First Phase: Initial Prototypes and Initial Produc

First Phase: Initial Prototypes and Initial Production

Initial prototype devices meeting commercial requirements are anticipated to be produced in sufficient quantities during the POET transition program utilizing the BAE fabrication facility. Prototypes such as the infrared sensor now in development with BAE for military testing and use are targeted to be used to introduce the POET platform process to the marketplace and to enable the Company to gain access to potential customers and seek early commercial design wins. Having a third party manufacture infrared sensors will help serve to validate POET and should provide momentum to seek design wins.

Second Phase: Production

The Company’s manufacturing model is to be fabless, meaning that we will partner with third party semiconductor fabrication facilities to produce the POET IC devices. As vertical market partnerships may be established, we anticipate those partnerships would seek to either utilize the BAE facility or another facility of their choosing to meet their volume fabrication needs, leveraging off of the prototypes expected to be manufactured at the BAE facility. To the extent that POET is successfully introduced and demand dictates, the Company intends to continue to improve on its ability to provide cost effective product by utilizing well known, commercial market-focused fabrication facilities worldwide.

The Company does not currently have a manufacturing agreement in place with BAE, but would seek to establish such agreements upon a successful transition of the POET process to production capability

BAE’s III-V GaAs fabrication facility is ISO 9001/14001 certified, military specification certified and can produce radiation hard devices. BAE’s state of the art facility houses two 3” wafer diameter production lines and two 6” wafer diameter production lines within 14,000 sq. ft. and a wafer test area covering 16,000 sq. ft. The facility is vibration isolated and environmentally controlled for sub-micron device development and manufacture. We believe that there is substantial capacity available to us for implementation of our development and to-market plans, and that BAE would be receptive to making such capacity available to us. Currently, a staff of over 150 engineers is devoted to design and development with another 70 devoted to foundry operations and testing.