Table of operations include, but are not limited to, risks associated with the company’s ability to obtain additional capital in the future to fund planned expansion, the demand for oil and natural gas, general economic factors, competition in the industry and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. We undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such 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's 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," and similar expressions are intended to identify forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and trends that it believes may affect its 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 operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for management to predict all risks, nor can they assess the impact of all factors on the Company's 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 Company 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.

Meta Materials Inc. (the “Company” or “META” or “Resulting Issuer”) is a developer of high-performance functional materials and nanocomposites.

The Company’s registered office is located at 85 Swanson Road, Boxborough, Massachusetts 01719, and its principal executive office is located at 1 Research Drive, Halifax, Nova Scotia, Canada.

The Company has generated a portfolio of intellectual property and is now moving toward commercializing products at a performance and price point combination that has the potential to be disruptive in multiple market verticals. The Company’s platform technology includes holography, lithography, and medical wireless sensing. The underlying approach that powers the Company’s 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’s 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, and radio waves have played key roles in technological advancements throughout history. Advances in electrical and electromagnetic technologies, 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.

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.

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 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. HoloOPTIXTM 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. 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 holoOPTIX TM 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.

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 has 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 Company 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 can be fabricated onto any glass or plastic transparent surface in order to offer high transparency, high conductivity and low haze smart materials.

The Company’s current principal prototype product in lithography technology is its transparent conductive film, NANOWEB®. The lithography division operates out of the Company’s 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 2020 and 2021, the Company has been ordering and upgrading its equipment at its California facility to efficiently supply NANOWEB® samples in larger volumes. The Company has recently installed its first roll-to-roll, NANOWEB® pilot scale production line at its Pleasanton, California facility. The line is configured for 300mm-wide rolls of substrate. All the equipment passed factory acceptance tests prior to delivery and installation, and the line is currently being optimized.

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 has entered into a collaboration agreement with Crossover Solutions Inc. to commercialize 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 structures and color-shifting foils - the Company recently 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’s nano-optic security technology platforms include:

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.

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

The Company operates under a Business-to-Business model. Its marketing and sales functions are organized to support and grow this operating model. The Company utilizes a combination of filed-based and in-house selling resources to promote and sell its more common 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's marketing efforts are focused on technical education of its customer base regarding its products, support of a meaningful presence at trade shows and industry events and routine production of collateral materials to support its sales and business development efforts.

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

The Company provides research scale production of its products in-house to its customers in its lithography and holography business areas. The Company is scaling up pilot scale production of its materials in its Pleasanton facility and Highfield Park facility. The Company has current capacity in its Thurso facility to produce its banknote security and brand security product at commercial scale and it is expanding this capacity. In certain instances where volume warrants, the Company will make available on a license basis, its equipment and proprietary processes to its customers or to third party contractors to product its products for their needs.

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

The Company operates in a rapidly evolving industry subject to significant technological change and new product introductions and enhancements. The Company believes that its continued commitment to research and development is a critical element of ability to introduce new and enhanced products and technologies. The Company has historically invested more than forty percent (40%) of its operating expenses in its research and development efforts and these activities are integral to maintaining and enhancing our competitive position. The Company also increasingly seeks to deploy its resources to solve fundamental challenges that are both common to, and provide competitive advantage across, its high-performance functional materials and nanocomposites.

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

~~Orogrande Project, West Texas~~•

improve its existing technologies to enable growth into new application areas; and expand its intellectual property portfolio

Intellectual Property

During 2021, the Company has expanded its patents and trademarks portfolio significantly in a wide range of applications including holography, lithography, wireless sensing technology and nano-optic structures. In addition to META's previous portfolio of 126 patents, the Company acquired more than 23 patents from Interglass Technology AG and 98 patents from the Nanotech acquisition The Company believes that its combination of patents and additional IP that is being held confidential by way of multiple trade secrets provides the Company with an important competitive advantage, marketing benefits, and licensing revenue opportunities.

Regulation

The Company is subject to significant regulation by local, state, federal and international laws in all jurisdictions in which it operates. Compliance with these requirements can be costly and time consuming. The Company believes that its 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's operations, products, services, and actions which will require significant time and resources.

Human Capital Resources

As of February 28, 2022, the Company had 130 employees. Approximately 90% of its employees are located in Canada and the United States. Of the total workforce, 48 employees are involved in research and development; 28 employees are involved in operations, manufacturing, service and quality assurance; and 54 employees are involved in sales and marketing, finance, information technology, general management and other administrative functions.

Available Information

The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are accessible free of charge on its website at www.metamaterial.com as soon as reasonably practicable after he Company electronically files such material with, or furnish it to, the SEC. The SEC also maintains an internet site that contains reports, proxy and information statements and other information regarding the Company's filings at www.sec.gov. The reference to the Company's website does not constitute incorporation by reference of the information contained at the site.

Business Combinations

Torchlight RTO

On ~~August 7, 2014, we~~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 ~~a Purchase~~an Arrangement Agreement (the “Arrangement Agreement”) with ~~Hudspeth Oil Corporation (“Hudspeth”~~Metamaterial Inc. ("MMI"), ~~McCabe Petroleum Corporation (“MPC”~~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 ~~Gregory McCabe, our Chairman. Mr. McCabe was the sole owner of both Hudspeth and MPC. Under~~subject to the terms and conditions of the ~~Purchase~~Arrangement Agreement (the “Torchlight RTO”). On June 25, 2021, the Company implemented a reverse stock split, changed its name from “Torchlight Energy Resources, Inc.” to “Meta Materials Inc.” and changed its 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 Company began trading on the NASDAQ 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 ~~closing, we~~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, the legal parent, has been treated as the accounting acquiree. The transaction has been accounted for as a reverse acquisition in accordance with ASC 805 Business Combination. Accordingly, these 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 3 for additional information.

Nanotech acquisition

On August 5, 2021, the Company announced the signing of a definitive agreement to indirectly acquire Nanotech. On October 5, 2021, a wholly owned subsidiary of META purchased 100% of the capital stock of Hudspeth which holds certain oil and gas assets, including a 100% working interest in approximately 172,000 mostly contiguous acres in the Orogrande Basin in West Texas. As of December 31, 2017, leases covering approximately 133,000 acres remain in effect. This acreage is in the primary term under five-year leases that carry additional five-year extension provisions. As consideration, at closing we issued 868,750 restricted shares of ourNanotech’s common stock ~~to Mr. McCabe and paid a total~~at CA$1.25 per share. In addition, the transaction price included the settlement of $100,000 in geologic origination fees to third parties. Additionally, Mr. McCabe has, at his option, a 10% working interest back-in after payout and a reversionary interest if drilling obligations are not met, all under the terms and conditions of a participation and development agreement among Hudspeth, MPC and Mr. McCabe. All drilling obligations through December 31, 2018 have been met.

On September 23, 2015, Hudspeth entered into a Farmout Agreement with Pandora Energy, LP (“Pandora”), Founders Oil & Gas, LLC (“Founders”), and for the limited purposes set forth therein, MPC and Mr. McCabe, for the entire Orogrande Project in Hudspeth County, Texas. The Farmout Agreement provided that Hudspeth and Pandora (collectively referred to as “Farmor”) would assign to Founders an undivided 50% of the leasehold interest and a 37.5% net revenue interest in the oil and gas leases and mineral interests in the Orogrande Project, which interests, except for any interests retained by Founders, would be reassigned to Farmor by Founders if Founders did not spend a minimum of $45.0 million on actual drilling operations on the Orogrande Project by September 23, 2017. Under a joint operating agreement also entered into on September 23, 2015, Founders was designated as operator of the leases.

~~ITEM 1. BUSINESS- continued~~

On March 22, 2017, Founders, Founders Oil & Gas Operating, LLC, Founders’ operating partner, Hudspeth and Pandora signed a Drilling and Development Unit Agreement (the “DDU Agreement”), with the Commissioner of the General Land Office, on behalf of the State of Texas, and as approved by the Board for Lease of University Lands, or University Lands, on the Orogrande Project. The DDU Agreement has an effective date of January 1, 2017 and required a payment from Founders, Hudspeth and Pandora, collectively, of $335,323 as the initial consideration fee. The initial consideration fee was paid by Founders in April 2017 and was to be deducted from the required spud fee payable to us at commencement of the next well drilled.

The DDU Agreement allows for all 192 existing leases covering approximately 133,000 net acres leased from University Lands to be combined into one drilling and development unit for development purposes. The term of the DDU Agreement expires on December 31, 2023, and the time to drill on the drilling and development unit continues through December 2023. The DDU Agreement also grants the right to extend the DDU Agreement through December 2028 if compliance with the DDU Agreement is met and the extension fee associated with the additional time is paid. Our drilling obligations began with one well to be spudded and drilled on or before September 1, 2017, and increased to two wells in year 2018, three wells in year 2019, four wells in year 2020 and five wells per year in years 2021, 2022 and 2023. The drilling obligations are minimum yearly requirements and may be exceeded if acceleration is desired. The DDU Agreement replaces all prior agreements, and will govern future drilling obligations on the drilling and development unit if the DDU Agreement is extended. The Company drilled three wells during the fourth quarter of 2018.

There are two vertical tests wells in the Orogrande Project, the Orogrande Rich A-11 test well and the University Founders B-19 #1 test well. The Orogrande Rich A-11 test well was spudded on March 31, 2015, drilled in the second quarter of 2015 and was evaluated and numerous scientific tests were performed to provide key data for the field development thesis. We believe that future utility of this well may be conversion to a salt water disposal well in the course of further development of the Orogrande acreage. The University Founders B-19 #1 was spudded on April 24, 2016 and drilled in the second quarter of 2016. The well successfully pumped down completion fluid in the third quarter of 2016 and indications of hydrocarbons were seen at the surface on this second Orogrande Project test well. We believe that future utility of this well may be conversion to a salt water disposal well in the course of further development of the Orogrande acreage.

During the fourth quarter of 2017, we took back operational control from Founders on the Orogrande Project. We were joined by Wolfbone Investments, LLC, (“Wolfbone”), a company owned by Mr. McCabe. We, along with Hudspeth, Wolfbone and, for the limited purposes set forth therein, Pandora, entered into an Assignment of Farmout Agreement with Founders, (the “Assignment of Farmout Agreement”), pursuant to which we and Wolfbone willcertain Nanotech share the remaining commitments under the Farmout Agreement. All original provisions of our carried interest were to remain in place including reimbursement to us on each wellbore. Founders was to remain a 9.5% working interest owner in the Orogrande Project for the $9.5 million it had spent as of the date of the Assignment of Farmout Agreement, and such interests were to be carried until $40.5 million is spent by Wolfbone and us, with each contributing 50% of such capital spend, under the existing agreement. Our working interest in the Orogrande Project thereby increased by 20.25% to a total of 67.75% and Wolfbone then owned 20.25%.

Founders was to operate a newly drilled horizontal well called the University Founders #A25 (at 5,540’ depth in a 1,000’ lateral) with supervision from us and our partners. The University Founders #A25 was spudded on November 28, 2017. During the month of April 2018, we, MPC and Mr. McCabe were to assume full operational control including managing drilling plans and timing for all future wells drilled in the project.

On July 25, 2018, we and Hudspeth entered into a Settlement & Purchase Agreement (the “Settlement Agreement”) with Founders (and Founders Oil & Gas Operating, LLC), Wolfbone and MPC, which agreement provides for Hudspeth and Wolfbone to each immediately pay $625,000 and for Hudspeth or the Company and Wolfbone or MPC to each pay another $625,000 on July 20, 2019, as consideration for Founders assigning all of its working interest in the oil and gas leases of the Orogrande Project to Hudspeth and Wolfbone equally. The assignments to Hudspeth and Wolfbone were made in July when the first payments were made. The payments to Founders in 2019 are not securitized. Future well capital spending obligations will require the same 50% contribution from Hudspeth and 50% from Wolfbone until such time as the $40.5 million to be spent on the project (as per our Assignment of Farmout Agreement with Founders) is completed. The Company estimates that there is still approximately $23 million remaining to be spent on the project until such time as the capital expenditures revert back to the percentages of the working interest owners.

After the assignment by Founders (for which Hudspeth’s total consideration is $1,250,000), Hudspeth’s working interest increased to 72.5%. Additionally, the Settlement Agreement provides that the Founders parties will assign to the Company, Hudspeth, Wolfbone and MPC their claims against certain vendors for damages, if any, against such vendors for negligent services or defective equipment. Further, the Settlement Agreement has a mutual release and waivers among the parties.

Rich Masterson, our consulting geologist, is credited with originating the Orogrande Project in Hudspeth County in the Orogrande Basin. With Mr. Masterson’s assistance, we have identified target payzone depths between 4,100’ and 6,100’ with primary pay, described as the WolfPenn formation, located at depths of 5,300 to 5,900’. Based on our geologic analysis to date, the Wolfpenn formation is prospective for oil and high British thermal unit (Btu) gas, with a 70/30 mix expected, respectively.

Recently, the Company drilled three additional test wells in the Orogrande in order to stay in compliance with University Lands D&D Unit Agreement, as well as, to test for potential shallow pay zones and deeper pay zones that may be present on structural plays. At the time of this writing, the results have not been published.

~~ITEM 1. BUSINESS- continued~~

~~Hazel Project in the Midland Basin in West Texas~~

Effective April 4, 2016, TEI acquired from MPC a 66.66% working interest in approximately 12,000 acres in the Midland Basin in exchange for 1,500,000 warrants to purchase shares of our common stock with an exercise price of $1.00 for five years and a back-in after payout of a 25% working interest to MPC.

Initial development of the first well on the property, the Flying B Ranch #1, began July 9, 2016 and development continued through September 30, 2016. This well is classified as a test well in the development pursuit of the Hazel Project. We believe that this wellbore will be utilized as a salt water disposal well in support of future development.

In October 2016, the holders of all of our then-outstanding shares of Series C Preferred Stock (which were issued in July 2016) elected to convert into a total 33.33% working interest in our Hazel Project, reducing our ownership from 66.66% to a 33.33% working interest. As of December 31, 2018, no shares of our Series C Preferred Stock were outstanding.

On December 27, 2016, drilling activities commenced on the second Hazel Project well, the Flying B Ranch #2. The well is a vertical test similar to our first Hazel Project well, the Flying B Ranch #1. Recompletion in an alternative geological formation for this well was performed during the three months ended September 30, 2017; however, we believe that the results were uneconomic for continuing production. We believe that this wellbore will be utilized as a salt water disposal well in support of future development.

We commenced planning to drill the Flying B Ranch #3 horizontal well in the Hazel Project in June 2017 in compliance with the continuous drilling obligation. The well was spudded on June 10, 2017. The well was completed and began production in late September 2017.

~~Acquisition of Additional Interests in Hazel Project~~

On January 30, 2017, we and our then wholly-owned subsidiary, Torchlight Acquisition Corporation, a Texas corporation (“TAC”), entered into and closed an Agreement and Plan of Reorganization and a Plan of Merger with Line Drive Energy, LLC, a Texas limited liability company (“Line Drive”), and Mr. McCabe, under which agreements TAC merged with and into Line Drive and the separate existence of TAC ceased, with Line Drive being the surviving entity and becoming our wholly-owned subsidiary. Line Drive, which was wholly-owned by Mr. McCabe, owned certain assets and securities, including approximately 40.66% of 12,000 gross acres, 9,600 net acres, in the Hazel Project and 521,739 warrants to purchase shares of our common stock (which warrants had been assigned by Mr. McCabe to Line Drive). Upon the closing of the merger, all of the issued and outstanding shares of common stock of TAC automatically converted into a membership interest in Line Drive, constituting all of the issued and outstanding membership interests in Line Drive immediately following the closing of the merger, the membership interest in Line Drive held by Mr. McCabe andawards outstanding immediately prior to the closing of the ~~merger ceased~~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 ~~exist, and we issued Mr. McCabe 3,301,739 restricted shares of our common stock as consideration therefor. Immediately after closing,~~CA$1.25 per option, less the ~~521,739 warrants held by Line Drive were cancelled, which warrants had an~~ exercise price ~~of $1.40 per share and an expiration date of June 9, 2020. A Certificate of Merger for~~thereof. The consideration payable to securityholders under the ~~merger transaction~~arrangement was filed with the Secretary of State of Texas on January 31, 2017. Subsequent to the closing the name of Line Drive Energy, LLC was changed to Torchlight Hazel, LLC. We are required to drill one well every six months to hold the entire 12,000 acre block for eighteen months, and thereafter two wells every six months starting June 2018.~~As of December 31, 2018 drilling commitments have been met.~~

Also on January 30, 2017, TEI entered into and closed a Purchase and Sale Agreement with Wolfbone. Under the agreement, TEI acquired certain of Wolfbone’s Hazel Project assets, including its interestpayable in ~~the Flying B Ranch #1 well and the 40 acre unit surrounding the well, for consideration of $415,000, and additionally, Wolfbone caused to be cancelled~~cash, resulting in a total ~~of 2,780,000 warrants to~~ purchase shares of our common stock, including 1,500,000 warrants held by MPC, and 1,280,000 warrants held by Green Hill Minerals, an entity owned by Mr. McCabe’s son, which warrant cancellations were effected through certain Warrant Cancellation Agreements. The 1,500,000 warrants held by MPC that were cancelled had an exercise price of ~~$1.00 per share~~$71.6 million (CA$90.8 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 ~~an expiration date~~operates a manufacturing facility located in Thurso, Quebec.

Item 1A. Risk Factors.

The following factors could materially affect META’s business, financial condition or results of ~~April 4, 2021.~~ operations and should be carefully considered in evaluating the Company and its business, in addition to other information presented elsewhere in this report.

Risks That Could Affect the Company’s Financial Condition

Limited Operating History

The ~~warrants held by Green Hill Minerals that were cancelled included 100,000 warrants~~Company has a limited operating history, which can make it difficult for investors to evaluate the Company’s operations and prospects and may increase the risks associated with ~~an exercise price of $1.73 and an expiration date of September 30, 2018 and 1,180,000 warrants with an exercise price of $0.70 and an expiration date of February 15, 2020.~~

Since Mr. McCabe held the controlling interest in both Line Drive and Wolfbone, the transactions were combined for accounting purposes. The working interest in the Hazel Project was the only asset held by Line Drive. The warrant cancellation was treated in the aggregate as an exercise of the warrants with the transfer of the working interests as the consideration. We recorded the transactions as an increase in its investment in the ~~Hazel Project working interests of $3,644,431, which is equal~~Company.

The Company has incurred recurring consolidated net losses since its inception and expects its operating costs to continue to increase in future periods as it expends 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 ~~exercise price~~growth of the ~~warrants plus the cash paid to Wolfbone.~~

~~Upon the closing of the transactions, our working interest in the Hazel Project increased by 40.66% to a total ownership of 74%.~~

Effective June 1, 2017, we acquired an additional 6% working interest from unrelated working interest owners in exchange for 268,656 shares of common stock valued at $373,430, increasing our working interest in the Hazel project to 80%, and an overall net revenue interest of 74-75%.

Mr. Masterson is credited with originating the Hazel Project in the Midland Basin. With Mr. Masterson’s assistance, we are targeting prospects in the Midland Basin that have 150 to 130 feet of thickness, are likely to require six to eight laterals per bench, have the potential for twelve to sixteen horizontal wells per section, and 200 long lateral locations, assuming only two benches.

~~ITEM 1. BUSINESS- continued~~

In April 2018, we announced that we have commenced a process that could result in the monetization of the Hazel Project. We believe the development activity at the Hazel Project, coupled with nearby activities of other oil and gas operators, suggests that this project has achieved a level of value worth monetizing. We anticipate that the liquidity that would be provided from selling the Hazel Project could be redeployed into the Orogrande Project. While this process is underway, we will take all necessary steps to maintain the leasehold as required. In May 2018, the working interest partners in the Hazel Project drilled a shallow well to test a zone at 2500’. As of this filing, we continue to maintain the leases in good standing and continue to market the acreage in an effort to focus on the Orogrande Project.

~~Winkler Project, Winkler County, Texas~~

On December 1, 2017, the Agreement and Plan of Reorganization that we and our then wholly-owned subsidiary, Torchlight Wolfbone Properties, Inc., a Texas corporation (“TWP”), entered into with MPC and Warwink Properties, LLC (Warwink Properties) on November 14, 2017 closed. Under the agreement, TWP merged with and into Warwink Properties and the separate existence of TWP ceased, with Warwink Properties being the surviving entity and becoming our wholly-owned subsidiary. Warwink Properties was wholly owned by MPC. Warwink Properties owns certain assets, including a 10.71875% working interest in approximately 640 acres in Winkler County, Texas. Upon the closing of the merger, all of the issued and outstanding shares of common stock of TWP converted into a membership interest in Warwink Properties, constituting all of the issued and outstanding membership interests in Warwink Properties immediately following the closing of the merger, the membership interest in Warwink Properties held by MPC and outstanding immediately prior to the closing of the merger ceased to exist, and we issued MPC 2,500,000 restricted shares of our common stock as consideration. Also on December 1, 2017, MPC closed its transaction with MECO IV, LLC (” MECO”), for the purchase and sale of certain assets as contemplated by the Purchase and Sale Agreement dated November 9, 2017 among MPC, MECO and additional parties thereto (the “MECO PSA”), to which we are not a party. Under the MECO PSA, Warwink Properties received a carry from MECO (through the tanks) of up to $1,179,076 in the next well drilled on the Winkler County leases. A Certificate of Merger for the merger transaction was filed with the Secretary of State of Texas on December 5, 2017.

Also on December 1, 2017, the transactions contemplated by the Purchase Agreement that TEI entered into with MPC closed. Under the Purchase Agreement, which was entered into on November 14, 2017, TEI acquired beneficial ownership of certain of MPC’s assets, including acreage and wellbores located in Ward County, Texas (the “Ward County Assets”). As consideration under the Purchase Agreement, at closing TEI issued to MPC an unsecured promissory note in the principal amount of $3,250,000, payable in monthly installments of interest only beginning on January 1, 2018, at the rate of 5% per annum, with the entire principal amount together with all accrued interest due and payable on January 1, 2021. In connection with TEI’s acquisition of beneficial ownership in the Ward County Assets, MPC sold those same assets, on behalf of TEI, to MECO at closing of the MECO PSA, and accordingly, TEI received $3,250,000 in cash for its beneficial interest in the Ward County Assets. Additionally, at closing of the MECO PSA, MPC paid TEI a performance fee of $2,781,500 in cash as compensation for TEI’s marketing and selling the Winkler County assets of MPC and the Ward County Assets as a package to MECO.

~~Addition to the Winkler Project~~

As of May 7, 2018 our Winkler project in the Delaware Basin had begun the drilling phase of the first Winkler Project well, the UL 21 War-Wink 47 #2H. Our operating partner, MECO had begun the pilot hole on the project. The plan is to evaluate the various potential zones for a lateral leg to be drilled once logging is completed. We expect the most likely target to be the Wolfcamp A interval. The well is on 320 newly acquired acres offsetting the original leasehold we entered into in December, 2017. The additional acreage was leased by our operating partner under the Area of Mutual Interest Agreement (AMI) and we exercised its right to participate for its 12.5% in the additional 1,080 gross acres at a cash cost of $447,847 in July, 2018. Our carried interest in the first well, as outlined in the agreement, was originally planned to be on the first acreage acquired. That carried interest is being applied to this new well and will allow MECO to drill and produce potential revenues sooner than originally planned. The primary leasehold is a 320-acre block directly west of the current position and will allow for 5,000-foot lateral wells to be drilled. The well was completed and began production in October, 2018.

~~Two additional wells are planned for development by MECO in 2019.~~

~~In December, 2018,~~Company's business. If the Company ~~began~~fails to ~~take measures~~grow revenues or to ~~market~~achieve profitability while its ~~working interest participation in the Warwink Project in an effort to focus on the Orogrande.~~

~~Hunton Play, Central Oklahoma~~

Asoperating costs increase, its business, financial condition, results of December 31, 2018, we were producing from one well in the Viking Area of Mutual Interest and one well in Prairie Grove. All other Oklahoma property interests including the lease interests previously held in the Viking, Rosedale, and Thunderbird AMI’s were abandoned pursuant to the Settlement and Mutual Release Agreement executed on June 27, 2018.

~~ITEM 1. BUSINESS- continued~~

~~Industry and Business Environment~~

We are experiencing a time of fluctuating oil prices caused by lower demand, higher US Supply, and OPEC’s policies on production. Unfortunately, this is the cyclical nature of the oil and gas industry. We experience highs and lows that seem to come in cycles. Fortunately, advances in technology drive the US market and we feel this will drive the development costs down on our exploration and drilling programs.

~~Competition~~

The oil and natural gas industry is intensely competitive, and we will compete with numerous other companies engaged in the exploration and production of oil and gas. Some of these companies have substantially greater resources than we have. Not only do they explore for and produce oil and natural gas, but also many carry on midstream and refining operations and ~~market petroleum and other products on a regional, national, or worldwide basis. The operations of other companies may be able to pay more for exploratory~~growth prospects and productive oil and natural gas properties. They may also have more resources to define, evaluate, bid for, and purchase a greater number of properties and prospects than our financial or human resources permit.

Our larger or integrated competitors may have the resources to be better able to absorb the burden of current and future federal, state, and local laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to locate reserves and acquire interests in properties in the future will be dependent upon our ability and resources to evaluate and select suitable properties and consummate transactions in this highly competitive environment. In addition, we may be at a disadvantage in producing oil and natural gas properties and bidding for exploratory prospects because we have fewer financial and human resources than other companies in our industry. Should a larger and better financed company decide to directly compete with us, and be successful in its efforts, our business could bematerially, adversely affected.

~~Marketing and Customers~~

The market for oil and natural gas that we will produce depends on factors beyond our control, including the extent of domestic production and imports of oil and natural gas, the proximity and capacity of natural gas pipelines and other transportation facilities, demand for oil and natural gas, the marketing of competitive fuels, and the effects of state and federal regulation. The oil and gas industry also competes with other industries in supplying the energy and fuel requirements of industrial, commercial, and individual consumers.

~~Our oil production~~Company is expected to be sold at prices tied to the spot oil markets. Our natural gas production is expected to be sold under short-term contracts and priced based on first of the month index prices or on daily spot market prices. We will rely on our operating partners to market and sell our production.

~~Governmental Regulation and Environmental Matters~~

~~Our operations are~~ subject to ~~various rules, regulations, and limitations impacting the oil and natural gas exploration and production industry as a whole.~~

~~Regulation of Oil and Natural Gas Production~~

Our oil and natural gas exploration, production, and related operations, when developed, will be subject to extensive rules and regulations promulgated by federal, state, tribal, and local authorities and agencies. Certain states may also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from wells, and the regulation of spacing, plugging, and abandonment of such wells. Failure to comply with any such rules and regulations can result in substantial penalties. The regulatory burden on the oil and gas industry will most likely increase our cost of doing business and may affect our profitability. Although we believe we are currently in substantial compliance with all applicable laws and regulations, because such rules and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws. Significant expenditures may be required to comply with governmental laws and regulations and may have a material adverse effect on our financial condition and results of operations.

~~Environmental Matters~~

Our operations and properties are and will be subject to extensive and changing federal, state, and local laws and regulations relating to environmental protection, including the generation, storage, handling, emission, transportation, and discharge of materials into the environment, and relating to safety and health. In the future, environmental legislation and regulation may trend toward stricter standards. These laws and regulations may:

●	~~require the acquisition of a permit or other authorization before construction or drilling commences and for certain other activities;~~

●	~~limit or prohibit construction, drilling, and other activities on certain lands lying within wilderness and other protected areas;~~

●	~~impose substantial liabilities for pollution resulting from operations; or~~

●	~~restrict certain areas from fracking and other stimulation techniques.~~

The permits required for our operations may be subject to revocation, modification, and renewal by issuing authorities. Governmental authorities have the power to enforce their regulations, and violations are subject to fines or injunctions, or both. In the opinion of management, we are and will be in substantial compliance with current applicable environmental laws and regulations, and have no material commitments for capital expenditures to comply with existing environmental requirements. Nevertheless, changes in existing environmental laws and regulations or in interpretations thereof could have a significant impact on our company, as well as the oil and natural gas industry in general.

~~ITEM 1. BUSINESS- continued~~

The Comprehensive Environmental, Response, Compensation, and Liability Act (“CERCLA”) and comparable state statutes impose strict, joint, and several liability on owners and operators of sites and on persons who disposed of or arranged for the disposal of “hazardous substances” found at such sites. It is not uncommon for the neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. The Federal Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes govern the disposal of “solid waste” and “hazardous waste” and authorize the imposition of substantial fines and penalties for noncompliance. Although CERCLA currently excludes petroleum from its definition of “hazardous substance,” state laws affecting our operations may impose clean-up liability relating to petroleum and petroleum related products. In addition, although RCRA classifies certain oil field wastes as “non-hazardous,” such exploration and production wastes could be reclassified as hazardous wastes thereby making such wastes subject to more stringent handling and disposal requirements.

The Endangered Species Act (“ESA”) seeks to ensure that activities do not jeopardize endangered or threatened animal, fish, and plant species, nor destroy or modify the critical habitat of such species. Under ESA, exploration and production operations, as well as actions by federal agencies, may not significantly impair or jeopardize the species or its habitat. ESA provides for criminal penalties for willful violations of the Act. Other statutes that provide protection to animal and plant species and that may apply to our operations include, but are not necessarily limited to, the Fish and Wildlife Coordination Act, the Fishery Conservation and Management Act, the Migratory Bird Treaty Act and the National Historic Preservation Act. Although we believe that our operations will be in substantial compliance with such statutes, any change in these statutes or any reclassification of a species as endangered could subject our company to significant expenses to modify our operations or could force our company to discontinue certain operations altogether.

Hydraulic fracturing is regulated by state and federal oil and gas regulatory authorities, including specifically the requirement to disclose certain information related to hydraulic fracturing operations. Operators must follow applicable legal requirements for groundwater protection in our operations that are subject to supervision by state and federal regulators (including the Bureau of Land Management on federal acreage). Furthermore, well construction practices require the installation of multiple layers of protective steel casing surrounded by cement that are specifically designed and installed to protect freshwater aquifers by preventing the migration of fracturing fluids into aquifers. Regulatory proposals in some states and local communities have been initiated to require or make more stringent the permitting and compliance requirements for hydraulic fracturing operations. Federal and state agencies have continued to assess the impacts of hydraulic fracturing, which could spur further action toward federal and/or state legislation and regulation of hydraulic fracturing activities. In addition, in light of concerns about seismic activity being triggered by the injection of produced waters into underground wells and hydraulic fracturing, certain regulators are also considering additional requirements related to seismic safety for hydraulic fracturing activities. Further restrictions on hydraulic fracturing could make it prohibitive to conduct our operations, and also reduce the amount of oil and natural gas that we or our operators are ultimately able to produce in commercial quantities from our properties.

~~Climate Change~~

Significant studies and research have been devoted to climate change and global warming, and climate change has developed into a major political issue in the United States and globally. Certain research suggests that greenhouse gas emissions contribute to climate change and pose a threat to the environment. Recent scientific research and political debate has focused in part on carbon dioxide and methane incidental to oil and natural gas exploration and production. Many states and the federal government have enacted legislation directed at controlling greenhouse gas emissions, and future legislation and regulation could impose additional restrictions or requirements in connection with our drilling and production activities and favor use of alternative energy sources, which could affect operating costs and demand for oil products. As such, our business could be materially adversely affected by domestic and international legislation targeted at controlling climate change.

~~Employees~~

We currently have two full time employees and no part time employees. We anticipate, as needed, we will add additional employees, and we will continue using independent contractors, consultants, attorneys, and accountants as necessary to complement services rendered by our employees. We presently have independent technical professionals under consulting agreements who are available to us on an as needed basis.

~~Research and Development~~

~~We did not spend any funds on research and development activities during the years ended December 31, 2018 or 2017.~~

~~ITEM 1A. RISK FACTORS~~

An investment in us involves a high degree of risk and is suitable only for prospective investors with substantial financial means who have no need for liquidity and can afford the entire loss of their investment in us. Prospective investors should carefully consider the following risk factors, in addition to the other information contained in this report.

~~Risks Related to our Business and Industry~~

~~We have a limited operating history relative to larger companies in our industry, and may not be successful in developing profitable business operations.~~

~~ITEM 1A. RISK FACTORS- continued~~

~~We have a limited operating history relative to larger companies in our industry. Our business operations must be considered in light~~many of the risks ~~expenses~~common to early-stage enterprises for the foreseeable future, including challenges related to laws, regulations, licensing, integrating and ~~difficulties frequently encountered~~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 ~~establishing a~~internal control.

Access to Capital

The Company believes that current working capital will be sufficient to continue its business infor at least the ~~oil~~next twelve months. Should the Company's costs and natural gas industries. As of the date of this report, we have generated limited revenues and have limited assets. We have an insufficient history at this time on which to base an assumption that our business operations willexpenses prove to be ~~successful~~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 ~~long-term. Our future operating results will depend on many factors, including:~~

●	~~our ability to raise adequate working capital;~~

●	~~the success of our development and exploration;~~

●	~~the demand for natural gas and oil;~~

●	~~the level of our competition;~~

●	~~our ability to attract and maintain key management and employees; and~~

●	our ability to efficiently explore, develop, produce or acquire sufficient quantities of marketable natural gas or oil in a highly competitive and speculative environment while maintaining quality and controlling costs.

~~To achieve profitable operations in~~acquisition of new products, the ~~future, we must, alone or with others, successfully manage~~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 ~~factors stated above, as well as continue~~Market S-3 Shelf Registration (ATM). The Company believes that this funding is sufficient to develop ways to enhance our production efforts. Despite our best efforts, we may not be successful in our exploration or development efforts, or obtain required regulatory approvals. There is a possibility that some, or all, of the wells in which we obtain interests may never produce oil or natural gas.

~~We have limited capital and will need to raise additional capital in the future.~~

~~We do not currently have sufficient capital~~enable it to fund ~~both our continuing operations and our planned growth. We will require additional~~its current working capital to continue to grow our business via acquisitions and to further expand our exploration and development programs. We may be unable to obtain additional capital when required. Future acquisitions and future exploration, development, production and marketing activities, asneeds well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.

Weinto 2024.

The Company may pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing, or other means. WeThe Company may not be successful in identifying suitable financing transactions in the time period required or at all, and weit may not obtain the capital ~~we require~~it requires by other means. ~~If we do not succeed in raising additional capital, our resources may not be sufficient to fund our planned operations.~~

~~Our~~

The Company's ability to obtain financing, if and when necessary, may be impaired by such factors as the capital markets ~~(both generally~~ and ~~in the oil and gas industry in particular), our~~its limited operating history, the location of our oil and natural gas properties and prices of oil and natural gas on the commodities markets (which will impact the amount of asset-based financing available to us, if any) and the departure of key employees. Further, if oil or natural gas prices on the commodities markets decline, our future revenues, if any, will likely decrease and such decreased revenues may increase our requirements for capital. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), we may be required to cease our operations, divest our assets at unattractive prices or obtain financing on unattractive terms.

history.

Any additional capital raised through the sale of equity may dilute the ownership percentage of ~~our~~the Company's stockholders. Raising any such capital could also result in a decrease in the fair market value of ~~our~~its equity securities because ~~our~~its assets would be owned by a larger pool of outstanding equity. The terms of securities ~~we issue~~the Company issues in future capital transactions may be more favorable to ~~our~~its 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 Company 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. WeThe Company may also be required to recognize non-cash expenses in connection with certain securities weit may issue, which may adversely impact our financial condition.

~~Our auditor indicated that certain factors raise substantial doubt about our ability~~

Currency Fluctuations

The Company’s revenues and expenses are denominated in US dollars, Canadian dollars, EURO, and Great British Pounds, and therefore are exposed to ~~continue as a going concern.~~

~~The~~significant currency exchange fluctuations. Recent events in the global financial ~~statements included~~markets have been coupled with ~~this report are presented under~~increased volatility in the ~~assumption that we will continue as a going concern, which contemplates~~currency markets. Fluctuations in the ~~realization of assets~~exchange rate between the US dollar, the Canadian dollar and the ~~satisfaction of liabilities~~Great British Pounds may have a material adverse effect on the Company’s business, financial condition, and operating results. The Company may, in the ~~normal course~~future, establish a program to hedge a portion of ~~business over~~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 ~~reasonable length~~hedging strategy will result in additional operating costs.

Costs of ~~time. We had~~Maintaining a ~~net loss~~Public Listing

As a publicly traded company, there are costs associated with legal, accounting, and other expenses related to regulatory compliance. Securities legislation and the rules and policies of ~~approximately $5.8 million~~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, ~~2018 and an accumulated deficit in aggregate~~2021, the Company had 3 customers that accounted for $3,307,914 or 81% of ~~approximately $89.3 million at year end. We are not generating sufficient operating cash flows to support continuing operations, and expect to incur further losses in the development of our business.~~

~~ITEM 1A. RISK FACTORS- continued~~

~~In our financial statements for~~total revenue. For the year ended December 31, ~~2018, our auditor indicated~~2020, the Company had 3 customers that ~~certain factors raised substantial doubt about our~~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 developing new products, applications, and end markets for the Company's products

The Company's future success will depend in part on its ability to ~~continue as a going concern. These factors included our accumulated deficit,~~generate sales of its products as well as generating development revenue. Current and potential customers may have substantial investment in, and know-how related to the ~~fact~~Company's technologies. Customers may be reluctant to change from incumbent suppliers or cease using their own solutions, or the Company's products may miss the design and procurement cycles of its 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 Company effectively transfer production processes from research and development to manufacturing and coordinate efforts with those suppliers to achieve increased production volume rapidly. If we ~~were~~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 ~~generating sufficient cash flows~~achieve market acceptance or may be rendered obsolete or less competitive by the introduction of new products by other companies.

Research and Market Development

Although the Company, itself and through its investments, is committed to meet our regular working capital requirements. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligationsresearching and repay our liabilities arising from normal business operations when they come due. Management’s plan to address our ability to continue as a going concern includes: (1) obtaining debt or equity funding from private placement or institutional sources; (2) obtaining loans from financial institutions, where possible, or (3) participating in joint venture transactions with third parties. Although management believes that it will be able to obtain the necessary funding to allow us to remain a going concern through the methods discussed above,developing new markets and products and improving existing products, there can be no assurances that such ~~methods~~research and market development activities will prove ~~successful. The accompanying financial statements do not include~~profitable or that the resulting markets and/or products, if any, ~~adjustments that might result from the outcome of this uncertainty.~~

~~The negative covenants contained in our outstanding unsecured promissory notes may limit our activities~~will be commercially viable or successfully produced and ~~make it difficult to run our business.~~

On April 10, 2017, we sold to investors in a private transaction two 12% unsecured promissory notes with a total of $8,000,000 in principal amount, or the 2017 Notes. In addition, on February 6, 2018, we sold to an investor in a private transaction a 12% unsecured promissory note with a principal amount of $4,500,000, or the 2018 Note, containing substantially the same terms as the 2017 Notes. We refer to the 2017 Notes and the 2018 Note collectively as, the Notes. Interest only is due and payable on the Notes each month at the rate of 12% per annum, with a balloon payment of the outstanding principal due and payable at maturity on April 10, 2020. The holders of the Notes will also receive annual payments of common stock at the rate of 2.5% of principal amountoutstanding, based on a volume-weighted average price. We sold the 2017 Notes at an original issue discount of 94.25% and accordingly, we received total proceeds of $7,540,000 from the investors. We sold the 2018 Note at an original issue discount of 96.27% and accordingly, we received total proceeds of $4,332,150 from the investor. The Notes allow for early redemption, provided that if we redeem before April 10, 2018 for the 2017 Notes and February 6, 2019 for the 2018 Note, we must pay the holder all unpaid interest and common stock payments on the portion of the Note redeemed that would have been earned through April 10, 2018 and February 6, 2019, respectively.

The Notes contain negative covenants which may make it difficult for us to run our business. Under the Notes, we may not, directly or indirectly, consolidate with or merge into another person or sell, lease, convey or transfer all or substantially all of our assets (computed on a consolidated basis), unless either (i)marketed. A failure in the case of a merger or consolidation, we are the surviving entity or (ii) the resulting, surviving or transferee entity expressly assumes by supplemental agreement all of the obligations of us in connection with the Notes.

~~In addition, the Notes also contain certain covenants under which we have agreed that, except~~demand for financing arrangements with established commercial banking or financial institutions and other debts and liabilities incurred in the normal course of business, we will not issue any other notes or debt offerings which have a maturity date priorproducts to the payment in full of the respective Note, unless consented to by the holder. Further, our subsidiaries cannot sell or otherwise dispose of any shares of capital stock or assets unless the transaction is for fair value and approved by our disinterested directors or is pursuant to any contractual obligation entered into by us in the ordinary course of business in connection with drilling, exploration and development of our oil and gas properties.

The Notes also restrict us and our subsidiaries from (i) issuing any preferred stock or any other comparable equity interest which are mandatorily redeemable at a date prior to the maturity date of the Notes, without the consent or approval of the holder, (ii) distributing any cash or other assets to any holders of our common stock prior to payment in full of the Notes, without the consent of the holder, (iii) entering into any transaction with an affiliate, subject to limited exceptions, and (iv) issuing any other notes or debt offerings which have a maturity date prior to the payment in full of the Notes, unless consented to by the holder.

~~Failure to comply with the negative covenants could accelerate the repayment of any debt outstanding under the Notes. Additionally,~~materialize as a result of ~~these negative covenants, we may be at a disadvantage compared to our competitors that have greater operating and financing flexibility than we do.~~

Lastly, we may have difficulty securing additional sources of capital through debt financing. If we do not succeed in raising additional capital, our resources may not be sufficient to fund our planned operations.

~~As a non-operator, our development of successful operations relies extensively on third-parties who, if not successful,~~competition, technological change or other factors could have a material adverse effect on ~~our~~the business, results of ~~operation.~~

~~We expect to primarily participate in wells operated by third-parties. As a result, we will not control the timing~~operations and financial condition of the ~~development, exploitation, production~~companies in which the Company has or will invest in, and ~~exploration activities~~consequently, on the Company.

Raw Material Source

The Company purchases its 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 Holography-related products.

Change in Laws, Regulations and Guidelines

The current and proposed operations of the Company are subject to a variety of laws, regulations and guidelines relating to ~~leasehold interests we acquire. We do,~~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 Company to incur substantial costs associated with compliance or alter certain aspects of its business plan. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of the Company’s business plan and result in a material adverse effect on certain aspects of its planned operations.

The Company launched a new product metaAIR® in March 2019 to provide laser glare protection to pilots in the airline industry. Currently, metaAIR® is not subject to any Federal Aviation Administration regulations, however, metaAIR® may become subject to evolving regulation by governmental authorities as the metaAIR® market evolves further.

Integrating Past or Future Acquisitions

The Company has completed a number of acquisitions during its operating history. The Company has 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 ~~certain rights as granted in our joint operating agreements that allow us~~ a ~~certain degree of freedom such as, but not limited to,~~material and adverse effect on the ~~ability to propose the drilling of wells. If our drilling partners are not successful in such activities relating to our leasehold interests, or are unable or unwilling to perform, our~~Company's business, financial condition, and results of ~~operation~~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 Company’s wireless sensing technology to enhance MRI and non-invasive glucoWISE® monitoring is under development. The Company has performed many experiments on animals and humans, and will continue to perform additional experiments as needed to continue the development of the related products.

These products have ~~an adverse material effect.~~

~~Further,~~not yet completed clinical trials/regulatory approval processes, and there can be no assurance that trials will be successful, or that approvals will be granted.

Insurance Coverage

The Company will require insurance coverage for a number of risks. Although management of the Company believes that the events and amounts of liability covered by its insurance policies will be reasonable, taking into account the risks relevant to its 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 Company may become subject. If insurance coverage is unavailable or insufficient to cover any such claims, the Company’s financial ~~risks are inherent in any operation where the cost~~resources, results of ~~drilling, equipping, completing~~operations and ~~operating wells is shared by more than one person. We~~prospects could be ~~held liable~~adversely affected.

Privacy and Data Security Concerns

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 Company to modify its 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 of Inability to Protect our Proprietary Technology and Intellectual Property Rights

The Company relies on a variety of intellectual property rights, including patents, trademarks, trade secrets, technical know-how and other unpatented proprietary information to protect the Company's technologies, products, product development and manufacturing activities from unauthorized use by third parties. The Company's patents do not cover all of its technologies, systems, products and product components and its competitors or others may design around its patented technologies. The Company 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 to adequately protect all such information. The Company also cannot assure shareholders that those agreements will provide meaningful protection for its trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure. The Company's trade secrets, know-how or other proprietary information could be obtained by third parties as a result of breaches of its physical or electronic security systems or its suppliers, employees or consultants could assert rights to its intellectual property.

Risk that Industry Targets will not Adopt the Company’s Products

Holography Market-Aviation Industry

The Company launched its 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 has co-developed this product with Airbus through a strategic partnership. Airbus further extended its support by introducing the Company to Satair, an Airbus-owned company, which became the global distribution partner for metaAIR® to the aviation market. Since 2016, Airbus and Satair have invested a total of $2,000,000 for the ~~joint activity obligations~~product development and exclusive distribution rights to metaAIR®. Since the launch of metaAIR® in March 2019, the ~~operator or other working interest owners such as nonpayment~~Company has sold fifty units to its distributor Satair. The Company is currently in the process of ~~costs~~increasing its marketing and ~~liabilities arising from~~sales capacity.

Despite the ~~actions~~Company’s close collaboration with the Airbus Group, with the impact of COVID-19 there can be no assurance that the ~~working interest owners. In~~aviation market will accept the ~~event~~metaAIR® product at the ~~operator or other working interest owners do not pay their share of such costs, we would likely~~expected market penetration rates and a slower than forecasted market acceptance may have ~~to pay those costs. In such situations, if we were unable to pay those costs, there could be~~ a material adverse effect ~~to our~~on Holography laser glare protection related products and the Company’s financial position.

~~We are mainly concentrated in one geographic area, which increases our exposure to many~~ The Company is pursuing ancillary markets outside of the ~~risks enumerated herein.~~

~~Operating~~aviation industry for its metaAIR® laser protection eyewear such as in law enforcement and defense.

Lithography Product and Market-Automotive

Lithography related products have not yet reached required manufacturing maturity. The first pilot scale roll-to-roll line is expected to be ready for low volume production during the second half of fiscal year 2022. Broader sales and production are expected to be launched in two to three years’ time after successful completion of automotive product qualification and product introductions. META believes that the automotive market is a ~~concentrated area increases~~strategic high growth opportunity, however despite the ~~potential~~Company’s 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’s financial position.

Risks Related to Facilities and Human Resources

New Facility and Permits for Lithography Production

The Company is 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 to allow use of certain chemicals and their disposal.

Any delay in setting up the facility and receiving permits may impact ~~that many~~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’s financial position.

At present, the facility is expected to be complete during the second half of fiscal 2022.

Recruiting or Retaining Qualified Personnel.

The Company's ability to successfully manage and grow the business and to develop new products depends, in large part, on its 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 to offer more competitive compensation packages.

Conflicts of Interest

Certain of the ~~risks stated herein~~Company’s 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 intends to provide. Situations may arise in connection with potential acquisitions or opportunities where the other interests of these directors and officers conflict with or diverge from the Company’s interests. In accordance with applicable corporate law, directors who have ~~upon our ability~~a material interest in or who are a party to ~~perform. For example, we have greater exposure~~a material contract or a proposed material contract with the Company are required, subject to ~~regulatory actions impacting Texas, natural disasters in~~certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the ~~geographic area, competition for equipment, services and materials available in the area and access to infrastructure and markets.~~contract. In addition, the ~~effect of fluctuations on supply~~directors and ~~demand may become more pronounced within specific geographic oil~~officers are required to act honestly and ~~gas producing areas such as the Permian Basin, which may cause these conditions to occur~~in good faith with ~~greater frequency or magnify the effect of these conditions. Due~~a view to the ~~concentrated nature~~Company’s best interests. However, in conflict of ~~our portfolio of properties,~~interest situations, the Company’s 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. Circumstances (including with respect to future corporate opportunities) may arise that may be resolved in a ~~number of our properties could experience any~~manner that is unfavorable to the Company.

Reliance on Management

The success of the ~~same conditions at~~Company is dependent upon the ~~same time, resulting in a relatively greater impact on our results~~ability, expertise, judgment, discretion, and good faith of ~~operations than they might have on other companies that have a more diversified portfolio~~its senior management team. Any loss of ~~properties. Such delays or interruptions~~the services of such individuals could have a material adverse effect on ~~our~~the Company’s business, operating results, or financial ~~condition~~condition.

Monitoring unauthorized use of the Company's intellectual property is difficult and ~~results~~costly. Unauthorized use of ~~operations.~~

Weits 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 ~~unable to monetize the Hazel and Warwink Projects at an attractive price, if at all,~~time consuming, and the ~~disposition~~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.

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 ~~assets~~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 ~~involve risks~~not be able to deliver the value of any remaining O&G Assets to the holders of Series A Preferred Stock.

Orogrande and ~~uncertainties.~~

~~We have commenced a process that could result~~Hazel Projects: Risks and Uncertainties.

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

For example, in connection with a disposition, wethe Company may enter into transition services agreements or other strategic relationships, which may result in additional ~~expense.~~expenses. In addition, in connection with a disposition, wethe Company may be required to make representations about the business and financial affairs of the business or assets. WeThe Company may also be required to indemnify the purchasers to the extent that ~~our~~its representations turn out to be inaccurate or with respect to certain potential liabilities. These indemnification obligations may require usthe Company to pay money to the purchasers as satisfaction of their indemnity claims. It may also take us 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 ~~our~~the Company's business and operating results. Any of the foregoing could adversely affect ~~our~~the Company's financial condition and results of operations.

~~Because of the speculative nature of oil and gas exploration, there is risk that we will not find commercially exploitable oil and gas and that our business will fail.~~

The search for commercial quantities of oil and natural gas as a business is extremely risky. We cannot provide investors with any assurance that any properties in which we obtain a mineral interest will contain commercially exploitable quantities of oil and/or gas. The exploration expenditures to be made by us may not result in the discovery of commercial quantities of oil and/or gas. Problems such as unusual or unexpected formations or pressures, premature declines of reservoirs, invasion of water into producing formations and other conditions involved in oil and gas exploration often result in unsuccessful exploration efforts. If we are unable to find commercially exploitable quantities of oil and gas, and/or we are unable to commercially extract such quantities, we may be forced to abandon or curtail our business plan, and as a result, any investment in us may become worthless.

~~Strategic relationships upon which we may rely are subject to change, which may diminish our ability to conduct our operations.~~

Our ability to successfully acquire oil and gas interests, to build our reserves, to participate in drilling opportunities and to identify and enter into commercial arrangements with customers will depend on developing and maintaining close working relationships with industry participants and our ability to select and evaluate suitable properties and to consummate transactions in a highly competitive environment. These realities are subject to change and our inability to maintain close working relationships with industry participants or continue to acquire suitable property may impair our ability to execute our business plan.

To continue to develop our business, we will endeavor to use the business relationships of our management to enter into strategic relationships, which may take the form of joint ventures with other private parties and contractual arrangements with other oil and gas companies, including those that supply equipment and other resources that we will use in our business. We may not be able to establish these strategic relationships, or if established, we may not be able to maintain them. In addition, the dynamics of our relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to in order to fulfill our obligations to these partners or maintain our relationships. If our strategic relationships are not established or maintained, our business prospects may be limited, which could diminish our ability to conduct our operations.

The price of oil and natural gas has historically been volatile. If it were to decrease substantially, our projections, budgets, and revenues would be adversely affected, potentially forcing us to make changes in our operations.

Our future financial condition, results of operations and the carrying value of any oil and natural gas interests we acquire will depend primarily upon the prices paid for oil and natural gas production.

Oil and natural gas prices historically have been volatile and likely will continue to be volatile in the future, especially given current world geopolitical conditions. Our cash flows from operations are highly dependent on the prices that we receive for oil and natural gas. This price volatility also affects the amount of our cash flows available for capital expenditures and our ability to borrow moneyGas Operations Liability or ~~raise additional capital. The prices for oil and natural gas are subject to a variety of additional factors that are beyond our control. These factors include:~~

●	~~the level of consumer demand for oil and natural gas;~~

~~ITEM 1A. RISK FACTORS- continued~~

●	~~the domestic and foreign supply of oil and natural gas;~~

●	~~the ability of the members of the Organization of Petroleum Exporting Countries (“OPEC”) to agree to and maintain oil price and production controls;~~

●	~~the price of foreign oil and natural gas;~~

●	~~domestic governmental regulations and taxes;~~

●	~~the price and availability of alternative fuel sources;~~

●	~~weather conditions;~~

●	~~market uncertainty due to political conditions in oil and natural gas producing regions, including the Middle East; and~~

●	~~worldwide economic conditions.~~

These factors as well as the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices affect our revenues, and could reduce the amount of oil and natural gas that we can produce economically. Accordingly, such declines could have a material adverse effect on our financial condition, results of operations, oil and natural gas reserves and the carrying values of our oil and natural gas properties. If the oil and natural gas industry experiences significant price declines, we may be unable to make planned expenditures, among other things. If this were to happen, we may be forced to abandon or curtail our business operations, which would cause the value of an investment in us to decline or become worthless.

~~If oil or natural gas prices remain depressed or drilling efforts are unsuccessful, we may be required to record additional write downs of our oil and natural gas properties.~~

If oil or natural gas prices remain depressed or drilling efforts are unsuccessful, we could be required to write down the carrying value of certain of our oil and natural gas properties. Write downs may occur when oil and natural gas prices are low, or if we have downward adjustments to our estimated proved reserves, increases in our estimates of operating or development costs, deterioration in drilling results or mechanical problems with wells where the cost to re drill or repair is not supported by the expected economics.

Under the full cost method of accounting, capitalized oil and gas property costs less accumulated depletion and net of deferred income taxes may not exceed an amount equal to the present value, discounted at 10%, of estimated future net revenues from proved oil and gas reserves plus the cost of unproved properties not subject to amortization (without regard to estimates of fair value), or estimated fair value, if lower, of unproved properties that are subject to amortization. Should capitalized costs exceed this ceiling, an impairment would be recognized.

~~The Company recognized an impairment charge of $139,891 in 2018 and -0-~~ ~~in 2017.~~

During the year ended December 31, 2017 the Company performed assessments of evaluated and unevaluated costs in the cost pool to conform the cumulative value of the Full Cost Pool to the combined amount of Reserve Value of evaluated, producing properties (as determined by independent analysis at December 31, 2017), plus the lesser of cumulative historical cost or estimated realizable value of unevaluated leases and projects expected to commence production in future operating periods. The Company identified impairment of $2,300,626 in 2017 related to its unevaluated properties. Although we had no recognized impairment expense in 2017, the Company has adjusted the separation of evaluated versus unevaluated costs within its full cost pool to recognize the value impairment related to the expiration of unevaluated leases in 2017 in the amount of $2,300,626. The impact of this change will be to increase the basis for calculation of future period’s depletion, depreciation and amortization to include $2,300,626 of cost which will effectively recognize the impairment on the Statement of Operations over future periods. The $2,300,626 has also become an evaluated cost for purposes of future period’s Ceiling Tests and which may further recognize the impairment expense recognized in future periods.

Because of the inherent dangers involved in oil and gas operations, there is a risk that we may incur liability or damages as we conduct our business operations, which could force us to expend a substantial amount of money in connection with litigation and/or a settlement.

~~ITEM 1A. RISK FACTORS- continued~~

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 usthe 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, wethe Company may be liable for environmental damages caused by previous owners of property purchased and leased by ~~us.~~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. ~~We believe~~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. We believe~~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 ~~our~~the Company's properties and/or force usit to expend substantial monies in connection with litigation or settlements. ~~In addition, we will need to quickly adapt to the evolving technology, which could take time and divert our attention to other business matters. We~~The Company currently ~~have~~has no insurance to cover such losses and liabilities, and even if insurance is obtained, it may not be adequate to cover any losses ~~orliabilities. We cannot predict the availability of insurance~~ or ~~the availability of insurance at premium levels that justify our purchase.~~liabilities. The occurrence of a significant event not fully insured or indemnified against could materially and adversely ~~affectour~~affect the Company's financial condition and operations. ~~We may elect to self-insure if management believes that the cost of insurance, although available, is excessive relative to the risks presented.~~ 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 ~~our~~the Company's financial condition and results of operations.

~~The market for oil and gas is intensely competitive, and competition pressures could force us to abandon or curtail our business plan.~~

The market for oil and gas exploration services is highly competitive, and we only expect competition to intensify in the future. Numerous well-established companies are focusing significant resources on exploration and are currently competing with us for oil and gas opportunities. Other oil and gas companies may seek to acquire oil and gas leases and properties that we have targeted. Additionally, other companies engaged in our line of business may compete with us from time to time in obtaining capital from investors. Competitors include larger companies which, in particular, may have access to greater resources, may be more successful in the recruitment and retention of qualified employees and may conduct their own refining and petroleum marketing operations, which may give them a competitive advantage. Actual or potential competitors may be strengthened through the acquisition of additional assets and interests. Additionally, there are numerous companies focusing their resources on creating fuels and/or materials which serve the same purpose as oil and gas, but are manufactured from renewable resources.

As a result, we may not be able to compete successfully and competitive pressures may adversely affect our business, results of operations, and financial condition. If we are not able to successfully compete in the marketplace, we could be forced to curtail or even abandon our current business plan, which could cause any investment in us to become worthless.

~~We may not be able to successfully manage our expected growth, which could lead to our inability to implement our business plan.~~

Our expected growth may place a significant strain on our managerial, operational and financial resources, especially considering that we currently only have a small number of executive officers, employees and advisors. Further, as we enter into additional contracts, we will be required to manage multiple relationships with various consultants, businesses and other third parties. These requirements will be exacerbated in the event of our further growth or in the event that the number of our drilling and/or extraction operations increases. Our systems, procedures and/or controls may not be adequate to support our operations or that our management will be able to achieve the rapid execution necessary to successfully implement our business plan. If we are unable to manage our growth effectively, our business, results of operations and financial condition will be adversely affected, which could lead to us being forced to abandon or curtail our business plan and operations.

The due diligence undertaken by us in connection with all of our acquisitions may not have revealed all relevant considerations or liabilities related to those assets, which could have a material adverse effect on our financial condition or results of operations.

The due diligence undertaken by us in connection with the acquisition of our properties may not have revealed all relevant facts that may be necessary to evaluate such acquisitions. The information provided to us in connection with our diligence may have been incomplete or inaccurate. As part

Estimates of the ~~diligence process, we have also made subjective judgments regarding the results~~Volume of operations and prospects of the assets. If the due diligence investigations have failed to correctly identify material issues and liabilities that may be present, such as title defects or environmental problems, we may incur substantial impairment charges or other losses in the future. In addition, we may be subject to significant, previously undisclosed liabilities that were not identified during the due diligence processes and which may have a material adverse effect on our financial condition or results of operations.

~~Our operations are heavily dependent on current environmental regulation, changes in which we cannot predict.~~

Oil and natural gas activities that we will engage in, including production, processing, handling and disposal of hazardous materials, such as hydrocarbons and naturally occurring radioactive materials (if any), are subject to stringent regulation. We could incur significant costs, including cleanup costs resulting from a release of hazardous material, third-party claims for property damage and personal injuries fines and sanctions, as a result of any violations or liabilities under environmental or other laws. Changes in or more stringent enforcement of environmental laws could force us to expend additional operating costs and capital expenditures to stay in compliance.

~~ITEM 1A. RISK FACTORS- continued~~

Various federal, state and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, directly impact oil and gas exploration, development and production operations, and consequently may impact our operations and costs. These regulations include, among others, (i) regulationsby the Environmental Protection Agency and various state agencies regarding approved methods of disposal for certain hazardous and non-hazardous wastes; (ii) the Comprehensive Environmental Response, Compensation, and Liability Act, Federal Resource Conservation and Recovery Act and analogous state laws which regulate the removal or remediation of previously disposed wastes (including wastes disposed of or released by prior owners or operators), property contamination (including groundwater contamination),and remedial plugging operations to prevent future contamination; (iii) the Clean Air Act and comparable state and local requirements which may result in the gradual imposition of certain pollution control requirements with respect to air emissions from our operations; (iv) the Oil Pollution Act of 1990 which contains numerous requirements relating to the prevention of and response to oil spills into waters of the United States; (v) the Resource Conservation and Recovery Act which is the principal federal statute governing the treatment, storage and disposal of hazardous wastes; and (vi) state regulations and statutes governing the handling, treatment, storage and disposal of naturally occurring radioactive material.

We believe that we will be in substantial compliance with applicable environmental laws and regulations. To date, we have not expended any amounts to comply with such regulations, and we do not currently anticipate that future compliance will have a materially adverse effect on our consolidated financial position, results of operations or cash flows. However, if we are deemed to not be in compliance with applicable environmental laws, we could be forced to expend substantial amounts to be in compliance, which would have a materially adverse effect on our financial condition.

~~Government regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.~~

Vast quantities of natural gas, natural gas liquids and oil deposits exist in deep shale and other unconventional formations. It is customary in our industry to recover these resources through the use of hydraulic fracturing, combined with horizontal drilling. Hydraulic fracturing is the process of creating or expanding cracks, or fractures, in deep underground formations using water, sand and other additives pumped under high pressure into the formation. As with the rest of the industry, our third-party operating partners use hydraulic fracturing as a means to increase the productivity of most of the wells they drill and complete. These formations are generally geologically separated and isolated from fresh ground water supplies by thousands of feet of impermeable rock layers.

We believe our third-party operating partners follow applicable legal requirements for groundwater protection in their operations that are subject to supervision by state and federal regulators. Furthermore, we believe our third-party operating partners’ well construction practices are specifically designed to protect freshwater aquifers by preventing the migration of fracturing fluids into aquifers.

Hydraulic fracturing is typically regulated by state oil and gas commissions. Some states have adopted, and other states are considering adopting, regulations that could impose more stringent permitting, public disclosure, and/or well construction requirements on hydraulic fracturing operations.

In addition to state laws, some local municipalities have adopted or are considering adopting land use restrictions, such as city ordinances, that may restrict or prohibit the performance of well drilling in general and/or hydraulic fracturing in particular. There are also certain governmental reviews either underway or being proposed that focus on deep shale and other formation completion and production practices, including hydraulic fracturing. Depending on the outcome of these studies, federal and state legislatures and agencies may seek to further regulate such activities. Certain environmental and other groups have also suggested that additional federal, state and local laws and regulations may be needed to more closely regulate the hydraulic fracturing process.

~~Further, the EPA has asserted federal regulatory authority over hydraulic fracturing involving “diesel fuels” under the~~ ~~Solid Waste Disposal Act’s Underground Injection Control Program~~. The EPA is also engaged in a study of the potential impacts of hydraulic fracturing activities on drinking water resources in the states where the EPA is the permitting authority. These actions, in conjunction with other analyses by federal and state agencies to assess the impacts of hydraulic fracturing could spur further action toward federal and/or state legislation and regulation of hydraulic fracturing activities.

We cannot predict whether additional federal, state or local laws or regulations applicable to hydraulic fracturing will be enacted in the future and, if so, what actions any such laws or regulations would require or prohibit. Restrictions on hydraulic fracturing could make it prohibitive for our third-party operating partners to conduct operations, and also reduce the amount of oil, natural gas liquids and natural gas that we are ultimately able to produce in commercial quantities from our properties. If additional levels of regulation or permitting requirements were imposed on hydraulic fracturing operations, our business and operations could be subject to delays, increased operating and compliance costs and process prohibitions.

~~Our estimates of the volume of reserves could have flaws, or such reserves could turn out not to be commercially extractable. As a result, our future revenues and projections could be incorrect.~~

~~ITEM 1A. RISK FACTORS- continued~~

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. ~~Our~~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. ~~Oiland~~Oil and gas reserve estimates are necessarily inexact and involve matters of subjective engineering judgment. In addition, any estimates of ~~our~~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 usmanagement that only represent our best estimates. If these estimates of quantities, prices and costs prove inaccurate, weThe 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 ~~we obtain~~it obtains may be required. Because of the nature of the estimates of ~~our~~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 ~~our~~the Company's reserve estimates are incorrect, weit may be forced to write down the capitalized costs of our oil and gas properties.

Decommissioning ~~costs~~Costs are ~~unknown~~Unknown and ~~may~~May be ~~substantial. Unplanned costs could divert resources from other projects.~~

WeSubstantial

The Company may become responsible for costs associated with abandoning and reclaiming wells, facilities and pipelines which ~~we use~~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.” ~~We accrue~~The Company accrues a liability for decommissioning costs associated with ~~our~~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 ~~our~~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, wethe 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.

~~We may have difficulty distributing production, which could harm our financial condition.~~

~~In order to sell the oil and natural gas that we are able to produce, if any, the operators of the wells we obtain interests in may have to make arrangements for storage and distribution~~

Challenges to the ~~market. We will rely on local infrastructure and~~Properties May Impact the availability of transportation for storage and shipment of our products, but infrastructure development and storage and transportation facilities may be insufficient for our needs at commercially acceptable terms in the localities in which we operate. This situation could be particularly problematic to the extent that our operations are conducted in remote areas that are difficult to access, such as areas that are distant from shipping and/or pipeline facilities. These factors may affect our and potential partners’ ability to explore and develop properties and to store and transport oil and natural gas production, increasing our expenses.

Furthermore, weather conditions or natural disasters, actions by companies doing business in one or more of the areas in which we will operate, or labor disputes may impair the distribution of oil and/or natural gas and in turn diminish our financial condition or ability to maintain our operations.

~~Our business will suffer if we cannot obtain or maintain necessary licenses.~~

Our operations will require licenses, permits and in some cases renewals of licenses and permits from various governmental authorities. Our ability to obtain, sustain or renew such licenses and permits on acceptable terms is subject to change in regulations and policies and to the discretion of the applicable governments, among other factors. Our inability to obtain, or our loss of or denial of extension of, any of these licenses or permits could hamper our ability to produce revenues from our operations.

~~Challenges to our properties may impact our financial condition.~~

Company's Financial Condition.

Title to oil and gas interests is often not capable of conclusive determination without incurring substantial expense. While ~~we have~~the Company has made and ~~intend~~intends to make appropriate inquiries into the title of properties and other development rights ~~we have~~it has acquired and ~~intend~~intends to acquire, title defects may exist. In addition, wethe 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 wethe 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 ~~our~~the property rights are reduced, ~~our~~the Company's ability to conduct ~~our~~ 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.

~~We rely on technology~~

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 ~~conduct our business,~~sell or spin out the leases in 2022 and ~~our technology could become ineffective or obsolete.~~

~~We rely on technology, including geographic and seismic analysis techniques and economic models,~~transfer the ongoing obligations to develop our reserve estimates and to guide our exploration, development and production activities. We and our operator partners will be required to continually enhance and update our technology to maintain its efficacy and to avoid obsolescence. The coststhe new owners of ~~doing so~~the leases. If such a transfer is not completed in a timely manner in 2022, the Company may be ~~substantial~~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:

•

oil, NGLs and natural gas prices;

•

global supply and demand for oil, NGLs and natural gas;

•

the overall state of the financial markets, including investor appetite for debt and equity securities issued by oil and natural gas companies and the effects of economic recessions or depressions;

•

the ability to secure and maintain financing on acceptable terms;

•

legislative, environmental and regulatory matters;

•

oil and natural gas reservoir quality;

•

the availability of drilling rigs, completions equipment and other facilities and equipment;

•

the ability to access lands;

•

the ability to access water for hydraulic fracturing operations;

•

reliance on vendors, suppliers, contractors and service providers;

•

shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work stoppages;

•

changes to free trade agreements;

•

inflation and other unexpected cost increases, including with respect to materials and labor;

•

prevailing interest and foreign exchange rates;

•

royalty and tax rates;

•

physical impacts from adverse weather conditions and natural disasters;

•

transportation and processing interruptions or constraints, including the availability and proximity of pipeline and processing capacity;

•

technology failures; and accidents

Risks Related to Legal Matters

Litigation

The Company is currently subject to securities class action litigation and may be ~~higher than~~subject to similar or other litigation in the ~~costs that we anticipate for technology maintenance~~future, all of which will require significant management time and ~~development. If we are unable to maintain the efficacy of our technology, our ability to manage our business~~attention, result in significant legal expenses and ~~to compete~~ may ~~be impaired. Further, even if we are able to maintain technical effectiveness, our technology~~result in unfavorable outcomes, which may ~~not be the most efficient means of reaching our objectives, in which case we may incur higher operating costs than we would were our technology more efficient.~~

~~ITEM 1A. RISK FACTORS- continued~~

~~The loss of key personnel would directly affect our efficiency and profitability.~~

Our future success is dependent, in a large part, on retaining the services of our current management team. Our executive officers possess a unique and comprehensive knowledge of our industry and related matters that are vital to our success within the industry. The knowledge, leadership and technical expertise of these individuals would be difficult to replace. The loss of one or more of our officers could have a material adverse effect on ~~our~~the Company's business, operating results and financial ~~performance, including our ability~~condition, and negatively affect the price of its common stock.

The Company is, and may in the future become, subject to ~~develop~~various legal proceedings and ~~execute our long-term business strategy. We do not maintain key-man life insurance with respect to any employees. We do have employment agreements with each~~claims that arise in or outside the ordinary course of ~~our~~business. For example, the Company currently has securities class action complaints pending against itself, its chief executive ~~officers.~~

~~We have limited management~~officer, and ~~staff~~its chief financial officer, asserting that they made false or misleading statements. The complaints seek monetary damages, costs and ~~are dependent upon partnering arrangements~~expenses. For more information, see “Item 3. Legal Proceedings” in this Annual Report on Form 10-K and ~~third-party service providers.~~

~~We currently have two full-time employees, including our Chief Executive Officer~~“Note 28 – Commitments and ~~Chief Financial Officer.~~ Contingencies” of the Company's consolidated financial statements included elsewhere in this report.

The ~~loss~~Company cannot predict the outcome of these ~~individuals would have~~proceedings or provide an ~~adverse effect on our business, as we have very limited personnel. We leverage~~estimate of potential damages, if any. The Company believes that the services of other independent consultants and contractors to perform various professional services, including engineering, oil and gas well planning and supervision, and land, legal, environmental and tax services. We also pursue alliances with partnersclaims in the ~~areas of geological~~securities class actions are without merit and ~~geophysical services and prospect generation, evaluation and prospect leasing. Our dependence on third-party consultants and service providers create~~intend to defend against them vigorously. Regardless, failure by the Company to obtain a ~~number of risks, including but not limited to:~~

●

~~the possibility that such third parties may not be available to us as and when needed; and~~

●

~~the risk that we may not be able to properly control the timing and quality of work conducted with respect to its projects.~~

~~If we experience significant delays in obtaining the services of such third parties or they perform poorly, our results of operations and stock price could be materially adversely affected.~~

~~Our officers and directors control a significant percentage of our current outstanding common stock and their interests may conflict with those of our stockholders.~~

Asfavorable resolution of the date of this report, our executive officers and directors collectively and beneficially own approximately 28% of our outstanding common stock (see Item 12 of this report for an explanation of how this number is computed). This concentration of voting control gives these affiliates substantial influence over any matters whichclaims set forth in the complaints could require a stockholder vote, including without limitation the election of directors and approval of merger and/or acquisition transactions, even if their interests may conflict with those of other stockholders. It could have the effect of delaying or preventing a change in controlit to pay damage awards or otherwise ~~discouraging a potential acquirer from attempting to obtain control of us. This~~enter into settlement arrangements for which its 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 ~~market price of our common stock or prevent our stockholders from realizing a premium over the then prevailing market prices for their shares of common stock.~~

~~In the future, we may incur significant increased costs as a result of~~Company's business, operating ~~as a public company, and our management may be required to devote substantial time to new compliance initiatives.~~

In the future, we may incur significant legal, accounting, and other expenses as a result of operating as a public company. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as well as new rules subsequently implemented by the SEC, have imposed various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these new rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage.

In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we are required to perform system and process evaluation and testing on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In performing this evaluation and testing, management concluded that our internal control over financial reporting is effective as of December 31, 2018. Our continued compliance with Section 404, will require that we incur substantial accounting expense and expend significant management efforts. We do not have an internal audit group. We have however, engaged independent professional assistance for the evaluation and testing of internal controls.

~~ITEM 1A. RISK FACTORS- continued~~

~~Terrorist attacks or cyber-incidents could result in information theft, data corruption, operational disruption and/~~results or financial ~~loss.~~

~~Like most companies, we have become increasingly dependent upon digital technologies, including information systems, infrastructure~~condition. Even if plaintiffs’ claims are not successful, defending against class action litigation is expensive and ~~cloud applications~~could divert management’s attention and ~~services, to operate our businesses, to process and record financial and operating data, communicate with our business partners, analyze mine and mining information, estimate quantities~~resources, all of coal reserves, as well as other activities related to our businesses. Strategic targets, such as energy-related assets, may be at greater risk of future terrorist or cyber-attacks than other targets in the United States. Deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties, or cloud-based applications could lead to corruption or loss of our proprietary data and potentially sensitive data, delays in production or delivery, difficulty in completing and settling transactions, challenges in maintaining our books and records, environmental damage, communication interruptions, other operational disruptions and third-party liability. Our insurance may not protect us against such occurrences. Consequently, it is possible that any of these occurrences, or a combination of them,which could have a material adverse effect on ~~our~~its business, operating results and financial condition and negatively affect the price of its common stock. In addition, such lawsuits may make it more difficult for the Company to finance its operations in the future.

Ongoing Government Investigation by the SEC

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 is cooperating and intends to continue to cooperate with the SEC’s investigation. Investigations of this nature are inherently uncertain and their results cannot be predicted. Regardless of the outcome, the SEC Investigation has had and may continue to have an adverse impact on the Company because of legal costs, diversion of management resources, and other factors. The SEC Investigation could also result in reputational harm to the Company, which, among other things, may limit its ability to obtain new customers and enter into new agreements with its existing customers, or its ability to obtain financing, and have a material adverse effect on its current and future business, financial condition, results of operations and ~~cash flows. Further, as cyber incidents continue~~prospects.

Risks Related to ~~evolve, we~~Financial Reporting

Material Weakness in Internal Controls over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) and for evaluating and reporting on the effectiveness of our system of internal control. Effective internal controls are necessary for the Company to provide timely, reliable and accurate financial reports, identify and proactively correct any deficiencies, material weaknesses or fraud and meet 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, or if any additional material weaknesses in our internal control over financial reporting are identified, the accuracy of our financial reporting and the Company's ability to timely file with the SEC may be adversely impacted. In addition, if the Company's remedial efforts are insufficient, or if additional material weaknesses or significant deficiencies in its internal controls occur in the future, the Company could be required to ~~expend additional resources to continue to modify or enhance~~restate our ~~protective measures or to investigate and remediate any vulnerability to cyber incidents.~~

We have adopted an Information Security Policy and Acceptable Use Statement to address precautions with respect to data security and we have created an Incident Response Plan which outlines appropriate responses in case of a reported breach. These policies and plan have been executed in coordination with our independent Information Technology Service provider.

~~Certain Factors Related to Our Common Stock~~

~~There presently is a limited market for our common stock, and the price of our common stock may be volatile.~~

Our common stock is currently quoted on The NASDAQ Stock Market LLC. There could be volatility in the volume and market price of our common stock moving forward. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the absence of consistent administrative supervision of “bid” and “ask” quotations, and generally lower trading volume. In addition, factors such as quarterly variations in our operating results, changes in financial estimates by securities analysts, or our failure to meet our or their projected financial and operating results, litigation involving us, factors relating to the oil and gas industry, actions by governmental agencies, national economic and stock market considerations, as well as other events and circumstances beyond our control could have a significant impact on the future market price of our common stock and the relative volatility of such market price.

~~Securities analysts may not initiate coverage or continue to cover our shares of common stock and this may have a negative impact on the market price of our shares of common stock.~~

The trading market for our shares of common stock will depend, in part, on the research and reports that securities analysts publish about our business and our shares of common stock. We do not have any control over these analysts. If securities analysts do not cover our shares of common stock, the lack of research coverage may adversely affect the market price of those shares. If securities analysts do cover our shares of common stock, they could issue reports or recommendations that are unfavorable to the price of our shares of common stock, and they could downgrade a previously favorable report or recommendation, and in either case our share prices could decline as a result of the report. If one or more of these analysts does not initiate coverage, ceases to cover our shares of common stock or fails to publish regular reports on our business, we could lose visibility in the financial markets,statements, which could ~~cause our share prices or trading volume to decline.~~

~~Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.~~

Our stockholders could sell substantial amounts of common stock in the public market, including shares sold upon the filing of a registration statement that registers such shares and/or upon the expiration of any statutory holding period under Rule 144 of the Securities Act of 1933 (the “Securities Act”), if available, or upon the expiration of trading limitation periods. Such volume could create a circumstance commonly referred to as a market “overhang” and in anticipation of which the market price of our common stock could fall. Additionally, we have a large number of warrants that are presently exercisable. The exercise of a large amount of these securities followed by the subsequent sale of the underlying stock in the market would likely have a negative effect on our common stock’s market price. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to secure additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

~~ITEM 1A. RISK FACTORS- continued~~

~~Our directors and officers have rights to indemnification.~~

Our Bylaws provide, as permitted by governing Nevada law, that we will indemnify our directors, officers, and employees, whether or not then in service as such, against all reasonable expenses actually and necessarily incurred by him or her in connection with the defense of any litigation to which the individual may have been made a party because he or she is or was a director, officer, or employee of the company. The inclusion of these provisions in the Bylaws may have the effect of reducing the likelihood of derivative litigation against directors and officers, and may discourage or deter stockholders or management from bringing a lawsuit against directors and officers for breach of their duty of care, even though such an action, if successful, might otherwise have benefited us and our stockholders.

~~We do not anticipate paying any cash dividends on our common stock.~~

We do not anticipate paying cash dividends on our common stock for the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our Board of Directors. We presently intend to retain all earnings, if any, to implement our business strategy; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.

~~NASDAQ may delist our common stock from trading on its exchange, which could limit shareholders’ ability to trade our common stock.~~

As a listed company on NASDAQ, we are required to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our common stock. If we fail to meet these continued listing requirements, our common stock may be subject to delisting. If our common stock is delisted and we are not able to list our common stock on another national securities exchange, we expect our securities would be quoted on an over-the-counter market. If this were to occur, our shareholders could face significant material adverse consequences, including limited availability of market quotations for our common stock and reduced liquidity for the trading of our securities. In addition, we could experience a decreased ability to issue additional securities and obtain additional financing in the future.

~~Issuance of our stock in the future could dilute existing shareholders~~materially and adversely affect its business, results of operations and financial condition, restrict its ability to access the ~~market price~~capital markets, require it to expend significant resources to correct the material weaknesses or deficiencies, subject the Company to regulatory investigations and penalties, harm its reputation, cause a decline in investor confidence or otherwise cause a decline in its stock price.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The Company’s registered office is located at 85 Swanson Road, Boxborough, Massachusetts 01719, and its principal executive office is located at 1 Research Drive, Halifax, Nova Scotia, Canada.

The Company's principal facilities include the following:


Location	Lease expiration	Approximate size (sqft)		Primary functions
Boxborough, Massachusetts	September 30, 2023		4,414	Administration
Research Drive, Dartmouth, Nova Scotia	month-to-month		8,792	Administration, Research and Development, and Production
Highfield Park, Dartmouth, Nova Scotia	August 31, 2031		68,000	Administration, Research and Development, and Production
Pleasanton, California	September 30, 2026		19,506	Research and Development and Production
London, United Kingdom	October 19, 2022		742	Research and Development
Burnaby, British Columbia	April 30, 2025		7,860	Administration and Research and Development
Thurso, Quebec	Owned		105,000	Production and Research and Development
Maroussi, Athens	October 31, 2031		15,457	Research and Development
Steinhausen, Switzerland	June 30, 2022		1,335	Research and Development
Plano, Texas	July 31, 2022		3,299	Administration

The Company also acquired the following properties as part of ~~our common stock.~~

~~We have~~ the authority to issue up to 150,000,000 shares of common stock and 10,000,000 shares of preferred stock, and to issue options and warrants to purchase shares of our common stock. We are authorized to issue significant amounts of common stockTorchlight RTO on June 28, 2021. Comparative figures in ~~the future, subject only~~Item 2 refer to the ~~discretion~~financial information of ~~our board of directors. These future issuances could be at values substantially below~~Torchlight as the ~~price paid~~legal acquirer and not the accounting acquirer. Refer to note 5 in Item 8. "Financial Statements and supplementary data" for ~~our common stock by investors. In addition, we could issue large blocks of our stock~~more details.

Investments to fend off unwanted tender offers or hostile takeovers without further shareholder approval. Because the trading volume of our common stock is relatively low, the issuance of our stock may have a disproportionately large impact on its price compared to larger companies.

~~The issuance of preferred stock in the future could adversely affect the rights of the holders of our common stock.~~

An issuance of preferred stock could result in a class of outstanding securities that would have preferences with respect to voting rights and dividends and in liquidation over the common stock and could, upon conversion or otherwise, have all of the rights of our common stock. Our board of directors’ authority to issue preferred stock could discourage potential takeover attempts or could delay or prevent a change in control through merger, tender offer, proxy contest or otherwise by making these attempts more difficult or costly to achieve.

~~ITEM 1B. UNRESOLVED STAFF COMMENTS~~

~~Not Applicable.~~

~~ITEM 2. PROPERTIES~~

Our principal executive offices are located at 5700 W. Plano Parkway, Suite 3600, Plano, Texas 75093. We currently lease this office space which totals approximately 3,181 square feet. We believe that the condition and size of our offices are adequate for our current needs.

~~Investments in~~support oil and gas properties during the years ended December 31, ~~2018~~2021 and ~~2017 are detailed as follows:~~

2018 2017
Property acquisition costs $ 1,072,047 $ 7,227,362
Development costs $ 9,191,041 $ 8,034,962
Exploratory costs $ - $ -

Totals $ 10,263,088 $ 15,262,324

~~Property acquisition costs presented above exclude interest capitalized into the full cost pool of $2,020,019 in 2018~~2020 were $14.2 million and ~~$1,010,868 in 2017.~~

Property acquisition cost relates to the Company’s acquisition of additional working interests in the Orogrande Project in west Texas and the acquisition of the Warwink Project, also in west Texas. The development costs include work in the Orogrande, Hazel, and Warwink projects in west Texas. No development costs were incurred for Oklahoma properties in 2018.

~~Oil and Natural Gas Reserves~~

~~Reserve Estimates~~

~~SEC Case.~~ ~~The following tables sets forth, as~~$3.4 million respectively.

As of December 31, ~~2018, our estimated net~~2021 and 2020, the Company had no proved ~~oil~~reserves. The Hazel and ~~natural gas~~Orogrande Projects consist only of unevaluated properties in progress of development for future production. At December 31, 2021, there are no proved nonproducing reserves the estimated present value (discounted at an annual rate of 10%) of estimated future net revenues before future income taxes (PV-10) and after future income taxes (Standardized Measure) of our proved reserves and our estimated net probable oil and natural gas reserves, each prepared using standard geological and engineering methods generally accepted by the petroleum industry and in accordance with assumptions prescribed by the Securities and Exchange Commission (“SEC”). All of our reservesrelated to these properties. The Oklahoma properties are ~~located~~marginal producing wells which are not economic in the ~~United States.~~

The PV-10 value is a widely used measure of value of oil and natural gas assets and represents a pre-tax present value of estimated cash flows discounted at ten percent. PV-10 is considered a non-GAAP financial measure as defined by the SEC. We believe that our PV-10 presentation is relevant and useful to our investors because it presents the estimated discounted future net cash flows attributable to our proved reserves before taking into account the related future income taxes, as such taxes may differ among various companies. We believe investors and creditors use PV-10 as a basis for comparison of the relative size and value of our proved reserves to the reserve estimates of other companies. PV-10 is not a measure of financial or operating performance under GAAP and neither it nor the Standardized Measure is intended to represent the current market value of our estimated oil and natural gas reserves. PV-10 should not be considered in isolation or as a substitute for the standardized measure of discounted future net cash flows as defined under GAAP.

~~The estimates of our proved reserves and the PV-10 set forth herein reflect estimated future gross revenue to be generated from the production~~context of proved ~~reserves, net of estimated production and future development costs, using prices and costs under existing economic conditions at December 31, 2018. For purposes of determining prices, we used~~reserve value.

The Company has not included the average of prices received for each month within the 12-month period ended December 31, 2018, adjusted for quality and location differences, which was $62.04 per barrel of oil and $3.10 per MCF of gas. This average historical price is not a prediction of future prices. The amounts shown do not give effect to non-property related expenses, such as corporate general administrative expenses and debt service, future income taxes or to depreciation, depletion and amortization.

~~ITEM 2. PROPERTIES- continued~~

December 31, 2018

December 31, 2018

Reserves

Future Net Revenue (M$)

Present Value Discounted

Category

Oil (Bbls)

Gas (Mcf)

Total (BOE)

Total

at 10%

Proved Producing
  177,300
  51,100
  185,817
$4,027
$2,029
Proved Undeveloped
  797,500
  105,800
  815,133
$15,313
$2,895
Total Proved
  974,800
  156,900
  1,000,950
$19,340
$4,924







Standardized Measure of Future Net Cash Flows Related to Proved Oil and Gas Properties

$5,341






Probable Undeveloped
  0
  0
  0
$-
$-

December 31, 2017

December 31, 2017

Reserves

Future Net Revenue (M$)

Present Value Discounted

Category

Oil (Bbls)

Gas (Mcf)

Total (BOE)

Total

at 10%

Proved Producing
  2,300
  43,800
  9,600
$132
$96
Proved Nonproducing
  0
  0
  0
$-
$-
Total Proved
  2,300
  43,800
  9,600
$132
$96







Standardized Measure of Future Net Cash Flows Related to Proved Oil and Gas Properties

$123






Probable Undeveloped
  0
  0
  0
$-
$-

The upward revisions of previous estimates from 2017 to 2018 of proved reserves of 972,500 BBLS and 113,100 MCF results primarily from 2018 reserve report calculations for the Company’s properties which includes reserves from producing properties in the Hazel and Warwink Projects for the first time.

~~Reserve values as of December 31, 2018 are related to a single producing well in Oklahoma, one in the Hazel Project, and one in the Warwink Project.~~

~~BOE equivalents are determined by combining barrels of oil with MCF of gas divided by six.~~

~~ITEM 2. PROPERTIES- continued~~

~~Standardized Measure of Oil & Gas Quantities - Volume Rollforward~~
~~Year Ended December 31, 2018~~

~~The following table sets forth the Company’s net proved reserves, including the changes therein, and proved developed reserves:~~

Crude Oil (Bbls)

Natural Gas (Mcf)

BOE

TOTAL PROVED RESERVES:

Beginning of period
  2,300
  43,800
  9,600
Revisions of previous estimates
  21,257
  (7,709)
  19,972
Extensions, discoveries and other additions
  974,110
  138,670
  997,222
    Divestiture of Reserves
  -
  -
  -
Acquisition of Reserves
  -
  -
  -
Production
  (22,887)
  (17,821)
  (25,857)
End of period
  974,780
  156,940
  1,000,937

~~Standardized Measure of Oil & Gas Quantities - Volume Rollforward~~
~~Year Ended December 31, 2017~~

~~The following table sets forth the Company’s net proved reserves, including the changes therein, and proved developed reserves:~~

Crude Oil (Bbls)

Natural Gas (Mcf)

BOE

TOTAL PROVED RESERVES:

Beginning of period
  48,200
  490,900
  130,017
Revisions of previous estimates
  (35,509)
  (437,841)
  (108,483)
Extensions, discoveries and other additions
  -
  -
  -
Divestiture of Reserves
  -
  -
  -
Acquisition of Reserves
  -
  -
  -
Production
  (10,391)
  (9,259)
  (11,934)
End of period
  2,300
  43,800
  9,600

~~Standardized Measure of Oil & Gas Quantities~~
~~Year Ended December 31, 2018 & 2017~~

~~The~~ standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves ~~is as follows :~~

2018

2017

Future cash inflows
$46,335,070
$240,370
Future production costs
  (15,042,900)
  (108,000)
Future development costs
  (11,740,000)
  -
Future income tax expense
  -
  -
Future net cash flows
  19,552,170
  132,370
10% annual discount for estimated timing of cash flows
  (14,210,840)
  (9,102)
Standardized measure of discounted future net cash flows related to proved reserves
$5,341,330
$123,268



A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved oil and natural gas reserves is as follows :

2018

2017

Balance, beginning of period
$123,268
$340,916
Net change in sales and transfer prices and in production (lifting) costs related to future production
  40,762
  207,241
Changes in estimated future development costs
  (8,718,999)
  116,934
Net change due to revisions in quantity estimates
  289,740
  (129,565)
Accretion of discount
  1,036
  28,604
Other
  (385,278)
  (43,372)



Net change due to extensions and discoveries
  14,467,005
  -
Net change due to sales of minerals in place
  -
  -
Sales and transfers of oil and gas produced during the period
  (476,204)
  (397,490)
Previously estimated development costs incurred during the period
  -
  -
Net change in income taxes
  -
  -
Balance, end of period
$5,341,330
$123,268

Due to the inherent uncertainties and the limited nature of reservoir data, both proved and probable reserves are subject to change as additional information becomes available. The estimates of reserves,given there hasn't been any expected future cash flows, and present value are based on various assumptions, including those prescribed by the SEC, and are inherently imprecise. Although we believe these estimates are reasonable, actual future production, cash flows, taxes, development expenditures, operating expenses, and quantities of recoverable oil and natural gas reserves may vary substantially from these estimates.

In estimating probable reserves, it should be noted that those reserve estimates inherently involve greater risk and uncertainty than estimates of proved reserves. While analysis of geoscience and engineering data provides reasonable certainty that proved reserves can be economically producible from known formations under existing conditions and within a reasonable time, probable reserves involve less certainty than reserves with a higher classification due to less data to support their ultimate recovery. Probable reserves have not been discounted for the additional risk associated with future recovery. Prospective investors should be aware that as the categories of reserves decrease with certainty, the risk of recovering reserves at the PV-10 calculation increases. The reserves and net present worth discounted at 10% relating to the different categories of proved and probable have not been adjusted for risk due to their uncertainty of recovery and thus are not comparable and should not be summed into total amounts.

inflows.

Reserve Estimation Process, Controls and Technologies

No reserve report has been prepared for 2021 or 2020. The ~~reserve estimates, including PV-10 estimates, set forth above were prepared~~only producing properties owned by ~~PeTech Enterprises, Inc. for~~ the ~~Company’s properties~~Company are those located in Oklahoma which are marginally producing and Texas. A copy of their full reports with regard to our reserves is attached as Exhibit 99.1 to this annual report on Form 10-K. These calculations were prepared using standard geological and engineering methods generally accepted by the petroleum industry and in accordance with SEC financial accounting and reporting standards.

~~ITEM 2. PROPERTIES- continued~~

We do not have any employees with specific reservoir engineering qualifications in the company. Our Chairman and Chief Executive Officer worked closely with PeTech Enterprises Inc. in connection with their preparation of ourare uneconomic for reserve ~~estimates, including assessing the integrity, accuracy, and timeliness of the methods and assumptions used in this process.~~

PeTech Enterprises, Inc. (“PeTech”), who provided 2018 reserve estimates for our properties, is a Texas based family owned oil and gas production and investment company that provides reservoir engineering, economics and valuation support to energy banks, energy companies and law firms as an expert witness. PeTech has been in business since 1982. Amiel David is the President of PeTech and the primary technical person in charge of the estimates of reserves and associated cash flow and economics on behalf of the company for the results presented in its reserves report to us. He has a PhD in Petroleum Engineering from Stanford University. He is a registered Professional Engineer in the state of Texas (PE #50970), granted in 1982, a member of the Society of Petroleum Engineers and a member of the Society of Petroleum Evaluation Engineers.

calculation purposes.

Proved Nonproducing Reserves

As of December 31, ~~2018, our~~2021 and 2020, the Company's proved ~~non producing~~nonproducing reserves totaled ~~815,133~~were 0 barrels of oil equivalents (BOE) ~~compared to -0- as~~.

At the end of ~~December 31, 2017, an increase of 815,133 BOE.~~ 2021 and 2020, reserves did not include any value for proved undeveloped properties.

The net reserves change associated with nonproducing reserves is an increase of approximately 797,500 bbls of oil and an increase of approximately 105,800 Mcf of gas (calculated with a gas-oil equivalency factor of six).

WeCompany made ~~investments and~~ development progress during ~~2018~~2021 to ~~further~~ develop proved producing reserves in the Orogrande ~~Hazel, and Warwink Projects~~Project in the Permian Basin in West Texas. AsThe Company incurred cost of ~~December 31, 2018 four test wells have been developed~~$14.2 million in relation to certain drilling activity carried out to remain in compliance with all aspects of the ~~Orogrande Project~~Company's lease obligations and ~~six test wells have been developed in~~to satisfy the Hazel Project including the Flying B #3 which has been in continuous production since September, 2017. The Warwink Project which was initiated in 2018 has continuing production from the Warwink # 47H well beginning in October, 2018.

Our current drilling plans, subject to sufficient capital resources and the periodic evaluation of interim drilling results and other potential investment opportunities, include drilling additional evaluation wells in the Orogrande and Hazel AMI’s to continue to derisk the prospects and obtain initial production from the development efforts. The next scheduled wells in the Hazel Project are scheduled to spud near the end of May, 2019.

Continuous Drilling Clause ("CDC") with University Lands.

Production, Price, and Production Cost History

During the year ended December 31, ~~2018, we~~2020, the Company produced and sold ~~22,887~~5,445 barrels of oil net to ~~our~~its interest at an average sale price of ~~$54.93~~$34.48 per bbl. WeIt produced and sold ~~17,821~~4,998 MCF of gas net to ~~our~~its interest at an average sales price of ~~$1.41~~$1.13 per MCF. ~~Our~~Its average production cost including lease operating expenses and direct production taxes was ~~$31.17~~$30.02 per BOE. ~~Our~~Its depreciation, depletion, and amortization expense was ~~$45.39~~$130.68 per BOE.

During the year ended December 31, 2017, we produced and sold 10,391 barrels of oil net to our interest at an average sale price of $52.37 per bbl. We produced and sold 9,259 MCF of gas net to our interest at an average sales price of $2.84 per MCF. Our average production cost including lease operating expenses and direct production taxes was $14.51 per BOE. Our depreciation, depletion, and amortization expense was $43.67 per BOE.

The changes in production, revenue, and operating costs were impacted by the production from the Flying B #3 well in the Hazel Project which began in late September, 2017 and production from the Warwink 47 H beginning in October, 2018.

~~Our 2018~~2020 production was from properties located in central Oklahoma and in west Texas. ~~Reserves at~~

During the beginning of 2018 from central Oklahoma comprised more than 15% of total reserves. For 2018, approximately 1,849 BOE was produced in Oklahoma and 24,008 BOE produced in Texas, or 7% from Oklahoma and 93% from wells in west Texas.

~~ITEM 2. PROPERTIES- continued~~

~~Quarterly Revenue and Production by State for 2018 and 2017 are detailed as follows:~~

Property

Quarter

Oil Production {BBLS}

Gas Production {MCF}

Oil Revenue

Gas Revenue

Total Revenue

Oklahoma   Q1 - 2018
  72
  2,008
  4,463
  5,202
$9,665
Hazel (TX)   Q1 - 2018
  7,786
  0
  471,498
  -
$471,498

Total Q1-2018

  7,858
  2,008
$475,961
$5,202
$481,163






Oklahoma   Q2 - 2018
  446
  1,857
  10,912
  2,690
$13,602
Hazel (TX)   Q2 - 2018
  4,368
  0
  266,506
  -
$266,506
Meco (TX)   Q2 - 2018
  51
  0
  3,155
  -
$3,155

Total Q2-2018

  4,865
  1,857
$280,573
$2,690
$283,263






Oklahoma   Q3 - 2018
  41
  2,324
$1,264
$3,845
$5,109
Hazel (TX)   Q3 - 2018
  2,283
  0
$123,566
$-
$123,566
Meco (TX)   Q3 - 2018
  0
  0
$-
$-
$-

Total Q3-2018

  2,324
  2,324
$124,830
$3,845
$128,675






Oklahoma   Q4 - 2018
  94
  986
$4,878
$1,104
$5,982
Hazel (TX)   Q4 - 2018
  3,779
  0
$178,015
$-
$178,015
Meco (TX)   Q4 - 2018
  3,967
  10,646
$192,916
$12,348
$205,264

Total Q4-2018

  7,840
  11,632
$375,809
$13,452
$389,261







2018 Year To Date

  22,887
  17,821
$1,257,173
$25,189
$1,282,362












Oklahoma   Q1 - 2017
  101
  2,303
$5,346
$7,604
$12,950
Hazel (TX)   Q1 - 2017
  0
  0
  -
  -
  -

Total Q1-2017

  101
  2,303
$5,346
$7,604
$12,950






Oklahoma   Q2 - 2017
  140
  2,332
  6,594
  6,709
  13,303
Hazel (TX)   Q2 - 2017
  0
  0
  -
  -
  -

Total Q2-2017

  140
  2,332
$6,594
$6,709
$13,303






Oklahoma   Q3 - 2017
  132
  2,041
  5,733
  3,727
  9,460
Hazel (TX)   Q3 - 2017
  204
  0
  8,836
  -
  8,836

Total Q3-2017

  336
  2,041
$14,569
$3,727
$18,296






Oklahoma   Q4 - 2017
  84
  2,583
  4,739
  8,227
  12,966
Hazel (TX)   Q4 - 2017
  9,730
  0
  512,984
  -
  512,984

Total Q4-2017

  9,814
  2,583
$517,723
$8,227
$525,950








Year Ended 12/31/17

  10,391
  9,259
$544,232
$26,267
$570,499

~~ITEM 2. PROPERTIES- continued~~

~~Drilling Activity and Productive Wells~~

~~Combined Well Status~~

~~The following table summarizes drilling activity and Well Status as of~~year ended December 31, ~~2018:~~

Cumulative Well Status

Wells Drilled

Cumulative Well Status

Drilling Activity/Well Status

at 12/31/2018

2018

at 12/31/2017

Gross

Net

Gross

Net

Gross

Net

Development Wells:

Productive -Texas (Hazel)
  1.00
  0.80
  -
  -
  1.00
  0.80
Productive -Texas (Warwink)
  1.00
  0.13
  1.00
  0.13
  -
  -
Productive - Okla
  2.00
  0.40
  -
  -
  2.00
  0.40
Test Wells (Dry) - Orogrande
  6.00
  3.66
  4.00
  2.71
  2.00
  0.95
Test Wells (Dry) - Hazel
  4.00
  3.20
  2.00
  1.60
  2.00
  1.60








Exploration Wells:





Productive
  -
  -
  -
  -
  -
  -
Dry
  -
  -
  -
  -
  -
  -















Total Drilled Wells:




Productive -Texas
  2.00
  0.93
  1.00
  0.13
  1.00
  0.80
Productive - Okla
  2.00
  0.40
  -
  -
  2.00
  0.40
Test Wells (Dry)
  10.00
  6.86
  6.00
  4.31
  4.00
  2.55















Acquired Wells:





Productive -Texas
  -
  -
  -
  -
  -
  -
Productive - Okla
  -
  -
  -
  -
  -
  -















Total Wells:






Productive -Texas
  2.00
  0.93
  1.00
  0.13
  1.00
  0.80
Productive - Okla
  2.00
  0.40
  -
  -
  2.00
  0.40
Test Wells (Dry)
  10.00
  6.86
  6.00
  4.31
  4.00
  2.55







Total
  14.00
  8.19
  7.00
  4.44
  7.00
  3.75








Well Type:






Oil
  -
  -
  -
  -
  -
  -
Gas
  -
  -
  -
  -
  -
  -
Combination -Oil and Gas
  4.00
  1.33
  1.00
  0.13
  3.00
  1.20
Test Wells (Dry)
  10.00
  6.86
  6.00
  4.31
  4.00
  2.55







Total
  14.00
  8.19
  7.00
  4.44
  7.00
  3.75

~~ITEM 2. PROPERTIES- continued~~

~~Our acreage positions at December~~2021, there was no oil or gas production.

Item 3. Legal Proceedings.

On January 31, ~~2018 are summarized~~2020, Torchlight Energy Resources, Inc. and its wholly owned subsidiaries Torchlight Energy, Inc. and Torchlight Energy Operating, LLC were served with a lawsuit brought by Goldstone Holding Company, LLC (Goldstone Holding Company, LLC v. Torchlight Energy, Inc., et al., in the 160th Judicial District Court 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 allegations 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 ~~follows:~~

TRCH Interest TRCH Interest
Total Acres Developed Acres Undeveloped Acres
Leasehold Interests - 12/31/2018 Gross Net Gross Net Gross Net

Texas -
Orogrande 133,000 90,108 - - 133,000 90,108
Hazel Project 12,000 9,600 320 256 11,680 9,344
Warwink Properties 1,400 175 1,400 175 - -

Oklahoma -
Viking 640 192 640 192 - -

Total 147,040 100,075 2,360 623 144,680 99,452

~~Current Projects~~

Asthe 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 ~~December 31, 2018, we had interests~~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's 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 ~~four oil and gas projects:~~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 ~~Project~~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 directors to the case pursuant 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 Corporation 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 with 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.

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 ~~Hazel Project~~Orogrande Field in ~~Sterling, Tom Green,~~the amount of $104,500.01 and ~~Irion Counties, Texas,~~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 ~~Winkler Project~~205th Judicial District Court of Hudspeth County, Texas. The Company is contesting the lien in ~~Winkler~~good faith and filed a Plea in Abatement on May 10, 2021, seeking a stay in the Hudspeth County ~~Texas,~~lien foreclosure case pending final disposition of the related case currently pending in Harris County, Texas.

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, its Chief Executive Officer, its 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. This complaint names the same defendants and asserts the same claims on behalf of the same purported class as the Maltagliati action. The Company believes these actions (collectively, the “Securities Class Action”) have no merit and intends to vigorously defend itself against these allegations.

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’s current officers and directors, certain former Torchlight officers and directors, and the ~~Hunton wells~~Company (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 ~~partnership with Husky Ventures in central Oklahoma.~~

~~See~~favor of the ~~description under “Current Projects” above under “Item 1. Business”~~Company, certain corporate governance related actions, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. The Company believes this action has no merit and intends to vigorously defend itself against these allegations.

Item 4. Mine Safety Disclosures.

Not Applicable.

PART II

Item 5. Market for ~~information~~Registrant’s Common Equity, Related Stockholder Matters and ~~disclosure regarding these projects which description is incorporated herein by reference.~~

~~ITEM 3. LEGAL PROCEEDINGS~~

~~None.~~

~~ITEM 4. MINE SAFETY DISCLOSURES~~

~~Not Applicable.~~

~~PART II~~

~~ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~

~~Our~~Issuer Purchases of Equity Securities.

Market Information for Common Stock

The Company's common stock is quoted on ~~The~~the NASDAQ Stock Market LLC ("NASDAQ") under the symbol, ~~“TRCH.” Trading in our common stock has historically been limited and occasionally sporadic and the quotations set forth below are not necessarily indicative of actual market conditions.~~

~~Record Holders~~

“MMAT”. As of ~~March 8, 2019,~~December 31, 2021, the Company had outstanding common shares of 284,573,316 out of which there were ~~approximately 225 stockholders~~88,274,449 Exchangeable Shares held on the Canadian Securities Exchange ("CSE") under the symbol "MMAX".

The average daily volume of MMAT on NASDAQ from June 28, 2021 through December 31, 2021 was 14,258,758 .

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's 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, there were 87 holders of record of ~~our~~the Company's common stock and we estimate that there were approximately 3,800 additional beneficial stockholders who hold their shares in “street name” through a brokerage firm or other institution. As of March 15, 2019, we have a total of 71,695,865listed on NASDAQ. Because many shares of MMAT's common stock ~~issued~~are held by brokers and ~~outstanding.~~

~~The holders~~other institutions on behalf of stockholders, the Company is unable to estimate the total number of beneficial owners of its common stock.

Holders of the Company's 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's 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.

~~Equity Compensation Plan Information~~

~~The following table sets forth all equity compensation plans as of December 31, 2018:~~

Number of
securities
remaining
available
for future
Number of issuance
securities to Weighted- under
be issued average equity
upon exercise compensation
exercise of price of plans
outstanding outstanding (excluding
options, options, securities
warrants warrants reflected in
Plan Category and rights and rights column (a))

Equity compensation plans approved by security holders 8,014,931 $ 1.48 1,985,069

Recent Sales of Unregistered Securities

~~Other than~~

The table below details all unregistered common shares issued by the ~~sales below, all equity securities that we have sold~~Company during the ~~period covered by this report that were not registered under the Securities Act have previously been~~fiscal year 2021. These shares are included in ~~a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.~~

~~All~~the issued and outstanding share count of the ~~above sales~~Company at December 31, 2021 and are adjusted to reflect the 1:2 reverse stock split of ~~securities described~~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 ~~this Item 2 were sold~~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., previously Torchlight Energy Resources, Inc. ("Torchlight"), after adjustment of reverse stock split on June 25, 2021.



	2021

Exercised Warrants		1,619,547
Principal of converted notes		8,362,899
Payment in Kind		93,165
Service fees paid in stock		285,868
Shares issued to Metamaterial Inc. Shareholders*		196,968,803
Total Unregistered Shares		207,330,282

* Issued under ~~the~~an exemption from registration ~~provided~~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.

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 ~~Section 4(a)(2)~~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 ~~rules~~Nasdaq Composite Index (COMP) beginning December 30, 2016, and ~~regulations promulgated thereunder.~~ending December 31, 2021. The ~~issuances~~graph assumes that $100 was invested at the market close on beginning December 30, 2016 in the common stock of ~~securities did not involve a “public offering” based upon~~MMAT, COMP, and RUT. The stock price performance of the following ~~factors: (i) the issuances~~graph is not necessarily indicative of securities were isolated private transactions; (ii) a limited number of securities were issued to a limited number of purchasers; (iii) there were no public solicitations; (iv) the investment intent of the purchasers; and (v) the restriction on transferability of the securities issued.

~~ITEM~~future stock price performance.

Item 6. ~~SELECTED FINANCIAL DATA~~

~~Not Applicable.~~

~~ITEM~~[Reserved]

Item 7. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Information set forth and discussed in this~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations is derived from our historical financial statements and the related notes thereto which are included in this Form 10-K. The following information and discussion should be read in conjunction with such financial statements and notes. Additionally, this Management’s Discussion and Analysis and Plan of Operations contain certain statements that are not strictly historical and are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a high degree of risk and uncertainty. Actual results may differ materially from those projected in the forward-looking statements due to other risks and uncertainties that exist in our operations, development efforts, and business environment, and due to other risks and uncertainties relating to our ability to obtain additional capital in the future to fund our planned expansion, the demand for oil and natural gas, and other general economic factors.

~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- continued~~

~~All forward-looking statements included herein are based on information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statements.~~

~~Summary of Key Results~~

~~Overview~~

~~We are engaged in the acquisition, exploration, exploitation, and/or development of oil and natural gas properties in the United States.~~

During the year ended December 31, 2016 the Board of Directors initiated a review of Company operations in view of the divestiture of its Oklahoma properties, which included the previous sale of the Chisholm Trail and Cimarron properties. During 2016 development had continued on the Orogrande Project in West Texas and in April, 2016, the Company acquired the Hazel Project in the Midland Basin also in West Texas. These West Texas properties demonstrate significant potential and future production capabilities based upon the analysis of scientific data being gathered in the day by day development activity. Therefore, the Board has determined to focus its efforts and capital on these projects to maximize shareholder value for the long run.

During 2017 the Company increased its commitment to the Orogrande and Hazel Projects. Additional working interests were acquired and test wells were drilled on the properties which is detailed in the Properties section of this filing. Near the end of 2017 the Warwink Project, also in West Texas, was acquired.

During 2018 the Company continued development in the Orogrande and Hazel Projects. Additional test wells were drilled to capture additional science data to support lease value. Production from the Hazel Flying B #3 continued through 2018. The carried well provision of the Warwink acquisition in 2017 was fulfilled with the drilling of the Warwink #47-H. That well began production in October, 2018.

The strategy in divesting of projects other than the Orogrande Project was to refocus on the greatest potential future value for the Company while systematically eliminating debt as noncore assets are sold and operations are streamlined.

Operations.

The following discussion and analysis of ~~our~~the Company's financial condition and results of operations should be read in conjunction with ~~our audited~~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 Forward-Looking Statements” in this Annual Report.

This Report on Form 10-K contains references to the Company's 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 Company will not assert, to the fullest extent under applicable law, the Company's rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend for the ~~years ended~~Company's use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of the Company by any other companies.

OVERVIEW

Meta Materials Inc. (the “Company” or “META” 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 its principal executive office is located at 1 Research Drive, Halifax, 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, new emphasis will be placed on investments in pilot scale manufacturing of NANOWEB® products, expansion of its production capacity in our banknote and brand security lines and more aggressive design, development and clinical testing of its array of medical products. These efforts represent an efficient approach to monetizing the Company's intellectual property assets.

Highfield Park facility

The Company leased approximately 53,000 square foot facility in Dartmouth, Nova Scotia, with the lease commencing on January 1, 2021. 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 rent for the 10-year term 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 MMI common stock at CA$3.40 per share. As at December 31, ~~2018~~2021, the Company has purchased equipment for approximately $1.5 million as well as spent $3.84 million on construction work. The Company will continue to incur additional construction and ~~2017 included herewith. This discussion should not be construed~~equipment costs through 2022.

Pleasanton facility

During 2021, the Company signed multiple lease amendments with its lessor in Pleasanton, California to ~~imply that~~expand the ~~results discussed herein will necessarily continue into~~leased space of the ~~future, or that any conclusion reached herein will necessarily be indicative of actual operating results~~facility in the ~~future. Such discussion represents only~~United States to include additional space of 14,379 square feet as well as extend the ~~best present assessment by our management.~~

~~Historical Results~~duration of 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 ~~Years Ended December 31, 2018~~second half of fiscal year 2022. The Company has also spent $1 million on leasehold improvements

Thurso facility

As part of the Nanotech acquisition, the Company acquired property plant and ~~2017~~

~~For~~equipment with an estimated fair value 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.

RESULTS OF OPERATIONS

Revenue and Gross Profit


	Year ended December 31,
	2021			2020			Change						2019			Change
	$			$			$			%			$			$			%
Product sales		407,915			2,905			405,010			13942	%		23,745			(20,840	)		-88	%
Development revenue		3,674,602			1,119,278			2,555,324			228	%		878,665			240,613			27	%
Total Revenue		4,082,517			1,122,183			2,960,334			264	%		902,410			219,773			24	%
Cost of goods sold		675,973			3,254			672,719			20674	%		9,172			(5,918	)		-65	%
Gross Profit		3,406,544			1,118,929			2,287,615			204	%		893,238			225,691			25	%
Gross Profit percentage		83	%		100	%		-17	%					99	%		1	%

Product sales include products, components, and samples sold to various customers. During the year ended December 31, ~~2018, we had a net loss of $5,806,612~~2021, the Company began earning revenue from development samples sold to certain customers. The $0.4 million increase in product sales in 2021 compared to 2020 is due to:

•

$0.3 million in revenue from sale of development samples of NANOWEB®

•

$0.1 million in Nano-optic product sales in Q4 2021 generated by Nanotech subsequent to its acquisition by the Company

•

Incidental revenue generated by product sales of holoOPTIXTM to different customers

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:

•

$1.7 million in revenue recognized by Nanotech from contract services subsequent to its acquisition by the Company. Nanotech currently derives a ~~net loss~~significant portion of ~~$919,910~~its revenue from contract services with a confidential G10 central bank. In 2021, Nanotech entered into a development contract for up to $41.5 million over a period of up to five years. These contract services incorporate both nano-optic and optical thin film technologies and are focused on developing authentication features for future banknotes.

•

$1 million in revenue recognized subsequent to achieving performance conditions of the ~~year ended December 31, 2017.~~ Cooperation Framework Agreement with Covestro Deutschland AG.

•

$0.2 million decrease in other development revenue with lower research and development revenue generated from customers in 2021 compared to 2020.

The ~~difference~~increase in development revenue of $0.2 million in 2020, compared to 2019, is Primarily due to revenue recognized from statements of work with different customers.

The increase of $0.7 million in cost of sales in 2021, compared to 2020, is primarily due to ~~increased general and administrative and depletion and depreciation expense and~~$0.17 million in cost of sales incurred by Nanotech subsequent to its acquisition by the ~~impact~~Company, as well as $0.16 million in cost of ~~a nonrecurring income item~~sales incurred in generating other product sales. There was minimal decrease in cost of ~~$2,781,500 received~~sales in ~~2017.~~

~~Revenues and Cost of Revenues~~

~~For the year ended December 31, 2018, we had production revenue of $1,282,362~~2020 compared to ~~$570,499~~2019.

Operating expenses


	Year ended December 31,
	2021		2020		Change					2019		Change
	$		$		$		%			$		$			%
Operating Expenses
Selling & Marketing		2,267,354		1,064,659		1,202,695		113	%		1,125,719		(61,060	)		-5	%
General & Administrative		29,699,601		6,707,858		22,991,743		343	%		4,819,737		1,888,121			39	%
Research & Development		9,497,427		4,102,791		5,394,636		131	%		3,825,194		277,597			7	%
Total operating expenses		41,464,382		11,875,308		29,589,074		249	%		9,770,650		2,104,658			22	%

The increase in selling and marketing expenses in 2021, compared to 2020, is primarily due to:

•

$0.6 million increase in salaries and benefits due to:

$0.2 million in salaries and benefits costs incurred by Nanotech subsequent to its acquisition by the Company.

$0.4 million increased cost for new hires in 2021 as part of ~~production revenue~~the Company’s expansion and building a sales and marketing team.

•

$0.2 million increase in consulting fees for market research and various investor relations campaigns as the ~~year ended December 31, 2017. Refer~~Company sought to list on the NASDAQ.

•

$0.2 million increase in trade shows and travel and entertainment due to the ~~table~~market rebound after COVID-19 and reopening of ~~production~~trade shows. The Company participated in global tradeshows including AWE in USA and ~~revenue~~Asia for ~~2018~~augmented reality ("AR") and ~~2017 included below. Our cost of revenue, consisting of lease operating~~5G networks, Photonics West for holoOPTIX and AR, CES for various industries and technologies such as 5G networks, augmented reality, consumer electronics, automotive, and medical applications.

There was a minimal decrease in selling and marketing expenses ~~and production taxes, was $806,158, and $173,187 for the years ended December 31, 2018 and 2017, respectively.~~

~~The change~~ in revenue was impacted by the new production from the Flying B #3 well in the Hazel Project that began in late September, 2017 and production from the Warwink #47H which began production in October, 2018.

~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- continued~~

~~Production and Revenue are detailed as follows:~~

~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- continued~~

~~We recorded depreciation, depletion and amortization expense of $1,173,752 for the year ended December 31, 2018~~2020 compared to $100,156 for 2017. Impairment expense recognized was $139,891 in 2018 compared to $-0- for 2017. Although we had no recognized impairment expense in 2017, the Company has adjusted the separation of evaluated versus unevaluated costs within its full cost pool to recognize the value impairment related to the expiration of unevaluated leases in 2017 in the amount of $2,300,626. The impact of this change will be to increase the basis for calculation of future period’s depletion, depreciation and amortization to include $2,300,626 of cost which will effectively recognize the impairment on the Statement of Operations over future periods. The $2,300,626 will also become an evaluated cost for purposes of future period’s Ceiling Tests and which may further recognize the impairment expense recognized in future periods.

~~General and Administrative Expenses~~

Our general and administrative expenses for the years ended December 31, 2018 and 2017 were $4,053,062 and $3,652,970, respectively, an increase of $400,092. Our general and administrative expenses consisted of consulting and compensation expense, substantially all of which were non-cash or deferred, accounting and administrative costs, professional consulting fees, and other general corporate expenses. 2019.

The increase in general and administrative expenses in 2021, compared to 2020, is primarily due to:

•

$5.0 million increase in legal and audit expenses, primarily resulting from costs associated with the Torchlight reverse acquisition ("RTO") and Nanotech acquisition, as well as costs associated with listing on the NASDAQ.

•

$6.2 million increase in consulting expenses primarily due to:

$4.1 million of expenses relating to the management of, and maintenance of the Oil and Gas assets ("O&G assets") acquired via the Torchlight RTO, including $3.1 million paid to consultants in the form of warrants as well as $0.9 million paid in cash.

$1.2 million in advisory fees relating to the acquisition of Nanotech.

•

$3.0 million increase in salaries and benefits primarily due to:

$2.0 million increase due to incurring an additional $1.1 million in salaries expense for general headcount expansion in 2021 as well as recording accrued bonuses of $0.9 million.

$0.9 million in salaries expenses in relation to management of, and maintenance of the O&G assets acquired via the Torchlight RTO.

•

$3.9 million increase in investor related expenses due to:

$2.7 million warrants and RSUs issued to non-employee consultants in 2021. The fair value of warrants was calculated based on the Monte Carlo simulation valuation technique. The fair value of RSUs was calculated using the grant date share price. Refer to note 14 in Item 8. "Financial Statements and supplementary data" for more details.

$1.0 million in other expenses in relation to stock market support, investor communication and holding an annual stockholders meeting.

•

$1.6 million increase in rent and utilities due to the new lease for the Company's Highfield Park facility in Nova Scotia, Canada, the expansion of the Pleasanton facility in California, the opening of new administrative locations in Boxborough, Massachusetts and Plano, Texas, and new research and development office in Athens, Greece.

•

$1.6 million increase in insurance costs due to the increased insurance requirements in the US resulting from the Company's NASDAQ listing.

•

$1.7 million increase in depreciation, amortization and impairment expense.

The increase in general and administrative expenses in 2020, compared to 2019, is primarily due to:

•

$1.1 million increase in legal and audit fees for work related to the preparation for the Torchlight RTO and the closing of the CPM RTO, $0.2 million increase in investment banking services, and $0.2 million increase in investor related expenses due to preparation for the acquisition of Torchlight.

•

$0.2 million increase in rent and utilities

The increase in research and development expenses in 2021, compared to 2020, is primarily due to:

•

$3.1 million increase in salaries and benefits due to general headcount expansion.

•

$1.1 million due to R&D materials purchases.

•

$0.6 million increase in IT & software, dues and subscriptions, rent & utilities as well as travel and entertainment expenses.

The increase in research and development expenses in 2020, compared to 2019, is primarily due to $0.3 million increase in consulting expenses.

Other expense


	Year ended December 31,
	2021			2020			Change						2019			Change
	$			$			$			%			$			$			%
Other expense:
Interest expense, net		(1,106,445	)		(1,429,954	)		323,509			-23	%		(1,135,922	)		(294,032	)		26	%
Loss on foreign exchange, net		(205,882	)		(264,831	)		58,949			-22	%		(316,261	)		51,430			-16	%
Loss on financial instruments, net		(40,540,091	)		(844,993	)		(39,695,098	)		4698	%		(280,319	)		(564,674	)		201	%
Other (loss) income, net		(11,939,068	)		1,491,188			(13,430,256	)		-901	%		2,081,398			(590,210	)		-28	%
Total other expense		(53,791,486	)		(1,048,590	)		(52,742,896	)		5030	%		348,896			(1,397,486	)		-401	%

The $0.2 million decrease in interest expense in 2021 compared to 2020 was due to the settlement of certain of the Company's convertible promissory notes and debentures, converted into MMI common stock during the year ended December 31, ~~2018~~2021, resulting in less interest expense being incurred.

The $0.3 million increase in interest expense in 2020 compared to ~~2017 is detailed~~2019 was due to a $5 million loan obtained from BDC and issued in April 2020 as ~~follows:~~

Increase(decrease) in non cash stock and warrant compensation $ 189,263
Increase(decrease) in consulting expense $ 292,488
Increase(decrease) in investor relations $ 140,043
Increase(decrease) in travel expense $ (13,019 )
Increase(decrease) in salaries and compensation $ (20,676 )
Increase(decrease) in legal fees $ (347,848 )
Increase(decrease) in filing and compliance fees $ 33,186
Increase(decrease) in insurance $ 55,279
Increase(decrease) in general corporate expenses $ (11,513 )
Increase(decrease) in audit fees $ 82,889

Total Increase in General and Administrative Expenses $ 400,092

well as issuance of $1 million in unsecured convertible debentures in the first half of fiscal year 2020.

The increase in ~~noncash~~loss on financial instruments in 2021, compared to 2020, was due to the re-measurement of convertible financial liabilities with carrying value of $12.0 million at the conversion dates and a recognition of a $40.2 million non-cash realized loss in the statements of operations and comprehensive loss. The increase in the fair value of convertible financial liabilities was due to the increase in the Company’s stock price from CA$0.66 as at December 31, 2020 to:

•

CA$3.01 at February 16, 2021 when the Company converted unsecured convertible promissory notes of $4.4 million principal and interest at a share price of CA$0.50 in accordance with the terms of the bridge financing;

•

CA$3.01 at February 16, 2021 when the Company converted unsecured convertible debentures of $1.5 million principal and interest at share price of CA$0.70 as per terms of the agreement and;

•

CA$3.80 at March 3, 2021 when the Company converted secured convertible debentures of $4.3 million principal and interest at share price of CA$0.70 pursuant to the terms of the agreement with Business Development Canada.

Each of the above referenced promissory notes and debentures included a conversion feature, exercisable at the option of the debt holder. For accounting purposes, each of these conversion features was an embedded derivative in the note or debenture. The Company elected to account for fluctuations in (a) the value of the liabilities driven by interest rate volatility and the Company’s credit risk and (b) the embedded derivatives driven by fluctuations in the Company’s common stock share price, using the fair value option. This accounting method calls for the Company to measure the fair value of the convertible financial liabilities at each balance sheet date and to record any non-cash adjustments relating to instrument-specific credit risk in other comprehensive income, and non-cash adjustments relating to other factors in the statements of operations. If, as was the case for the liabilities described above, the debt is converted, the valuations and any adjustments are to be recorded as of the date of such conversion.

The fair value option also provides that the total revaluation adjustment, in this case $40.2 million, be recorded in common stock and ~~warrant compensation arises from~~additional paid in capital along with the ~~combination~~$10.2 million principal and interest portion, resulting in an increase to stockholders' equity despite the recording of the $40.2 million loss in the statement of operations.

The recorded loss is a non-cash expense. The creditors of the Company exchanged their secured and unsecured debt for common stock of the Company at conversion prices that were established at the time the instruments were created and, at which time, represented a conversion price close to or higher than the then market price of the common stock. Had the Company been permitted to pay off the debts in cash at the time of conversion, fewer shares would have been required to be issued and a lower loss would have been recorded. However, the instruments prevented any pre-payment of the debts by the Company. The conversions had the beneficial effect of significantly reducing the Company’s liabilities and eliminating broad-based security interests in all of the Company’s assets previously held by the creditors.

The $0.6 million increase in loss on financial instruments in 2020 compared to 2019 is primarily due to the re-measurement of convertible financial liabilities with carrying value of $12.0 million at the conversion dates and a recognition of a $0.8 million non-cash realized loss in the statements of operations and comprehensive loss.

The $13.0 million decrease in ~~vested employee stock options expense,~~ net other income in 2021, compared to 2020, is primarily due to costs incurred in relation to certain drilling activity carried out by the company at its Oil and Gas ("O&G") properties, to remain in compliance with all aspects of the Company's lease obligations and to satisfy the Continuous Drilling Clause ("CDC") with University Lands. The Company was successful in maintaining lease compliance and is moving forward with the planned spin-out of the O&G assets.

The $0.6 million decrease in other income in 2020 compared to 2019 was primarily due to the following:

•

$0.4 million decrease in recognition of the fair value of the interest free component of the funding obligation.

•

$0.6 million decrease in recognition of fair value gain on the ACOA loans.

•

Offset by a $0.4 million increase in government assistance.

Deferred Tax recovery


	Year ended December 31,
	2021		2020		Change					2019		Change
	$		$		$		%			$		$		%
Income tax recovery		852,063		193,710		658,353		340	%		83,549		110,161		132	%

The Company records deferred income tax liabilities for some of its foreign subsidiaries in Canada and United Kingdom. The increase in income tax recovery in 2021, compared to 2020, was driven by:

•

an increase in ~~expense related to warrants issued by~~accumulated losses, as well as changes in foreign exchange rates, in the ~~company, and~~ Company's foreign subsidiary in United Kingdom.

•

an increase in accumulated losses, intangibles amortization and changes in foreign exchange rates in Nanotech securities, the ~~value~~Company's wholly owned subsidiary, pursuant to its acquisition on October 5, 2021.

The increase in income tax recovery in 2020, compared to 2019, was driven by:

•

an increase in accumulated losses, as well as changes in foreign exchange rates, in the Company's foreign subsidiary in United Kingdom.

The Company has not yet been able to establish profitability or other sufficient significant positive evidence, to conclude that its deferred tax assets are more likely than not to be realized. Therefore, the Company continues to maintain a valuation allowance against its deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity risk is the risk that the Company will not meet its financial obligations as they become due after use of ~~common stock issued~~currently available cash. The Company has a planning and budgeting process to monitor operating cash requirements, including amounts projected for ~~services. Consulting expense~~capital expenditures, which are adjusted as input variables change. These variables include, but are not limited to, the ability of the Company to generate revenue from current and ~~investor relations expense increased due~~prospective customers, general and administrative requirements of the Company and the availability of equity or debt capital and government funding. As these variables change, the Company may be required to ~~fees related~~issue equity or obtain debt financing.

At December 31, 2021, the Company had cash and cash equivalents of $46.6 million including $0.8 million in restricted cash compared to ~~capital raise activity~~$1.4 million in ~~2018. Legal fees were reduced from prior years due~~cash and cash equivalents at December 31, 2020. In addition, and as of December 31, 2021, the Company holds short-term investments amounting to ~~a reduction in transaction activity. Increased audit fees arose from the expanded compliance requirements under SOX 404.~~

~~Liquidity and Capital Resources~~

$2.8 million (December 31, 2020: $Nil).

For the year ended December 31, ~~2018, we had a~~2021, the Company’s principal sources of liquidity included $147 million of cash obtained through the Torchlight RTO, $14.0 million in cash obtained through convertible debt, $1.8 million in cash obtained through revenue and deferred revenue, and $1.1 million in cash obtained through long-term and short-term interest-free debt.

The Company’s primary uses of liquidity included the Nanotech acquisition of $66.1 million net ~~loss~~ of ~~$5,806,612 compared~~cash acquired, salaries of $10.3 million, legal and audit fees of $6.3 million, professional service fees of $11.0 million and, Oil and Gas drilling costs of $12.5 million.

The Company believes that its existing cash will be sufficient to ~~a net loss~~meet its working capital and capital expenditure needs as production capacity begins to come on line. The Company may need to raise additional capital to expand the commercialization of ~~$919,910~~its products, fund its operations and further its research and development activities. Future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the capital expansion of its facilities in Halifax and California and the ongoing investments to support the growth of its business.

The Company also has the option to raise equity through issuing common stock of up to approximately $112.5 million under an existing At-The-Market equity program where the Company's shares have been registered under the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form S-3 (No. 333-256632) filed by the Company with the Securities and Exchange Commission (the “SEC”) on May 28, 2021, and declared effective on June 14, 2021 (the “Registration Statement”).

The following table summarizes META’s cash flows for the periods presented:


	Year ended December 31,
	2021			2020			2019
Net cash used in operating activities		(34,764,911	)		(7,929,047	)		(4,360,747	)
Net cash provided by investing activities		65,144,545			2,412,991			(1,195,342	)
Net cash provided by financing activities		15,655,863			6,333,827			5,328,559
Net increase in cash, cash equivalents and restricted cash		46,035,497			817,771			(227,530	)

Net cash used in operating activities

During the year ended December 31, ~~2017.~~

At December 31, 2018, we had current assets of $1,521,982 and total assets of $38,097,881. As of December 31, 2018, we had current liabilities of $2,198,672. Stockholders’ equity was $18,022,776 at December 31, 2018.

~~Cash from~~2021, net cash used in operating activities of $36.2 million was primarily driven by a $91.0 million net loss reported for the year, and non-cash adjustments of $51.7 million mainly due to $40.5 million fair value losses on financial instruments, $8 million stock based compensation and non-cash consulting fees, $3.7 million in depreciation, amortization and impairment, and non-cash interest and accretion of $1.1 million, along with other less material line items. Change in operating assets and liabilities totaled $3.2 million.

During the year ended December 31, ~~2018,~~2020, net cash used in operating activities of $7.9 million was ~~$(1,168,524) compared~~primarily driven by $11.6 million of net loss reported for the year, and non-cash adjustments of $4.6 million mainly due to ~~$465,592 for~~$2.3 million in depreciation and amortization, $0.9 in fair value losses on financial instruments, $1.1 million in interest expense and $1.5 million in stock-based compensation. Change in operating assets and liabilities totaled $0.9 million.

During the year ended December 31, ~~2016, a decrease of $1,634,116. Cash from operating activities during 2018 can be attributed principally to~~2019, net ~~loss from operations of $5,806,212 adjusted for noncash stock based compensation of $1,340,324 and for $1,173,752 in depletion, depreciation, and amortization expense.~~

~~Cash~~cash used in operating activities ~~during 2017 can be attributed principally~~of $4.3 million was primarily driven by $8.4 million of net loss reported for the year, and non-cash adjustments of $3.3 million mainly due to $2.3 million in depreciation and amortization, $1.0 million in interest expense and $1.3 million in stock-based compensation net ~~losses from operations~~ of ~~$919,910 adjusted for noncash stock based compensation of $1,151,061.~~

~~Cash used~~$0.5 in non-cash finance income and $0.5 non-cash government assistance. Change in operating assets and liabilities totaled $0.8 million.

Net cash provided by investing activities ~~for year ended December 31, 2018 was $12,149,916 compared to $9,458,648 for~~

During the year ended December 31, ~~2017. Cash used in~~2021, net cash provided by investing activities ~~consisted~~ of ~~investment~~$66.6 million was primarily driven by cash acquired as a result of the Torchlight RTO of $147 million, offset by $66.1 million in ~~oil~~cash paid for the Nanotech acquisition, $2.9 million purchase of short-term investments, $10.4 million in property plant and ~~gas properties during~~equipment purchases associated with the construction of the Highfield Park Facility as well as equipment purchases for both the Highfield Park and Pleasanton facilities, and a $0.9 million increase in intangibles as a result of capitalized legal cost for certain patents, as well as the acquisition of certain intellectual property assets from Interglass Technology AG (Switzerland).

During the year ended December 31, ~~2018~~2020, net cash provided by investing activities of $2.4 million was primarily driven by proceeds from the CPM RTO of $3.1 million offset by $0.7 million in equipment purchases and ~~2017.~~

~~Cash from financing activities for~~capitalized legal costs to obtain certain patents.

During the year ended December 31, ~~2018~~2019, net cash used in investing activities of $1.2 million was ~~$13,106,883 as compared~~driven by equipment purchases and capitalized legal costs to ~~$8,275,275 for~~obtain certain patents.

Net cash provided by financing activities

During the year ended December 31, 2017. Cash from financing activities in 2018 consisted primarily of proceeds from common stock issuances and debt financing. 2017 activity consisted principally of debt financing transactions. We expect to continue to have2021, net cash provided by financing activities ~~as we seek new rounds~~ of ~~financing and continue~~$15.5 million was primarily driven by $10.0 million in proceeds received from the issuance of unsecured convertible promissory notes to ~~develop our oil and gas investments. Reference Note 11 to the Financial Statements regarding additional funding closed subsequent to~~Torchlight, subsequently eliminated upon consolidation at December 31, ~~2018.~~

~~ITEM 7. MANAGEMENT��S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- continued~~

~~Our current assets are insufficient~~2021, $3.9 million in proceeds from the issuance of unsecured convertible promissory notes to ~~satisfy our~~an affiliate that was subsequently converted into common stock during the year and $1.4 million in proceeds from options and warrants exercise.

During the year ended December 31, 2020, net cash ~~needs over~~provided by financing activities of $6.3 million was primarily driven by $3.6 million in proceeds received from the ~~next twelve months and as such we will require additional debt or equity financing~~issuance of secured convertible debentures to meet our plans and needs. We face obstacles in continuing to attract new financing due to our history and current record of net losses and past working capital deficits. Despite our efforts, we can provide no assuranceBDC Capital that ~~we will be able to obtain the financing required to meet our stated objectives or even to continue as a going concern.~~

~~We do not expect to pay cash dividends on our~~was subsequently converted into common stock in 2021, $0.7 million in proceeds from issuance of unsecured convertible debentures and $0.6 million in proceeds from the ~~foreseeable future.~~

~~Critical Accounting Policies~~issuance of convertible promissory notes to a shareholder that were subsequently converted into common stock in 2021, $0.6 million in proceeds from common stock and ~~Estimates~~

~~Oil~~warrants issuances offset by $0.2 million in repayments of long-term debt.

During the year ended December 31, 2019, net cash provided by financing activities of $5.3 million was primarily driven by $2.4 million in proceeds received from the issuance of secured convertible promissory notes, $0.6 million in proceeds from issuance of unsecured convertible debentures and ~~gas properties~~$0.8 million in proceeds from a private placement, $0.7 million in proceeds from long-term debt.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates. The accounting policies that reflect the Company's more significant estimates, judgments and assumptions and which it believes are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Revenue recognition – The Company uses the full cost method of accounting for exploration and development activities as defined by the Securities and Exchange Commission (“SEC”). Under this method of accounting, the costs of unsuccessful,Company’s revenue is generated from product sales as well as ~~successful, exploration~~development revenue. The Company recognizes revenue when it satisfies performance obligations under the terms of its contracts, and ~~development activities~~control of its products is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products or services.

Revenue 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. The Company considers whether there are ~~capitalized as properties and equipment. This includes any internal costs~~other obligations in the contract that are ~~directly related~~separate performance obligations to property acquisition, exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities. Gain or loss on the sale or other disposition of oil and gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.

Oil and gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs excluded represent investments in unevaluated properties and include non-producing leasehold, geological, and geophysical costs associated with leasehold or drilling interests and exploration drilling costs. The Company allocateswhich a portion of ~~its acquisition costs~~the transaction price needs to ~~unevaluated properties based on relative value. Costs are transferred~~be allocated. In determining the transaction price for the sale of prototypes, the Company considers the effects of variable consideration, the existence of significant financial components, non-cash consideration and consideration payable to the ~~full cost pool as~~customer (if any).

Revenue from development activities is recognized over time, using an input method to measure progress towards complete satisfaction of the ~~properties are evaluated~~research activities and associated performance obligations identified within each contract have been satisfied.

Goodwill- Goodwill represents the excess of the purchase price in a business combination over the ~~life~~fair value of ~~the reservoir. Unevaluated properties are~~net tangible and

intangible assets acquired. The carrying amount of goodwill is periodically reviewed for impairment ~~at least quarterly~~ (at a minimum annually)

and ~~are determined through an evaluation considering, among other factors, seismic data, requirements~~whenever events or changes in circumstances indicate that the carrying value of this asset may not be recoverable.

The Company first performs a qualitative assessment to ~~relinquish acreage, drilling results, remaining time in~~test the ~~commitment period, remaining capital plan, and political, economic, and market conditions.~~

~~Gains and losses~~reporting unit's goodwill for impairment. Based on the ~~sale of oil and gas properties are not generally reflected in income unless~~qualitative

assessment, if it is determined that the gain or loss would significantly alter the relationship between capitalized costs and proved reserves. Sales of less than 100% of the Company’s interest in the oil and gas property are treated as a reduction of the capital cost of the field, with no gain or loss recognized, as long as doing so does not significantly affect the unit-of-production depletion rate. Costs of retired equipment, net of salvage value, are usually charged to accumulated depreciation.

~~Depreciation, depletion, and amortization~~ – The depreciable base for oil and natural gas properties includes the sum of all capitalized costs net of accumulated depreciation, depletion, and amortization (“DD&A”), estimated future development costs and asset retirement costs not included in oil and natural gas properties, less costs excluded from amortization. The depreciable base of oil and natural gas properties is amortized on a unit-of-production method.

~~Ceiling test~~ – Future production volumes from oil and gas properties are a significant factor in determining the full cost ceiling limitation of capitalized costs. Under the full cost method of accounting, the Company is required to periodically perform a “ceiling test” that determines a limit on the book value of oil and gas properties. If the net capitalized cost of proved oil and gas properties, net of related deferred income taxes, plus the cost of unproved oil and gas properties, exceeds the present value of estimated future net cash flows discounted at 10 percent, net of related tax affects, plus the cost of unproved oil and gas properties, the excess is charged to expense and reflected as additional accumulated DD&A. The ceiling test calculation uses a commodity price assumption which is based on the unweighted arithmetic average of the price on the first day of each month for each month within the prior 12 month period and excludes future cash outflows related to estimated abandonment costs.

The determination of oil and gas reserves is a subjective process, and the accuracy of any reserve estimate depends on the quality of available data and the application of engineering and geological interpretation and judgment. Estimates of economically recoverable reserves and future net cash flows depend on a number of variable factors and assumptions that are difficult to predict and may vary considerably from actual results. In particular, reserve estimates for wells with limited or no production history are less reliable than those based on actual production. Subsequent re-evaluation of reserves and cost estimates related to future development of proved oil and gas reserves could result in significant revisions to proved reserves. Other issues, such as changes in regulatory requirements, technological advances, and other factors which are difficult to predict could also affect estimates of proved reserves in the future.

~~Asset retirement obligations~~ ~~– The~~ fair value of our reporting unit is more likely than not (i.e. a ~~liability for an asset’s retirement obligation (“ARO”) is recognized in~~likelihood of more than 50

percent) to be less than its carrying amount, the ~~period in which it is incurred if a reasonable estimate of fair value can be made, with the corresponding charge capitalized as part~~quantitative assessment of the ~~carrying amount of~~impairment test is performed. In the ~~related long-lived asset. The liability is accreted to its then-present value each subsequent period, and~~quantitative assessment, the ~~capitalized cost is depleted over the useful life of the related asset. Abandonment costs incurred are recorded as a reduction of the ARO liability.~~

~~Inherent in~~Company compares the fair value ~~calculation~~ of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisionsour reporting unit to ~~these assumptions impact~~its carrying value. If the fair value of the ~~existing ARO liability,~~reporting unit exceeds its carrying value, goodwill is not considered impaired and the Company is not required to perform further testing. If the carrying value of the net assets of the reporting unit exceeds its fair value, then an impairment loss equal to the difference, but not exceeding the total carrying value of goodwill allocated to the reporting unit, would be recorded.

Acquired intangibles - In accordance with ASC 805 Business Combinations, the Company allocates the purchase price of acquired companies to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values. Such valuations may require management to make significant estimates and assumptions, especially with respect to intangible assets. Acquired intangible assets consist of acquired technology and customer relationships. In valuing acquired intangible assets, the Company makes assumptions and estimates based in part on projected financial information, which makes assumptions and estimates inherently uncertain, particularly for early-stage technology companies. The significant estimates and assumptions used by the Company in the determination of the fair value of acquired intangible technology assets include the revenue growth rate, the royalty rate and the discount rate. The significant estimates and assumptions used by the Company in the determination of the fair value of acquired customer contract intangible assets include the revenue growth rate and the discount rate.

As a result of the judgments that need to be made, the Company obtains the assistance of independent valuation firms. The Company completes these assessments as soon as practical after the closing dates. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.

Although the Company believes the assumptions and estimates of fair value it has made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain and subject to refinement. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding ~~adjustment~~offset to goodwill, if the changes are related to conditions that existed at the time of the acquisition. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments, based on events that occurred subsequent to the acquisition date, are recorded in our consolidated statements of operations and comprehensive loss.

Business combinations - The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is ~~made~~recorded as goodwill to reporting units based on the expected benefit from the business combination. Allocation of purchase consideration to identifiable assets and liabilities affects the amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred.

Assets held for sale – The Company determines the fair market value of the oil and gas ~~property balance. Settlements greater than or less than amounts accrued as ARO are recorded as~~assets held for sale on a ~~gain or loss upon settlement.~~

~~Share-based compensation~~ ~~– Compensation cost for equity awards is based on~~periodic basis using inputs from a third party valuation firm skilled in the valuation of this class of assets. The Company estimated the fair value of the ~~equity instrument~~Orogrande property at June 28, 2021 as the sum of the median of each of a range of fair values of identified drilling locations determined using numerous assumptions including the number of drilling locations, forecasted production volumes per drilling location, fair value per barrel of forecasted production volumes based on comparable transactions or entities with acreage proximal to the ~~date~~Orogrande Project property, and applying a drilling location risk factor (collectively, “drilling location assumptions”); and a range of ~~grant~~fair values of the undeveloped land acreage determined using numerous assumptions including the number of undeveloped land acres, fair value per acre for comparable transactions or entities with acreage proximal to the Orogrande Project property, and ~~is recognized over the period during which~~applying an ~~employee is required to provide service in exchange for the award.~~

acreage risk factor (collectively, “undeveloped land assumptions”). The Company ~~accounts for stock option awards using~~estimated the calculated value method. The expected term was derived using the simplified method provided in Securities and Exchange Commission release Staff Accounting Bulletin No. 110, which averages an awards weighted average vesting period and contractual term for “plain vanilla” share options.

~~The Company accounts for any forfeitures of options when they occur. Previously recognized compensation cost for an award is reversed in the period that the award is forfeited.~~

~~The Company also issues equity awards to non-employees. The~~ fair value of ~~these option awards is estimated when~~ the ~~award recipient completes~~Hazel Property at June 28, 2021 using a discounted cash flow model. The significant estimates and assumptions used by the ~~contracted professional services. The~~ Company ~~recognizes expense for~~in the ~~estimated total~~determination of the fair value of the ~~awards during~~Hazel Project property at acquisition date included forecasted production volumes, forecasted commodity prices, and the ~~period from their issuance until performance completion.~~

Indiscount rate. The Company estimated the fair value of the O&G assets at December 31, 2021 by obtaining a valuation study performed by a third party valuation firm. The estimates involved are consistent with those outlined above for the June ~~2018,~~28, 2021 valuation estimate.

Commitments and contractual obligations

For a description of the ~~FASB issued ASU 2018-07,Compensation - Stock Compensation (Topic 718): Improvements~~Company’s commitments and contractual obligations, please see “Note 28 – Commitments and contingencies” as well as “Note 27 – Leases” in the Notes to ~~Nonemployee Share-Based Payment Accounting, which simplifies~~ the Consolidated Financial Statements of this Form 10-K.

Off-balance sheet arrangements

Off-balance sheet firm commitments relating to outstanding letters of credit amounted to approximately $1.1 million as of December 31, 2021. These letters of credit and bank guarantees are collateralized by $0.8 million in restricted cash. Please see “Note 27 – Commitments and contingencies” in the Notes to the Consolidated Financial Statements of this Form 10-K. The Company does not maintain any other off-balance sheet arrangements.

Recent accounting ~~for share-based payments granted~~pronouncements

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on the Company’s Consolidated Financial Statements, please see “Note 2 – Significant accounting policies” in the Notes to ~~nonemployees for goods~~the Consolidated Financial Statements of this Form 10-K.

Item 7A. Quantitative and ~~services. Under this ASU,~~Qualitative Disclosures About Market Risk.

Interest rate risk

Interest rate risk is the ~~guidance~~risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate risk is minimized through management’s decision to primarily obtain fixed rate or interest-free debt. The Company’s funding obligation and long-term debt have been obtained at a nil interest rate and the interest on ~~such payments to nonemployees~~the cash balances is ~~aligned with the requirements for share-based payments granted to employees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, however~~insignificant. As a result, the Company ~~has opted for early adoption effective July 1, 2018. The amendments~~is not exposed to material cash flow interest rate risk.

Foreign currency risk

Foreign currency risk is the risk to earnings or capital arising from changes in this ASU are to be applied through a cumulative-effect adjustment to retained earnings as of the first reporting period in which the ASU is effective. In evaluating early adoption the Company has determined that the change does not have a material impact on its consolidated financial statements.

~~The Company values warrant and option awards using the Black-Scholes option pricing model.~~

~~Commitments and Contingencies~~

~~Leases~~

foreign exchange rates. The Company has ~~a noncancelable lease for its office premises~~transactional currency exposures that ~~expires on November 30, 2019~~arise from loans and ~~which requires the payment of base lease amounts and executory costs~~receivables as well as purchases in currencies other than their functional currency such as ~~taxes, maintenance~~Canadian Dollars, Euros and ~~insurance. Rental expense for lease was $82,075 and $84,197 for~~Great Britain Pounds. Current exposure is not material at this time, as exchange rate impacts occur with a reasonable timeline of the ~~years ended December 31, 2018 and 2017, respectively.~~

~~Approximate future minimum rental commitments under~~decision to make the ~~office premises lease are:~~

Year Ending December 31,
Rent

To 2019 Expiration 88,605
Total $ 88,605

expenditure. As ~~of December 31, 2018,~~a result, the Company ~~had interests in four oil and gas projects:~~does not enter into derivatives to hedge the ~~Orogrande Project in Hudspeth County, Texas,~~exposure.

In the ~~Hazel Project in Sterling, Tom Green, and Irion Counties, Texas, the Warwink Project in Winkler County, Texas, and Hunton wells in Central Oklahoma, ..~~

See the description under “Current Projects” above under “Item 1. Business” for more information and disclosure regarding commitments and contingencies relating to these projects which description is incorporated herein by reference.

~~ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~Not Applicable.~~

~~ITEM~~future, a hedging strategy may be enacted if long term contracts or operational cash flows create a requirement.

Item 8. ~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and~~
~~Stockholders of Torchlight Energy Resources, Inc.~~
~~Plano, Texas~~

~~Opinions on the~~ Financial Statements and ~~Internal Control over~~Supplementary Data.


Report of Independent Registered Public Accounting Firm – (KPMG LLP, Vaughan, ON, Canada, Auditor Firm ID: 85)	33
Consolidated Balance Sheets	37
Consolidated Statements of Operations	38
Consolidated Statements of Stockholders’ Equity	39
Consolidated Statements of Cash Flows	40
Notes to Consolidated Financial Statements	41

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Meta Materials Inc.:

Opinion on the Consolidated Financial ~~Reporting~~

Statements

We have audited the accompanying consolidated balance sheets of ~~Torchlight Energy Resources,~~Meta Materials Inc. and subsidiaries (the Company) as of December 31, ~~2018~~2021 and ~~2017, and~~2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the ~~two-year~~three‑year period ended December 31, ~~2018,~~2021, and the related notes (collectively, ~~referred to as~~ the consolidated financial statements). ~~We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in~~ ~~Internal Control—Integrated Framework (2013)~~ ~~issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).~~

In our opinion, the consolidated financial statements ~~referred to above~~ present fairly, in all material respects, the financial position of the Company as of December 31, ~~2018~~2021 and ~~2017,~~2020, and the results of its operations and its cash flows for each of the years in the ~~two-year~~three‑year period ended December 31, ~~2018,~~2021, in conformity with ~~accounting principles~~U.S. generally accepted accounting principles.

We also have audited, in accordance with the ~~United States~~standards of ~~America. Also, in our opinion,~~ the Public Company ~~maintained, in all material respects, effective~~Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2018,~~2021, based on criteria established in Internal ~~Control—~~Control – Integrated Framework (2013) issued by ~~COSO.~~

~~The accompanying consolidated financial statements have been prepared assuming that~~ the ~~Company will continue as a going concern. As discussed in Note 2 to~~Committee of Sponsoring Organizations of the ~~consolidated financial statements,~~Treadway Commission, and our report dated March 1, 2022 expressed an adverse opinion on the Company has incurred recurring losses from its operations and has a net capital deficiency which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result fromeffectiveness of the ~~outcome of this uncertainty.~~

~~Basis for Opinion~~

~~The~~ Company’s ~~management is responsible for these financial statements, for maintaining effective~~ internal control over financial ~~reporting, and~~reporting.

Basis for ~~its assessment~~Opinion

These consolidated financial statements are the responsibility of the ~~effectiveness of internal control over financial reporting included in the accompanying Item 9A, “Management’s Annual Report on Internal Control Over Financial Reporting.”~~Company’s management. Our responsibility is to express an opinion on ~~the Company’s~~these consolidated financial statements ~~and an opinion on the Company’s internal control over financial reporting~~ based on our audits. We are a public accounting firm registered with the ~~Public Company Accounting Oversight Board (United States) (PCAOB)~~PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the ~~audits~~audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or ~~fraud, and whether effective internal control over financial reporting was maintained in all material respects.~~

fraud. Our audits ~~of the financial statements~~ included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition date fair value of a developed nanotechnology intangible asset in the acquisition of Nanotech Security Corp.

As discussed in Note 3 to the consolidated financial statements, on October 5, 2021, the Company acquired Nanotech Security Corp. for $72.1 million. The acquisition was accounted for as a business combination. The Company measured the assets acquired and liabilities assumed at fair value, which resulted in the recognition of a developed nanotechnology intangible asset of $14.8 million. As discussed in Note 2 to the consolidated financial statements, the significant estimates and assumptions used by the Company in the determination of the fair value of acquired intangible technology assets include the revenue growth rate, the royalty rate, and the discount rate.

We identified the evaluation of the acquisition date fair value of the developed nanotechnology intangible asset in the acquisition of Nanotech Security Corp. as a critical audit matter. Specifically, the assessment of the revenue growth rate, royalty rate, and discount rate assumptions used in estimating the acquisition date fair value involved a high degree of subjective auditor judgment. In addition, the estimated fair value was sensitive to possible changes to the above estimates and assumptions.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the revenue growth rate by comparing to historical results for the acquired entity and publicly available market data. We involved valuation professionals with specialized skills and knowledge, who assisted in:

•

evaluating the Company’s discount rate assumption, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities

•

evaluating the discount rate applied to the developed nanotechnology intangible asset by comparing it to the weighted average return on assets acquired in the Nanotech Security Corp. business combination and the internal rate of return of the Nanotech Security Corp. business combination

•

evaluating the Company’s royalty rate assumption, by comparing the selected royalty rate to ranges of royalty rates observed in comparable royalty agreements.

Fair value of the Orogrande Project property and preferred stock liability

As discussed in Note 3 to the consolidated financial statements, the Company completed a reverse acquisition of Torchlight Energy Resources, Inc. on June 28, 2021. The assets acquired included certain oil and natural gas properties with a fair value of $72.6 million, of which $71.1 million of the fair value related to the Orogrande Project property. The liabilities assumed included a preferred stock liability with a fair value of $72.6 million entitling the preferred stock owners to the net proceeds of the sale or spinout of the oil and natural gas properties. As a result, the fair value measurement of the oil and natural gas properties, including the Orogrande Project property, also forms the basis for the fair value measurement of the preferred stock liability as of June 28, 2021 and as of December 31, 2021. The Company engaged an independent valuation firm to assist in the determination of the fair value of the Orogrande Project property as of June 28, 2021 and December 31, 2021. The estimated fair value of the Orogrande Project property was calculated as the sum of the median of each of:

•

a range of fair values of identified drilling locations determined using numerous assumptions including the number of drilling locations, forecasted production volumes per drilling location, fair value per barrel of forecasted production volumes based on comparable transactions or entities with acreage proximal to the Orogrande Project property, and applying a drilling location risk factor (collectively, “drilling location assumptions”); and

•

a range of fair values of the undeveloped land acreage determined using numerous assumptions including the number of undeveloped land acres, fair value per acre for comparable transactions or entities with acreage proximal to the Orogrande Project property, and applying an acreage risk factor (collectively, “undeveloped land assumptions”).

We identified the evaluation of the acquisition-date and year-end fair value of the Orogrande Project property as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate the drilling location and undeveloped land assumptions used to calculate the fair value of the Orogrande Project property. Minor changes to these assumptions could have had a significant effect on the estimate of fair value of the Orogrande Project property. Additionally, the audit effort associated with this estimate required specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the competence, capabilities and objectivity of the independent valuation firm engaged by the Company. We involved valuation professionals with specialized skills and knowledge, who assisted in:

•

evaluating the methodology used by the independent valuation firm to calculate the estimated fair value of the Orogrande Project property, including the determination of the number of drilling locations, forecasted production volumes per drilling location, drilling location risk factors, number of undeveloped land acres, and acreage risk factor

•

evaluating the Company’s determination of fair value per barrel of forecasted production volumes and fair value per acre by comparing to publicly available market data for comparable transactions or entities with acreage proximal to the Orogrande Project property.

/s/ KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

We have served as the Company’s auditor since 2019.

Vaughan, Canada

March 1, 2022

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Meta Materials Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Meta Material Inc.’s (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2022 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses related to the following have been identified and included in management’s assessment:

•

An ineffective control environment resulting from a lack of the required number of trained financial reporting, accounting, information technology (IT) and operational personnel with the appropriate skills and knowledge of GAAP and with assigned responsibility and accountability related to the design, implementation, and operation of internal control over financial reporting.

•

The insufficient number of personnel described above contributed to an ineffective risk assessment process necessary to identify all relevant risks of material misstatement and to evaluate the implications of relevant risks on its internal control over financial reporting.

•

An ineffective information and communication process resulting from: (i) insufficient communication of internal control information, including objectives and responsibilities, such as delegation of authority; and (ii) ineffective general IT controls and ineffective controls over information from service organizations, resulting in insufficient controls to ensure the relevance, timeliness and quality of information used in control activities.

•

As a consequence of the above, the Company had ineffective control activities related to the design, implementation and operations of process level and financial statement close controls which had a pervasive impact on the Company's internal control over financial reporting. In addition, process-level automated control activities and manual control activities that are dependent upon information derived from IT systems were also ineffective.

•

An ineffective monitoring process resulting from the evaluation and communication of internal control deficiencies, including monitoring corrective actions, not being performed in a timely manner.

The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

The Company acquired Nanotech Security Corp. during the year ended December 31, 2021, and management excluded Nanotech Security Corp. from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Nanotech Security Corp.’s internal control over financial reporting associated with 17% of total assets and 45% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Nanotech Security Corp.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Form 10-K Item 9A under the header “Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our ~~audits~~audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our ~~audits provide~~audit provides a reasonable basis for our ~~opinions.~~

opinion.

Definition and Limitations of Internal Control ~~over~~Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ ~~Briggs & Veselka Co.~~

~~We have served as the Company’s auditor since 2016.~~

~~Houston, Texas~~

KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

Vaughan, Canada

March ~~18, 2019~~

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

December 31, December 31,
2018 2017
ASSETS
Current assets:
Cash $ 840,163 $ 1,051,720
Accounts receivable 179,702 596,141
Production revenue receivable 294,715 142,932
Prepayments - development costs 146,422 1,335,652
Prepaid expenses 60,980 39,506
Total current assets 1,521,982 3,165,951

Oil and gas properties, net 36,565,461 25,579,279
Office equipment, net 4,076 15,716
Other assets 6,362 6,362

TOTAL ASSETS $ 38,097,881 $ 28,767,308

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 729,806 $ 762,502
Funds received pending settlement - 520,400
Accrued payroll 816,176 695,176
Related party payables 45,000 45,000
Due to working interest owners 54,320 54,320
Accrued interest payable 553,370 202,050
Total current liabilities 2,198,672 2,279,448

Unsecured promissory notes, net of discount and financing costs of $702,217 at December 31, 2018 and $795,017 at December 31, 2017 11,862,080 7,269,281
Notes payable 6,000,000 3,250,000
Asset retirement obligations 14,353 9,274

Total liabilities 20,075,105 12,808,003

Commitments and contingencies

Stockholders’ equity:
Preferred stock, par value $0.001, 10,000,000 shares authorized; -0- issued and outstanding at December 30, 2018 and December 31, 2017
- -
Common stock, par value $0.001 per share; 150,000,000 shares authorized;
70,112,376 issued and outstanding at December 30, 2018 70,116 63,344
63,340,034 issued and outstanding at December 31, 2017
Additional paid-in capital 107,266,965 99,403,654
Accumulated deficit (89,314,305 ) (83,507,693 )
Total stockholders’ equity 18,022,776 15,959,305

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 38,097,881 $ 28,767,308

1, 2022

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

META MATERIALS INC.

CONSOLIDATED BALANCE SHEETS


	As of December 31,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	46,645,704		$	1,395,683
Restricted cash		788,768			—
Short-term investments		2,875,638			—
Grants receivable		175,780			327,868
Accounts and other receivables		1,665,700			22,833
Inventory		265,718			463,382
Prepaid expenses and other current assets		3,451,367			514,203
Assets held for sale		75,500,000			—
Due from related parties		10,657			—
Total current assets		131,379,332			2,723,969
Intangible assets, net		28,971,824			4,476,614
Property, plant and equipment, net		27,018,114			2,761,171
Operating lease right-of-use assets		6,278,547			270,581
Goodwill		240,376,634			—
Total assets	$	434,024,451		$	10,232,335
Liabilities and stockholders’ equity (deficit)
Current liabilities
Trade and other payables	$	13,335,470		$	2,940,452
Due to related party		—			245,467
Current portion of long-term debt		491,278			290,544
Current portion of deferred revenues		779,732			1,239,927
Current portion of deferred government assistance		846,612			779,578
Preferred stock liability		75,500,000			—
Current portion of operating lease liabilities		663,861			150,802
Asset retirement obligations		21,937			—
Unsecured convertible promissory notes		—			1,203,235
Secured convertible debentures		—			5,545,470
Total current liabilities		91,638,890			12,395,475
Deferred revenues		637,008			804,143
Deferred government assistance		3,038			146,510
Deferred tax liability		324,479			318,054
Unsecured convertible debentures		—			1,825,389
Long-term operating lease liabilities		3,706,774			119,779
Funding obligation		268,976			776,884
Long-term debt		2,737,171			2,743,504
Total liabilities		99,316,336			19,129,738
Stockholders’ equity (deficit)
Common stock - $0.001 par value; 1,000,000,000 shares authorized, 284,573,316 shares issued and outstanding at December 31, 2021, and $Nil par value; unlimited shares authorized, 154,163,975 shares issued and outstanding at December 31, 2020		262,751			132,347
Additional paid-in capital		463,136,404			29,022,977
Accumulated other comprehensive loss		(296,936	)		(655,884	)
Accumulated deficit		(128,394,104	)		(37,396,843	)
Total stockholders’ equity (deficit)		334,708,115			(8,897,403	)
Total liabilities and stockholders’ equity	$	434,024,451		$	10,232,335

Commitments and contingencies (note 28)

Subsequent events (note 29)

The accompanying notes are an integral part of these consolidated financial ~~statements.~~

TORCHLIGHT ENERGY RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year

Year

Ended

Ended

December 31, 2018

December 31, 2017

Revenues

Oil and gas sales
$1,282,362
$570,499






Cost of revenues
  (806,158)
  (173,187)



Gross profit
  476,204
  397,312






Operating expenses:


General and administrative expense
  (4,053,062)
  (3,652,970)
Depreciation, depletion and amortization
  (1,173,752)
  (100,156)
Loss on settlement
  (369,439)
  -
Impairment loss
  (139,891)
  -
     Total operating expenses
  (5,736,144)
  (3,753,126)






Other income (expense)


Interest expense and accretion of note discounts
  (547,710)
  (346,050)
Interest income
  1,038
  454
Consulting income
  -
  2,781,500
     Total income (expense)
  (546,672)
  2,435,904






Loss before income taxes
  (5,806,612)
  (919,910)



Provision for income taxes
  -
  -



Net loss
$(5,806,612)
$(919,910)









Loss per common share:


Basic and Diluted
$(0.09)
$(0.02)
Weighted average number of common shares outstanding:
Basic and Diluted
  68,134,745
  59,623,105

statements

META MATERIALS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


	Year ended December 31,
	2021			2020			2019
Revenue:
Product sales	$	407,915		$	2,905		$	23,745
Development revenue		3,674,602			1,119,278			878,665
Total revenue		4,082,517			1,122,183			902,410
Cost of goods sold		675,973			3,254			9,172
Gross profit		3,406,544			1,118,929			893,238
Operating expenses:
Selling & marketing		2,267,354			1,064,659			1,125,719
General & administrative		29,699,601			6,707,858			4,819,737
Research & development		9,497,427			4,102,791			3,825,194
Total operating expenses		41,464,382			11,875,308			9,770,650
Loss from operations		(38,057,838	)		(10,756,379	)		(8,877,412	)
Interest expense, net		(1,106,445	)		(1,429,954	)		(1,135,922	)
Loss on foreign exchange, net		(205,882	)		(264,831	)		(316,261	)
Loss on financial instruments, net		(40,540,091	)		(844,993	)		(280,319	)
Other (loss) income, net		(11,939,068	)		1,491,188			2,081,398
Total other expense, net		(53,791,486	)		(1,048,590	)		348,896
Loss before income taxes		(91,849,324	)		(11,804,969	)		(8,528,516	)
Income tax recovery		852,063			193,710			83,549
Net loss	$	(90,997,261	)	$	(11,611,259	)	$	(8,444,967	)
Other comprehensive income (loss) net of tax
Foreign currency translation (loss) gain		(321,230	)		88,173			81,432
Fair value gain (loss) on changes of own credit risk		680,178			(680,178	)		—
Total other comprehensive income (loss)		358,948			(592,005	)		81,432
Comprehensive loss	$	(90,638,313	)	$	(12,203,264	)	$	81,432
Basic and diluted loss per share (1)	$	(0.39	)	$	(0.08	)	$	(0.17	)
Weighted average number of shares outstanding - basic and diluted (1)		232,898,398			137,258,259			50,015,137

(2) Retroactively restated for the year ended December 31, 2021 and 2020 for the Torchlight reverse acquisition (“Torchlight RTO”) and CPM reverse recapitalization (“CPM RTO”)

The accompanying notes are an integral part of these consolidated financial ~~statements.~~

TORCHLIGHT ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2018 AND 2017

��

Common

Common

Additional

stock

stock

paid-in

Accumulated

shares

amount

capital

deficit

Total

Balance, December 31, 2016
  55,096,506
$55,100
$89,675,488
$(82,587,783)
$7,142,805






Issuance of common stock for services
  507,894
  508
  579,246

  579,754
Issuance of common stock for lease





  interests
  6,420,395
  6,421
  6,805,941

  6,812,362
Issuance of common stock for Note





   conversion
  1,007,890
  1,008
  1,006,882

  1,007,890
Issuance of stock for warrant exercise
  307,349
  307
  242,993

  243,300
Warrants issued for services


  161,560

  161,560
Stock options issued for services


  931,544

  931,544
Net loss



  (919,910)
  (919,910)






Balance, December 31, 2017
  63,340,034
$63,344
$99,403,654
$(83,507,693)
$15,959,305






Issuance of common stock for services
  450,000
  450
  544,550

  545,000
Issuance of common stock for cash
  5,750,000
  5,750
  6,043,984

  6,049,734
  less Underwriting/Offering Costs





Issuance of common stock for note
  172,342
  172
  220,852

  221,024
   payment in kind





Warrant exercise into common stock
  400,000
  400
  199,600

  200,000
Warrants issued for services


  510,575

  510,575
Stock options issued for services


  343,750

  343,750
Net loss



  (5,806,612)
  (5,806,612)






Balance, December 31, 2018
  70,112,376
$70,116
$107,266,965
$(89,314,305)
$18,022,776

statements

META MATERIALS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


																Accumulated
													Additional			Other						Total
	Preferred Stock						Common Stock						Paid-in			Comprehensive			Accumulated			Stockholders’
	Shares			Amount			Shares			Amount			Capital			Income (loss)			Deficit			Equity
Balance, December 31, 2018		58,153,368		$	58,153			49,339,552		$	27,522		$	17,270,864		$	(145,311	)	$	(17,340,617	)	$	(129,389	)
Net loss		—			—			—			—			—			—			(8,444,967	)		(8,444,967	)
Other comprehensive income		—			—			—			—			—			81,432			—			81,432
Issuance of common stock, net		—			—			3,027,283			3,027			636,975			—			—			640,002
Issuance of warrants		—			—			—			—			125,877			—			—			125,877
Conversion of deferred share units		—			—			776,283			776			(776	)		—			—			—
Beneficial conversion feature on convertible debt		—			—			—			—			479,061			—			—			479,061
Other stock-based compensation		—			—			154,450			155			1,385,613			—			—			1,385,768
Balance, December 31, 2019		58,153,368		$	58,153			53,297,568		$	31,480		$	19,897,614		$	(63,879	)	$	(25,785,584	)	$	(5,862,216	)
Net loss		—			—			—			—			—			—			(11,611,259	)		(11,611,259	)
Other comprehensive income		—			—			—			—			—			(592,005	)		—			(592,005	)
Issuance of common stock, net		—			—			2,613,321			2,613			445,939			—			—			448,552
Issuance of warrants		—			—			—			—			149,994			—			—			149,994
Conversion of deferred share units		—			—			522,596			523			(523	)		—			—			—
Conversion of promissory notes		—			—			17,752,163			17,752			3,921,695			—			—			3,939,447
Conversion of preferred stock		(58,153,368	)		(58,153	)		58,153,368			58,153			—			—			—			—
Effect of reverse recapitalization		—			—			21,599,223			21,599			3,192,903			—			—			3,214,502
Tax withheld on deferred share units		—			—			(72,717	)		(73	)		(18,669	)		—			—			(18,742	)
Other stock-based compensation		—			—			298,453			300			1,434,024			—			—			1,434,324
Balance, December 31, 2020		—		$	—			154,163,975		$	132,347		$	29,022,977		$	(655,884	)	$	(37,396,843	)	$	(8,897,403	)
Net loss		—			—			—			—			—			—			(90,997,261	)		(90,997,261	)
Other comprehensive income		—			—			—			—			—			358,948			—			358,948
Conversion of promissory notes		—			—			20,391,239			20,391			23,635,974			—			—			23,656,365
Conversion of secured debentures		—			—			14,155,831			14,156			22,104,626			—			—			22,118,782
Conversion of unsecured debentures		—			—			5,105,338			5,105			5,764,370			—			—			5,769,475
Conversion of long-term debt		—			—			124,716			125			221,718			—			—			221,843
Conversion of payable to related party		—			—			150,522			151			225,835			—			—			225,986
Exercise of stock options		—			—			4,786,927			4,787			1,288,476			—			—			1,293,263
Exercise of warrants		—			—			361,729			362			122,108			—			—			122,470
Exercise of broker warrants		—			—			82,494			83			16,173			—			—			16,256
Effect of reverse acquisition		—			—			82,813,994			82,814			369,378,596			—			—			369,461,410
Shares issued in lieu of operating lease liability		—			—			1,832,989			1,833			2,780,135			—			—			2,781,968
Other stock-based compensation		—			—			603,562			597			8,575,416			—			—			8,576,013
Balance, December 31, 2021		—		$	—			284,573,316		$	262,751		$	463,136,404		$	(296,936	)	$	(128,394,104	)	$	334,708,115

(2) Retroactively restated from the earliest period presented for the Torchlight reverse acquisition (“Torchlight RTO”) and CPM reverse recapitalization (“CPM RTO”)

The accompanying notes are an integral part of these consolidated financial ~~statements.~~

TORCHLIGHT ENERGY RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year

Year

Ended

Ended

December 31, 2018

December 31, 2017

Cash Flows From Operating Activities

Net loss
$(5,806,612)
$(919,910)

Adjustments to reconcile net loss to net cash from operations:

Stock based compensation
  1,340,324
  1,151,061
Accrued interest payable in stock
  228,057
  -
Amortization of debt issuance costs
  268,917
  188,342
Accretion of note discounts
  216,732
  103,044
Depreciation, depletion and amortization
  1,173,752
  100,156
Net settlement offset
  (100,561)
  -
Impairment loss
  139,891
  -
Change in:


Accounts receivable
  (3,400)
  7,305
Production revenue receivable
  (151,783)
  (135,607)
Prepayments - development costs
  1,189,230
  (752,305)
Prepaid expenses
  (21,474)
  (12,676)
Other assets
  -
  12,000
Accounts payable and accrued expenses
  14,116
  519,818
Accrued interest payable
  344,287
  204,364
Net cash from operating activities
  (1,168,524)
  465,592






Cash Flows From Investing Activities


Investment in oil and gas properties
  (12,149,916)
  (9,460,830)
Acquisition of office equipment
  -
  2,182



Net cash from investing activities
  (12,149,916)
  (9,458,648)






Cash Flows From Financing Activities


Issuance of common stock, net of offering costs
  6,049,734
  -
Proceeds from promissory notes, net of offering costs
  4,107,149
  10,541,475
Repayment of promissory notes
  (3,250,000)
  (2,509,500)
Proceeds from notes payable
  6,000,000
  -
Proceeds from warrant exercise
  200,000
  243,300
Net cash from financing activities
  13,106,883
  8,275,275






Net decrease in cash
  (211,557)
  (717,781)



Cash - beginning of period
  1,051,720
  1,769,501



Cash - end of period
$840,163
$1,051,720






Supplemental disclosure of cash flow information: (Non Cash Items)
Increase in accounts payable for property development costs
$133,189
$375,000
Common stock issued for financing costs
$-
$279,754
Common stock issued for mineral interests
$-
$6,812,362
Accounts payable increase-investment in oil and gas properties
$-
$375,000
Common stock issued for partial payment of unpaid compensation
$59,000
$-
Common stock issued in conversion of promissory note
$-
$1,007,890
Common stock issued for payment in kind on notes payable
$221,024
$-
Cash paid for interest
$1,519,573
$813,652
Cash paid for income tax
$-
$-

statements

META MATERIALS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year ended December 31,
	2021			2020			2019
Cash flows from operating activities:
Net loss	$	(90,997,261	)	$	(11,611,259	)	$	(8,444,967	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash finance (income) expense		(471,689	)		138,927			(448,437	)
Non-cash interest expense		902,940			1,052,776			959,838
Non-cash lease expense		439,791			—			—
Deferred income tax		(852,063	)		(193,710	)		(83,549	)
Depreciation and amortization		3,491,493			2,326,220			2,360,043
Impairment of assets		237,013			4,018			66,765
Unrealized foreign currency exchange loss		407,352			205,001			313,387
Loss on financial instruments, net		40,540,091			844,993			280,319
Change in deferred revenue		(679,541	)		(551,374	)		(627,902	)
Non-cash government assistance		(544,932	)		(775,800	)		(500,051	)
Loss on debt settlement		19,253			—			—
Other income		—			—			(401,186	)
Stock-based compensation		1,576,849			1,509,684			1,292,773
Non-cash consulting expense		6,513,378			2,307			91,993
Changes in operating assets and liabilities		4,652,415			(880,830	)		780,227
Net cash used in operating activities		(34,764,911	)		(7,929,047	)		(4,360,747	)
Cash flows from investing activities:
Purchases of intangible assets		(1,133,894	)		(104,132	)		(42,332	)
Purchases of property, plant and equipment		(11,655,417	)		(555,013	)		(1,153,010	)
Purchase of short-term investments		(2,889,852	)		—			—
Acquisition of business, net of cash acquired		(66,131,025	)		—			—
Proceeds from reverse takeover		146,954,733			3,072,136			—
Net cash provided by investing activities		65,144,545			2,412,991			(1,195,342	)
Cash flows from financing activities:
Proceeds from long-term debt		1,127,151			25,783			664,810
Repayments of long-term debt		(1,090,047	)		(190,633	)		(58,201	)
Proceeds from secured promissory notes		—			—			2,407,118
Proceeds from government grants		223,384			198,286			—
Proceeds from unsecured promissory notes		13,963,386			1,378,042			—
Proceeds from secured convertible debentures		—			3,630,019			—
Proceeds from unsecured convertible debentures		—			693,784			566,690
Proceeds on funding obligation		—			—			982,263
Proceeds from issuance of common stock and warrants, net		—			598,546			765,879
Proceeds from stock option exercises		1,293,263			—			—
Proceeds from warrant exercises		138,726			—			—
Net cash provided by financing activities		15,655,863			6,333,827			5,328,559
Net increase in cash, cash equivalents and restricted cash		46,035,497			817,771			(227,530	)
Cash, cash equivalents and restricted cash at beginning of the year		1,395,683			407,061			623,532
Effects of exchange rate changes on cash, cash equivalents and restricted cash		3,292			170,851			11,059
Cash, cash equivalents and restricted cash at end of the year	$	47,434,472		$	1,395,683		$	407,061
Supplemental cash flow information
Accrued purchases of property, equipment and patents		1,692,969			1,449,197			440,751
Right-of-use assets obtained in exchange for lease liabilities		3,590,148			309,907			109,735
Right-of-use assets and prepaid expenses recognized in exchange for common stock		2,149,381			—			—
Settlement of liabilities in common stock		51,992,451			—			—
Beneficial conversion feature on convertible debt		—			—			479,061
Interest paid on debt		64,528			193,745			14,477

The accompanying notes are an integral part of these consolidated financial ~~statements.~~

statements

META MATERIALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	~~NATURE OF BUSINESS~~

~~Torchlight~~

1. Corporate information

On March 5, 2020, Metamaterial Inc. (“MMI” or “Resulting Issuer”). and Metamaterial Technologies Inc. (“MTI”) completed a business combination by way of a three-cornered amalgamation pursuant to which MTI amalgamated with a subsidiary of Continental Precious Minerals Inc. (“CPM”), known as Continental Precious Minerals Subco Inc. (“CPM Subco”), to become “Metacontinental Inc.” (the “CPM RTO”). The CPM RTO was completed pursuant to the terms and conditions of an amalgamation agreement dated August 16, 2019 between CPM, MTI and CPM Subco, as amended March 4, 2020. Following the completion of the RTO, Metacontinental Inc. is carrying on the business of the former MTI, as a wholly-owned subsidiary of CPM. In connection with the RTO, CPM changed its name effective March 2, 2020 from Continental Precious Minerals Inc. to MMI. The common stock of CPM was delisted from the TSX Venture Exchange on March 4, 2020 and was posted for trading on the Canadian Securities Exchange (“CSE”) on March 9, 2020 under the symbol “MMAT”.

For accounting purposes, the legal subsidiary, MTI, has been treated as the accounting acquirer and CPM, the legal parent, has been treated as the accounting acquiree. The transaction has been accounted for as a reverse recapitalization. Accordingly, these consolidated financial statements are a continuation of MTI consolidated financial statements prior to March 5, 2020 and exclude the balance sheets, statements of operations and comprehensive loss, statement of changes in stockholder’s equity and statements of cash flows of CPM prior to March 5, 2020. See note 3 for additional information.

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. (“~~Company”~~Callco”), entered into an Arrangement Agreement (the “Arrangement Agreement”) ~~was incorporated~~with Metamaterial Inc., an Ontario corporation headquartered in ~~October 2007~~Nova Scotia, Canada (“MMI”), to acquire all of the outstanding common stock of MMI by way of a statutory plan of arrangement (the “Arrangement”) under the ~~laws~~Business Corporations Act (Ontario), on and subject to the terms and conditions of the ~~State of Nevada as Pole Perfect Studios, Inc. (“PPS”). From its incorporation to November 2010, the company was primarily engaged in business start-up activities.~~

~~On November 23, 2010, we entered into and closed a Share Exchange~~Arrangement Agreement (the ~~“Exchange Agreement”~~“Torchlight RTO”). On June 25, 2021, the Company implemented a reverse stock split, changed its name from “Torchlight Energy Resources, Inc.” to “Meta Materials Inc.” and changed its 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 Company began trading on the NASDAQ under the symbol “MMAT” while MMI common stock was delisted from the Canadian Securities Exchange (“CSE”) ~~between~~and at the ~~major~~same time, Metamaterial Exchangeco Inc., a wholly-owned subsidiary of META, started trading under the symbol “MMAX” on the CSE. Certain previous shareholders of ~~PPS~~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, the legal subsidiary, MMI, has been treated as the accounting acquirer and the ~~shareholders~~Company, the legal parent, has been treated as the accounting acquiree. The transaction has been accounted for as a reverse acquisition in accordance with ASC 805 Business Combinations. Accordingly, these 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 ~~Energy, Inc. (“TEI”). As a result~~prior to June 28, 2021. See note 3 for additional information.

2. Significant accounting policies

Basis of the transactions effected by the Exchange Agreement, at closing TEI became our wholly-owned subsidiary, and the business of TEI became our sole business. TEI was incorporated under the laws of the State of Nevada in June 2010. We are engaged in the acquisition, exploitation and/or development of oil and natural gas properties in the United States. We operate our business through our subsidiaries Torchlight Energy Inc., Torchlight Energy Operating, LLC, and Hudspeth Oil Corporation, Torchlight Hazel LLC, and Winkler Properties LLC.

2.	~~GOING CONCERN~~

At December 31, 2018, the Company had not yet achieved profitable operations. We had a net loss of $5,806,612 for the year ended December 31, 2018 and had accumulated losses of $89,314,305 since our inception. We expect to incur further losses in the development of our business. The Company had a working capital deficit as of December 31, 2018 of $676,690. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent on its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management’s plan to address the Company’s ability to continue as a going concern includes: (1) obtaining debt or equity funding from private placement or institutional sources; (2) obtain loans from financial institutions, where possible, or (3) participating in joint venture transactions with third parties. Although management believes that it will be able to obtain the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful.

presentation – These consolidated financial statements ~~have been prepared assuming that the Company will continue as a going concern~~ and therefore, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.

3.	~~SIGNIFICANT ACCOUNTING POLICIES~~

~~The Company maintains its accounts on the accrual method of accounting~~related notes are presented in accordance with accounting principles generally accepted in the United States of ~~America. Accounting principles followed~~America (“US GAAP”). The Company’s fiscal year-end is December 31. The consolidated financial statements include the accounts of Meta Materials Inc. and its wholly-owned subsidiaries (collectively, the Company). All significant intercompany balances and transactions have been eliminated in consolidation.

Functional currency – Items included in the consolidated financial statements of each of the Company and its subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’).

Reporting Currency – The reporting currency of the Company is in US Dollars. The consolidated financial statements, and the ~~methods of applying those principles, which materially affect~~financial information contained herein, are reported in US dollars, except share amounts or as otherwise stated, as the ~~determination of~~Company believes this results in more relevant and reliable information for its financial ~~position, results of operations and cash flows are summarized below:~~statement users.


	•		transactions and balances– Foreign currency transactions are recorded into the functional currency using the exchange rates prevailing at the dates of the associated transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the measurement at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of operations.


	•		translation –The results and financial position of all subsidiaries that have a functional currency different from the presentation currency are translated into the presentation currency as follows:


	•		Company’s assets and liabilities are translated at the closing rate at the date of the balance sheet;


	•		Company’s income and expenses are translated at average exchange rates;


	•		Company’s resulting exchange differences are recognized in other comprehensive income, a separate component of equity.

Use of estimates–The preparation of these consolidated financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~US GAAP requires management to make estimates and certain assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

~~Basis~~ Significant items subject to such estimates and assumptions include the valuation of ~~presentation~~—goodwill, the valuation of net assets acquired via business combinations; the valuation of oil & natural gas properties, and the valuation of financial instruments measured at fair value.

Cash and cash equivalents – The ~~financial statements~~Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Inventory – Inventory is measured at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method (FIFO) for all inventory. Inventory consumed during research and development activities is recorded as a research and development expense.

Long-lived assets –Long-lived assets, such as property, plant and equipment, and intangible assets subject to amortization, are ~~presented on~~reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a ~~consolidated basis and include all~~long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the accounts of Torchlight Energy Resources Inc. and its wholly owned subsidiaries, Torchlight Energy, Inc., Torchlight Energy Operating, LLC, Hudspeth Oil Corporation, Torchlight Hazel LLC, and Warwink Properties LLC. All significant intercompany balances and transactions have been eliminated.

~~Certain reclassifications have been made~~long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the ~~2017 consolidated financial statements to make them consistent with~~extent that the ~~2018 presentation. Total stockholders’ equity and net loss are unchanged due to these reclassifications made in~~carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow ~~statement.~~

~~Risks~~models, quoted market values and ~~uncertainties~~third-party independent appraisals, as considered necessary.

Assets held for sale – ~~The Company’s operations~~Assets held for sale are ~~subject~~measured at the lower of their carrying amount or fair value less cost to ~~significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating an emerging business, including~~sell. See Note 3 for further discussion of assets held for sale.

Goodwill– Goodwill represents the ~~potential risk of business failure.~~

~~Concentration of risks~~ ~~– At times the Company’s cash balances are in~~ excess of ~~amounts guaranteed by~~ the ~~Federal Deposit Insurance Corporation.~~purchase price in a business combination over the fair value of net tangible and

intangible assets acquired. The ~~Company’s cash~~carrying amount of goodwill is ~~placed with~~periodically reviewed for impairment (at a ~~highly rated financial institution,~~minimum annually)

and whenever events or changes in circumstances indicate that the carrying value of this asset may not be recoverable.

The Company first performs a qualitative assessment to test the reporting unit’s goodwill for impairment. Based on the qualitative

assessment, if it is determined that the fair value of our reporting unit is more likely than not (i.e. a likelihood of more than 50

percent) to be less than its carrying amount, the quantitative assessment of the impairment test is performed. In the quantitative assessment, the Company compares the fair value of our reporting unit to its carrying value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired and the Company ~~regularly monitors~~is not required to perform further testing. If the ~~credit worthiness~~carrying value of the ~~financial institutions with which it does business.~~

~~Fair~~net assets of the reporting unit exceeds its fair value, then an impairment loss equal to the difference, but not exceeding the total carrying value of ~~financial instruments~~goodwill allocated to the reporting unit, would be recorded.

Acquired intangibles – ~~Financial instruments~~In accordance with ASC 805 Business Combinations, the Company allocates the purchase price of acquired companies to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values. Such valuations may require management to make significant estimates and assumptions, especially with respect to intangible assets. Acquired intangible assets consist of ~~cash, receivables, payables~~acquired technology and ~~promissory notes, if any.~~customer relationships. In valuing acquired intangible assets, the Company makes assumptions and estimates based in part on projected financial information, which makes assumptions and estimates inherently uncertain, particularly for early-stage technology companies. The significant estimates and assumptions used by the Company in the determination of the fair value of acquired intangible technology assets include the revenue growth rate, the royalty rate and the discount rate. The significant estimates and assumptions used by the Company in the determination of the fair value of acquired customer contract intangible assets include the revenue growth rate and the discount rate.

As a result of the judgments that need to be made, the Company obtains the assistance of independent valuation firms. The Company completes these assessments as soon as practical after the closing dates. Any excess of the purchase price over the estimated fair values of ~~cash, receivables,~~the identifiable net assets acquired is recorded as goodwill.

Business combinations - The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and ~~payables approximate~~intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill to reporting units based on the expected benefit from the business combination. Allocation of purchase consideration to identifiable assets and liabilities affects the amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred.

Leases - The Company is a lessee in several non-cancellable operating leases for buildings. The Company accounts for leases in accordance with ASC 842 Leases. The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right-of-use (ROU) asset and a lease liability at the lease commencement date.

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases and is subsequently measured at amortized cost using the effective-interest rate method.

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. The ROU asset is subsequently measured throughout the lease term at the carrying amount ~~due to~~of the ~~relatively short maturity~~lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of ~~these instruments. The carrying amounts of any promissory notes approximate~~lease incentives received.

Government grants and assistance –Government grants are recognized at their fair value ~~giving affect~~in the period when there is reasonable assurance that the conditions attaching to the grant will be met and that the grant will be received. Grants are recognized as income over the periods necessary to match them with the related costs that they are intended to compensate. When the grant relates to an asset, it is recognized as income over the useful life of the depreciable asset by way of government assistance.

The Company also receives interest-free repayable loans from the Atlantic Canada Opportunities Agency (“ACOA”), a government agency. The benefit of the loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates. The fair value of the components, being the loan and the government grant, must be calculated initially in order to allocate the proceeds to the components. The valuation is complex, as there is no active trading market for these items and is based on unobservable inputs.

Revenue recognition – The Company’s revenue is generated from product sales as well as development revenue. The Company recognizes revenue when it satisfies performance obligations under the terms of its contracts, and control of its products is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products or services.

Revenue 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. The Company considers 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 ~~term~~sale of prototypes, the Company considers the effects of variable consideration, the existence of significant financial components, non-cash consideration and consideration payable to the customer (if any).

Revenue from development activities is recognized over time, using an input method to measure progress towards complete satisfaction of the ~~note~~research activities and associated performance obligations identified within each contract have been satisfied.

Deferred revenue – consist of fees invoiced or paid by the ~~effective interest rates.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

3.	~~SIGNIFICANT ACCOUNTING POLICIES- continued~~

~~For assets~~Company’s customers for which the associated performance obligations have not been satisfied and ~~liabilities~~revenue has not been recognized based on the Company’s revenue recognition criteria described above.

Deferred revenue is reported in a net position on an individual contract basis at the end of each reporting period and is classified as current in the consolidated balance sheet when the revenue recognition associated with the related customer payments and invoicing is expected to occur within one year of the balance sheet date and as long-term when the revenue recognition associated with the related customer payments and invoicing is expected to occur more than one year from the balance sheet date.

Fair value measurements – The Company uses valuation approaches that ~~require re-measurement~~maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the ~~Company categorizes them~~principal or most advantageous market. When considering market participant assumptions in ~~a three-level~~fair value measurements, the following fair value hierarchy ~~as follows:~~

distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

●
	•		Level 1 ~~inputs are~~inputs: Unadjusted quoted prices ~~(unadjusted)~~ in active markets for identical assets or ~~liabilities.~~liabilities accessible to the reporting entity at the measurement date.

●
	•		Level 2 ~~inputs are~~inputs: Other than quoted prices ~~for similar assets and liabilities~~included in ~~active markets or~~Level 1 inputs that are observable for the asset or liability, either directly or indirectly, ~~through market corroboration.~~for substantially the full term of the asset or liability.

●
	•		Level 3 inputs: Unobservable inputs ~~are unobservable inputs based on management’s own assumptions~~for the asset or liability used to measure ~~assets and liabilities~~fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at ~~fair value.~~measurement date.

Fair value option – Under the Fair Value Option Subsections of ASC Subtopic 825-10, Financial Instruments – Overall, the Company has the irrevocable option to report certain financial ~~asset or liability’s classification within~~assets and financial liabilities at fair value on an instrument-by-instrument basis, with changes in fair value reported in the ~~hierarchy is determined based on the lowest level input that is significant to~~statement of operations. Any changes in the fair value ~~measurement.~~

~~Cash and cash equivalents -~~ ~~Cash and cash equivalents include certain investments~~of liabilities resulting from changes in ~~highly liquid instruments with original maturities of three months or less.~~

~~Accounts receivable~~ – Accounts receivable consist of uncollateralized oil and natural gas revenues due under normal trade terms, as well as amounts due from working interest owners of oil and gas properties for their share of expenses paid on their behalf by the Company. Management reviews receivables periodically and reduces the carrying amount by a valuation allowance that reflects management’s best estimate of the amount that may not be collectible. As of December 31, 2018 and December 31, 2017, no valuation allowance was considered necessary.

~~As of December 31, 2017 accounts receivable included $419,839 the Company computed as being due from Husky Ventures with respect to the sale of Chisholm Trail properties~~instrument-specific credit risk are reported in 2015 and in dispute as part of the Husky legal action in process at that dates. Additionally, a payment of $520,400 made by Husky Ventures which is also disputed by the Company had been included in current liabilities captioned “Funds received pending settlement”. The Company settled the matter with Husky during the quarter ended June 30, 2018.
other comprehensive income.

~~Oil and gas properties~~ ~~– The Company uses the full cost method of accounting for exploration~~

Research and development ~~activities as defined by the Securities and Exchange Commission (“SEC”). Under this method of accounting, the costs of unsuccessful, as well as successful, exploration~~– Research and development activities are ~~capitalized~~expensed as ~~properties~~incurred.

Basic and ~~equipment. This includes any internal costs that~~diluted earnings (loss) per share – Basic earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common stock outstanding during the period. Diluted earnings (loss) per common share gives effect to all dilutive potential common stock outstanding during the period including stock options, deferred stock units (“DSUs”), Restricted Share Units ("RSUs"), and warrants which are ~~directly related to property acquisition, exploration~~calculated using the treasury stock method, and ~~development activities but does not include any costs related to production, general corporate overhead or similar activities. Gain or loss on~~convertible debt instruments using the ~~sale or other disposition of oil and gas properties~~if-converted method. Diluted earnings (loss) per common share excludes all dilutive potential stock if their effect is ~~not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.~~anti-dilutive.

Stock based compensation – The Company allocates a portion of its acquisition costs to unevaluated properties based on relative value. Costs are transferred to the full cost pool as the properties are evaluated over the life of the reservoir. Unevaluated properties are reviewedrecognizes compensation expense for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions.

Gains and losses on the sale of oil and gas properties are not generally reflected in income unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves. Sales of less than 100% of the Company’s interest in the oil and gas property are treated as a reduction of the capital cost of the field, with no gain or loss recognized, as long as doing so does not significantly affect the unit-of-production depletion rate. Costs of retired equipment, net of salvage value, are usually charged to accumulated depreciation.

~~Capitalized interest –~~ The Company capitalizes interest on unevaluated properties during the periods in which they are excluded from costs being depleted or amortized. During the years ended December 31, 2018 and 2017, the Company capitalized $2,020,019 and $1,010,868, respectively, of interest on unevaluated properties.

~~Ceiling test~~ – Future production volumes from oil and gas properties are a significant factor in determining the full cost ceiling limitation of capitalized costs. Under the full cost method of accounting, the Company is required to periodically perform a “ceiling test” that determines a limit on the book value of oil and gas properties. If the net capitalized cost of proved oil and gas properties, net of related deferred income taxes, plus the cost of unproved oil and gas properties, exceeds the present value of estimated future net cash flows discounted at 10 percent, net of related tax affects, plus the cost of unproved oil and gas properties, the excess is charged to expense and reflected as additional accumulated DD&A. The ceiling test calculation uses a commodity price assumption which isequity awards based on the ~~unweighted arithmetic average of the price on the first day of each month for each month within the prior 12 month period and excludes future cash outflows related to estimated abandonment costs.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

3.	~~SIGNIFICANT ACCOUNTING POLICIES- continued~~

~~Asset retirement obligations~~ –The fair value of a liability for an asset’s retirement obligation (“ARO”) is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, with the corresponding charge capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its then-present value each subsequent period, and the capitalized cost is depleted over the useful life of the related asset. Abandonment costs incurred are recorded as a reduction of the ARO liability.

Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact thegrant date fair value of the ~~existing ARO liability,~~award. The Company recognizes stock-based compensation expense for awards granted to employees that have a ~~corresponding adjustment~~graded vesting schedule based on a service condition only on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards (the “graded-vesting attribution method”), based on the estimated grant date fair value for each separately vesting tranche. For equity awards with a graded vesting schedule and a combination of service and performance conditions, the Company recognizes stock-based compensation expense using a graded-vesting attribution method over the requisite service period when the achievement of a performance-based milestone is probable, based on the relative satisfaction of the performance condition as of the reporting date.

For stock-based awards granted to consultants and non-employees, compensation expense is recognized using the graded-vesting attribution method over the period during which services are rendered by such consultants and non-employees until completed.

The measurement date for each tranche of employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is the vesting period.

The Company estimates the grant date fair value of awards using the Black-Scholes option pricing model and estimates the number of forfeitures expected to occur. The Company may use other pricing models when applicable such as Monte-Carlo simulation. See note 15 for the Company’s assumptions used in connection with option grants made toduring the ~~oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.~~periods covered by these consolidated financial statements.

Income taxes - – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

Authoritative guidance for uncertainty in income taxes requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an examination. Management has reviewed the Company’s tax positions and determined there were no uncertain tax positions requiring recognition in the consolidated financial statements. Company tax returns remain subject to Federal, Provincial and State tax examinations. Generally, the applicable statutes of limitation are three to four years from their respective ~~filings.~~filings.

Recently adopted accounting pronouncements

ASU 2019-12

Effective January 1, 2021, the Company adopted ASU 2019-12 on a prospective basis. The new standard was issued in December 2019 with the intent of simplifying the accounting for income taxes. The accounting update removes certain exceptions to the general principles in Accounting Standards Codification (ASC) Topic 740 Income Taxes and provides simplification by clarifying and amending existing guidance. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

ASU 2020-09

In October 2020, the FASB issued ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762. The amendments in ASU 2020-09 amend rules focused on the provision of material, relevant, and decision-useful information regarding guarantees and other credit enhancements and eliminate prescriptive requirements that have imposed unnecessary burdens and incentivized issuers of securities with guarantees and other credit enhancements to offer and sell those securities on an unregistered basis. The adopted amendments relate to the financial disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered in Rule 3-10 of Regulation S-X, and affiliates whose securities collateralize securities registered or being registered in Rule 3-16 of Regulation S-X. The amendments in ASU 2020-09 are effective for public business entities for annual periods beginning after December 15, 2020. The Company adopted ASU 2020-09 on January 1, 2021 and its adoption did not have a material effect on the Company's consolidated financial statements and related disclosures.

ASU 2020-10

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updated various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The amendments in ASU 2020-10 are effective for annual periods beginning after December 15, 2020, for public business entities. The Company adopted ASU 2020-10 on January 1, 2021 and its adoption did not have a material effect on the Company's consolidated financial statements and related disclosures.

Accounting pronouncements not yet adopted

ASU 2021-04

In April 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260). This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. This guidance is effective for the Company's interim and annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

ASU 2021-08

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. This guidance will be effective for the Company's interim and annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

ASU 2021-10

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance, which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity's financial statements. This guidance is effective for the Company's interim and annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

3. Acquisitions and preferred stock liability

Torchlight RTO

Arrangement

As discussed in note 1, on December 14, 2020, Meta Materials Inc. and its subsidiaries, Metamaterial Exchangeco Inc. and 2798831 Ontario Inc. (“Callco”) entered into an Arrangement Agreement with Torchlight Energy Resources, Inc. to acquire all of the outstanding common stock of MMI. On March 12, 2021, MMI’s annual general and special meeting was held and MMI’s securityholders approved the Arrangement and on June 11, 2021, approval was obtained from Torchlight shareholders through a special meeting.

On June 25, 2021, Torchlight effected a reverse stock split of its Common Stock, at a ratio of two-to-one, changed its name from “Torchlight Energy Resources, Inc.” to “Meta Materials Inc.” and declared a dividend, on a one-for-one basis, of stock of Series A Non-Voting Preferred Stock to holders of record of Company Common Stock as of June 24, 2021.

On June 28, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed. The stock of Company Common Stock, previously traded on the NASDAQ under the ticker symbol “TRCH,” commenced trading on the NASDAQ under the ticker symbol “MMAT”.

Securities conversion

Pursuant to the completion of the Arrangement, each common share of MMI that was issued and outstanding immediately prior to June 28, 2021 was converted into the right to receive 1.845 newly issued shares of common stock, par value $0.001 per share of the Resulting Issuer or stock of Canco, which are exchangeable for shares of the Resulting Issuer at the election of each former MMI stockholder. In addition, all of MMI’s outstanding options, deferred share units and other securities exercisable or exchangeable for, or convertible into, and any other rights to acquire MMI Common Stock were exchanged for securities exercisable or exchangeable for, or convertible into, or other rights to acquire Resulting Issuer Common Stock. Immediately following the completion of the RTO, the former security holders of MMI owned approximately 70% of the Resulting Issuer Common Stock, accordingly, the former shareholders of MMI, as a group, retained control of the Resulting Issuer, and while Torchlight was the legal acquirer of MMI, MMI was deemed to be the acquirer for accounting purposes.

Reverse acquisition

Pursuant to ASC 805 Business Combinations, the transaction was accounted for as a reverse acquisition since: (i) the shareholders of MMI owned the majority of the outstanding common stock of the Company after the share exchange; (ii) a majority of the directors of the Company are also directors of MMI; and (iii) the previous officers of the Company were replaced with officers designated by MMI. The Company and MMI remain separate legal entities (with the Company as the parent of MMI). These consolidated financial statements are those of MMI prior to June 28, 2021 and exclude the balance sheets, results of operations and comprehensive loss, statement of changes in stockholders' equity, and statements of cash flows of Torchlight prior to June 28, 2021.

Measuring the Consideration Transferred

The accounting acquirer issued no cash consideration for the acquiree. Instead, the accounting acquiree issued its 196,968,803 common shares to the owners of the accounting acquirer. However, the acquisition-date fair value of the consideration transferred by the accounting acquirer for its interest in the accounting acquiree is based on the number of equity interests the legal subsidiary would have had to issue to give the owners of the legal parent the same percentage equity interest in the combined entity that results from the reverse acquisition. Accordingly, the consideration transferred of $358,138,773 was based on the following calculation:

•

The assumption that MMI would have issued 44,885,634 shares to Torchlight in order for MMI shareholders to own approximately 70% of the outstanding Combined Company Stock at a share price of $7.96, the closing share price of MMI on June 28, 2021 to equal $357,289,644.

•

Adding the fair value of deemed issuance of Torchlight options and warrants that were outstanding at the time of acquisition.

~~Estimated~~•

Deducting the estimated fair value of the previously existing unsecured promissory notes issued by MMI to Torchlight of $11,000,000 plus interest. These notes were effectively settled pursuant to the closing of the Arrangement.

The fair value of the number of equity interests calculated in that way can be used as the fair value of consideration transferred in exchange for the acquiree. The assets and liabilities of the legal acquiree are measured and recognized in the consolidated financial statements at their pre-combination carrying amounts.

Presentation of Consolidated Financial Statements Post Reverse Acquisition

The consolidated financial statements reflect all of the following:

the assets and liabilities of the legal subsidiary (the accounting acquirer) recognized and measured at their pre-combination carrying amounts

the assets and liabilities of the legal parent (the accounting acquiree) recognized and measured in accordance with ASC 805 Business Combinations

the retained earnings and other equity balances of the legal subsidiary (accounting acquirer) before the business combination

the amount recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary (the accounting acquirer) outstanding immediately before the business combination to the fair value of the legal parent (accounting acquiree). However, the equity structure (that is, the number and ~~penalties~~type of equity interests issued) reflects the equity structure of the legal parent (the accounting acquiree)

All references to common stock, options, deferred share units, and warrants as well as per share amounts have been retroactively restated to reflect the number of shares of the legal parent (accounting acquiree) issued in the reverse acquisition.

Pursuant to the completion of Torchlight RTO on June 28, 2021 and as a result of information presented post acquisition, the Company has made the following changes to the purchase price allocation previously disclosed in the interim financial statements for the three and six months ended June 30, 2021 in Form 10-Q:

•

decreased the consideration by $169,592 and reclassed the preferred stock liability from the consideration value to the acquired liabilities.

•

decreased the value of the acquired oil and natural gas ("O&G") assets and the preferred stock liability by $197,608 and $5,306,354 respectively, to reflect the finalization of a third-party valuation study of the O&G assets as of June 28, 2021.

•

decreased working capital by $1,034,288 as a result of recording pre-acquisition receivable of $3,404,866, liabilities of $865,650 and reduce cash as of June 28, 2021 by $3,573,504. The pre-acquisition receivable represents shares issued before acquisition date where the cash was received immediately after the acquisition date.

•

As a result, the Goodwill balance has decreased by $4,244,265.

The Company believes that information gathered to date provides a reasonable basis for estimating the fair value of assets acquired and liabilities assumed, however the Company is waiting for additional information necessary to finalize these fair values including assessment of any tax assets and liabilities and tax position in different jurisdictions. Therefore, the provisional measurements of fair value set forth below are subject to change. The Company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

The following table summarizes the preliminary allocation of the purchase price to the net assets acquired based on the respective fair value of the acquired assets and liabilities:


	Amount
Fair value of deemed issuance of MMI’s stock – Common Stock	$	82,814
Fair value of deemed issuance of MMI’s stock – Additional paid in capital		357,206,830
Fair value of Torchlight’s outstanding warrants – Additional paid in capital		2,773,778
Fair value of Torchlight’s outstanding options – Additional paid in capital		9,397,988
Total Effect on Equity		369,461,410
Effective settlement of notes payable by MMI to Torchlight 1		(11,322,637	)
	$	358,138,773
Net assets (liabilities) of Torchlight:
Cash and cash equivalents	$	143,381,229
Other assets		3,906,290
Oil and natural gas properties 2		72,600,000
Preferred stock liability 2		(72,600,000	)
Accounts payable		(2,496,510	)
Other liabilities		(21,937	)
Goodwill 3		213,369,701
	$	358,138,773

1 Notes receivable/payable

Notes receivable or payable represent unsecured promissory notes previously issued by MMI to Torchlight between September 20, 2020 to February 18, 2021 for proceeds of $11,000,000 plus interest. These notes have been eliminated upon acquisition and subsequent consolidation (see note 10 to these consolidated financial statements for further details).

2 Oil and natural gas properties and preferred stock liability

Valuation at acquisition

Acquired oil and natural gas properties include the Orogrande Project property in West Texas and the Hazel Project property in the Midland basin in West Texas. Refer to note 5 for additional details.

The Company engaged an independent valuation firm to assist in the determination of the fair value of the Orogrande Project property and the Hazel Project property as of June 28, 2021 and December 31, 2021.

The estimated fair value of the Orogrande Project property was calculated as the sum of the median of each of:

•

The estimated fair value of the Hazel Project property was calculated using a discounted cash flow model. The significant estimates and assumptions used by the Company in the determination of the fair value of the Hazel Project property at acquisition date included forecasted production volumes, forecasted commodity prices, and the discount rate.

The Company valuation concluded an implied enterprise value as of June 28, 2021 to be between $57.7 million and $101.1 million. The Company recorded the fair value of the Orogrande Project property at $71.1 million and the fair value of the Hazel Project property at $1.5 million, totaling a value of $72.6 million.

On June 11, 2021, Torchlight’s stockholders approved an amendment to its Articles of Incorporation to increase the authorized number of shares of Torchlight’s preferred stock, par value $0.001 per share (“Preferred Stock”), from 10,000,000 shares to 200,000,000 shares. In addition, Torchlight’s Board of Directors formally declared the Preferred Dividend and set June 24, 2021 as the Dividend Record Date.

On June 25, 2021, the Company declared a dividend, on a one-for-one basis, of shares of Series A Non-Voting Preferred Stock (the “Series A Preferred Stock”) to holders of record of Torchlight’s common stock as of June 24, 2021. This preferred stock entitles its holders to receive certain dividends based on the net proceeds of the sale of any assets that are used or held for use in the Company’s oil and gas exploration business (the “O&G Assets”), subject to certain holdbacks. Such asset sales must occur prior to the earlier of (i) December 31, 2021 or (ii) the date which is six months from the closing of the Arrangement, or 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.

As a result, the fair value measurement of the oil and natural gas properties also forms the basis for the fair value measurement of the preferred stock liability as of June 28, 2021 and as of December 31, 2021. The preferred stock liability is accounted for in accordance with ASC 480 Distinguishing Liabilities from Equity.

2021 developments

After the closing of the merger transaction with Torchlight, the Company engaged in a series of activities related to ~~potential underpayment~~the oil and gas assets to ensure that compliance with the relevant leases was maintained and that the lease rights retained their value in advance of a possible sale or other disposition. The activities over a 4-month period were focused on the obligation to drill four wells on the subject leased property by year-end 2021 to ensure continued compliance with the lease requirements. The activities included assembly of a team of professionals to manage the efforts, permitting, site preparation, drilling equipment rentals, pad preparations at each of the four sites and a variety of site clean-up, data summarization and similar activities. In 2021, the Company invested approximately $14.2 million in these activities to preserve compliance and the value of the assets. These costs were initially capitalized and then assessed at December 31, 2021 to determine if an adjustment was required to the carrying value based on the updated fair value determination. In addition to the drilling activities, the Company organized a new wholly owned subsidiary to enable consolidation of the leases into one company to help facilitate any ~~unrecognized~~future sale or other disposition of the assets and provide additional structural alternatives for such sale or disposition.

Valuation at December 31, 2021

The Company continues to actively explore the sale of the assets or spinout, should a sale not occur. The Company estimated the fair value of the O&G assets by obtaining a valuation study performed by a third party valuation firm. The estimates involved are consistent with those outlined above as part of the acquisition. The valuation concluded an implied enterprise value as of December 31, 2021 to be between $55.1 million and $109.0 million. The Company recorded the fair value of the Orogrande Project property at $72.0 million and the fair value of the Hazel Project property at $3.5 million, totaling a value of $75.5 million.

There are 164,923,363 outstanding Series A Non-Voting Preferred shares as of December 31, 2021.

3 Goodwill

Goodwill is attributed to the difference between the total consideration calculated above and deemed to be transferred by the accounting acquirer (MMI) and, the total net assets of the accounting acquiree (Torchlight). Based on the market value of META's Stock on June 28, 2021, this resulted in total “consideration” being transferred to Torchlight of approximately $358.1 million. Further, the net assets of Torchlight acquired by MMI has been estimated to be approximately $144.8 million. The difference between the $358.1 million of consideration deemed to have been transferred and the $144.8 million of net assets acquired results in goodwill of approximately $213.4 million. Torchlight is delivering a NASDAQ listed legal entity in good standing that will provide the Company with ready access to significant capital sources in the future to fund its growth plans.

The company deemed it necessary to perform an annual test for impairment at December 31, 2021 due to market conditions. As at December 31, 2021 0 impairment was found.

Revenue and losses from the Torchlight RTO since the acquisition date included in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021 were $NaN and $15.8 million respectively.

Unaudited pro forma results of operations for the years ended December 31, 2021 and 2020 are included below as if the Torchlight RTO occurred on January 1, 2020. This summary of the unaudited pro forma results of operations is not necessarily indicative of what the Company’s results of operations would have been had Torchlight been acquired at the beginning of 2020, nor does it purport to represent results of operations for any future periods.


	Year ended									Year ended
	December 31, 2021									December 31, 2020
	META excluding Torchlight			Torchlight			Total			META			Torchlight			Total
Revenue	$	4,082,517		$	94,537		$	4,177,054		$	1,122,183		$	193,379		$	1,315,562
Net loss		(75,181,395	)		(23,652,112	)		(98,833,507	)		(11,611,259	)		(12,781,896	)		(24,393,155	)

Add back: acquisition cost		3,220,870			4,103,184			7,324,054			724,129			—			724,129
Adjusted net loss	$	(71,960,525	)	$	(19,548,928	)	$	(91,509,453	)	$	(10,887,130	)	$	(12,781,896	)	$	(23,669,026	)

Acquisition cost includes legal, accounting, and other professional fees related to the Torchlight acquisition.

Nanotech acquisition

On August 5, 2021, the Company announced the signing of a definitive agreement to indirectly acquire Nanotech Security Corp. (“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 $72.1 million (CA$90.8 million).

The Company believes that information gathered to date provides a reasonable basis for estimating the fair value of assets acquired and liabilities assumed, however the Company is waiting for additional information necessary to finalize these fair values including assessment of any tax ~~benefits~~assets and liabilities and tax position in different jurisdictions. Therefore, the provisional measurements of fair value set forth below are ~~classified~~subject to change. The Company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

The preliminary allocation of consideration paid for the Nanotech acquisition is summarized as follows:


	Amount
Consideration paid to acquire Nanotech outstanding common stock	$	69,214,652
Consideration paid to repurchase Nanotech restricted stock units (RSUs)		300,610
Consideration paid to repurchase Nanotech stock options		2,612,035
	$	72,127,297
Net assets (liabilities) of Nanotech:
Cash and cash equivalents	$	5,974,254
Accounts receivable		741,783
Trade payables		(1,349,139	)
Prepaid expenses		271,741
Inventory		126,326
Property and equipment		14,771,456
Intangibles		25,309,847
Deferred tax liability		(859,394	)
Goodwill		27,140,423
	$	72,127,297

The preliminary purchase price allocation is subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed, including certain contracts and obligations. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.

The estimated fair value of acquired assets and liabilities has been measured as at the acquisition date based on a valuation report provided by a third-party valuation expert.

Acquired property, plant and equipment acquired totaling $14.8 million is comprised primarily of a production facility in Quebec, Canada with an estimated fair value of $6.0 million, as well as specialized machinery and equipment with an estimated fair value of $8.6 million.

Acquired intangible assets totaling $25.3 million include a developed optical thin film technology intangible asset ($0.2 million), a developed nanotechnology intangible asset ($14.8 million) as well as a ~~component of tax expense~~customer contract intangible asset for $10.3 million. The significant estimates and assumptions used by the Company in the ~~statement~~determination of ~~operation.~~the fair value of acquired intangible technology assets include the revenue growth rate, the royalty rate and the discount rate. The significant estimates and assumptions used by the Company ~~has~~in the determination of the fair value of the acquired customer contract intangible asset include the revenue growth rate and the discount rate.

The goodwill resulting from the transaction is attributable to different factors including assembled workforce, Nanotech's market potential, specific purchase synergies, technical know-how and expertise, customer service capabilities, geographical presence, and manufacturing capabilities.

Revenue and losses from the Nanotech acquisition since the acquisition date included in the consolidated statements of operations for the year ended December 31, 2021 were $1.8 million and $0.9 million respectively.

Unaudited pro forma results of operations for the years ended December 31, 2021 and 2020 are included below as if the Nanotech acquisition occurred on January 1, 2020. This summary of the unaudited pro forma results of operations is not ~~recorded any interest or penalties associated with unrecognized tax benefits~~necessarily indicative of what the Company’s results of operations would have been had Nanotech been acquired at the beginning of 2020, nor does it purport to represent results of operations for any ~~periods covered~~future periods.


	Year ended									Year ended
	December 31, 2021									December 31, 2020
	META excluding Nanotech			Nanotech			Total			META			Nanotech			Total
Revenue	$	2,237,470		$	7,755,350		$	9,992,820		$	1,122,183		$	5,944,983		$	7,067,166
Net loss		(90,279,119	)		(2,942,395	)		(93,221,514	)		(11,611,259	)		(1,040,463	)		(12,651,722	)

Add back: acquisition cost		1,837,796			1,646,522			3,484,318			—			—			—
Deduct: additional depreciation and amortization		—			(3,143,659	)		(3,143,659	)		—			(3,844,899	)		(3,844,899	)
Adjusted net loss	$	(88,441,323	)	$	(4,439,532	)	$	(92,880,855	)	$	(11,611,259	)	$	(4,885,362	)	$	(16,496,621	)

Acquisition cost includes legal, accounting, and other professional fees related to the Nanotech acquisition. Additional depreciation and amortization is based on the above-mentioned valuation report that was performed as at October 5, 2021.

CPM RTO

As outlined in note 1, on August 16, 2019, MTI entered into an Amalgamation Agreement (“Amalgamation Agreement”) with CPM, a Canadian public company listed on the CSE in relation to a Reverse Takeover transaction of CPM by ~~these financial statements.~~

~~Share-based compensation~~ ~~– Compensation cost~~MTI (“CPM RTO”). On October 10, 2019, CPM shareholders approved matters ancillary to the transaction and on November 25, 2019, MTI shareholders approved the CPM RTO. Subject to an amendment to the Amalgamation Agreement dated March 4, 2020, the CPM RTO was completed on March 5, 2020.

The CPM RTO was completed by the way of three-cornered amalgamation, whereby MTI was amalgamated with CPM Subco and holders of stock of MTI received common stock of MMI as consideration. Pursuant to the Amalgamation Agreement, the holders of the common stock of MTI (“MTI Common Stock”) and holders of MTI’s Class A-1 preferred stock of MTI received MMI Common Stock in exchange for ~~equity awards~~their MTI Common Stock at a ratio of 2.75 MMI Common Stock for each MTI Common Share or Class A-1 Preferred share held. Also pursuant to the Amalgamation Agreement, the holders of MTI’s Class A-2 preferred stock received 4.125 Resultant Issuer Common Stock for each Class A-2 preferred share held.

Upon completion of the CPM RTO, all of MTI’s outstanding options, deferred share units and other securities exercisable or exchangeable for, or convertible into, and any other rights to acquire MTI Common Stock were exchanged for securities exercisable or exchangeable for, or convertible into, or other rights to acquire MMI Common Stock. Immediately following the completion of the CPM RTO, the former security holders of MTI owned approximately 86% of the Resulting Issuer Common Stock, on a fully diluted basis; accordingly, the former shareholders of MTI, as a group, retained control of MMI, and while CPM was the legal acquirer of MTI, MTI was deemed to be the acquirer for accounting purposes. As CPM did not meet the definition of a business as defined in ASC 805—Business Combinations, the acquisition is not within the scope of ASC 805 and was considered to be a reverse recapitalization.

Reverse recapitalization accounting applies when a non-operating public shell company (CPM) acquires a private operating company (MTI) and the owners and management of the private operating company have actual or effective voting and operating control of the combined company. A reverse recapitalization is equivalent to the issuance of stock by the private operating company for the net monetary assets of the public shell corporation accompanied by a recapitalization with accounting similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets are recorded.

Since the transaction was treated as capital transaction in substance, the consideration transferred was assumed to equal the fair value of CPM’s net monetary assets of $3,110,834. Consideration transferred was then allocated between stock and options based on the fair value of the options deemed to have been issued. Accordingly, $212,566 has been allocated to options as outlined in consolidated Statements of changes in stockholders’ equity ~~instrument on~~with the ~~date~~remainder $2,898,268 allocated to common stock.

The carrying value of ~~grant~~CPM’s assets and ~~is recognized over~~liabilities have been assumed to approximate their fair values, due to their short-term nature. The following table summarizes the ~~period during which an employee is required to provide service in exchange for the award.~~

~~The Company accounts for stock option awards~~monetary assets acquired and liabilities assumed using the calculated value method. The expected term was derived using the simplified method provided in Securities and Exchange Commission release Staff Accounting Bulletin No. 110, which averages an awards weighted average vesting period and contractual term for “plain vanilla” share options.

~~The Company accounts for any forfeitures~~March 5, 2020 exchange rate of ~~options when they occur. Previously recognized compensation cost for an award is reversed in the period that the award is forfeited.~~

~~The Company also issues equity awards to non-employees.~~ $1.00 CAD = $0.7454 USD:


	Amount
Cash and cash equivalents	$	3,112,172
Marketable securities		3,274
Accounts receivable		20,277
Accounts payable and accrued liabilities		(24,889	)
	$	3,110,834

The fair value of ~~these option awards is~~CPM’s 700,000 options issued has been estimated when the award recipient completes the contracted professional services. The Company recognizes expense for the estimated total value of the awards during the period from their issuance until performance completion.

~~In June 2018, the FASB issued ASU 2018-07,Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting~~, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under this ASU, the guidance on such payments to nonemployees is aligned with the requirements for share-based payments granted to employees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, however the Company has opted for early adoption effective July 1, 2018. The amendments in this ASU are to be applied through a cumulative-effect adjustment to retained earnings as of the first reporting period in which the ASU is effective. In evaluating early adoption the Company has determined that the change does not have a material impact on its consolidated financial statements.

~~The Company values warrant and option awards~~ using the Black-Scholes option pricing ~~model.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

model with the following assumptions:

3.	~~SIGNIFICANT ACCOUNTING POLICIES~~
	Amount
Risk free interest rate	0.83% - ~~continued~~0.96%
Expected volatility	117% -134%
Expected dividend yield	0%
Expected forfeiture rate	0%
Fair value of Resulting Issuer Common Share	CA$0.62
Exercise price of the options	CA$0.35
Expected term for directors resigning from CPM board	6 months
Expected term for a director continuing as Resulting Issuer director	8 years

Revenue ~~recognition~~ ~~– On January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, and the related guidance in ASC 340-40 (the new revenue standard), and related guidance on gains~~ and losses ~~on derecognition of nonfinancial assets ASC 610-20, using~~from the ~~modified retrospective method applied to those contracts which~~CPM RTO since the acquisition date were not completed as of January 1, 2018. Under the modified retrospective method, the Company recognizes the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings; however, no significant adjustment was required as a result of adopting the new revenue standard. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard. The comparative information has not been restated and continues to be reported under the historic accounting standards in effect for those periods. The impact of the adoption of the new revenue standard was immaterial to the Company’s net income.Nil since acquisition.

The Company’s revenue is typically generated from contracts to sell natural gas, crude oil or NGLs produced from interests in oil and gas properties owned by the Company. Contracts for the sale of natural gas and crude oil are evidenced by (1) base contracts for the sale and purchase of natural gas or crude oil, which document the general terms and conditions for the sale, and (2) transaction confirmations, which document the terms of each specific sale. The transaction confirmations specify a delivery point which represents the point at which control of the product is transferred to the customer. These contracts frequently meet the definition of a derivative under ASC 815, and are accounted for as derivatives unless the Company elects to treat them as normal sales as permitted under that guidance. The Company elects to treat contracts to sell oil and gas production as normal sales, which are then accounted for as contracts with customers. The Company has determined that these contracts represent multiple performance obligations which are satisfied when control of the commodity transfers to the customer, typically through the delivery of the specified commodity to a designated delivery point.

Revenue is measured based on consideration specified in the contract with the customer, and excludes any amounts collected on behalf of third parties. The Company recognizes revenue in the amount that reflects the consideration it expects to be entitled to in exchange for transferring control of those goods to the customer. Amounts allocated in the Company’s price contracts are based on the standalone selling price of those products in the context of long-term contracts. Payment is generally received one or two months after the sale has occurred.

Gain or loss on derivative instruments is outside the scope of ASC 606 and is not considered revenue from contracts with customers subject to ASC 606. The Company may in the future use financial or physical contracts accounted for as derivatives as economic hedges to manage price risk associated with normal sales, or in limited cases may use them for contracts the Company intends to physically settle but do not meet all of the criteria to be treated as normal sales.

~~Producer Gas Imbalances.~~ ~~The Company applies the sales method of accounting for natural gas revenue. Under this method, revenues are recognized based on the actual volume of natural gas sold to purchasers.~~

~~Basic and diluted earnings (loss) per share~~– Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed in the same way as basic earnings (loss) per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares had been issued and if the additional common shares were dilutive. The calculation of diluted earnings per share excludes 14,814,586 shares issuable upon the exercise of outstanding warrants and options because their effect would be anti-dilutive.

~~Environmental laws and regulations~~ – The Company is subject to extensive federal, state, and local environmental laws and regulations. Environmental expenditures are expensed or capitalized depending on their future economic benefit. The Company believes that it is in compliance with existing laws and regulations.

~~Recent accounting pronouncements~~ – In February 2016 the FASB, issued ASU, 2016-02, Leases. The ASU requires companies to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 will be effective for the Company in the first quarter of 2019, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on the Company’s consolidated financial statements and related disclosures.

~~Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material impact on the Company’s financial position or results from operations.~~

~~Subsequent events –~~ ~~The Company evaluated subsequent events through March 18, 2019, the date of issuance of these financial statements. Subsequent events are disclosed in Note 11.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

4. ~~OIL & GAS PROPERTIES~~

~~The following table presents the capitalized costs for oil & gas properties of the Company as~~Related party transactions

As of December 31, ~~2018~~2021 and ~~2017:~~December 31, 2020, receivables due from a related party (Lamda Guard Technologies Ltd, or “LGTL”) were for a nominal amount and $NaN, respectively. On March 16, 2021, MMI converted an amount of $0.3 million owing to LGTL into 81,584 MMI common stock for a price per share of CA$4.51. The conversion price of CA$4.51 per share represented a 10% premium to the CA$4.10 closing price of MMI stock on the CSE at the close of business on March 12, 2021. MMI has recognized $0.2 million in common stock in the consolidated statements of changes in stockholders’ equity at fair value at the time of conversion and recorded the difference of $0.1 million between the fair value of the common stock and the carrying value of the extinguished liability as a loss on debt settlement in the consolidated statements of operations and comprehensive loss.

2018 2017

Evaluated costs subject to amortization $ 11,664,586 $ 5,022,129
Unevaluated costs 31,746,477 26,100,749
Total capitalized costs 43,411,063 31,122,878
Less accumulated depreciation, depletion and amortization (6,845,602 ) (5,543,599 )
Total oil and gas properties $ 36,565,461 $ 25,579,279

~~Unevaluated costs as~~

As of December 31, ~~2018 include cumulative costs on developing projects including the Orogrande, Hazel,~~2021, and ~~Winkler projects in West Texas.~~

~~The Company identified impairment of $2,300,626 in 2017~~2020, related party payables due to ~~its unevaluated properties. Although we had no recognized impairment expense in 2017, the Company has adjusted the separation~~LGTL were $Nil and $0.2 million respectively.

5. Assets held for sale

As of evaluated versus unevaluated costs within its full cost pool to recognize the value impairment related to the expiration of unevaluated leases in 2017 in the amount of $2,300,626. The impact of this change will be to increase the basis for calculation of future period’s depletion, depreciation and amortization to include $2,300,626 of cost which will effectively recognize the impairment on the Consolidated Statement of Operations over future periods. The $2,300,626 has also become an evaluated cost for purposes of future period’s Ceiling Tests and which may further recognize the impairment expense recognized in future periods. The impact of this cost reclassification at March 31, 2018 was a recognized impairment expense of $139,891. No additional impairment adjustment was required through December 31, ~~2018.~~

~~Due to~~2021, assets held for sale represented the ~~volatility of commodity prices, should~~acquired oil and natural gas ~~prices decline in~~properties from the ~~future, it is possible that a further write-down could occur. Proved reserves are estimated quantities~~Torchlight RTO. Refer to note 3 for details of crude oil, natural gas, and natural gas liquids, which geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs under existing economic and operating conditions. The independent engineering estimates include only those amounts considered to be proved reserves and do not include additional amounts which may result from new discoveries in the future, or from application of secondary and tertiary recovery processes where facilities are not in place or for which transportation and/or marketing contracts are not in place. Estimated reserves to be developed through secondary or tertiary recovery processes are classified as unevaluated properties.

fair value determination.

Orogrande Project, West Texas

On August 7, 2014, weTorchlight entered into a Purchase Agreement with Hudspeth Oil Corporation (“Hudspeth”), McCabe Petroleum Corporation (“MPC”), and Gregory McCabe, ~~our~~Torchlight prior Chairman. Mr. McCabe was the sole owner of both Hudspeth and MPC. Under the terms and conditions of the Purchase Agreement, ~~at closing, we~~Torchlight purchased ~~100%~~100% of the capital stock of Hudspeth which ~~holds~~held certain oil and gas assets, including a ~~100%~~100% working interest in approximately 172,000 ~~mostly~~ predominately contiguous acres in the Orogrande Basin in West Texas. As of December 31, 2017, leases covering approximately 133,000 acres remain in effect. This acreage is in the primary term under five-year leases that carry additional five-year extension provisions. As consideration, at closing we issued 868,750 restricted shares of our common stock to Mr. McCabe and paid a total of $100,000 in geologic origination fees to third parties. Additionally, Mr. McCabe has, at his option, a ~~10%~~10% working interest back-in after payout and a reversionary interest if drilling obligations are not met, all under the terms and conditions of a participation and development agreement among Hudspeth, MPC and Mr. McCabe. ~~We believe all drilling obligations through December 31, 2018 have been met.~~

On September 23, 2015, Hudspeth entered into a Farmout Agreement with Pandora Energy, LP (“Pandora”), Founders Oil & Gas, LLC (“Founders”), and for the limited purposes set forth therein, MPC and Mr. McCabe for the entire Orogrande Project in Hudspeth County, Texas. The Farmout Agreement provided that Hudspeth and Pandora (collectively referred to as “Farmor”) would assign to Founders an undivided 50% of the leasehold interest andalso holds a ~~37.5% net revenue~~4.5% overriding royalty interest in the ~~oil~~Orogrande acreage, which he obtained prior to, and ~~gas leases and mineral interests in the Orogrande Project, which interests, except for any interests retained by Founders, would be reassigned to Farmor by Founders if Founders did~~was not ~~spend~~ a minimum of $45.0 million on actual drilling operations on the Orogrande Project by September 23, 2017. Under a joint operating agreement also entered into on September 23, 2015, Founders was designated as operatorpart of the ~~leases.~~

OnAugust 2014 transaction.

Effective March ~~22,~~27, 2017, ~~Founders, Founders Oil & Gas Operating, LLC, Founders’ operating partner, Hudspeth and Pandora signed~~the property became subject to a Drilling and Development Unit Agreement (the “DDU Agreement”), with the Commissioner of the General Land Office, on behalf of the State of Texas, and as approved by the Board for Lease of University Lands, or University Lands, on the Orogrande Project. The DDU Agreement has an effective date of January 1, 2017 and required a payment from Founders, Hudspeth and Pandora, collectively, of $335,323 as the initial consideration fee. The initial consideration fee was paid by Founders in April 2017 and was to be deducted from the required spud fee payable to us at commencement of the next well drilled.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~4. OIL & GAS PROPERTIES- continued~~

~~The DDU Agreement~~which allows for all 192 existing leases covering approximately ~~133,000~~134,000 net acres leased from University Lands to be combined into one drilling and development unit for development purposes. The term of the DDU Agreement expires on December 31, 2023, and the time to drill on the drilling and development unit

continues through December 2023. The DDU Agreement also grants the right to extend the DDU Agreement through December 2028 if compliance with the DDU Agreement is met and the extension fee associated with the additional time is paid. Our drilling obligations began with one well to be spudded and drilled on or before September 1, 2017, and increased to two wells in year 2018, three wells in year 2019, four wells in year 2020 and five wells per year in years 2021, 2022 and 2023. The drilling obligations are minimum yearly requirements and may be exceeded if acceleration is desired. The DDU Agreement replaces all prior agreements, and will govern future drilling obligations on the drilling and development unit if the DDU Agreement is extended. The Company drilled three wells during fourth quarter, 2018.

During the fourth quarter of 2017, we took back operational control from Founders on the Orogrande Project. We were joined by Wolfbone Investments, LLC, (“Wolfbone”), a company owned by Mr. McCabe. We, along with Hudspeth, Wolfbone and, for the limited purposes set forth therein, Pandora, entered into an Assignment of Farmout Agreement with Founders, (the “Assignment of Farmout Agreement”), pursuant to which we and Wolfbone will share the remaining commitments under the Farmout Agreement. All original provisions of our carried interest were to remain in place including reimbursement to us on each wellbore. Founders was to remain a 9.5% working interest owner in the Orogrande Project for the $9.5 million it had spent as of the date of the Assignment of Farmout Agreement, and such interests were to be carried until $40.5 million is spent by Wolfbone and us, with each contributing 50% of such capital spend, under the existing agreement. Our working interest in the Orogrande Project thereby increased by 20.25% to a total of 67.75% and Wolfbone then owned 20.25%.

Founders was to operate a newly drilled horizontal well called the University Founders #A25 (at 5,540’ depth in a 1,000’ lateral) with supervision from us and our partners. The University Founders #A25 was spudded on November 28, 2017. During the month of April, 2018, we, MPC and Mr. McCabe were to assume full operational control including managing drilling plans and timing for all future wells drilled in the project.

On July 25, 2018, weTorchlight and Hudspeth entered into a Settlement & Purchase Agreement (the “Settlement Agreement”) with Founders (and Founders Oil & Gas Operating, ~~LLC)~~LLC, former Operator), Wolfbone and MPC (entities controlled by Torchlight prior Chairman), which agreement ~~provides for Hudspeth and Wolfbone to each immediately pay $625,000 and for Hudspeth or the Company and Wolfbone or MPC to each pay another $625,000 on July 20, 2019, as consideration~~provided for Founders assigning all of its working interest in the oil and gas leases of the Orogrande Project to Hudspeth and Wolfbone equally. ~~The assignments to Hudspeth and Wolfbone were made in July when the first payments were made. The payments to Founders in 2019 are not securitized.~~ Future well capital spending obligations ~~will require~~remained the same ~~50%~~50% contribution from Hudspeth and ~~50%~~50% from Wolfbone until such time as the ~~$40.5~~$40.5 million to be spent on the ~~project (as per our Assignment of Farmout Agreement with Founders)~~project.

The Company's outstanding drilling obligations includes 5 wells in 2022 and 2023. All drilling obligations through December 31, 2021 have been met. The drilling obligations are minimum yearly requirements and may be exceeded if acceleration is ~~completed.~~ desired.

The Company estimates that there is still approximately $23 million remaining to be spent on the project until such time as the capital expenditures revert back to the percentages of the working interest owners.

~~Rich Masterson, our consulting geologist, is credited with originating the~~ Orogrande Project ~~in Hudspeth County in the Orogrande Basin. With Mr. Masterson’s assistance, we have identified target payzone depths between 4,100’ and 6,100’ with primary pay, described~~ownership as ~~the WolfPenn formation, located at depths~~ of ~~5,300 to 5,900’. Based on our geologic analysis to date, the Wolfpenn formation~~December 31, 2021 is ~~prospective for oil and high British thermal unit (Btu) gas, with a 70/30 mix expected, respectively~~.

~~Recently, the Company drilled three additional test wells in the Orogrande in order to stay in compliance with University Lands D&D Unit Agreement,~~detailed as ~~well as, to test for potential shallow pay zones and deeper pay zones that may be present on structural plays. At the time of this writing, the results have not been published.~~follows:


	Revenue Interest			Working Interest
University Lands - Mineral Owner		20.00	%	n/a
ORRI - Magdalena Royalties, LLC, and entity controlled by Gregory McCabe, Chairman		4.50	%	n/a
ORRI - Unrelated Party		0.50	%	n/a
Hudspeth Oil Corporation, a subsidiary of Meta Materials Inc.		49.88	%		66.50	%
Wolfbone Investments LLC, and entity controlled by Gregory McCabe, Chairman		18.75	%		25.00	%
Conversion by Note Holders in March, 2020		4.50	%		6.00	%
Unrelated Party		1.88	%		2.50	%
		100.00	%		100.00	%

Hazel Project in the Midland Basin in West Texas

Effective April 4, 2016, ~~TEI~~a wholly owned subsidiary of Torchlight acquired from MPC a ~~66.66%~~66.66% working interest in approximately 12,000 acres in the Midland ~~Basin in exchange for 1,500,000 warrants to purchase shares of our common stock with an exercise price of $1.00 for five years and a~~Basin. A back-in after payout of a ~~25%~~25% working interest ~~to MPC.~~

~~Initial development of the first well on the property, the Flying B Ranch #1, began July 9, 2016~~was retained by MPC and development continued through September 30, 2016. This well is classified as a test well in the development pursuit of the Hazel Project. We believe that this wellbore will be utilized as a salt water disposal well in support of future development.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~4. OIL & GAS PROPERTIES- continued~~

another unrelated working interest owner.

In October 2016, the holders of ~~all of our then-outstanding~~Torchlight's outstanding shares of Series C Preferred Stock (which were issued in July 2016) elected to convert into a total ~~33.33%~~33.33% working interest ~~in our Hazel Project, reducing our ownership from 66.66% to a 33.33% working interest. As of December 31, 2018, no shares of our Series C Preferred Stock were outstanding.~~

~~We commenced planning to drill the Flying B Ranch #3 horizontal well~~ in the Hazel Project, ~~in June 2017 in compliance with the continuous drilling obligation. The well was spudded on June 10, 2017. The well was completed and began production in late September 2017.~~

~~Acquisition of Additional Interests in Hazel Project~~

reducing Torchlight ownership from 66.66% to a 33.33% working interest.

On January 30, 2017, ~~we and our then wholly-owned subsidiary,~~ Torchlight ~~Acquisition Corporation, a Texas corporation (“TAC”),~~ entered into and closed an Agreement and Plan of Reorganization and a Plan of Merger with Line Drive Energy, LLC, a Texas limited liability company (“Line Drive”), and Mr. McCabe, under which agreements TAC merged with and into Line Drive and the separate existence of TAC ceased, with Line Drive being the survivingan entity ~~and becoming our wholly-owned subsidiary. Line Drive,~~ which was wholly-owned by Mr. McCabe, ~~owned certain assets and securities, including~~which resulted in the acquisition of approximately ~~40.66% of~~ 40.66% working interest in the 12,000 gross acres, 9,600 net acres, in the Hazel Project and 521,739 warrants to purchase shares of our common stock (which warrants had been assigned by Mr. McCabe to Line Drive). Upon the closing of the merger, all of the issued and outstanding shares of common stock of TAC automatically converted into a membership interest in Line Drive, constituting all of the issued and outstanding membership interests in Line Drive immediately following the closing of the merger, the membership interest in Line Drive held by Mr. McCabe and outstanding immediately prior to the closing of the merger ceased to exist, and we issued Mr. McCabe 3,301,739 restricted shares of our common stock as consideration therefor. Immediately after closing, the 521,739 warrants held by Line Drive were cancelled, which warrants had an exercise price of $1.40 per share and an expiration date of June 9, 2020. A Certificate of Merger for the merger transaction was filed with the Secretary of State of Texas on January 31, 2017. Subsequent to the closing the name of Line Drive Energy, LLC was changed to Torchlight Hazel, LLC. We are required to drill one well every six months to hold the entire 12,000 acre block for eighteen months, and thereafter two wells every six months starting June 2018.

Project.

Also, on January 30, 2017, ~~TEI~~the Company entered into and closed a Purchase and Sale Agreement with Wolfbone. Under the agreement, ~~TEI~~Torchlight acquired certain of Wolfbone’s Hazel Project assets, including its interest in the Flying B Ranch #1 well and the 40 acre unit surrounding the well, for consideration of $415,000, and additionally, Wolfbone caused to be cancelled a total of 2,780,000 warrants to purchase shares of our common stock, including 1,500,000 warrants held by MPC, and 1,280,000 warrants held by Green Hill Minerals, an entity owned by Mr. McCabe’s son, which warrant cancellations were effected through certain Warrant Cancellation Agreements. The 1,500,000 warrants held by MPC that were cancelled had an exercise price of $1.00 per share and an expiration date of April 4, 2021. The warrants held by Green Hill Minerals that were cancelled included 100,000 warrants with an exercise price of $1.73 and an expiration date of September 30, 2018 and 1,180,000 warrants with an exercise price of $0.70 and an expiration date of February 15, 2020.

Since Mr. McCabe held the controlling interest in both Line Drive and Wolfbone, the transactions were combined for accounting purposes. The working interest in the Hazel Project was the only asset held by Line Drive. The warrant cancellation was treated in the aggregate as an exercise of the warrants with the transfer of the working interests as the consideration. We recorded the transactions as an increase in its investment in the Hazel Project working interests of $3,644,431, which is equal to the exercise price of the warrants plus the cash paid to Wolfbone.

well.

Upon the closing of the transactions, ~~our~~Torchlight's working interest in the Hazel Project increased by ~~40.66%~~40.66% to a total ownership of ~~74%~~74%.

Effective June 1, 2017, weTorchlight acquired an additional 6%6% working interest from unrelated working interest owners ~~in exchange for 268,656 shares of common stock valued at $373,430,~~ increasing ~~our~~its working interest in the Hazel project to ~~80%~~80%, and an overall net revenue interest of ~~74-75%~~74-75%.

~~Mr. Masterson is credited with originating~~

The Company has drilled 6 test wells on the Hazel Project to capture and document the scientific base in support of demonstrating the Midland Basin. With Mr. Masterson’s assistance, we are targeting prospects in the Midland Basin that have 150 to 130 feet of thickness, are likely to require six to eight laterals per bench, have theproduction potential ~~for twelve to sixteen horizontal wells per section, and 200 long lateral locations, assuming only two benches.~~

~~In April 2018, we announced that we have commenced a process that could result in the monetization~~ of the property.

Option Agreement with Masterson Hazel ~~Project. We believe~~Partners, LP

On August 13, 2020, Torchlight's subsidiaries Torchlight Energy, Inc. and Torchlight Hazel, LLC (collectively, “Torchlight”) entered into an option agreement (the “Option Agreement”) with Masterson Hazel Partners, LP (“MHP”) and McCabe Petroleum Corporation. Under the ~~development activity~~agreement, MHP was obligated to drill and complete, or cause to be drilled and completed, at its sole cost and expense, a new lateral well (the “Well”) on the Hazel Project, ~~coupled with nearby activities~~sufficient to satisfy Torchlight’s continuous development obligations on the southern half of ~~other oil~~the prospect no later than September 30, 2020. MHP has satisfied this drilling obligation. MHP paid to Torchlight $1,000 as an option

fee at the time of execution of the Option Agreement. MHP is entitled to receive, as its sole recourse for the recoupment of drilling costs, the revenue from production of the Well attributable to Torchlight’s interest until such time as it has recovered its reasonable costs and ~~gas operators, suggests that this project has achieved a level of value worth monetizing. We anticipate that~~expenses for drilling, completing, and operating the ~~liquidity that would be provided from selling~~well.

In exchange for MHP satisfying the above drilling obligations, Torchlight granted to MHP the exclusive right and option to perform operations, at MHP’s sole cost and expense, on the Hazel Project ~~could be redeployed into~~sufficient to satisfy Torchlight’s continuous development obligations on the ~~Orogrande Project. While~~northern half of the prospect. Because MHP exercised this ~~process is underway, we will take all necessary steps~~drilling option and satisfied the continuous development obligations on the northern half of the prospect, under the terms of the Option Agreement (as amended in September 2020) MHP had the option to ~~maintain~~purchase the ~~leasehold as required. In May, the working interest partners in the~~entire Hazel Project ~~drilled~~no later than May 31, 2021 under the terms of a ~~shallow well to test a zone at 2500’. As~~form of ~~this filing, we continue to maintain the leases in good standing and continue to market the acreage in an effort to focus on the Orogrande Project.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~4. OIL & GAS PROPERTIES- continued~~

~~Winkler Project, Winkler County, Texas~~

On December 1, 2017, the Agreement and Plan of Reorganization that we and our then wholly-owned subsidiary, Torchlight Wolfbone Properties, Inc., a Texas corporation (“TWP”), entered into with MPC and Warwink Properties, LLC (Warwink Properties) on November 14, 2017 closed. Under the agreement, TWP merged with and into Warwink Properties and the separate existence of TWP ceased, with Warwink Properties being the surviving entity and becoming our wholly-owned subsidiary. Warwink Properties was wholly owned by MPC. Warwink Properties owns certain assets, including a 10.71875% working interest in approximately 640 acres in Winkler County, Texas. Upon the closing of the merger, all of the issued and outstanding shares of common stock of TWP converted into a membership interest in Warwink Properties, constituting all of the issued and outstanding membership interests in Warwink Properties immediately following the closing of the merger, the membership interest in Warwink Properties held by MPC and outstanding immediately prior to the closing of the merger ceased to exist, and we issued MPC 2,500,000 restricted shares of our common stock as consideration. Also on December 1, 2017, MPC closed its transaction with MECO IV, LLC (” MECO”), for the purchase and sale of certain assets as contemplated by the Purchase and Sale Agreement ~~dated November 9, 2017 among MPC, MECO~~included as an exhibit to the Option Agreement, at an aggregate purchase price of $12,690,704 for approximately 9,762 net mineral acres, and ~~additional parties thereto (the “MECO PSA”), to which we are~~ not ~~a party. Under~~less than 74% net revenue interest (approximately $1,300 per net mineral acre).The option expired unexercised.

Hunton Play, Central Oklahoma

Presently, the ~~MECO PSA, Warwink Properties received a carry~~Company is producing from ~~MECO (through the tanks) of up to $1,179,076~~one well in the ~~next well drilled on the Winkler County leases. A Certificate of Merger for the merger transaction was filed with the Secretary of State of Texas on December 5, 2017.~~

~~Addition to the Winkler Project~~

6. Inventory

Inventory consists of ~~$447,847 in July, 2018. Our carried interest in the first well, as outlined in the agreement, was originally planned to be on the first acreage acquired. That carried interest~~photosensitive materials, lenses, laser protection film and finished eyewear, and is ~~being applied to this new well and will allow MECO to drill and produce potential revenues sooner than originally planned. The primary leasehold is a 320-acre block directly west~~comprised of the ~~current position and will allow for 5,000-foot lateral wells to be drilled. The well was completed and began production in October, 2018.~~following:


	As of December 31,
	2021		2020
Raw materials	$	196,868	$	378,265
Supplies		8,886		14,414
Work in process		30,636		69,380
Finished goods		29,328		1,323
Total inventory	$	265,718	$	463,382

~~Two additional wells are planned for development by MECO in 2019.~~

~~In December, 2018, the Company began to take measures on its own to market the Warwink Project in an effort to focus on the Orogrande.~~

5.	~~RELATED PARTY PAYABLES~~

~~As of December 31, 2018 and 2017, related party payables consisted of accrued and unpaid compensation to one of our executive officers totaling $45,000.~~

6.	~~COMMITMENTS AND CONTINGENCIES~~

~~Leases~~

The Company has a ~~noncancelable lease~~contract with a primary raw material supplier which outlines certain restrictions for ~~its office premises~~use of the associated materials. Raw material inventory as at December 31, 2021 includes $Nil (2020 - $0.3 million) that ~~expires~~is restricted.

The Company expensed $0.2 million of restricted raw materials inventory to research and development expense during the year ended December 31, 2021 (2020 - $0.2 million).

During the year ended December 31, 2021, the Company recognized $0.7 million (2020 - Nominal amount) of inventory in cost of goods sold in the consolidated statements of operations and comprehensive loss.

7. Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following:


	As of December 31,
	2021		2020
Prepaid expenses	$	1,262,112	$	227,425
Other current assets		683,044		134,466
Taxes receivable		1,506,211		152,312
Total prepaid expenses and other current assets	$	3,451,367	$	514,203

8. Property, plant and equipment, net

Property, plant and equipment consist of the following:


		As of December 31,
	Useful life	2021			2020
	(years)
Land	N/A	$	469,317		$	—
Building	25		5,509,403			—
Computer equipment	3-5		262,320			163,856
Computer software	1		277,717			256,554
Manufacturing equipment	2-10		17,762,405			6,645,986
Office furniture	5-7		525,961			99,234
Leasehold improvements	2-5		236,251			—
Enterprise Resource Planning software	5		211,149			210,254
Assets under construction	N/A		8,872,695			424,393
			34,127,218			7,800,277
Accumulated depreciation and impairment			(7,109,104	)		(5,039,106	)
		$	27,018,114		$	2,761,171

Depreciation expense was $1.8 million and $1.6 million for the year ended December 31, 2021 and 2020, respectively.

Impairment expense was $0.3 million and $Nil for the year ended December 31, 2021 and 2020 respectively.

Land and building were acquired as part of the Nanotech acquisition.

Manufacturing equipment additions include $8.6 million of acquired equipment as part of the Nanotech acquisition, $1.4 million in purchased equipment for the Highfield Park facility in Nova Scotia, Canada and $1.2 million in equipment purchased for the NANOWEB® pilot scale production line in the facility in Pleasanton, California, USA.

Assets under construction include $5.4 million in costs related to ongoing construction work at the Highfield Park and Pleasanton facilities and $3.6 million of equipment in transit.

Property, plant and equipment is pledged as security under a General Security Agreement (a “GSA”) signed in favor of the Royal Bank of Canada (“RBC”) on ~~November 30, 2019~~July 14, 2014, which is related to the Company’s corporate bank account and ~~which requires~~credit card and includes all property, plant and equipment and intangible assets.

9. Intangible Assets and Goodwill

Intangibles

Intangibles consist of the ~~payment of base lease amounts~~following:


		As of December 31,
	Useful life	2021			2020
	(years)
Patents	5-10	$	7,839,182		$	6,954,657
Trademarks	N/A		132,636			72,804
Developed technology	20		14,931,377			—
Customer contract	5		10,253,983			—
			33,157,178			7,027,461
Accumulated amortization and impairment			(4,185,354	)		(2,550,847	)
		$	28,971,824		$	4,476,614

Amortization expense was $1.7 million and ~~executory costs such as taxes, maintenance and insurance. Rental expense for lease was $82,075 and $84,197~~$0.8 million for the years ended December 31, ~~2018~~2021 and ~~2017,~~2020, respectively.

~~Approximate future minimum rental commitments under~~

Developed technology and customer contract additions represent the ~~office premises lease are:~~

Year Ending December 31, Rent

To 2019 Expiration 88,605
Total $ 88,605

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

7.	~~STOCKHOLDERS’ EQUITY~~

~~Environmental matters~~

~~The Company is subject to contingencies~~acquired intangibles as ~~a result~~part of ~~environmental laws and regulations. Present and future environmental laws and regulations applicable to~~ the Company’s operations could require substantial capital expenditures or could adversely affect its operations in other ways that cannot be predicted at this time. As of December 31, 2018 and 2017, no amounts had been recorded because no specific liability has been identified that is reasonably probable of requiring the Company to fund any future material amounts.

~~Common Stock~~

~~During the years ended December 31, 2018 and 2017, the Company issued 5,750,000 and -0- shares of common stock, respectively, for cash of $6,049,734 and $-0-.~~

During the years ended December 31, 2018 and 2017, the Company issued 450,000 and 507,897 shares of common stock, respectively, with total fair values of $545,000 and $579,754 as compensation for services.

~~During the years ended December 31, 2018 and 2017, the Company issued -0- and 6,420,395 shares of common stock respectively, for lease interests with total fair values of $-0- and $6,812,362.~~

Nanotech acquisition.

Goodwill

During the year ended December 31, ~~2017~~2021, the Company ~~issued 1,007,890~~recognized $213.4 million in goodwill from the Torchlight RTO and $27.1 million in goodwill from the Nanotech acquisition.

The Company performs the annual impairment test for goodwill at year-end, by comparing the reporting unit’s fair value to its carrying amount, including goodwill, as of December 31, 2021, using the market approach to determine fair value. As the reporting unit’s fair value exceeded its carrying amount, the Company determined that goodwill was not impaired. The key assumption used to calculate the recoverable amount of goodwill as of December 31, 2021 was the Company’s share price.

10. Unsecured convertible promissory notes


	Year ended December 31,									Year ended December 31,
	2021									2020
	Bridge loan (a)			Torchlight (b)			Total			Bridge loan (a)		Torchlight (b)			Total
Beginning balance	$	538,020		$	665,215		$	1,203,235		$	0	$	0		$	0
Issued		3,963,386			10,000,000			13,963,386			378,042		1,000,000			1,378,042
Interest accrued		17,804			329,965			347,769			2,698		12,701			15,399
Fair value loss (gain)		19,163,417			333,947			19,497,364			139,609		(354,839	)		(215,230	)
Unrealized fair value loss (gain) due to own credit risk		0			(5,554	)		(5,554	)		0		14,132			14,132
Unrealized foreign currency exchange gain		0			(258,480	)		(258,480	)		0		(23,849	)		(23,849	)
Foreign currency translation adjustment		(26,262	)		257,544			231,282			17,671		17,070			34,741
Conversion to common stock		(23,656,365	)		0			(23,656,365	)		0		0			0
Elimination pursuant to Torchlight RTO (note 3)		0			(11,322,637	)		(11,322,637	)		0		0			0
Ending balance	$	0		$	0		$	0		$	538,020	$	665,215		$	1,203,235

a) In November 2020, MMI entered into a commitment letter (the “Commitment Letter”) with a shareholder, pursuant to which the shareholder will provide up to CA$5,500,000 in debt financing (the “Bridge Loan”) to fund MMI’s continued operations while MMI worked toward completion of the Proposed Transaction with Torchlight. Pursuant to the Commitment Letter, MMI was able to draw up to CA$500,000 monthly beginning in November 2020. The Bridge Loan bore interest at the rate of 8% per annum, payable monthly in arrears. The principal amount and any accrued but unpaid interest was due and payable on the 10th business day after the closing of the Proposed Transaction, or on November 29, 2022, if the Transaction did not close before that date. At the option of the holder, the Bridge Loan, or any portion of the Bridge Loan and accrued but unpaid interest was convertible into MMI Common Stock at a conversion price of CA$0.50 per share, subject to customary adjustments. MMI had the option to repay the Bridge Loan in whole or in part, without penalty, at any time on or after March 28, 2021.

MMI elected to measure the financial instrument at fair value. MMI subsequently remeasured the instrument on December 31, 2020 and recorded fair value loss of $139,609 in the statements of operations. There was no change in instrument specific credit risk.

On February 16, 2021, the total Bridge Loan of $4,361,930 of principal and accrued interest was converted at CA$0.50 per share into 20,391,239 common shares, in accordance with the terms of the bridge financing. MMI has remeasured the instrument as of the conversion date and recognized a non-cash realized fair value loss of $19,163,417 and the full amount of $23,656,365 was reclassified into the consolidated statements of changes in stockholders’ equity.

b) On September 15, 2020, MMI entered into a non-binding Letter of Intent (the “LOI”) with Torchlight pursuant to which Torchlight loaned MMI three unsecured convertible promissory notes totaling $11,000,000. These Unsecured Convertible Promissory Notes bore interest at 8% annually, with principal and interest due and payable on the maturity date. If MMI and Torchlight had not entered into a Definitive Agreement, or the Definitive Agreement were terminated, then the Unsecured Convertible Promissory Notes and all accrued and unpaid interest were convertible at the option of the holder into common stock of the Company at the conversion prices set out

below. The Company had the option to repay all or part of the Unsecured Convertible Promissory Notes, plus any accrued and unpaid interest, without penalty on or after 120 days from the note issuance date.

Tranche 1

Tranche 2

Tranche 3

Face value of notes issued

500,000

10,000,000

Issuance date

September 20, 2020

December 16, 2020

February 18, 2021

Maturity date

September 20, 2022

December 16, 2022

February 18, 2022

Interest rate

Conversion price

CA$0.35

CA$0.62

CA$2.80

The conversion option was a foreign currency embedded derivative as the note was denominated in ~~conversions~~USD and the conversion price was in Canadian dollars. MMI elected to measure the financial instrument at fair value. MMI subsequently remeasured the instrument on March 31, 2021, and recorded fair value gain of $197,527, of which $5,554 was a gain recorded in other comprehensive income relating to instrument specific credit risk and $191,973 was a gain recorded in the statements of operations.

As part of the closing of the Arrangement, the promissory notes were remeasured at fair value and a fair value loss of $525,920 was recorded in the statements of operations and comprehensive loss. The notes were considered part of the consideration transferred (see note 3) and were eliminated upon acquisition and subsequent consolidation. In addition, the related accumulated fair value losses in OCI of $9,011 were recycled to the statements of operations and comprehensive loss.

11. Secured convertible debentures


	Year ended December 31,
	2021			2020
Beginning balance	$	5,545,470		$	—
Issued		—			3,630,019
Interest accrued		121,860			508,757
Interest paid		(64,528	)		(285,154	)
Fair value loss		16,408,482			511,699
Fair value loss—own credit		—			865,280
Foreign currency translation adjustment		107,498			314,869
Conversion to common stock		(22,118,782	)		—
Ending balance	$	—		$	5,545,470

On April 3, 2020, MMI issued CA$5,000,000 in Secured Debentures to BDC Capital Inc.(“BDC”), a wholly owned subsidiary of the Business Development Bank of Canada. The Secured Debentures mature on October 31, 2024, and bear interest at a rate of 10.0% per annum, payable ~~valued~~monthly in cash. In addition to the cash interest, the Secured Debentures accrued a non-compounding payment in kind (“PIK”) of 8% per annum. The PIK may be reduced by up to 3% (reduced to as low as 5% per annum) upon meeting certain conditions. BDC may elect to have the PIK paid in cash.

The Secured Debentures and the PIK are convertible in full or in part, at ~~$1,007,890.~~BDC’s option, into MMI common stock at any time prior to their maturity at a conversion price of CA$0.70 (the “Conversion Price”) or MMI may force the conversion of Secured Debentures if MMI’s common stock are trading on the CSE on a volume-weighted average price greater than 100% of the Conversion Price (i.e. greater than CA$1.40) for any 20 consecutive trading days with a minimum daily volume of at least 100,000 Common Stock.

MMI elected to measure the financial instrument at fair value. MMI subsequently remeasured the instrument on December 31, 2020, and recorded a fair value loss of $1,376,979, of which $511,699 was recorded in other comprehensive income relating to instrument specific credit risk and $865,280 was recorded in the statements of operations.

The secured debentures were subject to a covenant clause, whereby MMI was required to maintain a working capital ratio of no less than 3:1. The working capital ratio excluded deferred revenue and deferred government assistance from current liabilities. MMI did not fulfil the ratio as required in the contract and consequently, the secured debentures were reclassified as a current liability as at December 31, 2020.

On March 3, 2021, MMI forced the conversion of the Secured Debentures pursuant to the terms of the agreement with BDC. The total debentures balance of $3,910,954 was converted at CA$0.70 per share into 14,155,831 common shares. MMI remeasured the liability as of the conversion date and recognized a non-cash realized fair value loss of $16,408,482 and the full amount of $22,118,782 was reclassified into the consolidated statements of changes in stockholders’ equity. All security interests held by BDC on assets of MMI were immediately discharged.

In addition, the accumulated losses in OCI of $511,699 were recycled to the statements of operations and comprehensive loss.

12. Unsecured convertible debentures

Unsecured convertible debentures (the “Unsecured Debentures”) consist of the following:


	Year ended December 31,
	2021			2020
Beginning balance	$	1,825,389		$	585,267
Issued		—			693,784
Interest accrued		23,660			147,304
Fair value loss		3,914,931			189,708
Fair value loss due to own credit risk		—			154,347
Foreign currency translation adjustment		5,495			54,979
Conversion to common stock		(5,769,475	)		—
Ending balance	$	—		$	1,825,389

On December 10, 2019, an agreement was signed to convert an existing CA$250,000 short-term loan into an Unsecured Debenture, and also during December 2019, MMI issued an additional CA$500,000 in Unsecured Debentures to the same investor, under the same terms.

During the year ended December 31, 2020, MMI issued an additional CA$950,000 (US $693,784) in Unsecured Debentures to individuals and companies under the same terms as previous issues.

The Unsecured Debentures bear interest at a fixed rate of 1% per month, compounding monthly and have a maturity date of April 30, 2025. Each Unsecured Debenture is convertible at the option of the holder into MMI common stock at a price of CA$0.70 per share. Following completion of the RTO, MMI may elect to repay the outstanding amounts owing under the Unsecured Debentures in cash or in stock at a conversion price of CA$0.70 upon meeting certain conditions or the holder can convert the Unsecured Debentures at CA$0.70 or the Unsecured Debentures can be converted at maturity at the greater of 80% of the 10 day volume-weighted average price of the Resulting Issuer’s common stock or the closing price on the preceding trading day less the maximum permitted discount by the exchange.

MMI elected to measure the financial instrument at fair value. MMI subsequently remeasured the instrument on December 31, 2020 and recorded a fair value loss of $344,055, of which $154,347 was recorded in other comprehensive income relating to instrument specific credit risk and $189,708 was recorded in the statements of operations.

On February 16, 2021, MMI converted $1,439,103 of principal and accrued interest of Unsecured Debentures at CA$0.70 per share into 5,105,338 common shares in accordance with the terms of their debt instruments. MMI remeasured the liability as of the conversion date and recognized a non-cash realized fair value loss of $3,914,931 and the full amount of $5,769,475 was reclassified into the consolidated statements of changes in stockholders’ equity.

In addition, the accumulated losses in OCI of $154,347 were recycled to the statements of operations.

13. Long-term debt


	As of December 31,
	2021		2020
'ACOA Business Development Program (“BDP”) 2012 interest-free loan1 with a maximum contribution of CA$500,000, repayable in monthly repayments commencing October 1, 2015 of CA$5,952 until June 1, 2023. Loan repayments were temporarily paused effective April 1, 2020 until January 1, 2021 as a result of the COVID-19 outbreak. As at December 31, 2021, the amount of principle drawn down on the loan, net of repayments, is CA$107,143 (2020 - CA$178,571).	$	80,390	$	129,384
'ACOA Atlantic Innovation Fund (“AIF”) 2015 interest-free loan1,2 with a maximum contribution of CA$3,000,000. Annual repayments, commencing June 1, 2021, are calculated as a percentage of gross revenue for the preceding fiscal year, at NaN when gross revenues are less than CA$1,000,000, 5% when gross revenues are less than CA$10,000,000 and greater than CA$1,000,000, and CA$500,000 plus 1% of gross revenues when gross revenues are greater than CA$10,000,000. As at December 31, 2021, the amount or principle drawn down on the loan, net of repayments, is CA$2,924,615 (2020 - CA$3,000,000).		1,666,764		1,458,954
ACOA BDP 2018 interest-free loan1,3 with a maximum contribution of CA$3,000,000, repayable in monthly repayments commencing June 1, 2021 of CA$31,250 until May 1, 2029. As at December 31, 2021, the amount of principle drawn down on the loan, net of repayments, is CA$2,781,250 (2020 - CA$3,000,000).		1,319,130		1,285,307
ACOA BDP 2019 interest-free loan1 with a maximum contribution of CA$100,000, repayable in monthly repayments commencing June 1, 2021 of CA$1,400 until May 1, 2027. As at December 31, 2021, the amount of principle drawn down on the loan, net of repayments, is CA$90,278 (2020 - CA$62,165).		42,011		30,138
ACOA Regional Relief and Recovery Fund (“RRRF”) 2020 interest-free loan with a maximum contribution of CA$390,000, repayable on monthly repayments commencing April 1, 2023 of CA$11,000 until April 1, 2026. As at December 31, 2021, the amount of principle drawn down on the loan is CA$390,000 (2020 - $NaN).		120,154		—
CAIXA Capital loan bearing interest at 6-month EURIBOR rate plus 4% interest spread. The loan principal and interest are fully repayable on January 15, 2025. On March 12, 2021, the principal loan balance with outstanding interest totaling $209,506 (EUR 171,080) was converted into MMI common stock at $3.87 per share4. Pursuant to the conversion, CAIXA Capital was issued 67,597 MMI common shares.		—		130,265
		3,228,449		3,034,048
Less: current portion		491,278		290,544
	$	2,737,171	$	2,743,504

1 The Company was required to maintain a minimum balance of positive equity throughout the term of the loan. However, on November 14, 2019, ACOA waived this requirement for the period ending June 30, 2019 and for each period thereafter until the loan is fully repaid.

2 The carrying amount of the ACOA AIF loan is reviewed each reporting period and adjusted as required to reflect management’s best estimate of future cash flows, discounted at the original effective interest rate.

3 A portion of the ACOA BDP 2018 loan was used to finance the acquisition and construction of manufacturing equipment resulting in $425,872 was recorded as deferred government assistance, which is being amortized over the useful life of the associated equipment. The Company recorded the amortization expense for the year ended December 31, 2021 of $145,739 (year ended December 31, 2020—$136,320) as government assistance in the consolidated statements of operations and comprehensive loss.

4 MMI has recognized the common stock issued ~~172,342~~in the consolidated statements of changes in stockholders’ equity at fair value at time of conversion to be $221,842 and recorded the difference of $88,763 between the fair value of the common stock and the carrying value of the long-term debt as loss on debt settlement in the consolidated statements of operations and comprehensive loss.

14. Capital stock

Common stock

Authorized: 1,000,000,000 common shares, $0.001 par value.

All references to numbers of common ~~stock,~~shares and amounts in ~~payment~~the consolidated statements of changes in ~~kind on~~stockholder’s equity and in the notes ~~payable valued at $221,024.~~to the consolidated financial statements have been retroactively restated to reflect as if the CPM RTO and the Torchlight RTO had taken place as of the beginning of the earliest period presented.

•

The numbers of common shares issued pre-CPM RTO have been multiplied by the 2.75 CPM conversion ratio and the 1.845 Torchlight conversion ratio.

•

The numbers of common shares issued post-CPM RTO have been multiplied by the 1.845 Torchlight conversion ratio.

•

The amounts of common shares issued pre-CPM RTO were calculated by multiplying the number of shares by 0.001, the 2.75 CPM conversion ratio and the 1.845 Torchlight conversion ratio and the difference was recognized in additional paid in capital.

•

The amounts of common shares issued post-CPM RTO were calculated by multiplying the number of shares by 0.001 and the 1.845 Torchlight conversion ratio and the difference were recognized in additional paid in capital.

During the year ended December 31, ~~2018~~2021, the Company converted unsecured convertible promissory notes of $23,656,365, secured convertible debentures of $22,118,782, and ~~2017,~~unsecured convertible debentures of $5,769,475 into common stock. The Company remeasured the financial liabilities at fair value as of respective conversion dates and recognized a non-cash realized loss of $39,486,830. The Company subsequently reclassified the remeasured liabilities into equity and recognized $39,652 in common stock and $51,504,970 in additional paid in capital. The number of shares issued was calculated as the total outstanding principal and interest of each liability divided by the conversion price stated in each respective instrument’s agreement.

During the year ended December 31, 2021, the Company converted long-term debt of $221,843 and due to related party of $225,986 into common stock. The Company recorded the common stock issued at fair value using the Company’s share price at the time of conversion. The Company recognized $276 in common stock and $447,553 in additional paid in capital. The resulting net loss calculated as the difference between the fair value of common stock and the carrying value of the liabilities of $19,330 was recorded in other income in the consolidated statements of operations and comprehensive loss. The number of shares issued was calculated as the total outstanding principal and interest of each liability multiplied by the agreed upon conversion price.

During the year ended December 31, 2021, the Company issued ~~400,000~~286,292 common shares at CA$0.58 per share as compensation in exchange for a fairness opinion obtained with respect to the Torchlight RTO. The company paid CA $90,000 in cash in 2020 and ~~307,349~~agreed to settle the remaining CA $90,000 in common stock. The Company recognized the share-based payment in trade and other payables in 2020 until the shares were issued in 2021.

During the year ended December 31, 2021, and pursuant to the Torchlight RTO, the Company recognized $369,631,002 in equity as the fair value of 82,813,994 common shares that were deemed to have been issued to Torchlight as part of the Torchlight RTO (note 3).

During the year ended December 31, 2021, the Company issued 148,368 common shares as stock-based compensation at $3.37 per share to a service provider. The total amount of $500,000 was recorded as prepaid expenses and is being amortized over the period of service.

During the year ended December 31, 2021, the Company issued 125,000 common shares as stock-based compensation at $5.27 per share for a total of $658,750 as partial compensation for a fairness opinion obtained with respect to the Nanotech acquisition. The company paid the remaining $511,406 in cash.

During the year ended December 31, 2020 and pursuant to the CPM RTO, all preferred shares were converted into 58,153,368 common shares.

During the year ended December 31, 2020, the aggregate principal of the Secured Promissory Notes and all interest accrued up until January 28, 2020 were converted into 17,752,163 common shares.

During the year ended December 31, 2020, and pursuant to the CPM RTO, the Company recognized $3,214,502 in equity as the fair value of 21,599,223 common shares that were deemed to have been issued to CPM as part of the CPM RTO.

At-the-Market Equity Offering Program ("ATM")

On June 16, 2021, Torchlight Energy Resources, Inc. ("Torchlight”) entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”) to conduct an “at-the-market” equity offering program pursuant to which the Company may issue and sell, from time to time at its sole discretion, shares (the "Placement Shares”) of its common stock, par value $0.001 per share, having an aggregate offering price of up to $100,000,000 (the “Shares”), through or to the Agent, as the Company’s sales agent. Subject to the terms and conditions of the Sales Agreement, the Agent will use its commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has no obligation to sell any of the Shares, and may, at any time, suspend the sale of the Shares under the Sales Agreement upon proper notice to the other party. The Sales Agreement will terminate upon the issuance and sale of all of the Shares through or to the Agent, unless earlier terminated in accordance with its terms.

On June 21, 2021, the Sales Agreement was amended and restated to increase the aggregate offering price to up to $250,000,000.

The Company has provided the Agent with customary indemnification rights, and the Agent will be entitled to an aggregate fixed commission of 3.0% of the gross proceeds from Shares sold through the Agent under the Sales Agreement. Sales of the Shares under the Sales Agreement will be made in transactions that are deemed to be “at-the-market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’ transactions, including on The NASDAQ Capital Market, at market prices or as otherwise agreed to with the Agent.

The Shares have been registered under the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form S-3 (No. 333-256632) filed by the Company with the Securities and Exchange Commission (the “SEC”) on May 28, 2021, and declared effective on June 14, 2021 (the “Registration Statement”). The Company has prepared a prospectus supplement dated June 16, 2021 and a prospectus supplement dated June 21, 2021 specifically relating to the Placement Shares to the base prospectus included as part of such registration statement.

During the period from June 16, 2021 to June 25, 2021 and prior to the Torchlight RTO, Torchlight sold a total of 16,185,805 shares of common stock ~~respectively,~~under the ATM for aggregate gross proceeds of approximately $137.5 million. There was 0 sale of common stock under the ATM after June 28, 2021.

Warrants

Prior to completion of the CPM RTO on March 5, 2020, every two warrants had the right to purchase 1 MTI common share for CA$2.475 per share.

Pursuant to the completion of the RTO on March 5, 2020, MTI warrants were adjusted such that one warrant has the right to purchase 1 MMI Common Share for CA$0.90 per share.

On June 28, 2021 and pursuant to the completion of Torchlight RTO, each MMI warrant was converted into 1.845 META warrants and the exercise price was updated to be CA$0.49. Also, as part of the Torchlight RTO, Torchlight outstanding warrants of 853,278 underwent a reverse stock split at a ratio of 2:1 resulting ~~from warrant exercises~~in warrants of 430,380 and for an amount being recorded at $2,773,779 in additional paid in capital as part of the consideration ~~totaling $200,000~~transferred.

The following table summarizes the changes in warrants of the Company:


	Year ended December 31,						Year ended December 31,
	2021						2020
	Number of						Number of
	warrants 1			Amount 1			warrants 1		Amount 1
Balance, beginning of year		3,046,730		$	402,883			1,590,866	$	132,299
Issued		2,153,500			3,831,124			1,455,864		166,916
Adjustment to 2019 warrants		—			—			—		103,668
Exercised		(365,651	)		(49,812	)		—		—
Fair value of deemed issuance to Torchlight		430,380			2,773,779			—		—
Balance, end of year		5,264,959		$	6,957,974			3,046,730	$	402,883

1 All references to numbers of warrants have been retroactively restated to reflect as if Torchlight RTO had taken place as of the beginning of the earliest period presented. The numbers of warrants issued pre-CPM RTO have been divided by 2, multiplied by the 2.75 CPM conversion ratio and ~~$243,300.~~

~~Warrants and Options~~

the 1.845 Torchlight conversion ratio. There were no warrants issued post CPM RTO except for Torchlight warrants.

During the ~~years~~year ended December 31, ~~2018 and 2017,~~2021, the Company ~~issued/vested 1,820,000~~granted 2,153,500five-year warrants (year ended December 31, 2020 - 1,455,864) to purchase common stock to external consultants as stock-based compensation.

The fair value of 1,153,500 warrants issued during the year ended December 31, 2021 was estimated to be $3,129,208 using the Black-Scholes option pricing model. The total amount has been recorded in General & Administrative expense in the consolidated statements of operations and ~~1,808,026~~comprehensive loss.

The fair value of 1,000,000 warrants issued during the year ended December 31, 2021 was estimated to be $701,910 using the Monte Carlo Simulation model. The total amount has been recorded in General & Administrative expense in the consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2021, 365,651 warrants were exercised to purchase 361,729 common shares where a warrant holder elected a cashless exercise and consequently, the difference of 3,922 shares was withheld to cover the exercise cost.

Broker warrants

Prior to completion of the CPM RTO on March 5, 2020, every MTI broker warrant had the right to purchase 1 MTI common share for CA$1.70 per share.

Pursuant to the completion of the RTO on March 5, 2020, each MTI broker warrant was converted into 1.845 MMI warrants, and ~~options with total~~the exercise price was updated to be CA$0.62.

On June 28, 2021, and pursuant to the completion of the Torchlight RTO, each MMI warrant was converted into 1.845 META warrants and the exercise price was updated to be CA$0.34.

The following table summarizes the changes in broker warrants of the Company:


	Year ended December 31,						Year ended December 31,
	2021						2020
	Number of						Number of
	warrants 1			Amount 1			warrants 1		Amount 1
Balance, beginning of year		97,542		$	16,144			—	$	—
Issued		—			—			97,542		16,144
Exercised		(83,655	)		(14,318	)		—		—
Balance, end of year		13,887		$	1,826			97,542	$	16,144

1 All references to numbers of broker warrants have been retroactively restated to reflect the number of stock of the legal parent (accounting acquiree) issuable following the reverse acquisition. The numbers of broker warrants issued pre-CPM RTO have been multiplied by the 2.75 CPM conversion ratio and the 1.845 Torchlight conversion ratio. There were no broker warrants issued post CPM RTO.

During the year ended December 31, 2021, 83,655 warrants were exercised to purchase 82,494 common shares where a warrant holder elected a cashless exercise and consequently, the difference of 1,161 shares was withheld to cover the exercise cost.

The fair ~~values of $854,325 and $1,093,104, respectively, as compensation for services.~~

~~A summary~~value of warrants and broker warrants that were issued and estimated using the Black-Scholes option pricing model have the following inputs and assumptions:


	Year ended	Year ended
	December 31, 2021	December 31, 2020
Risk free interest rate	0.45% - 0.98%	0.80% - 1.43%
Expected volatility	92%	134%
Expected dividend yield	0%	0%
Expected forfeiture rate	0%	0%
Common stock price	5.31		1.70
Exercise price per common stock	$0.85 - $4.50	$1.70 - $2.475
Expected term of warrants	2.20 - 5 years	2 years

The fair value of warrants that were issued and estimated using the Monte Carlo Simulation have the following inputs and assumptions:


	Year ended
	December 31, 2021
Risk free interest rate	0.42%
Weighted average expected volatility	80%
Expected term of warrants	5 years

15. Stock-based payments

On December 3, 2021, the shareholders of the Company approved the 2021 Equity Incentive Plan to utilize the 3,500,000 shares reserved and unissued under the Torchlight 2015 Stock Option and Grant Plan and the 6,445,745 shares reserved and unissued under the MMI 2018 Stock Option and Grant plan to set the number of shares reserved for issuance under the 2021 Equity Incentive Plan at 34,945,745 shares.

The 2021 Equity Incentive Plan allows the grants of non-statutory stock options, restricted stock, restricted stock units ("RSUs"), stock appreciation rights, performance units and performance shares to employees, directors, and consultants.

DSU Plan

Each unit is convertible at the option of the holder into one common share of the Company.

On March 28, 2013, the Company implemented a Deferred Stock Unit (DSU) Plan for its directors, employees and officers. Directors, employees and officers are granted DSUs of the Company with immediate vesting as a form of compensation. Each unit is convertible at the option of the holder into one common share of the Company. Eligible individuals are entitled to receive all DSUs (including dividends and other adjustments) no later than December 1st of the first calendar year commencing after the time of termination of their services.

On December 22, 2021, the Company granted 191,802 DSUs to directors of the Company with immediate vesting. The Company recognized an expense of $517,869 in the consolidated statement of operations and comprehensive loss based on grant date fair value of $2.70.

The following table summarizes the change in outstanding DSUs of the Company:


	Year ended December 31,
	2021		2020
Outstanding, beginning of year		3,455,224		3,977,820
Issued		491,802		0
Converted into common stock		0		(522,596	)
Outstanding, end of year		3,947,026		3,455,224

Information concerning units outstanding is as follows:


	As of December 31,
	2021		2020
Issue price	Number of units		Number of units
CA$0.27		3,348,675		3,348,675
CA$0.51		106,549		106,549
US$2.70		491,802		0
		3,947,026		3,455,224

1 All references to numbers of DSUs have been retroactively restated to reflect as if the Torchlight RTO had taken place as of the beginning of the earliest period presented. The numbers of DSUs issued pre-CPM RTO have been multiplied by the 2.75 CPM conversion ratio and the 1.845 Torchlight conversion ratio.

RSU Plan

Each unit is convertible at the option of the holder into one common share of the Company upon meeting the vesting conditions.

During the year ended December 31, 2021, the Company granted 300,000 RSUs to a consulting firm with vesting conditions satisfied in 2021. The Company recognized an expense of $1,928,000 in the consolidated statement of operations and comprehensive loss based on weighted average grant date fair value of $6.43/unit.

As of December 31, ~~2018~~2021, there was $NaN unrecognized compensation cost related to unvested RSUs.

Employee Stock Option Plan

Each stock option is convertible at the option of the holder into one common share of the Company.

The Company has an Employee Stock Option Plan [the “Plan”] for directors, officers, and ~~2017~~employees. Unless otherwise determined by the Board of Directors, 25% of the options shall vest and become exercisable on the first anniversary of the grant date and 75% of the options issuable under the Plan shall vest and become exercisable in equal monthly installments over the three-year period commencing immediately after the first anniversary of the grant date. The option exercise price will not be less than the fair market value of a share on the grant date, as determined by the Board of Directors, taking into account any considerations which it determines to be appropriate at the relevant time. The contractual term of the stock options is 10 yearsand there are 0 cash settlement alternatives for the employees.

During the year ended December 31, 2020, the Company’s existing MTI options were converted at a ratio of ~~expiration~~2.75 MMI options for each MTI option pursuant to the CPM RTO. Also, as part of the CPM RTO, 1,291,500 stock options were issued to executives and directors of CPM. Additionally, and subsequent to the completion of the CPM RTO, the Company granted 13,402,080 options to employees and directors, 898,515 of which vested upon grant date and 12,503,565 of which vest over 1-4 years. Subsequent to the completion of the CPM RTO, 2,589,457 stock options were forfeited as a result of employee departures and 2,090,866 options expired unexercised.

During the year ended December 31, 2021, the Company’s existing MMI options were converted at a ratio of 1.845 META options for each MMI option pursuant to the Torchlight RTO. Also, as part of the Torchlight RTO, Torchlight outstanding options of 3,000,000 underwent a reverse stock split at a ratio of 2:1 resulting in outstanding options of 1,500,000 and an amount of $9,397,988 was recorded in additional paid in capital as part of the consideration transferred.

Total stock-based compensation expense included in the consolidated statements of operations was as follows:


	Year ended December 31,
	2021		2020		2019
Selling & Marketing	$	34,735	$	61,560	$	154,086
General & Administrative		544,530		1,114,556		940,613
Research & Development		479,715		333,570		198,073
	$	1,058,980	$	1,509,686	$	1,292,772

The following table summarizes the change in outstanding stock options of the Company:


				Average		Average
				exercise		exercise
				price per		remaining	Aggregate
	Number of options			stock option		contractual term (years)	intrinsic value
Outstanding, December 31, 2019		14,502,303		$	0.33	8.38	$	104,500
Issued to CPM executives and directors pursuant to CPM RTO		1,291,500			0.19
Granted		13,402,080			0.34
Forfeited		(2,627,510	)		0.34
Expired		(2,090,866	)		0.27
Outstanding, December 31, 2020		24,477,507		$	0.33	8.36	$	688,952
Exercised		(4,486,965	)		0.36
Forfeited		(85,901	)		0.34
Fair value of deemed issuance to Torchlight		1,500,000			2.22
Outstanding, December 31, 2021		21,404,641		$	0.46	7.34	$	56,924,556

Exercisable, December 31, 2021		13,231,030		$	0.54	6.74	$	34,148,435

Below is ~~presented below:~~

Exercise

Expiration Date in

2018

Price

2019

2020

2021

2022

2023

Total

$0.70
  -
  420,000
  -
  -
  -
  420,000
$0.77
  100,000
  -
  -
  -
  -
  100,000
$1.00
  25,116
  -
  -
  -
  -
  25,116
$1.03
  -
  -
  120,000
  -
  -
  120,000
$1.08
  37,500
  -
  -
  -
  -
  37,500
$1.14
  -
  -
  -
  -
  600,000
  600,000
$1.21
  -
  -
  -
  -
  120,000
  120,000
$1.40
  -
  1,121,736

  -
  -
  1,121,736
$1.50
  -

  100,000
  -
  -
  100,000
$1.64
  -
  -
  200,000
  -
  -
  200,000
$1.80
  -
  1,250,000
  -
  -
  -
  1,250,000
$2.00
  -
  -
  400,000
  -
  -
  400,000
$2.23
  -
  832,512

  -
  -
  832,512
$2.50
  35,211
  -
  -
  -
  -
  35,211
$3.50
  15,000
  -
  -
  -
  -
  15,000
$4.50
  700,000
  -
  -
  -
  -
  700,000
$6.00
  22,580
  -
  -
  -
  -
  22,580
$7.00
  700,000
  -
  -
  -
  -
  700,000

  1,635,407
  3,624,248
  820,000
  -
  720,000
  6,799,655

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

7.	~~STOCKHOLDERS’ EQUITY- continued~~

Exercise

Expiration Date in

2017

Price

2018

2019

2020

2021

Total

$0.50
  400,000
  -
  -
  -
  400,000
$0.70
  -
  -
  420,000
  -
  420,000
$0.77
  -
  100,000
  -
  -
  100,000
$1.00
  -
  25,116
  -
  -
  25,116
$1.03
  -
  -
  -
  120,000
  120,000
$1.08
  -
  37,500
  -
  -
  37,500
$1.40
  -
  -
  1,121,736

  1,121,736
$1.64
  -
  -
  -
  200,000
  200,000
$1.73
  100,000
  -
  -
  -
  100,000
$1.80
  -
  -
  1,250,000
  -
  1,250,000
$2.00
  1,906,249
  -
  -
  -
  1,906,249
$2.03
  2,000,000
  -
  -
  -
  2,000,000
$2.09
  2,800,000
  -
  -
  -
  2,800,000
$2.23
  -
  -
  832,512
  -
  832,512
$2.29
  120,000
  -
  -
  -
  120,000
$2.50
  -
  35,211
  -
  -
  35,211
$2.82
  38,174
  -
  -
  -
  38,174
$3.50
  -
  15,000
  -
  -
  15,000
$4.50
  -
  700,000
  -
  -
  700,000
$6.00
  523,123
  22,580
  -
  -
  545,703
$7.00
  -
  700,000
  -
  -
  700,000

  7,887,546
  1,635,407
  3,624,248
  320,000
  13,467,201

Aa summary of the outstanding options as at December 31, 2021:


Exercise price $	Number outstanding		Number exercisable
CA$0.34		19,067,529		10,893,918
CA$0.15		518,112		518,112
CA$0.19		369,000		369,000
US$2.00		1,075,000		1,125,000
US$1.00		375,000		325,000
		21,404,641		13,231,030

Below is a summary of the outstanding options as at December 31, 2020:


Exercise price	Number outstanding		Number exercisable
CA$0.34		23,550,394		9,636,758
CA$0.15		558,113		558,113
CA$0.19		369,000		369,000
		24,477,507		10,563,871

1 All references to numbers of stock options have been retroactively restated to reflect as if the Torchlight RTO had taken place as of the beginning of the earliest period presented. The numbers of stock options issued pre-CPM RTO have been multiplied by the 2.75 CPM conversion ratio and the 1.845 Torchlight conversion ratio. The numbers of stock options issued post CPM RTO have been multiplied by the 1.845 Torchlight conversion ratio.

The weighted average remaining contractual life for the stock options outstanding as ofat December 31, ~~2018~~2021 was 7.65 (December 31, 2020 – 8.36) years. There were 1,500,000 and ~~2017 by exercise price and year of expiration is presented below:~~

Exercise Expiration Date in 2018

Price 2019 2020 2021 2022 2023 Total

$ 0.97 - - 259,742 - - 259,742
$ 1.10 - - - 800,000 - 800,000
$ 1.19 - - - - 600,000 600,000
$ 1.57 1,497,163 4,500,000 - - - 5,997,163
$ 1.63 - - - 58,026 - 58,026
$ 1.79 - 300,000 - - - 300,000
1,497,163 4,800,000 259,742 858,026 600,000 8,014,931

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

7.	~~STOCKHOLDERS’ EQUITY- continued~~

Exercise

Expiration Date in

2017

Price

2018

2019

2020

2021

2022

Total

$0.97
  -
  -
  -
  259,742
  -
  259,742
$1.10
  -
  -
  -
  -
  800,000
  800,000
$1.57
  -
  -
  5,997,163
  -
  -
  5,997,163
$1.63
  -
  -
  -
  58,026
  -
  58,026
$1.79
  -
  -
  300,000
  -
  -
  300,000

  -
  -
  6,297,163
  317,768
  800,000
  7,414,931

~~At December 31, 2018, the Company 2018 and 2017 had reserved 14,814,586 and 20,882,132 common shares, respectively, for future exercise of warrants and options.~~

~~Warrants and~~13,402,080 stock options granted ~~were valued using the Black-Scholes Option Pricing Model. The assumptions used in calculating the~~with a weighted-average grant date fair value of $6.27 and $0.39 per share respectively during the ~~warrants~~year ended December 31, 2021 and the year ended December 31, 2020.

The fair value of options ~~issued were~~granted was estimated at the grant date using the following weighted-average assumptions:


	Year ended December 31,
	2021	2020	2019
Dividend yield [%]	—	—	—
Volatility	84%	52%-134%	84%-130%
Risk-free interest rate	0.73%	0.73%	1.21%
Expected term (in years)	1 year	7.48 years	8.67 years

The expected life of the stock options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

16. Income taxes

Loss before income taxes was as follows:


	Year ended December 31,
	2021			2020			2019
Local	$	(30,552,839	)	$	(1,549,534	)	$	(1,278,498	)
Foreign		(61,296,485	)		(10,255,435	)		(7,250,018	)
Loss before income taxes	$	(91,849,324	)	$	(11,804,969	)	$	(8,528,516	)

Income tax provision was as follows:


	Year ended December 31,
	2021			2020			2019
Current tax expense:
Local	$	800		$	800		$	800
Foreign		—			—			—
Current tax expense		800			800			800
Deferred tax benefit:
Local		—			—			—
Foreign		(852,863	)		(194,510	)		(84,349	)
Deferred tax benefit		(852,863	)		(194,510	)		(84,349	)
Income tax recovery	$	(852,063	)	$	(193,710	)	$	(83,549	)

~~2018~~

~~Risk-free interest rate~~	~~2.15% - 2.83%~~
~~Expected volatility of common stock~~	~~97% - 119%~~
~~Dividend yield~~	~~0.00%~~
~~Discount due to lack of marketability~~	~~20%~~
~~Expected life of option/warrant~~	~~2.75 to 5 Years~~

~~2017~~

~~Risk-free interest rate~~	~~1.47% - 2.06%~~
~~Expected volatility of common stock~~	~~106% - 122%~~
~~Dividend yield~~	~~0.00%~~
~~Discount due to lack of marketability~~	~~20%~~
~~Expected life of option/warrant~~	~~2.75 to 5 Years~~

8.	~~INCOME TAXES~~

The ~~Company recorded no~~ income tax ~~provision for 2018 and 2017 because of losses incurred. The Company has placed a full valuation allowance against net deferred tax assets because future realization of these assets is not assured.~~

~~The following is a reconciliation between~~provision differs from the amount computed by applying the federal income tax ~~benefit computed at statutory federal~~rate of 21% for 2021 (2020 - 21%) to the loss before income ~~tax rates and actual income tax provision for~~taxes as a result of the ~~years ended December 31, 2018 and 2017:~~following differences:


	Year ended December 31,
	2021			2020			2019
Tax computed at federal statutory rate	$	(19,288,357	)	$	(2,479,044	)	$	(1,790,988	)
State income taxes, net of federal benefit		(1,075,114	)		(136,979	)		(113,019	)
Share-based compensation		2,289,214			317,034			285,287
Unrealized loss on FVTPL liabilities		11,752,697			—			—
Other permanent items		(114,799	)		104,181			145,204
Foreign currency and other		929,664			343,574			159,409
Impact of different tax rate in foreign jurisdiction		(4,889,797	)		(787,329	)		(644,394	)
Change in valuation allowance		9,544,429			2,444,853			1,874,952
Income tax recovery	$	(852,063	)	$	(193,710	)	$	(83,549	)

Year ended

Year ended

December 31, 2018

December 31, 2017

Federal income tax benefit at statutory rate
  (1,221,483)
$(312,769)
Permanent Differences
  505
  1,640
Annual reconciling adjustment
  1,449,429
  719,197
Change in valuation allowance
  (228,451)
  (9,186,334)
Change in federal tax rate
  -
  8,778,266
Provision for income taxes
$-
$-

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

8.	~~INCOME TAXES– continued~~

The tax effects of temporary differences that ~~gave~~give rise to significant portions of the deferred tax assets and deferred tax liabilities atare as follows:


	As of December 31,
	2021			2020
Deferred tax assets
Non-capital losses	$	25,110,497		$	10,059,528
Intangible assets		69,964			62,938
Other assets		46,725			42,488
Research and development tax credits		1,972,694			—
Total gross deferred tax assets		27,199,880			10,164,954
Less: valuation allowance		(18,659,901	)		(9,115,472	)
		8,539,979			1,049,482
Deferred tax liabilities
Intangible assets		(6,276,390	)		(703,872	)
Property and equipment		(2,226,741	)		(281,092	)
Long-term debt		(251,646	)		(293,168	)
Funding obligation		(109,681	)		(35,404	)
Unsecured convertible promissory notes		—			(54,000	)
		(8,864,458	)		(1,367,536	)
Net deferred tax liability	$	(324,479	)	$	(318,054	)

At December 31, ~~2018 and December 31, 2017 are as follows:~~

December 31, 2018

December 31, 2017

Deferred tax assets:

  Net operating loss carryforward
  11,968,500
$11,116,332
  Stock based compensation
  4,490,775
  4,209,307
  Other
  371,636
  302,042
Deferred tax liabilities:


  Investment in oil and gas properties
  (2,879,086)
  (1,447,405)
Net deferred tax assets and liabilities
  13,951,825
  14,180,276
Less valuation allowance
  (13,951,825)
  (14,180,276)
Total deferred tax assets and liabilities
$-
$-

~~The~~2021, the Company ~~had a net deferred tax asset related to federal~~has net operating loss carryforwards (“NOLs”) of ~~$56,992,857~~approximately $91.3 million (2020: $34.7 million) that can be used to offset future taxable income, and ~~$52.934.915 at December 31, 2018 and December 31, 2017, respectively. The federal net operating loss carryforward will~~such NOLs, as well as timing differences from certain financial instruments, result in a gross deferred tax asset of approximately $27.2 million (2020: $10.2 million). These NOLs begin to expire in ~~2033. Realization~~2028.

In evaluating its valuation allowance, the Company considers all available positive and negative evidence, including projected future taxable income and recent financial performance. Due to uncertainty with respect to the ultimate realizability of these deferred tax assets, the Company has recorded a valuation allowance of approximately $18.7 million (2020: $9.1 million) against its deferred tax assets.

17. Net loss per share

The following table sets forth the calculation of basic and diluted net loss per share during the periods presented:


	Year ended December 31,
	2021			2020			2019
Numerator:
Net loss	$	(90,997,261	)	$	(11,611,259	)	$	(8,444,967	)
Denominator:
Weighted-average shares, basic		232,898,398			137,258,259			50,015,137
Weighted-average shares, diluted		232,898,398			137,258,259			50,015,137
Net loss per share
Basic		(0.39	)		(0.08	)		(0.17	)
Diluted		(0.39	)		(0.08	)		(0.17	)

The following potentially dilutive shares were not included in the calculation of diluted shares above as the effect would have been anti-dilutive:


	As of December 31,
	2021		2020		2019
Convertible debt		—		10,423,477		9,957,387
Options		21,404,641		24,477,507		7,860,328
Warrants		5,278,846		3,144,272		862,258
DSUs		3,947,026		3,947,026		1,872,750
		30,630,513		41,992,282		20,552,723

18. Additional cash flow information

The net changes in operating assets and liabilities consist of the ~~deferred tax asset~~following:


	As of December 31,
	2021			2020			2019
Grants receivable	$	149,798		$	(131,318	)	$	16,243
Inventory		325,657			(109,986	)		(17,495	)
Accounts and other receivables		(880,613	)		58,891			(95,244	)
Prepaid expenses and other current assets		(2,100,371	)		(27,313	)		(124,555	)
Trade payables		6,906,376			(644,120	)		998,335
Due to related party		(78,940	)		(26,984	)		2,943
Operating lease Right-of-use Asset		1,018,691			—			—
Operating lease liabilities		(688,183	)		—			—
	$	4,652,415		$	(880,830	)	$	780,227

19. Fair value measurements

The Company uses a fair value hierarchy, based on the relative objectivity of inputs used to measure fair value, with Level 1 representing inputs with the highest level of objectivity and Level 3 representing the lowest level of objectivity.

The fair values of cash and cash equivalents, restricted cash, short-term investments, grants and accounts receivables, due from (to) related parties and trade and other payables approximate their carrying values due to the short-term nature of these instruments. The current portion of long-term debt has been included in the below table.

The fair values of convertible promissory notes secured convertible debentures and unsecured convertible debentures are classified at level 3 as they were accounted for under the fair value option election of ASC 825 and the estimated fair value was computed using significant inputs that are not observable in the market.

The fair value of assets held for sale is ~~dependent, in part, on generating sufficient taxable income prior to expiration~~classified at level 3 as the fair value of the ~~loss carryforwards.~~ O&G assets was estimated by obtaining a valuation study performed by a third party valuation firm. Refer to note 3 for the significant estimates and assumptions used by the Company in the determination of the fair value.

The fair value of the preferred stock liability is also classified as level 3 since the fair value measurement of the oil and natural gas properties forms the basis for the fair value measurement of the preferred stock liability as of June 28, 2021 and as of December 31, 2021.

The fair values of the funding obligation, operating lease liabilities, and long-term debt would be classified at Level 3 in the fair value hierarchy, as each instrument is estimated based on unobservable inputs including discounted cash flows using the market rate, which is subject to similar risks and maturities with comparable financial instruments as at the reporting date.

Carrying values and fair values of financial instruments that are not carried at fair value are as follows:


	2021				2020
Financial liability	Carrying value		Fair value		Carrying value		Fair value
Funding obligation	$	268,976	$	170,338	$	776,884	$	571,839
Operating lease liabilities		4,370,635		6,149,369		270,581		270,641
Long-term debt		3,228,449		2,303,648		3,034,048		2,734,931

20. Revenue

The Company has ~~placed a 100% valuation allowance against the net deferred tax asset because future realization of these assets is not assured.~~

On December 22, 2017, the U.S. government enacted comprehensive legislation titled the Tax Cuts and Jobs Act. Generally, effective for years 2018 and beyond, it makes broad and complex changes to the Internal Revenue Code, including, but not limited to, reducing the federal corporate income tax rate from 35% to 21%. As of December 31, 2017 we made a reasonable estimate of the effects on our deferred tax assets and liabilities of the change in the corporate tax rate to be effective in 2018. The estimated amount is included our computation of net deferred tax assets and liabilities and the related valuation allowance.

9.	~~PROMISSORY NOTES~~

On April 10, 2017, we sold to investors in a private transaction two 12% unsecured promissory notes with a total of $8,000,000 in principal amount. Interest only is due and payable on the notes each month at the rate of 12% per annum, with a balloon payment of the outstanding principal due and payable at maturity on April 10, 2020. The holders of the notes will also receive annual payments of common stock at the rate of 2.5% of principal amount outstanding,1 operating segment based on ~~a volume-weighted average price. Both notes were sold at an original issue discount~~how management internally evaluates separate financial information, business activities and management responsibility.

Revenue is disaggregated as follows:


	Year ended December 31,
	2021		2020		2019
Product sales	$	407,914	$	2,905	$	23,745
Contract revenue [1]		3,427,938		624,316		247,669
Other development revenue		246,665		494,962		630,996
Development revenue		3,674,603		1,119,278		878,665
	$	4,082,517	$	1,122,183	$	902,410

1 Contract revenue represents previously recorded deferred revenue that was recognized as revenue after satisfaction of ~~94.25% and accordingly, we received total proceeds~~performance obligations either through passage of ~~$7,540,000 from the investors. We used the proceeds~~time or after completion of specific performance milestones. Refer to note 21 for ~~working capital and general corporate purposes, which includes, without limitation, drilling capital, lease acquisition capital and repayment of prior debt.~~

These 12% promissory notes allow for early redemption. The notes also contain certain covenants under which we have agreed that, except for financing arrangements with established commercial banking or financial institutions and other debts and liabilities incurred in the normal course of business, we will not issue any other notes or debt offerings which have a maturity date prior to the payment in full of the 12% notes, unless consented to by the holders.

~~The effective interest rate is 16.15%.~~

~~On April 24, 2017, we used $2,509,500 of the proceeds from this financing to redeem and repay a portion of the~~ outstanding ~~12% Series B Convertible Unsecured Promissory Notes. Separately, $1,000,000 of the principal~~contracts.

Customer concentration

A significant amount of the ~~Series B Notes plus accrued interest was converted into 1,007,890 shares of common stock and $64,297 was rolled into the new debt financing.~~

~~On February 6, 2018, we sold to an investor in a private transaction a 12% unsecured promissory note~~revenue is derived from contracts with a principal amount of $4,500,000. Interest only is due and payable on the note each month at the rate of 12% per annum, with a balloon payment of the outstanding principal due and payable at maturity on April 10, 2020. The holder of the note will also receive annual payments of common stock at the rate of 2.5% of principal amount outstanding, based on a volume-weighted average price. We sold the note at an original issue discount of 96.27% and accordingly, we received total proceeds of $4,332,150 from the investor. We used the proceeds for working capital and general corporate purposes, which includes, without limitation, drilling capital, lease acquisition capital and repayment of prior debt.

This 12% promissory note allows for early redemption, provided that if we redeem before February 6, 2019, we must pay the holder all unpaid interest and common stock payments on the portion of the note redeemed that would have been earned through February 6, 2019. The note also contains certain covenants under which we have agreed that, except for financing arrangements with established commercial banking or financial institutions and other debts and liabilities incurred in the normal course of business, we will not issue any other notes or debt offerings which have a maturity date prior to the payment in full of the 12% note, unless consented to by the holder.

~~The effective interest rate is 15.88%.~~

~~TORCHLIGHT ENERGY RESOURCES, INC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

9.	~~PROMISSORY NOTES (CONTINUED)~~

On April 12, 2018, the holders of the notes described above received 172,342 shares of common stock as a payment in kind representing the annual payments of common stock due at the rate of 2.5% of principal amount outstanding as of April 10, 2018 based on a volume-weighted average price calculation.

~~Promissory note transactions for~~major customers. For the year ended December 31, ~~2018 and 2017 are summarized as follows:~~

~~Unsecured promissory note balance - December 31, 2016~~	$-

~~New borrowing~~	~~8,000,000~~
~~Original issue discount~~	~~(460,000~~)
~~Proceeds from borrowing~~	~~7,540,000~~

~~New note debt issuance costs~~	~~(279,754~~)
~~Accretion of discount and amortization of debt issuance costs~~	~~9,035~~

~~Unsecured promissory note balance - December 31, 2017~~	$~~7,269,281~~

~~New borrowing~~	~~4,500,000~~
~~Original issue discount~~	~~(167,850~~)
~~Proceeds from borrowing~~	~~4,332,150~~

~~New note debt issuance costs~~	~~(225,000~~)
~~Accretion of discount and amortization of debt issuance costs~~	~~485,649~~


~~Unsecured promissory note balance - December 31, 2018~~	$~~11,862,080~~

~~In connection with the transaction for the acquisition of Warwink Properties effective December 5, 2017,~~2021, the Company borrowed $3.25 million from its Chairman, Greg McCabe on a three-year interest only promissory note bearing interest at 5% per annum. The Company paid $250,000 as a principal payment on June 20, 2018 and paid the remaining principal balancehad 3 customers that accounted for $3,307,914 or 81% of ~~$3,000,000 on October 19, 2018.~~

~~On October 17, 2018, we sold to certain investors in a private transaction 16% Series C Unsecured Convertible Promissory Notes with a~~ total principal amount of $6,000,000. Interest and principal are due and payable on the notes in one balloon payment at maturity on April 17, 2020. The notes are convertible, at the election of the holders, into an aggregate 6% working interest in certain oil and gas leases in Hudspeth County, Texas, known as our “Orogrande Project.” After an analysis of the transaction and a ~~review of applicable accounting pronouncements, m~~anagement concluded that the notes issued on October 17, 2018 which contain a conversion right for holders to convert into a working interest in the Orogrande Project of the Company, meet a specific scope exception to the provisions requiring derivative accounting.

The notes allow us to redeem them early only upon the event of a fundamental transaction, such as a merger or sale of substantially all our assets. The notes provide that the noteholders may accelerate and declare any and all of the obligations under the notes to be immediately due and payable in the event of default, such as nonpayment, failure to perform required conversions, failure to perform any covenant or agreement under the notes, an insolvency event, or certain defaults or judgments. As part of the sale of the of the notes, the noteholders required that McCabe Petroleum Corporation, a Texas corporation owned by our Chairman Gregory McCabe (“MPC”), provide them a put option whereby they have the right to have MPC purchase from them any unpaid principal amount due on the notes. Additionally, if there is a fundamental transaction, Mr. McCabe will be required to pay a fee to each noteholder that elects not to convert or require MPC to purchase the principal amount under the note, which fee will be equal to such noteholder’s pro-rata share of a total fee amount of $1,500,000.

We received total proceeds of $6,000,000 from the sale of the notes, of which $3,000,000 was used to pay back the promissory note issued to MPC on December 1, 2017, which note was due on December 31, 2020. We used the remaining proceeds for working capital and general corporate purposes, which includes, without limitation, drilling and lease acquisition capital.

Prior to entering into the above transactions, our Board of Directors formed a special committee composed of independent directors to analyze and authorize the transactions on behalf of Torchlight Energy Resources, Inc. and determine whether the transactions are fair to the company. In this role, the special committee engaged an independent financial consulting firm which rendered a fairness opinion deeming that the transactions were fair to the company, from a financial point of view, and contained terms no less favorable to the company than those that could be obtained in arm’s length transactions.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~10.~~

~~ASSET RETIREMENT OBLIGATIONS~~

~~The following is a reconciliation of the asset retirement obligation liability for~~revenue. For the year ended December 31, ~~2018 and 2017:~~

~~Asset retirement obligation – December 31, 2016~~	$~~7,051~~

~~Accretion expense~~	~~216~~
~~Estimated liabilities recorded~~	~~2,007~~

~~Asset retirement obligation – December 31, 2017~~	$~~9,274~~

~~Accretion expense~~	~~390~~
~~Estimated liabilities recorded~~	~~4,689~~

~~Asset retirement obligation – December 31, 2018~~	$~~14,353~~

~~11.~~

~~SUBSEQUENT EVENTS~~

~~In February and March, 2019~~2020, the Company ~~raised~~had 3 customers that accounted for $807,912 or 72% of total revenue.

Nanotech currently derives a ~~total~~significant portion of ~~$2,000,000~~its revenue from ~~investors through~~contract services with a G10 central bank. In 2021, Nanotech entered into a development contract for up to $41.5 million over a period of up to five years. These contract services incorporate both nano-optic and optical thin film technologies and are focused on developing authentication features for future banknotes. During the sale of 14% Series D Unsecured Convertible Promissory Notes. Principal is payable in a lump sum at maturity on May 11, 2020 with payments of interest payable monthly at the rate of 14% per annum. Holdersyear ended December 31, 2021, revenue recognized from this development contract represented 45% of the ~~notes have~~Company's total revenue.

Cooperation Framework Agreement

During the ~~right~~year ended December 31, 2020, the Company entered into a Cooperation Framework Agreement ("CFA") with Covestro Deutschland AG (“Covestro”) where Covestro is obligated to ~~convert principal~~provide EUR 800,000 (US$987,577) of proceeds to the Company in exchange for a license to the Interglass patents and ~~interest at any time into common stock at a conversion price~~upon the completion of ~~$1.08 per share.~~certain performance milestones. The Company has also entered into an agreement with Canton Zug in Switzerland for the acquisition of specialized lens casting production equipment and intellectual property ("Interglass assets") for US$800,000.

During the year ended December 31, 2021, and pursuant to receiving the required funds from Covestro, the Company acquired and recognized the Interglass assets in property, plant and equipment in the amount of $320,000 and intangibles in the amount of $480,000. The Company identified the performance obligations associated with the agreement as per ASC 606 Revenue Recognition and recognized the full amount of the contract as development revenue in the consolidated statement of operations and comprehensive loss.

21. Deferred revenue

Deferred revenue consists of the following:


	As of December 31,
	2021		2020
Satair A/S-exclusive rights [1]		717,615		815,310
Satair A/S-advance against PO [2]		490,929		488,847
LM Aero-MetaSOLAR commercialization [3]		92,698		646,135
Breakthrough Starshot Foundation [4]		75,000		75,000
Innovate UK-R&D tax credit		18,588		18,778
Other deferred revenue		21,910		—
		1,416,740		2,044,070
Less current portion		779,732		1,239,927
	$	637,008	$	804,143

[1] On September 18, 2018, the Company signed an exclusive distribution agreement with Satair A/S for a term of 10 years. According to this agreement, the Company grants Satair A/S the exclusive right to ~~redeem~~sell, market, and distribute eyewear and visor products incorporating metamaterial-based laser protection technology that are developed or manufactured by the ~~notes at any time, provided that the redemption amount must include all interest that would have been earned through maturity.~~

~~Additionally,~~Company for use in aviation, military and defense. On September 13, 2018, the Company received ~~$1,214,078 from the sale~~a fee of ~~common stock at $.80 per share during February and March, 2019. The offering included provisions~~$1,000,000 for the ~~cancellation~~exclusive distribution rights granted under this agreement and the payment was recognized as deferred revenue on the consolidated balance sheets. It will be accounted as development revenue over a period of ~~warrants~~8 years and 0 repayment of the $1,000,000 is required if the contract termination is after the 8th anniversary of the effective date. During the year ended December 31, 2021, the Company has recognized $102,269 (2019: $98,292) as development revenue related to this agreement.

[2] On July 20, 2018, the Company received a purchase ~~common stock issued~~order for MetaVisor (eyewear/eye protection) from Satair A/S for $2,000,000. On November 7, 2018, the Company received a partial advance payment of $500,000 against this purchase order. The Company has set up a guarantee/standby letter of credit with RBC. In the event the Company fails to deliver the ~~participants in~~product as per the ~~agreements in prior periods.~~

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION~~

~~AND PRODUCTION ACTIVITIES~~

~~(Unaudited)~~

~~The unaudited supplemental information on oil and gas exploration and production activities has been presented~~contract or refuse to accept the return of the product as per the buyback clause of the contract or fails to repay the advance payment in accordance with ~~Financial Accounting Standards Board Accounting Standards Codification Topic 932,~~ ~~Extractive Activities—Oil and Gas~~the conditions of the agreement signed with Satair on September 18, 2018, Satair shall draw from the letter of credit with RBC. As at December 31, 2021, 0 amount has been drawn from the letter of credit with RBC. Refer to note 28 for information regarding the letter of credit.

[3] On April 26, 2017, the Company received $4,150,000 from Lockheed Martin Aeronautics Corporation (“LM Aero”) in relation to the Offset Project Agreement (“OPA”). The purpose of the OPA was to document the agreement between LM Aero and the ~~SEC’s final rule,~~ ~~Modernization~~Company with respect to the Company’s planned growth through R&D and commercialization activities using the MetaSOLAR technology as well as the contribution that LM Aero made to the Company in return for the Company’s effective assistance in obtaining credit arising from the project as set forth in the OPA. The Company has set up an irrevocable standby letter of ~~Oil~~credit with RBC. In the event the Company fails to meet the obligations under the OPA, LM Aero shall draw from the letter of credit with RBC. The performance obligations for the milestone are satisfied through-out the period. During the year ended December 31, 2021, the Company has recognized $562,531 (2020: $526,109) as development revenue related to this agreement.

[4] On March 1, 2020, the Company entered into a research agreement with Breakthrough Starshot Foundation LLC under the project “Lightsail” for $150,000. The Company received $75,000 on March 6, 2020 which has been recorded as part of deferred revenue.

22. Deferred government assistance

a) Grants receivable


	As of December 31,
	2021		2020
ACOA-PBS [1]	$	8,069	$	11,960
Co-Op wage subsidy [2]		7,318		31,400
Canada Emergency Wage Subsidy [3]		122,940		233,446
Innovate UK – Diabet [4]		13,790		51,062
NSBI - Export development program [5]		23,663		—
	$	175,780	$	327,868


[1]	On November 21, 2018, ACOA approved two non-repayable contribution of $37,679 each to the Company under Business Development Program – Productivity and Business skills (“PBS”) for the cost to create product and commercialization strategies.


[2]	During 2021 and 2020, the Company applied for and received grants related to co-op students and recent graduates under the Nova Scotia Co-Op Subsidy, Graduate To Opportunity Program ("GTO") and Venture for Canada program ("VFC").


[3]	During 2021, the Company received the 2020 outstanding balance of $233,446 as well as recognized $443,494 government assistance from Canada Emergency Wage subsidy ("CEWS") as other income in the consolidated statements of operations and comprehensive loss, of which $321,547 has been received.

[4]

On February 13, 2019, Innovate UK approved a grant to MediWise for the project “Diabet – Innovate wrist device for high accuracy non-invasive blood glucose monitoring”. During 2021, the Company received $132,288 (2020: $139,940) in relation to the grant and recognized government assistance of $110,125 (2020: $130,734) as other income in the consolidated statements of operations and comprehensive loss.


[5]	On December 15, 2021, the Company applied for NSBI - Export development program and recognized $23,663 as other income in the consolidated statements of operations and comprehensive loss.

b) Deferred government assistance


	As of December 31,
	2021		2020
SDTC [1]	$	846,612	$	779,579
Deferred government assistance		3,038		31,400
		849,650		810,979
Less: current portion		846,612		779,578
	$	1,696,262	$	1,590,557

[1]

On May 15, 2018, the Company entered into an agreement with the Canada Foundation for Sustainable Development Technology Canada (“SDTC”) for $4,189,966. The contribution provides funding for eligible costs incurred relating to the further development and demonstration of technology related to solar cells in connection with the project entitled “Enabling solar flight a testing ground for lightweight and efficient solar panels”. On March 30, 2021, the Company has received an additional 5% contribution from SDTC of $223,409 (2020: $211,868). The Company has recognized $161,990 (2020: $639,505) as government assistance in the consolidated statements of operations and comprehensive loss.

c) Government assistance recognized in the consolidated statements of operations and ~~Gas Reporting~~.comprehensive loss


	Year ended December 31,
	2021		2020		2019
SDTC	$	161,990	$	639,505	$	192,574
Payroll subsidies		741,322		831,148		690,434
Amortization of deferred government assistance		145,739		135,654		135,125
Fair value gain on initial recognition of ACOA loans		236,021		—		172,352
Scientific Research and Experimental Development ("SR&ED")		448,894		—		—
Other grants		—		23,807		41,290
	$	1,733,966	$	1,630,114	$	1,231,775

23. Interest expense, net


	Year ended December 31,
	2021			2020			2019
Non-cash interest accretion	$	(904,925	)	$	(1,052,478	)	$	(742,360	)
Interest & bank charges		(220,460	)		(394,330	)		(394,147	)
Interest income		18,940			16,854			585
	$	(1,106,445	)	$	(1,429,954	)	$	(1,135,922	)

~~Investment~~

24. Loss on financial instruments, net


	Year ended December 31,
	2021			2020			2019
Loss on secured convertible promissory notes	$	—		$	(5,234	)	$	(280,319	)
Loss on unsecured convertible promissory notes – Bridge loan		(19,163,417	)		(139,610	)		—
(Loss) Gain on unsecured convertible promissory notes – Torchlight notes		(343,197	)		354,840			—
Loss on secured convertible debentures		(16,957,029	)		(865,280	)		—
Loss on unsecured convertible debentures		(4,076,448	)		(189,709	)		—
	$	(40,540,091	)	$	(844,993	)	$	(280,319	)

The net gain/loss on financial instruments for the years ending December 31, 2021 and December 31, 2020 represent non-cash gains/losses resulting from remeasurement of the fair value of convertible financial liabilities at each balance sheet date or on conversion date using the fair value option.

Each of the above referenced promissory notes and debentures included a conversion feature, exercisable at the option of the debt holder. For accounting purposes, each of these conversion features is an embedded derivative in ~~oil~~the note or debenture. The Company elected to account for fluctuations in (a) the value of the liabilities driven by interest rate volatility and ~~gas~~the Company’s credit risk and (b) the embedded derivatives driven by fluctuations in the Company’s common stock share price using a method known as Fair Value option. This accounting method calls for the Company to measure the fair value of the convertible financial liabilities at each balance sheet date and to record any fluctuations in the values that as non-cash adjustments relating to instrument specific credit risk in the other comprehensive income and non-cash adjustments relating to other factors in the statements of operations. If, as in the case of the liabilities described above, the debt is converted, the valuations and any adjustments are to be recorded as of the date of such conversion.

The Fair Value option also provides that the total revaluation adjustment be recorded in Common Stock and additional paid in capital thus having no impact on stockholders' equity despite the recording of the loss in the statement of operations.

25. Other (loss) income, net


	Year ended December 31,
	2021			2020			2019
O&G assets maintenance cost [1]	$	(14,155,851	)	$	—		$	—
Government Assistance (note 22)		1,733,966			1,630,114			1,231,775
Other income		8,850			—			401,186
Fair value gain (loss) on long-term debt		2,278			(106,635	)		448,437
Fair value gain (loss) on funding obligation (note 26)		471,689			(32,291	)		—
	$	(11,939,068	)	$	1,491,188		$	2,081,398


[1]	The Company incurred costs of $14.2 million in relation to certain drilling activity carried out at its Oil and Gas properties, to remain in compliance with all aspects of the Company's lease obligations and to satisfy the Continuous Drilling Clause ("CDC") with University Lands.

26. Funding obligation


	As of December 31,
	2021			2020
Outstanding obligation [1]	$	1,025,398		$	1,021,050
Fair value of interest-free component [2]		(855,060	)		(384,056	)
Principal adjusted for interest-free component		170,338			636,994
Accumulated non-cash interest accretion		98,638			139,890
Carrying amount		268,976			776,884
Less current portion		—			—
	$	268,976		$	776,884

[1]

In June 2019, the Company entered into a statement of work (“SOW”) with a third party for the purchase of manufacturing equipment. The SOW was initiated based on the Industrial and Regional Benefits general investment funding between the third party and the Government of Canada. The Company received the funds in 2 tranches after achieving 2 milestones as per the SOW. The funds are repayable, commencing three years from date of receipt, based on 10% of revenue from the sale of holographic film that is produced using the related manufacturing equipment paid for under this funding obligation.

In June 2019, the Company achieved the first milestone and received CA$325,000 and in October 2019, the Company achieved the second milestone and received CA$975,000. The Company has not sold holographic film related to this SOW to date.

[2]

The amounts received under the agreement have been recorded at fair value by applying the effective interest rate method on the dates the funding was received, using an estimated market interest rate of 15%. Accordingly, during the year ended December 31, 2019, the Company recognized $401,186 as other income in the consolidated statements of operations and comprehensive loss. In the year ended 2020, the Company recognized a loss of $32,291 resulting from changes in repayment period of the obligation. The gain was recorded in the consolidated statements of operations and comprehensive loss. During the year ended December 31, 2021, the Company elected to bring the market interest rate to current rates and increased it to 19.17%. Following management discussions the revenue generation ability from the manufacturing equipment bought under the funding obligation was reduced, resulting in a longer repayment period. The combination of these two changes prompted the Company to recognize a gain of $471,004 for the year ended December 31, 2021 in the consolidated statements of operations and comprehensive loss.

27. Leases

The Company entered into the following leases during the years ended December 31, ~~2018~~2021 and ~~2017~~2020 respectively outlined below:

Nova Scotia, Canada

On January 1, 2013, MMI signed an initial lease with a lessor in Dartmouth, Nova Scotia, commencing in 2013. The most recent amendment was signed on July 1, 2020 for a month to month lease for an 8,792 square foot facility, which currently hosts the Company’s holography and lithography R&D labs and manufacturing operations.

On August 31, 2020, MMI signed a ten-year lease with a lessor in Nova Scotia, Canada, commencing January 1, 2021, for an approximately 53,000 square foot facility, which will host the Company’s holography and lithography R&D labs and manufacturing operations. Commencing in September 2021, the Company was to pay monthly basic rent of CA$28,708 and additional rent for its proportionate share of operating costs and property taxes of CA$24,910 per month, subject to periodic adjustments. In conjunction with signing the lease, the Company entered into a loan agreement with the lessor in the amount of CA$500,000 to fund leasehold improvements.

The Company has accounted for the lease as an operating lease and recorded a right-of-use (“ROU”) asset in the amount of $1,021,499. The ROU asset is ~~detailed as follows:~~

2018 2017
Property acquisition costs $ 1,072,047 $ 7,227,362
Development costs $ 9,191,041 $ 8,034,962
Exploratory costs $ - $ -

Totals $ 10,263,088 $ 15,262,324

~~Property acquisition costs presented above exclude interest capitalized into~~being amortized over the ~~full cost pool of $2,020,019~~remaining lease term in ~~2018 and $1,010,868 in 2017.~~

~~Property acquisition cost relates~~an amount equal to the ~~Company’s acquisition~~difference between the calculated straight-line expense of ~~additional working interests~~the total lease payments less the monthly interest calculated on the remaining lease liability.

On June 9, 2021, MMI signed a lease amendment with the landlord to expand the leased space of the facility by approximately 15,000 square feet, reduce the annual rent for the 10-year term of the lease and obtain from the landlord CA$500,000 in cash to fund ongoing tenant improvements. In exchange, the landlord received 993,490 MMI common shares valued at CA$3.40 per share.

The lease amendment was accounted for as a lease modification. As such, the operating lease liability was remeasured, and the difference was recorded in ROU assets.

California, United States

On June 3, 2021, MMI signed a lease amendment with its lessor in Pleasanton, California to expand the leased space of the facility in the ~~Orogrande Project in west Texas~~United States to include additional office space of 5,475 square feet, commencing from June 2021. Alongside this lease amendment, the durations of all of the leased spaces were also extended until August 31, 2024. The lease amendment was accounted for as a lease modification. As such, the operating lease liability was remeasured, and the ~~acquisition~~difference was recorded in ROU assets. These amendments required the Company to derecognize the existing right-of-use asset and operating lease liability and recognize a new right-of-use asset and an operating lease liability commencing June 2021.

On September 16, 2021, the Company signed an agreement to extend the lease term of its existing leased premises at Pleasanton, California, from September 1, 2024 to September 30, 2026. In addition, the ~~Warwink Project,~~Company also signed an agreement to lease an additional 8,904 square feet at the same property to have a total leased area at Pleasanton of 19,506 square feet. The new lease commenced on October 1, 2021 and has the same expiry date as above. The lease amendment was accounted for as a lease modification. As such, the operating lease liability was remeasured, and the difference was recorded in ~~west Texas. The development costs include work in the Orogrande, Hazel, and Warwink projects in west Texas. No development costs were incurred for Oklahoma properties in 2018.~~

~~Oil and Natural Gas Reserves~~

~~Reserve Estimates~~

~~SEC Case.~~ ~~The following tables sets forth,~~ROU assets as of December 31, ~~2018, our estimated net proved oil~~2021.

Massachusetts, United States

On September 17, 2021, the Company entered into an lease agreement with Boxer Property Management Corp. to lease a space of 4,414 square feet at 85 Swanson Road, Boxborough, MA with a term of two years commencing October 1, 2021. The Company recognized a ROU asset and ~~natural gas reserves,~~an operating lease liability of $132,780 for this lease.

Athens, Greece

On November 1, 2021, the ~~estimated present value (discounted~~Company entered into a lease agreement with Special Purpose AP10 S.A. Real Estate Company, to lease a space of 1,436 square meters (15,457 square feet) in Athens, Greece, with a term of 10 years commencing oNovember 1, 2021. The Company recognized a ROU asset and an operating lease liability of $1,019,795 (EUR 898,419) as of November 1, 2021. The Company

secured a rent-free period of 9 months commencing the date of lease commencement, and also prepaid two months amounting to $35,188 (EURO 31,000).

British Columbia, Canada

As part of the Nanotech acquisition (note 3) the Company acquired Nanotech's lease obligations, including a space of 7,860 square feet in British Columbia, Canada with a remaining lease term of 3 years and 7 months, ending on April 30, 2025. The Company recognized a ROU asset and an operating lease liability of $607,354 for this lease.

London, United Kingdom

In October 2020, the Company renewed its lease agreement to lease a space of 742 square feet in London, United Kingdom with a term of two years commencing on October 20, 2020. The Company recognized a ROU asset and an operating lease liability of $62,543 (GBP 46,284) at initial recognition.

Steinhausen, Switzerland

The Company entered into a lease agreement with a lessor to lease a space of 1,335 square feet at Steinhausen, Switzerland with a term of one year and four months commencing on March 1, 2021. The Company recognized a ROU asset and an ~~annual rate~~operating lease liability of ~~10%~~$25,009 (CHF 22,815) as of ~~estimated future net revenues before future income taxes (PV-10)~~March 1, 2021. The monthly rent was reduced from $1,756 (CHF 1,602) to $ 1,019 (CHF 930) in August 2021 as per the terms of the agreement.

Total operating lease expense included in the consolidated statements of operations and ~~after future income taxes (Standardized Measure)~~comprehensive loss is as follows:


	Year ended December 31,
	2021		2020		2019
Operating lease expense	$	546,197	$	224,210	$	201,242
Short term lease expense		229,475		104,470		126,421
Variable and other lease expense		92,862		40,006		31,408
Total		868,534		368,686		359,071

The Company completed its evaluation of ~~our proved reserves~~the provisions of ASC 842 "Leases" and ~~our estimated net probable oil~~elected the practical expedient to not capitalize any leases with initial terms of less than twelve months on its balance sheet and ~~natural gas reserves, each prepared using standard geological~~include them as short term lease expense in the consolidated statements of operations.

Future minimum payments under non-cancelable operating lease obligations were as follows as of December 31, 2021:


2022		1,028,314
2023		1,176,935
2024		1,180,745
2025		1,098,049
Thereafter		3,965,777
Total minimum lease payments		8,449,820
Less: interest		(4,079,185	)
Present value of net minimum lease payments		4,370,635
Less: current portion of lease liabilities		(663,861	)
Total long-term lease liabilities	$	3,706,774

Supplemental balance sheet information related to leases is as follows:


	Year ended December 31,
	2021	2020
Weighted Average Remaining Lease Term	5 years	2 years
Weighted Average Discount Rate	17.85 %	15 %

28. Commitments and ~~engineering methods generally accepted~~contingencies

Legal Matters

On January 31, 2020, Torchlight Energy Resources, Inc. and its wholly owned subsidiaries Torchlight Energy, Inc. and Torchlight Energy Operating, LLC were served with a lawsuit brought by Goldstone Holding Company, LLC (Goldstone Holding Company, LLC v. Torchlight Energy, Inc., et al., in the 160th Judicial District Court 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 allegations 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 ~~petroleum industry~~applicable statute of limitations, that the claims had been released, and that the claims were barred because of contractual disclaimers between sophisticated note 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 ~~accordance~~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's 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 Cote rdax 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 directors to the case pursuant 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 Corporation 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 ~~assumptions prescribed by~~citation, alleging that he was a Canadian citizen with 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.

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.

In September 2021, the Company received a subpoena from the Securities and Exchange Commission, ~~(“SEC”). All~~Division of ~~our reserves are located~~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 is cooperating and intends to continue to cooperate with the SEC’s investigation. The Company can offer no assurances as to the outcome of this investigation or its potential effect, if any, on the Company or its results of operation.

On January 3, 2022, a putative securities class action lawsuit was filed in the ~~United States.~~

~~The PV-10 value is a widely used measure~~U.S. District Court for the Eastern District of ~~value of oil and natural gas assets and represents a pre-tax present value of estimated cash flows discounted at ten percent. PV-10 is considered a non-GAAP financial measure as defined by~~New York captioned Maltagliati v. Meta Materials Inc., et al., No. 1:21-cv-07203, against the SEC. We believe that our PV-10 presentation is relevant and useful to our investors because it presents the estimated discounted future net cash flows attributable to our proved reserves before taking into account the related future income taxes, as such taxes may differ among various companies. We believe investors and creditors use PV-10 as a basis for comparisonCompany, its Chief Executive Officer, its Chief Financial Officer, Torchlight’s former Chairman of the ~~relative size~~Board of Directors, and ~~value~~Torchlight’s former Chief Executive Officer. The complaint, purportedly brought on behalf of ~~our proved reserves~~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 ~~reserve estimates of other companies. PV-10 is not~~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 ~~measure of financial or operating performance under GAAP and neither it nor~~similar putative securities class action lawsuit was filed in the ~~Standardized Measure is intended to represent the current market value of our estimated oil and natural gas reserves. PV-10 should not be considered in isolation or as a substitute~~U.S. District Court for the ~~standardized measure~~Eastern District of ~~discounted future net cash flows~~New York captioned McMillan v. Meta Materials Inc., et al., No. 1:22-cv-00463. This complaint names the same defendants and asserts the

same claims on behalf of the same purported class as ~~defined under GAAP.~~

the Maltagliati action. The ~~estimates~~Company believes these actions (collectively, the “Securities Class Action”) have no merit and intends to vigorously defend itself against these allegations.

On January 14, 2022, a shareholder derivative action was filed in the U.S. District Court for the Easter District of ~~our proved reserves~~New York captioned Hines v. Palikaras, et al., No. 1:22-cv-00248. The complaint names as defendants certain of the Company’s current officers and directors, certain former Torchlight officers and directors, and the ~~PV-10 set forth herein reflect estimated future gross revenue~~Company (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 ~~be generated~~the derivative plaintiff, including attorneys’ fees.

Contractual Commitments and Purchase Obligations

As highlighted in note 20, on January 29, 2021, the Company arranged an irrevocable standby letter of credit with TD in favor of Covestro for EUR 600,000 in relation to the CFA agreement. In the event the Company fails to meet the performance milestones under the CFA, Covestro shall draw from the ~~production~~letter of ~~proved reserves, net~~credit with TD. The letter of ~~estimated production~~credit was secured by restricted cash of CA$1,000,000 under a cash use agreement which has been recorded as long-term debt in the consolidated balance sheets. In July 2021, the Company settled the long term debt and ~~future development costs, using prices and costs under existing economic conditions~~used its own funds as guarantee. Covestro has issued certificates of reduction of $462,563 (ER 300,000) to reduce the letter of credit after completion of certain performance milestones. This will take effect in Fiscal 2022. As at December 31, ~~2018. For purposes~~2021, the letter of ~~determining prices, we used~~credit has an outstanding amount of EUR 600,000.

During 2018, the ~~average~~Company arranged a guarantee/standby letter of ~~prices~~credit with RBC in favor of Satair A/S for $500,000 in relation to an advance payment received. In the event the Company fails to deliver the product as per the contract or refuse to accept the return of the product as per the buyback clause of the contract or fails to repay the advance payment in accordance with the conditions of the agreement signed with Satair on September 18, 2018, Satair shall draw from the letter of credit with RBC. Borrowings from the letter of credit with RBC are repayable on demand. The letter of credit from RBC is secured by a performance security guarantee cover issued by Export Development of Canada. Further, this guarantee/standby letter of credit expires on October 5, 2022. As at December 31, 2021, 0 amount has been drawn from the letter of credit with RBC.

On December 8, 2016, the Company entered into a cooperation agreement with a large aircraft manufacturer to co-develop laser protection filters for space and aeronautical civil and military applications, metaAIR, and support the setup of manufacturing facilities for product certification and development. The cooperation agreement includes financial support provided to the Company in the form of non-recurring engineering costs of up to $4,000,000 to be released upon agreement of technical milestones in exchange for a royalty fee due by the Company on gross profit after sales and distribution costs. The total royalty fee to be paid may be adjusted based on the timing of the Company’s sales and the amount ultimately paid to the Company by large aircraft manufacturer to support the development.

Certain nano-optic products are subject to a 3% sales royalty in favor of Simon Fraser University (“SFU”) where certain elements of the nano-optic technology originated. Royalties were $NaN during the period since acquisition date until December 31, 2021. In 2014, the Company's wholly owned subsidiary, Nanotech, prepaid royalties that would offset against future royalties owed as part of the transfer of the intellectual property from SFU, of which $197,016 remains prepaid as at December 31, 2021.

Product revenue associated with 6 patents acquired by Nanotech is subject to royalties. The Company agreed to share 10% of any revenues related to the patents received from a specific customer for ~~each month within~~a period of two years and ongoing royalties of 3% to 6% on other revenues derived from the ~~12-month~~patents for a period of five years. There were 0 royalties during the year ended December 31, 2018, adjusted for quality and location differences, which was $62.04 per barrel of oil and $3.10 per MCF of gas. This average historical price is not a prediction of future prices. The amounts shown do not give effect to non-property related expenses, such as corporate general administrative expenses and debt service, future income taxes or to depreciation, depletion and amortization.2021.

~~Reserve values as of~~As at December 31, ~~2018 are related~~2021, the Company had on-going commitments for maintenance contracts as follow:


2022	$	292,125
2023		43,730
2024		3,105
	$	338,960

29. Subsequent events

Subsequent to ~~a single producing well~~December 31, 2021, 82,753 stock options and 156,728 warrants were exercised.

Item 9. Changes in ~~Oklahoma, one in the Hazel Project,~~ and ~~one in the Warwink Project.~~

~~BOE equivalents are determined by combining barrels of oil with MCF of gas divided by six.~~

Standardized Measure of Oil & Gas Quantities - Volume Rollforward

Year Ended December 31, 2018

The following table sets forth the Company’s net proved reserves, including the changes therein, and proved developed reserves:

Crude Oil (Bbls)

Natural Gas (Mcf)

BOE

TOTAL PROVED RESERVES:

Beginning of period
  2,300
  43,800
  9,600
Revisions of previous estimates
  21,257
  (7,709)
  19,972
Extensions, discoveries and other additions
  974,110
  138,670
  997,222
    Divestiture of Reserves
  -
  -
  -
Acquisition of Reserves
  -
  -
  -
Production
  (22,887)
  (17,821)
  (25,857)
End of period
  974,780
  156,940
  1,000,937

Standardized Measure of Oil & Gas Quantities - Volume Rollforward

Year Ended December 31, 2017

The following table sets forth the Company’s net proved reserves, including the changes therein, and proved developed reserves:

Crude Oil (Bbls)

Natural Gas (Mcf)

BOE

TOTAL PROVED RESERVES:

Beginning of period
  48,200
  490,900
  130,017
Revisions of previous estimates
  (35,509)
  (437,841)
  (108,483)
Extensions, discoveries and other additions
  -
  -
  -
    Divestiture of Reserves
  -
  -
  -
Acquisition of Reserves
  -
  -
  -
Production
  (10,391)
  (9,259)
  (11,934)
End of period
  2,300
  43,800
  9,600

~~Standardized Measure of Oil & Gas Quantities~~

~~Year Ended December 31, 2018 & 2017~~

~~The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves is as follows :~~

~~A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved oil and natural gas reserves is as follows :~~

~~Due to the inherent uncertainties~~Disagreements With Accountants on Accounting and the limited nature of reservoir data, both proved and probable reserves are subject to change as additional information becomes available. The estimates of reserves, future cash flows, and present value are based on various assumptions, including those prescribed by the SEC, and are inherently imprecise. Although we believe these estimates are reasonable, actual future production, cash flows, taxes, development expenditures, operating expenses, and quantities of recoverable oil and natural gas reserves may vary substantially from these estimates.

~~Reserve Estimation Process,~~Financial Disclosure.

None.

Item 9A. Controls and ~~Technologies~~

The reserve estimates, including PV-10 estimates, set forth above were prepared by PeTech Enterprises, Inc. for the Company’s Properties in Oklahoma. A copy of their full reports with regard to our reserves is attached as Exhibit 99.1 to this annual report on Form 10-K. These calculations were prepared using standard geological and engineering methods generally accepted by the petroleum industry and in accordance with SEC financial accounting and reporting standards.

Results of Operations for Oil and Gas Producing Activities
For the Year Ended December 31, 2018 Total Texas Oklahoma

Oil and Gas revenue $ 1,282,362 $ 1,248,004 $ 34,358

Production costs $ 806,158 $ 787,681 $ 18,477
Depreciation, depletion, and amortization $ 1,173,752 $ 464,318 $ 709,434
Exploration expenses $ - $ - $ -
1,979,910 $ 1,251,999 $ 727,911

Income tax expense $ - $ - $ -

Results of Operations (excluding corporate overhead and interest costs) $ (697,548 ) $ (3,995 ) $ (693,553 )

~~ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~

~~Not Applicable.~~

~~ITEM 9A. CONTROLS AND PROCEDURES~~

~~Management’s~~ Procedures.

Evaluation of Disclosure Controls and Procedures

~~Our management,~~

Management, with the participation of ~~our~~the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of ~~our~~the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, ~~2018.~~ 2021.

Based on this evaluation, ~~our~~the Company's management including the Chief Executive Officer and Chief Financial Officer have concluded that, ~~as of December 31, 2018, our~~due to the material weaknesses in the Company's internal control over financial reporting described below, the Company's disclosure controls and procedures were not effective inas of December 31, 2021.

However, giving full consideration to the material weaknesses, the Company has concluded that ~~they ensure that information required to be disclosed by us~~the consolidated financial statements included in the ~~reports that we file or submit~~Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial position, the results of its operations and its cash flows for each of the periods presented in conformity with U.S. generally accepted accounting principles.

Management’s Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined in Securities Exchange Act Rule 13a‑15(f). The Company’s internal control over financial reporting is a process designed by and under the ~~Exchange Act~~supervision of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, and effected by the Company’s management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s management, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, using the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that internal control over financial reporting was not effective as of December 31, 2021, due to material weaknesses in internal control over financial reporting.

A material weakness is ~~(1) recorded, processed, summarized~~a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements may not be prevented or detected on a timely basis.

Management has determined that it did not maintain effective internal controls over financial reporting due to the existence of the following identified material weaknesses:

•

An ineffective control environment resulting from a lack of the required number of trained financial reporting, accounting, information technology (IT) and ~~reported within~~operational personnel with the ~~time periods specified~~appropriate skills and knowledge and with assigned responsibility and accountability related to the design, implementation, and operation of internal control over financial reporting.

•

An ineffective information and communication process resulting from: (i) insufficient communication of internal control information, including objectives and responsibilities, such as delegation of authority; and (ii) ineffective general IT controls and ineffective controls over information from a service organization, resulting in insufficient controls to ensure the ~~SEC’s rules~~relevance, timeliness and ~~forms,~~quality of information used in control activities.

•

As a consequence of the above, the Company had ineffective control activities related to the design, implementation and ~~(2) accumulated~~operation of process level and ~~communicated~~financial statement close controls which had a pervasive impact on the Company's internal control over financial reporting.

•

An ineffective monitoring process resulting from the evaluation and communication of internal control deficiencies, including monitoring corrective actions, not being performed in a timely manner.

These material weaknesses resulted in material misstatements, which were corrected prior to ~~our~~the release of the consolidated financial statements as of and for the year ended December 31, 2021, and also in immaterial misstatements, some of which were corrected prior to the release of the consolidated financial statements as of and for the year ended December 31, 2021. These material weaknesses create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis.

In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Our management, ~~including~~with the participation of our Chief Executive Officer and Chief Financial Officer, ~~as appropriate to allow timely decisions regarding required disclosure.~~

~~Management’s Annual Report on Internal Control Over Financial Reporting~~

~~Management acknowledges its responsibility for establishing and maintaining adequate~~has limited the evaluation of our internal ~~control~~controls over financial reporting ~~in accordance with Rule 13a-15(f) promulgated under the Exchange Act. The company’s~~to exclude controls, policies and procedures and internal ~~control~~controls over financial reporting ~~includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions~~ of the recently acquired operations of Nanotech Security Corp. (acquired on October 5, 2021). The operations of Nanotech Security Corp. represent approximately 17% of our total assets and 45% of our total revenues for the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Management has also evaluated the effectiveness of its internal control over financial reporting in accordance with generally accepted accounting principles within the guidelines of the Committee of Sponsoring Organizations of the Treadway Commission framework (2013). Based on the results of this evaluation, management has determined that the Company’s internal control over financial reporting was effective as ofyear ended December 31, ~~2018. The~~2021.

KPMG LLP, our independent registered public accounting firm, ~~of Briggs & Veselka Co, the auditors of the Company’s financial statements included in the Annual Report,~~ has issued an attestation report on the Company’s internal control over financial reporting, which report expresses an adverse opinion on the effectiveness of internal control over financial reporting.

Plan for Remediation of Material Weaknesses

Management is continuing to evaluate and strengthen the Company's internal controls over financial reporting to ensure that management can routinely prepare our financial statements under GAAP, meet the requirements of the Company's independent auditors and remain in compliance with the SEC reporting requirements. These efforts are time consuming and require significant resource investment that the Company is committed to making.

The Company is still developing and documenting the full extent of the procedures to implement to remediate the material weaknesses described above, however the current remediation plan includes:

•

Training the newly hired ERP specialist and Supply Chain and Procurement Director.

•

Identifying and hiring additional key positions necessary to support the Company’s initiatives related to internal controls over financial reporting, including but not limited to Technical Accounting, Transactional Accounting, IT Management and Analysts.

•

Hiring consultants to assist with process improvements and control remediation efforts in targeted accounting, IT and operations processes.

•

Continuing on-going testing of policies and procedures implemented in late 2021 to assess their effectiveness.

•

Formalizing its entity-wide risk assessment process, and documenting internal ownership of risk monitoring and mitigation efforts, with improved risk monitoring activities and regular reporting to those charged with governance at an appropriate frequency.

•

Finalize a delegation of authority matrix to enforce desired limits of authority for key transactions, events, and commitments, and communicating these limits of authority to relevant personnel throughout the Company.

Changes in Internal ~~Controls~~

~~There were~~Controls.

Except for the material weaknesses described above, no changes in ~~our Company’s~~the Company's internal control over financial reporting (as defined in ~~Rule~~Rules 13a-15(f) ofand 15d-15(f) under the ~~Securities~~ Exchange ~~Act of 1934)~~Act) occurred during the ~~year~~quarter ended December 31, ~~2018,~~2021 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, ~~our~~the Company's internal control over financial reporting.

~~ITEM 9A. CONTROLS AND PROCEDURES- continued~~

Limitations on Effectiveness of Internal Controls ~~and Procedures~~

~~Our management,~~

Management, including ~~our~~the Chief Executive Officer and Chief Financial Officer, does not expect that disclosure controls or internal controls, when effective, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management’s override of the control. The design of any systems of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Individual persons may perform multiple tasks which normally would be allocated to separate persons and therefore extra diligence must be exercised during the period these tasks are combined.

~~ITEM~~

Item 9B. ~~OTHER INFORMATION~~

~~Not applicable.~~

~~PART III~~

~~ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

~~Our executive officers and directors are~~Other Information.

Effective as ~~follows:~~

~~Name~~	~~Age~~	~~Position(s) and Office(s)~~
~~John A. Brda~~	54	~~Chief Executive Officer, Secretary and Director~~
~~Roger N. Wurtele~~	72	~~Chief Financial Officer~~
~~Greg McCabe, Sr.~~	58	~~Director (Chairman)~~
~~Robert Lance Cook~~	62	~~Director~~
~~Michael Graves~~	51	~~Director~~
~~Alexandre Zyngier~~	49	~~Director~~

~~Below is certain biographical information~~ of ~~our executive officers and directors:~~

~~John A. Brda~~ ~~– Mr. Brda has been our Chief Executive Officer since December 2014 and our Secretary and a member of~~February 28, 2022, the Board of Director since January 2012. He has been the Managing Member of Brda & Company, LLC since 2002, which provided consulting services to public companies—with a focus in the oil and gas sector—on investor relations, equity and debt financings, strategic business development and securities regulation matters, prior to him becoming PresidentDirectors of the ~~company.~~

~~We believe~~Company voted to promote Kenneth L. Rice to the position of Chief Operating Officer. In this new role Mr. ~~Brda is an excellent fit to our Board of Directors and management team based on~~Rice will retain his extensive experience in transaction negotiation and business development, particularly in the oil and gas sector as well as other non-related industries. He has consulted with many public companies in the last ten years, and we believe that his extensive network of industry professionals and finance firms will contribute to our success.

~~Roger N. Wurtele~~ ~~– Mr. Wurtele has served as our Chief Financial Officer since September 2013. He is a versatile, experienced finance executive that has served~~duties as Chief Financial Officer and will assume management responsibility for ~~several public~~Business Development Operations, Manufacturing and ~~private companies. He has a broad range of experience in public accounting, corporate finance~~Quality Control.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

None.

Item 10. Directors, Executive Officers and executive management. Mr. Wurtele previously served as CFO of Xtreme Oil & Gas, Inc. from February 2010 to September 2013. From May 2013 to September 2013 he worked as a financial consultant for us. From November 2007 to January 2010, Mr. Wurtele served as CFO of Lang and Company LLC, a developer of commercial real estate projects. He graduated from the University of Nebraska and has been a Certified Public Accountant for 40 years.

~~Gregory McCabe~~ – Mr. McCabe has been a member of our Board of Directors since July 2016 and was appointed Chairman of the Board in October 2016. He is an experienced geologist who brings over 32 years of oil and gas experience to our company. He is a principal of numerous oil and gas focused entities including McCabe Petroleum Corporation, Manix Royalty, Masterson Royalty Fund and GMc Exploration. He has been the President of McCabe Petroleum Corporation from 1986 to the present. Mr. McCabe has been involved in numerous oil and gas ventures throughout his career and has a vast experience in technical evaluation, operations and acquisitions and divestitures. Mr. McCabe is also our largest stockholder and provided entry for us into our two largest assets, the Hazel Project in the Midland Basin and the Orogrande Project in Hudspeth County, Texas.

~~We believe that Mr. McCabe’s background in geology and his many years in the oil and gas industry compliments the Board of Directors.~~

~~Robert Lance Cook~~ – Mr. Cook has been a member of our Board of Directors since February 2019. He is currently the Vice President of Production Operations of WellsX Corp., a position he has held since July 2018. WellsX provides hydraulic fracturing and related oilfield services. Additionally, he has been the Managing Partner of Metis Energy LLC since January 2017, which owns and operates oil and gas wells in Texas as well as holds proprietary intellectual properties. Prior to that, Mr. Cook worked for Shell Oil Company and its subsidiaries for over 36 years, retiring from the company in September 2016. He held numerous management and engineering positions for Shell, including most recently Chief Scientist for Wells and Production Technology and Chief Operations Officer for SWMS JV with Great Wall Drilling Company from January 2012 until his retirement. He holds a Bachelor of Science in Petroleum Engineering from the University of Texas.

~~We believe Mr. Cook’s wide-ranging experience in operating exploration and production companies makes him an excellent fit to the Board of Directors.~~

~~Michael J. Graves~~ – Mr. Graves has served on the Board of Directors since August 17, 2017. He is a Certified Public Accountant, and since 2005 he has been a managing shareholder of Fitch & Graves in Sioux City, Iowa, which provides accounting and tax, financial planning, consulting and investment services. Since 2008, he has also been a registered representative with Western Equity Group where he has worked in investment sales. He is also presently a shareholder in several businesses involved in residential construction and property rentals. Previously, he worked at Bill Markve & Associates, Gateway 2000 and Deloitte & Touche. He graduated Summa Cum Laude from the University of South Dakota with a B.S. in Accounting.

~~ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE- continued~~

With Mr. Graves’ extensive background in accounting and investment businesses, we believe his understanding of financial statements, business valuations, and general business performance are a valuable asset to the Board.

~~Alexandre Zyngier -~~ ~~Mr. Zyngier has served on our Board of Directors since June 2016. He has been the Managing Director of Batuta Advisors since founding it in August 2013.~~ Corporate Governance.

The firm pursues high return investment and advisory opportunities in the distressed and turnaround sectors. Mr. Zyngier has over 20 years of investment, strategy, and operating experience. He is currently a director of Atari SA, AudioEye Inc. and GT Advanced Technologies, Inc. Before starting Batuta Advisors, Mr. Zyngier was a portfolio manager at Alden Global Capital from February 2009 until August 2013, investing in public and private opportunities. He has also worked as a portfolio manager at Goldman Sachs & Co. and Deutsche Bank Co. Additionally, he was a strategy consultant at McKinsey & Company and a technical brand manager at Procter & Gamble. Mr. Zyngier holds an MBA in Finance and Accounting from the University of Chicago and a BS in Chemical Engineering from UNICAMP in Brazil.

~~We believe that Mr. Zyngier’s investment experience and his experience in overseeing a broad range of companies will greatly benefit the Board of Directors.~~

~~Section 16(a) Beneficial Ownership Reporting Compliance~~

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own beneficially more than ten percent of our common stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3, 4 and 5 furnished to us during the fiscal year ended December 31, 2018, we believe that the directors, executive officers, and greater than ten percent beneficial owners have complied with all applicable filing requirements during the fiscal year ended December 31, 2018.

~~Code of Ethics~~

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is available at our website at torchlightenergy.com. Further, we undertake to provideinformation required by mail to any person without charge, upon request, a copy of such code of ethics if we receive the request in writing by mail to: Torchlight Energy Resources, Inc., 5700 W. Plano Parkway, Suite 3600, Plano, Texas 75093.

~~Procedures for Stockholders to Recommend Nominees to the Board~~

~~There have been no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors since we last provided disclosure regarding~~ this ~~process.~~

~~Audit Committee~~

We maintain a separately-designated standing audit committee. The Audit Committee currently consists of our three independent directors, Alexandre Zyngier, Michael Graves, and Robert Lance Cook. Mr. Zyngier is the Chairman of the Audit Committee, and the Board of Directors has determined that he is an audit committee financial expert as defined in Item 5(d)(5) of Regulation S-K. The primary purpose of the Audit Committee is to oversee our accounting and financial reporting processes and audits of our financial statements on behalf of the Board of Directors. The Audit Committee meets privately with our management and with our independent registered public accounting firm and evaluates the responses by our management both to the facts presented and to the judgments made by our outside independent registered public accounting firm.

~~ITEM 11. EXECUTIVE COMPENSATION~~

~~The following table provides summary information for the years of 2018 and 2017 concerning cash and non-cash compensation paid or accrued to or on behalf of certain executive officers.~~

~~Summary Executive Compensation Table~~

Year Salary Bonus Stock Option Non-Equity Change in All Other Total
($) ($) Awards Awards Incentive Pension Compensation ($)
($) ($) Plan Value ($)
(A) Compensation and
Name and (1) ($) Nonqualified
Principal Deferred
Position Compensation
($)
John A. Brda 2018 $ 375,000 - - $ - - - - $ 375,000
CEO/Secretary/Director 2017 $ 375,000 - - $ - - - - $ 375,000

Roger Wurtele 2018 $ 225,000 - - $ - - - - $ 225,000
CFO 2017 $ 225,000 - - $ - - - - $ 225,000

~~(A)~~

~~Stock/Option Value as applicable is determined using the Black Scholes Method.~~

~~Setting Executive Compensation~~

We fix executive base compensation at a level we believe enables us to hire and retain individuals in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business goals. We also take into account the compensation that is paid by companies that we believe to be our competitors and by other companies with which we believe we generally compete for executives.

In establishing compensation packages for executive officers, numerous factors are considered, including the particular executive’s experience, expertise, and performance, our company’s overall performance, and compensation packages available in the marketplace for similar positions. In arriving at amounts for each component of compensation, our Compensation Committee strives to strike an appropriate balance between base compensation and incentive compensation. The Compensation Committee also endeavors to properly allocate between cash and non-cash compensation (including without limitation stock and stock option awards) and between annual and long-term compensation.

~~Employment Agreements~~

On June 16, 2015, we entered into new five-year employment agreements with each of John Brda, our President and Chief Executive Officer, and Roger Wurtele, our Chief Financial Officer. Under the new agreements, which replace and supersede their prior employment agreements, each individual’s salary was increased by 25%, so that the salaries of Messrs. Brda and Wurtele were $375,000, and $225,000, respectively, provided these salary increases will accrue unpaid until such time as management believes there is adequate cash for such increases. Also under the new agreements, each individual was eligible for a bonus, at the Compensation Committee’s discretion, of up to two times his salary and was eligible for any additional stock options, as deemed appropriate by the Compensation Committee. Each agreement also provided that if we (or our successor) terminate the employee upon the occurrence of a change in control, the employee will be ~~paid~~provided in ~~one lump sum his salary and any bonus or other amounts due through the end of the term of the agreement. Each employment agreement also has a covenant not~~an amendment to ~~compete.~~

~~ITEM 11. EXECUTIVE COMPENSATION- continued~~

~~Outstanding Equity Awards at Fiscal Year End~~

~~The following table details all outstanding equity awards held by our named executive officers at December 31, 2018:~~

Option Awards

Number of

Number of

Equity Incentive

Securities

Securities

Plan Awards: Number of



Underlying

Underlying

Securities

Unexercised

Unexercised

Underlying

Option

Options

Options

Unexercised

Exercise

Option
  (#)

  (#)

Unearned Options

Price

Expiration
Name

Exercisable

Unexercisable

  (#)

($)

Date






John A. Brda
  3,000,000
(1)
  -
  -
$1.57
6/11/2020







Roger Wurtele
  1,500,000
(1)
  -
  -
$1.57
6/11/2020

~~(1)~~

The options were awarded on June 11, 2015. The options were granted under our 2015 Stock Option Plan which plan was approved by stockholders on September 9, 2015. Presently, the options are all fully vested.

~~Compensation of Directors~~

We have no standard arrangement pursuant to which directors are compensated for any services they provide or for committee participation or special assignments. We anticipate, however, implementing more standardized director compensation arrangements in the near future.

~~Summary Director Compensation Table~~

~~Compensation to directors during the year ended December 31, 2018 was as follows:~~

Fees Earned Option Awards Nonqualified
Paid Non-Equity Deferred All
in Stock Option Incentive Plan Compensation Other
Cash Awards Awards Compensation Earnings Compensation Total
Name ($) ($) ($)(A) ($) ($) ($) ($)

Alexandre Zyngier - - $ 100,000 (1) - - - $ 100,000
R. David Newton (2) - - $ 100,000 (1) - - - $ 100,000
Michael Graves - - $ 100,000 (1) - - - $ 100,000

~~(A)~~

~~Stock Value as applicable is determined using the Black Scholes Method.~~

~~ITEM 11. EXECUTIVE COMPENSATION- continued~~

~~(1)~~	~~On August 16, 2018, this director was granted 200,000 stock options~~ ~~under the 2015 Stock Option Plan as director compensation. 100,000 of the stock options vested immediately, and the remaining 100,000 stock options vest on August 16, 2019.~~

~~(2)~~	~~Mr. Newton resigned from the Board of Directors on February 4, 2019.~~

~~Compensation Policies and Practices as they Relate to Risk Management~~

~~We attempt to make our compensation programs discretionary, balanced and focused~~this Annual Report on the long term. We believe goals and objectives of our compensation programs reflect a balanced mix of quantitative and qualitative performance measures to avoid excessive weight on a single performance measure. Our approach to compensation practices and policies applicable to employees and consultants is consistent with that followed for its executives. Based on these factors, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.

~~ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT~~

The following table sets forth information, as of March 18, 2019, concerning, except as indicated by the footnotes below, (i) each person whom we know beneficially owns more than 5% of our common stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all of our directors and executive officers as a group. The table includes these persons’ beneficial ownership of common stock. Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Torchlight Energy Resources, Inc., 5700 W. Plano Parkway, Suite 3600, Plano, Texas 75093. We have determined beneficial ownershipForm 10-K in accordance with ~~the rules of the SEC. Except as indicated~~General Instruction G(3) to Form 10-K.

Item 11. Executive Compensation.

The information required by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws. Applicable percentage ownership is based on 71,433,864 shares of common stock outstanding at March 18, 2019 (which amount excludes the 262,001 restricted shares of common stock held by our director Alexandre Zyngier). In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to stock options or warrants held by that person that are currently exercisable or exercisable within 60 days after March 18, 2019 and shares of common stock issuable upon conversion of other securities held by that person that are currently convertible or convertible within 60 days after March 18, 2019. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise noted, stock options and warrants referenced in the footnotes below are currently fully vested and exercisable. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

~~ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT– continued~~

Shares Beneficially Owned

Common Stock
Name of beneficial owner Shares % of Class

John A. Brda 5,318,322 (1) 7.15
President, CEO, Secretary and Director

Gregory McCabe 13,648,390 (2) 19.08
Director (Chairman of the Board)

Roger N. Wurtele 1,510,000 (3) 2.07
Chief Financial Officer

Robert Lance Cook 100,000 (4) *
Director

Michael J. Graves 445,000 (5) *
Director

Alexandre Zyngier 300,000 (6) *
Director

All directors and executive officers as a group (6 persons) 21,321,712 27.79

Robert Kenneth Dulin (7) 4,351,381 (7) 5.94

David Moradi (8)
4,176,891
(8) 5.85

~~(1)~~

Includes 2,318,322 shares of common stock held by the John A. Brda Trust (the “Trust”). Mr. Brda is the settlor of the Trust and reserves the right to revoke the Trust without the consent of another person. Further, he is the trustee of the Trust and exercises investment control over the securities held by the Trust. Also includes stock options that are exercisable into 3,000,000 shares of common stock, held individually by Mr. Brda.

~~(2)~~

Includes (a) 10,264,335 shares of common stock held individually by Mr. McCabe; (b) securities held by G Mc Exploration, LLC (“GME”), including (i) 797,099 shares of common stock and (ii) 86,956 shares issuable upon exercise of warrants; and (c) 2,500,000 shares of common stock beneficially owned by ~~McCabe Petroleum Corporation (“MPC”).~~ ~~Mr. McCabe may be deemed to hold beneficial ownership of securities held by GME as a result of his ownership of 50% of the outstanding membership interests of GME.~~ ~~Mr.~~ ~~McCabe may be deemed to hold beneficial ownership of securities held by MPC as a result of his ownership of 100% of the outstanding shares of capital stock of MPC.~~

~~(3)~~

~~Includes 10,000 shares of common stock and stock options that are exercisable into 1,500,000 shares of common stock held by Mr. Wurtele.~~

~~(4)~~

~~Includes stock options that are exercisable into 100,000 shares of common stock held by Mr. Cook.~~

~~(5)~~

Includes 145,000 shares of common stock and stock options that are exercisable into 300,000 shares of common stock held by Mr. Graves. Excludes stock options that are exercisable into 100,000 shares of common stock held by Mr. Graves that are not scheduled to vest within 60 days after March 18, 2019.

~~(6)~~

Includes stock options that are exercisable into 300,000 shares of common stock held by Mr. Zyngier. Excludes stock options that are exercisable into 100,000 shares of common stock held by Mr. Zyngier that are not scheduled to vest within 60 days after March 18, 2019.

~~ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT- continued~~

~~(7)~~

Includes (a) securities held individually by Robert Kenneth Dulin, including (i) 27,000 shares of common stock and (ii) warrants that are exercisable into 150,000 shares of common stock; (b) 243,360 shares of common stock held in trust for the benefit of immediate family members of Mr. Dulin; (c) securities held by Sawtooth Properties, LLLP (“Sawtooth”), including (i) 892,258 shares of common stock and (ii) warrants that are exercisable into 234,745 shares of common stock; (d) securities held by Black Hills Properties, LLLP (“Black Hills”), including (i) 612,099 shares of common stock, and (ii) warrants that are exercisable into 189,956 shares of common stock; (e) securities held by Pine River Ranch, LLC (“Pine River”), including (i) 801,939 shares of common stock and (ii) warrants that are exercisable into 450,024 shares of common stock; and (f) securities held by Pandora Energy, LP (“Pandora”), including warrants that are exercisable into 750,000 shares of common stock. Mr. Dulin is trustee/custodian of each of the trusts and/or accounts referenced in “(b)” above and has voting and investment authority over the shares held by them. Mr. Dulin is the Managing Partner of Sawtooth Properties, LLLP, the Managing Partner of Black Hills, the Managing Member of Pine River, and the General Partner of Pandora, and he has voting and investment authority over the shares held by each entity. Mr. Dulin’s address is 8449 Greenwood Drive, Niwot, Colorado, 80503. The information herein is based in part on information provided to us by Mr. Dulin, and accordingly, we are unable to verify the accuracy this information.

~~(8)~~

Based on a Schedule 13G/A filed on February 5, 2019, by Anthion Management, LLC, a Delaware limited liability company (“Anthion Management”), which reports beneficial ownership of our common stock held by Anthion Management, Anthion Partners II LLC, a Delaware limited liability company (“Anthion Partners”), and David Moradi, an individual. The filing lists the address of all three reporting persons as 119 Washington Avenue, Suite 406, Miami Beach, Florida 33139, and indicates that Anthion Management and Antion Partners each has sole voting power and sole dispositive power with respect to 2,034,513 shares of common stock and David Moradi has sole voting power and sole dispositive power with respect to 4,176,891 shares of common stock.

~~ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS~~

On January 30, 2017, we and our wholly-owned subsidiary, Torchlight Acquisition Corporation, a Texas corporation (“TAC”), entered into and closed an Agreement and Plan of Reorganization and Plan of Merger with Line Drive Energy, LLC, a Texas limited liability company (“Line Drive”), under which agreements TAC merged with and into Line Drive and the separate existence of TAC ceased, with Line Drive being the surviving organization and becoming our wholly-owned subsidiary. Line Drive, which was wholly-owned by Gregory McCabe, owned certain assets and securities, including approximately 40.66% of 12,000 gross acres in the Hazel Project and 521,739 warrants to purchase our common stock (which warrants had been assigned by Mr. McCabe to Line Drive). Under the merger transaction, our shares of common stock of TAC converted into a membership interest of Line Drive, the membership interest in Line Drive held by Mr. McCabe immediately prior to the transaction ceased to exist, and we issued Mr. McCabe 3,301,739 restricted shares of common stock as consideration therefor. Immediately after closing, the 521,739 warrants held by Line Drive were cancelled, which warrants had an exercise price of $1.40 per share and an expiration date of June 9, 2020. A Certificate of Merger for the merger transaction was filed with the Secretary of State of Texas on January 31, 2017.

Also on January 30, 2017, our wholly-owned subsidiary, Torchlight Energy, Inc., a Nevada corporation (“TEI”), entered into and closed a Purchase and Sale Agreement with Wolfbone Investments, LLC, a Texas limited liability company (“Wolfbone”) which is wholly-owned by Gregory McCabe. Under the agreement, TEI acquired certain of Wolfbone’s Hazel Project assets, including its interest in the Flying B Ranch #1 well and the 40 acre unit surrounding the well, for consideration of $415,000, and additionally, Wolfbone caused to be cancelled a total of 2,780,000 warrants to purchase our common stock, including 1,500,000 warrants held by McCabe Petroleum Corporation, an entity owned by Mr. McCabe, and 1,280,000 warrants held by Green Hill Minerals, an entity owned by Mr. McCabe’s son, which warrant cancellations were effected through certain Warrant Cancellation Agreements. The 1,500,000 warrants held by McCabe Petroleum Corporation had an exercise price of $1.00 per share and an expiration date of April 4, 2021. The warrants held by Green Hill Minerals included 100,000 warrants with an exercise price of $1.73 and an expiration date of September 30, 2018 and 1,180,000 warrants with an exercise price of $0.70 and an expiration date of February 15, 2020.

On November 15, 2017, we and our wholly-owned subsidiary, Hudspeth Oil Corporation, a Texas corporation (“HOC”), entered into an Assignment of Farmout Agreement with Founders Oil & Gas, LLC (“Founders”) and Wolfbone Investments, LLC (“Wolfbone”), along with Pandora Energy, LP as a party to the agreement for limited purposes. Wolfbone is owned by our Chairman, Gregory McCabe. Under the agreement, Founders will assign to HOC and Wolfbone all its right, title and interest in the remaining leases under the original Farmout Agreement that Founders entered into with us on September 23, 2015; provided, however, that Founders will retain an undivided 9.5% of 8/8ths working interest and 9.5% of 75% of 8/8ths net revenue interest to the remaining leases, which retained interestthis Item will be ~~carried~~provided in an amendment to this Annual Report on Form 10-K in accordance with General Instruction G(3) to Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by HOC and Wolfbone through the next $40,500,000 in total costs. Accordingly, HOC and Wolfbone will each gain a 20.25% working interest in the remaining leases, bringing HOC’s total working interest to 67.75%. On behalf of HOC and Wolfbone, Founders (through its operating affiliate) will take such action necessary to spud the University Founders A 25 Well on or before December 1, 2017. After spudding of the well, Founders’ operating affiliate will remain operator of that well under the direction of us and Gregory McCabe.

~~ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS- continued~~

On December 1, 2017, the transactions contemplated by the Agreement and Plan of Reorganization that we and our newly formed wholly-owned subsidiary, Torchlight Wolfbone Properties, Inc., a Texas corporation (“TWP”), entered into with McCabe Petroleum Corporation, a Texas corporation (“MPC”), and Warwink Properties, LLC, a Texas limited liability company (“Warwink Properties”) closed. Under the agreement, which was entered into on November 14, 2017, TWP merged with and into Warwink Properties and the separate existence of TWP ceased, with Warwink Properties becoming the surviving organization and our wholly-owned subsidiary. Warwink Properties was wholly owned by MPC which is wholly owned by Gregory McCabe, our Chairman. Warwink Properties owns certain assets, including a 10.71875% working interest in 640 acres in Winkler County, Texas. At closing of the merger transaction, our shares of common stock of TWP converted into a membership interest of Warwink Properties, the membership interest in Warwink Properties held by MPC ceased to exist, and we issued MPC 2,500,000 restricted shares of common stock as consideration. Also on December 1, 2017, MPC closed its transaction with MECO IV, LLC (“MECO”) for the purchase and sale of certain assets as contemplated by the Purchase and Sale Agreement dated November 9, 2017 (the “MECO PSA”), to which we are not a party. Under the MECO PSA, Warwink Properties received a carry from MECO (through the tanks) of up to $1,475,000 in the next well drilled on the Winkler County leases. A Certificate of Merger for the merger transaction was filed with the Secretary of State of Texas on December 5, 2017.

Also on December 1, 2017, the transactions contemplated by the Purchase Agreement that our wholly-owned subsidiary, Torchlight Energy, Inc., a Nevada corporation (“TEI”), entered into with MPC closed. Under the Purchase Agreement, which was entered into on November 14, 2017, TEI acquired beneficial ownership of certain of MPC’s assets, including acreage and wellbores located in Ward County, Texas (the “Ward County Assets”). As consideration under the Purchase Agreement, at closing TEI issued to MPC an unsecured promissory note in the principal amount of $3,250,000, payable in monthly installments of interest only beginning on January 1, 2018, at the rate of 5% per annum, with the entire principal amount together with all accrued interest due and payable on December 31, 2020. In connection with TEI’s acquisition of beneficial ownership in the Ward County Assets, MPC sold those same assets, on behalf of TEI, to MECO at closing of the MECO PSA, and accordingly, TEI received $3,250,000 in cash for its beneficial interest in the Ward County Assets. Additionally, at closing of the MECO PSA, MPC paid TEI a performance fee of $2,781,500 in cash as compensation for TEI’s marketing and selling the Winkler County assets of MPC and the Ward County Assets as a package to MECO.

On July 25, 2018, Torchlight Energy Resources, Inc. and our wholly-owned subsidiary, Hudspeth Oil Corporation, entered into a Settlement & Purchase Agreement (the “Settlement Agreement”) with Founders Oil & Gas, LLC, Founders Oil & Gas Operating, LLC, Wolfbone Investments, LLC (a wholly-owned company of Gregory McCabe, our Chairman) and McCabe Petroleum Corporation (also a wholly-owned company of Mr. McCabe), which agreement provides for Hudspeth Oil and Wolfbone Investments to each immediately pay $625,000 and for Hudspeth Oil or the Company and Wolfbone Investments or McCabe Petroleum to each pay another $625,000 on July 20, 2019, as consideration for Founders Oil & Gas assigning all of its working interest in the oil and gas leases of the Orogrande Project to Hudspeth Oil and Wolfbone Investments equally. The assignments to Hudspeth Oil and Wolfbone Investmentsthis Item will be ~~made when the first payments are made,~~provided in an amendment to this Annual Report on Form 10-K in accordance with General Instruction G(3) to Form 10-K.

Item 13. Certain Relationships and ~~the payments to Founders Oil & Gas due in 2019 are not securitized. After~~Related Transactions, and Director Independence.

The information required by this assignment (for which Hudspeth Oil’s total consideration is $1,250,000), Hudspeth Oil’s working interest will increase to 72.5%. Additionally, the Settlement Agreement provides that the Founders parties will assign to the Company, Hudspeth Oil, Wolfbone Investments and McCabe Petroleum their claims against certain vendors for damages, if any, against such vendors for negligent services or defective equipment. Further, the Settlement Agreement has a mutual release and waivers among the parties.

On October 17, 2018, we sold to certain investors in a private transaction 16% Series C Unsecured Convertible Promissory Notes with a total principal amount of $6,000,000. Interest and principal are due and payable on the notes in one balloon payment at maturity on April 17, 2020. The notes are convertible, at the election of the holders, into an aggregate 6% working interest in certain oil and gas leases in Hudspeth County, Texas, known as our “Orogrande Project.” The notes allow us to redeem them early only upon the event of a fundamental transaction, such as a merger or sale of substantially all our assets. The notes provide that the noteholders may accelerate and declare any and all of the obligations under the notes to be immediately due and payable in the event of default, such as nonpayment, failure to perform required conversions, failure to perform any covenant or agreement under the notes, an insolvency event, or certain defaults or judgments. As part of the sale of the of the notes, the noteholders required that McCabe Petroleum Corporation, a Texas corporation owned by our Chairman Gregory McCabe (“MPC”), provide them a put option whereby they have the right to have MPC purchase from them any unpaid principal amount due on the notes. Additionally, if there is a fundamental transaction, Mr. McCabeItem will be provided in an amendment to this Annual Report on Form 10-K in accordance with General Instruction G(3) to Form 10-K.

Item 14. Principal Accounting Fees and Services.

The information required ~~to pay a fee to each noteholder that elects not to convert or require MPC to purchase the principal amount under the note, which fee~~by this Item will be ~~equal~~provided in an amendment to ~~such noteholder’s pro-rata share of a total fee amount of $1,500,000. We received total proceeds of $6,000,000 from the sale of the notes, of which $3,000,000 was used~~this Annual Report on Form 10-K in accordance with General Instruction G(3) to pay back the promissory note issued to MPC on December 1, 2017, which note was due on December 31, 2020. We intend to use the remaining proceeds for working capital and general corporate purposes, which includes, without limitation, drilling and lease acquisition capital. Prior to entering into the above transactions, our Board of Directors formed a special committee composed of independent directors to analyze and authorize the transactions on behalf of Torchlight Energy Resources, Inc. and determine whether the transactions are fair to the company. In this role, the special committee engaged an independent financial consulting firm which rendered a fairness opinion deeming that the transactions were fair to the company, from a financial point of view, and contained terms no less favorable to the company than those that could be obtained in arm’s length transactions.

~~ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS- continued~~

In December 2018, we paid WellsX Corp. a total of $173,000 for performing hydraulic fracturing services on a well at our Orogrande Project in Hudspeth County, Texas. Robert Lance Cook, a member of our Board of Directors, holds a 19% beneficial ownership in WellsX Corp. and is its Vice President of Production Operations.

~~Director Independence~~

We currently have three independent directors on our Board, Alexandre Zyngier, Michael Graves, and Robert Lance Cook. The definition of “independent” used herein is based on the independence standards of The NASDAQ Stock Market LLC. The Board performed a review to determine the independence of these Directors and made a subjective determination as to each of these directors that no transactions, relationships, or arrangements exist that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director of Torchlight Energy Resources, Inc. In making these determinations, the Board reviewed information provided by these directors with regard to each Director’s business and personal activities as they may relate to us and our management.

~~ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

The following table sets forth the fees paid or accrued by us for the audit and other services provided by our auditor, Briggs & Veselka Co. and our independent consultant during the years ended December 31, 2018 and 2017.

2018

2017

Audit Fees(1)
$159,253
$196,666
Audit Related Fees(2)
  107,186
  -
Tax Fees(3)
  20,400
  65,888
All Other Fees
  41,959
  -



Total Fees
$328,798
$262,554

Form 10-K.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

Exhibit Index

~~(1)~~

Audit Fees: This category represents the aggregate fees billed for professional services rendered by the principal independent accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-K and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years.

~~(2)~~

Audit Related Fees: This category consists of the aggregate fees billed for SOX 404 Internal Control compliance services and assurance and related services by our independent consultant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.”

~~(3)~~

~~Tax Fees: This category consists of the aggregate fees billed for professional services rendered by the principal independent consultant for tax compliance, tax advice, and tax planning.~~

~~PART IV~~

~~ITEM 15. EXHIBITS~~

~~Exhibit No.~~	~~Description~~
		Incorporated by Reference
~~2.1~~ Exhibit Number	Exhibit Description	Form	Filing Date	Filed Herewith
1.1.0	~~Share Exchange~~Underwriting Agreement, dated November 23, 2010. (Incorporated by reference from Form 8-K filed with the SEC on November 24, 2010.) *February 8, 2021, between Torchlight Energy Resources, Inc. and Roth Capital Partners, LLC	10k	18-Mar-21
1.2.0	Sales Agreement, dated as of June 16, 2021, by and between Torchlight Energy Resources, Inc. and Roth Capital Partners, LLC	8k	16-Jun-21
~~3.1~~ 1.2.1	Amended and Restated Sales Agreement, dated as of June 21, 2021, by and between Torchlight Energy Resources, Inc. and Roth Capital Partners, LLC	8k	21-Jun-21
2.1.0	Arrangement Agreement between Metamaterial Inc. and Torchlight Energy Resouces, Inc., dated December 14, 2020	8k	14-Dec-20
2.1.1	Amendment to Arrangement Agreement dated February 3, 2021	8k	3-Feb-21
2.1.2	Amendment to Arrangement Agreement dated March 11, 2021	8k	11-Mar-21
2.1.3	Amendment to Arrangement Agreement dated March 31, 2021	8k	1-Apr-21
2.1.4	Amendment to Arrangement Agreement dated April 15, 2021	8k	15-Apr-21
2.1.5	Amendment to Arrangement Agreement dated May 2, 2021	8k	3-May-21
2.1.6	Amendment to Arrangement Agreement dated June 18, 2021	8k	21-Jun-21


2.2.0	Arrangement Agreement between Meta Materials Inc. and Nanotech Securities, dated August 4, 2021			X
3.1.0	Articles of Incorporation	10k	18-Mar-19
3.1.1
~~3.2~~	Certificate of Amendment to Articles of Incorporation dated December 10, 2014. (Incorporated by reference from Form 10-Q filed with the SEC on May 15, 2015.) *	10Q	15-May-15
3.1.2
~~3.3~~	Certificate of Amendment to Articles of Incorporation dated September 15, 2015. (Incorporated by reference from Form 10-Q filed with the SEC on November 12, 2015.) *	10Q	12-Nov-15
3.1.3
3.4	Certificate of Amendment to Articles of Incorporation dated August 18, 2017.	10Q	9-Nov-18
3.1.4	Amendment to the Articles of Incorporation of Torchlight Energy Resources, Inc., dated June 14, 2021	8K	16-Jun-21
3.1.5	Certificate of Amendment related to the Reverse Stock Split and Name Change, filed June 25, 2021	8k	29-Jun-21
3.2.0	Amended and Restated Bylaws	8k	26-Oct-16
3.3.0	Certificate of Designation of Preferences, Rights and Limitations of Series A Non-Voting Preferred Stock, dated June 14, 2021, as modified by the Certificate of Correction, dated June 15, 2021	8k	16-Jun-21
3.3.1	Certificate of Designation of Preferences, Rights and Limitations of Series B Special Voting Preferred Stock, dated June 14, 2021	8k	16-Jun-21
4.1.0	Form of Investor Warrant			X
4.2.0	Form of Broker Warrant			X
4.3.1	ACOA BDP (2015) - Contract 200804 - Original Document			X
4.3.2	ACOA AIF (2015) - Contract 203260 - Original Document			X
4.3.3	ACOA BDP (2018) - Contract 211326 - Original Document			X
4.3.4	ACOA BDP (2019) - Contract 212622 - Original Document			X
4.3.5	ACOA RRRF (2021) - Contract 217574 - Original Document			X
4.6	Form of Common Stock			X
10.1.1	Highfield Park, Dartmouth, NS - Lease 20200828 - Original Document			X
10.1.1.1	Highfield Park, Dartmouth, NS - Lease 20210603 - Amendment June 1, 2021			X
10.1.1.2	Highfield Park, Dartmouth, NS - Subscription Agreement			X
10.2.0	Employment Agreement with George Palikaras, dated July 1, 2021			X
10.2.1	Employment Agreement with Kenneth Rice, dated December 11, 2020			X
10.2.2	Employment Agreement with Jonathan Waldern dated December 16, 2020			X
10.14.0	Form of Meta Materials Inc. Indemnification Agreement (Incorporated by reference from Form 10-Q filed with the SEC on November 9, 2018.) *

3.5	Amended and Restated Bylaws (Incorporated by reference from Form 8-K filed with the SEC on October 26, 2016.) *

~~10.1~~	~~Employment Agreement (with John A. Brda) (Incorporated by reference from Form 8-K~~form 8-k filed with the SEC on June 16, 2015.) *29, 2021)	X
14.0	Code of Conduct	X
~~10.2~~ 21.1.0	Employment Agreement (with Roger Wurtele) (Incorporated by reference from Form 8-K filed with the SEC on June 16, 2015.) *List of Subsidiaries	X
23.0	Consent of Independent Auditors	X
~~10.3~~ 23.1.0	Farmout Agreement between Hudspeth Oil Corporation, Founders Oil & Gas, LLC and certain other parties (Incorporated by reference from Form 8-K filed with the SEC on September 29, 2015) *Consent of Independent Registered Public Accounting Firm	X
24.0	Power of Attorney	X
~~10.4~~ 31.1	Purchase and Sale Agreement with Husky Ventures, Inc. (Incorporated by reference from Form 8-K filed with the SEC on November 12, 2015) *

~~10.5~~	Purchase Agreement with McCabe Petroleum Corporation for acquisition of “Hazel Project” (Incorporated by reference from Form 10-Q filed with the SEC on August 15, 2016) *

~~10.6~~	Agreement and Plan of Reorganization and Plan of Merger with Line Drive Energy, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 31, 2017) *

~~10.7~~

Purchase and Sale Agreement with Wolfbone Investments, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 31, 2017) *

~~10.8~~		12% 2020 Senior Unsecured Promissory Note (form of) (Incorporated by reference from Form 10-Q filed with the SEC on May 12, 2017) *

~~10.9~~		Agreement and Plan of Reorganization and Plan of Merger with McCabe Petroleum Corporation and Warwink Properties, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~ITEM 15. EXHIBITS- continued~~

~~10.10~~		Purchase Agreement with Torchlight Energy, Inc. and McCabe Petroleum Corporation (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~10.11~~		Promissory Note for $3,250,000 by Torchlight Energy, Inc. to McCabe Petroleum Corporation (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~10.12~~		Assignment of Farmout Agreement between Hudspeth Oil Corporation, Founders Oil & Gas, LLC and Wolfbone Investments, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~10.13~~		12% 2020 Senior Unsecured Promissory Note for $4,500,000 with David A. Straz, Jr Revocable Trust of 1986 (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~10.14~~		Underwriting Agreement, dated April 19, 2018, between Torchlight Energy Resources, Inc. and Roth Capital Partners, LLC (Incorporated by reference from Form 8-K filed with the SEC on April 19, 2018) *

~~10.15~~		Purchase & Settlement Agreement, dated July 24, 2018, between Torchlight Energy Resources, Inc., Hudspeth Oil Corporation, Founders Oil & Gas, LLC, Founders Oil & Gas Operating, LLC, Wolfbone Investments, LLC and McCabe Petroleum. Corporation (Incorporated by reference from Form 10-Q filed with the SEC on August 9, 2018) *

~~10.16~~		16% Series C Unsecured Convertible Promissory Note (form of) dated October 17, 2018 (Incorporated by reference from Form 8-K filed with the SEC on October 18, 2018)*

~~14.1~~		Code of Ethics (Incorporated by reference from Form S-1 filed with the SEC on May 2, 2008.) *

~~16.01~~		Letter from Calvetti Ferguson to the Securities and Exchange Commission (Incorporated by reference from Form 8-K filed with the SEC on December 19, 2016) *

~~21.1~~		~~Subsidiaries~~

~~23.1~~		~~Consent of Briggs & Veselka Co.~~

~~23.2~~		~~Consent of PeTech Enterprises, Inc.~~

~~31.1~~	Certification of ~~principal executive officer required by Rule 13a 14(1) or Rule 15d 14(a) of~~Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as ~~adopted pursuant~~Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2
~~31.2~~	Certification of ~~principal financial officer required by Rule 13a 14(1) or Rule 15d 14(a) of~~Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as ~~adopted pursuant~~Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X


32.1
~~32.1~~	Certification of ~~principal executive officer and principal financial officer pursuant~~Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002 and~~2002.	X
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of ~~18 U.S.C. 63.~~the Sarbanes-Oxley Act of 2002.	X
101.SCH
~~99.1~~	~~Report of PeTech Enterprises, Inc.~~

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~~101.SCH~~ 101.CAL		~~XBRL Taxonomy Extension Schema~~
~~101.CAL~~		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension ~~Definitions~~Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
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~~Incorporated by reference from our previous filings with the SEC~~

Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements ~~of Section 13 or 15(d)~~ of the Securities Exchange Act of 1934, the registrant has duly caused this ~~report~~Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	~~Torchlight Energy Resources, Inc.~~
		Meta Materials Inc.
	~~/s/~~ ~~John A. Brda~~
Dated: March 1, 2022	~~By: John A. Brda~~	By:	/s/ George Palikaras
			George Palikaras
			President, Chief Executive Officer	and
			(Principal Executive Officer)
~~Date:~~
Dated: March ~~18, 2019~~1, 2022		By:	/s/ Ken Rice
			Ken Rice
			Chief Financial Officer and Executive Vice President
			(Principal Financial and Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints George Palikaras and Ken Rice and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this ~~report~~Annual Report on Form 10-K has been signed ~~below~~ by the following persons on behalf of the ~~registrant~~Registrant and in the capacities and on the dates indicated:

~~Signature~~	~~Title~~	~~Date~~
Signature	Title	Date
~~/s/ John A. Brda~~
~~John A. Brda~~ /s/ Georgios Pallifaras	~~Director,~~ Chief Executive Officer ~~President and Secretary~~	~~March 18, 2019~~ 1-Mar-22
Georgios Palikaras	(Principal Executive Officer)
~~/s/ Gregory McCabe~~
~~Gregory McCabe~~	~~Director (Chairman of the Board)~~	~~March 18, 2019~~

/s/ ~~Roger N. Wurtele~~ Kenneth Rice
~~Roger N. Wurtele~~	Chief Financial Officer ~~and Principal Accounting Officer~~	~~March 18, 2019~~ 1-Mar-22
Kenneth Rice	(Principal Financial Officer)
~~/s/~~ ~~Robert Lance Cook~~	~~Director~~	~~March 18, 2019~~
~~Robert Lance Cook~~ /S/ Jonathan Waldern	Chief Technology Officer	1-Mar-22
Jonathan Waldern	(Principal Technology Officer)
~~/s/ Alexandre Zyngier~~
~~Alexandre Zyngier~~ /s/ Ram Ramkumar	Chairman and Director	~~March 18, 2019~~ 1-Mar-22
Ram Ramkumar
~~/s/ Michael J. Graves~~
~~Michael J. Graves~~ /s/ Maurice Guitton	Director	~~March 18, 2019~~ 1-Mar-22
Maurice Guitton

/s/ Allison Christilaw	Director	1-Mar-22
Allison Christilaw

/s/ Steen Karsbo	Director	1-Mar-22
Steen Karsbo

/s/ Eric Leslie	Director	1-Mar-22
Eric Leslie

/s/ Ken Hannah	Director	1-Mar-22
Ken Hannah

~~Nevada~~	~~74-3237581~~
Nevada	74-3237581
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
~~Organization)~~



~~(214) 432-8002~~
~~(Registrant’s telephone number, including area code)~~

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

~~Common Stock ($0.001 Par Value)~~
( Title of ~~Each Class)~~each class
Trading Symbol(s)
~~The NASDAQ Stock Market LLC~~
( Name of each exchange on which ~~registered)~~registered
Common Stock, par value $0.001 per share
~~Securities registered pursuant to Section 12(g) of the Exchange Act:~~ MMAT

~~None~~
Nasdaq Capital Market


Large accelerated filer	☐ ☒	Accelerated filer	⌧ ☐
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	⌧ ☐

Emerging growth company	☐


☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

			~~Page~~
~~Item 1.~~	~~Business~~		5 Page
~~Item 1A.~~ PART I	~~Risk Factors~~		11
Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments		21 17
Item 2.	Properties		22 18
Item 3.	Legal Proceedings		19
~~Item 3.~~	~~Legal Proceedings~~		29
Item 4.	Mine Safety Disclosures		29 20

PART II
~~PART II~~

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		30 21
Item 6.	~~Selected Financial Data~~ [Reserved]		30 22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30 23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		35 32
Item 8.	Financial Statements and Supplementary Data		36 32
Item 9.	Changes in and Disagreements ~~with~~With Accountants on Accounting and Financial Disclosure		60 82
Item 9A.	Controls and Procedures		60 82
Item 9B.	Other Information		61 84
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		84
~~PART III~~
PART III
Item 10.	Directors, Executive ~~Officer,~~Officers and Corporate Governance		62 84
Item 11.	Executive Compensation		64 84
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		66 84
Item 13.	Certain Relationships and Related Transactions, and Director Independence		68 84
Item 14.	Principal ~~Accountant~~Accounting Fees and Services		70 84

PART IV
Item 15.	Exhibits, Financial Statement Schedules		70 84
Item 16.	Form 10-K Summary
	~~Signatures~~		73 86

	2018		2017
Property acquisition costs	$	1,072,047	$	7,227,362
Development costs	$	9,191,041	$	8,034,962
Exploratory costs	$	-	$	-

Totals	$	10,263,088	$	15,262,324

	December 31, 2018			December 31, 2018
	Reserves			Future Net Revenue (M$)
					Present Value Discounted
Category	Oil (Bbls)	Gas (Mcf)	Total (BOE)	Total	at 10%

Proved Producing	177,300	51,100	185,817	$4,027	$2,029
Proved Undeveloped	797,500	105,800	815,133	$15,313	$2,895
Total Proved	974,800	156,900	1,000,950	$19,340	$4,924

Standardized Measure of Future Net Cash Flows Related to Proved Oil and Gas Properties					$5,341

Probable Undeveloped	0	0	0	$-	$-

	December 31, 2017			December 31, 2017
	Reserves			Future Net Revenue (M$)
					Present Value Discounted
Category	Oil (Bbls)	Gas (Mcf)	Total (BOE)	Total	at 10%

Proved Producing	2,300	43,800	9,600	$132	$96
Proved Nonproducing	0	0	0	$-	$-
Total Proved	2,300	43,800	9,600	$132	$96

Standardized Measure of Future Net Cash Flows Related to Proved Oil and Gas Properties					$123

Probable Undeveloped	0	0	0	$-	$-

	Crude Oil (Bbls)	Natural Gas (Mcf)	BOE
TOTAL PROVED RESERVES:
Beginning of period	2,300	43,800	9,600
Revisions of previous estimates	21,257	(7,709)	19,972
Extensions, discoveries and other additions	974,110	138,670	997,222
Divestiture of Reserves	-	-	-
Acquisition of Reserves	-	-	-
Production	(22,887)	(17,821)	(25,857)
End of period	974,780	156,940	1,000,937

	2018	2017

Future cash inflows	$46,335,070	$240,370
Future production costs	(15,042,900)	(108,000)
Future development costs	(11,740,000)	-
Future income tax expense	-	-
Future net cash flows	19,552,170	132,370
10% annual discount for estimated timing of cash flows	(14,210,840)	(9,102)
Standardized measure of discounted future net cash flows related to proved reserves	$5,341,330	$123,268

A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved oil and natural gas reserves is as follows :

	2018	2017
Balance, beginning of period	$123,268	$340,916
Net change in sales and transfer prices and in production (lifting) costs related to future production	40,762	207,241
Changes in estimated future development costs	(8,718,999)	116,934
Net change due to revisions in quantity estimates	289,740	(129,565)
Accretion of discount	1,036	28,604
Other	(385,278)	(43,372)

Net change due to extensions and discoveries	14,467,005	-
Net change due to sales of minerals in place	-	-
Sales and transfers of oil and gas produced during the period	(476,204)	(397,490)
Previously estimated development costs incurred during the period	-	-
Net change in income taxes	-	-
Balance, end of period	$5,341,330	$123,268

Property	Quarter	Oil Production {BBLS}	Gas Production {MCF}	Oil Revenue	Gas Revenue	Total Revenue

Oklahoma	Q1 - 2018	72	2,008	4,463	5,202	$9,665
Hazel (TX)	Q1 - 2018	7,786	0	471,498	-	$471,498
Total Q1-2018		7,858	2,008	$475,961	$5,202	$481,163

Oklahoma	Q2 - 2018	446	1,857	10,912	2,690	$13,602
Hazel (TX)	Q2 - 2018	4,368	0	266,506	-	$266,506
Meco (TX)	Q2 - 2018	51	0	3,155	-	$3,155
Total Q2-2018		4,865	1,857	$280,573	$2,690	$283,263

Oklahoma	Q3 - 2018	41	2,324	$1,264	$3,845	$5,109
Hazel (TX)	Q3 - 2018	2,283	0	$123,566	$-	$123,566
Meco (TX)	Q3 - 2018	0	0	$-	$-	$-
Total Q3-2018		2,324	2,324	$124,830	$3,845	$128,675

Oklahoma	Q4 - 2018	94	986	$4,878	$1,104	$5,982
Hazel (TX)	Q4 - 2018	3,779	0	$178,015	$-	$178,015
Meco (TX)	Q4 - 2018	3,967	10,646	$192,916	$12,348	$205,264
Total Q4-2018		7,840	11,632	$375,809	$13,452	$389,261

2018 Year To Date		22,887	17,821	$1,257,173	$25,189	$1,282,362


Oklahoma	Q1 - 2017	101	2,303	$5,346	$7,604	$12,950
Hazel (TX)	Q1 - 2017	0	0	-	-	-
Total Q1-2017		101	2,303	$5,346	$7,604	$12,950

Oklahoma	Q2 - 2017	140	2,332	6,594	6,709	13,303
Hazel (TX)	Q2 - 2017	0	0	-	-	-
Total Q2-2017		140	2,332	$6,594	$6,709	$13,303

Oklahoma	Q3 - 2017	132	2,041	5,733	3,727	9,460
Hazel (TX)	Q3 - 2017	204	0	8,836	-	8,836
Total Q3-2017		336	2,041	$14,569	$3,727	$18,296

Oklahoma	Q4 - 2017	84	2,583	4,739	8,227	12,966
Hazel (TX)	Q4 - 2017	9,730	0	512,984	-	512,984
Total Q4-2017		9,814	2,583	$517,723	$8,227	$525,950

Year Ended 12/31/17		10,391	9,259	$544,232	$26,267	$570,499

	Cumulative Well Status		Wells Drilled		Cumulative Well Status
Drilling Activity/Well Status	at 12/31/2018		2018		at 12/31/2017
	Gross	Net	Gross	Net	Gross	Net

Development Wells:
Productive -Texas (Hazel)	1.00	0.80	-	-	1.00	0.80
Productive -Texas (Warwink)	1.00	0.13	1.00	0.13	-	-
Productive - Okla	2.00	0.40	-	-	2.00	0.40
Test Wells (Dry) - Orogrande	6.00	3.66	4.00	2.71	2.00	0.95
Test Wells (Dry) - Hazel	4.00	3.20	2.00	1.60	2.00	1.60

Exploration Wells:
Productive	-	-	-	-	-	-
Dry	-	-	-	-	-	-


Total Drilled Wells:
Productive -Texas	2.00	0.93	1.00	0.13	1.00	0.80
Productive - Okla	2.00	0.40	-	-	2.00	0.40
Test Wells (Dry)	10.00	6.86	6.00	4.31	4.00	2.55


Acquired Wells:
Productive -Texas	-	-	-	-	-	-
Productive - Okla	-	-	-	-	-	-


Total Wells:
Productive -Texas	2.00	0.93	1.00	0.13	1.00	0.80
Productive - Okla	2.00	0.40	-	-	2.00	0.40
Test Wells (Dry)	10.00	6.86	6.00	4.31	4.00	2.55

Total	14.00	8.19	7.00	4.44	7.00	3.75

Well Type:
Oil	-	-	-	-	-	-
Gas	-	-	-	-	-	-
Combination -Oil and Gas	4.00	1.33	1.00	0.13	3.00	1.20
Test Wells (Dry)	10.00	6.86	6.00	4.31	4.00	2.55

Total	14.00	8.19	7.00	4.44	7.00	3.75

					TRCH Interest				TRCH Interest
	Total Acres				Developed Acres				Undeveloped Acres
Leasehold Interests - 12/31/2018	Gross		Net		Gross		Net		Gross		Net

Texas -
Orogrande		133,000		90,108		-		-		133,000		90,108
Hazel Project		12,000		9,600		320		256		11,680		9,344
Warwink Properties		1,400		175		1,400		175		-		-

Oklahoma -
Viking		640		192		640		192		-		-

Total		147,040		100,075		2,360		623		144,680		99,452

				Number of
				securities
				remaining
				available
				for future
	Number of			issuance
	securities to	Weighted-		under
	be issued	average		equity
	upon	exercise		compensation
	exercise of	price of		plans
	outstanding	outstanding		(excluding
	options,	options,		securities
	warrants	warrants		reflected in
Plan Category	and rights	and rights		column (a))

Equity compensation plans approved by security holders	8,014,931	$	1.48	1,985,069

Increase(decrease) in non cash stock and warrant compensation	$	189,263
Increase(decrease) in consulting expense	$	292,488
Increase(decrease) in investor relations	$	140,043
Increase(decrease) in travel expense	$	(13,019	)
Increase(decrease) in salaries and compensation	$	(20,676	)
Increase(decrease) in legal fees	$	(347,848	)
Increase(decrease) in filing and compliance fees	$	33,186
Increase(decrease) in insurance	$	55,279
Increase(decrease) in general corporate expenses	$	(11,513	)
Increase(decrease) in audit fees	$	82,889

Total Increase in General and Administrative Expenses	$	400,092

Year Ending December 31,	Rent

To 2019 Expiration		88,605
Total	$	88,605

	December 31,			December 31,
	2018			2017
ASSETS
Current assets:
Cash	$	840,163		$	1,051,720
Accounts receivable		179,702			596,141
Production revenue receivable		294,715			142,932
Prepayments - development costs		146,422			1,335,652
Prepaid expenses		60,980			39,506
Total current assets		1,521,982			3,165,951

Oil and gas properties, net		36,565,461			25,579,279
Office equipment, net		4,076			15,716
Other assets		6,362			6,362

TOTAL ASSETS	$	38,097,881		$	28,767,308

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	729,806		$	762,502
Funds received pending settlement		-			520,400
Accrued payroll		816,176			695,176
Related party payables		45,000			45,000
Due to working interest owners		54,320			54,320
Accrued interest payable		553,370			202,050
Total current liabilities		2,198,672			2,279,448

Unsecured promissory notes, net of discount and financing costs of $702,217 at December 31, 2018 and $795,017 at December 31, 2017		11,862,080			7,269,281
Notes payable		6,000,000			3,250,000
Asset retirement obligations		14,353			9,274

Total liabilities		20,075,105			12,808,003

Commitments and contingencies

Stockholders’ equity:
Preferred stock, par value $0.001, 10,000,000 shares authorized; -0- issued and outstanding at December 30, 2018 and December 31, 2017
		-			-
Common stock, par value $0.001 per share; 150,000,000 shares authorized;
70,112,376 issued and outstanding at December 30, 2018		70,116			63,344
63,340,034 issued and outstanding at December 31, 2017
Additional paid-in capital		107,266,965			99,403,654
Accumulated deficit		(89,314,305	)		(83,507,693	)
Total stockholders’ equity		18,022,776			15,959,305

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	38,097,881		$	28,767,308

TORCHLIGHT ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

	Year	Year
	Ended	Ended
	December 31, 2018	December 31, 2017
Revenues
Oil and gas sales	$1,282,362	$570,499


Cost of revenues	(806,158)	(173,187)

Gross profit	476,204	397,312


Operating expenses:
General and administrative expense	(4,053,062)	(3,652,970)
Depreciation, depletion and amortization	(1,173,752)	(100,156)
Loss on settlement	(369,439)	-
Impairment loss	(139,891)	-
Total operating expenses	(5,736,144)	(3,753,126)


Other income (expense)
Interest expense and accretion of note discounts	(547,710)	(346,050)
Interest income	1,038	454
Consulting income	-	2,781,500
Total income (expense)	(546,672)	2,435,904


Loss before income taxes	(5,806,612)	(919,910)

Provision for income taxes	-	-

Net loss	$(5,806,612)	$(919,910)



Loss per common share:
Basic and Diluted	$(0.09)	$(0.02)
Weighted average number of common shares outstanding:
Basic and Diluted	68,134,745	59,623,105

TORCHLIGHT ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2018 AND 2017
		��

	Common	Common	Additional
	stock	stock	paid-in	Accumulated
	shares	amount	capital	deficit	Total


Balance, December 31, 2016	55,096,506	$55,100	$89,675,488	$(82,587,783)	$7,142,805

Issuance of common stock for services	507,894	508	579,246		579,754
Issuance of common stock for lease
interests	6,420,395	6,421	6,805,941		6,812,362
Issuance of common stock for Note
conversion	1,007,890	1,008	1,006,882		1,007,890
Issuance of stock for warrant exercise	307,349	307	242,993		243,300
Warrants issued for services			161,560		161,560
Stock options issued for services			931,544		931,544
Net loss				(919,910)	(919,910)

Balance, December 31, 2017	63,340,034	$63,344	$99,403,654	$(83,507,693)	$15,959,305

Issuance of common stock for services	450,000	450	544,550		545,000
Issuance of common stock for cash	5,750,000	5,750	6,043,984		6,049,734
less Underwriting/Offering Costs
Issuance of common stock for note	172,342	172	220,852		221,024
payment in kind
Warrant exercise into common stock	400,000	400	199,600		200,000
Warrants issued for services			510,575		510,575
Stock options issued for services			343,750		343,750
Net loss				(5,806,612)	(5,806,612)

Balance, December 31, 2018	70,112,376	$70,116	$107,266,965	$(89,314,305)	$18,022,776

	2018			2017

Evaluated costs subject to amortization	$	11,664,586		$	5,022,129
Unevaluated costs		31,746,477			26,100,749
Total capitalized costs		43,411,063			31,122,878
Less accumulated depreciation, depletion and amortization		(6,845,602	)		(5,543,599	)
Total oil and gas properties	$	36,565,461		$	25,579,279

Exercise	Expiration Date in					2018
Price	2019	2020	2021	2022	2023	Total

$0.70	-	420,000	-	-	-	420,000
$0.77	100,000	-	-	-	-	100,000
$1.00	25,116	-	-	-	-	25,116
$1.03	-	-	120,000	-	-	120,000
$1.08	37,500	-	-	-	-	37,500
$1.14	-	-	-	-	600,000	600,000
$1.21	-	-	-	-	120,000	120,000
$1.40	-	1,121,736		-	-	1,121,736
$1.50	-		100,000	-	-	100,000
$1.64	-	-	200,000	-	-	200,000
$1.80	-	1,250,000	-	-	-	1,250,000
$2.00	-	-	400,000	-	-	400,000
$2.23	-	832,512		-	-	832,512
$2.50	35,211	-	-	-	-	35,211
$3.50	15,000	-	-	-	-	15,000
$4.50	700,000	-	-	-	-	700,000
$6.00	22,580	-	-	-	-	22,580
$7.00	700,000	-	-	-	-	700,000
	1,635,407	3,624,248	820,000	-	720,000	6,799,655

	December 31, 2018	December 31, 2017
Deferred tax assets:
Net operating loss carryforward	11,968,500	$11,116,332
Stock based compensation	4,490,775	4,209,307
Other	371,636	302,042
Deferred tax liabilities:
Investment in oil and gas properties	(2,879,086)	(1,447,405)
Net deferred tax assets and liabilities	13,951,825	14,180,276
Less valuation allowance	(13,951,825)	(14,180,276)
Total deferred tax assets and liabilities	$-	$-

Standardized Measure of Oil & Gas Quantities - Volume Rollforward
Year Ended December 31, 2018

The following table sets forth the Company’s net proved reserves, including the changes therein, and proved developed reserves:


	Crude Oil (Bbls)	Natural Gas (Mcf)	BOE
TOTAL PROVED RESERVES:
Beginning of period	2,300	43,800	9,600
Revisions of previous estimates	21,257	(7,709)	19,972
Extensions, discoveries and other additions	974,110	138,670	997,222
Divestiture of Reserves	-	-	-
Acquisition of Reserves	-	-	-
Production	(22,887)	(17,821)	(25,857)
End of period	974,780	156,940	1,000,937

Standardized Measure of Oil & Gas Quantities - Volume Rollforward
Year Ended December 31, 2017

The following table sets forth the Company’s net proved reserves, including the changes therein, and proved developed reserves:


	Crude Oil (Bbls)	Natural Gas (Mcf)	BOE
TOTAL PROVED RESERVES:
Beginning of period	48,200	490,900	130,017
Revisions of previous estimates	(35,509)	(437,841)	(108,483)
Extensions, discoveries and other additions	-	-	-
Divestiture of Reserves	-	-	-
Acquisition of Reserves	-	-	-
Production	(10,391)	(9,259)	(11,934)
End of period	2,300	43,800	9,600

Results of Operations for Oil and Gas Producing Activities
For the Year Ended December 31, 2018	Total			Texas			Oklahoma

Oil and Gas revenue	$	1,282,362		$	1,248,004		$	34,358

Production costs	$	806,158		$	787,681		$	18,477
Depreciation, depletion, and amortization	$	1,173,752		$	464,318		$	709,434
Exploration expenses	$	-		$	-		$	-
		1,979,910		$	1,251,999		$	727,911

Income tax expense	$	-		$	-		$	-

Results of Operations (excluding corporate overhead and interest costs)	$	(697,548	)	$	(3,995	)	$	(693,553	)

	Year		Salary		Bonus		Stock		Option		Non-Equity		Change in		All Other		Total
			($)		($)		Awards		Awards		Incentive		Pension		Compensation		($)
							($)		($)		Plan		Value		($)
									(A)		Compensation		and
Name and									(1)		($)		Nonqualified
Principal													Deferred
Position													Compensation
													($)
John A. Brda		2018	$	375,000		-		-	$	-		-		-		-	$	375,000
CEO/Secretary/Director		2017	$	375,000		-		-	$	-		-		-		-	$	375,000

Roger Wurtele		2018	$	225,000		-		-	$	-		-		-		-	$	225,000
CFO		2017	$	225,000		-		-	$	-		-		-		-	$	225,000

	Option Awards
	Number of		Number of	Equity Incentive
	Securities		Securities	Plan Awards: Number of
	Underlying		Underlying	Securities
	Unexercised		Unexercised	Underlying	Option
	Options		Options	Unexercised	Exercise	Option
	(#)		(#)	Unearned Options	Price	Expiration
Name	Exercisable		Unexercisable	(#)	($)	Date

John A. Brda	3,000,000	(1)	-	-	$1.57	6/11/2020

Roger Wurtele	1,500,000	(1)	-	-	$1.57	6/11/2020

	Fees Earned				Option Awards					Nonqualified
	Paid							Non-Equity		Deferred		All
	in		Stock		Option			Incentive Plan		Compensation		Other
	Cash		Awards		Awards			Compensation		Earnings		Compensation		Total
Name	($)		($)		($)(A)			($)		($)		($)		($)

Alexandre Zyngier		-		-	$	100,000	(1)		-		-		-	$	100,000
R. David Newton (2)		-		-	$	100,000	(1)		-		-		-	$	100,000
Michael Graves		-		-	$	100,000	(1)		-		-		-	$	100,000

Shares Beneficially Owned

	Common Stock
Name of beneficial owner	Shares			% of Class

John A. Brda		5,318,322	(1)		7.15
President, CEO, Secretary and Director

Gregory McCabe		13,648,390	(2)		19.08
Director (Chairman of the Board)

Roger N. Wurtele		1,510,000	(3)		2.07
Chief Financial Officer

Robert Lance Cook		100,000	(4)		*
Director

Michael J. Graves		445,000	(5)		*
Director

Alexandre Zyngier		300,000	(6)		*
Director

All directors and executive officers as a group (6 persons)		21,321,712			27.79

Robert Kenneth Dulin (7)		4,351,381	(7)		5.94

David Moradi (8)		4,176,891	(8)		5.85

	2018	2017
Audit Fees(1)	$159,253	$196,666
Audit Related Fees(2)	107,186	-
Tax Fees(3)	20,400	65,888
All Other Fees	41,959	-

Total Fees	$328,798	$262,554