General Key Valuation Assumptions from the Pellegrino Report:
The following are key assumptions that are common to all of our valuation models:
• It will take between 6 and 18 months for POET to pass through technical readiness level
(“TRL”), making POET then desirable for licensing transactions.
• All revenue models rely on technology licensing fees; thus, there is no cost of goods sold
• The holding period used for the discount rate determination would reflect an investment
of 22 years (i.e., ODIS is a strategic acquisition, not a financial acquisition).
• The nominal remaining economic life for the technology is 22 years.
• ODIS will incur a 40% nominal income tax rate.
• ODIS will incur a 5% royalty payment to UCONN for the technology licensing.
• ODIS will enjoy an average of 20 remaining years for statutory protection for POET patent portfolio.
• A per-unit royalty would constitute 8.17% of the total value basis for the product.
• Once deployed, it will take 48 months for penetration of the market to the nominal ending
market share.
Defense Market Key Valuation Assumptions
The following are key assumptions that we integrated into the valuation model for the defense
market:
• ODIS will continue to receive annual revenues from Small Business Innovation Research
(SBIR) grants and other awards, in accordance with a projected schedule provided by
ODIS representatives
• ODIS will likely license POET to one or all of the top ten defense contractors.
• A time gap that ranges between 2 and 18 months exists that captures when each defense
contractor considers executing a license.
• The defense contractors would pay an initial, nonexclusive license fee that may range
between $20 million and $50 million
• Defense contractors would make monthly royalty payments thereafter of $250,000 to
account for any product-specific royalties.
Commercial Market Key Valuation Assumptions
The following are key assumptions that we integrated into the valuation model for the
commercial market:
• The first market application for POET in the commercial market would be for generalpurpose
microprocessors for server computers.
• The second market application for POET in the commercial market would be for generalpurpose
microprocessors for desktop computers.
• The third market application for POET in the commercial market would be for generalpurpose
microprocessors for laptop computers.
• ODIS will likely license POET to one or all of the top general computer microprocessor
manufacturers on an exclusive basis.
• In each target market, POET platform would nominally allow a manufacturer to capture
its current nominal market share deploying it.
• The server processor market would start at 6,939,877 annual units, growing at 0% per
year.
• Server processors would enter the market 48 months from the effective date of the
valuation.
• Server processors average $828.89 per unit, which would serve as a basis for a negotiated
royalty payment.
• Each server would require two processors.
• The desktop processor market would start at 128,200,000 annual units, growing at 1.13%
per year.
• Desktop processors would enter the market 48 months from the effective date of the
valuation.
• Desktop processors average $93.22 per unit, which would serve as a basis for a
negotiated royalty payment.
• Each desktop would require one processor.
• The laptop processor market would start at 231,900,000 annual units, growing at 12.43%
per year.
• Laptop processors would enter the market 48 months from the effective date of the
valuation.
• Laptop processors average $93.22 per unit, which would serve as a basis for a negotiated
royalty payment.
• Each laptop would require one processor.