UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K/A

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 20212022

OR

Commission File Number: 001-36247

Meta Materials Inc.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: (902) 482-5729

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Yes☐ No ☒No☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for a such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for a such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on June 30, 2021,2022, was $1,523,026,255371,634,314.

The number of shares of Registrant’s Common Stock outstanding as of March 1, 202220, 2023 is 284,812,797382,152,643.

EXPLANATORY NOTE

Meta Materials Inc. (the “Company”) filed its Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K") with the Securities and Exchange Commission (the "SEC") on March 23, 2023. The Company is filing this Amendment No. 1 on Form 10-K/A to correct the date of the Section 302 and 906 Certifications furnished in the 2022 Form 10-K as Exhibits 31.1, 31.2, 32.1 and 32.2; the initial Exhibits 31.1, 31.2, 32.1 and 32.2 were dated March 23, 2022, rather than the March 23, 2023 filing date. This Amendment No. 1 also contains minor edits to Exhibits 4.5.2 and 4.6.

Except as expressly set forth herein, this Form 10-K/A does not reflect events occurring after the date of the 2022 Form 10-K filing or modify or update any of the other disclosures contained therein in any way other than as required to reflect the amendments discussed above. Other than the changes in exhibits referred to above, all other information in the 2022 Form 10-K remains unchanged.

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Table of Contents

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CAUTIONARY NOTE ABOUTREGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this Annual Report on Form 10-K other than statements of historical fact, including statements regarding the Company'sour future results of operations and financial position, its business strategy and plans, and its objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect,“potential," “expect," and similar expressions are intended to identify forward-looking statements. The Company hasWe have based these forward-looking statements largely on itsour current expectations and projections about future events and trends that it believeswe believe may affect itsour financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Moreover, the Company operateswe operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for managementus to predict all risks, nor can theywe assess the impact of all factors on the Company'sour business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements the Companywe may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

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Item 1. Business.

Business Overview

Meta Materials Inc. (the(also referred to herein as the “Company” or, “META®”, “META” “we”, “us”, “our”, or “Resulting Issuer”) is a developer of high-performance functional materials and nanocomposites. We are developing materials that we believe can improve the performance and efficiency of many current products as well as allow new products to be developed that cannot otherwise be developed without such materials. We believe META is positioned for growth, by pioneering a new category of intelligent surfaces, which will allow us to become the metamaterials industry leader. We enable our potential customers across a range of industries - consumer electronics, 5G communications, healthcare, aerospace, automotive, and clean energy - to deliver improved products to their customers. For example, our nano-optic metamaterial technology provides anti-counterfeiting security features for Central Bank customers and currencies and authentication for Global brands. We currently have over 500 active patent documents, of which 315 patents have issued.

The Company’s registered office is located at 85 Swanson Road, Boxborough, Massachusetts 01719, and itsOur principal executive office is located at 1 Research60 Highfield Park Drive, Halifax,Dartmouth, Nova Scotia, Canada.

The CompanyAt META, we create nanostructures on the surfaces that everyone is surrounded by and interacts with - windows, windshields, screens on our devices, even the glasses we wear on our heads – and we believe that the materials we are developing can open up an entirely new world of performance and efficiency.

We specialize in the design and fabrication of metamaterials, a new class of multi-functional surfaces that require less raw material and energy compared to traditional solutions and are able to do things that were previously unachievable.

META in the last decade has generateddeveloped and acquired a portfolio of intellectual property, and iswe are now moving toward commercializing products at a performance and price point combination that haswe believe have the potential to be disruptive in multiple market verticals. The Company’sOur platform technology includes holography, lithography, electro-optics, nano-optics, battery materials, and medical wireless sensing. In 2021, we acquired the assets and IP which comprise ARfusion®, our platform technology for smart, augmented reality (AR) prescription eyewear, and we added nano-optic security products with the acquisition of Nanotech Security Corp. In 2022, we acquired nanoporous ceramic battery separator technology and high-speed vacuum coating capabilities. The underlying approach that powers the Company’sour platform technologies comprises advanced materials, metamaterials and functional surfaces. These materials include structures that are patterned in ways that manipulate light, heat, and electromagnetic waves in unusual ways. The Company’sOur advanced structural design technologies and scalable manufacturing methods provide a path to broad commercial opportunities in aerospace and defense, automotive, energy, healthcare, consumer electronics, and data transmission.

Controlling light, heat, electricity,Throughout 2022, we focused our resources on the pilot scale manufacturing of our NANOWEB®transparent conductive filmapplications, expansion of our production capacity in our ARfusion® smart lenses for AR eyewear, as well as the banknote and radio wavesbrand security lines, and more aggressive design, development and pre-clinical testing of certain medical products.

We have played key rolesproduct concepts currently in technological advancements throughout history. Advancesvarious stages of development with multiple potential customers in electricaldiverse market verticals. Our business model is to co-develop innovative products or applications with industry leaders that add value. This approach enables us to understand market dynamics and electromagneticensure the relevance and need for our products.

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META’s customerscan benefit from:

What is possible to manipulate them.
a Metamaterial?

Over the past 20 years, techniques for producing nanostructures have matured, resulting in a wide range of groundbreaking solutions that can control light, heat, and electromagnetic waves at very small scales. Some of the areas of advancement that have contributed to these techniques are photonic crystals, nanolithography, plasmonic phenomena and nanoparticle manipulation. From these advances, a new branch of material science has emerged – metamaterials. Metamaterials are composite structures, consisting of conventional materials such as metals and plastics, which are engineered by scientists to exhibit new or enhanced properties relating to reflection, refraction, diffraction, filtering, conductance and other properties that have the potential for multiple commercial applications.

A metamaterial typically consists of a multitude of structured unit nano-cells that are comprised of multiple individual elements. These are referred to as meta-atoms. The individual elements are usually arranged in periodic patterns that, together, can manipulate light, heat, or electromagnetic waves. Development strategies for metamaterials and functional surfaces focus on structures that produce unusual and exotic electromagnetic properties by manipulating light and other forms of energy in ways that have never been naturally possible. They gain their properties not as much from their composition as from their exactingly designed structures. The precise shape, geometry, size, orientation, and arrangement of these nanostructures affect the light and other electromagnetic waves to create material properties that are not easily achievable with conventional materials.

The Company has many product concepts currently in various stages of development with multiple potential customers in diverse market verticals. The Company’s business model is to co-develop innovative products or applications with industry leaders that add value. This approach enables the Company to understand market dynamics and ensure the relevance and need for its products.

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Controlling light, heat, electricity, and radio waves have played key roles in technological advancements throughout history. Advances in electrical and electromagnetic technologies, semiconductors, wireless communications, lasers, and computers have all been made possible by challenging the understanding of how light and other types of energy naturally behave, and how it is possible to manipulate them.

Holography Technology
 

Holography is a technique where collimated visible wavelength lasers are used to directly write an interference pattern inside the volume of light-sensitive material (photopolymer) in order to produce highly transparent optical filters and holographic optical elements. For

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some product lines that require large surface areas, this is combined with a proprietary scanning technique, where the lasers, optically or mechanically, directly write nano-patterns to cover large surface areas with nanometer accuracy.

META’s principal products that employ holography technology are its metaAIR® laser glare protection eyewear, metaAIR® laser glare protection films for law enforcement and holoOPTIXTM® notch filters. META co-developed its metaAIR® laser glare protection eyewear product with Airbus S.A.S. It has been engineered to provide laser glare protection for pilots, military and law enforcement using META’s holography technology. metaAIR® is a holographic optical filter developed using nano-patterned designs that block and deflect specific colors or wavelengths of light. META launched metaAIR® with strategic and exclusive distribution partner, Satair, a wholly owned Airbus company and started producing and selling metaAIR® in April 2019. The scale-up and specification for the raw photopolymer material used to produce the eyewear was successfully finalized in late 2019 and commercialized in 2020. META launched its laser glare protection films for law enforcement use in late 2020. These films are designed to be applied to face shields and helmet visors providing the wearer with the same type of laser glare eye protection afforded to pilots by metaAIR® glasses while preserving peripheral vision critical to law enforcement duties. HoloOPTIXholoOPTIXTM® notch filters are optical filters that selectively reject a portion of the spectrum, while transmitting all other wavelengths. They are used in applications where it is necessary to block light from a laser, as in machine vision applications and in confocal or multi-photon microscopy, laser-based fluorescence instrumentation, or other life science applications. HoloOPTIXWe commercially launched holoOPTIXTM® notch filters were commercially launched by the Company in November 2020.

META has additional products in development that utilize its proprietary holography technology. Included in the holoOPTIXTM® family of products are holographic optical elements (“HOEs”). HOEs are a core component in the display of augmented reality smart glasses products, as well as (in their larger version) in Heads-Up Displays (“HUDs”), in automobiles and aircraft.

Additionally, our ARfusion® technology combines precision cast lens fabrication tools with functional metamaterials and volume holograms, to provide AR wearable developers with a platform for seamlessly integrating smart technologies into thin lightweight prescription glasses. To achieve widespread commercial adoption and ultimately become as ubiquitous as smartphones, AR glasses must be comfortable, affordable, natural looking, and easy to use. A successful solution needs to achieve high-quality images and a large field of view (FOV) in a fashionable, compact form factor, without adding excess weight. This means that the smart technologies (displays, filters, active dimming) must be embedded within a rugged, cast prescription lens.

Our ARfusion® system was first developed by a Swiss company, Interglass Technology (“Interglass”), which we acquired in February 2021. Interglass designed the automated lens casting system as a more sustainable solution to producing prescription lenses, using a fraction of the material and energy compared to conventional processes. The lenses were directly cast into the final correction using an extensive library of reusable front and back molds. Acrylic monomer injected between the two molds is cured with UV light in seconds. The molds are automatically separated, and the lens substrate is ready in as quick as 1 minute, with no cleaning, polishing or post-production for a simple corrective lens. To accommodate precisely formed and embedded smart AR elements in prescription lenses, ARfusion® produces an optimized, minimal thickness, semi-finished blank lens, ready to be ground to the final curvature on standard ophthalmic processing equipment.

In a traditional cast plastic lens, up to 80% of the original lens blank material is wasted as the prescription is ground into the blank. With the same amount of material, ARfusion® can produce several optimized semi-finished lenses. In a standard thermal process, curing of semi-finished lens blanks for up to 50 hours requires much more energy and process time compared to the UV curable materials and associated processes used by ARfusion®.

Lithography Technology
 

Lithography is a process commonly used in the fabrication of integrated circuits, in which a light-sensitive polymer (photoresist), is exposed and developed to form 3D relief images on the substrate, typically a silicon wafer of up to 300mm (11.8 inches) in diameter. In order to meet the performance, fabrication-speed, and/or cost criteria required for many potential applications that require large area and low cost nanopatterning, the Company haswe have developed a new nanolithography method called “Rolling Mask” lithography (registered trademark RML®), which combines the best features of photolithography, soft lithography and roll-to-plate/roll-to-roll printing capability technologies. Rolling Mask Lithography utilizes a proprietary UV light exposure method where a master pattern is provided in the form of a cylindrical mask. These master patterns are designed by the Companyus and over the years they have become part of a growing library of patterns, enriching the intellectual property (“IP”) of the Company. The nanostructured pattern on the mask is then rolled over a flat surface area writing a nano-pattern into the volume of a photoresist, creating patterned grooves, metal is then evaporated and fills the patterned grooves. The excess metal is then removed by a known post-process called lift-off. The result is an invisible conductive metal mesh-patterned surface (registered trademark NANOWEB®) that is not visible to the unaided eye, and which can be fabricated onto any glass or plastic transparent surface in order to offer high transparency, high conductivity and low haze smart materials.

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The Company’sOur current principal prototype product in lithography technology is its transparent conductive film, NANOWEB®. The lithography division operates out of the Company’sour wholly owned U.S. subsidiary, Metamaterial Technologies USA Inc. ("MTI US"). MTI US can produce meter-long samples of NANOWEB®, at a small volumes scale, for industry customers/partners. Throughout 20202021 and 2021, the Company has2022, we have been ordering and upgrading itsour equipment at itsMTI US's California facility to efficiently supply NANOWEB® samples in larger volumes. The Company has recentlyIn early 2022, we installed itsour first roll-to-roll, NANOWEB®NANOWEB® pilot scale production line at itsour Pleasanton, California facility. The line is configured for 300mm-wide rolls of substrate. All the equipment passed factory acceptance tests prior to deliveryOur roll-to-roll production now matches or exceeds functional performance of wafer-based samples. We have achieved cosmetic uniformity and installation,transparency in our samples and the line is currently being optimized.

they now exceed customer specifications for transmission, haze and sheet resistance.

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There are six NANOWEB®-enabled products and applications that are currently in early stages of development including:

More details of these products and applications can be found in META’s EDGAR filings and on META’s website at www.metamaterial.com.

The Company hasWe have entered into a collaboration agreement with Crossover Solutions Inc. to commercializeassist with commercialization of the NANOWEB® enabled products and applications for the automotive industry and with ADI Technologies to help secure contracts with the US Department of Defense.

Nano-optic structuresStructures and color-shifting foilsColor-shifting Foils

- the Company recentlyDuring 2021 we acquired Nanotech Security Corp. "Nanotech" which specializes in designing, originating, recombining, and mass-producing nanotechnology-based films with application for a wide variety of products and markets. Nanotech develops and produces nano-optic structures and color-shifting foils used in authentication and brand protection applications across a wide range of markets including banknotes, secure government documents, and commercial branding. The Company’sOur nano-optic security technology platforms include:

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Wireless Sensing and Radio Wave Imaging Technology
 

META’s Wireless Sensing platform uses infrared and radio frequency (RF) transmitters and receivers to collect and measure a variety of biological information enabling non-invasive and safe medical diagnostics. The platform requires the ability to cancel reflections (anti-reflection) from the skin to reduce the natural impedance the skin provides to such signals and increase the Signal-to-Noise Ratio (“SNR”) of certain diagnostic instruments used in conjunction with the platform. This reflection-cancelling requirement is satisfied using META’s proprietary metamaterial films that employ patterned designs, printed on metal-dielectric structures on flexible substrates that act as anti-reflection (impedance-matching) coatings when placed over the human skin in combination with medical diagnostic modalities, such as MRI, ultrasound systems, non-invasive glucometers etc. The Company is

We are developing a number of medical products that employ this proprietary technology.technology, which are subject to FDA approval prior to marketing as described in more detail below. glucoWISETM®, is in development as a completely non-invasive glucose measurement device. It is being developed first as a benchtop medical device product,tabletop system for use in the home or clinic, followed by a portable, pocket-size product and ultimately as a wearable. In magnetic resonance imaging (MRI), increasing the SNR by orders of magnitude has been demonstrated to produce much higher resolution images with significant increases in imaging speed resulting in better patient throughput and potentially more accurate diagnoses in imaging clinics. For example, the Company iswe began developing metaSURFACE™ (also known as radiWISE™) an innovation which allows an improvement in signal to noise ratioSNR of up to 40 times for MRI scans. The metaSURFACE™ device consists of proprietary non-ferrous metallic and dielectric layers that are exactingly designed to interact (resonate) with radio waves increasing the SNR.METASNR. META is also researching the use of its Radio Wave Imaging technology in breast cancer and stroke diagnosis.

The Company is We also are developing wireless sensing and radio wave imaging applications from itsour London, UK office and its newly established Athens, Greece office.offices.

During 2022, we developed new prototypes utilizing glucoWISE® technology for new pre-clinical studies and human trials. These prototypes are for a non-invasive glucose monitor that incorporates metamaterial antireflective film as well as dual radio wave and optical sensors which provides for enhanced signal penetration through the skin.

Battery Materials

We acquired the assets and IP of Optodot Corporation, a developer of advanced materials technologies in June 2022, and we began focusing on developing and licensing ceramic separatortechnology for lithium-ion batteries. The separator is a critical component for battery performance and safety. Ceramic coated plastic separators (CCS) are widely used today. They are prone to failure at high temperatures, leading to battery fires thus aggravating a tenuous safety profile as energy density and battery size increase. Our next-generation NPORE®is the world’s first flexible, free-standing ceramic nanoporous membrane separator for lithium-ion batteries. NPORE® separators eliminate the use of plastic substrate, provide superior functionality and outstanding heat resistance for current and next generation lithium-ion batteries. NPORE®all-ceramic separators (CSP) offer increased safety and performance by eliminating the plastic layer entirely, and exhibit less than 1% heat shrinkage at temperatures up to 200 degrees C. Our third generation electrode coated separators (ECS) combine what are presently two discrete functions in Lithium-ion batteries and offer a simpler, faster, lower-cost assembly process compatible with current and future battery chemistries (siliconanode, lithium metal, and solid state).

The global market for Lithium-ion battery separators was estimated at $5.1 billion in 2021 and is projected to reach $9.0 billion in 2025 (Source: Yano Research Institute Ltd.). Separator shipments were about 5.5 billion square meters in 2021 and are projected to reach 15.9 billion square meters in 2025 (Source: SNE Research). About 15 million square meters are required per GWh of battery capacity.

Additionally, electric vehicle (EV) consumers desire increased range and fast charging to get back on the road quickly. Storing more energy relative to weight and volume and accepting higher charge rates increase the requirements for material performance, stability, and safety. Wider EV adoption demands improved material utilization along the supply chain.

In April 2022, we acquired UK-based Plasma App Ltd., developer of a proprietary, high-speed, pulsed plasma deposition technology. With the combination of these acquired technologies, we plan to develop new battery materials and manufacturing techniques to address all these challenges. PLASMAfusion® high-speed vacuum coating technology has been used to produce prototype NCORE™ thin polymer-metal composite copper current collectors, significantly reducing weight, with a fuse-like feature for increased safety. Lighter batteries increase energy density and vehicle range. Lower copper content makes battery production and recycling more sustainable.

High Speed Coating

PLASMAfusion®is a first of its kind, patented manufacturing platform technology developed by our Oxford, UK based Plasma App Ltd, a wholly owned subsidiary which was acquired during 2022.PLASMAfusion®enables high speed coating of any solid material on any substrate. It uniquely enables doping, multilayering, or mixing of materials in vacuum with controlled stoichiometry distribution within the deposited film at low substrate temperature.

We expect to apply PLASMAfusion®to the metallization step in our roll-to-roll production process for NANOWEB® films as well as KolourOptik® security films. This is expected to significantly accelerate line speed and increase annual capacity. Large scale and efficient metallization is a critical step for volume production of NANOWEB® and many other high volume potential applications such

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as lithium-ion battery components. Large scale metallization is expected to leverage capital equipment investment and substantially reduce cost per square meter of output. META intends to continue to industrialize and scale up PLASMAfusion® including applications for its high volume factory in Thurso, Quebec. Additionally, PLASMAfusion® will be available for licensing and co-development for strategic partners.

PLASMAfusion® creates unprecedented new high-performance nanocomposites in real time by using multiple, time sequenced targets. We believe this is a unique process enabler, likely to facilitate META’s entry into multiple high-growth markets. High energy beam deposition of materials, at low temperature, without solvents and other toxic chemicals, promises highly sustainable, breakthrough performance. Compared to traditional coating technologies, we estimate PLASMAfusion® is approximately 60x more energy efficient compared to Plasma Laser Deposition (PLD) and 8x more efficient compared to Magnetron Sputtering to produce each 100nm of coating on each square cm area of the substrate, while also offering higher adhesion, deposition rates, and overall coating uniformity.

PLASMAfusion® enables design of surfaces and a path to industrial surface manufacturing for a variety of applications including batteries, semiconductors and metamaterials, printed circuit boards and protective optical coatings.

OilElectro-Optic and Gas operationsIR

As part of the Arrangement AgreementWe produce high-precision thin film coatings, optics, holographic and lithographic gratings, and optomechanical assemblies for ultraviolet, visible, and infrared applications. For example, we are developing an advanced, electro-optical motion imagery system with Torchlight Energy Resources, Inc. ("Torchlight") as mentionedapplications in the following section, the Company acquired a group of oilaerospace and gas assets ("O&G assets")defense sectors, and had interest in them as follows:

The Company has classified these assets as assets held for sale pursuant to its commitment to sell or spin out the O&G assets prior to the earlier of (i) December 31, 2021 or (ii) the date which is six months from the closing of the Arrangement, or (iii) such later date as may be agreed between the Company and the individual appointed to serve as the representative of the holders of Series A Preferred Stock (the “Sale Expiration Date”). The Series A Preferred Stock will automatically be cancelled once the entitled dividends have been paid. See the description in Note 5, “Assets Held for Sale” of the financial statements included with this report for information and disclosure regarding these assets. See Item 1A, risk Factors for more information on these assets.

Customers

The Company’sOur customers are OEM providers in multiple industries including aerospace, automotive, consumer electronics, communications, energy, banknote and brand security, and medical devices. The Company organizes itsWe organize our development and support efforts around these differentiateddifferent vertical markets to enable itus to effectively penetrate these markets and to develop products specific to the needs of these OEM customers.

Marketing and Sales

The Company operatesWe operate under a Business-to-Business model. ItsOur marketing and sales functions are organized to support and grow this operating model. The Company utilizesWe utilize a combination of filed-basedfield-based and in-house selling resources to promote and sell its more commonour standard off-the-shelf products and a vertical market focused Business Development group to develop and support long-term customer relationships in the vertical market of interest. The Company'sOur marketing efforts are focused on technical education of itsour customer base regarding itsour products, support of a meaningful presence at trade shows and industry events and routine production of collateral materials to support itsour sales and business development efforts.efforts throughout the year.

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Manufacturing

The Company employsWe employ a hybrid model for manufacturing of our high-performance functional materials and nanocomposites.

The Company providesWe provide research scale production of itsour products in-house to itsour customers in itsthe lithography and holography business areas. The Company isWe are scaling up pilot scale production of its materials in itsour Pleasanton facility and Highfield Park facility. The Company hasfacilities. We have current capacity in itsour Thurso facility to produce its7.5 million square meters per year of our banknote security and brand security product at commercial scale and it iswe are expanding this capacity. In certain instances where volume warrants, the Companywe will make available on a license basis, itsour equipment and proprietary processes to itsour customers or to third party contractors to product itsproduce our products for their needs.

The Company is

We are constantly improving and investing in itsour manufacturing capabilities and the associated quality control and resource planning infrastructure. The Company holdsWe hold ISO9001 certification for itsour Highfield Park facility and it is pursuing additional certifications in itsour Thurso facility.

Research And Development

The Company operates

We operate in a rapidly evolving industry subject to significant technological change and new product introductions and enhancements. The Company believesWe believe that itsour continued commitment to research and development is a critical element of our ability to introduce new and enhanced products and technologies. The Company has historicallyIn 2022 we invested more than fortyapproximately twenty-five percent (40%(25%) of itsour operating expenses in itsour research and development efforts and these activities are integral to maintaining and enhancing our competitive position. The CompanyWe also increasingly seeksseek to deploy itsour resources to solve fundamental challenges that are both common to, and provide competitive advantage across, itsour high-performance functional materials and nanocomposites.

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The Company believesWe believe that itsour success depends in part on itsour ability to achieve the following in a cost-effective and timely manner:

Intellectual Property

During 2021, the Company has2022, we significantly expanded its patentsour patent and trademarks portfolio significantlytrademark portfolios in a wide range of applications including holography, lithography, wireless sensing technology, nano-optic structures as well as battery safety, battery separator technology, and nano-optic structures. In addition to META's previoushigh-speed coating capabilities. We added more than 10 patent documents from the Plasma acquisition, and 101 patent documents from the Optodot acquisition. We currently have over 500 active patent documents, of which 315 patents have issued, compared with 269 active patent documents and 163 issued patents one year ago. Our patent portfolio is comprised of 126 patents, the Company acquired more than 23 patents from Interglass Technology AGpatent families, of which 68 include at least one issued patent. During 2022 we also filed 44 trademark registration applications and 15 trademarks were registered, resulting in a total of 60 registered trademarks and 98 patents from the Nanotech acquisition The Company believespending applications. We believe that itsour combination of patents, trademarks, and additional IP that is being held confidential by way of multiple trade secrets provides the Companyus with an important competitive advantage, marketing benefits, and licensing revenue opportunities.

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Regulation

The Company isWe are subject to significant regulation by local, state, federal and international laws in all jurisdictions in which it operates.we operate. Compliance with these requirements can be costly and time consuming. The Company believesWe believe that itsour operations, products, services, and actions substantially comply with applicable regulations in all jurisdictions. However, the risk of non-compliance cannot be eliminated and therefore there is no assurance that future costs related to these regulations will not be incurred. There is also the possibility that regulations will be retroactively applied, interpreted, or applied differently to the Company'sour operations, products, services, and actions which will require significant time and resources.

The development, testing, manufacturing, marketing, post-market surveillance, distribution, advertising, and labeling of certain medical devices are subject to regulation in the United States by the Center for Devices and Radiological Health of the U.S. Food and Drug Administration (FDA) under the Federal Food, Drug, and Cosmetic Act (FDCA) and comparable state and foreign regulatory agencies. FDA defines a medical device as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component part or accessory, which is (i) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or (ii) intended to affect the structure or any function of the body of man or other animals and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes. Medical devices to be commercially distributed in the United States must receive from the FDA either clearance of a premarket notification, known as 510(k), or premarket approval pursuant to the FDC Act prior to marketing, unless subject to an exemption.

In the U.S., if we market our products for medical purposes, such products would be subject to regulation by the FDA under premarket and post-market control as medical devices, unless an exemption applies, and we would be required to obtain either prior 510(k) clearance or prior premarket approval from the FDA before commercializing the product. Obtaining the requisite regulatory approvals can be expensive and may involve considerable delay. Some countries have regulatory review processes that are substantially longer than U.S. processes. Failure to obtain regulatory approval in a timely manner and meet all of the local regulatory requirements where we plan to market our products could prevent us from marketing products in such countries or subject us to sanctions and fines. Changes to the current regulatory framework, including the imposition of additional or new regulations, could arise at any time during the development or marketing of our products.

FDA classifies medical devices into one of three classes. Devices deemed to pose lower risk to the patient are placed in either class I or II, which, unless an exemption applies, requires the manufacturer to submit a premarket notification requesting FDA clearance for commercial distribution pursuant to Section 510(k) of the FDCA. This process, known as 510(k) clearance, requires that the manufacturer demonstrate that the device is substantially equivalent to a previously cleared and legally marketed 510(k) device or a “pre-amendment” class III device for which premarket approval applications (“PMAs”) have not been required by the FDA. This FDA review process typically takes from four to twelve months, although it can take longer. Most Class I devices are exempted from this 510(k) premarket submission requirement. If no legally marketed predicate can be identified for a new device to enable the use of the 510(k) pathway, the device is automatically classified under the FDCA as Class III, which generally requires premarket approval, or PMA approval. However, the FDA can reclassify or use “de novo classification” for a device that meets the FDCA standards for a Class II device, permitting the device to be marketed without PMA approval. To grant such a reclassification, FDA must determine that the

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FDCA’s general controls alone, or general controls and special controls together, are sufficient to provide a reasonable assurance of the device’s safety and effectiveness. The de novo classification route is generally less burdensome than the PMA approval process. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or those deemed not substantially equivalent to a legally marketed predicate device, are placed in class III. Class III devices typically require PMA approval. To obtain PMA approval, an applicant must demonstrate the reasonable safety and effectiveness of the device based, in part, on data obtained in clinical studies. All clinical studies of investigational medical devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption (“IDE”) regulations, including the requirement for the study sponsor to submit an IDE application to the FDA, unless exempt, which must become effective prior to commencing human clinical studies. PMA reviews generally last between one and two years, although they can take longer. Both the 510(k) and the PMA processes can be expensive and lengthy and may not result in clearance or approval. If we are required to submit our products for premarket review by the FDA, we may be required to delay marketing and commercialization while we obtain premarket clearance or approval from the FDA. There would be no assurance that we could ever obtain such clearance or approval.

All medical devices that are regulated by the FDA are also subject to the quality system regulation. Obtaining the requisite regulatory approvals, including the FDA quality system inspections that are required for PMA approval, can be expensive and may involve considerable delay. The regulatory approval process for such products may be significantly delayed, may be significantly more expensive than anticipated, and may conclude without such products being approved by the FDA. Without timely regulatory approval, we will not be able to launch or successfully commercialize such diagnostic products. Changes to the current regulatory framework, including the imposition of additional or new regulations, could arise at any time during the development or marketing of our products. This may negatively affect our ability to obtain or maintain FDA or comparable regulatory clearance or approval of our products in the future. In addition, regulatory agencies may introduce new requirements that may change the regulatory requirements for us or our customers, or both.

If our products become subject to FDA regulation as medical devices, the regulatory clearance or approval and the maintenance of continued and postmarket regulatory compliance for such products will be expensive, time-consuming, and uncertain both in timing and outcome. Commercialization of such regulated medical devices can increase our exposure under additional laws. For example, medical device companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business and may constrain the financial arrangements and relationships through which we research, as well as sell, market and distribute any medical products for which we obtain marketing authorization. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, data privacy and security, and transparency laws and regulations related to payments and other transfers of value made to physicians and other healthcare providers. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply, we may be subject to penalties, including, without limitation, administrative, civil, and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and imprisonment.

Additionally, we must comply with complex foreign and U.S. laws and regulations, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other local laws prohibiting corrupt payments to governmental officials, anti-competition regulations and sanctions imposed by the U.S. Office of Foreign Assets Control, and other similar laws and regulations. Violations of these laws and regulations could result in fines and penalties, criminal sanctions, restrictions on our business conduct, and on our ability to offer our products in one or more countries, and could also materially affect our brand, our ability to attract and retain employees, our international operations, our business, and our operating results. As we continue to expand our business into multiple international markets, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. Any of these risks could harm our international operations and negatively impact our sales, adversely affecting our business, results of operations, financial condition, and growth prospects.

Human Capital Resources

As of February 28, 2022, the Company2023, we had 130239 employees. Approximately 90%86% of itsour employees are located in Canada and the United States. Of the total workforce, 48114 employees are involved in research and development; 2845 employees are involved in operations, manufacturing, service and quality assurance; and 5480 employees are involved in sales and marketing, finance, information technology, general management and other administrative functions.

Available Information

The Company'sOur Annual ReportsReport on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports and proxy and information statements are accessible free of charge on itsour website at www.metamaterial.com as soon as reasonably practicable after he Companywe electronically filesfile such material with, or furnish itthem to, the SEC. The SEC also maintains an internet site that

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contains reports, proxy and information statements and other information regarding the Company'sour filings at www.sec.gov. The reference to the Company'sour company website does not constitute incorporation by reference of the information contained at the site.

Business Combinations

Torchlight RTO

On December 14, 2020, the Company (formerly known as “Torchlight Energy Resources, Inc.” or “Torchlight”) and its subsidiaries, Metamaterial Exchangeco Inc. (formerly named 2798832 Ontario Inc., “Canco”) and 2798831 Ontario Inc. (“Callco”), entered into an Arrangement Agreement (the “Arrangement Agreement”) with Metamaterial Inc. ("MMI"), an Ontario corporation headquartered in Nova Scotia, Canada, to acquire all of the outstanding common stock of MMI by way of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (Ontario), on and subject to the terms and conditions of the Arrangement Agreement (the “Torchlight RTO”). On June 25, 2021, the Companywe implemented a reverse stock split, changed itsour name from “Torchlight Energy Resources, Inc.” to “Meta Materials Inc.” and changed itsour trading symbol from “TRCH” to “MMAT”. On June 28, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed.

On June 28, 2021, and pursuant to the completion of the Arrangement Agreement, the Companywe began trading on the NASDAQNasdaq Capital Market under the symbol “MMAT” while MMI common stock was delisted from the Canadian Securities Exchange (“CSE”). At the same time, Metamaterial Exchangeco Inc., a wholly owned subsidiary of META, started trading under the symbol “MMAX” on the CSE. Certain previous shareholders of MMI elected to convert their common stock of MMI into exchangeable shares in Metamaterial Exchangeco Inc. These exchangeable shares, which can be converted into common stock of META at the option of the holder, are similar in substance to common shares of META and have been included in the determination of outstanding common shares of META.

For accounting purposes MMI, the legal subsidiary, has been treated as the accounting acquirer and the Company,we the legal parent, hashave been treated as the accounting acquiree. The transaction has been accounted for as a reverse acquisition in accordance with ASC 805 Business Combination. Accordingly, thesethe consolidated financial statements are a continuation of MMI consolidated financial statements prior to June 28, 2021 and exclude the balance sheets, statements of operations and comprehensive loss, statement of changes in stockholders’ equity and statements of cash flows of Torchlight prior to June 28, 2021. See note 34 of our audited consolidated financial statements for additional information.

On December 14, 2022, we distributed all of our 165,472,241 outstanding shares of Common Stock of Next Bridge Hydrocarbons Inc. (“Next Bridge”) to holders of our Series A Non-Voting Preferred Stock on a pro rata basis. Next Bridge was originally incorporated in Nevada on August 31, 2021 as OilCo. Holdings, Inc. (and changed its name to Next Bridge Hydrocarbons, Inc. pursuant to its Amended and Restated Articles of Incorporation filed on June 30, 2022) and was previously our wholly owned subsidiary. Immediately after the distribution, Next Bridge became an independent company, and as a result, we have deconsolidated the financial results of Next Bridge from our consolidated financial results from December 14, 2022 onwards. See note 5 of our audited consolidated financial statements for additional information on this transaction.

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Nanotech acquisition

On August 5, 2021, the Companywe announced the signing of a definitive agreement to indirectly acquire Nanotech. On October 5, 2021, a wholly owned subsidiary of META purchased 100% of Nanotech’s common stock at CA$1.25 per share. In addition, the transaction price included the settlement of certain Nanotech share awards outstanding immediately prior to the closing of the agreement, including the repurchase and cancellation of 303,391 Nanotech restricted share units ("RSU") at a purchase price of CA$1.25 per RSU and the settlement of 4,359,000 Nanotech in-the-money stock options at a purchase price equal to CA$1.25 per option, less the exercise price thereof. The consideration payable to securityholders under the arrangement was payable in cash, resulting in a total purchase price of $71.6 million (CA$90.8 million).$72.1 million.

Nanotech is incorporated under the laws of British Columbia, Canada. Nanotech’s head office is located at #505 - 3292 Production Way, Burnaby, BC, Canada V5A 4R4. In addition, Nanotech owns and operates a manufacturing facility located in Thurso, Quebec.

Plasma App Ltd acquisition

On April 1, 2022, we completed the purchase of 100% of the issued and outstanding shares of Plasma App Ltd. ("PAL"). PAL is the developer of PLASMAfusion®, a proprietary manufacturing platform technology, which enables high speed coating of any solid material on any type of substrate. PAL’s team is located at the Rutherford Appleton Laboratories in Oxford, UK.

We issued an aggregate of 9,677,419 shares of our common stock to PAL's shareholders at closing, representing a number of shares of common stock equal to $18,000,000 divided by $1.86 (the volume weighted average price for the ten trading days ending on March 31, 2022), with an additional deferral of common stock equal to $2,000,000 divided by $1.86 to be issued subject to satisfaction of certain claims and warranties.

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Optodot acquisition

We completed an asset purchase agreement with Optodot Corporation (“Optodot”) on June 22, 2022). Optodot, based in Devens, Massachusetts, USA, is a developer of advanced materials technologies for the battery and other industries.

The consideration transferred included the following: A cash payment of $3,500,000 as well as unrestricted common stock equal to $37,500,000 divided by our common stock's daily volume weighted average trading price per share on the Nasdaq Capital Market for a period of twenty trading days ending on June 21, 2022 and restricted common stock, subject to milestones as set forth in the Purchase Agreement, equal to $7,500,000 divided by the daily volume weighted average trading price per share of our Common Stock on the Nasdaq Capital Market for the consecutive period of twenty trading days ending on June 21, 2022.

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Item 1A. Risk Factors.

The following factors could materially affect META’sour business, financial condition or results of operations and should be carefully considered in evaluating the Companyus and itsour business, in addition to other information presented elsewhere in this report.

Risks That Could Affect the Company’s Financial ConditionSUMMARY OF RISK FACTORS

Limited Operating History

The Company hasBelow is a summary of the principal factors that could materially harm our business, operating results and/or financial condition, impair our future prospects or cause the price of our common stock to decline. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below after the summary of risk factors and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission ("SEC") before making an investment decision regarding our common stock.

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The Company has

Risks Related to our Business

We have a limited operating history, which can make it difficult for investors to evaluate our operations and prospects and may increase the risks associated with investing in us.

We have incurred recurring consolidated net losses since itsour inception and expects itsour operating costs to continue to increase in future periods as it expendswe expend substantial financial and other resources on, among other things, business and headcount expansion in operations, sales and marketing, research and development, and administration as a public company. These expenditures may not result in additional revenues or the growth of the Company'sour business. If the Company failswe fail to grow revenues or to achieve profitability while itsour operating costs increase, itsour business, financial condition, results of operations and growth prospects will be materially, adversely affected.

The Company is

We are expected to be subject to many of the risks common to early-stage enterprises for the foreseeable future, including challenges related to laws, regulations, licensing, integrating and retaining qualified employees; making effective use of limited resources; achieving market acceptance of existing and future products; competing against companies with greater financial and technical resources; acquiring and retaining customers; and developing new solutions; and challenges relating to identified material weaknesses in internal control.

Access to Capital

The Company believes that current working capital will be sufficientWe have a history of net losses, and we expect to continue its businessto incur losses for at least the next twelve months. Should the Company's costs and expenses proveforeseeable future. If we ever achieve profitability, we may not be able to be greater than it currently anticipates, or should it change its current business plan in a manner that will increase or accelerate its anticipated costs and expenses, such as through the acquisition of new products, the depletion of its working capital could be accelerated. The Company presently has access to approximately one hundred and twelve million dollars of new funding through its existing At the Market S-3 Shelf Registration (ATM). The Company believes that this funding is sufficient to enable it to fund its current working capital needs well into 2024.sustain it.

We have incurred losses from operations since our inception and expect to continue to incur losses from operations for the foreseeable future. We reported net losses of $79.1 million and $91.0 million for the years ended December 31, 2022 and 2021, respectively. As a

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result of these losses, as of December 31, 2022, we had an accumulated deficit of $207.5 million. We expect to continue to incur significant sales and marketing, research and development, regulatory and other expenses as we grow our business. In addition, we expect our general and administrative expenses to increase due to the additional costs associated with being a public company. The Companynet losses that we incur may fluctuate significantly from period to period. We will need to generate significant additional revenue in order to achieve and sustain profitability. Even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time.

We expect to continue to incur losses from operations and negative cash flows, which raise substantial doubt about our ability to continue as a going concern.

We anticipate incurring additional losses until such time, if ever, we can achieve profitability. Substantial additional financing will be needed to fund our development, marketing and sales activities and generally to commercialize our technology. These factors raise substantial doubt about our ability to continue as a going concern.

We will seek to obtain additional capital through the issuance of debt or equity financings or other arrangements to fund operations; however, there can be no assurance we will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing shareholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit our ability to pay dividends or make other distributions to shareholders. If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in our ability to raise capital, we believe that there is substantial doubt as to our ability to continue as a going concern.

We will need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.

We will need to raise additional capital to expand the commercialization of our products, fund our operations and further our research and development activities. We will pursue sources of additional capital through various financing transactions or arrangements, including the sale/leaseback of certain properties, joint venturing of projects, debt financing, equity financing, or other means. The CompanyWe may not be successful in identifying suitable financing transactions in the time period required or at all, and itwe may not obtain the capital it requireswe require by other means.

The Company'sOur ability to obtain financing, if and when necessary, may be impaired by such factors as the capital markets and itsour limited operating history.

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Any additional capital raised through the sale of equity may dilute the ownership percentage of the Company'sour stockholders. Raising any such capital could also result in a decrease in the fair market value of itsour equity securities because itsour assets would be owned by a larger pool of outstanding equity. The terms of securities the Company issueswe issue in future capital transactions may be more favorable to itsour new investors, and may include preferences, superior voting rights and the issuance of other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.

The CompanyIn addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. The CompanyWe may also be required to recognize non-cash expenses in connection with certain securities itwe may issue, which may adversely impact our financial condition.

Currency Fluctuations

If we are unable to maintain effective disclosure controls and procedures, our business, financial position and results of operations could be adversely affected

We are subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our management has concluded that a material weakness in our internal control over financial reporting exists at December 31, 2022. Management has further concluded that this material weakness resulted in our disclosure controls and procedures not being effective as of December 31, 2022. Please see Item 9A of Part II, Controls and Procedures, for more information about the material weakness that we identified.

The Company’s revenues and expenses are denominated in US dollars, Canadian dollars, EURO, and Great British Pounds, and therefore are exposed to significant currency exchange fluctuations. Recent events in the global financial markets have been coupled with increased volatility in the currency markets. Fluctuations in the exchange rate between the US dollar, the Canadian dollar and the Great British Pounds may have a material adverse effect on the Company’s business, financial condition, and operating results. The Company may, in the future, establish a program to hedge a portion of its foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. With appropriate risk management and oversight this may be able to offset future risk, however a hedging strategy will result in additional operating costs.17

Costs of Maintaining a Public Listing

As a publicly traded company, there are costs associated with legal, accounting, and other expenses relatedWe may be unable to regulatory compliance. Securities legislation and the rules and policies of the NASDAQ require listed companies to, among other things, adopt corporate governance and related practices, and to continuously prepare and disclose material information, all of which add to a company’s legal and financial compliance costs. The Company may also elect to devote greater resources than it otherwise would have on communication and other activities typically considered important by publicly traded companies.

Risks That Could Have a Material Adverse Effect on the Company’s Business

Customer Concentration

The Company relies on a few customers for a significant portion of its revenues. For the year ended December 31, 2021, the Company had 3 customers that accounted for $3,307,914 or 81% of total revenue. For the year ended December 31, 2020, the Company had 3 customers that accounted for $807,912 or 72% of total revenue.

The Company currently derives a significant portion of its revenue from contract services between its wholly-owned subsidiary, Nanotech, and a G10 central bank. The Company is developing a new security feature under a framework contract with this customer. There can be no assurance that this project will be successful, or that will result in long-term production revenue for this security feature.

Risk of not developingdevelop new products, applications, and end markets for the Company's productsour products.

The Company'sOur future success will depend in part on itsour ability to generate sales of itsour products as well as generating development revenue. Current and potential customers may have substantial investment in, and know-how related to the Company'sour technologies. Customers may be reluctant to change from incumbent suppliers or cease using their own solutions, or the Company'sour products may miss the design and procurement cycles of itsour customers. Many target markets have historically been slow to adopt new technologies. These markets often require long testing and qualification periods or lengthy government approval processes before admitting new suppliers or adopting new technologies.

Introduction of new products and product enhancements will require that the Companywe effectively transfer production processes from research and development to manufacturing and coordinate efforts with those suppliers to achieve increased production volume rapidly. If we are unable to implement this strategy to develop new applications and end markets for products or develop new products, the business, financial condition, results of operations and growth prospects could be materially adversely affected. In addition, any newly developed or enhanced products may not achieve market acceptance or may be rendered obsolete or less competitive by the introduction of new products by other companies.

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ResearchOur research and Market Developmentmarketing development activities and investments may not result in profitable, commercially viable or successfully produced and marketed products.

Although the Company, itselfwe, ourselves and through itsour investments, isare committed to researching and developing new markets and products and improving existing products, there can be no assurances that such research and market development activities will prove profitable or that the resulting markets and/or products, if any, will be commercially viable or successfully produced and marketed. A failure in the demand for products to materialize as a result of competition, technological change or other factors could have a material adverse effect on the business, results of operations and financial condition of the companies in which the Company haswe have or will invest in, and consequently, on the Company.

Raw Material Sourceus.

The Company purchases itsDisruption in supply from our single source supplier of our holographic raw materials may cause a material adverse effect on our Holography-related products.

We purchase our holographic raw materials from a tier 1 German manufacturer, which is a single source supplier. Disruption in supply from this supplier for any number of factors may cause a material adverse effect on our Holography-related products.products, which would negatively impact our financial condition and results of operations.

Change

Impairment of our goodwill or other intangible assets could materially and adversely affect our business, operating results, and financial condition.

Events or changes in Laws, Regulationscircumstances, such as declines in our stock price or market capitalization, could increase the likelihood that we will be required to recognize an impairment charge against our goodwill and/or intangible assets. In particular, these or other adverse events or changes in circumstances may affect the estimated undiscounted future operating cash flows expected to be derived from our goodwill and Guidelinesintangible assets. We have recently experienced substantial declines in our stock price, and continued weakness or further declines in our stock price increase the likelihood that we may be required to recognize impairment charges. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge. We cannot provide assurances that we will not in the future be required to recognize impairment charges. Please see Item 7 of Part II, Management’s Discussion and Analysis of Financial Condition and Results of Operation – Goodwill, for more information.

For example, a sustained decline in market capitalization below book value is an indicator that goodwill and other intangible assets should be tested for impairment under ASC 350 Intangibles – Goodwill and Other. During the period from January 1, 2022 to December 31, 2022, our stock price ranged between a high of $2.95 and a low of $0.63 and as of December 31, 2022 our market capitalization was $431.1 million and the book value of our goodwill was $281.7 million. While our market capitalization exceeded the book value of our goodwill as of December 31, 2022, as of March 17, 2023, our market capitalization is approximately $191.1 (based on a closing price of $0.50 per share) million and the book value of our goodwill is $281.7 million, and as such we may be required to recognize an impairment loss in the future if the drop in our market capitalization is deemed to be sustained.

We depend on our OEM customers and system integrators to incorporate our products into their systems.

Our revenues depend, in part, on our ability to maintain existing and secure new OEM customers. Our revenues also depend, in part, on the ability of our current and potential OEM customers and system integrators to incorporate our products into their systems, and to sell such systems successfully. Limited marketing resources, reluctance to invest in research and development and other factors affecting these OEM customers and third-party system integrators could have a substantial impact upon demand for our products, and in turn upon our revenues and financial results. If OEM customers or integrators are not able to adapt existing tools or develop new systems to

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take advantage of the features and benefits of our products or if they perceive us to be an actual or potential competitor, then the opportunities to expand our revenues and increase our margins may be severely limited or delayed. In addition, some of our OEM customers are developing their own competitive products. If they are successful, this may reduce our revenues from these customers.

Our revenues may be concentrated in a few customers, and if we lose any of these customers, or these customers do not pay us, our revenues could be materially adversely affected.

We rely on a few customers for a significant portion of our revenues. For the year ended December 31, 2022, revenue from one customer accounted for $8.6 million or 84% of total revenue.

We currently derive a significant portion of our revenue from contract services with a G10 central bank. Although we are developing a new security feature under a framework contract with this customer, there can be no assurance that this project will be successful, or that will result in long-term production revenue for this security feature.

Our agreements with various national governments and suppliers to such governments subject us to unique risks.

We must comply with, and are affected by, laws and regulations relating to the award, administration, and performance of various national government contracts. Awards received from such governments may be cancelled or lose funding. Such government contracting parties may require us to increase or decrease production of certain products sold to such governments due to changes in strategy, priorities or other reasons, which could impact production of other products or sales to other customers to meet the requirements of such governments. In addition, such governments routinely retain rights to intellectual property developed in connection with government contracts. Such governments could exercise these rights in certain circumstances in the future, which could have the effect of decreasing the benefit we are able to realize commercially from such intellectual property.

National government agencies routinely audit and investigate government contractors and can decrease or withhold certain payments when it deems systems subject to its review to be inadequate. Additionally, any costs found to be misclassified may be subject to repayment. If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines and suspension, or prohibition from doing business with such governments. In addition, we could suffer serious reputational harm if allegations of impropriety were made against it. Any such imposition of penalties, or the loss of such government contracts, could materially adversely affect our business, financial condition, results of operations and growth prospects

We are subject to the Foreign Corrupt Practices Act and similar anti-bribery and anti-corruption laws, as well as governmental export and import controls, all of which could subject us to liability or impair our ability to compete in international markets.

Our business activities may be subject to the U.S. Foreign Corrupt Practices Act (the FCPA), and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate. These laws generally prohibit companies and their employees and third-party business partners, representatives and agents from engaging in corruption and bribery, including offering, promising, giving or authorizing the provision of anything of value, either directly or indirectly, to a government official or commercial party in order to influence official action, direct business to any person, gain any improper advantage, or obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with government officials, including potentially officials of non-U.S. governments.

In addition to our own employees, we may in the future leverage third parties to conduct our business abroad, such as obtaining government licenses and approvals. We and our third-party business partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies, state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of our employees, our third-party business partners, representatives and agents, even if we do not explicitly authorize such activities. There is no certainty that our employees or the employees of our third-party business partners, representatives and agents will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, debarment from U.S. government contracts, substantial diversion of management’s attention, significant legal fees and fines, severe criminal or civil sanctions against us, our officers, or our employees, disgorgement and other sanctions and remedial measures, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, financial condition and stock price.

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The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of certain products, technologies, and software. We must export our products in compliance with U.S. export controls and we may not always be successful in obtaining necessary export licenses. Our failure to obtain required import or export approval for our products or limitations on our ability to export or sell our products imposed by these laws may harm our international and domestic revenues. Noncompliance with these laws could have negative consequences, including government investigations, penalties and reputational harm.

Changes in our products or changes in export, import and economic sanctions laws and regulations may delay our introduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the export or import of our products to or from certain countries altogether. In addition to the tariffs imposed by the U.S. Government on certain items imported from China, it is possible that additional sanctions or restrictions may be imposed by the United States on items imported into the United States from China. Similarly, in addition to the tariffs imposed by China on certain items imported from the United States, it is possible that additional sanctions or restrictions may be imposed by China on items imported into China from the United States. Any such measures could further adversely affect our ability to sell our products to existing or potential customers and harm our ability to compete internationally and grow our business. In addition, generally, tariffs may materially increase the cost of our raw materials and finished goods, may negatively impact our margins as we may not be able to pass on the additional cost through increasing the prices of our products, and may cause the contraction of certain industries, including the Industrial market. Any change in export or import regulations or legislation, shift or change in enforcement, or change in the countries, persons or technologies targeted by these regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations. In such event, our business, financial condition, results of operations and growth prospects could be materially adversely affected.

We may experience delays in providing sufficient product for future testing of our products due to ongoing supply chain limitations.

Due to current supply chain disruptions, our contract manufacturing organizations may experience an inability to manufacture and produce sufficient quantities of our products as we progress through our regulatory testing and/or approval. Should this happen, we may not be able to provide sufficient quantities of our products which could delay our ability to bring products to market. Such a delay would cause us to use more capital than currently planned which may have a material adverse effect on our projected timing of product launches and financials.

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Change in laws, regulations or guidelines relating to our business plan and activities could adversely affect our business.

Our current and proposed operations of the Company are subject to a variety of laws, regulations and guidelines relating to production, the conduct of operations, transportation, storage, health and safety, medical device regulation and the protection of the environment. These laws and regulations are broad in scope and subject to evolving interpretations, which could require the Companyus to incur substantial costs associated with compliance or alter certain aspects of itsour business plan. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of the Company’sour business plan and result in a material adverse effect on certain aspects of itsour planned operations.

The CompanyAs an example, we launched a new product metaAIR®metaAIR® in March 2019 to provide laser glare protection to pilots in the airline industry. Currently, metaAIR®metaAIR® is not subject to any Federal Aviation Administration regulations, however, metaAIR® mayregulations. However, metaAIR® has yet to receive FDA approval/clearance and could become subject to evolving regulation by governmental authorities as the metaAIR®metaAIR® market evolves further.

Integrating Past or Future Acquisitions

The Company hasIf we are unable to make acquisitions, or successfully integrate them into our business, our results of operations and financial condition could be adversely affected.

We have completed a number of acquisitions during itsour operating history. The Company hasWe have spent and may continue to spend significant resources identifying and pursuing future acquisition opportunities. Acquisitions involve numerous risks including: (1) difficulties in integrating the operations, technologies and products of the acquired companies; (2) the diversion of management’s attention from other business concerns; and (3) the potential loss of key employees of the acquired companies. Failure to achieve the anticipated benefits of any prior and future acquisitions or to successfully integrate the operations of the acquired companies could have a material and adverse effect on the Company'sour business, financial condition, and results of operations. Any future acquisitions could also result in potentially dilutive issuance of equity securities, acquisition or divestiture-related write-offs or the assumption of debt and contingent liabilities.

Regulatory Approval

The regulatory approval process for our medical products in the United States and other countries around the world is time-consuming and complicated, and we may not obtain the approval required to market a product within the timeline required, or at all. Additionally, we may lose regulatory approval and/or our products may become subject to new and unanticipated foreign regulations.

The Company’sOur wireless sensing technologytechnologies to enhance MRI and glucoWISE®non-invasive glucoWISE® glucose_monitoring isare under research and development. The Company hasWe have performed many pre-clinical experiments on animals and humans, and will continuewe are preparing to perform additionalclinical experiments as needed to continue the development of the related products.

These products have not yet completedentered the clinical trials/phase, and we have not engaged with any regulatory authorities regarding any medical uses subject to regulatory approval processes, and thereprocesses. We can beprovide no assurance that any clinical trials we commence will be successful, or that approvalswe will be granted.successful in obtaining any regulatory approvals for any medical products we may develop in the future.

Development of medical devices and related operations are subject to extensive government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could harm our business.

Any medical devices that we may develop in the future and related operations are subject to extensive regulation in the United States and elsewhere, including by the FDA and by the FDA’s foreign counterparts. The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices: design, development, manufacturing, and release; laboratory, preclinical, and clinical testing; labeling, packaging, content, and language of instructions for use and storage; product safety and efficacy claims; establishment, registration, and device listing; marketing, sales, and distribution; pre-market clearances, approvals, and certifications; service operations; record keeping procedures; advertising and promotion; recalls and field safety corrective actions; post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; post-market studies; and product import and export.

The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales. The FDA and foreign counterparts enforce these regulatory requirements through, among other means, periodic unannounced inspections and periodic reviews of public marketing and promotion materials. We do not know whether we will be found compliant in connection with any future FDA or foreign counterparts’ inspections or reviews. Failure to comply with applicable regulations could jeopardize our ability to sell our medical devices and result in enforcement actions such as: warning letters; untitled letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, approvals, or certifications; withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our medical devices; and in the most serious cases, criminal penalties.

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Legislative or regulatory reforms in the United States or other countries may make it more difficult and costly for us to obtain regulatory clearances, approvals, or certifications for our products or to manufacture, market, or distribute our products after clearance, approval, or certification is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulation of medical devices. In addition, the FDA may change its clearance and approval policies, adopt additional regulations, or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis. The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be promulgated that could prevent, limit, or delay regulatory clearance or approval of our product candidates. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare system, could harm our business, financial condition, and results of operations.

In the United States, there have been, and continue to be, a number of legislative initiatives to contain healthcare costs. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (ACA) was enacted in the United States, which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers. We expect additional state and federal healthcare policies and reform measures to be adopted in the future. Any of these could make it more difficult and costly for us to obtain regulatory clearances or approvals for our products or to manufacture, market, or distribute our products after clearance or approval is obtained. Any such reforms could have a material adverse effect on our industry generally and on our customers. In addition, any healthcare reforms that expand the government’s role in the U.S. healthcare industry may result in decreased sale of our products and lower reimbursement by payors for procedures using our products, any of which could affect demand for our products and/or result in additional pricing pressure, which in turn could impact our ability to successfully commercialize our products and could have an adverse material effect on our business, financial condition, and results of operations. Changes and reforms in the EU and other countries where we may decide to commercialize could have similar effects.

If coverage and reimbursement from third-party payors for procedures using our medical products, if authorized by a regulatory authority, significantly decline, physicians, hospitals, and other healthcare providers may be reluctant to use our products and our sales may decline.

In the United States, healthcare providers who purchase medical products generally rely on third-party payors, including Medicare, Medicaid, and private health insurance plans, to pay for all or a portion of the cost of the medical products that we may commercialize upon regulatory approval or clearance. Any decline in the amount payors are willing to reimburse our medical products, if cleared or approved for commercial use and distribution, may make it difficult for customers to adopt our products and could create additional pricing pressure for us. We may be unable to sell our products on a profitable basis if third-party payors deny coverage or reduce their current levels of reimbursement.

To contain costs of new technologies, governmental healthcare programs and third-party payors are increasingly scrutinizing new and existing treatments by requiring extensive evidence of favorable clinical outcomes. Physicians, hospitals, and other healthcare providers may not purchase our products if they do not receive satisfactory reimbursement from these third-party payors for the cost of using our products. If third-party payors issue non-coverage policies or if our customers are not reimbursed at adequate levels, this could adversely affect sales of our products. Outside of the United States, reimbursement systems vary significantly by country. The marketability of our products may suffer if government and commercial third-party payors fail to provide adequate coverage and reimbursement. Even if favorable coverage and reimbursement status is attained, less favorable coverage policies and reimbursement rates may be implemented in the future.

If we or our contractors fail to comply with healthcare and other governmental regulations, we could face substantial fines and penalties and our business, results of operations and financial condition could be adversely affected.

We are subject to certain federal, state, and foreign fraud and abuse laws, health information privacy and security laws, and transparency laws regarding payments and other transfers of value made to physicians and other healthcare professionals that could subject us to substantial penalties. Additionally, any challenge to, or investigation into, our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business. Our arrangements with physicians, hospitals and medical centers could expose us to broadly applicable fraud and abuse laws and other laws and regulations that may restrict the financial arrangements and relationships through which we may market, sell, and distribute our medical products after we receive the applicable marketing authorization. Our employees, consultants, and commercial partners may engage in misconduct or other improper activities, including

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non-compliance with regulatory standards and requirements. Federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation:

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If our operations are found to be in violation of any of the federal, state and foreign laws described above or any other current or future fraud and abuse or other healthcare laws and regulations that apply to us, we may be subject to penalties, including significant criminal, civil, and administrative penalties, damages, fines, imprisonment for individuals, exclusion from participation in government programs, such as Medicare and Medicaid, and we could be required to curtail or cease our operations. Any of the foregoing consequences could seriously harm our business and our financial results.

If we fail to obtain and maintain necessary regulatory clearances, approvals, or certifications for our products, or if clearances, approvals or certifications for future products and indications are delayed or not issued, our commercial operations would be harmed.

Our medical products are subject to extensive regulation by the FDA in the United States and by regulatory agencies in other countries outside of the United States. Government regulations specific to medical devices are wide ranging and govern, among other things:

Before a new medical device, or a new intended use for an existing product, can be marketed in the United States, a company must first submit and receive 510(k) clearance pursuant to Section 510(k) of the Food, Drug and Cosmetic Act (FDCA), approval of a PMA by the FDA, or grant of a de novo classification request from the FDA, unless an exemption applies.

In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, in order to clear the proposed device for marketing. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence. In the PMA approval process, the FDA must determine that a proposed device is safe and effective for its intended use based on extensive data, including technical, pre-clinical, clinical trial, manufacturing, and labeling data. The PMA process is typically required for devices for which the 510(k) process cannot be used and that are deemed to pose the greatest risk, such as life sustaining, life supporting, or implantable devices. In the de novo classification process, a manufacturer whose novel device under the FDCA would otherwise be automatically classified as Class III and require the submission and approval of a PMA prior to marketing is able to request down-classification of the device to Class I or Class II on the basis that the device presents a low or moderate risk. If the FDA grants the de novo classification request, the applicant will receive authorization to market the device. This device type may be used subsequently as a predicate device for future 510(k) submissions. Modifications to products that are approved through a PMA application generally need prior FDA approval of a PMA supplement. Similarly, some modifications made to products cleared through a 510(k) submission may require a new 510(k) clearance, or such modification may put the device into Class III and require PMA approval or the grant of a de novo classification request.

The CompanyPMA approval, 510(k) clearance, and de novo classification processes can be expensive, lengthy, and uncertain. Any delay or failure to obtain necessary regulatory approvals, clearances or certifications would have a material adverse effect on our business, financial condition, and results of operations.

The FDA and foreign bodies can delay, limit, or deny clearance, approval, or certification of a device for many reasons, including:

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Upon commercialization of any medical devices for which we receive FDA clearance or approval, we are required to investigate all product complaints we receive, and timely file reports with the FDA, including MDRs that require that we report to regulatory authorities if our products may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not submitted in a timely manner, regulators may impose sanctions and we may be subject to product liability or regulatory enforcement actions, including warning letters, untitled letters, fines, civil penalties, recalls, seizures, operating restrictions, denial of requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products, withdrawal of current 510(k) clearances or premarket approvals, and narrowing of approved or cleared product labeling, all of which could harm our business. In addition, the FDA may provide notice of and conduct additional inspections, such as “for cause” inspections, of our business, sites, and facilities as part of its review process. Similar requirements may apply in foreign countries.

If we initiate a correction or removal action for our products to reduce a significant risk to health posed by our products, we would be required to submit a publicly available correction and removal report to the FDA and, in many cases, similar reports to other regulatory agencies. This report could be classified by the FDA as a device recall which could lead to increased scrutiny from the FDA, other international regulatory agencies, and our customers regarding the quality and safety of our products. Furthermore, the submission of these reports could be used by competitors against us and cause physicians to delay or cancel orders, which could harm our reputation.

The FDA and the Federal Trade Commission (FTC) also regulate the advertising, promotion, and labeling of our products to ensure that the claims we make are consistent with our regulatory authorizations, that there is adequate and reasonable scientific data to substantiate the claims, and that our promotional labeling and advertising is neither false nor misleading in any respect. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated, or not permissible, we may be subject to enforcement actions, including adverse publicity and/or warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions.

The FDA, state authorities, and foreign counterparts have broad investigation and enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state agencies, or foreign counterparts, which may include any of the following sanctions:

If any of these events were to occur, our business and financial condition could be harmed. In addition, the FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our products. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval or certification that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, financial condition, and results of operations.

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We are exposed to risks that our employees, consultants, or other commercial partners and business associates may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

We are exposed to the risk that our employees, consultants, and other commercial partners and business associates may engage in fraudulent or illegal activity. Misconduct by these parties could include intentional, reckless, or negligent conduct or other unauthorized activities that violate the regulations of the FDA and other regulators (both domestic and foreign), including those laws requiring the reporting of true, complete, and accurate information to such regulators, manufacturing standards, healthcare fraud and abuse laws, and regulations in the United States and internationally or laws that require the true, complete, and accurate reporting of financial information or data. In particular, sales, marketing, and business arrangements in the healthcare industry, including the sale of medical devices, are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. It is not always possible to identify and deter misconduct by our employees, consultants, and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal, and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of operations, any of which could adversely affect our business, financial condition and results of operations. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees and reputational harm, and divert the attention of management in defending ourselves against any of these claims or investigations.

Compliance with environmental laws and regulations could be expensive, and failure to comply with these laws and regulations could subject us to significant liability.

Our research and development and manufacturing operations involve the use of some hazardous substances and are subject to a variety of federal, state, local, and foreign environmental laws and regulations relating to the storage, use, discharge, disposal, remediation of, and human exposure to, hazardous substances and the sale, labeling, collection, recycling, treatment, and disposal of products containing hazardous substances. Liability under environmental laws and regulations can be joint and several and without regard to fault or negligence. Compliance with environmental laws and regulations may be expensive and noncompliance could result in substantial liabilities, fines and penalties, personal injury and third-party property damage claims and substantial investigation and remediation costs. Environmental laws and regulations could become more stringent over time, imposing greater compliance costs, and increasing risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes. The expense associated with environmental regulation and remediation could harm our financial condition and operating results.

Our insurance coverage strategy may not be adequate to protect us from all business risks.

We will require insurance coverage for a number of risks.numerous risks related to our business. Although our management of the Company believes that the events and amounts of liability covered by itsour insurance policies will be reasonable, taking into account the risks relevant to itsour business, and the fact that agreements with users contain limitations of liability, there can be no assurance that such coverage will be available or sufficient to cover claims to which the Companywe may become subject. If insurance coverage is unavailable or insufficient to cover any such claims, the Company’sour financial resources, results of operations and prospects could be adversely affected.

The risk of loss of our intellectual property, trade secrets or other sensitive business or customer confidential information or disruption of operations due to cyberattacks or data breaches could negatively impact our financial results.

11Cyberattacks or data breaches could compromise confidential, business-critical information, cause disruptions in our operations, expose us to potential litigation, or harm our reputation. We have important assets, including intellectual property, trade secrets, and other sensitive, business-critical and/or confidential information which may be vulnerable to such incidents. While we are in the process of implementing a cybersecurity program that is continually reviewed, maintained, and upgraded, no assurance can be made that we are invulnerable to cyberattacks and data breaches which, if significant, could negatively impact our business and financial results.

Cybersecurity breaches and information technology failures could harm our business by increasing our costs and negatively impacting our business operations.

We rely extensively on information technology systems, including internet sites, computer software, data hosting facilities and other hardware and platforms, some of which are hosted by third parties, to assist in conducting our business. Our information technology systems, as well as those of third parties we use in our business operations, may be vulnerable to a variety of evolving cybersecurity

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Privacyrisks, such as those involving unauthorized access or control, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and Data Security Concernsother security issues. Moreover, cybersecurity threat actors, whether internal or external, are becoming more sophisticated and coordinated in their attempts to access companies’ information technology systems and data, including the information technology systems of cloud providers and other third parties with whom we conduct our business.

Changes in laws or regulations relating to privacy, information security and data protection, or any actual or perceived failure by us to comply with such laws and regulations or any other obligations, could adversely affect our business.

Personal privacy, information security and data protection are significant issues worldwide. The regulatory framework governing the collection, use, and other processing of personal data and other information is rapidly evolving. The United States federal and various state and foreign governments have adopted or proposed requirements regarding the collection, distribution, use, security and storage of personally identifiable information and other data relating to individuals, and federal and state consumer protection laws are being applied to enforce regulations related to the online collection, use and dissemination of data.

The costs of compliance with and other burdens imposed by laws, regulations, standards and other actual or asserted obligations relating to privacy, data protection and information security may be substantial, and they may require the Companyus to modify itsour data processing practices and policies. Any actual or alleged noncompliance with any of these laws, regulations, standards, and other actual or asserted obligations may lead to claims and proceedings by governmental actors and private parties, and significant fines, penalties or liabilities.

Risk

We are subject to taxation-related risks in multiple jurisdictions, and the adoption and interpretation of Inabilitynew tax legislation, tax regulations, tax rulings, or exposure to Protectadditional tax liabilities could materially affect our Proprietary Technologybusiness, financial condition and Intellectual Property Rightsresults of operations.

The Company reliesWe are a U.S. parented multinational group subject to income and other taxes in Canada, the United States, the United Kingdom, and other jurisdictions in which we do business. As a result, our provision for (benefit from) income taxes is derived from a combination of applicable tax rates in the various jurisdictions in which we operate. Significant judgment is required in determining our global provision for (benefit from) income taxes, value added and other similar taxes, deferred tax assets or liabilities and in evaluating our tax positions on a varietyworldwide basis. It is possible that our tax positions may be challenged by tax authorities, which may have a significant impact on our global provision for (benefit from) income taxes. If such a challenge were to be resolved in a manner adverse to us, it could have a material adverse effect on our business, financial condition and results of operations.

Recent or future changes to U.S., Canadian, United Kingdom and other non-U.S. tax laws could impact the tax treatment of our earnings. For example, the Inflation Reduction Act of 2022, enacted on August 16, 2022, imposes a one-percent non-deductible excise tax on repurchases of stock that are made by U.S. publicly traded corporations on or after January 1, 2023. In addition, as of January 1, 2022, the Tax Cuts and Jobs Act of 2017 requires research and experimental expenditures attributable to research conducted within the United States to be capitalized and amortized ratably over a five-year period. Any such expenditures attributable to research conducted outside the United States must be capitalized and amortized over a 15-year period. We generally conduct our international operations through wholly owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. The intercompany relationships between our legal entities are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. Although we believe we are compliant with applicable transfer pricing and other tax laws in the United States, Canada, the United Kingdom and other relevant countries, due to changes in such laws and rules, we may have to modify our international structure in the future, which will incur costs and may adversely affect our business, financial condition and results of operations.

If U.S., Canadian, United Kingdom or other non-U.S. tax laws change further, if our current or future structures and arrangements are challenged by a taxing authority, or if we are unable to appropriately adapt the manner in which we operate our business, we may have to undertake further costly modifications to our international structure, which may cause our tax liabilities to increase and adversely affect our business, financial condition and results of operations.

Our ability to use our deferred tax assets to offset future taxable income is subject to certain limitations, which may have a material impact on our business, financial condition or results of operations.

As of December 31, 2022, a valuation allowance has been recorded against our deferred tax assets that are more likely than not to be realized in the U.S. federal and state tax jurisdictions. We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Certain of our deferred tax assets may expire unutilized or underutilized, which could prevent us from offsetting future taxable income. We continue to assess the realizability of our deferred tax assets in the future. Future adjustments in our valuation allowance may be required, which may have a material impact on our quarterly and annual operating results.

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Risks Related to Intellectual Property

If we fail to protect and enforce our intellectual property rights including patents, trademarks, trade secrets, technical know-howand our confidential information, our business could be adversely affected.

We rely on a combination of nondisclosure agreements and other unpatented proprietary informationcontractual provisions and patent, trade secret and copyright laws to protect the Company'sour technologies, products, product development and manufacturing activities from unauthorized use by third parties. The Company'sOur patents do not cover all of itsour technologies, systems, products and product components and itsour competitors or others may design around itsour patented technologies. The CompanyWe cannot guarantee that it has entered into appropriate agreements with all parties that have had access to its trade secrets, know-how or other proprietary information tothese mechanisms will adequately protect all such information. The Company also cannot assure shareholdersour technology and intellectual property, nor can we guarantee that those agreementsa court will provide meaningful protection for its trade secrets, know-how or other proprietary informationenforce our intellectual property rights.

In addition, the laws and enforcement regimes of certain countries do not protect our technology and intellectual property to the same extent as do the laws and enforcement regimes of the U.S. In certain jurisdictions, we may be unable to protect our technology and intellectual property adequately against unauthorized use, which could adversely affect our business.

We may become involved in material legal proceedings in the eventfuture to enforce or protect our intellectual property rights, which could harm our business.

From time to time, we may identify products that we believe infringes on our patents and may have to initiate litigation to enforce our patent rights against those products. Litigation stemming from such disputes could harm our ability to gain new customers, who may postpone licensing decisions pending the outcome of any unauthorized usethe litigation or disclosure. The Company's trade secrets, know-how or other proprietary information could be obtained by third partieswho may, as a result of breachessuch litigation, choose not to adopt our technologies. Such litigation may also harm our business relationships with existing customers, who may, because of its physicalsuch litigation, cease making royalty or electronic security systemsother payments to us or its suppliers, employeeschallenge the validity and enforceability of our patents or consultantsthe scope of our related agreements.

In addition, the costs associated with legal proceedings are typically high, relatively unpredictable and not completely within our control. These costs may be materially higher than expected, which could assertadversely impair our working capital, affect our operating results and lead to volatility in the price of our common stock. Whether or not determined in our favor or ultimately settled, litigation would divert managerial, technical, legal and financial resources from our business operations. Furthermore, an adverse decision in any of these legal actions could result in a loss of our proprietary rights, subject us to itssignificant liabilities, require us to seek licenses from others, limit the value of our technology or otherwise negatively impact the price of our common stock, business and financial position, results of operations and cash flows.

Even if we prevail in a legal action, significant contingencies may exist to the settlement and final resolution, including the scope of the liability of each party, our ability to enforce judgments against the parties, the ability and willingness of the parties to make any payments owed or agreed upon, and the dismissal of the legal action by the relevant court, none of which are completely within our control. Parties that may have financial obligations to us could be insolvent or decide to alter their business activities or corporate structure, which could affect our ability to collect royalties from such parties.

Our technologies may infringe on the intellectual property.property rights of others, which could lead to costly disputes or disruptions.

Various business segments in which we operate are characterized by frequent allegations of intellectual property infringement. Any allegation of infringement could be time consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause suspension of operations or force us to enter into royalty, license, or other agreements rather than dispute the merits of such allegation. Furthermore, third parties making such claims may be able to obtain injunctive or other equitable relief that could block our ability to further develop or commercialize some or all of our technologies, and the ability of our customers to develop or commercialize their products incorporating our technologies, in the U.S. and abroad. If patent holders or other holders of intellectual property initiate legal proceedings, we may be forced into protracted and costly litigation. We may not be successful in defending such litigation and may not be able to procure any required royalty or license agreements on acceptable terms or at all.

Risk thatRelated to Industry Targets will not Adopt the Company’sAdoption of our Products

Holography Market-Aviation Industry

The CompanyWe cannot provide assurance that markets will accept our various products at the expected market penetration rates, which may adversely affect our business operations and financial position.

We launched itsour first product, a laser glare protection eyewear named metaAIR®, in March 2019, with a primary focus on the aviation market. The product offers unique performance and benefits over the competition and is the only industry-approved solution to date. The Company hasWe have co-developed this product with Airbus through a strategic partnership. Airbus further extended its support by introducing the Companyus to Satair, an Airbus-owned company, which became the global distribution partner for metaAIR® to the aviation market.

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Since 2016, Airbus and Satair have invested a total of $2,000,000 for the product development and exclusive distribution rights to metaAIR®. Since the launch of metaAIR®

 in March 2019, the Company has sold fifty units to its distributor Satair. The Company is currently in the process of increasing its marketing and sales capacity.

Despite the Company’sour close collaboration with the Airbus Group with the impact of COVID-19and future plans for marketing and sales expansion, there can be no assurance that the aviation market will accept the metaAIR® product at the expected market penetration rates and a slower than forecasted market acceptance may have a material adverse effect on Holography laser glare protection related products and the Company’sour financial position. The Company is pursuing ancillary markets outside of the aviation industry for its metaAIR® laser protection eyewear such as in law enforcement and defense.

Lithography Product and Market-Automotive

Slower than forecasted market acceptance of Lithography related products, partially in the automotive market, may have a material adverse effect on our financial position.

Our NANOWEB® applications have not yet reached the required manufacturing maturity. Thescale to enable us to address the volume demands of a number of our target vertical markets. We currently have only our first pilot scale, 300mm wide, roll-to-roll line, is expectedand we will need to be ready for low volume production during the second half of fiscal year 2022.add additional capacity and wider substrates to support our target applications. Broader sales and production are expected to be launched in two to three years’ time after successful completion of automotive and other vertical market product qualification and product introductions. META believesWe believe that the automotive market is a strategic high growth opportunity however, despite the Company’sour close collaboration with automotive partners, there can be no assurance that the automotive market will accept the NANOWEB®product at the expected market penetration rates and a slower than forecasted market acceptance may have a material adverse effect on Lithography de-icing/de-fogging, transparent antenna and other related products and the Company’sour financial position.

If products incorporating our technologies are used in defective products, we may be subject to product liability or other claims.

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If our technology is used in defective or malfunctioning products, we could be sued for damages, especially if the defect or malfunction causes physical harm to people. While we will endeavor to carry product liability insurance, contractually limit our liability and obtain indemnities from our customers, there can be no assurance that we will be able to obtain insurance at satisfactory rates or in adequate amounts or that any insurance and customer indemnities will be adequate to defend against or satisfy any claims made against us. The costs associated with legal proceedings are typically high, relatively unpredictable and not completely within our control. Even if we consider any such claim to be without merit, significant contingencies may exist, similar to those summarized in the above risk factor concerning intellectual property litigation, which could lead us to settle the claim rather than incur the cost of defense and the possibility of an adverse judgment. Product liability claims in the future, regardless of their ultimate outcome, could have a material adverse effect on our business, financial condition and reputation, and on our ability to attract and retain customers.

We participate in markets that are subject to rapid technological change and require significant research and development expenses to develop and maintain products that can achieve market acceptance.

We operate in a rapidly evolving industry subject to significant technological change and new product introductions and enhancements. Our future performance depends in part on the successful development, introduction and market acceptance of new and enhanced products that address these changes and current and potential customer requirements. To the extent customers defer or cancel orders for existing products due to a slowdown in demand or in the expectation of a new product release, or if there is any delay in development or introduction of our new products or enhancements of our products, our business and financial conditions, results of operations, and growth prospects would be materially adversely affected. We also may not be able to develop the underlying core technologies necessary to create new products and enhancements, or to license these technologies from third parties.

Risks Related to Facilities and Human Resources

We have ongoing environmental costs, which could have a material adverse effect on our financial position or results of operations.

Certain of our operations and assets are subject to extensive environmental, health and safety regulations, including laws and regulations related to waste disposal and remediation of contaminated sites. The nature of our operations and products, including the raw materials we handle, exposes us to the risk of liabilities, obligations or claims under these laws and regulations due to the production, storage, use, transportation and sale of materials that can adversely impact the environment or cause personal injury, including, in the case of chemicals, unintentional releases into the environment. Environmental laws may have a significant effect on the costs of use, transportation and storage of raw materials and finished products, as well as the costs of storage, transportation and disposal of wastes.

The ultimate costs and timing of environmental liabilities are difficult to predict. Liabilities under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis. One liable party could be held responsible for all costs at a site, regardless of fault, percentage of contribution to the site or the legality of the original disposal. We could incur significant costs, including clean-up costs, natural resource damages, civil or criminal fines and sanctions and third-party lawsuits claiming, for example, personal injury and/or property damage, as a result of past or future violations of, or liabilities under, environmental or other laws.

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In addition, future events, such as changes to or more rigorous enforcement of environmental laws, could require us to make additional expenditures, modify or curtail our operations and/or install additional pollution control equipment. It is possible that regulatory agencies may enact new or more stringent clean-up standards for chemicals of concern, including chlorinated organic products that we manufacture. This could lead to expenditures for environmental remediation in the future that are additional to existing estimates.

We may incur claims relating to our use, manufacture, handling, storage or disposal of hazardous materials.

Our research and development and manufacturing processes require the transportation, storage and use of hazardous materials, including chemicals, and may result in the generation of hazardous waste. National and local laws and regulations in many of the jurisdictions in which we operate impose substantial potential liability for the improper use, manufacture, handling, storage, transportation and disposal of hazardous materials as well as for land contamination, and, in some cases, this liability may continue over long periods of time. Despite our compliance efforts, we cannot eliminate the risk of industrial accidents that may lead to discharges or releases of hazardous materials and any resultant injury, property damage or environmental contamination from these materials. For example, real properties that we owned or used in the past or that we own or use now or in the future may contain detected or undetected contamination resulting from our operations at those sites or the activities of prior owners or occupants. We may suffer from expenses, claims or liability which may fall outside of or exceed our insurance coverage.

Furthermore, changes to current environmental laws and regulations may impose further compliance requirements on us that may impair our research, development and production efforts as well as our other business activities. New Facility and Permitsevolving regulatory requirements include producer responsibility frameworks and regulations related to addressing climate change or other emerging environmental areas. Increased environment, health and safety laws, regulations and enforcement could result in substantial costs and liabilities to us and could subject our use, manufacture, handling, storage, transportation, and disposal of hazardous materials to additional constraints. Consequently, compliance with these laws could result in capital expenditures as well as other costs and liabilities, thereby adversely affecting business, financial position and results of operations.

Our failure to comply with applicable laws and regulations material to our operations, such as export control, environmental and climate related laws and regulations, or the inability to timely obtain requisite approvals necessary for Lithography Productionthe conduct of our business, such as fab land and construction approvals, could harm our business and operational results or subject us to potential significant legal liability.

Because we engage in manufacturing activities in multiple jurisdictions and conduct business with our customers located worldwide, such activities are subject to a myriad of governmental regulations. Our failure to comply with any such laws or regulations, as amended from time to time, and our failure to comply with any information and document sharing requests from the relevant authorities in a timely manner could result in:

Complying with applicable laws and regulations, such as environmental and climate related laws and regulations, could also require us, among other things, to do the following: (a) purchase, use or install remedial equipment; (b) implement remedial programs such as climate change mitigation programs; (c) modify our product designs and manufacturing processes, or incur other significant expenses such as obtaining renewable energy sources, renewable energy certificates or carbon credits, substitute raw materials or chemicals that may cost more or be less available for our operations.

Our inability to timely obtain approvals necessary for the conduct of our business could impair our operational and financial results. For example, if we are unable to timely obtain environmental related approvals needed to undertake the development and construction of a

The Company is30

new fab or expansion project, then such inability may delay, limit, or increase the cost of our expansion plans that could also in turn adversely affect our business and operational results. In light of increased public interest in environmental issues, our operations and expansion plans may be adversely affected or delayed responding to public concern and social environmental pressures even if we comply with all applicable laws and regulations.

Delays in setting up facilities or receiving required permits could have an adverse effect on our financial position.

We are in the process of moving into a larger facility suitable to host the scale-up of production relating to Holography and Lithography. Lithography is a wet chemistry process which requires specific approvals from the local government approvals to allow use of certain chemicals and their disposal.

Any delay in setting up the facility and receiving permits may impact launch and/or development of related products and may have a material adverse effect on Lithography and Holography related products and consequently on the Company’sour financial position.

At present, the facility is expectedWe are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to be complete during the second half of fiscal 2022.successfully implement our business strategy.

Recruiting or Retaining Qualified Personnel.

The Company'sOur ability to successfully manage and grow the business and to develop new products depends, in large part, on itsour ability to recruit and retain qualified employees, particularly highly skilled technical, sales, service, management, and key staff personnel. Competition for qualified resources is intense and other companies may have greater resources available to provide substantial inducements and to offer more competitive compensation packages. If we are not successful in attracting and retaining highly qualified personnel, it could have a material adverse effect on our business, financial condition, and results of operations.

Conflicts

Our results of Interestoperations could be adversely affected by labor shortages, turnover, labor cost increases and inflation.

A number of factors may adversely affect the labor force available to us in one or more of our geographies, including high employment levels, increasing market wages and other compensation costs, federal unemployment subsidies, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices and immigration. These factors can also impact the cost of labor. Increased turnover rates within our employee base can lead to decreased efficiency and increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees. An overall labor shortage or lack of skilled labor, increased turnover or labor inflation could have a material adverse effect on results of operations.

Certain directors and officers may be subject to conflicts of interest.

Certain of the Company’sour directors and officers are, and may continue to be involved in other business ventures through their direct and indirect participation in corporations, partnerships, joint ventures, etc. that may become potential competitors of the technologies, products and services the Company intendswe intend to provide. Situations may arise in connection with potential acquisitions or opportunities where the other interests of these directorsdirectors' and officersofficers' conflict with or diverge from the Company’sour interests. In accordance with applicable corporate law, directors who have a material interest in or who are a party to a material contract or a proposed material contract with the Companyus are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the contract. In addition, the directors and officers are required to act honestly and in good faith with a view to the Company’sour best interests. However, in conflict of interestconflict-of-interest situations, the Company’sour directors and officers may owe the same duty to another company and will need to balance their competing interests with their duties to the Company.us. Circumstances (including with respect to future corporate opportunities) may arise that may be resolved in a manner that is unfavorable to the Company.us.

Reliance on Management

The success of the Company is dependent upon the ability, expertise, judgment, discretion, and good faith of its senior management team. Any loss of the services of such individuals could have a material adverse effect on the Company’s business, operating results, or financial condition.

Monitoring unauthorized use of the Company's intellectual property is difficult and costly. Unauthorized use of its intellectual property may have already occurred or may occur in the future. The Company's failure to identify unauthorized use or otherwise adequately protect its intellectual property could jeopardize its competitive advantage and materially adversely affect its business. Moreover, any litigation in connection with unauthorized use of its intellectual property could be time consuming, and the Company could be forced to incur significant costs and divert its attention and the efforts of its employees, which could, in turn, result in lower revenues and higher expenses, and it may not be successful in enforcing its intellectual property rights.

Risks Related to Oil and Gas Assets Held for Sale

Series A Preferred Stock Dividends

In connection with the Arrangement, the Company declared a dividend of shares of the Series A Preferred Stock to holders of record of its common stock as of June 24, 2021. The Series A Certificate of Designation entitles the holders of Series A Preferred Stock to receive dividends, or Asset Sale Dividends, comprised of the holder’s pro rata portion of the proceeds from the sale of the O&G Assets in the event that the Company consummates one or more such transaction prior to the Sale Expiration Date. However, the Company may not be able to consummate any such transaction prior to such date on terms that will permit itself to pay such dividends, or at all.

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Holders of Series A Preferred Stock are entitled to receive Asset Sale Dividends from any O&G Asset Sale. Prior to declaring or paying any dividend, the Company will deduct from the gross proceeds of an O&G Asset Sale various costs and expenses described in the Series A Certificate of Designation, which include, among others, (i) costs and expenses the Company incurs in connection with the applicable O&G Asset Sale transaction, (ii) costs the Company incurs following the consummation of the Arrangement with respect to the O&G Assets, (iii) taxes the combined company incurs in connection with the applicable O&G Asset Sale, the payment of dividends to the holders of Series A Preferred Stock, and the O&G Assets, (iv) liabilities the Company incurs in connection with the applicable O&G Asset Sale and (v) amounts paid or payable with respect to outstanding debt, if any. In addition, the Company will also withhold an amount of 10% of the proceeds from each O&G Asset Sale, (“the Holdback Amount”) to cover potential post-closing liabilities and obligations that the combined company may incur in respect of such transaction. If, after the deduction and withholding of these amounts, there are no net proceeds available for distribution to the holders of Series A Preferred Stock, then the Company will not declare or pay a dividend with respect to that transaction unless and until any remaining funds from the Holdback Amount are due to be distributed to the holders of Series A Preferred Stock through a dividend, or the Company receives additional net proceeds from such O&G Asset Sale (for example, as a result of post-closing payments or the release of escrowed funds).

In the event that any O&G Assets have not been sold in an O&G Asset Sale that is consummated prior to the Sale Expiration Date, the Company will, to the extent permitted by applicable law, declare a spin-off dividend to distribute beneficial ownership of the remaining O&G Assets to the holders of Series A Preferred Stock. However, if the combined company cannot effect such spin-off dividend in a manner that is exempt from registration under all applicable securities laws, the combined company will not declare the spin-off dividend and instead will use good faith, commercially reasonable efforts to preserve the value of the remaining O&G Assets or to distribute or provide the value of the remaining O&G Assets to the holders of Series A Preferred Stock, so long as the Company is not required to divert the attention of management or incur material expenses in excess of amount required to be reserved under the Arrangement Agreement. Thus, the Company, ultimately may not be able to deliver the value of any remaining O&G Assets to the holders of Series A Preferred Stock.

Orogrande and Hazel Projects: Risks and Uncertainties.

The Company is in the process of selling or spinning out the O&G Assets. Such dispositions may result in proceeds to Series A preferred shareholders in an amount less than they expect or less than the Company's assessment of the value of the assets. The Company does not know if it will be able to successfully complete such disposition on favorable terms or at all. In addition, the sale of these assets involves risks and uncertainties, including disruption to other parts of its business, potential loss of customers or revenue, exposure to unanticipated liabilities or result in ongoing obligations and liabilities to the Company following any such divestiture.

For example, in connection with a disposition, the Company may enter into transition services agreements or other strategic relationships, which may result in additional expenses. In addition, in connection with a disposition, the Company may be required to make representations about the business and financial affairs of the business or assets. The Company may also be required to indemnify the purchasers to the extent that its representations turn out to be inaccurate or with respect to certain potential liabilities. These indemnification obligations may require the Company to pay money to the purchasers as satisfaction of their indemnity claims. It may also take longer than expected to fully realize the anticipated benefits of this transaction, and those benefits may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect the Company's business and operating results. Any of the foregoing could adversely affect the Company's financial condition and results of operations.

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Oil and Gas Operations Liability or Damages

The oil and natural gas business involves a variety of operating hazards and risks such as well blowouts, pipe failures, casing collapse, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, spills, pollution, releases of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to the Company from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations. In addition, the Company may be liable for environmental damages caused by previous owners of property purchased and leased by itself. In recent years, there has also been increased scrutiny on the environmental risk associated with hydraulic fracturing, such as underground migration and surface spillage or mishandling of fracturing fluids including chemical additives. This technology has evolved and continues to evolve and become more aggressive. The Company believes that new techniques can increase estimated ultimate recovery per well to over 1.0 million barrels of oil equivalent and have increased initial production two or three-fold. The Company believes that recent designs have seen improvement in, among other things, proppant per foot, barrels of water per stage, fracturing stages, and clusters per fracturing stage. As a result, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could reduce or eliminate the funds available for exploration, development or acquisitions or result in the loss of the Company's properties and/or force it to expend substantial monies in connection with litigation or settlements. The Company currently has no insurance to cover such losses and liabilities, and even if insurance is obtained, it may not be adequate to cover any losses or liabilities. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect the Company's financial condition and operations. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on the Company's financial condition and results of operations.

Estimates of the Volume of Reserves

Estimates of reserves and of future net revenues prepared by different petroleum engineers may vary substantially depending, in part, on the assumptions made and may be subject to adjustment either up or down in the future. The Company's actual amounts of production, revenue, taxes, development expenditures, operating expenses, and quantities of recoverable oil and gas reserves may vary substantially from the estimates. Oil and gas reserve estimates are necessarily inexact and involve matters of subjective engineering judgment. In addition, any estimates of its future net revenues and the present value thereof are based on assumptions derived in part from historical price and cost information, which may not reflect current and future values, and/or other assumptions made by management that only represent our best estimates. If these estimates of quantities, prices and costs prove inaccurate, The Company may be unsuccessful in expanding our oil and gas reserves base with our acquisitions. Additionally, if declines in and instability of oil and gas prices occur, then write downs in the capitalized costs associated with any oil and gas assets it obtains may be required. Because of the nature of the estimates of the Company's reserves and estimates in general, reductions to our estimated proved oil and gas reserves and estimated future net revenues may not be required in the future, and/or that our estimated reserves may not present and/or commercially extractable. If the Company's reserve estimates are incorrect, it may be forced to write down the capitalized costs of our oil and gas properties.

Decommissioning Costs are Unknown and May be Substantial

The Company may become responsible for costs associated with abandoning and reclaiming wells, facilities and pipelines which it uses for production of oil and natural gas reserves. Abandonment and reclamation of these facilities and the costs associated therewith is often referred to as “decommissioning.” The Company accrues a liability for decommissioning costs associated with its wells but have not established any cash reserve account for these potential costs in respect of any of our properties. If decommissioning is required before economic depletion of our properties or if the Company's estimates of the costs of decommissioning exceed the value of the reserves remaining at any particular time to cover such decommissioning costs, the Company may have to draw on funds from other sources to satisfy such costs. The use of other funds to satisfy such decommissioning costs could impair our ability to focus capital investment in other areas of our business.

Challenges to the Properties May Impact the Company's Financial Condition.

Title to oil and gas interests is often not capable of conclusive determination without incurring substantial expense. While the Company has made and intends to make appropriate inquiries into the title of properties and other development rights it has acquired and intends to acquire, title defects may exist. In addition, the Company may be unable to obtain adequate insurance for title defects, on a commercially reasonable basis or at all. If title defects do exist, it is possible that the Company may lose all or a portion of our right, title and interests in and to the properties to which the title defects relate. If the property rights are reduced, the Company's ability to conduct exploration, development and production activities may be impaired. To mitigate title problems, common industry practice is to obtain a title opinion from a qualified oil and gas attorney prior to the drilling operations of a well.

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Continuing Drilling Obligations Under Leases May Not be Met.

The leases for the Orogrande properties include additional drilling requirements for 2022 and 2023. The Company is intending to sell or spin out the leases in 2022 and transfer the ongoing obligations to the new owners of the leases. If such a transfer is not completed in a timely manner in 2022, the Company may be forced to seek an extension from the lessor of the lease drilling obligations or fund the additional activities out of working capital which could adversely impact the Company’s financial condition.

The Company's Ability to Maintain its Rights Under the Leases is Dependent on Numerous Factors Outside of its Control.

The leased assets are held for sale. The Company's ability to attract capital to enable on-going compliance with the lease obligations depends upon numerous factors largely beyond our control. These factors include:

Risks Related to Legal Matters

Litigation

The Company is currently subject to securities class action litigationWe are, and may be subject to similar or other litigation in the future allbecome, subject to various legal proceedings and claims that arise in or outside the ordinary course of business and which will require significant management time and attention, result in significant legal expenses and may result in unfavorable outcomes, which may have a material adverse effect on the Company's business, operating results and financial condition, and negativelycould adversely affect the price of its common stock.our business.

The Company is,

We are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business. For example, the Company currently has securities class action complaints pending against itself, its chief executive officer, and its chief financial officer, asserting that they made false or misleading statements. The complaints seek monetary damages, costs and expenses. For more information, see “Item 3. Legal Proceedings” in this Annual Report on Form 10-K and “Note 28 – Commitments and Contingencies” of the Company's consolidated financial statements included elsewhere in this report.

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The CompanyWe cannot predict the outcome of these proceedings or provide an estimate of potential damages, if any. The Company believesWe believe that the claims in the securities class actions are without merit and intend to defend against them vigorously. Regardless, failure by the Companyus to obtain a favorable resolution of the claims set forth in the complaints could require itus to pay damage awards or otherwise enter into settlement arrangements for which itsour insurance coverage may be insufficient. Any such damage awards or settlement arrangements in current or future litigation could have a material adverse effect on the Company'sour business, operating results or financial condition. Even if plaintiffs’ claims are not successful, defending against class action litigation is expensive and could divert management’s attention and resources, all of which could have a material adverse effect on its business,our financial condition and operations, operating results and financial condition and negatively affect the price of itsour common stock. In addition, such lawsuits may make it more difficult for the Companyus to finance itsour operations in the future. See Part 1, Item 3, "Legal Proceedings" in this Annual Report on Form 10-K for more information regarding our legal proceedings.

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Ongoing Government InvestigationCurrent and future investigations by the SEC have and could continue to have an adverse impact on our business.

In September 2021, the Company received a subpoena from the Securities and Exchange Commission, Division of Enforcement, in a matter captioned 

In the Matter of Torchlight Energy Resources, Inc. The subpoena requests that the Company produces certain documents and information related to, among other things, the merger involving Torchlight Energy Resources, Inc. and Metamaterial Inc. The Company isWe are cooperating and intendsintend to continue to cooperate with the SEC’s investigation.investigation as described elsewhere in this Annual Report on Form 10-K. Investigations of this nature arecan be inherently uncertain and their results and timing cannot be predicted. Regardless of the outcome, the SEC Investigation has hadinvestigations have and maycould continue to have an adverse impact on the Company because ofus by resulting in legal costs, diversion of management resources, and other negative factors. The SEC Investigationinvestigations could also result in reputational harm to the Company,us, which, among other things, may limit itsour ability to obtain new customers and enter into new agreements with itsour existing customers, or itsour ability to obtain financing, and have a material adverse effect on itsour current and future business, financial condition, results of operations and prospects. See Part 1, Item 3, "Legal Proceedings" in this Annual Report on Form 10-K for more information regarding the SEC’s investigation.

Risks Related to Financial Reportingour Common Stock

Material Weakness in Internal Controls over Financial ReportingYou may experience future dilution as a result of future equity offerings or other equity issuances.

Management

We will have to raise additional capital in the future. To raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may be lower than the price you paid per share. In addition, investors purchasing shares or other securities in the future could have rights superior to those of other investors. Any such issuance could result in substantial dilution to investors.

Subject to various spending levels approved by our board of directors, our management will have broad discretion in the use of the net proceeds from our capital raises and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from our capital raises, and our stockholders will not have the opportunity as part of their investment decision to assess whether the net proceeds from our capital raises are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from our capital raises, their ultimate use may vary substantially from their currently intended use. You may not agree with our decisions, and our use of the proceeds from our capital raises may not yield any return to stockholders. Our failure to apply the net proceeds of our capital raises effectively could compromise our ability to pursue our growth strategy and we might not be able to yield a significant return, if any, on our investment of those net proceeds. Stockholders will not have the opportunity to influence our decisions on how to use our net proceeds from our capital raises. Pending their use, we may invest the net proceeds from our capital raises in interest and non-interest-bearing cash accounts, short-term, investment-grade, interest-bearing instruments and U.S. government securities. These temporary investments are not likely to yield a significant return.

An active, liquid and orderly trading market may not be sustained for our common stock, and, as a result, it may be difficult for you to sell your shares of our common stock.

The trading market for our common stock on the Nasdaq Capital Market may not be sustained. If the market for our common stock is responsiblenot sustained, it may be difficult for establishingyou to sell your shares of common stock at an attractive price or at all. We cannot predict the prices at which our common stock will trade. It is possible that in one or more future periods our results of operations may not meet the expectations of public market analysts and maintaining adequate internal control over financial reporting (as definedinvestors, and, as a result of these and other factors, the price of our common stock may fall.

Our failure to satisfy certain Nasdaq listing requirements may result in our common stock being delisted from the Nasdaq Capital Market, which could eliminate the trading market for our common stock.

On March 20, 2023, we received written notice (“The Bid Price Letter”) from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we are not in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 13a-15(f)5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until September 18, 2023, to regain compliance with the Bid Price Rule. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period. The Bid Price Letter was a notice of deficiency, not delisting, and does not currently affect the listing or trading of shares of our common stock on The Nasdaq Capital Market, which continues to trade under the Exchange Act)symbol “MMAT.” We intend to continue actively monitoring the closing bid price of shares of our common stock and for evaluating and reportingmay, if appropriate, consider implementing available options to regain compliance with the Bid Price Rule.

If we do not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our common stock will be subject to delisting. We would then be entitled to appeal that determination to a Nasdaq hearings panel. If the stock is delisted, we may trade on the effectivenessover-the-counter market, or even in the pink sheets, which would significantly decrease the liquidity of an investment in our common stock. In addition, the stock may be deemed to be penny stock. If

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our common stock is considered penny stock, we would be subject to rules that impose additional sales practices on broker-dealers who sell our securities. For example, broker-dealers would have to make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. Also, a disclosure schedule must be prepared prior to any transaction involving a penny stock and disclosure is required about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Monthly statements are also required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock. Because of these additional obligations, some brokers may be unwilling to effect transactions in penny stocks. This could have an adverse effect on the liquidity of our systemcommon stock and the ability of internal control. Effective internal controls are necessary forinvestors to sell the Company to provide timely, reliable and accurate financialcommon stock.

If equities or industry analysts do not publish research or reports identify and proactively correct any deficiencies, material weaknesses or fraud and meetabout our reporting obligations. As disclosed in Part II, Item 9A, Management identified material weaknesses during fiscal year 2021. Remediation efforts place a significant burden on management and add increased pressure on its financial reporting resources and processes. If the Company is unable to successfully remediate this material weakness in a timely manner,company, or if any additional material weaknessesthey issue adverse or misleading opinions regarding us or our stock, our stock price and trading volume could decline.

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our internal control over financial reporting are identified,business. If no or few analysts commence coverage of us or if such coverage is not maintained, the accuracy ofmarket price for our financial reporting and the Company's ability to timely file with the SECstock may be adversely impacted. In addition,affected. Our stock price also may decline if the Company's remedial efforts are insufficient,any analyst who covers us issues an adverse or erroneous opinion regarding us, our business model, our intellectual property or our stock performance, or if additional material weaknessesour operating results fail to meet analysts’ expectations. If one or significant deficienciesmore analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in its internal controlsthe financial markets, which could cause our stock price or trading volume to decline and possibly adversely affect our ability to engage in future financings.

The market price of our common stock has been and may continue to be volatile, and the value of your investment could decline significantly.

The trading price of our common stock has been and is likely to continue to be volatile. The trading price of our common stock since June 28, 2021 (the date of completion of the Arrangement) up to March 17, 2023, has ranged from a high of $ 7.96 to a low of $0.48. Factors that have caused, and could continue to cause, fluctuations in the trading price of our common stock include, but are not limited to, the following:

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The stock market in general, and market prices for the securities of similar companies in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance, which might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. In several recent situations when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and materially adversely affect our results of operations. We currently have ongoing lawsuits. See Part 1, Item 3, "Legal Proceedings" in this Annual Report on Form 10-K for more information regarding these lawsuits and the SEC’s investigation.

Future sales and issuances of a substantial number of shares of our common stock or rights to purchase common stock by our stockholders in the public market could result in additional dilution of the percentage ownership of our stockholders and cause our stock price to fall.

If our stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline.

We have and will continue to issue equity, convertible securities or other securities to investors in public and private offerings. In addition, we currently have effective resale shelf registration statements which enable the selling stockholders thereunder to sell shares in the public market pursuant thereto.

We also have outstanding as of December 31, 2022, warrants to purchase 39,920,919 shares of our common stock at a weighted average exercise price of $1.93 per share. These warrants include 37,037,039 warrants issued in the June 2022 registered direct offering with an exercise price of $1.75 per share that are now eligible for exercise, and, if exercised, will have a dilutive effect on the percentage ownership held by holders of our common stock.

Further, additional capital will be needed in the future to continue our planned operations, including commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner, we determine from time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our common stock. Additional issuances and sales of our common stock, including shares of our common stock available for issuance to our employees, directors and consultants, or a perception that such shares will be sold in the public market, could result in additional dilution and the trading price of our common stock could decline.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Our board of directors is authorized, without further stockholder action, and subject to Nasdaq rules, to issue preferred stock in one or more series and to designate the dividend rate, voting rights and other rights, preferences and restrictions of each such series. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. Also, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our common stock.

Anti-takeover provisions in our articles of incorporation and bylaws, as amended, as well as provisions in Nevada law, might discourage, delay, or prevent a change of control of us or changes in our management and, therefore, depress the trading price of our securities.

Our articles of incorporation and bylaws, as amended, as well as provisions in Nevada law, contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board. Our corporate governance documents include provisions:

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These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our management.

As a Nevada corporation, we are also subject to provisions of Nevada corporate law, including Section 78.411, et seq. of the Nevada Revised Statutes, which, among other things, prohibits a publicly-held Nevada corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last two years has owned, 10% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner, and, unless otherwise provided in our articles of incorporation or by-laws, restricts the ability of an acquiring person to obtain a controlling interest of 20% or more of our voting shares. Our articles of incorporation and by-laws, as amended, do not contain any provision which would currently keep the change of control restrictions of Section 78.378 from applying to it.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of us, thereby reducing the likelihood that our stockholders could receive a premium for their common stock in an acquisition.

We are a smaller reporting company. We cannot be certain whether the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors or otherwise limit our ability to raise additional funds.

As of December 31, 2022, we are a “smaller reporting company” under applicable U.S. securities regulations. A smaller reporting company is a company that, as of the last business day of its most recently completed second fiscal quarter, has (i) an aggregate market value of the company’s voting stock held by non-affiliates, or public float, of less than $250 million or (ii) less than $100 million in revenue and less than $700 million in public float. In addition, a smaller reporting company is able to provide simplified executive compensation disclosures in our filings and has certain other reduced disclosure obligations in our SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Reduced disclosure in our SEC filings due to our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects.

We have not paid cash dividends in the past and have no immediate plans to pay dividends.

Our current plan is to reinvest earnings, if any, to cover operating costs and otherwise remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend. Therefore, you should not expect to receive cash dividends on our common stock.

General Risk Factors

We are exposed to fluctuations in currency exchange rates.

Our revenues and expenses are denominated in U.S. dollars, Canadian dollars, EURO, and Great British Pounds, and therefore are exposed to significant currency exchange fluctuations. Recent events in the global financial markets have been coupled with increased volatility in the currency markets. Fluctuations in the exchange rate between the U.S. dollar, the Canadian dollar and the British Pound may have a material adverse effect on our business, financial condition, and operating results. We may, in the future, establish a program to hedge a portion of our foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. With appropriate risk management and oversight this may be able to offset future risk, however a hedging strategy will result in additional operating costs.

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Operating as a public company requires us to incur substantial costs and requires substantial management attention. In addition, certain members of our management team have limited experience managing a public company.

As a public company, we incur substantial legal, accounting and other expenses that we did not incur as a private company. For example, we are subject to the reporting requirements of the Exchange Act, the applicable requirements of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market. For example, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business, financial condition and results of operations. We are also required to maintain effective disclosure controls and procedures and internal control over financial reporting. Compliance with these rules and regulations has increased and will continue to increase our legal and financial compliance costs and increase demand on our systems. In addition, as a public company, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management and impact the manner in which we operate our business in ways we cannot currently anticipate. As a result of disclosure of information in filings required of a public company, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors.

Additionally, certain members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These obligations and constituents will require itsignificant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and results of operations.

Increased scrutiny of our environmental, social and governance responsibilities and practices may result in additional costs, liability risks, and may adversely impact our reputation, our ability to expend significantattract and retain a skilled workforce and willingness of customers and suppliers to do business with us.

Investor advocacy groups, institutional investors, proxy advisory services, stockholders, government, regulators, employees, customers and other stakeholders are increasingly focused on environmental, social and governance (“ESG”) practices of companies. Additionally, public interest and legislative pressure related to public companies’ ESG practices continues to grow. If our ESG practices fail to meet regulatory requirements or investor or other stakeholders' evolving expectations and standards for responsible business practices in numerous areas, including climate change and greenhouse gas emissions, environmental stewardship, support for communities where we operate, human and civil rights, director and employee diversity, human capital management, employee health and safety practices, product quality and safety, data security, supply chain management, regulatory compliance corporate governance and transparency and employing ESG strategies within business operations, our brand, reputation and employee retention may be negatively impacted and customers and suppliers may be unwilling to do business with us. As we work to align our ESG practices with industry standards, we will be dealing with uncertainties and risks resulting from the forward-looking nature of many ESG issues, In addition, we will continue to expand our disclosures in these areas and doing so may result in additional costs and require additional resources to correctmonitor, report, and comply with our various ESG practices. If we fail to adopt ESG standards or practices as quickly as stakeholders desire, report on our ESG efforts or practices accurately, or satisfy the material weaknesses or deficiencies, subject the Company to regulatory investigationsexpectations of stakeholders, our reputation, business, financial performance and penalties, harm its reputation, cause a decline in investor confidence or otherwise cause a decline in its stock price.growth may be adversely impacted.

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Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

The Company’s registered office is located at 85 Swanson Road, Boxborough, Massachusetts 01719, and itsOur principal executive office is located at 1 Research60 Highfield Park Drive, Halifax,Dartmouth, Nova Scotia, Canada.

The Company'sOur principal facilities include the following:

The Company also acquired the following properties as part of the Torchlight RTO on June 28, 2021. Comparative figures in Item 2 refer to the financial information of Torchlight as the legal acquirer and not the accounting acquirer. Refer to note 5 in Item 8. "Financial Statements and supplementary data" for more details.

Investments to support oil and gas properties during the years ended December 31, 2021 and 2020 were $14.2 million and $3.4 million respectively.

As of December 31, 2021 and 2020, the Company had no proved reserves. The Hazel and Orogrande Projects consist only of unevaluated properties in progress of development for future production. At December 31, 2021, there are no proved nonproducing reserves related to these properties. The Oklahoma properties are marginal producing wells which are not economic in the context of proved reserve value.

The Company has not included the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves given there hasn't been any expected future cash inflows.

Reserve Estimation Process, Controls and Technologies

No reserve report has been prepared for 2021 or 2020. The only producing properties owned by the Company are those located in Oklahoma which are marginally producing and are uneconomic for reserve calculation purposes.

Proved Nonproducing Reserves

As of December 31, 2021 and 2020, the Company's proved nonproducing reserves totaled were 0 barrels of oil equivalents (BOE).

At the end of 2021 and 2020, reserves did not include any value for proved undeveloped properties.

The Company made development progress during 2021 to develop proved producing reserves in the Orogrande Project in the Permian Basin in West Texas. The Company incurred cost of $14.2 million in relation to certain drilling activity carried out to remain in compliance with all aspects of the Company's lease obligations and to satisfy the Continuous Drilling Clause ("CDC") with University Lands.

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Production, Price, and Production Cost History

During the year ended December 31, 2020, the Company produced and sold 5,445 barrels of oil net to its interest at an average sale price of $34.48 per bbl. It produced and sold 4,998 MCF of gas net to its interest at an average sales price of $1.13 per MCF. Its average production cost including lease operating expenses and direct production taxes was $30.02 per BOE. Its depreciation, depletion, and amortization expense was $130.68 per BOE. The 2020 production was from properties located in central Oklahoma and in west Texas.

During the year ended December 31, 2021, there was no oil or gas production.

Item 3. Legal Proceedings.

On January 31, 2020, Torchlight Energy Resources, Inc.In December 2022 we completed the spin-off of our oil and its wholly owned subsidiaries Torchlight Energy, Inc.gas assets and Torchlight Energy Operating, LLC were served with a lawsuit broughtoperations by Goldstone Holding Company, LLC (Goldstone Holding Company, LLC v. Torchlight Energy, Inc., et al., in the 160th Judicial District Courtdistributing shares of Dallas County, Texas). On February 24, 2020, Torchlight Energy Resources, Inc., Torchlight Energy, Inc., and Torchlight Energy Operating, LLC timely filed their answer, affirmative defenses, and requests for disclosure. The suit, which sought monetary relief over $1 million, made unspecified allegationscommon stock of misrepresentations involving a November 2015 participation agreement and a 2016 amendment to the participation agreement. Torchlight denied the allegations and asserted several affirmative defenses including but not limited to, that the suit is barred by the applicable statute of limitations, that the claims had been released, and that the claims were barred because of contractual disclaimers between sophisticated parties. Torchlight also asserted counterclaims for attorney fees. On January 14, 2021, Goldstone Holding Company, LLC dismissed its claims without prejudice, leaving Torchlight’s counterclaims for attorney fees as the only pending claim in the case. On February 26, 2021, Torchlight filed a non-suit without prejudice on its counterclaims for attorney fees, leaving no claims in the case. The court signed a final order disposing of the entire case on March 5, 2021. However, Goldstone Holding Company, LLC asked the court to re-instate its claims, and a hearing was held on April 13, 2021. On June 16, 2021, the court signed an order denying the motion to reinstate Goldstone Holding Company’s, LLC’s claims, and the case is closed.

On April 30, 2020, The Company'sour wholly owned subsidiary, Hudspeth Oil Corporation, filed suit against Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies. The suit seeks the recovery of approximately $1.4 million in costs incurred as a result of a tool failure during drilling activities on the University Founders A25 #2 well that is located in the Orogrande Field. Working interest owner Wolfbone Investments, LLC, a company owned by the Company's former Chairman Gregory McCabe, is a co-plaintiff in that action. After the suit was filed, Cordax filed a mineral lien in the amount of $104,500 against the Orogrande Field and has sued the operator and counterclaimed against Hudspeth for breach of contract, seeking the same amount as the lien. The Company has added the manufacturer of one of the tool components that the Company contends was a cause of the tool failure. It was later discovered that Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies forfeited its charter to conduct business in the State of Texas by failing to timely pay its franchise taxes, and the Company added members of the board of directorsNext Bridge, to the case pursuantholders of our Series A Preferred Stock. All previously disclosed legal proceedings relating to the Texas Tax Code. It was recently disclosed that Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies is the subsidiary of a Canadian parent company, Cordax Evaluation Technologies, Inc., who has also been added to the case. The suit, Hudspeth Oil Corporationour oil and Wolfbone Investments, LLC v. Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies, was filed in the 189th Judicial District Court of Harris County, Texas. The Company’s current Chairman of the Board filed a special appearance after being served with citation, alleging that he was a Canadian citizen withgas assets and related operations were assumed by NBH and no meaningful ties to Texas. After discovery was conducted on this issue, the Company filed a nonsuit without prejudice for this Defendant, dismissing him from the case. The remaining parties are currently engaged in preliminary discovery and are scheduling mediation.longer involve us.

On March 18, 2021, Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies filed a lawsuit in Hudspeth County, Texas seeking to foreclose its mineral lien against the Orogrande Field in the amount of $104,500.01 and recover related attorney’s fees. The foreclosure action, Datalog LWT Inc. d/b/a Cordax Evaluation Technologies v. Torchlight Energy Resources, Inc., was filed in the 205th Judicial District Court of Hudspeth County, Texas. The Company is contesting the lien in good faith and filed a Plea in Abatement on May 10, 2021, seeking a stay in the Hudspeth County lien foreclosure case pending final disposition of the related case currently pending in Harris County, Texas.

SEC Subpoena

In September 2021, the Companywe received a subpoena from the Securities and Exchange Commission, Division of Enforcement, in a matter captioned In the Matter of Torchlight Energy Resources, Inc. The subpoena requests that the Company produceswe produce certain documents and information related to, among other things, the merger involving Torchlight Energy Resources, Inc. and Metamaterial Inc. The Company isWe are cooperating and intendsintend to continue to cooperate with the SEC’s investigation. The CompanyWe can offer no assurances as to the outcome of this investigation or its potential effect, if any, on the Companyus or itsour results of operation.

19Securities Class Action

On January 3, 2022, a putative securities class action lawsuit was filed in the U.S. District Court for the Eastern District of New York captioned Maltagliati v. Meta Materials Inc., et al., No. 1:21-cv-07203, against the Company, itsus, our Chief Executive Officer, itsour Chief Financial Officer, Torchlight’s former Chairman of the Board of Directors, and Torchlight’s former Chief Executive Officer. The complaint, purportedly brought on behalf of all purchasers of the Company’s publicly traded securities from September 21, 2020 through and including December 14, 2021, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) arising primarily from a short-seller report and statements related to the Company’s business combination with Torchlight. The complaint seeks unspecified compensatory damages and reasonable costs and expenses, including attorneys’ fees.

On January 26, 2022, a similar putative securities class action lawsuit was filed in the U.S. District Court for the Eastern District of New York captioned McMillan v. Meta Materials Inc., et al., No. 1:22-cv-00463. ThisThe McMillan complaint names the same defendants and asserts the same claims on behalf of the same purported class as the Maltagliati action.complaint. The Company believescomplaints, purportedly brought on behalf of all purchasers of our publicly traded securities from September 21, 2020 through and including December 14, 2021, assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) arising primarily from a short-seller report and statements related to our business combination with Torchlight. The complaints seek unspecified compensatory damages and reasonable costs and expenses, including attorneys’ fees. On July 15, 2022, the Court consolidated these actions (collectively,under the “Securities Class Action”) have no meritcaption In re Meta Materials Inc. Securities Litigation, No. 1:21-cv-07203, appointed lead plaintiffs and intendsapproved the lead plaintiffs’ selection of lead counsel. Lead plaintiffs filed a consolidated complaint on August 29, 2022. We moved to vigorously defend itself against these allegations.dismiss that complaint on October 13, 2022. The motion was fully briefed on January 12, 2023. The Court held a hearing on the motion to dismiss on February 27, 2023 and took the motion under submission.

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Shareholder Derivative Action

On January 14, 2022, a shareholder derivative action was filed in the U.S. District Court for the Easter District of New York captioned Hines v. Palikaras, et al., No. 1:22-cv-00248. The complaint names as defendants certain of the Company’sour current officers and directors, certain former Torchlight officers and directors, and the Companyus (as nominal defendant). The complaint, purportedly brought on behalf of the Company, asserts claims under Section 14(a) of the Exchange Act, contribution claims under Sections 10(b) and 21D of the Exchange Act, and various state law claims such as breach of fiduciary duties and unjust enrichment. The complaint seeks, among other things, unspecified compensatory damages in favor of the Company, certain corporate governance related actions, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. The Company believesOn March 9, 2022, the Court entered a stipulated order staying this action has no merituntil there is a ruling on a motion to dismiss in the securities class action.

Westpark Capital Group

On July 25, 2022, WestPark Capital Group, LLC filed a complaint in Los Angeles County Superior Court against us for breach of contract, alleging that it is owed a $450,000 commission as a placement agent with respect to our June 2022 registered direct offering. On August 31, 2022, we filed an answer to the complaint. We dispute that WestPark Capital Group placed the investor in the direct registered offering and intends to vigorously defend itself against these allegations.is owed a commission.

Item 4. Mine Safety Disclosures.

Not Applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information for Common Stock

The Company'sOur common stock is quoted on the NASDAQ Stock Market LLC ("NASDAQ") under the symbol, “MMAT”. As of December 31, 2021, the Company2022, we had outstanding common shares of 284,573,316 out of362,247,867 which there were 88,274,449includes 79,605,384 Exchangeable Shares held by certain shareholders in Canada and which are traded on the Canadian Securities Exchange ("CSE") under the symbol "MMAX".

The average daily volume, and that are exchangeable for shares of MMAT on NASDAQ from June 28, 2021 through December 31, 2021 was 14,258,758 .a 1-for-1 basis.

The Exchangeable Shares were listed in connection with the completion of the Torchlight RTO where former holders of Metamaterial Inc.’s common shares (that were previously traded on the CSE) were entitled to receive 1.845 of the Company'sour common shares for each previously held common share of Metamaterial Inc. or in Exchangeable Shares of a wholly-owned subsidiary of META that reflect the same exchange ratio on issuance.

Holders of Record

As of December 31, 2021,2022, there were 87154 holders of record of the Company's common stock listed on NASDAQ. Because many sharesNASDAQ the majority of MMAT'sour common stock areis held by brokers and other institutions on behalf of stockholders, the Company isaccordingly, we are unable to estimate the total number of beneficial owners of itsour common stock.

Holders of the Company'sour common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.

Holders of the Company'sour common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our Board, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board may deem relevant.

Issuer Purchases of Equity Securities

None.

Recent Sales of Unregistered Securities

The table below details allThere were no unregistered common sharessecurities issued by the Companyus during the fiscal year 2021. These shares are included in the issued and outstanding share count of the Company at December 31, 2021 and are adjusted to reflect the 1:2 reverse stock split of the Company’s common stock effected immediately prior to the closing of the Arrangement agreement. With the exception of the shares issuable to Metamaterial holder in connection with the Arrangement Agreement, all other unregistered shares contained restrictions subjecting them to Rule 144.

All common shares referenced in the below table represents shares issued by Meta Materials Inc.,2022 not previously Torchlight Energy Resources, Inc. ("Torchlight"), after adjustment of reverse stock splitreported on June 25, 2021.

* Issued under an exemption from registration under Section 3(a)(10)

In addition to the common shares detailed above, in June 2021 the Company issued a total of 164,923,363 Series A Preferred Shares to shareholders of record of Torchlight as of June 24, 2021.Form 8-K or Form 10-Q.

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Stock Performance Graph

This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Meta Materials Inc., Inc. under the Securities Act of 1933, as amended, or the Exchange Act.

The following graph shows a comparison of the cumulative total return for the Company's common stock, the Russell 2000 (RUT), and the Nasdaq Composite Index (COMP) beginning December 30, 2016, and ending December 31, 2021. The graph assumes that $100 was invested at the market close on beginning December 30, 2016 in the common stock of MMAT, COMP, and RUT. The stock price performance of the following graph is not necessarily indicative of future stock price performance.

Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the Company'sour financial condition and results of operations should be read in conjunction with its consolidated financial statements and related notes, each included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in or implied by these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A and elsewhere in this Annual Report. See “Note about“Cautionary Note Regarding Forward-Looking Statements” in this Annual Report.

This Report on Form 10-K contains references to the Company'sour trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Report on Form 10-K, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the Companywe will not assert, to the fullest extent under applicable law, the Company'sour rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend for the Company'sour use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of the Companyus by any other companies.

OVERVIEW

Meta Materials Inc. (the(also referred to herein as the “Company” or, “META”, “we”, “us”, “our”, or “Resulting Issuer”) is a developer of high-performance functional materials and nanocomposites specializing in metamaterial research and products, nanofabrication, and computational electromagnetics. The Company’s registered office is located at 85 Swanson Road, Boxborough, Massachusetts 01719, and itsOur principal executive office is located at 1 Research60 Highfield Park Drive, Halifax,Dartmouth, Nova Scotia, Canada.

Impact of COVID-19 on the Company’s Business

During March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. This has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. In response, the Company’s management implemented a Work-From-Home policy for management and non-engineering employees in all of the Company’s locations for various periods through Fiscal 2020 and Fiscal 2021 as was required or deemed prudent by management. Engineering staff continued to work on given tasks and followed strict safety guidelines. As of November 2021, the majority of the Company’s employees had returned to the workplace. Although the Company’s supply chain has slowed down, the Company is currently able to maintain inventory of long lead items and is working with its suppliers to optimize future supply orders

COVID-19 has impacted the Company’s 2020 and 2021 sales of its metaAIR® laser protection eyewear product. Worldwide restrictions on travel are significantly impacting the airline industry and purchasing of metaAIR® eyewear has not been the primary spending focus of airline companies emerging from the financial impacts of COVID-19, however, the Company is pursuing sales in adjacent markets such as consumer, military and law enforcement. The situation is dynamic and the ultimate duration and magnitude of the impact of COVID-19 on the economy and financial effect specific to the Company cannot be quantified or known at this time.

BUSINESS AND OPERATIONAL HIGHLIGHTS

Throughout 2021, the Company’s activities were focused on its research and development efforts as well as expansion of its intellectual property estate. As the Company moves into 2022, we emphasized new emphasis will be placed on investments in pilot scale manufacturing of our NANOWEB® products,applications, expansion of itsour production capacity in our banknote and brand security lines, and more aggressive design, development and clinical testing of itsour broad array of medical products. These efforts represent an efficient approach to monetizing the Company's intellectual property assets.For more information regarding our business, see Part I, Item I (Business). of this Form 10-K.

As of December 31, 2022, we have substantially completed the construction of our Highfield Park facility

The Company leased approximately 53,000 square foot facilityFacility in Dartmouth, Nova Scotia with the lease commencing on January 1, 2021.and expanding our facility in Thurso, Quebec.

Nasdaq Potential Delisting

On March 20,2023, we received a notice (the “Notice”) from The facility will host the Company’s holography and lithography R&D labs and manufacturing operations. The Company also amended this lease agreement on June 9, 2021 to expand the leased space by approximately 15,000 square feet, reduce the annual rentNasdaq Stock Market LLC (the "Nasdaq Exchange”) informing us that for the 10-year termlast 30 consecutive business days, the bid price of the lease and obtain from the landlord CA$0.5 million in cash to fund ongoing tenant improvements. In exchange, the landlord received 993,490 shares of MMIour common stock had closed below $1.00 per share, which is the minimum required closing bid price for continued listing on the Nasdaq Exchange pursuant to Listing Rule 5450(a)(1). The Notice has no immediate effect on our Nasdaq listing or trading of our common stock. We have 180 calendar days, or until September 18, 2023 (the “Compliance Date”), to regain compliance. To regain compliance, the closing bid price of our common stock must be at CA$3.40least $1.00 per share. As at December 31, 2021,share for a minimum of ten consecutive business days. If we do not regain compliance by the Company has purchased equipmentCompliance Date, we may be eligible for approximately $1.5 million as well as spent $3.84 millionadditional 180 days to regain compliance or if we are otherwise not eligible, we may request a hearing before a Nasdaq Hearings Panel.

Known Trends and Uncertainties

Inflation

A prolonged period of inflation in Europe, for energy costs in particular, could cause shortages or material cost increases for certain key raw materials, for which we depend on construction work. The Company will continueEuropean suppliers. In particular, shortages or cost increases in certain polymers used in our Holography products could result in higher costs for these products that may not be able to incur additional construction and equipment costs through 2022.be passed on to our customers.

23Inflation in North America, for labor costs and transportation costs in particular, could elevate our costs of hiring new team members and cause increases in our labor costs for existing team members. In addition, rising transportation costs are likely to increase our costs for shipping our products and the costs associated with our material purchases. Further, inflation could cause increases in the cost of routine borrowing for the purchase of equipment.

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Pleasanton facility

During 2021,Vehicle Electrification

The transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) may be accelerated by recent disruptions in global oil supply, reduced investment in new domestic oil exploration, and increased government support for domestic EV production, battery and battery materials supply chain, and EV charging infrastructure. This may increase the Company signed multiple lease amendmentsopportunity for META to scale up battery materials production, acquire new battery component customers, and obtain government funding for capital projects. It could also accelerate demand for certain of our NANOWEB® products targeting EV’s.

Global Chip Shortage

A global shortage of computer chips has triggered significant delays in product launches in the automotive industry. Should these shortages continue, META could experience on-going delays in orders for our NANOWEB® applications from this vertical market since these products are intended to be incorporated into planned new models.

Expanding Operations, Facilities and Staffing

META is expanding capacity and facilities to support a growing range of market opportunities. This includes a new headquarters facility in Dartmouth, Nova Scotia; expanded production capacity in Thurso, Quebec; and new development facilities in Maryland for Electro Optics and IR, and in Massachusetts for the Battery Materials team. These activities require capital investments, increased overhead for leased facilities, and higher operating expenses for personnel additions. The timing of new customer programs and revenues associated with its lessorthese expansions is uncertain and META will require additional financing to support the related cash consumption.

Expanding Focus and Emphasis on Information Technology

With the rapid growth of our global business, our data protection and cyber security needs have become a significant element of our business. Failure on our part to invest in Pleasanton, Californiathe tools, equipment and personnel required to expandadequately manage these elements could result in regulatory issues, claims by customers and potential financial liabilities. Further, customer prospects identifying such failures could decide to delay or abandon orders from us.

NANOWEB® Capacity

Our NANOWEB® products have not yet reached the leased spacerequired manufacturing scale to enable us to address the volume demands of a number of our target vertical markets. We must either design, develop and procure additional internal capacity to produce NANOWEB® in higher volume and larger formats or identify outsourced suppliers capable of producing our designs. Internal capacity expansion may require higher capital expenditures and faces risk of supply chain delays. Outsourced production may increase variable costs and put pressure on gross margins as we scale volumes.

Recent Acquisitions

Plasma App Ltd

On April 1, 2022, we completed the purchase of 100% of the facilityissued and outstanding shares of Plasma App Ltd. ("PAL"). PAL is the developer of PLASMAfusion®, a proprietary manufacturing platform technology, which enables high speed coating of any solid material on any type of substrate. PAL’s team is located at the Rutherford Appleton Laboratories in Oxford, UK.

We issued an aggregate of 9,677,419 shares of our common stock to PAL's shareholders at closing, representing a number of shares of common stock equal to $18,000,000 divided by $1.86 (the volume weighted average price for the United Statesten trading days ending on March 31, 2022), with an additional deferral of common stock equal to include additional space$2,000,000 divided by $1.86 to be issued subject to satisfaction of 14,379 square feetcertain claims and warranties.

Optodot

We completed an asset purchase agreement with Optodot Corporation ("Optodot") on June 22, 2022. Optodot, based in Devens, Massachusetts, USA, is a developer of advanced materials technologies for the battery and other industries.

The consideration transferred included the following: A cash payment of $3,500,000 as well as extendunrestricted common stock equal to $37,500,000 divided by our common stock's daily volume weighted average trading price per share on the durationNasdaq Capital Market for a period of twenty trading days ending on June 21, 2022 and restricted common stock, subject to milestones as set forth in the leased spaces until September 30, 2026. The Company has spent approximately $4.3 million on equipment including its first pilot scale roll-to-roll line which is expected to be ready for low volume production during the second half of fiscal year 2022. The Company has also spent $1 million on leasehold improvementsPurchase

Thurso facility43

As partAgreement, equal to $7,500,000 divided by the daily volume weighted average trading price per share of our Common Stock on the Nanotech acquisition,Nasdaq Capital Market for the Company acquired property plant and equipment with an estimated fair valueconsecutive period of $25.8 million including a 105,000 square foot facility in Thurso, Quebec. Approximately 35,000 square feet is being utilized for existing production capacity, and the remaining 70,000 square feet is available to expand output to facilitate future growth.twenty trading days ending on June 21, 2022.

RESULTS OF OPERATIONS

We have incurred recurring losses to date, and we anticipate incurring additional losses until such time, if ever, we can achieve profitability. Substantial additional financing will be needed to fund our development, marketing and sales activities and generally to commercialize our technology, and we expect to raise additional capital through various financing transactions or arrangements, including sale/leaseback of certain properties, joint venturing of projects, debt financing, equity financing, or other means. These factors raise substantial doubt about our ability to continue as a going concern. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

Revenue and Gross Profit

Our revenue is generated from product sales as well as development revenue. We recognize revenue when we satisfy performance obligations under the terms of our contracts, and control of our products is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products or services.

Product Sales

Product sales include products, components, and samples sold to variousour customers. DuringRevenue from the sale of prototypes and finished products is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of goods. We consider whether there are other obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of prototypes, we consider the effects of variable consideration, the existence of significant financial components, non-cash consideration and consideration payable to the customer (if any).

Development Revenue

Development Revenue consists of revenues from contract services and research services, including non-recurring engineering services. Revenue from development activities is recognized over time, using an output method to measure progress towards complete satisfaction of the research activities and whether associated performance obligations identified within each contract have been satisfied.

Cost of Goods Sold

Cost of Goods Sold consists of direct material used in production, depreciation expenses of machinery and equipment used in production, salaries and benefits relating to the production staff, and other overhead costs allocated to production.

Product Sales

The increase in product sales of $0.8 million for the year ended December 31, 2022, as compared to the same period of 2021, is primarily due to increase in sales revenue from our nanoimprint-lithography revenue - banknotes applications.

Development Revenue

The increase in development revenue for the year ended December 31, 2022, of $5.3 million compared to the year ended December 31, 2021, is mainly due to our nanoimprint-lithography revenue - banknotes applications during 2022 of $6.8 million, offset by $1.5 million decrease due to the Company began earning revenue fromcompletion of certain development samples sold to certain customers. The $0.4 million increasecontracts in product sales in 2021 compared to 2020 is due to:

There was minimal change in product sales between 2019 and 2020.

Development revenue is comprised of revenue from contract services and other development revenue. The increase in development revenue of $2.6 million in 2021 compared to 2020 is primarily due to:

Goods Sold

The increase in development revenuecost of $0.2goods sold for the year ended December 31, 2022, of $2.4 million in 2020, compared to 2019,the year ended December 31, 2021, is Primarilymainly due toour production cost associated with the nanoimprint-lithography revenue recognized from statements of work with different customers.- banknotes applications.

Gross Profit

The increase in gross profit for the year ended December 31, 2022, of $0.7$3.8 million in cost of sales in 2021, compared to 2020,the year ended December 31, 2021, is primarilyagain mainly due to $0.17 million in cost of sales incurred by Nanotech subsequent to its acquisition by the Company, as well as $0.16 million in cost of sales incurred in generating other product sales. There was minimal decrease in cost of sales in 2020 compared to 2019.our increased revenue from contract services with a confidential G10 central bank during 2022.

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Operating expenses

Selling & Marketing

The increase in selling and& marketing expenses in 2021,for the year ended December 31, 2022, of $4.0 million compared to 2020,the year ended December 31, 2021, is primarilymainly due to:

marketing costs year over year.

There was a minimal decrease in selling and marketing expenses in 2020 compared to 2019.General & Administrative

The increase in general and& administrative expenses in 2021,for the year ended December 31, 2022 ,of $31.8 million compared to 2020,the year ended December 31, 2021, is primarily due to:

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