352,885 shares as the maximum number (the "Fixed Number") of common shares which may be issued
pursuant to options granted under the 2016 Plan and previous plans.

The purpose of the Plan is to allow the Company to grant options to directors, officers, employees and consultants, as additional
compensation, and as an opportunity to participate in the success of the Company. The granting of such options is intended to
align the interests of such persons with that of the shareholders. Options are exercisable over periods of up to ten (10) years
as determined by the Board and are required to have an exercise price no less than the closing market price of the Company’s
shares prevailing on the last trading day before the option is granted less a discount of up to 25%, the amount of the discount
varying with market price in accordance with the policies of the TSXV. Generally, the Company does not grant options at a discount
to the market price. Pursuant to the Plan, the Board may from time to time authorize the issue of options to directors, officers,
employees and consultants of the Company and its subsidiaries or employees of companies providing management or consulting services
to the Company or its subsidiaries. In addition, as a percentage of the issued and outstanding shares at the time of grant, the
number of shares which may be reserved for issuance:

 

		(a)	to all optionees under the Stock Option Plan in aggregate shall not exceed 20%;

 

		(b)	to all insiders as a group may not exceed 20%; and

 

		(c)	to any one individual may not exceed 2% on a yearly basis if the optionee is engaged in investor
relations activities or is a consultant.

 

By resolution of the Directors dated February 25, 2016,
it was resolved that, generally, the terms of stock options would be ten years with 25% of the stock options vesting on the first
anniversary of the grant of the options and the balance vesting quarterly for three years thereafter. However, the Board can vary
the vesting schedule for differing purposes, subject to complying with TSXV Policies.

The Plan provides that if a change of control, as defined
therein, occurs, all shares subject to option shall immediately become vested and may thereupon be exercised in whole or in part
by the option holder. The exercise price for options is generally set at the closing price of the common shares of the Company
as of the last trading day prior to the date of the grant of the options, in accordance with TSXV Policies.

As at December 31, 2017, the number of outstanding options
granted under the Stock Option Plan was 33,090,291. For more information, refer to Note 13 “Stock Options and Contributed
Surplus” in the Company’s audited financial statements for the year ended December 31, 2017. The criteria for determining
awards to the NEOs is described under the “Stock Options” subsection of “Description and Explanation
of Elements of Compensation”. As of May 7, 2018, the number of outstanding options granted under the Stock Option Plan
was 40,506,521.

The Company’s Non-Equity Incentive Plan for compensation
to the NEOs along with the criteria for determining awards is described under the “Variable Pay Compensation” subsection
of “Description and Explanation of Elements of Compensation”.

 

    	 	- 14 -	 

     

    

 

E)       Pension Plan Benefits

 

		(i)	Defined Benefit Plans

 

The Company does not provide a defined benefit plan to
the NEOs or any of its employees.

 

		(ii)	Defined Contribution Plans

 

The Company offers a defined contribution plan that is
a 401K Plan for the US Subsidiary but does not contribute toward such plan.

 

(iii)       Deferred
Compensation Plans

 

The Company does not have any Deferred
Compensation Plans other than that described above.

 

F)       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 of 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, other than immediate vesting of existing and
outstanding stock options in the event of change of control.

 

 

Written Management Agreements

 

The Company and/or its subsidiaries entered into employment
contracts with the following current and former officers as follows:

 

		·	Mr. Barnes has 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 at a monthly rate of CA$11,667. The Company may terminate the
arrangement without cause on six months’ notice or equivalent compensation.

		·	Dr. Venkatesan entered into an Executive Employment Agreement with an effective date of June 10,
2015 wherein Dr. Venkatesan (i) would be paid US$550,000 per year under at-will terms of employment; (ii) would be eligible for
annual and special bonuses as determined by the Board of Directors; (iii) was granted 6,357,000 stock options vesting over 4 years;
(iv) was eligible for a signing bonus of US$450,000 payable on the first anniversary of the effective date provided that the Executive
Employment Agreement had not been terminated prior to that date; and (v) would receive a severance of twelve months on termination
of employment by the Company, other than for cause. Dr. Venkatesan agreed to reduce his compensation by 20% effective October 2016.
At Dr. Venkatesan’s request, the reduction subsequently became permanent.

		·	Dr. Deshmukh entered into an Executive Employment Agreement with an effective date of June 8, 2015
wherein Dr. Deshmukh (i) would be paid US$250,000 (subsequently amended to US$300,000 effective January 1, 2016) per year under
at-will terms of employment; (ii) would be eligible for annual and special bonuses as determined by the Board of Directors up to
a maximum of US$250,000; (iii) was granted 1,500,000 stock options vesting over 4 years; and (iv) was to receive a severance of
six months’ salary, if terminated during the first year of employment, plus two months’ salary additional per each
full year of employment thereafter, up to a maximum of twelve months of termination of employment by the Company, other than for
cause. Dr. Deshmukh agreed to reduce his compensation by 20% effective October 2016. On January 13, 2017, Dr. Deshmukh resigned
as Chief Operating Officer of the Company. No termination payments were paid to Dr. Deshmukh.

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

 

    	 	- 15 -	 

     

    

 

		·	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 US$150,000 for the term
from July 1, 2016 to December 31, 2016. Mr. Lazovsky entered into an Executive Agreement to provide services as the Executive Chairman
of the Board with an effective date of February 1, 2017 wherein Mr. Lazovsky (i) would be paid US$200,000 per year under at-will
terms of employment; (ii) would be eligible for annual and special bonuses as determined by the Board of Directors; (iii) was granted
3,000,000 stock options vesting over 4 years; and (iv) would be entitled to compensation of six months’ salary on termination
of employment within 2 years by the Company, if termination is other than for cause.

 

		·	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 (i)
would be paid US$220,000 per year; (ii) would be eligible for annual and special bonuses as determined by the Board of Directors;
(iii) was granted 500,000 stock options vesting over 4 years; (iv) would be granted an additional 500,000 stock options no later
than June 30, 2017; and (v) would be entitled to compensation of one month’s salary on termination of employment by the Company,
if termination is other than for cause.

 

G)       Compensation of Directors

 

(i) Director Compensation Table

 

The following table sets forth
all amounts of compensation provided to the directors, who are not also a Named Executive Officer,
for the Company’s most recently completed financial year:

 

	Director 

Name (1)	
        Fees or Salary (2)

        (US$)
	
        Share-Based Awards

        (US$)
	Option-Based Awards (2)(3)	
        Non-Equity Incentive Plan 

Compensation

        (US$)
	
        Pension Value

        (US$)
	
        All Other 

Compensation

        (US$)
	
        Total

        (US$)

	No. of Options	
        Value

        (US$)

	John F. O’Donnell (4)	46,435	N/A	625,000	124,336	N/A	N/A	N/A	170,771
	Todd A. DeBonis (5)	35,750	N/A	562,500	111,902	N/A	N/A	N/A	147,652
	Jean-Louis Malinge (8)	10,000	N/A	525,500	115,099	N/A	N/A	N/A	125,099
	Ajit Manocha (7)	20,083	N/A	-	-	N/A	N/A	N/A	20,083
	Chris Tsiofas	56,570	N/A	687,500	136,770	N/A	N/A	N/A	193,340
	Mohandas Warrior (6)	35,750	N/A	562,500	111,902	N/A	N/A	N/A	147,652

 

		NOTES:	

 

		(1)	Relevant
                                         disclosure has been provided in the Summary Compensation Table above, for directors
                                         who are also Named Executive Officers.

		(2)	The
                                         exchange rate used in these calculations to convert CAD to USD is based on the exchange
                                         rate applicable on the date of grant.

		(3)	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.

		(4)	The
                                         firm of Stikeman Keeley Spiegel LLP of which Mr. O’Donnell is counsel was paid
                                         the sum of USD $115,660 for legal fees incurred in 2017 (2016 – USD $113,250).

		(5)	Mr.
                                         DeBonis was appointed to the Board on April 8, 2015 and resigned from the Board on January
                                         19, 2018.

		(6)	Mr.
                                         Warrior was appointed to the Board on June 12, 2015.

		(7)	Mr.
                                         Manocha resigned from the Board on September 4, 2017.

		(8)	Mr.
                                         Malinge was appointed to the Board on September 5, 2017.

 

    	 	- 16 -	 

     

    

 

		(ii)	Narrative Discussion

 

From January 1, 2017 to March 31, 2017, the outside,
or non-management, directors were paid an annual fee of $32,000 for acting as a director, plus $1,500 per board meeting attended
and $750 per committee meeting – paid quarterly. Committee Chairs were entitled to receive an additional $8,000 annually.
Mr. O’Donnell serves as Chair of the Corporate Governance and Nominating Committee and Mr. Tsiofas serves as Chair of the
Audit Committee and the Compensation Committee.

 

Effective April 1, 2017, non-executive directors are
paid $120,000 annually, consisting of a cash retainer of $30,000, plus stock options equal to $90,000 (based on a Black-Scholes
valuation). No additional fees are paid for attending board or committee meetings. An additional $10,000 in cash and $10,000 in
value of options are granted to each standing committee chair. The options vest quarterly over the one-year term of service as
directors. The 2017 director compensation reflects the compensation arrangement from January to March 2017 and the new arrangement
that became effective April 1, 2017.

 

The directors participate in the Company’s Stock
Option Plan for the granting of incentive stock options to the officers, employees and directors, which Plan is described under
the subsection “Narrative Discussion” of “Incentive Plan Awards”. The purpose of granting
such options is to assist the Company in compensating, attracting, retaining and motivating the directors of the Company and to
closely align the personal interests of such persons to that of the shareholders.

 

		(iii)	Incentive Plan Awards - Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth information as at December 31, 2017, the end of the most recently completed financial year, concerning
all awards outstanding under incentive plans of the Company, including awards granted before the most recently completed financial
year, to each of the directors who are not Named Executive Officers:

 

	 	Option-Based Awards	Share-Based Awards
	Director Name	
        Number of 

Securities 

Underlying 

Unexercised 

Options

        (#)
	
        Option 

Exercise 

Price

        ($)
	Option Expiration 

Date	
        Value of 

Unexercised 

In-The-Money 

Options (1)(2)

        (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$)

	John F. O’Donnell	150,000	CA$0.23	16-Feb-2022	-	N/A 	N/A 
	12,500	CA$0.345	19-Aug-2020	-	N/A	N/A
	300,000	CA$0.49	13-Aug-2018	-	N/A	N/A
	300,000	CA$1.24	12-Aug-2019	-	N/A	N/A
	100,000	CA$1.54	12-Jun-2020	-	N/A	N/A
	150,000	CA$0.86	07-Jul-2026	-	N/A	N/A
	625,000	CA$0.28	13-Jul-2027	-	N/A	N/A
	Chris Tsiofas	300,000	CA$0.49	13-Aug-2018	-	N/A	N/A
	300,000	CA$1.24	12-Aug-2019	-	N/A	N/A
	300,000	CA$1.54	12-Jun-2020	-	N/A	N/A
	150,000	CA$0.86	07-Jul-2026	-	N/A	N/A
	687,500	CA$0.28	13-Jul-2027	-	N/A	N/A
	Todd A. DeBonis	275,000	CA$1.54	12-Jun-2020	-	N/A	N/A
	250,000	CA$1.99	08-Apr-2020	-	N/A	N/A
	150,000	CA$0.86	07-Jul-2026	-	N/A	N/A
	562,500	CA$0.28	13-Jul-2027	-	N/A	N/A

 

    	 	- 17 -	 

     

    

 

	 	Option-Based Awards	Share-Based Awards
	Director Name	
        Number of 

Securities 

Underlying 

Unexercised 

Options

        (#)
	
        Option 

Exercise 

Price

        ($)
	Option Expiration 

Date	
        Value of 

Unexercised 

In-The-Money 

Options (1)(2)

        (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$)

	Jean-Louis Malinge	525,000	CA$0.30	05-Sep-2027	-	N/A	N/A
	Mohandas Warrior	250,000	CA$1.54	12-Jun-2020	-	N/A	N/A
	150,000	CA$0.86	07-Jul-2026	-	N/A	N/A
	562,500	CA$0.28	13-Jul-2027	-	N/A	N/A

 

NOTES:

 

(1)   
This amount is calculated based on the difference between the market value of the securities underlying the options at the end
of the most recently completed financial year, which was CA$0.21 (US$0.17), and the exercise or base price of the option.

(2)   
The exchange rate used in these calculations to convert CAD to USD was 0.7953, being the rate on December 31, 2017.

 

		(iv)	Incentive Plan Awards - Value Vested or Earned During the Year

The value vested or earned during the most recently completed financial year of incentive plan awards granted to directors who
are not Named Executive Officers are as follows:

	Director Name	Option-Based Awards - 

Value Vested 

During The Year (1) 

(US$)	Share-Based Awards - 

Value Vested 

During The Year 

(US$)	Non-Equity Incentive 

Plan Compensation - 

Value Earned 

During The Year 

(US$)
	Todd A. DeBonis	-	N/A	N/A
	John F. O’Donnell	-	N/A	N/A
	Jean-Louis Malinge	-	N/A	N/A
	Chris Tsiofas	-	N/A	N/A
	Mohandas Warrior	-	N/A	N/A

       NOTES:

 

(1)   
This amount is the dollar value that would have been realized 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 directors to have realized this value, they would have had to exercise their options and sell the shares on the day of vesting.
None of these options were exercised.

		(2)	The
                                         exchange rate used in these calculations to convert CAD to USD was the exchange rate
                                         applicable on the vesting date.

 

    	 	- 18 -	 

     

    

 

H)       Securities Authorized for Issuance
Under Equity Compensation Plans

 

The following table sets forth the Company's compensation plans
under which equity securities are authorized for issuance as at December 31, 2017, being the end of the most recently completed
financial year.

 

	Plan Category	Number of securities 

to be issued upon 

exercise of 

outstanding options	Weighted-average 

exercise price of 

outstanding options

(US$)	Number of securities 

remaining available for 

future issuance under 

equity compensation 
	Equity compensation plans approved by securityholders	 	 	 
	     2016 Stock Option Plan	33,090,291	$0.68	11,167,594

 

INDEBTEDNESS TO COMPANY OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS

 

As at the date hereof, there is no indebtedness of any current or
former director, executive officer or employee of the Company or any subsidiaries which is owing to the Company or any of its subsidiaries
or to another entity which is the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding
provided by the Company or any of its subsidiaries, entered into in connection with a purchase of securities or otherwise.

 

No individual who is, or at any time during the most recently completed
financial year was, a director or executive officer of the Company, no proposed nominee for election as a director of the Company
and no associate of such persons:

 

		(i)	is or at any time since the beginning of the most recently completed financial year has been, indebted
to the Company or any of its subsidiaries; or

 

		(ii)	whose indebtedness to another entity is, or at any time since the beginning of the most recently
completed financial year has been, the subject of a guarantee, support agreement, letter of credit or other similar arrangement
or understanding provided by the Company or any of its subsidiaries in relation to a securities purchase program or other program.

 

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

 

Except as set out herein, no person who has been a director or executive
officer of the Company at any time since the beginning of the Company's last financial year, no proposed nominee of Management
of the Company for election as a director of the Company and no associate or affiliate of the foregoing persons, has any material
interest, direct or indirect, by way of beneficial ownership or otherwise, in matters to be acted upon at the Meeting other than
the election of directors and potentially, the amendment of the Company’s stock Option Plan.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

 

No informed person or proposed director of the Company and no associate
or affiliate of the foregoing persons has or has had any material interest, direct or indirect, in any transaction since the commencement
of the Company's most recently completed financial year or in any proposed transaction which in either such case has materially
affected or would materially affect the Company or any of its subsidiaries, except for stock option grants.

 

APPOINTMENT OF AUDITORS

 

Marcum LLP, Certified Public Accountants, of New Haven, Connecticut,
are the auditors of the Company.

 

At the Meeting, shareholders will be asked to re-appoint Marcum
LLP as the auditors of the Company to hold office for the ensuing year at a remuneration to be fixed by the directors.

 

Unless otherwise instructed, the proxies given pursuant to this
solicitation will be voted for the re-appointment of Marcum LLP as the auditors of the Company to hold office for the ensuing year
at a remuneration to be fixed by the directors.

 

    	 	- 19 -	 

     

    

 

MANAGEMENT CONTRACTS

 

No management functions of the Company or its subsidiaries are performed
to any substantial degree by a person other than the directors or executive officers of the Company or its subsidiaries.

 

Corporate Governance Disclosure

 

A summary of the responsibilities and activities and the membership
of each of the Committees is set out below.

National Instrument (“NI”) 58-201 establishes corporate
governance guidelines which apply to all public companies. The Company has reviewed its own corporate governance practices in light
of these guidelines. In certain cases, the Company’s practices comply with the guidelines, however, the Board considers that
some of the guidelines are not suitable for the Company at its current stage of development and therefore these guidelines have
not been adopted. NI 58-101 mandates disclosure of corporate governance practices which disclosure is set out below. 

Independence of Members of Board

 

The Company's Board in 2017 consisted of seven (7) directors, four
(4) of whom were independent based upon the tests for independence set forth in NI 52-110. Todd DeBonis, Ajit Manocha, Mohandas
Warrior and Chris Tsiofas were the independent directors. David Lazovsky was not independent after he was appointed the Executive
Chairman of the Company. Ajit Manocha resigned as the Executive Chairman of the Board on February 1, 2017 and was replaced by David
Lazovsky. John O’Donnell is not independent as he acts as legal counsel to the Company. Dr. Suresh Venkatesan is not independent
as he is the Chief Executive Officer of the Company. On March 27, 2018, the Board was increased to eight (8) directors, (five)
of whom are independent. Jean-Louis Malinge, Chris Tsiofas, Mohandas Warrior, Don Listwin and Peter Dominic Charbonneau are the
independent directors.

Management Supervision by Board

 

During 2017, independent supervision of Management was accomplished
through its independent Board members. The Board considered that Management was effectively supervised by the independent directors
as the independent directors were actively and regularly involved in reviewing and supervising the operations of the Company and
had regular and full access to Management. The CEO and CFO reported upon the operations of the Company separately to the independent
directors of the Board at such other times throughout the year as was considered necessary or advisable by the independent directors.
The independent directors were encouraged to meet at any time they consider necessary without any members of Management including
the non-independent directors being present, and generally did so several times per year by adjourning Board meetings and asking
all persons who were not independent directors to leave the room. The Company's auditors, legal counsel and employees may have
been invited to attend. Further supervision was performed through the Audit Committee currently composed of all independent directors,
who meet with the Company's auditors without Management being in attendance, generally on a quarterly basis and at least once a
year. Additional supervision was performed through the Compensation Committee and the Corporate Governance and Nominating Committee
(the “CGNC”), both of which were composed of a majority of independent directors. The CGNC has determined that the
current constitution of the Board of eight (8) directors is appropriate for the Company's current stage of development. The Board
currently has a majority of independent directors.

Participation of Directors in Other Reporting Issuers

 

No director of the Company, nor any proposed nominee for election
as a director, hold directorships in other reporting issuers, except for (i) John F. O’Donnell who is a director and Chairman
of the Board of Peloton Minerals Corporation (CSE: PMC) and a director of African Metals Corporation (NEX: AFR.H), (ii) Peter Charbonneau
who is a director of: Telus Corporation (TSX: T), CounterPath Corporation (TSX: PATH), Mitel Networks Corporation (TSX: MNW) and
March Networks Corporation (TSX: MN), (iii) Don Listwin who is a director of Calix Inc. (NYSE: CALX) and, (iv) Jean-Louis Malinge
who is a director of EGIDE Group (EURONEXT: GID).

 

    	 	- 20 -	 

     

    

 

Orientation and Continuing Education

 

While the Company does not have formal orientation and training
programs, new Board members are provided with:

 

		1.	information respecting the functioning of the Board, committees and copies of the Company's corporate
governance policies;

 

		2.	access to recent, publicly filed documents of the Company, technical reports and the Company's
internal financial information;

 

		3.	access to Management and technical experts and consultants; and

 

		4.	advice to consult on the internet the TSXV Policy relating to Corporate Governance and applicable
regulations and policies and also the applicable securities laws, rules and regulations.

 

Board members are encouraged to communicate with Management, auditors
and technical consultants; to keep themselves current with industry trends and developments and changes in legislation with Management’s
assistance; and to attend related industry seminars and visit the Company’s operations. Board members have full access to
the Company's records.

Ethical Business Conduct

 

The Board views good corporate governance as an integral component
to the success of the Company and to meet responsibilities to shareholders. The Board has adopted a Code of Conduct which was updated
on February 25, 2016 and has instructed its Management and employees to abide by the provisions of the Code. A copy of said code
is posted on the Company’s website www.poet-technologies.com.

 

The directors of the Corporation are responsible for monitoring
compliance with this Code, for regularly assessing its adequacy, for interpreting this Code in any particular situation and for
approving any changes to this Code from time to time.

 

Investor Relations Disclosure Policy

 

The Board has established a Company Disclosure Policy related to
disclosure and external communications, which applies to all officers, directors and employees of the Company. The purpose of the
Policy is to ensure compliance with legal and regulatory requirements, when preparing public disclosure documents, answering investor
inquiries and/or attending conferences or meetings with its analysts and institutional shareholders. This policy covers disclosures
in documents filed with the securities regulators and written statements made in POET's annual and quarterly reports, news releases,
letters to shareholders, presentations (both of a business or technical nature), marketing materials, advertisements, and information
contained on POET's website and other electronic communications. It also extends to oral statements made in meetings and telephone
conversations with analysts and investors, interviews with the media as well as speeches, press conferences, and conference calls.

 

Trading by Insiders

 

Insiders of the Company are expected to comply with all applicable
Regulatory Laws, Rules and Regulations with respect to buying and selling shares of the Company. In addition, the Company has well-defined
criteria for when the Trading Window for officers and directors opens and closes as per the Company’s Securities Trading
Policy posted on its website www.poet-technologies.com, the purpose of which is to ensure that Insiders do not trade shares of
the Company at inappropriate times. Insiders are expected to abstain from trading the shares of the Company when the Trading Window
is closed.

Nomination of Directors

 

The Board established a Corporate Governance and Nominating Committee
(the “CGNC”) currently composed of John O’Donnell (Chairman of the CGNC), David Lazovsky and Chris Tsiofas. The
CGNC has the responsibility for identifying potential Board candidates. The CGNC assesses potential Board candidates to fill perceived
needs on the Board for required skills, expertise, independence and other factors. Members of the Board and representatives of
the semi-conductor and infrared industries are consulted for possible candidates. The Board has adopted a written charter that
sets forth the responsibilities of the CGNC. In addition to its Board identification responsibilities, the CGNC is mandated to
take a leadership role in shaping corporate governance by overseeing and assessing the functioning of the Board and the committees
of the Board and developing, implementing and assessing effective corporate governance processes and practices. The Charter was
recently amended and a copy is posted on the Company’s website www.poet-technologies.com.

 

    	 	- 21 -	 

     

    

 

Compensation of Directors and the CEO

 

On December 14, 2007, the Company established a Compensation Committee
(the “CC”) to be responsible for reviewing all overall compensation strategy, objectives and policies; annually reviewing
and assessing the performance of the executive officers; recommending to the Board the compensation of the executive officers;
reviewing executive appointments; and recommending the adequacy and form of directors' compensation. The CC also reviews and recommends
incentive stock option awards under the Company’s Stock Option Plan. The current members of the CC are Chris Tsiofas (Chairman
of the CC), Don Listwin and John O’Donnell. Mr. Manocha joined the CC on February 25, 2016 and resigned on March 22, 2017.

The CC discusses and makes recommendations to the Board for approval
or disapproval of all compensation issues that pertain to the Company. 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 CC is
responsible for evaluating the compensation of the senior Management 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 CC 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 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 CC’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 CC 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) review 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 CC and settling the reports required to be made by the CC in any document required to
be filed with a regulatory authority and/or distributed to shareholders.

Board Committees

 

In addition to its responsibility for nominating directors, the
CGNC also has the responsibility for monitoring corporate governance compliance and setting corporate governance policy.

The Company also has a Disclosure Committee who meet periodically,
as needed, to review the Company’s material news disclosure prior to dissemination. The current members of the Disclosure
Committee are Suresh Venkatesan, John O’Donnell and Chris Tsiofas by reason of their positions as CEO, Chairman of the CGNC
and Chairman of the Audit Committee respectively. On February 25, 2016, the Directors, on the advice of the CGNC resolved that
the CGNC be authorized as it may determine, on a case by case basis, to add a supplemental member to the Committee as a subject
matter expert, depending on the nature of the disclosure, to ensure the appropriateness of the disclosure.

 

    	 	- 22 -	 

     

    

 

As the directors are actively involved in the operations of the
Company, the Board has determined that additional committees, other than the AC, the CGNC and the CC, are not necessary at this
stage of the Company’s development.

Assessments

 

The Board annually, at such times as it deemed appropriate, reviewed
the performance and effectiveness of the Board, the directors and its committees to determine whether changes in size, personnel
or responsibilities are warranted. To assist in its review, the Board conducted informal surveys of its directors, received reports
from the CGNC on its assessment of the functioning of the Board and reports from each committee respecting its own effectiveness.

Audit Committee

 

A) The Audit Committee's
Charter

 

The current Audit Committee Charter was put in place on
December 14, 2007, a copy of which can be found in Appendix “A” and has been reviewed periodically since that time.

 

B) Composition of the
Audit Committee

 

The following are the current members of the Committee:

 

	Name	 	Independent / 

    Not independent (1)	 	Financially literate / Not 

    Financially literate (1)
	Chris Tsiofas	 	Independent	 	Financially literate
	Mohandas Warrior	 	Independent	 	Financially literate
	Peter Dominic Charbonneau	 	Independent	 	Financially literate

 

NOTE:

 

(1)       As
defined by National Instrument 52-110 ("NI 52-110").

 

C) Relevant
Education and Experience

 

The education and experience of each Audit Committee member
that is relevant to the performance of his responsibilities are as follows:

 

Chris Tsiofas, the Chairman of the Audit Committee, holds
B. Comm. from the University of Toronto. He has been a member of the Institute of Chartered Accountants of Ontario since 1993 and
also a member of the Canadian Tax Foundation. He is a Partner with Myers Tsiofas Norheim Chartered Professional Accountants LLP.

Mohandas Warrior was the President & CEO of Alfalight, Inc. between February 2004 and July 2016 – a high power diode
laser company which serves military and industrial customers. Mohan is a 30+ year semiconductor industry veteran with 15 years
of experience at Motorola Semiconductors where he held senior executive responsibilities in engineering and operations. Following
Motorola, he successfully launched two venture-backed companies in Austin, Texas. He was a founding charter member of the Austin
chapter of TiE and served on the Texas Higher Education Panel. He has also served on the Electronics Materials panel of the National
Science Foundation and has been an invited speaker/panelist to many semiconductor forums. He serves on the Boards of several opto-electronic
and technology companies. Mohan’s academic credentials include a BS in Chemical Engineering from IIT Delhi, a MS in Chemical
Engineering from Syracuse University and an MBA from the Kellogg School of Management at Northwestern University.

Peter Dominic Charbonneau holds a Bachelor of Science from the University of Ottawa and a Master of Business Administration from
the University of Western Ontario. He is also a member and elected Fellow of the Institute of Chartered Professional Accountants
of Ontario and has received the ICD.D designation from Institute of Corporate Directors of Canada. 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.

 

    	 	- 23 -	 

     

    

 

All members have an understanding of the accounting principles
used by the Company to prepare its financial statements and have an understanding of its internal controls and procedures for financial
reporting.

 

D) Audit Committee Oversight

 

At no time since the commencement of the Company's most
recently completed financial year was a recommendation of the Committee to nominate or compensate an external auditor not adopted
by the Board of Directors.

 

E) Reliance on Certain
Exemptions

 

At no time since the commencement of the Company's most
recently completed financial year has the Company relied on the exemption in Section 2.4 of NI 52-110 (De Minimis Non-audit
Services), or an exemption from NI 52-110, in whole or in part, granted under Part 8 of NI 52-110.

 

F) Pre-Approval Policies
and Procedures

 

The Committee has adopted specific policies and procedures
for the engagement of non-audit services as described above in paragraph 7 (e) of the Audit Committee Charter.

 

G) External Auditors Service
Fees (By Category)

 

The aggregate fees billed by the Company's external auditors
for each of the last two fiscal years for audit fees are as follows:

 

	Financial Year Ending	Audit Fees (1)	Audit Related Fees	Tax Fees (2)	All Other Fees
	December 31, 2017 	$165,000	Nil	$18,690	Nil
	December 31, 2016 (1)	$97,000	Nil	$8,650	Nil

 

		NOTE:	

 

		(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.

 

 

Expectations of Management

 

The Board expects Management to
operate the business of the Company in a manner that enhances shareholder value and is consistent with the highest level of integrity.
Management is expected to execute the Company's business plan and to meet performance goals and objectives. 

PARTICULARS OF OTHER MATTERS TO BE ACTED UPON

 

The Company is seeking shareholders’
approval for: (a) amendments to the Company’s Stock Option Plan. 

 

		A)	Approval of Stock Option Plan

 

Introduction

 

On July 7, 2016, Shareholders of the Company approved the 2016 Plan
whereby the number of Shares (the “Fixed Number”) issuable under the Plan was increased to 44,352,885, representing
20% of the issued and outstanding shares of the Company.

 

    	 	- 24 -	 

     

    

 

On April 26, 2018, the directors resolved to increase the Fixed
Number of shares reserved for issuance under the Company’s Stock Option Plan to such number equal to 20% of the issued and
outstanding shares of the Company on the day prior to the Meeting, subject to shareholder and TSXV approval. (the “2018 Plan”).
All other terms and conditions remain unchanged. As at May 7, 2018 were 288,056,802 Shares of the Company issued and outstanding.
If approved by the shareholders, the Fixed Number issuable under the Plan will be increased to 57,611,360, an increase of 13,258,475
Shares reserved for issuance under the Plan.

 

To be effective, the Company must obtain approval of a simple majority
of the shareholders at the Meeting, to the increase in the number of options, but excluding insiders and their associates, (the
"disinterested shareholders") with respect to the adoption of the 2018 Plan. For the purposes hereof, an "Insider"
is a director or senior of the Company, a director or senior officer of a company that is itself an Insider or subsidiary of the
Company, or a person whose control, or direct or indirect beneficial ownership, or a combination thereof, over securities of the
Company extends to securities carrying more than 10% of the voting rights attached to all the Company's outstanding voting securities.

 

Text of Resolution

 

Accordingly, at the Meeting, shareholders will be asked to pass
an ordinary resolution in the following form:

 

RESOLVED to:

 

		(a)	approve the amendment of the Company’s
stock option plan pursuant to which the Board of Directors may, from time to time, grant stock options to directors, officers,
employees and consultants of the Company and its subsidiaries (the "Plan") as follows:

 

		(i)	to increase the number of common shares
of the Company reserved for issuance under the Plan (the “Fixed Number”) from 44,352,885 to 57,611,360, being 20% of
the number of issued and outstanding common shares of the Company; and

 

		(b)	(with all Interested Parties abstaining from voting) to approve the
adoption of the 2018 Plan incorporating the aforesaid amendment providing for the grant of the increased number of options under
the Plan and under all other previously established share compensation arrangements. 

 

Recommendation of Directors

 

The Board recommends that the holders of Common Shares vote in favour
of the amendments to the Plan and the adoption of the 2018 Plan. Unless otherwise instructed, the persons named in the accompanying
Proxy (provided the same is duly executed in their favour and is duly deposited) intend to vote FOR the approval of the Stock Option
Plan.

 

Additional Information AND DOCUMENTS INCORPORATED
BY REFERENCE 

 

The following documents filed with the securities commissions or
similar regulatory authority of the Canadian provinces are specifically incorporated by reference into, and form an integral part
of, this Information Circular: (i) the financial statements for the year ended December 31, 2017 (ii) the report of the auditors
thereon, (iii) the related management’s discussion and analysis (MD&A), (iv) the Form 20-F filed on EDGAR as well as
on the SEDAR website which constitutes the Company’s Annual Information Form, and (v) any other documents referred to herein
which are filed including:

 

a.       Code of Conduct;

b.       Disclosure Policy;

c.       Securities Trading Policy;

d.       CGNC Charter;

e.       Compensation Committee
Charter;

f.       Fraud and Embezzlement
Policy; and

g.       Whistleblower and Protected
Disclosure Policy

 

 

Shareholders may contact the Company at Suite 1107, 120 Eglinton
Avenue East, Toronto, Ontario M4P 1E2 to request copies of these documents or download them from the SEDAR website at www.sedar.com.

 

    	 	- 25 -	 

     

    

 

Additional information relating to the Company is also available
on SEDAR or from the Company’s website at www.poet-technologies.com.

 

Other Matters

 

Management of the Company is not aware of any other matter to come
before the Meeting other than as set forth in the notice of Meeting. If any other matter properly comes before the Meeting, it
is the intention of the persons named in the enclosed Proxy to vote the shares represented thereby in accordance with their best
judgment on such matter.

 

 

 

DATED this 7th day of May, 2018.

 

	 	APPROVED BY THE BOARD OF DIRECTORS
	 	 
	 	 
	 	(signed) “Suresh Venkatesan”, CEO

 

 

 

 

 

 

 

 

 

    	 	- 26 -	 

     

    

 

APPENDIX “A”

 

POET TECHNOLOGIES
INC. (the “Company”)

 

The Audit Committee's
Charter

 

1.    Composition

 

The AC comprises three (3) or more directors as determined
by the Board, each of whom shall be unrelated non-executive directors, free from any relationship that would interfere with the
exercise of his or her independent judgment. The Board shall appoint one of the members of the AC as chairperson. Such appointment
will be for a one (1) year term and will be ratified by the full Board. Each AC member must be, or must become, within a reasonable
period of time after appointment, "financially literate," which qualification shall be determined by the Board. In addition,
at least one (1) AC member shall have accounting or related financial management background/experience.

 

2.    Authority

 

The AC may, at its own initiative or at the request of
the Board, investigate any activity of the Company. All employees are directed to co-operate as requested by members of the AC.
The AC is empowered to retain persons having special competence as necessary to assist the committee in fulfilling its responsibility.

 

3.    Responsibility

 

The AC is to serve as a focal point for communication between
non-committee directors, the independent (external) auditors and the Company’s Management Team as their duties relate to
financial accounting, reporting, and controls. The AC is to assist the Board in fulfilling its fiduciary responsibilities as to
accounting policies and reporting practices of the Company and all subsidiaries, and the sufficiency of auditing relative thereto.
The AC is the Board’s principal agent in assuring the independence of the Company’s independent auditors, the integrity
of financial management, and the adequacy of financial disclosures to shareholders. However, the opportunity for the independent
auditors to meet with individual directors or the entire Board, as needed, is not to be restricted.

 

The Company’s independent (external) auditors are
ultimately accountable to the AC and the Board. The AC and the Board have the ultimate authority and responsibility to select,
evaluate, and nominate the independent (external) auditor to be proposed for any shareholder approval; and where appropriate, to
replace the Company’s independent (external) auditors.

 

4.    Meetings

 

The AC is to meet at least four (4) times per fiscal year
or as many additional times as the committee deems necessary.

 

5.    Attendance

 

A majority of the members of the AC must be present at
all committee meetings and every effort should be made to hold meetings with all members present. As necessary or desirable, the
chairperson may request that members of the Company’s Management Team and representatives of the independent (external) auditors
be present at meetings of the committee.

 

6.    Minutes

 

Minutes of each AC meeting are to be prepared summarizing
the matters discussed.

 

7.    Specific Mandate/Duties

 

		a)	Inform the independent (external) auditors and Management Team that the independent (external)
auditors and the members of the AC may communicate with each other at any time.

 

		b)	Review with the CEO, CFO and independent (external) auditors, the Company’s policies and
procedures to reasonably assure the adequacy of internal accounting and financial reporting controls.

 

    	 	- 27 -	 

     

    

 

		c)	Have familiarity with the accounting and reporting principles and practices applied by the Company
in preparing its financial statements and make, or cause to be made, all necessary inquiries of the Management Team and the independent
(external) auditors concerning established standards of corporate conduct and performance and any deviations therefrom.

 

		d)	Review, prior to the annual audit, the scope and general extent of the independent (external) auditor’s
audit examinations. The auditors’ fees are to be arranged with the Management Team and annually summarized for the AC’s
review and approval.

 

		e)	Review with the Company’s Management Team the extent of non-audit services planned to be
provided by the independent (external) auditors in relation to the objectivity needed in the audit.

 

		f)	Review with the Company’s Management Team and the independent (external) auditors, upon completion
of their audit, financial results and MD&A at year end, together with any related press releases, prior to filing or distribution.

 

		g)	Evaluate the cooperation received by the independent (external) auditors during their audit examination,
including their access to all requested records, data and information, and also inquire of the independent (external) auditors
whether there have been any disagreements with the Company’s Management Team, which if not satisfactorily resolved would
have caused the independent auditors to issue a non-standard report on the Company’s financial statements. Elicit the comments
of the Management Team regarding the responsiveness of the independent auditors to the Company’s needs.

 

		h)	Recommend to the Board whether, based on the reviews and discussions referred to above, the annual
financial statements and any related MD&A should be included in the Company’s Annual Report filed on SEDAR, distributed
to shareholders and otherwise released.

 

		i)	Review with the Company’s Management Team and the independent (external) auditors (if required
or determined necessary by the AC), interim financial results and MD&A, together with any related press releases, prior to
filing or distribution.

 

		j)	Recommend to the Board whether, based on the reviews and discussions referred to above, the interim
financial statements and any related MD&A should be filed on SEDAR, distributed to shareholders and otherwise released.

 

		k)	Discuss with the independent (external) auditors and the Company’s Management Team the quality
of the Company’s financial and accounting personnel and any relevant recommendations the independent auditors (external)
may have.

 

		l)	Discuss any significant changes to the Company’s accounting principles and any items required
to be communicated to the independent (external) auditors.

 

		m)	Review and reassess the adequacy of the AC’s Charter at least annually and submit this same
to the Board for approval.

 

		n)	Ensure that the independent (external) auditors submit, on a periodic basis to the AC, a formal
written statement delineating all relationships between the independent auditors and the Company, actively engage in a dialogue
with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence
of the independent auditors, and recommend that the Board take appropriate action in response to the independent auditors’
report to satisfy itself of the auditors’ independence.

 

		o)	Recommend to the Board the retention or replacement of the independent auditors.

 

		p)	Review and approve the Company’s hiring policies regarding partners, employees and former
partners and employees of the present and former independent (external) auditors of the Company.

 

		q)	Apprise the Board, as necessary, through minutes and special presentations of significant developments
in the course of performing the above duties.

 

		r)	Approve capital expenditures at levels up to the maximum amount of the AC’s authority as
determined by the Board from time to time. Any decisions made by the AC will be reported to the full Board and ratified at its
next meeting.

 

    	 	- 28 -	 

     

    

 

		s)	Recommend to the Board any appropriate extensions or changes in the duties of the AC.

 

		t)	Establish and monitor procedures for the receipt, retention and treatment of complaints received
by the Company regarding accounting, internal accounting controls or audit matters and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters. The AC shall review periodically with the Company’s
Management Team these procedures and any significant complaints received.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 29 -Exhibit 4.4

 

 

 

 

 

 

 

 

 

 

 

 

POET

TECHNOLOGIES INC.

 

 

 

 

 

Management’s
Discussion

and Analysis

For the Year Ended December 31,
2017

 

 

 

 

 

 

 

NOTICE TO READER

 

 

The attached Management’s Discussion and Analysis for POET
Technologies Inc. for the year ended December 31, 2017 have been amended to correct December 31, 2016 comparative information contained
on page 17 under the section “Segmented Information”. Amounts reported for Cost of sales, Selling, marketing and administration
and Research and development have been updated to reflect the appropriate classifications. There have been no other changes. This
change did not impact any other information reported in this Management’s Discussion and Analysis.

 

     

     

    

 

 

		POET Technologies Inc.
        

        Suite 1107 – 120 Eglinton Avenue East

        Toronto, Ontario, Canada M4P 1E2

        Tel: (416) 368-9411 Fax: (416) 322-5075

 

 

Management’s
Discussion and Analysis

For
the Year Ended December 31, 2017

 

The following discussion
and analysis of the operations, results, and financial position of POET Technologies Inc., (the “Company”) for the
year ended December 31, 2017 (the “Period”) should be read in conjunction with the Company’s audited consolidated
financial statements for the year ended December 31, 2017 and the related notes thereto both of which were prepared in accordance
with International Financial Reporting Standards (“IFRS”). The effective date of this report is April 27, 2018. All
financial figures are in United States dollars (“USD”) unless otherwise indicated. The abbreviation “U.S.”
used throughout refers to the United States of America.

 

Forward-Looking Statements

 

This management discussion
and analysis contains forward-looking statements that involve risks and uncertainties. It uses words such as “may”,
“would”, “could”, “will”, “likely”, “expect”, “anticipate”,
“believe”, “intend”, “plan”, “forecast”, “project”, “estimate”,
and other similar expressions to identify forward-looking statements. Forward-looking statements are subject to a variety of risks
and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements,
including, without limitation, risks and uncertainties relating to the early stage of the Company’s development and the
possibility that future development of the Company’s technology and business will not be consistent with management’s
expectations, difficulties in achieving commercial production or interruptions in such production if achieved, inherent risks
of operating a manufacturing facility, including risks associated with supplier delays, factory uptime, inventory management and
other operating uncertainties, the inherent uncertainty of cost estimates and the potential for unexpected costs and expenses,
the uncertainty of profitability and failure to obtain adequate financing on a timely basis. The Company undertakes no obligation
to update forward-looking statements if circumstances or Management’s estimates or opinions should change, except to the
extent required by law. The reader is cautioned not to place undue reliance on forward-looking statements.

 

The Company is incorporated under the laws of the Province of Ontario.
The Company’s shares trade under the symbol “PTK” on the TSX Venture Exchange in Canada and under the symbol
“POETF” on the OTCQX in the U.S.

 

    	 	1	 

     

    

 

BUSINESS

 

Overview

 

We are an advanced semiconductor development and manufacturing company
dedicated to enabling the integration of photonics and electronics through novel approaches to device design and packaging. We
have developed, or are in the process of developing, solutions that provide dramatic reductions in the cost of key components of
photonic devices. Through integration and the adaptation of silicon processing methods to photonic device fabrication, we believe
that the Company can capture a meaningful portion of the market for photonics devices that address the need for increased bandwidth,
speed, sensitivity and cost across a range of high growth data communications and photonic sensing applications. We believe that
the integration of discrete functions onto fewer devices is the optimal way to lower cost, reduce size, limit power consumption
and increase the performance, scalability and value of photonics devices, making opto-electronics a more viable economic proposition.

 

The cost of building silicon-based devices today contrasts sharply
with the cost of building photonics-based devices. While the majority of the cost of building silicon-based devices is in fabricating
the device on the wafer, the majority of the cost of building photonics devices today is in the packaging and testing process.
It is inevitable that these costs will be reduced through integration. In addition, integration opens up entirely new markets for
photonics, including on-board and on-chip data transfer (“inside the box”).

 

Until early to mid-2017, our Company had been focused on “monolithic”
integration, based on a proprietary design fabricated into a single Gallium Arsenide (GaAs) chip that has all of the elements needed
to communicate data at the speed of light, yet with the lower cost profile of copper. POET’s GaAs design integrates at least
three essential discrete devices onto a single GaAs chip: a vertical-cavity surface-emitting laser (VCSEL), a photodetector and
an electronic circuit based on either a thyristor or a heterostructure field-effect transistor (HFET).

 

In 2017 we began to develop solutions based on a novel “hybrid”
integration approach, which combines Indium Phosphide (InP)-based photonics chips and dielectric-based waveguide devices into a
single package. This approach enables the replacement of high-cost optical components, such as mirrors and lenses, with embedded
dielectric passive devices, dramatically lowering the cost of data communications transceiver solutions for data center operators
and telecom companies. Our ability to address hybrid integration is a direct result of our acquisitions, in 2016, of DenseLight
Semiconductor Pte. Ltd. (“DenseLight”) based in Singapore, and BB Photonics, Inc. based in New Jersey.

 

By mid-2017 it became apparent that the majority of transceiver
applications in the data center market was biased strongly in favor of InP-based solutions. This, and the fact that our GaAs development
efforts faced a number of challenges that could only be solved by working closely with a well-resourced strategic partner, we decided
to focus our own resources on hybrid integration, utilizing the unique capabilities that we acquired with DenseLight and BB Photonics.
By late-2017, we demonstrated that we could dramatically reduce the cost of conventional transceivers through the integration of
discrete devices employing a novel approach that we call an “Optical Interposer”.

 

POET’s Optical InterposerÔ
facilitates the co-packaging of electronics and optics in a single Multi-Chip Module (MCM), paving the way for “Photonics-in-a-package”.
Based on our dielectric waveguide technology, the Optical Interposer provides the ability to run electrical and optical interconnections
side-by-side on the same interposer chip at a micrometer scale. Hybrid Integrated Photonics Packaging (HiPP) enabled by the Optical
Interposer plays a critical role in improving electrical and thermal performance, power consumption and form factor of photonics
sub-assemblies. The Optical Interposer currently forms an integral part of POET’s hybrid integrated optical engines and leverages
the manufacturing processes and unique capabilities of its dielectric waveguides.

 

    	 	2	 

     

    

 

Industry Background

 

In the ten years since the introduction of the smartphone, people
have fundamentally changed the way they communicate, socialize, and interact with themselves and the data around them. Today, smartphones
and other such devices allow us to capture, create and communicate enormous amounts of content. 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 two-thirds of
total IP traffic by 20211), social media activity, the progression of video transmission,
the ramp 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 Everything, and the evolution of big data analytics and machine learning/artificial intelligence.
These factors will continue to drive a long term increased demand for capacity and higher speeds.

 

Photonics has traditionally been employed to transmit data over
long distances because light can carry considerably more content and data at faster speeds. 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 much of the data center communication links.

 

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 of up 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 others. 5G networks requires substantial capacity expansion for base stations, which is
driven by three factors: more spectrum, higher density of base stations in each region, and higher spectral efficiency.

 

Photonics Markets

 

The two target markets in which we currently sell or plan to sell
products near-term are Photonic Sensing and Data Communications. The global photonics market is forecasted to grow at a compound
average growth rate (CAGR) of 8% to 12% through 2021, reaching an estimated $54 billion.2
This market includes Photonic Sensing (which consists of devices for test and measurement, navigation, LIDAR systems) and Data
Communications (both telecom applications and optical data communications).

 

_______________________

1 Cisco Visual Networking
Index: Forecast and Methodology, 2016-2021, June 6, 2017

2 MarketsandMarkets Photonics
Market by Application – Global Forecasts to 2021, September 2016 

    	 	3	 

     

    

 

The growth of the overall Data Communications market is forecasted
to grow at a 27% CAGR over the period 2015 to 2020 and is being driven largely by cloud data centers, which have a forecasted
CAGR of 29.6% over the same period. This compares to traditional data centers at only a 9% CAGR3.
The expected growth in the networking and data communication market is the result of many factors, including smartphone use, over-the-top
video consumption, social networking and the “Internet of Things”. Increased consumer demand for data requires both
data storage and data communications at higher speeds. As a result, 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 of up to 2km have already been transitioned from inherently lower
speed copper cable to optical fibers.

 

Photonic transceivers will represent a $25 billion market opportunity
in 2025, according to Oculi, llc. 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, singlemode
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).4

 

Integrated photonic transceivers, incorporating approaches comparable
to what POET has, are expected to overtake those using discrete components by 2021, growing from a current $3.2 billion to $20
billion in 20255. 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 package, 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.

 

In addition to building optical engines for transceivers, we believe
the Company has the opportunity to sell individual components to other suppliers of optical transceivers, including single-chip
local area network (LAN) wavelength division multiplexing (WDM) lasers, receiver optical sub-assemblies (ROSA) and transmit optical
sub-assemblies (TOSA) in advance of selling optical engines for transmit and receive assemblies (TXRX).

 

_______________

3 Cisco Global Cloud Index, 2015-2020,
November 2016

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

5 Ibid

 

    	 	4	 

     

    

 

The Photonics Sensing market6
represents a Total Available Market (“TAM”) of approximately $23 billion of system sales and comprises the following
segments: 1) Test & Measurement (TAM: $10 billion), which includes monitoring equipment for communication, components and material
testing, as well as sensing equipment such as distributed temperature and strain measurement; 2) Structural Health Monitoring (TAM:
$6 billion), which includes devices to monitor the power grid, and fiber optic-based sensors in rail lines, nuclear facilities,
etc.; 3) Guidance and Navigation (TAM: $4.5 billion), which includes navigational guidance systems, gyrocompasses, and optical-based
systems for navigating self-driving automobiles; and 4) Medical and Health Care (TAM: $2.5 billion), which includes devices for
non-invasive blood glucose monitoring, pulse-oximeter devices, and ophthalmic examination. Component sales to systems providers
typically represent approximately 10% of system market TAM’s. We plan to address these high growth markets with component
sales in a combination of current and expected new products from our DenseLight subsidiary.

 

POET’s Optical Interposer Platform

 

The Optical Interposer extends the functionality of traditional
electrical interposers – by adding a parallel lane of optical interconnections to an electrical interposer. Optical Interposers
enable the concept of “photonics-in-a-package” by eliminating traditionally used micro-optics such as lenses, filters
and prisms from the optical assembly and by further simplifying fiber alignment and coupling.

 

POET’s Optical Interposer utilizes our proprietary dielectric
waveguide technology. The unique manufacturing process and capabilities of this technology enables us to fabricate an optical communication
fabric within the context of a traditional CMOS process. Consequently, it enables a novel and differentiated extension to the more
traditional electrical interposers.

 

The waveguides incorporated in POET’s Optical Interposers
perform more than just waveguide transmission functions. They act as gratings, splitters, couplers and allow for manipulation of
the light with built in functionality suited to the application. For example, POET’s 100G family of Optical Interposer would
include gratings that both function to enable narrow line width operation of its light sources and to perform critical Wavelength
Division Multiplexing (WDM) operations.

 

 

A Typical Electrical Interposer

 

 

 

Shown above is a typical cross-section of an electrical interposer
that enables a closer placement of electronic chips and minimizes communication lengths.

 

_______________

6 Global Market Insights
Optical Sensors Market Size By Product, By Application, Industry Analysis Report, Regional Outlook, Application Potential,
Price Trends, Competitive Market Share & Forecast, 2016 – 2024, August 2016

    	 	5	 

     

    

 

POET’s Optical Interposer

 

 

 

In much the same way as the electrical interposer incorporates electrical
passive functionality, the POET Optical Interposer incorporates passive optical functionality. Furthermore, the Optical Interposer
enables the conversion of electrical signals to optical signals and the manipulation and transmission of these optical signals
outside the package.

 

POET’s Optical Interposer provides the following advantages
compared to conventional optical modules:

 

		ü	Wafer-level integration into silicon

 

		ü	Waveguides formed and integrated with embedded passive optical components (SSC, mux-demux, filters,
waveguides) at chip level

 

		ü	Ultra-low loss waveguide dielectric with high coupling efficiency

 

		ü	Pick and place assembly and passive alignment of components

 

		ü	Elimination of lenses and active alignment

 

		ü	Athermal waveguide dielectric allows multi-channel scalability

 

		ü	Wafer-level hermetic sealing, testing and burn-in of active components to produce known good die

 

		ü	Small form factor and platform architecture readily scalable

 

		ü	High frequency metal traces managed in the dielectric platform

 

		ü	Fully compatible with conventional CMOS processing allowing integration with complex electronics
at chip or module level

 

Compared to semiconductors, where packaging accounts for 10% of
the final die cost, packaging and assembly is generally 80-90% for a photonic die. POET’s Optical Interposer represents a
new and potentially disruptive approach to photonics packaging and assembly that could allow more functionality to be integrated
into a single package, similar to the system-in-package (SiP) trends observable in the industry today.

 

Our Strategy

 

Our vision is to become a global leader in photonics by deploying
an Optical Interposer-based approach to the integration of photonics devices into a wide variety of vertical market applications.
Our strategy includes the following key elements:

 

    	 	6	 

     

    

 

· 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 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, thus 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.

 

· 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 100/200/400G
transceiver components represent a uniquely attractive opportunity for collaborative development with a strategic partner(s). We
also believe that the continued development of our GaAs platform is dependent on securing a strategic partner.

 

· Continue to invest in our capabilities
and infrastructure. We intend to continue to invest in new products, new technology and our production infrastructure and facilities
to maintain and strengthen our competitive position. Our R&D programs in Singapore are partially reimbursed by the Singapore
Economic Development Board, whose support will help to defer the costs associated with bringing innovative new products to market.

 

· Selectively pursue other opportunities
that leverage our existing expertise. Our expertise in designing and manufacturing photonics devices, both discrete and integrated,
positions us well to pursue applications in high growth markets and our Singapore operation is ideally located to support customers
in Asia, where much of the growth in photonics is occurring.

 

· 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.

 

Our Products

 

		·	We are currently engaged in the development of 100Gbs ROSA (Receiver Optical Sub-Assemblies) and TOSA (Transmitter Optical
Sub-Assemblies) for 100G Transceiver assemblies.

 

We expect our InP-based solutions from our DenseLight subsidiary
will add to the Company’s current and future product portfolio, including:

 

		·	Broadband Super-Luminescent LEDs (Light Emitting Diodes)

		·	Narrow Linewidth Lasers

		·	DFB (Distributed Feedback) Lasers for Data Communications

		·	High Power ELEDs (Edge Emitting Light Emitting Diodes)

		·	Integrated CWDM (Coarse Wavelength Division Multiplexing) Solutions

 

 

    	 	7	 

     

    

 

Intellectual Property

 

We have 57 issued patents and 12 patent applications pending, including
seven related to our optical interposer platform. 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 acquired from DenseLight and BB Photonics. We intend to continue to apply for additional patents
in the future. Currently, we are working on the design of integrated devices, manufacturing processes, and products for data communication
applications in the data center market, along with products for photonic sensing markets that employ novel packaging technologies.

 

Fabrication and Assembly Capabilities

 

We provide one-stop design and manufacturing solutions, from photonics
design and simulation, epitaxial growth, wafer fabrication, chip production, in-line optical coating, sub-mounting, photonic measurements,
product testing and screening. We are operationally ready for responsive prototyping and quality production. The 50,000 sq. ft.
purpose-built facility in Singapore houses our R&D, product design and manufacturing operations under one roof. Its 15,000
sq. ft. clean room is fully equipped for enabling vertically integrated volume manufacturing, from wafer fabrication to test and
packaging. We are ISO9001 certified in Singapore processing Indium Phosphide (InP) and Gallium Arsenide (GaAs) based opto-electronic
devices and photonic integrated circuits through our in-house wafer fabrication and assembly & test facilities.

 

We have an experienced team with deep know-how in GaAs and InP semiconductors
wafer processing and we continue to build on this technical base. Together with our operationally ready manufacturing and photonics
design center, various ODM and design-in programs can be supported for both discrete and integrated optical components.

 

Summary for 2017

 

Revenue was $2,794,044 for the year ended December 31, 2017 and
gross margin for the Period was $1,451,353 or 52%. Reported revenue and gross margin for 2016 was $1,861,747 and $915,746 or 49%
respectively. It is important to note, however, that revenue and gross margin for the comparable period in 2016 was only reported
since the acquisition of DenseLight on May 11, 2016. Our net loss from operations, before taxes for the year ended December 31,
2017 was $13,095,737 compared to a net loss from operations, before taxes of $13,431,941 in 2016.

 

 

Significant
Events and Milestones During 2017

 

In 2017, we continued
to execute on our stated strategic plan. We achieved the following significant milestones during the first half of 2017:

 

		1)	On
                                         January 16, 2017, the Company announced certain organizational changes that included
                                         the addition of Rajan Rajgopal as the president and general manager of DenseLight and
                                         Soma Sankaran as vice president of sales for the Asia-Pacific region.

 

		2)	On
                                         January 31, 2017, the Company announced the development of micro multiplexer and de-multiplexer
                                         solutions. The Company also unveiled its next generation Constellation Series of Narrow
                                         Linewidth Laser solutions for test and measurement applications.

 

    	 	8	 

     

    

 

		3)	On
                                         February 1, 2017, the Company announced the appointment of David Lazovsky as Executive
                                         Chairman of the Board of Directors.

 

		4)	On
                                         April 3, 2017, the Company announced that it successfully demonstrated the functionality
                                         of the VCSEL for the integrated GaAs opto-electronic platform.

 

		5)	On
                                         August 8, 2017, the Company announced that announced that Rodman & Renshaw, a unit
                                         of H.C. Wainwright & Co. LLC, initiated research coverage on the Company in a detailed
                                         report published on August 7, 2017.

 

		6)	On
                                         September 5, 2017, the Company announced the appointment of Jean-Louis Malinge to the
                                         Board of Directors. The Company also announced that Ajit Manocha, who served on the Board
                                         from July 2014, resigned from the Board to devote his time to his new role as president
                                         and CEO of SEMI. Mr. Malinge currently serves as partner to ARCH Venture Partners an
                                         early-stage venture capital firm with nearly $2 billion under management. Additionally,
                                         he also serves as a managing director for YADAIS, a leading consulting firm in the photonics
                                         and telecommunications industries, and is a board member of EGIDE SA, which designs,
                                         manufactures and sells hermetic packages for the protection and interconnection of several
                                         types of electronic and photonic chips.

 

		7)	On
                                         September 6, 2017, the Company announced that it will start sampling high-power, continuous
                                         wave 1310nm Distributed Feedback (DFB) lasers for 100G Silicon Photonics applications
                                         in the fourth quarter of 2017. During this this time frame, the Company will also begin
                                         sampling long wavelength 1650nm DFB lasers for the Test and Measurement, Optical Time
                                         Domain Reflectometry (OTDR) and Photonics/Biomedical sensing markets.

 

		8)	On
                                         September 7, 2016, the Company announced the availability of Avalanche Photodiodes (APD)
                                         and PIN Photodiodes (PIN) for the 10G Datacom and Telecom markets. In addition, the Company
                                         also began sampling its Monitor Photodiode (MPD) arrays for applications in 100G datacom
                                         applications.

 

		9)	On
                                         September 8, 2017, the Company announced that it introduced a new family of its specialized
                                         external cavity narrow linewidth (NLW) laser products with enhanced capabilities. These
                                         new NLW lasers are assembled in integrated laser modules (ILM) and provide feature rich
                                         extensions to the existing BF series ILMs.

 

 

    	 	9	 

     

    

 

Summary of Quarterly Results

 

Following are the highlights of financial data of
the Company for the most recently completed eight quarters, which have been derived from the Company’s consolidated financial
statements prepared in accordance with IFRS:

 

	 	 	 Dec. 31/17	 	 Sep. 30/17	 	 Jun. 30/17	 	 Mar. 31/17	 	 Dec. 31/16	 	 Sep. 30/16	 	 Jun. 30/16	 	 Mar. 31/16
	Sales	 	$	717,692	 	 	$	715,420	 	 	$	648,382	 	 	$	712,550	 	 	$	423,461	 	 	$	861,545	 	 	$	576,741	 	 	$	-	 
	Cost of sales	 	 	385,456	 	 	 	348,187	 	 	 	320,857	 	 	 	288,191	 	 	 	346,462	 	 	 	318,976	 	 	 	280,563	 	 	 	-	 
	Research and development	 	 	1,661,887	 	 	 	1,078,934	 	 	 	1,186,042	 	 	 	1,147,003	 	 	 	1,104,733	 	 	 	581,354	 	 	 	576,073	 	 	 	530,469	 
	Depreciation and amortization	 	 	616,514	 	 	 	559,334	 	 	 	558,919	 	 	 	540,393	 	 	 	643,344	 	 	 	550,420	 	 	 	239,958	 	 	 	87,844	 
	Professional fees	 	 	203,372	 	 	 	98,101	 	 	 	167,726	 	 	 	155,742	 	 	 	96,009	 	 	 	207,220	 	 	 	272,287	 	 	 	140,200	 
	Wages and benefits	 	 	698,814	 	 	 	625,676	 	 	 	604,608	 	 	 	645,880	 	 	 	586,596	 	 	 	676,700	 	 	 	1,054,413	 	 	 	483,169	 
	Management and consulting fees	 	 	42,439	 	 	 	42,877	 	 	 	40,330	 	 	 	103,931	 	 	 	51,303	 	 	 	230,352	 	 	 	172,401	 	 	 	157,805	 
	Stock-based compensation (1)	 	 	1,032,158	 	 	 	1,088,170	 	 	 	159,783	 	 	 	894,813	 	 	 	903,253	 	 	 	1,019,970	 	 	 	887,990	 	 	 	1,259,051	 
	General expenses and rent	 	 	591,462	 	 	 	567,721	 	 	 	653,933	 	 	 	547,052	 	 	 	758,947	 	 	 	508,178	 	 	 	546,626	 	 	 	260,764	 
	Impairment and other loss	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	29,807	 	 	 	-	 	 	 	-	 	 	 	80,453	 
	Change in fair values	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(283,130	)	 	 	-	 	 	 	-	 
	Other (income), including interest	 	 	(1,599,170	)	 	 	(4,990	)	 	 	(142,557	)	 	 	(19,807	)	 	 	(19,647	)	 	 	(11,473	)	 	 	(14,950	)	 	 	(20,802	)
	Net loss before taxes	 	$	2,915,240	 	 	$	3,688,590	 	 	$	2,901,259	 	 	$	3,590,648	 	 	$	4,077,346	 	 	$	2,937,022	 	 	$	3,438,620	 	 	$	2,978,953	 

 

		(1)	Stock
                                         based compensation allocated between General & Administrative and Research &
                                         Development issuances are combined for MD&A purposes. For financial statement presentation
                                         purposes, stock-based compensation is split between General & Administrative
                                         and Research & Development.

 

 

Explanation of Quarterly Results
for the three months ended December 31, 2017 ("Q4 2017") compared to the same three-month period in the prior year (“Q4
2016”)

 

Net loss before taxes for Q4 2017 was $2,915,240 compared to a net
loss before taxes of $4,077,346 in Q4 2016, a 29% decrease in net loss before taxes. The following discusses the significant variances
between Q4 2017 and Q4 2016.

 

During Q4 2017, the Company reported revenue of $717,692 through
its DenseLight subsidiary compared to $423,461 in Q4 2016, a 70% increase. Sales in Q4 2016 were unusually low due to backlog pushed
into 2017 resulting from production challenges with one large customer. Expected Q4 2016 NRE was also delayed and was not recognized
until 2017. Q4 2017 revenue represents the consistent quarter over quarter revenue for the Company’s sensing products. The
unusually low revenue in Q4 2016 resulted in gross margin of 18% as compared to 46% in Q4 2017.

 

Research and development (“R&D”) increased by 50%
or $557,154 to $1,661,887 in Q4 2017 from $1,104,733 in Q4 2016. Since the acquisition of DenseLight and BB Photonics in May and
June of 2016 respectively, the Company has systematically increased its R&D activities in an effort to bring new products to
market and expand its product portfolio. As a result of increased R&D spending in Q4 2017, the Company announced the development
of its new POET Optical Interposer Platform and demonstrated the functionality of PIN photodetectors targeting 100G to 400G optical
transceivers. New skilled technical human resource represents the largest area of increase in R&D.

 

    	 	10	 

     

    

 

Professional fees in Q4 2017 increased by 112% or $107,363 to $203,372
from $96,009 in Q4 2016. Increased professional services were required as the Company initiated co-development partnerships for
activities disclosed in early 2018.

 

General expenses and rent decreased by 22% or $167,485 to $591,462
in Q4 2017 from $758,947 in Q4 2016, primarily resulting from lower repairs and maintenance during the quarter as compared to Q4
2016.

 

Wages and benefits increased by 19% or $112,218 from $586,596 in
Q4 2016 to $698,814 in Q4 2017. The increase is a result of the new employees and other payroll related obligations.

 

Non-cash stock-based compensation increased by 14% or $128,905 to
$1,032,158 during Q4 2017 from $903,253 in Q4 2016. 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”).

 

Other income in Q4 2017 was $1,599,170 as compared to $19,647 in
Q4 2016. The Company is entitled to a recovery of certain qualifying expenses from the Economic Development Board (EDB) in Singapore.
The increase is a result of both collected recoveries and an amount accrued during 2017 to be received in 2018. During Q4 2016
anticipated EDB recoveries were not accrued as the company did not have sufficient experience with the EDB recovery process to
confidently accrue the recovery.

 

 

Explanation of the results
for the year ended December 31, 2017 compared to the same twelve-month period in the prior year (the “prior-year”)

 

Net loss before taxes for the twelve-month period ended December
31, 2017 was $13,095,737 compared to net loss before taxes of $13,431,941 for the twelve months ended December 31, 2016, a 2.5%
increase. The loss before taxes for the year ended December 31, 2017 includes the operations of DenseLight and BB Photonics for
the entire year, while the loss for the prior-year reflected the operations of the Company with those subsidiaries for less than
the full twelve months (i.e., from May 11, 2016 for DenseLight and June 22, 2016 for BB Photonics).

 

During the twelve-month period ended December 31, 2017, the Company
reported revenue of $2,794,044 through its DenseLight subsidiary compared to revenue of $1,861,747 for the same period in 2016,
a 50% increase. Revenue for the period ended December 31, 2017 was for twelve months, while the revenue in 2016 was only from May
11, 2016 through December 31, 2016.

 

R&D increased by 82% or $2,281,237 to $5,073,866 in 2017 from
$2,792,629 in 2016. R&D costs in 2016 included the activities of POET for the full twelve-month period and R&D of DenseLight
and BB Photonics only from May 11, 2016 and June 22, 2016, respectively. The twelve months of 2017 include R&D costs for the
GaAs platform and the programs in InP integrated dielectrics and wafer-level packaging all associated with the Company’s
efforts to expand its product portfolio in datacom. In addition to 2016 costs only representing R&D costs of a partial year
for DenseLight and BB Photonics, increased HR and related costs in 2017 also contributed to the increase over the prior year.

 

General expenses and rent increased by 14% or $285,653 to $2,360,168
in 2017 from $2,074,515 in 2016. This increase was also a result of shortened activity during the prior-year related to the dates
of acquisition of DenseLight and BB Photonics (i.e., May 11, 2016 and June 22, 2016, respectively).

 

Non-cash stock-based compensation decreased by 22% or $895,340 to
$3,174,924 in 2017 from $4,070,264 in 2016. Departing employees and consultants who had unvested stock options contributed to the
substantial reduction in 2017, as their unvested options were returned to the Company. 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”).

 

    	 	11	 

     

    

 

Management and consulting fees decreased by 62% or $382,284 from
2016. The expense in 2017 was $229,577 as compared to $611,861 in 2016. The resignation of Mr. Manocha from the position of Executive
Chairman of the Board in February 2017 contributed to the decrease. This reduction in management and consulting fees was partially
offset by an increase in wages and benefits for the compensation paid to Mr. Lazovsky who replaced Mr. Manocha as the Executive
Chairman of the Board. Mr. Lazovsky is paid $200,000 annually in his capacity as Executive Chairman as compared to $500,000 that
was previously paid to Mr. Manocha

 

Wages and benefits decreased by 8% or $225,900 to $2,574,978 in
2017 compared to $2,800,878 in the prior-year. Three principal factors contributed to the decrease: (1) 2016 wages included an
accrued bonus of $550,000 to the CEO and the former COO which was deferred to 2017. $450,000 due to the CEO was paid in 2017 and
$100,000 due to the former COO was subsequently reversed; (2) 2016 wages also included wages paid to the former Executive Co-Chairman
of the Board of $136,655; and (3) 2016 wages included twelve months of wages for the former COO, Dr. Deshmukh who resigned in Q1
2017. These decreases were offset by: (1) the inclusion of the compensation of the new Executive Chairman of the Board; and (2)
wages of DenseLight and BB Photonics for the entire 2017 as compared to only the period from May 11, 2016 and June 22, 2016 respectively.

 

Depreciation and amortization increased by 50% or $753,594 to $2,275,160
in 2017 from $1,521,566 in the prior-year. The increase was a result of depreciation and amortization related to the property and
equipment, patents and licenses, and intangible assets acquired during and after the acquisition of DenseLight and BB Photonics
in 2016. The Company acquired $11,118,460 of property and equipment, patents and licenses and intangible assets since May 2016.

 

Other income in 2017 was $1,766,524 as compared to $66,872 in 2016.
The Company is entitled to a recovery of certain qualifying expenses from EDB in Singapore. The increase is a result of both collected
recoveries and an amount accrued in 2017 to be received in 2018. During 2016 anticipated EDB recoveries were not accrued as the
company did not have enough experience with the EDB recovery process to confidently accrue the recovery.

 

 

Explanation of Material Variations
by Quarter for the Last Eight Quarters

 

Q4 2017 compared to Q3 2017

 

R&D increased by 54% or $582,953 to $1,661,887 in Q4 2017 from
$1,078,934 in Q3 2017. Head count and recruitment costs were the largest contributing factors to the period over period increase.
As a result of increased R&D spending in Q4 2017, the Company announced the development of its new POET Optical Interposer
Platform and demonstrated the functionality of PIN photodetectors targeting 100G to 400G optical transceivers. Skilled technical
human resource represents the largest area of increase in R&D.

 

Professional fees in Q4 2017 increased by 107% or $105,271 to $203,372
from $98,101 in Q3 2017. Increased professional services were required as the Company initiated co-development partnerships for
activities disclosed in early 2018.

 

Wages and benefits increased by 12% or $73,138 from $625,676 in
Q3 2017 to $698,814 in Q4 2017. The increase is a result of the new employees and other payroll related obligations as the Company
ramped its technical resource and production-related capabilities.

 

Other income in Q4 2017 was $1,599,170 as compared to $4,990 in
Q3 2017. The Company is entitled to a recovery of certain qualifying expenses from EDB in Singapore. The increase is a result of
both collected recoveries and an amount accrued in 2017 to be received in 2018.

 

    	 	12	 

     

    

 

Q3 2017 compared to Q2 2017

 

Sales were $67,038 higher to $715,420 in Q3 2017 from $648,382 Q2
2017. The increase is a function of shipping more units in Q3 2017 than in Q2 2017.

 

Professional fees decreased by 42% or 69,625 to $98,101 in Q3 2017
from $167,726 in Q2 2017. The Company had less professional service activity in Q3 2017 than in Q2 2017, including lower recruitment
fees, legal and audit-related expenses.

 

Non-cash stock-based compensation increased by $928,387 or 581%
to $1,088,170 in Q3 2017 from $159,783 in Q2 2017. The departure of employees and consultants who had unvested stock options contributed
to the unusually low expense in Q2 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”).

 

General expenses and rent decreased by $86,212 or 13% to $567,721
in Q3 2017 from $653,933 in Q2 2017. In Q2 2017, the Company had significant facility and factory maintenance costs. While the
company continues to have facility and factory maintenance costs on a period over period basis, the expense was lower in Q3 2017
than Q2 2017.

 

 

Q2 2017 compared to Q1 2017

 

Gross margin was 51% in Q2 2017 as compared to 60% in Q1 2017. The
reduced gross margin was a result of lower absorption of factory costs from reduced revenue of $648,382 in Q2 2017 compared to
$712,550 in Q1 2017. Cost of sales includes certain fixed costs that do not change in a linear fashion with revenue.

 

Management and consulting fees decreased by $63,601 or 61% to $40,330
in Q2 2017 from $103,931 in Q1 2017. The resignation of Mr. Manocha as Executive Chairman of the Board contributed to this the
decrease.

 

Non-cash stock-based compensation decreased by $735,030 or 82% to
$159,783 in Q2 2017 from $894,813 in Q1 2017. The departure of employees and consultants who had unvested stock options contributed
to the substantial reduction from Q1 2017.

 

General expenses and rent increased by $106,881 or 20% to $653,933
in Q2 2017 from $547,052 in Q1 2017. In Q2 2017, the Company had additional facility and factory maintenance.

 

 

Q1 2017 compared to Q4 2016

 

Sales in Q1 2017 were $712,550 as compared to $423,461 in Q4 2016.
Backlog from 2016 contributed to increased Q1 sales, along with $80,000 of NRE revenue. Gross margin percent for the quarter was
60% compared to the 18% in Q4 2016.

 

R&D increased by $42,270 or 4% to $1,147,003 in Q1 2017 from
$1,104,733 in Q4 2016. Development costs of $272,000, which were capitalized in prior periods, were expensed to R&D
in Q4 2016 as the Company no longer felt those capitalized costs continued to meet the criteria for capitalization. The Company
did not expense any capitalized R&D costs in Q1 2017.

 

Professional fees increased by $59,733 or 62% to $155,742 in Q1
2017 from $96,009 in Q4 2016. Professional fees relating the Company’s year-end audit contributed to the quarter over quarter
increase.

 

Wages and benefits increased by 10% or $59,284 to $645,880 Q1 2017
from $586,596 in Q4 2016. Wages and benefits were lower in Q4 2016 due to the reversal of an accrued and unpaid retention bonus
of $100,000 to the former COO in Q1 2017. Additionally, Q1 2017 wages and benefits included the wages of the new CFO, the new President
of DenseLight, the new VP of Sales for the Asia-Pacific region and the new Executive Chairman of the Board.

 

    	 	13	 

     

    

 

General expenses and rent decreased by $211,895 or 28% to $547,052
in Q1 2017 from $758,947 in Q4 2016. General expenses were higher in Q4 2016 due to the ancillary costs such as travel, and other
administrative costs associated with the $9.3 million equity financing in Q4 2016.

 

Management and consulting fees increased by $52,628 or 103% to $103,931
in Q1 2017 from $51,303 in Q4 2016. A reclassification of $75,000 of consulting fees paid to a director in Q4 2016 from management
and consulting to the cost of financing resulted in the lower expense in this category in Q4 2016.

 

 

Q4 2016 compared to Q3 2016

 

Sales in Q4 2016 were $423,461 compared to $861,545 in Q3 2016.
The reduction in Q4 sales was a result of backlog pushed into Q1 2017 resulting from production challenges with one large customer.
Expected Q4 NRE was also delayed and was not recognized until Q1 2017.

 

R&D expenses increased by $523,379 or 90% to $1,104,733 in Q4
2016 compared to $581,534 in Q3 2016. Development costs of $272,000, which were capitalized in prior periods, were
expensed to R&D in Q4 2016 as the Company no longer felt those capitalized costs continued to meet the criteria for capitalization. Q3
2016 R&D was also limited in scope because of certain export restrictions. Those restrictions were resolved, resulting in the
Company incurring costs in Q4 2016 that would have been incurred more evenly throughout the year.

 

Q4 2016 professional fees were $96,009 compared to $207,220 in Q3
2016. The quarter over quarter reduction of $111,211 or 54% was a result of the Company settling most issues in Q3 and earlier
periods relating to corporate acquisitions, financing and the export issues that required professional advisors.

 

Wages and benefits were $586,596 in Q4 2016 and $676,700 in Q3 2016.
The reduction of $90,104 or 13% was from cost savings resulting from the 10-20% temporary non-recoverable reduction in US management
compensation, a recovery of an accrued but unpaid retention bonus of $100,000 to the former COO, and staff reductions at DenseLight.

 

The reduction in management and consulting fees of $179,049 or 78%
to $51,303 in Q4 2016 from $230,352 in Q3 2016 was a result of a 10% to 20% reduction in management fees to head-office-based executives,
along with a reclassification of $75,000 of consulting fees paid to a director in Q3 2016. The fees were paid in Q3 2016 and classified
as general consulting fees but were reclassified to financing cost in Q4 2016.

 

General expenses and rent increased by $250,769 or 49% to $758,947
in Q4 2016 from $508,178 in Q3 2016. The increase included ancillary costs such as travel and other administrative costs related
to the $9.3M financing that were not included as finance costs.

 

 

Q3 2016 compared to Q2 2016

 

Sales in Q3 2016 were wholly related to the sales of products and
services of DenseLight. Sales increased by $284,804 or 49% to $861,545 in Q3 2016 from $576,741 in Q2 2016. The increase in sales
also resulted in increased gross margin to 63% in Q3 2016 from 51% in Q2 2016. The increase in gross margin resulted from better
absorption of fixed costs with increased revenue.

 

Q3 2016 was the first full quarter since the acquisition of DenseLight
and BB Photonics. Depreciation increased by $310,462 or 129% to $550,420 in Q3 2016 from $239,958 in Q2 2016 due primarily to the
depreciation and amortization expense on property and equipment acquired through the acquisition of DenseLight and BB Photonics.
The Company also acquired additional property and equipment during Q3 2016. Depreciation on the new property and equipment also
contributed to the increase over Q2 2016.

 

Professional fees decreased by $65,067 or 24% to $207,220 in Q3
2016 from $272,287 in Q2 2016. Professional fees in Q2 2016 included the cost of acquiring both DenseLight and BB Photonics. Professional
fees in Q3 2016 were also higher due to professional fees incurred in dealing with export issues and responding to regulatory inquiries.

 

    	 	14	 

     

    

 

Wages and benefits decreased by $377,713 or 36% to $676,700 in Q3
2016 from $1,054,413 in Q2 2016. The expense in Q3 2016 reflects a full quarter operating wages of DenseLight that was acquired
on May 11, 2016, while representing only a partial quarter in Q2. Q2 2016 wages and benefits included the accrued but unpaid executive
retention bonuses totaling $550,000 to the CEO and COO that were payable in mid-June 2016 at the one-year anniversary date of commencement
of the respective employment terms, but voluntarily deferred by them and paid in 2017. The $100,000 bonus to the COO was reversed
in Q1 2017.

 

Management and consulting fees increased by $57,951 or 34% to $230,352
Q3 2016 from $172,401 in Q2 2016. The Q3 2016 expense included $75,000 of fees paid to a director for consulting services, an expense
which was later reclassified to financing costs in Q4 2016.

 

General expenses and rent decreased by $38,448 or 7% to $508,178
in Q3 2016 from $546,626 in Q2 2016. Q3 2016 included a full quarter of operating costs of DenseLight, while the Q2 2016 expense
included all the ancillary costs relating to the acquisitions of both DenseLight and BB Photonics.

 

Non-cash stock-based compensation increased by $131,980 or 15% to
$1,019,970 in Q3 2016 from $887,990 in Q2 2016. 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”).

 

Shareholders of DenseLight were entitled to an additional 1,000,000
shares of the Company if DenseLight met or exceeded a certain revenue target by December 31, 2016. On the date of the acquisition,
this contingent consideration was valued at $283,130. As of September 30, 2016, it was determined that DenseLight would not meet
the revenue target, so the contingent consideration was reclassified to earnings during Q3 2016.

 

 

Q2 2016 compared to Q1 2016

 

The Company had sales of $576,741 in Q2 2016 but no sales in Q1
2016. The sales in Q2 2016 were wholly related to DenseLight, which was acquired on May 11, 2016.

 

Depreciation and amortization in Q2 2016 increased by $152,114 or
173% to $239,958 from $87,844 in Q1 2016. The increase included $149,723 of depreciation relating to $8,706,029 of new property
and equipment acquired from DenseLight and BB Photonics.

 

Professional fees increased by $132,087 or 94% to $272,287 in Q2
2016 from $140,200 in Q1 2016. The acquisition of DenseLight and BB Photonics contributed to the substantial increase from Q1 to
Q2 2016. The Company required the services of various professional consultants including lawyers, accountants and appraisers to
complete the acquisition of both companies.

 

Wages and benefits had a substantial increase of $571,244 or 118%
to $1,054,413 in Q2 2016 from $483,169 in Q1 2016. The increase was a result of accrued executive retention bonuses totaling $550,000
to the CEO and COO that were payable in mid-June 2016, but voluntarily deferred by them and paid in 2017. Wages and benefits for
Q2 2016 also included $261,721 for DenseLight from the May 11, 2016 acquisition date to the quarter end. The $100,000 bonus to
the COO was reversed in Q1 2017.

 

General expenses and rent increased by $285,862 or 110% to $546,626
in Q2 2016 from $260,764 in Q1 2016. DenseLight contributed $203,402 to the increase during the period. The difference resulted
from additional costs incurred relating to the acquisition of DenseLight and BB Photonics.

 

Non-cash stock-based compensation decreased by $371,061 or 29% to
$887,990 in Q2 2016 from $1,259,051 in Q1 2016. This resulted from the timing of stock-based compensation expense relative to the
vesting date of the historical granted stock options. The valuation of stock options is driven by a number of factors including
the quantity 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.

 

    	 	15	 

     

    

 

Segment Disclosure

 

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:

 

ODIS Inc. (“ODIS”)

 

Odis is the developer of the POET platform semiconductor process
IP for fabrication of integrated circuit devices containing both electronic and optical elements on a single die ("monolithic
integration") and in a

single package ("hybrid integration").

 

BB Photonics

 

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

 

DenseLight

 

DenseLight designs, manufactures, and delivers photonic optical
light source products and solutions to the communications, medical, instrumentations, industrial, defense, and security industries.
DenseLight processes compound semiconductor-based optoelectronic devices and photonic integrated circuits through its in-house
wafer fabrication and assembly & test facilities. The Company operates geographically in the United States, Canada and Singapore.
Geographical information is as follows:

 

	 	 	2017
	 	 	 	 	 	 	 	 	 
	As of December 31,	 	Singapore	 	US	 	Canada	 	Consolidated
	Current assets	 	$	3,190,298	 	 	$	4,621,318	 	 	$	139,096	 	 	$	7,950,712	 
	Property and equipment	 	 	8,018,900	 	 	 	259,270	 	 	 	-	 	 	 	8,278,170	 
	Patents and licenses	 	 	18,816	 	 	 	437,434	 	 	 	-	 	 	 	456,250	 
	Goodwill and intangible assets	 	 	6,756,181	 	 	 	1,764,459	 	 	 	-	 	 	 	8,520,640	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Assets	 	$	17,984,195	 	 	$	7,082,481	 	 	$	139,096	 	 	$	25,205,772	 

 

 

	Year Ended December 31,	 	Singapore	 	US	 	Canada	 	Consolidated
	Sales	 	$	2,794,044	 	 	$	-	 	 	$	-	 	 	$	2,794,044	 
	Cost of sales	 	 	1,342,691	 	 	 	-	 	 	 	-	 	 	 	1,342,691	 
	Selling, marketing and administration	 	 	4,955,497	 	 	 	4,872,902	 	 	 	1,042,342	 	 	 	10,870,741	 
	Research and development	 	 	3,237,713	 	 	 	1,877,966	 	 	 	327,194	 	 	 	5,442,873	 
	Other income	 	 	(1,748,244	)	 	 	-	 	 	 	(18,280	)	 	 	(1,766,524	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss from operations	 	$	4,993,613	 	 	$	6,750,868	 	 	$	1,351,256	 	 	$	13,095,737	 

 

    	 	16	 

     

    

 

	 	 	2016
	 	 	 	 	 	 	 	 	 
	As of December 31,	 	Singapore	 	US	 	Canada	 	Consolidated
	Current assets	 	$	2,118,561	 	 	$	10,058,018	 	 	$	4,957,624	 	 	$	17,134,203	 
	Property and equipment	 	 	9,039,069	 	 	 	322,633	 	 	 	2,508	 	 	 	9,364,210	 
	Patents and licenses	 	 	-	 	 	 	449,676	 	 	 	-	 	 	 	449,676	 
	Goodwill and intangible assets	 	 	6,793,409	 	 	 	1,764,459	 	 	 	-	 	 	 	8,557,868	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Assets	 	$	17,951,039	 	 	$	12,594,786	 	 	$	4,960,132	 	 	$	35,505,957	 

 

 

	Year Ended December 31,	 	Singapore	 	US	 	Canada	 	Consolidated
	Sales	 	$	1,861,747	 	 	$	-	 	 	$	-	 	 	$	1,861,747	 
	Cost of sales	 	 	946,001	 	 	 	-	 	 	 	-	 	 	 	946,001	 
	Selling, marketing and administration	 	 	3,069,493	 	 	 	7,200,243	 	 	 	1,151,868	 	 	 	11,421,604	 
	Research and development	 	 	1,042,842	 	 	 	2,122,983	 	 	 	-	 	 	 	3,165,825	 
	Impairment loss	 	 	-	 	 	 	63,522	 	 	 	-	 	 	 	63,522	 
	Loss on disposal of property and equipment	 	 	-	 	 	 	29,807	 	 	 	16,931	 	 	 	46,738	 
	Other income	 	 	(14,027	)	 	 	-	 	 	 	(52,845	)	 	 	(66,872	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss from operations	 	$	3,182,562	 	 	$	9,416,555	 	 	$	1,115,954	 	 	$	13,715,071	 

 

Liquidity and Capital Resources

 

The Company had working capital of $7,140,119 on December 31, 2017
as compared to $15,509,859 on December 31, 2016.

 

The Company’s balance sheet as of December 31, 2017 reflects
assets with a book value of $25,205,772, compared to $35,505,957 as of December 31, 2016. Thirty-two percent (32%) of the book
value as of December 31, 2017, or $7,950,712, was in current assets consisting primarily of cash and other current assets, compared
to 48%, or $17,134,203 as of December 31, 2016.

 

The Company is in a position to cover its liabilities as they come
due, however, due to the continuation of losses, the Company will need to seek debt or equity financing to fund its operations.
Consistent with its needs for additional financing, on March 21, 2018, the Company completed a 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). Additionally, subsequent to December
31, 2017 the Company raised $1,131,921 from the exercise of warrants and stock options. Refer to Subsequent Events for further
details

 

Acquisitions 

 

DenseLight

On May 11, 2016, the Company acquired all the issued and
outstanding shares of DenseLight Semiconductors Pte. Ltd, a designer, manufacturer and provider of photonic sensing and optical
light source products for consideration of $10,500,000. The all-stock purchase was accomplished with the issuance of 13,611,150
common shares of the Company at a price of $0.7714 per share. The Company also committed to issuing shares representing $1,000,000
to the sellers in the event that DenseLight met or exceeded a pre-determined revenue target during calendar 2016. The revenue targets
were not met.

 

This acquisition provides the Company with direct and preferred
access to a fab infrastructure for future product development, access to product sales and channel distribution networks and a
broader product portfolio of photonic products, technology and know-how.

 

Upon closing the acquisition, the Company negotiated a
settlement agreement relating to obligations that were due to past or current employees of DenseLight. As part of the settlement
agreement, the Company issued 1,738,236 common shares at a price of $0.7714 per share for a total of $1,343,629. The Company also
paid $240,266 to current and past employees as part of the debt settlement. Accounts payable and accrued liabilities included $184,570
that was due to past and current employees have been settled

 

The Company also settled a loan of $500,000 owing to EDB
Investments Pte. Ltd., an investor in DenseLight, with the issuance of 648,150 shares at a price of 0.771 per share.

 

    	 	17	 

     

    

 

Former management shareholders of DenseLight agreed not
to sell, transfer, pledge or otherwise dispose of the shares of the Company for a period of nine months, at which time they were
each able to sell up to 25% of their shares. They were able to sell an additional 25% of the shares after twelve months. These
restrictions expired on May 11, 2017. All management shareholders are able to sell any remaining shares after 24 months from closing
(i.e., May 11, 2018). Former non-management shareholders of DenseLight are no longer restricted from selling their shares.

 

On acquisition, DenseLight held accounts receivable and
unbilled revenue in the amount of $198,898 that reflected their fair value. The billed receivables at closing have been subsequently
collected.

 

The acquisition has been accounted for using the acquisition
method of accounting. Acquisition related costs of $197,284 were expensed in the year and included in selling, marketing and administrative
expenses.

 

Fair value of consideration paid

 

	Fair value of 13,611,150 shares issued	 	$	10,500,000	 
	Contingent consideration payable	 	 	283,130	 
	 	 	 	 	 
	Total consideration	 	$	10,783,130	 
	 	 	 	 	 
	 	 	 	 	 
	Recognised amounts of identifiable net assets:	 	 	 	 
	 	 	 	 	 
	Cash	 	$	2,971	 
	Accounts receivables and unbilled revenue	 	 	198,898	 
	Prepaid and other current assets	 	 	293,386	 
	Inventory	 	 	319,257	 
	Property and equipment	 	 	8,635,650	 
	Customer relationships	 	 	186,131	 
	Goodwill	 	 	6,630,544	 
	Trade payables	 	 	(2,979,546	)
	Loans and advances	 	 	(1,000,000	)
	Deferred tax liability	 	 	(1,504,161	)
	 	 	 	 	 
	Net assets acquired	 	$	10,783,130	 

 

Loans and advances include $500,000 that was advanced to
DenseLight by the Company prior to its acquisition. This advance was used by DenseLight to cover the expenses required for the
development under the Development Services Agreement between DenseLight and the Company, based on the special pricing negotiated
between the parties.

 

The purchase and sale agreement provided for an additional
$1,000,000 worth of shares to be issued to the sellers should gross revenue from DenseLight exceed certain targets for 2016. The
fair value of this contingent consideration payable was determined by estimating the probability of the Company making that future
payment and then discounting it to present value using a discount rate of 9% being the estimated cost of debt for the Company.
At December 31, 2016, DenseLight did not exceed the established revenue targets for 2016. The Company has therefore adjusted the
fair value of contingent consideration to nil through earnings.

 

    	 	18	 

     

    

 

A deferred tax liability of $1,504,161 was created on the
date of purchase relating to the fair value adjustment of the assets acquired. Deferred tax liability relating to the DenseLight
acquisition at December 31, 2017 and 2016 was $1,005,627 and $1,303,567 respectively.

 

BB Photonics

On June 22, 2016, the Company acquired all the issued and
outstanding shares of 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.

 

The acquisition of BB Photonics provides the Company with
additional differentiated intellectual property and know-how for product development, which will enable the Company to better reach
its first identified commercial market, the data communications market, as well as to augment its sensing roadmap.

 

The acquisition has been accounted for using the acquisition
method of accounting. Acquisition related costs of $59,930 were expensed in the year and included in selling, marketing and administrative
expenses.

 

Fair value of consideration paid

 

	Fair value of 1,996,090 shares issued	 	$	1,550,000	 
	 	 	 	 	 
	 	 	 	 	 
	Recognised amounts of identifiable net assets:	 	 	 	 
	Cash	 	$	15,820	 
	Property and equipment	 	 	70,379	 
	Intangibles	 	 	714,000	 
	Goodwill	 	 	1,050,459	 
	Trade payables	 	 	(7,918	)
	Deferred tax liability	 	 	(292,740	)
	 	 	 	 	 
	Net assets acquired	 	$	1,550,000	 

 

A deferred tax liability of $292,740 was created on the
date of acquisition and related to the value of the In-Process Research and Development (IPR&D).  Externally generated
IPR&D is subject to impairment whenever events or changes indicate that its carrying amount may not be recoverable.  Since
the Company is still in the process of completing its technology and related products, the IPR&D and related deferred tax liability
have not been impaired or amortized.

 

    	 	19	 

     

    

 

Related Party Transactions

 

Compensation to key management personnel was as follows:

 

	 	 	 	2017	 	 	 	2016	 
	 	 	 	 	 
	Salaries	 	$	932,133	 	 	$	2,047,634	 
	Share-based payments (1)	 	 	2,110,773	 	 	 	3,061,686	 
	 	 	 	 	 	 	 	 	 
	Total	 	$	3,042,906	 	 	$	5,109,320	 

 

(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.

 

In 2016, the Company paid or accrued $150,000 in consulting
fees to a director for strategic, technology, integration and general business consulting services.

 

The Company paid or accrued $115,660 in fees for the year
ended December 31, 2017 (2016 - $113,250) to a law firm, of which a director is counsel, for legal services rendered to the Company.

 

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.

 

Critical Accounting Estimates

 

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.

 

The provision policy for doubtful accounts of the Company is based
on the ageing analysis and management's ongoing evaluation of the recoverability of the outstanding receivables. A considerable
amount of judgment is required in assessing the ultimate realization of these receivables, including the assessment of the creditworthiness
and the past collection history of each customer. If the financial conditions of these customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may be required. As at the balance sheet date, no provision
was required for accounts receivable.

 

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 inventory 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.

 

    	 	20	 

     

    

 

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

 

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.

 

Intangible assets

 

Internally generated intangible assets are recorded at cost and
will be amortized on a straight-line basis based on the best estimate of the useful life of the asset developed from the point
at which the asset is ready for use. Internally generated intangible assets are tested for impairment whenever events or changes
indicate that its carrying amount may not be recoverable. Externally acquired intangible assets are amortized on a straight-line
basis over 5 years commencing when the asset is ready for use. Externally generated intangible assets are tested for impairment
whenever events or changes indicate that its carrying amount may not be recoverable.

 

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.

 

Other stock-based payments

 

The Company accounts for other stock-based payments based on the
fair value of the equity instruments issued or service provided, whichever is more reliable.

 

Cumulative Translation Adjustment

 

IFRS requires certain gains and losses such as certain exchange
gains and losses arising from the translation of the financial statements of a self-sustaining foreign operation to be included
in comprehensive income.

 

Recent Accounting Pronouncements

 

The Company has considered all recently issued accounting pronouncements
and does not believe the adopting of such pronouncements will have a material impact on its consolidated financial statements.
Please see note 3 of the financial statements for additional information.

 

Financial Instruments and Risk Management

 

The Company's financial instruments consist of cash, short-term
investments, accounts receivable, non-current assets held for sale, accounts payable and accrued liabilities and contingent consideration
payable. 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.

 

Exchange Rate Risk

 

The Company is exposed to foreign currency risk with the Canadian
dollar and Singapore dollar due to cash reserves and other current assets and liabilities that are maintained in those currencies,
all of which are exposed to currency fluctuations. Most of the Company’s operations are transacted in US dollars and Singapore
Dollars. A 10% change in the Canadian dollar and Singapore dollar would increase or decrease other comprehensive loss by $260,175.

 

    	 	21	 

     

    

 

Interest Rate Risk

 

Cash equivalents 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.

 

 

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. No provision
has been made for potentially uncollectable amounts.

 

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

 

	 	 	2017	 	2016
	 	 	 	 	 
	Current	 	$	330,731	 	 	$	125,610	 
	31 - 60 days	 	 	56,094	 	 	 	16,346	 
	61 - 90 days	 	 	-	 	 	 	75,816	 
	> 90 days	 	 	107,100	 	 	 	75,077	 
	 	 	 	 	 	 	 	 	 
	 	 	$	493,925	 	 	$	292,849	 

 

 

World Economic Risk 

 

Like many other companies, the world economic climate could have
an impact on the Company's business and the business of many of its current and prospective customers. A slump in demand for electronic-based
devices, due to a world economic crisis, may impact any anticipated licensing revenue.

 

Obsolescence Risk

 

The Company designs, manufactures and sells various highly technological
electronic products that could become obsolete should lower priced competitors or new technology enter the market. This would expose
the company to obsolescence risk in inventory balances, but also a risk of obsolescence in the product offering. The redesign of
the product offering could take significant time or could never occur.

 

 

Liquidity Risk

 

The Company predominately relies on equity funding for liquidity
to meet current and foreseeable financial requirements.

 

    	 	22	 

     

    

 

Subsequent Events

 

On March 21, 2018, the Company completed a brokered 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 option until March 21, 2020 with each compensation unit comprising
one common share and one-half compensation share purchase warrant. Each 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.

 

Subsequent to December 31, 2017 the Company also raised $1,131,921
from the exercise of warrants and stock options.

 

 

Strategy and Outlook

 

There are a number of projects that the Company expects will address
the short-term and long-term growth plans of the Company including, but not limited to the following:

 

· Introduce the Optical Interposer
concept to suppliers of transceivers and data center operators and form commercial partnerships for product development;

· Promote the POET Optical
Interposer as a true platform technology across several photonic applications and markets;

· Pursue multiple potential
sources of non-product revenue and strategic partnerships;

· Continue to invest in our capabilities and infrastructure;

· Selectively pursue other opportunities that leverage
our existing expertise; and

· Pursue complementary strategic alliance or acquisition
opportunities.

 

 

Outstanding Share Data

 

Common Shares

Total common shares of the Company outstanding at December 31, 2017
and April 27, 2018 were 260,018,853 and 288,056,802 respectively.

 

Stock Options and Warrants

Total warrants outstanding to purchase common shares of the Company
at December 31, 2017 and April 27, 2018 were 34,800,000 and 43,109,000 respectively priced between CA$0.52 and CA$0.75 per common
share.

 

Total stock options outstanding as at December 31, 2017 and April
27, 2018 were 33,090,291 and 40,506,521 respectively, priced between CA$0.20 and CA$1.99 per common share.

 

Total compensation units due to brokers as at December 31, 2017
and April 27, 2018 were nil and 1,309,080 respectively, priced at CA$0.55. Each compensation unit is convertible into one common
share and one half common share purchase warrant.

 

Additional detailed share data information is available in the Company’s
Notes to Consolidated Financial Statement.

 

Off-Balance Sheet Arrangements

 

The Company has not entered into any off-balance sheet arrangements.

 

    	 	23	 

     

    

 

Key Business Risks and Uncertainties

 

 

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.

 

Customer demand is difficult to forecast accurately and, as
a result, we may be unable to match production with customer demand.

 

We make planning and spending decisions, including determining the
levels of business that we will seek and accept, production schedules, component procurement commitments, personnel needs and other
resource requirements, based on our estimates of product demand and customer requirements. Our products are typically sold pursuant
to individual purchase orders. While our customers may provide us with their demand forecasts, they are typically not contractually
committed to buy any quantity of products beyond firm purchase orders. Furthermore, many of our customers may increase, decrease,
cancel or delay purchase orders already in place without significant penalty. The short-term nature of commitments by our customers
and the possibility of unexpected changes in demand for their products reduce our ability to accurately estimate future customer
requirements. If any of our customers decrease, stop or delay purchasing our products for any reason, we will likely have excess
manufacturing capacity or inventory and our business and results of operations would be harmed.  

 

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.

 

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, photonic integrated circuits, among others, that compete directly with our current and proposed product offerings.

 

    	 	24	 

     

    

 

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.

 

Our products, including those sold by predecessor company,
OPEL Solar, could contain defects that may cause us to incur significant costs or result in a loss of customers or subject us to
claims for which we may not be fully insured.

 

Our predecessor company, Opel Solar, sold solar systems and products
between 2007 and 2012, and some of those products may still be under warranty. We have not undertaken to quantify the size of that
warranty obligation and it is not recorded on our balance sheet because it is not determinable. Although we carry product liability
insurance, this insurance may not adequately cover our costs arising from defects or warranty claims related to those products.

 

Our current products sold by DenseLight are complex and undergo
quality testing as well as formal qualification by our customers. Our customers’ testing procedures are limited to evaluating
our products under likely and foreseeable failure scenarios and over varying amounts of time. For various reasons, such as the
occurrence of performance problems that are unforeseeable in testing or that are detected only when products age or are operated
under peak stress conditions, our products may fail to perform as expected long after customer acceptance. Failures could result
from faulty components or design, problems in manufacturing or other unforeseen reasons. As a result, we could incur significant
costs to repair or replace defective products under warranty, particularly when such failures occur in installed systems. Our products
are typically embedded in, or deployed in conjunction with, our customers’ products, which incorporate a variety of components,
modules and subsystems and may be expected to interoperate with modules produced by third parties. As a result, not all defects
are immediately detectable and when problems occur, it may be difficult to identify the source of the problem. While we have not
experienced material failures in the past, we will continue to face this risk going forward because our products are widely deployed
in many demanding environments and applications worldwide. In addition, we may in certain circumstances honor warranty claims after
the warranty has expired or for problems not covered by warranty to maintain customer relationships. Any significant product failure
could result in litigation, damages, repair costs and lost future sales of the affected product and other products, divert the
attention of our engineering personnel from our product development efforts and cause significant customer relations problems,
all of which would harm our business. Although we carry product liability insurance, this insurance may not adequately cover our
costs arising from defects in our products or otherwise.

 

The business that we acquired did not have a history of profitable
operations. Our ability to successfully manage our manufacturing operations is essential to our overall success, and if we fail
to do so, our financial results will suffer. 

 

At the time of the acquisition of DenseLight Semiconductors, Pte.
Ltd. in May of 2016, the company had been operating at a loss for several years and was at a minimum staffing level. Since the
acquisition, we have committed substantial capital and management attention to improving the operation, increasing sales and driving
to profitability. Even though substantial changes in the management and personnel have been made, the results to date have been
less than anticipated and more improvement will be required in order to make the DenseLight operation profitable. We cannot guarantee
that our efforts to improve the DenseLight operation will be successful, and if they are not, the operation will continue to need
capital and attention from the senior management of the company and our financial results may suffer as a result.

 

    	 	25	 

     

    

 

If we encounter manufacturing problems or if manufacturing
at our Singapore operation is discontinued for any reason, including an industrial or workplace accident, we may lose sales and
damage our customer relationships, or be subject to claims for which we may not be fully insured.

 

We may experience delays, disruptions or quality control problems
in our manufacturing operations. These and other factors may cause less than acceptable yields at our wafer fabrication facility.
Manufacturing yields depend on a number of factors, including the quality of available raw materials, the degradation or change
in equipment calibration and the rate and timing of the introduction of new products. Changes in manufacturing processes required
as a result of changes in product specifications, changing customer needs and the introduction of new products may significantly
reduce our manufacturing yields, resulting in low or negative margins on those products. In addition, because of our wafer size,
we use equipment that is not readily available on the open market and for which spare parts and qualified service people may not
be available. If any of our key equipment were to be damaged or destroyed for any reason, our manufacturing process would be severely
disrupted. Any such manufacturing problems would likely delay product shipments to our customers, which would negatively affect
our sales, competitive position and reputation.

 

Our operations in Singapore are subject to government regulations
that protect the workplace safety of employees. We strive to maintain an accident-free workplace, but we cannot guarantee that
industrial accidents will not take place, or that we will not be subject to liability for these and other workplace related claims.
We have obtained insurance policies to protect the company against claims for workplace related claims, but we cannot guarantee
that these and other insurance policies carried by the Company will be sufficient to cover the full costs of such claims, which
could have a material adverse effect on the Company.

 

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 both our GaAs and InP 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.

 

    	 	26	 

     

    

 

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 prevent us from being able to respond immediately
to adverse events affecting our suppliers.

 

Our international business and operations expose us to additional
risks.

 

Products shipped to customers located outside Canada and the United
States account for a majority of our revenues. In addition, we have significant tangible assets located outside the United States.
Our manufacturing 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.

 

    	 	27	 

     

    

 

Our prior acquisitions created a large amount of goodwill,
which may have to be impaired in the future and as a result may adversely affect our financial results. In addition, past and any
future acquisitions may adversely affect our financial condition and results of operations.

 

As part of our business strategy, we have in the past and may in
the future pursue acquisitions of companies that we believe could enhance or complement our current product portfolio, augment
our technology roadmap or diversify our revenue base. Acquisitions involve numerous risks, any of which could harm our business,
including: 

 

	•	difficulties integrating the acquired business;
	•	unanticipated costs, capital expenditures, liabilities or changes to product development efforts;
	•	difficulties integrating the business relationships with suppliers and customers of the acquired business with our existing operations;
	•	acts or omissions by the acquired company prior to the acquisition that may subject us to unknown risks or liabilities;
	•	risks associated with entering markets in which we have little or no prior experience; 
	•	potential loss of key employees, particularly those of the acquired organizations; and 
	•	diversion of financial and management resources from our existing business;

 

Our prior acquisitions have resulted, and future acquisitions may
result in the recording of goodwill and other intangible assets subject to potential impairment in the future, adversely affecting
our operating results. We may not achieve the anticipated benefits of an acquisition if we fail to evaluate it properly, and we
may incur costs in excess of what we anticipate. A failure to evaluate and execute an acquisition appropriately or otherwise adequately
address these risks may adversely affect our financial condition and results of operations. 

 

Our subsidiaries receive and expect to receive in the future
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 would adversely affect our financial condition.

 

Our subsidiary ODIS received research and development grants from
the United States Air Force and from NASA; our recently acquired subsidiary, DenseLight Semiconductor, Pte, Ltd. receives funding
for new product development activities conducted in Singapore from the Economic Development Board; and we expect that our recently
acquired subsidiary BB Photonics U.K., may also apply for certain grants to defer the cost of development in the U.K. The rules
for eligibility vary widely across government agencies, are complex and may be subject to different interpretations. Furthermore,
some of the grants set pre-defined development or spending objectives, which we may not achieve. 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 would have to borrow
large sums or refinance with dilutive financing in order to make the repayments, which would adversely affect our financial condition.

 

    	 	28	 

     

    

 

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.

 

We have a history of large operating losses. We may not be
able to 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, 2017, we had an accumulated deficit of $116,873,153. For the years
ended December 31, 2017 and December 31, 2016, we incurred net losses before income taxes of $13,095,737 and $13,431,941
respectively.

 

As of December 31, 2017, we held $4,974,478 in cash, and
we had working capital of $7,140,119.

 

The Company is currently in a position to cover its liabilities
as they come due. However, we have sustained considerable operating losses in the past.  Should such losses continue, the
Company may need to seek debt or equity financing to fund its operations. Although the Company has been successful in obtaining
such financings in the past, there is no assurance that it will be able do so in the future. If the Company is unable to obtain
such financing, it may have an adverse effect on the Company’s ability to continue operations. Consistent with its needs
for additional financing, on March 21, 2018, the Company completed a “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). Additionally, subsequent to December
31, 2017 the Company raised $1,131,921 from the exercise of warrants and stock options.

 

The optical data 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.

 

    	 	29	 

     

    

 

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 U.S. SEC in October 2016, 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.

 

Our business could be negatively impacted as a result of shareholder
activism.

 

In recent years, shareholder activists have become involved in numerous
public companies. Shareholder activists frequently propose to involve themselves in the governance, strategic direction, and operations
of the company. We may in the future become subject to such shareholder activity and demands. Such demands may disrupt our business
and divert the attention of our management and employees, and any perceived uncertainties as to our future direction resulting
from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern
to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners,
all of which could adversely affect our business. In addition, actions of activist shareholders may cause significant fluctuations
in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying
fundamentals and prospects of our business. 

 

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

 

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.

 

    	 	30	 

     

    

 

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. While we have a policy in place that is designed to
reduce the risk of infringement of intellectual property rights of others, there can be no assurance that third parties will not
assert infringement claims against us. 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, which may be up to five years following the
filing of our Form 20F Registration Statement, 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.

 

    	 	31	 

     

    

 

We have implemented internal controls that we believe provide reasonable
assurance that we will be able to avoid accounting errors or material weaknesses in future periods. However, 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, 2017, we had accumulated net operating losses
(NOLs), of approximately $124 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 our annual utilization of our NOLs is not limited. 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.

 

    	 	32	 

     

    

 

Our manufacturing operations are subject to environmental
regulation that could limit our growth or impose substantial costs, adversely affecting our financial condition and results of
operations.

 

Our properties, operations and products are subject to the environmental
laws and regulations of the jurisdictions in which we operate and sell products. These laws and regulations govern, among other
things, air emissions, wastewater discharges, the management and disposal of hazardous materials, the contamination of soil and
groundwater, employee health and safety and the content, performance, packaging and disposal of products. Our failure to comply
with current and future environmental laws and regulations, or the identification of contamination for which we are liable, could
subject us to substantial costs, including fines, cleanup costs, third-party property damages or personal injury claims, and make
significant investments to upgrade our facilities or curtail our operations. Identification of presently unidentified environmental
conditions, more vigorous enforcement by a governmental authority, enactment of more stringent legal requirements or other unanticipated
events could give rise to adverse publicity, restrict our operations, affect the design or marketability of our products or otherwise
cause us to incur material environmental costs, adversely affecting our financial condition and results of operations.  

 

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, or 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.  

 

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. Foreign 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. 

 

    	 	33	 

     

    

 

The Company may experience these factors in the future and these
factors may have a material adverse effect on the Company’s business, operating results and financial condition.

 

Please refer to the Company's Annual Information Forms filed on
SEDAR for a detailed discussion of Risks and Uncertainties most recently filed on April 17, 2017.

 

 

Additional Information

 

Additional information relating to the Company is available on SEDAR
at www.sedar.com including the information contained in the Company's Annual Information Form filed on SEDAR on April 17,
2017.

 

 

 

 

 

 

 

 

 

 

 

 

    	 	34	 

     

    

 

 

 

 

 

 

		POET
                                         TECHNOLOGIES INC.

        Suite
        1107, 120 Eglinton Ave. E     780 Montague Expy #107

        Toronto,
        Ontario M4P 1E2       San Jose, CA 95131 USA

        Tel: 416-368-9411    -     Fax: 416-322-5075

        http://www.poet-technologies.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00288-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00288-of-00352.parquet"}]]