POET Technologies (POET) - 2025 Q1 - Quarterly Report

Condensed Interim Consolidated Financial Statements Condensed Interim Consolidated Statements of Financial Position As of March 31, 2025, total assets decreased to $64.9M, liabilities reduced to $32.4M, and equity increased to $32.5M Financial Position Summary (as of March 31, 2025 vs. December 31, 2024) | Account | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $64,873,410 | $69,652,449 | ($4,779,039) | | Cash and cash equivalents | $15,900,425 | $37,143,759 | ($21,243,334) | | Short-term investments | $32,741,545 | $16,672,811 | $16,068,734 | | Total Liabilities | $32,417,199 | $48,963,562 | ($16,546,363) | | Derivative warrant liability | $20,342,530 | $35,750,607 | ($15,408,077) | | Total Shareholders' Equity | $32,456,211 | $20,688,887 | $11,767,324 | Condensed Interim Consolidated Statements of Operations and Deficit Q1 2025 net income of $6.34M, a turnaround from a $5.72M loss, was driven by a $15.38M non-cash gain Statement of Operations Summary (Three Months Ended March 31) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $166,760 | $8,710 | +1814.6% | | Operating Expenses | $9,703,169 | $5,127,869 | +89.2% | | Operating Loss | ($9,536,409) | ($5,119,159) | +86.3% | | Fair value adjustment to derivative warrant liability | $15,382,971 | ($629,824) | Favorable | | Net Income (Loss) | $6,341,558 | ($5,716,178) | Favorable | | Basic EPS | $0.08 | ($0.12) | Favorable | Condensed Interim Consolidated Statements of Comprehensive Loss The company reported a comprehensive income of $6.51M for Q1 2025, a significant improvement from a $5.80M loss in Q1 2024 Comprehensive Income (Loss) Summary (Three Months Ended March 31) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $6,341,558 | ($5,716,178) | | Exchange differences on translating foreign operations | $164,831 | ($81,932) | | Comprehensive income (loss) | $6,506,389 | ($5,798,110) | Condensed Interim Consolidated Statements of Changes in Shareholders' Equity Total shareholders' equity increased to $32.46M by March 31, 2025, driven by Q1 net income and warrant/option exercises - Shareholders' equity grew from a beginning balance of $223.7M to $230.4M in Q1 2025, mainly due to $4.2M from warrant exercises and $0.16M from stock option exercises[5] - Total shareholders' equity at the end of Q1 2025 was $32,456,211, a significant increase from $5,356,063 at the end of Q1 2024[5] Condensed Interim Consolidated Statements of Cash Flows Cash and equivalents decreased by $21.2M to $15.9M in Q1 2025, primarily from operating and investing outflows Cash Flow Summary (Three Months Ended March 31) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash flows used in operating activities | ($8,979,502) | ($4,604,882) | | Cash flows used in investing activities | ($16,618,741) | ($102,415) | | Cash flows from financing activities | $4,317,396 | $5,172,347 | | Net Change in Cash and Cash Equivalents | ($21,243,334) | $414,788 | | Cash and Cash Equivalents, end of period | $15,900,425 | $3,433,857 | - The significant cash used in investing activities was due to a $16.1 million purchase of short-term investments[7] Notes to Condensed Interim Consolidated Financial Statements Note 1: Nature of Operations POET Technologies designs optical interposers and photonic integrated circuits for data center and telecom markets - The company's core business is the design and development of optical interposers and photonic integrated circuits for data center and telecom markets[9] - The company's shares are listed on the Nasdaq (POET) and the TSX Venture Exchange (PTK)[9] Note 2: Summary of Material Accounting Policy Information Financial statements follow IFRS, with critical estimates for share-based compensation and derivative warrant liability - The financial statements are prepared in accordance with IFRS applicable to a going concern[10][11] - Critical accounting estimates include the valuation of share-based compensation and derivative warrant liability using the Black-Scholes Option Pricing Model[18] Classification of Financial Instruments | Financial Instrument | Classification | | :--- | :--- | | Cash and cash equivalents | Amortized cost | | Short-term investments | Amortized cost | | Accounts receivable | Amortized cost | | Convertible debt | Amortized cost | | Derivative warrant liability | Fair value through profit and loss (FVTPL) | Note 3: Revenue Revenue from NRE services and product sales dramatically increased to $166,760 in Q1 2025 from $8,710 in Q1 2024 Revenue Comparison (Three Months Ended March 31) | Revenue Source | 2025 | 2024 | | :--- | :--- | :--- | | NRE services and product sales | $166,760 | $8,710 | Note 5: Acquisition Acquired remaining 24.8% of SPX for $6.5M convertible debt, resulting in a $6.85M loss on acquisition - Acquired the remaining 24.8% of SPX from Sanan IC for $6.5M in convertible debt[49] - The convertible debt is interest-free and payable in installments through October 2029. Sanan IC has the right to convert unpaid amounts into common stock[49] - The transaction was determined to be an asset acquisition, not a business combination under IFRS 3[50] Note 11: Share Capital As of March 31, 2025, common shares increased to 78,074,707 due to $4.35M from stock option and warrant exercises Share Capital Continuity (Q1 2025) | Item | Number of Shares | Amount | | :--- | :--- | :--- | | Balance, Dec 31, 2024 | 76,507,157 | $223,742,335 | | Exercise of stock options | 127,250 | $542,569 | | Exercise of warrants | 1,440,300 | $6,078,225 | | Balance, Mar 31, 2025 | 78,074,707 | $230,363,129 | Note 13: Stock Options and Contributed Surplus As of March 31, 2025, 9.41M stock options were outstanding at $1.52 average exercise price, with $841,793 Q1 compensation expense Stock Option Activity (Q1 2025) | Item | Number of Options | Weighted Avg. Exercise Price | | :--- | :--- | :--- | | Balance, Dec 31, 2024 | 9,562,224 | $1.47 | | Expired/cancelled | (179,393) | $1.29 | | Exercised | (127,250) | $1.29 | | Granted | 155,000 | $3.69 | | Balance, Mar 31, 2025 | 9,410,581 | $1.52 | - Stock-based compensation expense for Q1 2025 was $841,793, compared to $947,502 in Q1 2024[82] Note 14: Earnings Per Share Q1 2025 basic income per share was $0.08, a significant improvement from ($0.12) loss in Q1 2024 Earnings Per Share Calculation (Three Months Ended March 31) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $6,341,558 | ($5,716,178) | | Weighted average shares - basic | 77,538,957 | 46,551,582 | | Basic income (loss) per share | $0.08 | ($0.12) | Note 17: Segment Information The company operates in a single segment, with all Q1 2025 revenue from Asia, and Canada reporting $14.4M net income - The company operates in a single reportable segment[92] Geographical Breakdown of Net Income (Loss) for Q1 2025 | Region | Revenue | Net Income (Loss) | | :--- | :--- | :--- | | Asia | $166,760 | ($5,083,060) | | US | $0 | ($2,954,453) | | Canada | $0 | $14,379,071 | | Consolidated | $166,760 | $6,341,558 | Note 18: Financial Instruments and Risk Management The company faces exchange rate and liquidity risks, but current cash resources are deemed sufficient for over one year - The company is exposed to exchange rate risk. A 10% change in foreign currencies held would increase or decrease other comprehensive loss by $1,970,000[99] - Regarding liquidity risk, management states that existing cash resources are sufficient to fund operating and investing activities beyond one year[100] Note 20: Expenses Operating expenses significantly increased in Q1 2025, with R&D costs nearly doubling to $4.5M and SM&A rising to $5.2M Expense Breakdown (Three Months Ended March 31) | Expense Category | 2025 | 2024 | | :--- | :--- | :--- | | Research and development | $4,514,107 | $2,290,316 | | Selling, marketing and administration | $5,189,062 | $2,837,553 | Note 21: Derivative Warrant Liability The derivative warrant liability generated a $15.38M non-cash gain in Q1 2025, significantly impacting net income - The derivative warrant liability arises because warrants exercisable in USD are issued by an entity with a CAD functional currency, creating variability in potential cash flows[112] - A remeasurement of the derivative liability in Q1 2025 resulted in a fair value gain of $15,382,971, which was recognized in the statement of operations[113] Derivative Warrant Liability Fair Value | Date | Fair Value of Liability | Number of Warrants | | :--- | :--- | :--- | | Dec 31, 2024 | $35,750,607 | 8,298,912 | | Mar 31, 2025 | $20,342,530 | 8,284,112 |