POET Technologies Inc.

Good morning, everyone, and welcome to POET Technologies Financial and Business Update Conference Call. As a reminder, this conference call is being recorded. And now I'd like to turn the conference over to Brett Perry, Investor Relations for POET Technologies. Please go ahead.

Thank you, Operator, and welcome to everyone participating on today's conference call over the phone and via webcast. I'm Brett Perry, Vice President of Shelton Group, POET Technologies Investor Relations firm. Joining us on today's call is Suresh Venkatesan, POETS Chairman and CEO, Vivek Rajahia, President and General Manager of POET Technologies, and Thomas Micah, Executive Vice President and Chief Financial Officer. As previously mentioned, today's call is being recorded for replay purposes. A link to the webcast replay can be found in the Investor Relations section of POETS website at www.poet-technologies.com. We've also posted a series of supporting slides in the IR section of the website, However, to avoid any confusion, I want to emphasize that management's prepared remarks are independent of this supporting material, and therefore the remarks on today's call are not directly tied to specific pages or the order of content in the supporting slide deck. Additionally, for those joining the call over the phone, we will conduct a Q&A session following management's prepared remarks, at which time the operator will provide further instructions. Before turning the call over to management, I'd like to remind listeners to review the safe harbor statements included in POET Technologies' recent press releases and regulatory filings. On today's conference call, management's prepared remarks will include forward-looking statements, and we may make additional forward-looking statements in response to questions. These forward-looking statements involve risks and uncertainties, as well as assumptions and expectations as of today, April 27, 2022. The company's actual results may differ materially from those anticipated in any such forward-looking statements, which can be identified by terminology such as may, well, should, expects, plans, anticipates, believes, or estimates, and other similar expressions. The company assumes no obligation to update or revise forward-looking information or statements except as is required by law. More information about other risks that could cause, that could impact POET's future business and results are set forth in the risk factor section of the company's filings with CDAR and the SEC. And finally, all financial numbers referenced on today's call will be in U.S. dollars unless otherwise stated. It's now my pleasure to turn the call over to Dr. Suresh Venkatesan for his opening remarks. Suresh, please go ahead.

Thank you, Brett. And good morning and welcome to all of those participating in today's conference call. We appreciate you joining us and for your interest and support. Our company has been trading on the NASDAQ for about six weeks now, and we expect that some of you participating in today's call are relatively new to PoetStory, so I would like to take a few minutes to review the company's history and our current business strategy. Although we've been public for 15 years, as the company's CEO since the middle of 2015, I still think of Poet as a startup. Coming from a long career in the semiconductor industry, during which I've introduced many new technologies to the market for the first time, I looked carefully at the technology the company had at that time and determined that we needed a new direction. But I earnestly believed, based on my experience and the requirements of the market, that the core mission of the company around integrated photonics was correct. The combination of devices into smaller, more integrated designs really has been the basis of events in semiconductor technology for the past 50 years. With stunning amounts of innovation bringing countless services and capabilities to our modern lives, with the emergence of cloud data centers providing information and entertainment to our TVs, cell phones, and smart devices, the demand for more data at lower cost has driven growth and innovation across many aspects of data communications technology and services but one area that has lagged well behind others is the way that photonic subassemblies what we call engines are built they've got limited integration and come with a very high cost of both capital and labor so we identified that as a problem that needed a new solution however To succeed in a space with large companies spending billions on technology development, a new startup such as ours must create a truly disruptive product that will compete, not just with what others are producing today, but with products grounded in technology that will continue to be competitive far into the future. I've always said, Competitive differentiation is good. Sustained competitive differentiation is the key, and that's what we're after here at POET. So in 2018, we adopted the strategy of hybrid photonics integration that we're following today, based on our invention of the silicon-based POET optical interposer, which is a completely new and innovative way to combine electronic and photonic devices into a single chip scale package produced entirely at wafer scale with standard semiconductor capital equipment. After two years of platform technology development, we transitioned to product development in 2020. And we have just in the past few months delivered first fully functional samples of our optical engines to customers. In the photonics world, This is an extremely short time to develop products. The gestation period is usually three years or more. We validated the platform first at 100 gig as a proof of concept with a systematic development path to extend the capabilities to higher speeds and higher data rates. I'm pleased to say that the products that we delivered and recently demonstrated live at the Optical Fiber Conference made a strong positive impression on several of the largest and most well-known companies in the data communications and telecommunications industry. This year's OFC was really our first opportunity to get face-to-face with customers where they had a chance to physically, face-to-face, see our optical engines in operation. We have not had this chance before due to COVID and all of the other restrictions. So it was extremely gratifying to see the response we got and to get the visceral reaction from the customers on what it is that we had accomplished. On a personal level, it was extremely gratifying for me to see the reaction many industry leaders had. They had positive things to say about what we had accomplished in terms of size, scope, and performance. I now believe that in the datacom telecom space, we have a technology platform that has the potential to gain a significant share of the market for optical engines at 400, 800 gig nodes, while opportunistically serving the 100 gig, 200 gig markets as well. And because of the size and level of integration that others have not even conceived of matching, to subsequently take these nodes and deliver pluggable optic solutions for 1.6 terabits per second 3.2 and even 6.4 terabits per second in a single chip scale form factor the simplicity of the architecture of the optical interposer the bandwidth density and the energy efficiency the flexibility of the design for different formats and applications and the ease with which module makers network equipment suppliers and data center operators can utilize the optical interposer all point to an opportunity for POIC to become a de facto integration standard in the photonics industry. Opportunities for the company in the data communications and telecommunications market are large, but they are outstripped by the potential size and growth in other areas in which the fundamental features of the optical interposer can be applied. 5G networks, AI accelerator, and other photonics computing and computing chips, communication and computing chips, automotive LIDAR, wearables. These are all areas that we believe represent fertile ground for products based on our technology. But we have to walk before we can run, so let's review where the company currently is on our product development roadmap. At our annual general meeting in October last year, and in later investor decks posted on our website, we outlined a roadmap in which our initial product, 100 gig CWDM4, LR4, and 200 gig FR4 would be moving from alpha to beta during the first half of this year. I'm pleased to say that despite intermittent shutdowns related to COVID-19, in both our Singapore and our Shenzhen lab, those milestones are intact. We delivered our final LR4 designs to our leading customer and expect to be shipping beta samples to other customers in May. It was exciting to see our leading LR4 customer announce future availability of their products based on our solutions at the OFC. It speaks to increasing levels of confidence in the technology and our ability to execute to the roadmap. A critical and pivotal next step in our product roadmap is 400 gig, as it is the speed that is ramping up today in data centers, and it is a basic building block of future 800 gig architectures. We have executed flawlessly on the 400 gig RX engine, being one of the few companies that demonstrated hybrid silicon photonics-based integrated receive solutions at 400 gig at the OFC. We will also be developing this year a version of the 400 gig receive engine with an integrated hybrid transimpedance amplifier, which will also mark our first product. with full optics-electronics hybrid integration. The 400-gig transmit solution has been a challenge, however, given third-party delays in the delivery of key components, particularly the modulator. Nevertheless, we are actively working to mitigate this risk by pursuing alternate modulator sources in North America and Europe, and even designing our platform to be external modulator-free through the inclusion of advanced high-speed lasers that are being introduced to the market now. Delivering 400-gig FR4 transmit and receive optical engines in both alpha and beta versions are key milestones for the company and will be important entry points for Foyt in this large and growing segment of the transceiver market. The real long-term payoff is in the way we can scale the speed of these devices because of the small size of the interposer platform. We're the only company today that can place two complete 400-gig FR4 optical engines into a single QSFP module for a 2x400 gig or an equivalent of an 800-gig market. Beyond that, we can architect four 400-gig engines into a 1.6 terabit per second modular chiplet. In fact, we already have designs for up to 6.4 terabits per second with a staggering 20 gigabits per second per square millimeter of real estate. This is almost 10x the bandwidth density of alternate solutions we've seen. Data versions of our light bar products should also be available in the second half of this year as planned. These are potentially large volume products as both module makers and network equipment operators use remote light sources that allow for thermal management and ease of laser replacement. We're applying the light designs of our light bar in our products going to Celestial AI, a designer of AI accelerator chips, and others in an addressable market that the market research firm Omdia projects at larger than 70 billion in 2025. When this market takes off, and it will, it's really a question of when, the volumes in this market are greater than 10x larger than the highest Datacom volumes we see today. Clearly, servicing such volumes requires wafer-scale engine assembly, which is exactly what Poet does. There is no way such a market can be served using conventional integration techniques that are being used in the market today. What also makes this market so interesting for us is that for each of these chips, whether they're accelerator chips or communication chips or optical computing chips, they all need their own light source. It's a one-to-one attach rate, and it spells a tremendous opportunity for Pulitzer. In summary, based on what we observe at the OFC, we believe that there are significant and sustainable advantages of our hybrid silicon photonic solutions. in terms of size, complexity, and energy efficiency relative to the alternatives. We believe that the entire industry needs and is looking for a means to combine best-in-breed components onto a small, flexible, easy-to-understand, easy-to-use, energy-efficient platform with built-in features like multiplexing and other component integrations, including scalability for generations of devices. We believe you already have that platform. We call it the POET Optical Interposer. As a further testament to the increasing awareness and traction of our solution, we've been invited to make presentations at the PIC conference in Brussels in June, at the ECOC conference in Basel in September. Our paper entitled A Wafer-Scale Hybrid Integration Platform for Co-Packaged Photonics Using a CMOS-Based Optical Interposer was also accepted for publication of the VLSI Technology Symposium, which is a peer-referred premier conference for CMOS technologies in the world, and a conference with historically low acceptance rates. I'll turn it over to Vivek, who is President and General Manager, to describe why we believe that OFC was such a milestone event for POET.

Thanks, Suresh. Good morning, good afternoon. I would like to add some color to what we experienced at OFC and to review in general our interactions with customers as we pursue our new product introductions, both in standard products and in custom developments for certain customers. Product introductions are all about building momentum. This is especially true with the new technology that customers do not yet fully understand. POET's momentum began with our appearance at the virtual OFC in June 2021, where we showed a live demonstration of two of our optical engines. This was followed up in September of 2021 with demonstrations of six different variations of our optical engines and a talk given by Dr. Mo at the CIOE or China International Electro-Optics Conference in September. Most recently, we appeared at the Optical Fiber Conference in San Diego in mid-March, showing two fully functional products in the 200G and 400G space. They were very different in size and capability than any other products being shown. As some visitors to our booth came back several times, they began to understand what they were seeing, a truly revolutionary approach to device integration in photonics. POET's challenge is to convince the industry that there is a different way to build photonic devices than the way it has been doing for a few decades. Whether invested in conventional assembly with its high capital cost and labor cost, or in photonic integration using silicon photonics, in which some companies have invested tens and hundreds of millions of dollars. Asking customers to step back and view the problem from a different angle often takes a person of exceptional credibility and experience. That's why we are pleased to be joined recently by Raju Kankapati, our new Vice President of Product Line Management. I have worked with Raju in previous companies, and I believe he brings to Poet experience with deploying innovative components and network equipment in rapidly expanding markets. I believe that as he builds a team out of our Allentown office to service customers globally, he will prove to be a great addition to Poet's management team, complementing our leadership in other locations. As Suresh mentioned, last month's OSC event in San Diego was a watershed moment in the history of POET, with several key players in the industry becoming aware of POET's products and solutions and seeing our optical engines in action for the first time. We conducted live demonstrations of our 200G FR4 transmit and our 400G FR4 receive engines FR4 is a multiplex standard, meaning that we can mix the signals of four independent laser-generated frequencies into one channel and transmit the mixed signal along a single fiber to quadruple the speed of the data transmission. When a multiplex signal comes into a received side of the module on a second fiber, it is filtered or demultiplexed, on the optical interposer into the original four frequencies. Compared to other 400G transceivers shown at OFC, which were predominantly built to DR4 standards that require eight fibers per module compared to our two. There is a cost difference in the fiber needed But more importantly, using only two fibers is a way for data centers to utilize the existing fiber investment more efficiently. POET is the only supplier of a fully integrated MUX and DMUX built into the optical interposer itself, which lowers the cost and increases the energy efficiency of the device. two key competitive advantages for POET optical engines. History has shown that when a multiplex version at a particular speed is available, the market usually gravitates to it because of these cost efficiency factors. Meta, formerly known as Facebook, recently began deploying 200G FR4 modules in their data centers. Tencent in China is also deploying 200GFR4, and Google is deploying 2x200GFR4, followed by 2x400GFR4 as an upgrade path. The market for 200GFR4 is projected to be several million units over the next two to three years. Also, because of our small size, roughly 50 millimeters square of silicon, we are able to easily to fit two of our 200G optical engines as well as two of our 400G FR4 optical engines in the compact QSFP double density module. In the weeks following OFC, we have been following up with potential customers and strategic partners in the US, including face-to-face visits with several companies, a welcome departure from the virtual conference calls over the past year, two years due to COVID. The meetings include visits with network equipment suppliers, data center operators, and laser suppliers. They are going very well. and we expect to continue to follow up and to add to our customer list in the coming weeks and months. The customer landscape for POET breaks down into two distinct types of customers, those for what I will call our standard products and those that are new and novel designs that take advantage of the optical interposer's unique features. Our standard products include our 100G and 200G CWDM4, LR4, FR4, and 400G receive optical engines, to which we will add 400G FR4 and DR4 transmit engines later this year. All of these optical engines will be assembled and sold through Super Photonics, our joint venture with San'an located in Xiamen, China, POET will design and sell our more advanced products, beginning with 400G outside of China and extending to our 800G 1.6 terabit products and beyond. Once customers have completed reliability testing using our beta samples, we expect that they will place purchase orders directly with SPX for initial production units. We currently have three such customers in China who have committed to using our optical engines, with several more customers in the pipeline and others asking for more advanced designs. Customers interested in our standard products are looking for a means to grow their market share against large module suppliers. FiberTop, for example, is a company that sees Poet as a means to both expand market share and adopt a platform that will allow it to offer multiple generations of product at higher speeds. The advanced designs or more custom product sales will be handled by Poet. These usually require more design and engineering efforts, an expense that is typically covered by the customer in what we call NRE, or non-recurring engineering payments. This type of sale is what is customarily associated with a design win. We have three such projects ongoing at POET. Since signing the joint venture with Sanan in October 2020, we have been building super photonics company in Xiamen, co-located with Sanan IC. POET recruited most of the senior staff of SPX, and I am the representative member of the JV board from POET. The company now has 30 personnel and all of the equipment needed for the first production line for the assembly and testing of optical engines. They are actively engaged with our teams in Shenzhen and Singapore, as well as in Allentown, to produce samples and evaluation boards for the 20 or so companies that have requested samples of 100G and 200G optical engines. They are also refining all of the assembly and the testing steps with the objective of reducing production time, increasing yields, and preparing for production. The building of critical capabilities in Singapore, Allentown, Shenzhen, and Super Photonics aligned with the talent that these hubs provide for semiconductors, photonics, and optoelectronics. is paying fruits in our endeavor of profilerating the industry with the optical interposer-based solutions. Key milestones for SPX and for POET for the remainder of this year are to deliver beta samples to customers for our three contracted advanced projects, deliver beta samples on evaluation boards to other potential customers globally, release the products to production and to prepare for ramping volume, and produce the first samples of a 400G transmit optical engine. We all know the advantages that the POET optical interposer brings to the optical transceiver and co-packaged optics markets and are confident that customers are beginning to understand the benefits as well. We are highly motivated with a strong team and expect to grow the company in these markets, as well as to other vertical markets like artificial intelligence accelerator chips and variables for health monitoring. I'll now turn it over to Tom Micah, POET CFO, to review the overall financial business highlights for 2021 and to provide some insight into 2022. Thank you.

Thanks, Vivek. I would like to take a few moments to review the financial highlights for the year ending December 31st, 2021, and to speak to our recent listing on the NASDAQ and our efforts to reach out to both retail and institutional investors. The company recognized a small amount of revenue in 2021, just over $200,000 for non-recurring engineering, which was the first revenue recognized by the company in three years. NRE are payments from customers for engineering work to adapt the optical interposer for a specific application. In this case, the $200,000 represented a partial payment for architecting four of our optical engines into a single module. This customer also placed a purchase order for initial units of optical engines for a combined value of $1.2 million. Overall operating expenses for the year ending December 31st, 2021 rose to $17.3 million, an increase of $2.5 million over the prior year, reflecting a large increase in headcount to approximately 50 at year end compared to about 25 as of December 2019. We added to our engineering admin and management teams. Overall cash used in operations for the year was 11.4 million compared to 9.7 million in the prior year. For the first time, we recognized a gain on our contribution of intellectual property to the joint venture, and at the same time also recognized our share of the losses. Both the gain and the loss were non-cash charges. On a per share basis, our net loss was 45 cents for the year compared to 62 cents loss the prior year, all based on the consolidated share amounts. Our cash burn remained at $1 million per month, which was the same for the prior year. Cash and cash equivalents for short-term investments at year end stood at 21.3 million compared to 6.9 million at the end of last year. We had cash inflows of a combined 28 million with 12 million from the public offering and $16 million of warrant and option exercises. We repaid all outstanding convertible debt of $3.3 million, almost entirely through the conversion to equity. The company committed to invest about $1 million in CapEx, against which we paid approximately $800,000. We exited the year with one of the strongest balance sheets in liquidity we have ever had, with $21.3 million in cash and short-term investments, no debt, and sufficient working capital for more than 14 months of operation. The company continued to invest in patents with 18 of our portfolios specifically related to the optical interposer. In addition, we have 21 applications filed and three other applications in preparation. In order to reduce a large backlog of recorded patentable ideas, we brought in Dr. Robert DiTizio as VP of intellectual property in December. Bob DiTizio has been working with us as an outside consultant since 2017 on our patents and other intellectual property issues. Subsequent to year end, the company proceeded with a direct listing and began trading on the NASDAQ capital market on March 14th. which was preceded by a 10 for 1 consolidation of our shares, which took effect on Monday, February 28th. Regarding the recent NASDAQ listing, it's important to note that the benefits, including exposure to a broader investor audience, are not expected to be immediate. The NASDAQ listing itself is not a magic bullet, but it is important for enabling access to our shares by institutional investors in the U.S. as well as internationally. Polak's previous trading on the OTCQX and on the TSX Venture Exchange restricted many institutions from investing and therefore also from doing the prerequisite due diligence on the company. Institutional investors have large portfolios, which entails doing research and following a lot of different companies and stocks. Unfortunately, they don't buy into a new company simply because it's now listed on national exchange. However, it does increase their motivation to do more homework on the company, and we anticipate that the benefits of our NASDAQ listing will be realized over time. Regarding recent trading pattern in POET shares, I believe this is largely a byproduct of the change in overall market sentiment, which has gotten significantly more negative over the past several months. With the exception of a small number of mega cap companies, the NASDAQ composite index and nearly everything in the technology sector and smaller cap has performed poorly since the beginning of the year. In fact, 75% of all NASDAQ stocks are currently trading below their 50-day average, and over 82% of all NASDAQ stocks are trading below their 200-day moving average. Looking at smaller technology listed on NASDAQ, there are numerous companies that are down 30%, 40%, or more than 50% year-to-date. During the last week, more than 1,000 companies, or over 20% of all NASDAQ-listed companies, have set new 52-week lows. While Poet Management shares in your frustration about the recent stock performance, there are relatively few companies or stocks that have sustained trading that is counter to the trend of the larger market. We believe the main reason for going to the NASDAQ remains sound with our thesis intact and that we expect the additional opportunity of attracting institutional investors to our stock that were not previously available to us. Any share price gains that we achieve will be longer lasting than those we experienced on either the OTCQX or the TSX Venture Exchange. I can assure you that we are not expecting our exposure to investors or any increase in our share price to happen on its own. At the beginning of the year, in preparation for our direct listing, we began a number of initiatives to reach out to both institutional investors in the US and Canada, as well as retail investors in both markets. We substantially increased our media outreach, with articles in several key journals which were distributed through multiple channels. We produced several videos in-house for our YouTube channel, and those were highlighted by at least two stock channels. Our engagement with social media increased substantially over last year with double-digit increases on key platforms. Our engagement with North equities multiplied our efforts with direct messages to 35,000 followers and impressions overwhelmingly positive on platforms such as Discord, Telegram, and Twitter. To attract institutional investors, we are also in need of additional sell-side coverage. We are in discussions with the analysts of several prominent banks in the U.S. on what that may take to achieve such coverage, and there has been significant interest expressed based on our recent success at OFC. That completes our prepared remarks, and we will now open the call to questions. For that, I'll turn it over to the operator.

Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press the star 1. To remove yourself from the queue, press the pound key. One moment while we compile the Q&A roster and prepare to take our first question. Our first question comes from Lisa Thompson with Vax Investment Research. Your line is open.

Good morning, and thank you for finally having an earnings call. This is very exciting. Thanks, Lisa. So I will just focus a little bit. I mean, you gave so much information, there's hardly anything to ask at this point. But I'm interested in this company that you have a contract with that says you're going to pay $1.2 million. Is that some sort of minimum, or how does that work? And how does a company introduce a product that at a trade show and not have even bought the components of the product before the announcement. So there must be something in Q1, correct?

Well, I mean, usually companies have, you know, they make future announcements on availability of capability. And so that's what companies do. They introduce, you know, a future product. And so in this particular case, that's what was done. Of course, with these customers, we've been working for a while. Obviously, we've got samples and they're building their designs and their triplets and so on and so forth to go with it. That is not necessarily different from the norms in the industry. It was just nice for us to see um that you know our solutions are going into products that are then getting announced and you know they have to also build you know their customer base um and um on that product base uh in terms of you know i guess initial i would say it's nre plus initial production right it doesn't represent what we believe the business is going to be worth um it is just a very initial commitment and in terms of you know dollars of Vivek, I don't know if you want to have any additional comments on that.

Yeah. So as you mentioned, so Lisa, when we get into a custom design and product, there's two parts to it. One is, you know, being compensated for this customization through the NRE. But also most, if not all, our objective when we engage with customers where after developing, designing, and developing the product, we expect and the customer expects to go into production. So it's not just a design service, right? So what we... usually negotiate, and in this case we did, that there's at least an initial advanced PO that once the design is done, you know, we have a PO for products. So that is just an initial, as Suresh mentioned. We would expect that to ramp up as product volumes, as our customer gains traction.

Did they happen to say when they announced the product when they expected to be available? No.

So we are working closely with them. It's a very close collaboration, as you can understand, because their product is based on our optical engine. So as we mentioned on our roadmap, we'll get into production later this year, so that is aligned with their products and getting into. So they do have previous generations of products. This is the next generation. So they have traction at customers. It's getting into that next generation products, introducing that to their customers. So I think that should give you an idea.

Okay, great. That helps. And the JV, I guess FiberCon is supposed to be the first customer to start

So customer we were able to announce. As you know, we cannot – customers are – they want to – it's their differentiation of using a next-generation platform like ours. So FibreTop is one of them. We are working very closely, making great progress, and we plan our FibreTop plans to get into production also aligned with our production schedules. Okay.

So will they be the first, or are they the only ones that you can use their name?

At this time, yes. So we keep asking customers, of course, but at the same time, customers value their differentiation in using our engines. They don't want to reveal it to their competitors. So it goes back and forth. But as we get customer... acceptance or approval to release names. We would like to do it, especially for our shareholders to understand and realize that we are gaining quite a bit of traction. Just because they are not hearing names doesn't mean we are not getting traction.

Right. I've had this conversation with Tom. Is there any way that we can tell that your product is inside somebody else's? by its specs or something other than ripping it apart and looking for your name stamped somewhere?

Yeah, that's an interesting question. I mean, there was a case where, you know, we were obviously doing a product that is custom and a third customer or potential customers of theirs that come by our OFC saw what we were doing and they immediately figured out that we were likely the only way that particular product could have been done. There are certain cues that would suggest that we would be inside the product, but I suppose at some point when the products are actually released, those things will become public and they're readily understood and available. You have to understand that the dynamics and there might be other questions relating to the same topic that, you know, I might as well just bring up and answer now, which is, you know, we're an integrated optical engine, which means our optical engine comes built in with lasers and CDs and other components. So we're basically supplanting, you know, an existing supply chain associated with these other components, you know, when a customer utilizes our engine. clearly, you know, there's sensitivity associated with that. If, you know, in the case of our 100 gig engines, you know, we're using lasers and photo detectors from Sanan. I mean, if these customers are already using, you know, other lasers or other photo detectors, then there is a change. And there's sensitivity associated with these kinds of things. So, you know, that does erect that, you know, kind of, sense of, no, we can't, you know, till we're all done. Yeah, it's going to be really hard to get that kind of visibility and transparency out.

Yeah, so Lisa, just to add there, as you know, most of our products are going into these MSA form factors, right? Multi-source agreements. So from the outside, they all look similar. So except for cases, as Suresh mentioned, where some people can put two and two together, right, that they could only achieve a certain application or, you know, way of doing things by using our engine. So they can put two and two together. Otherwise, from the outside, they all look similar. So it's difficult to identify that, yeah, they're using our engine inside.

Okay. Okay. Thanks, Vivek. We should move on to other questioners. Thanks, Lisa.

Okay. Thanks, Tom. Our next question comes from Kevin Deedy with HC Wainwright. Your line is open.

Hi. Good morning, folks. Thanks for taking my questions. Maybe, you know, maybe just to address Lisa's perspective, you could put a little sticker on the module that says poet inside. Take a page from Intel. Suresh, would you mind just reviewing from a high level? I guess you mentioned three standard products in contract and three custom products in contract. Could you review the timeline to market for those three? Let us know if you have signed agreements there, if there's stipulations around volume. Any of the details you can share with us publicly, please. Perfect.

Yeah, so we have announced two of the contracts, you know, which are signed contracts. And there is a third one, which is a commitment on both sides, and we are working together, okay? Okay. So that is there. In terms of volumes, Kevin, as I mentioned, it is aligned since their products are very much dependent on our engine, and we are also dependent on their schedule of the complete module for release. It's interdependent, and we expect towards the end of the year, those would start production, generally speaking. The standard products are more where either the customer, like FiberTop, is trying to introduce a product and take share from incumbents. So although they can bring the product out, of course, they will have to win business and get the volumes out. But as I mentioned, Our interactions with customers and customers clearly understand the objective is to get into production with future volumes. You know, it's not a design service that we are doing. So that is very well understood. And, you know, we expect to be in production with most of these by towards the end of the year.

Kevin, just to clarify, on the advanced projects, all three of those have contracts associated with them. On standard products, it doesn't really require a contract until they want to maybe lock in some volume once they've qualified the product and have decided that they're going to introduce and win business from their own customers.

Yeah, I do want to mention, Kevin, that even though for standard products there's no contract, but those customers are actively designing their solutions using our engine, which is a big commitment, you know, for us, right?

So there's NRE associated in the custom side, but not necessarily on the standard side. Is that the correct assumption?

That's a good way to look at it, yes.

Okay. Can we talk a little bit about supply chain? I know Suresh mentioned a little of this, and I understand the secrecy associated with it, but I'm wondering how you would assess changes in your ability to source product given logistics issues related to COVID and not, fabs operating and not. Can you give us your perspective on that and how comfortable or whether or not your level of comfort is improved versus where we were say 12 months ago and how you might see it looking forward 12 to 24 months. I think they're, you know, obviously looking from the outside, it's really difficult, right? Because none of this is necessarily tangible from somebody sitting in San Francisco, but as much as you could share, on that logistics side of things and manufacturing vis-a-vis China, COVID, logistics, transportation?

Kevin, I mean, I think there are clearly many issues associated with the supply chain that we continue to face as a company for it. I mean, just on a broader, grander scale, I should, you know, just so you guys have visibility, and I'm sure you do, but at least the appreciation. You know, this prolonged shortage, you know, starting with COVID, continuing with COVID, and, you know, now with the war and a whole bunch of, you know, things geopolitical, you You know, it's been a challenge and a stress on small companies. I mean, this is an environment where big companies get bigger because they have the clout and the buying power and everything else. And so all of the initial supply is, you know, targeted for the big guys. And for some of us, you know, we've got lead times that can be 52 weeks long, I mean, in terms of quoted lead times. So, you know, what we've been doing to manage this is to kind of systematically look at where our dependencies are and risk mitigate to the extent that we can. So we are sole source to Filtera, so we manage that very, very closely from a relationship perspective, so we get what we want. We've got an arrangement where we buy a certain number away for the month, so for them there is a predictability associated with our orders, and for us there is predictability in the supply. But outside of that, substrate supply, um you know other equipment spare parts supply you know we're kind of managing a lot of that you know internally to you know frankly a pre-ordering relationships that we have um and and leveraging that um that said you know i should say one area that you know we did um you know see an issue and we're now working hard to mitigate our risk there is is the modulator if you recall Last year, we'd announced an agreement with BilexTech in China to supply us with modulators compatible with our platform. Our platform's been ready since January to receive these modulators, but due to their supply chain associated with their foundries and delays and with the shutdowns in China, they've had some challenges delivering to us. You know, we do see these impacts, and, you know, the best we can do is to manage them with dual and triple sources. You know, as of, you know, a couple of months ago, we started actively engaging with alternate suppliers for modulators because we see the risk. And so we're trying our best to mitigate ourselves from a schedule perspective. I think we've done exceedingly well. relative to what we see in terms of how people quote cycle times to us relative to what we've been able to accomplish. Could we have done better? Absolutely. But to the extent that we have things in our control, we have executed flawlessly. And I think where we've felt challenges is in some interactions with third-party suppliers that we've had to deal with.

Thanks. Kevin, we've got a couple of other questioners, and we only have a few minutes left. Would you like to give them an opportunity to ask their questions?

Absolutely. Thank you for entertaining my questions, gentlemen. Welcome. All right.

Our next question comes from Tim Savigo with Northland Capital. Your line is open.

Hi there. Good morning. I wanted to kind of continue to focus on the committed customer sort of topic here and you know I assume we should relate I think what you've described is the three maybe JV based standard product relationships and the three kind of POA custom projects with the six committed customers that you outline kind of in your funnel slide here and I guess I had a couple of questions about that which is you know given the size of the pipeline above that I guess as we look you know maybe to the end of this year Where do you see that six committed relationships going? Do you have kind of a target for what that might look like in the future? And as an aside, might that include a direct relationship with a cloud operator? And if we look at those current six committed relationships, any sense of the market opportunity or revenue opportunity associated with what you have now? And I have a follow-up.

So I can address the, you know, the customer traction here. So, Tim, yeah, thanks for your question. So the more custom type of designs, you know, we are engaged with certain opportunities and customers, and we do believe a couple of them will pan out towards the end of the year. You know, there are not going to be several opportunities of that type. Also, it's difficult for us to handle, you know, many of those. So you can view that as maybe a couple more towards the end of the year. They are more advanced, so they do take longer to get into revenue and things like that, as you can imagine. Okay. The others, the more standard, we are continuously expanding our funnel and pipeline, and we have many engagements as we are rolling out samples, getting traction, they're seeing the benefit of the engine in their products. So that could be many more, but it will not come with NREs. So that is really the way I would say you can look at it. Does that answer that part of your question, Tim? Absolutely. Okay, great. On the revenue, I'll leave it to Tom, our CFO.

Well, we're not really providing guidance on that. I mean, Tim, we're building our business plan, and our business plan shows revenue in the second half from product and initial product revenue. and then ramping in 2023, but we haven't given an indication of scale of that yet, largely because we need more insight into what our customers' volumes are expected to be.

Got it. Fair enough. And if I could follow up on the engagement with the NRE, engagement there with what looks to be a pretty sizable switch router supplier or what have you. I was going to ask if you can say anything more about the type of application you might be working on there. I know you've got both LR4 and CWM4 capability. Typically, LR4 we see on routing and optical transport equipment. For shorter reach type interfaces, although there seems to be some potential for applications kind of inside data center switching as well, I wonder if you could provide any more color on the direction of that application.

Yeah, so with how much we can reveal here, it is a unique application where it's, we mentioned that multiple four of these engines in each case is used. So it's a four times 100G. And you're right in saying that these are used in core routers and core switches. So to connect from the core router downstream, you know, into the data center. So the end-end customers would be the top core router, core switch providers.

Got it. Thanks. I'll pass it on. Okay.

Thanks, Tim. We have one more question here, and I think we have enough time.

Our next question comes from Suji De Silva with Roth Capital. Your line is open.

Hi, Suresh, Vivek, Thomas. Thanks for squeezing me in here. I'll try to keep these briefs. And congratulations on all the progress. So the customers, the six that you've talked about, I'm wondering, is this one design-in per customer or are there multiple design-ins? I know you have certain bandwidth limitations on the number of projects you can handle, but I'm curious, are there multiple design-ins per customer potentially?

So these are presently projects, and some customers, as we mentioned, would have following, so once, it's a platform, right? So once they design our engine, for example, FiberTop for 100G CWDM, they do have the intention, and so do we, to work with them for 200G, 400G. So presently, the six customer opportunities are, they're customer opportunities, But there is multiple customers here.

I just want to provide one distinction here. When we say opportunity, these are customers that are actively designing their products based on our solution. Whether it's contracted, committed, engaged, we can use different words, but these are people that are truly designing their product with our engines in mind, with our footprint in mind, with our pad locations in mind. And so it's well advanced. I mean, it is not one of those things that we're kind of starting the dialogue.

Okay. Okay, great. And then another quick question on the modulator, supplier delays. What's the timing of the readiness of alternative solutions here? I know you're working hard to kind of have multiple sources.

yeah you know it's it's the there are i mean the the world of silicon photonics modulators and the 56 gigabaud regime is you know and there are two issues one is a supply delay and one is a technical challenge that modulate companies have faced so um maybe in the case of silent spec we're dealing with a supply chain uh challenge but in the meantime you know there have been other customers other suppliers that have announced So we are actively in dialogue with them to gain access to that supply. I would say, you know, about a quarter, within the quarter, we should, you know, be in a position to evaluate alternate solutions. Great. Very helpful. Thanks, guys.

Thank you.

This concludes the question and answer session. I'd like to turn the call back over to management for any closing remarks.

Yeah, thank you. And thanks again, everyone, for your time this morning. I think Tom, Vivek, and I very much appreciate everyone's continued interest in PULIT. We really look forward to talking with you and seeing many of you in person someday soon. You know, have a great day, everyone, and thanks again.

This concludes today's conference call. Thank you for joining us today.