META MATERIALS INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)


	Three months ended March 31,
	2022			2021
Revenue:
Product sales	$	168,127		$	22,047
Development revenue		2,806,568			574,256
Total Revenue		2,974,695			596,303
Cost of goods sold		778,712			400
Gross Profit		2,195,983			595,903
Operating Expenses:
Selling & Marketing		1,035,986			396,594
General & Administrative		14,597,913			2,592,885
Research & Development		3,971,139			1,779,256
Total operating expenses		19,605,038			4,768,735
Loss from operations		(17,409,055	)		(4,172,832	)
Interest expense, net		(164,434	)		(450,908	)
Gain (Loss) on foreign exchange, net		148,391			(166,444	)
Loss on financial instruments, net		—			(40,004,921	)
Other (loss) income, net		(1,009,443	)		591,907
Total other expense, net		(1,025,486	)		(40,030,366	)
Loss before income taxes		(18,434,541	)		(44,203,198	)
Income tax recovery		—			44,679
Net loss	$	(18,434,541	)	$	(44,158,519	)
Other Comprehensive Income net of tax
Foreign currency translation gain		905,382			21,128
Fair value gain on changes of own credit risk		—			671,600
Total Other Comprehensive Income		905,382			692,728
Comprehensive loss	$	(17,529,159	)	$	(43,465,791	)
Basic and diluted loss per share (1)	$	(0.06	)	$	(0.26	)
Weighted average number of shares outstanding - basic and diluted (1)		285,224,469			168,864,762

(1)

Retroactively restated for the three months ended March 31, 2021 for the Torchlight RTO (“Reverse Acquisition”) as described in Note 3

Three Months Ended

June 30,

Six Months Ended

June 30,


2021

2020

2021

2020

Revenue:

Product sales    1,953 —   24,000 1,922
Development revenue
   622,367 210,344 1,196,623 648,761
Total Revenue


624,320

210,344

1,220,623

650,683

Cost of goods sold
   706 1,336 1,106 2,160
Gross Profit


623,614

209,008

1,219,517

648,523

Operating Expenses:

Selling & Marketing
   298,871 153,962 695,465 324,528
General & Administrative
   3,145,368 1,553,118 5,738,252 3,157,652
Research & Development
   1,633,653 960,430 3,412,909 1,892,601
Total operating expenses


5,077,892

2,667,510

9,846,626

5,374,781

Other income (expense):

Interest expense, net    (427,809 ) (324,421 ) (878,717 ) (516,225 )
(Loss) Gain on foreign exchange, net    (163,941 ) (323,172 ) (330,385 ) 256,673
(Loss) Gain on financial instruments, net    (535,170 ) 1,042,928 (40,540,091 ) 1,285,765
Other income, net    341,958 236,001 933,864 411,669
Total other income (expenses)


(784,962
)

631,336

(40,815,329
)

1,437,882

Loss before income taxes


(5,239,240
)

(1,827,166
)

(49,442,438
)

(3,288,376
)
Income tax recovery
   57,847 10,425 102,526 54,347
Net loss


(5,181,393
)

(1,816,741
)

(49,339,912
)

(3,234,029
)

Other Comprehensive Income (Loss) net of tax

Foreign currency translation gain (loss)    87,087 160,012 108,648 (159,248 )
Fair value gain (loss) on changes of own credit risk    9,011 (388,332 ) 680,178 (365,208 )
Total Other Comprehensive Income (Loss)


96,098

(228,320
)

788,826

(524,456
)
Comprehensive loss


(5,085,295
)

(2,045,061
)

(48,551,086
)

(3,758,485
)
Basic and diluted loss per share
(1)
   (0.03 ) (0.01 ) (0.27 ) (0.03 )
Weighted average number of shares outstanding - basic and diluted
(1)
   197,911,144 155,931,625 183,485,933 120,093,443

~~(1)~~

~~Retroactively restated for the three and six months ended June 30, 2021 and 2020 for the Torchlight RTO (“Reverse Acquisition”) and CPM RTO (“Reverse Recapitalization”) as described in Note 3~~

The accompanying notes are an integral part of these condensed consolidated interim financial statements

~~Table of Contents~~

META MATERIALS INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)(1)


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Income (loss)			Deficit			Equity
Balance, January 1, 2022		284,573,316	$	262,751	$	463,136,404	$	(296,936	)	$	(128,394,104	)	$	334,708,115
Net loss		—		—		—		—			(18,434,541	)		(18,434,541	)
Other comprehensive income		—		—		—		905,382			—			905,382
Exercise of stock options		730,249		730		196,437		—			—			197,167
Exercise of warrants		1,623,700		1,625		167,950		—			—			169,575
Stock-based compensation		—	��	—		4,191,984		—			—			4,191,984
Balance, March 31, 2022		286,927,265	$	265,106	$	467,692,775	$	608,446		$	(146,828,645	)	$	321,737,682

Balance, January 1, 2021		154,163,975	$	132,347	$	29,022,977	$	(655,884	)	$	(37,396,843	)	$	(8,897,403	)
Net loss		—		—		—		—			(44,158,519	)		(44,158,519	)
Other comprehensive income		—		—		—		692,728			—			692,728
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		178,720		179		48,450		—			—			48,629
Exercise of warrants		82,097		82		31,502		—			—			31,584
Exercise of broker warrants		61,331		61		16,194		—			—			16,255
Stock-based compensation		286,292		286		497,489		—			—			497,775
Balance, March 31, 2021		194,700,061	$	172,883	$	81,569,135	$	36,844		$	(81,555,362	)	$	223,500

(1)

Retroactively restated from the earliest period presented for the Torchlight RTO (“Reverse acquisition”) as described in Note 3

Accumulated

Additional

Other

Total

Preferred Stock

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

Shares

Amount

Capital

Income (loss)

Deficit

Equity

Balance, April 1, 2021

—

—

194,700,061

172,883

81,568,131

37,848

(81,555,362
)

223,500

Net loss
—   —   —   —   —   —   (5,181,393 ) (5,181,393 )
Other comprehensive income
—   —   —   —   —   96,098 —   96,098
Exercise of stock options
—   —   235,199 235 64,291 —   —   64,526
Exercise of warrants
—   —   156,709 157 62,252 —   —   62,409
Effect of reverse acquisition
—   —   82,813,994 82,814 369,548,188 —   —   369,631,002
Shares issued in lieu of operating
lease liability
—   —   1,832,989 1,833 2,780,135 —   —   2,781,968
Stock-based compensation
—   —   43,902 44 236,195 —   —   236,239

Balance, June 30, 2021

—

—

279,782,854

257,966

454,259,192

133,946

(86,736,755
)

367,914,349

Balance, April 1, 2020

—

—

154,236,692

132,420

27,896,288

(360,015
)

(27,202,872
)

465,821

Net loss
—   —   —   —   —   —   (1,816,741 ) (1,816,741 )
Other comprehensive loss
—   —   —   —   —   (228,320 ) —   (228,320 )
Stock-based compensation
—   —   —   —   365,763 —   —   365,763

Balance, June 30, 2020

—

—

154,236,692

132,420

28,262,051

(588,335
)

(29,019,613
)

(1,213,477
)

Accumulated

Additional

Other

Total

Preferred Stock

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

Shares

Amount

Capital

Income (loss)

Deficit

Equity

Balance, January 1, 2021
—   —   154,163,975 132,347 29,021,974 (654,880 ) (37,396,843 ) (8,897,402 )
Net loss
—   —   —   —   —   —   (49,339,912 ) (49,339,912 )
Other comprehensive
incom
e
—   —   —   —   —   788,826 —   788,826
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
—   —   413,919 414 112,741 —   —   113,155
Exercise of warrants
—   —   238,806 239 93,755 —   —   93,994
Exercise of broker warrants
—   —   61,331 61 16,194 —   —   16,255
Effect of reverse acquisition
—   —   82,813,994 82,814 369,548,188 —   —   369,631,002
Shares issued in lieu of operating lease liability
—   —   1,832,989 1,833 2,780,135 —   —   2,781,968
Stock-based compensation
—   —   330,194 330 733,682 —   —   734,012

Balance, June 30, 2021
—   —   279,782,854 257,966 454,259,192 133,946 (86,736,755 ) 367,914,349

Balance, January 1, 2020
58,153,368 58,153 53,297,568 31,480 19,896,611 (63,879 ) (25,785,584 ) (5,863,219 )
Net loss
—   —   —   —   —   —   (3,234,029 ) (3,234,029 )
Other comprehensive loss
—   —   —   —   —   (524,456 ) —   (524,456 )
Issuance of common stock, net
—   —   2,613,321 2,613 429,795 —   —   432,408
Issuance of warrants
—   —   —   —   149,994 —   —   149,994
Issuance of broker warrants
—   —   —   —   16,144 —   —   16,144
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 3,089,235 —   —   3,110,834
Stock-based compensation
—   —   298,453 300 759,100 —   —   759,400

Balance, June 30, 2020
—   —   154,236,692 132,420 28,262,051 (588,335 ) (29,019,613 ) (1,213,477 )

~~(1)~~

~~Retroactively restated from the earliest period presented for the Torchlight RTO (“Reverse acquisition”) and CPM RTO (“Reverse Recapitalization”) as described in Note 3~~

The accompanying notes are an integral part of these condensed consolidated interim financial statements

~~Table of Contents~~

META MATERIALS INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

June 30, 2021

June 30, 2020

$

$

Cash flows from operating activities:

Net loss
   (49,339,912 ) (3,234,029 )
Adjustments to reconcile net loss to net cash used in operating activities:

Non-cash finance income    —   (14,002 )
Non-cash interest expense    742,174 378,485
Non-cash lease expense    160,437 —
Deferred income tax
   (102,526 ) (54,347 )
Depreciation and amortization
   1,173,884 1,197,123
Unrealized foreign currency exchange loss (gain)
   230,837 (304,973 )
Loss (gain) on financial instruments, net
   40,540,091 (1,285,765 )
Change in deferred revenue
   18,302 (232,986 )
Non-cash government assistance
   (472,499 ) (182,664 )
Loss on debt
s
ettlement
   19,253 —
Stock-based compensation
   651,718 708,468
Non-cash
consulting expense
   12,009 43,673
Changes in operating assets and liabilities
   758,381 (1,480,270 )
Net cash used in operating activities


(5,607,851
)

(4,461,287
)
Cash flows from investing activities:

Purchases of intangible assets
   (274,579 ) (46,977 )
Purchases of property, plant and equipment
   (3,040,296 ) (538,893 )
Proceeds from reverse takeover    146,954,733 3,072,136
Net cash provided by
invest
ing activities


143,639,858

2,486,266

Cash flows from
financ
ing activities:

Proceeds from long-term debt
   1,127,151 25,783
Repayments of long-term debt
   (53,331 ) (190,633 )
Proceeds from government grants

223,384

198,286

Proceeds from unsecured promissory notes
   13,963,386 —
Proceeds from secured convertible debentures
   —   3,630,019
Proceeds from unsecured convertible debentures
   —   693,784
Proceeds from issuance of common stock and warrants, net
   —   598,546
Proceeds from stock option exercises
   113,155 —
Proceeds from warrants exercises
   93,993 —
Proceeds from broker warrants exercises
   16,255 —


Net cash provided by financing activities


15,483,993

4,955,785

Net increase in cash, cash equivalents and restricted cash
   153,516,000 2,980,764
Cash, cash equivalents and restricted cash at beginning of the period
   1,395,683 407,061
Effects of exchange rate changes on cash, cash equivalents and restricted cash
   156,367 3,931
Cash, cash equivalents and restricted cash at end of the period
   155,068,050 3,391,756
Supplemental cash flow information

Accrued purchases of property, equipment and patents
   297,345 35,724
Right-of-use
assets obtained in exchange for lease liabilities
   1,730,743 —
Right-of-use
assets and prepaid expenses recognized in exchange for common stock
   2,149,381 —
Settlement of

liabilities in common stock
   52,063,432 —
Interest paid on debt
   64,528 18,124


	Three months ended
	March 31, 2022			March 31, 2021
	$			$
Cash flows from operating activities:
Net loss	$	(18,434,541	)	$	(44,158,519	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash finance income		(12,920	)		—
Non-cash interest expense		126,714			358,562
Non-cash lease expense		240,548			73,383
Deferred income tax		—			(44,679	)
Depreciation and amortization		1,672,969			590,201
Unrealized foreign currency exchange (gain) loss		(140,902	)		31,339
Loss on financial instruments, net		—			40,004,921
Change in deferred revenue		(79,146	)		565,801
Non-cash government assistance		(3,047	)		(348,650	)
Loss on debt settlement		—			19,253
Stock-based compensation		3,995,442			426,794
Non-cash consulting expense		196,541			—
Changes in operating assets and liabilities		(6,306,857	)		88,119
Net cash used in operating activities		(18,745,199	)		(2,393,475	)
Cash flows from investing activities:
Purchases of intangible assets		—			(128,209	)
Purchases of property, plant and equipment		(1,746,936	)		(1,477,329	)
Proceeds from short-term investments		2,884,999			—
Net cash provided by (used in) investing activities		1,138,063			(1,605,538	)
Cash flows from financing activities:
Proceeds from long-term debt		—			1,096,262
Repayments of long-term debt		(91,641	)		(12,098	)
Proceeds from government grants		—			223,384
Proceeds from unsecured promissory notes		—			13,963,386
Proceeds from stock option exercises		197,167			48,629
Proceeds from warrants exercises		169,575			47,839
Net cash provided by financing activities		275,101			15,367,402
Net (decrease) increase in cash, cash equivalents and restricted cash		(17,332,035	)		11,368,389
Cash, cash equivalents and restricted cash at beginning of the period		47,434,472			1,395,683
Effects of exchange rate changes on cash, cash equivalents and restricted cash		126,233			108,578
Cash, cash equivalents and restricted cash at end of the period	$	30,228,670		$	12,872,650
Supplemental cash flow information
Accrued purchases of property, equipment and patents	$	1,772,821		$	127,456
Right-of-use assets obtained in exchange for lease liabilities		146,822			1,300,573
Settlement of liabilities in common stock		—			52,063,431
Interest paid on debt		—			64,528

The accompanying notes are an integral part of these condensed consolidated interim financial statements

~~Table of Contents~~

META MATERIALS INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

1. Corporate information

Meta Materials Inc. ~~(the~~(also referred to herein as the “Company” or, “META”, “we”, “us”, “our”, or “Resulting Issuer”) is a smart materials and photonics company specializing in metamaterial research and products, nanofabrication, and computational electromagnetics. ~~The Company’s~~Our registered office is located at ~~5700 West Plano Pkwy, Plano, Texas 75093~~85 Swanson Road, Boxborough, Massachusetts 01719 and ~~its~~our principal executive office is located at 1 Research Drive, Halifax, Nova Scotia, ~~Canada~~

Canada.

On March 5, 2020, MMI 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 the CPM. In connection with the RTO, CPM changed its name effective March 2, 2020 from Continental Precious Minerals Inc. to Metamaterial Inc. (“MMI” or “Resulting Issuer”). The common stock of CPM were delisted from the TSX Venture Exchange on March 4, 2020 and were 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 condensed consolidated interim 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~~, we (formerly known as “Torchlight Energy Resources, Inc.” or “Torchlight”) and ~~its~~our subsidiaries, Metamaterial Exchangeco Inc. (formerly named 2798832 Ontario Inc., “Canco”) and 2798831 Ontario Inc. (“Callco”), entered into an Arrangement Agreement (the “Arrangement Agreement”) with Metamaterial Inc., an Ontario corporation headquartered in 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 Business Corporations Act (Ontario), on and subject to the terms and conditions of the Arrangement Agreement (the “Torchlight RTO”). On June 25, 2021, ~~the Company~~we 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”.~~split. On June 28, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was ~~completed.~~

completed, and we changed our name from “Torchlight Energy Resources, Inc.” to “Meta Materials Inc.” and changed our trading symbol from “TRCH” to “MMAT”.

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

Business Combinations

. Accordingly, these condensed consolidated interim 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.

~~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 the remaining period of the year. Engineering staff continued to work on given tasks and follow strict safety guidelines. As of August 2021, the majority of the Company’s employees have 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~~

~~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.~~

2. Significant accounting policies

Basis of presentation

—These unaudited condensed consolidated interim financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). ~~The Company’s~~Our fiscal year-end is December 31.

The condensed consolidated interim financial statements include the accounts of Meta Materials Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation.

These unaudited condensed consolidated interim financial statements do not include all of the information and notes required by US GAAP for annual financial statements. Accordingly, these unaudited condensed consolidated interim financial statements should be read in conjunction with ~~the Company’s~~our audited consolidated financial statements and notes for the ~~year~~years ended December 31, 2021, 2020 and 2019, filed with the Securities and Exchange Commission (“SEC”) on Form ~~8-K/~~10-K/A.

~~Functional and reporting currency~~

—Items included in the condensed consolidated interim 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’). The condensed consolidated interim financial statements are presented in US Dollars, which is the Company’s reporting currency.

~~Table of Contents~~

~~transactions and balances~~

Foreign currency transactions are measured 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 quarter 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~~

Recently Adopted Accounting Pronouncements: We currently 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 all resulting exchange differences are recognized in other comprehensive income, a separate component of equity.~~

~~Principles of consolidation~~

- These condensed consolidated interim financial statements include all of the accounts of Torchlight Energy Resources Inc and its wholly owned subsidiaries: Torchlight Energy, Inc., Torchlight Energy Operating, LLC, Hudspeth Oil Corporation, and Torchlight Hazel LLC. as well as Metamaterial Exchangeco Inc., 2798831 Ontario Inc. (“Callco”), Metamaterial Inc., Metamaterial Technologies Canada Inc., Metamaterial Technologies USA Inc., Medical Wireless Sensing Limited, Lamda Guard Inc., Lamda Lux Inc., and Lamda Solar Inc. (the “Subsidiaries”). All intercompany balances and transactionsno material recently adopted accounting pronouncements.

Recently Issued Accounting Pronouncements: We currently have ~~been eliminated upon consolidation.~~

~~Use of estimates~~

The preparation of the condensed consolidated interim financial statements in conformity with US GAAP requires management to make estimates and certain assumptions that affect the amounts reported in these condensed consolidated interim financial statements and accompanying notes. Actual results could differ from these estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; the valuation of financial instruments measured at fair value, lease liabilities and right-of-use assets, and stock-based compensation.

~~Assets Held for Sale~~

~~Assets held for sale are measured at the lower of their carrying amount or fair value less cost to sell. See Note 3 for further discussion of assets held for sale.~~

~~Goodwill -~~

Goodwill represents the excess of the purchase price of all acquisitions over the estimated fair value of the net assets acquired. The Company evaluates goodwill for impairment at least annually or more frequently whenever events or changes in circumstances indicate that the asset may be impaired, or in the case of goodwill, the fair value of the reporting unit is below its carrying amount. When impairment indicators are identified, the Company compares the reporting unit’s fair value to its carrying amount, including goodwill. An impairment loss is recognized as the difference, if any, between the reporting unit’s carrying amount and its fair value, to the extent the difference does not exceed the total amount of goodwill allocated to the reporting unit.

~~Cash and cash equivalents -~~

~~The Company considers all highly liquid investments with a maturity of three months or less when purchased~~no material recent accounting pronouncements yet to be ~~cash equivalents.~~adopted.

~~Inventory -~~

~~Inventory is measured at the lower of cost~~

3. Acquisitions and ~~net realizable value. Cost is determined using the first-in, first-out method (FIFO) for all inventory. Inventory consumed during research~~preferred stock liability

Torchlight RTO

On June 28, 2021, We and ~~development activities is recorded as a research~~our subsidiaries, Canco and ~~development expense.~~

~~Long-lived assets -~~

Long-lived assets, such as property, plant and equipment, and intangible assets subject to amortization, are 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 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 long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

~~Leases -~~

~~The Company is a lessee in several noncancellable operating leases for buildings. The Company accounts for leases in accordance with ASC topic 842, Leases. The Company determines if~~Callco, completed 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~~agreement where we acquired all of the unpaid lease payments at the lease commencement date. 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 of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

~~Table of Contents~~

~~Government grants and assistance -~~

Government grants are recognized at their fair value 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 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 research activities and once confirmation of milestone achievement has been received from the customer.

~~Deferred revenue -~~

consist of fees invoiced or paid by the Company’s customers for which the associated performance obligations have not been satisfied and 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 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 principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

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

Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 inputs: Unobservable inputs for the asset or liability used to measure 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 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 most financial assets and financial liabilities at fair value on an instrument-by-instrument basis, with changes in fair value reported in the statement of operations. Any changes in the fair value of liabilities resulting from changes in instrument-specific credit risk are reported in other comprehensive income.

~~Research and development~~

~~- Research and development activities are expensed as incurred.~~

~~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 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”) and warrants which are calculated using the treasury stock method, and convertible debt instruments using the if-converted method. Diluted EPS excludes all dilutive potential stock if their effect is anti-dilutive.

~~Table of Contents~~

~~Stock based compensation~~

– The Company recognizes compensation expense for equity awards based on the grant date fair value of the award. The Company recognizes stock-based compensation expense for awards granted to employees that have a 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 grant date fair value of award using the Black-Scholes option pricing model and estimates the number of forfeitures expected to occur. See Note 14 for the Company’s assumptions used in connection with option grants made during the periods covered by these consolidated financial statements.

Tax payments made on behalf of employees to tax authorities in order to satisfy employee income tax withholding obligations from the vesting of shares under the Company’s stock-based compensation plans are classified as a financing activity in the Statement of Cash Flows.

~~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 and State tax examinations. Generally, the applicable statutes of limitation are three to four years from their respective filings.

~~Recently adopted accounting pronouncements~~

~~ASU 2019-12 – Income Taxes (ACS 740)~~

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 ASC 740

~~Income Taxes~~

~~and provides simplification by clarifying and amending existing guidance. The adoption of this ASU did not have a material impact on our consolidated financial statements.~~

~~ASU 2020-09 – Debt (ACS 470)~~

In October 2020, the FASB issued ASU 2020-09, Debt- Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762 (“ASU 2020-09”). 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 has evaluated the provisions of ASU 2020-09 and noted no material impact to our consolidated financial statements or disclosures from the adoption of this ASU.

~~Table of Contents~~

~~ASU~~

~~2020-10~~

~~– Codification improvements~~

~~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 financial statements and related disclosures.~~

~~3. Reverse take-over transaction (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 the outstanding common stock of ~~MMI. On March 12, 2021, MMI’s annual general~~MMI and ~~special meeting was held and MMI’s securityholders approved~~ the ~~Arrangement and on June 11, 2021, approvals were obtained from Torchlight~~former 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 stock~~acquired approximately 70% of common stock, par value $0.001 per share of the Resulting Issuer or stock of Canco, which are exchangeable for stock 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 Issuerour 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,~~Accordingly, the former shareholders of MMI, as a group, retained control of the ~~Resulting Issuer,~~Company, and while ~~Torchlight~~the Company was the legal acquirer of MMI, MMI was deemed to be the acquirer for accounting ~~purposes~~

~~Reverse acquisition~~

purposes. Pursuant to ASC 805

Business ~~combination~~

Combinations, the transaction was accounted for as a reverse ~~acquisition since: (i)~~acquisition. Consideration transferred was measured to be $358 million and the ~~shareholders~~difference between the consideration transferred and fair value of ~~MMI owned~~net assets resulted in the ~~majority~~recognition of goodwill of $213 million.

Nanotech acquisition

On October 5, 2021, a wholly-owned subsidiary of the ~~outstanding~~Company purchased 100% of the common stock of Nanotech Security Corp. ("Nanotech") at CA$1.25 per share. In addition, the ~~Company after~~transaction price included the settlement of certain Nanotech share ~~exchange; (ii) a majority~~awards outstanding immediately prior to the closing of the ~~directors~~agreement. The consideration paid to the shareholders under the agreement resulted in a total purchase price of $72.1 million (CA$90.8 million) and the ~~Company are also directors of MMI; and (iii)~~difference between 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 condensed consolidated interim financial statements are those of MMI prior to June 28, 2021 and exclude the balance sheets, results of operations and comprehensive loss, statements of cash flows and stockholders’ equity of Torchlight prior to June 28, 2021.

Had the business combination occurred on January 1, 2021, the impact for the six months ended June 30, 2021 would have been an increase to revenue by $5,977 and an increase in loss by $6,768,457 (June 30, 2020 – increase to revenue by $130,097 and an increase to loss by $6,993,115). These pro forma amounts exclude the interestconsideration paid and fair value ~~impacts~~of net assets resulted in the recognition of goodwill of $27 million.

Other considerations

As of and for the period ended March 31, 2022, no changes have been made to the provisional purchase price allocations of the ~~pre-existing debt owing from MMI to Torchlight. The impact of~~Torchlight RTO and the ~~business combination on the post-acquisition period was not significant.~~

~~Measuring the Consideration Transferred~~

The accounting acquirer issued no consideration for the acquiree. Instead, the accounting acquiree issued its 196,968,803 common stock to the owners of the accounting acquirer. However, the acquisition-date fair value of the consideration transferred by the accounting acquirer for its interestNanotech acquisition, as disclosed 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 $436,214,719

~~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.~~

Adding the estimated fair value of the obligation created through the Series A Non-Voting Preferred Stock to distribute additional consideration to the previous shareholders based on the proceeds of the acquired Oil and Gas (O&G) assets.

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 close 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 theaudited consolidated financial statements ~~at their pre-combination carrying amounts.~~

~~Presentation of Condensed Consolidated Financial Statements Post Reverse Acquisition~~

~~The condensed consolidated interim financial statements reflect all of~~and notes for 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~~

~~Table of Contents~~

the amount recognized as issued equity interests in the condensed consolidated interim 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 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,~~years ended December 31, 2021 and ~~warrants as well as per share amounts have been retroactively restated to reflect~~2020 contained in form 10K/A filed with the ~~number of stock of the legal parent (accounting acquiree) issued in the reverse acquisition.~~

~~The Company believes~~Securities and Exchange Commission on May 2, 2022.

We believe that information gathered to date provides a reasonable basis for estimating the fair value of assets acquired and liabilities assumed, however ~~the Company is~~we are waiting for additional information necessary to finalize these fair values including ~~updated valuations for Oil~~assessment of any tax assets and ~~natural gas properties~~liabilities and ~~the Preferred stock liability included as part of the consideration.~~tax position in different jurisdictions. Therefore, the provisional measurements of fair value ~~set forth below~~ are subject to change. ~~The Company expects~~We expect to complete the purchase price ~~allocation~~allocations 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 assets acquired on a relative fair value basis:~~

dates.


	~~Amount ($)~~
~~Fair value of deemed issuance of MMI’s stock – Common Stoc~~ k		~~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~~		~~2,943,370~~
~~Fair value of Torchlight’s outstanding options – Additional paid in capital~~		~~9,397,988~~
~~Total Effect on Equity~~		~~369,631,002~~
~~Effective settlement of notes payable by MMI to Torchlight~~ 1		~~(11,322,637~~	)
~~Preferred stock liability~~ 2		~~77,906,354~~
		~~436,214,719~~
~~Net assets (liabilities) of Torchlight:~~
~~Cash and cash equivalents~~		~~146,954,733~~
~~Other assets~~		~~501,424~~
~~Oil and natural gas properties~~ 2		~~72,797,392~~
~~Accounts payable~~		~~(1,630,859~~	)
~~Other liabilities~~		~~(21,937~~	)
~~Goodwill~~ 3		~~217,613,966~~

		~~436,214,719~~

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. (note 7)

2	~~Oil and natural gas properties and preferred stock liability~~

~~On June 11, 2021, Torchlight’s stockholders approved an amendment to its Articles of Incorporation to increase the authorized number of s~~

~~tock~~

~~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.~~

~~June 25, 2021, the Company declared a dividend, on~~

~~a one-for-one basis,~~

of stock 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 entitled 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.

Pursuant to the Arrangement, the Company has reclassified the O&G Assets as assets held for sale since: (i) Management has committed to a plan to sell the assets; (ii) The assets are available for sale in their present condition as of June 30, 2021; (iii) The sale is probable and is expected to close within 1 year; and (iv) The selling price is reasonable in relation to the asset’s current fair value.

~~The Preferred stock liability is calculated as the estimated net proceeds from the sale the “O&G Assets” in addition to~~

~~$5 million in expected costs associated with maintaining and selling the assets.~~

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 Metas Stock on June 28, 2021, this resulted in total “consideration” being transferred to Torchlight of approximately $436 million. Further, the net assets of Torchlight acquired by MMI has been provisionally estimated to be approximately $219 million. The difference between the

~~$436~~

~~million of consideration deemed to have been transferred and the~~

~~$219~~

million of net assets acquired results in goodwill of approximately $218 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 acquired goodwill will continue to be assessed for impairment in future periods.

~~Table of Contents~~

4. Related party transactions

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, receivables due from a related party (Lamda Guard Technologies Ltd, or “LGTL”) were ~~$57,658~~$10,314 and ~~$NaN,~~$10,657, respectively. On

5. Assets held for sale

As of March ~~16,~~31, 2022 and December 31, 2021, ~~MMI converted~~assets held for sale represent the acquired oil and natural gas properties from the Torchlight RTO.

Orogrande Project, West Texas

Our outstanding drilling obligation 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 desired.

During the three months ended March 31, 2022, we have incurred an ~~amount~~additional $1.1 million in cost to ensure that compliance with the relevant leases was maintained.

The Orogrande Project ownership as of ~~$290,230 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 $225,986 in common stock~~31, 2022 is detailed as 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 ~~condensed consolidated interim statements~~Midland Basin in West Texas

As part of ~~changes in stockholders’ equity at fair value at the time~~our review of ~~conversion and recorded the difference of~~

~~$64,245~~

~~between~~ the fair value of the ~~common stock~~Hazel Project property as at March 31, 2022, we obtained a new engineering reserve report prepared by PeTech Enterprises, Inc. ("PeTech"), a third-party Reserve Engineer. The calculations were prepared using standard geological and engineering methods generally accepted by the ~~carrying~~petroleum industry and in accordance with SEC financial accounting and reporting standards.

Total reserve estimates made in the new engineering reserve report were lower than those previously made and used in the valuation for the Hazel Project property as of December 31, 2021. This resulted in $3.5 million decrease in the fair value of the ~~extinguished~~preferred share liability, and a corresponding impairment for the same amount to Assets Held for Sale, such that the fair value of the Hazel Project property as ~~a loss on debt settlement in the condensed consolidated interim statements~~ of ~~operations and comprehensive loss.~~

March 31, 2022 is $NaN.

6. Inventory

~~As of June 30, 2021 and December 31, 2020, related party payables were $NaN and $245,467 due to LGTL, respectively.~~

~~5. Inventory~~

Inventory consists of photosensitive materials, lenses, laser protection film and finished eyewear, and is comprised of the following:


	March 31, 2022		December 31, 2021
Raw materials	$	291,191	$	196,868
Supplies		17,349		8,886
Work in process		40,804		30,636
Finished goods		17,615		29,328
Total inventory	$	366,959	$	265,718

June 30, 2021

December 31, 2020


$

$

Raw materials
   281,065    378,265
Supplies
   14,786    14,414
Work in process
   72,442    69,381
Finished goods
   0    1,322




Total inventory


368,293



463,382

7. Property, plant and equipment, net

Property, plant and equipment consist of the following:


	Useful life	As of
	(years)	March 31, 2022			December 31, 2021
Land	N/A	$	476,152		$	469,317
Building	25		5,545,952			5,509,403
Computer equipment	3-5		295,481			262,320
Computer software	1		281,667			277,717
Manufacturing equipment	2-5		22,603,569			17,762,405
Office furniture	5-7		584,447			525,961
Enterprise Resource Planning software	5		214,224			211,149
Leasehold Improvements	5		1,346,287			236,251
Assets under construction	N/A		6,545,468			8,872,695
			37,893,247			34,127,218
Accumulated depreciation and impairment			(7,915,463	)		(7,109,104	)
		$	29,977,784		$	27,018,114

Useful life

(years)

June 30, 2021

$

December 30, 2021

$

Computer equipment
   3-5    187,131    163,856
Computer software
   1    263,549    256,554
Manufacturing equipment
   2-5    7,932,152    6,645,986
Office furniture
   5-7    108,408    99,234
Enterprise Resource Planning software
   5    215,987    210,254
Assets under construction

N/
A
   2,545,012    424,393






11,252,239



7,800,277

Accumulated depreciation and impairment
      (5,870,043 )    (5,039,106 )






5,382,196



2,761,171

Depreciation expense was ~~$362,054~~$754,957 and ~~$393,351~~$361,773 for the three months ended ~~June 30,~~March 31, 2022, and March 31, 2021, ~~and 2020, respectively, and $723,827 and $812,046 for the six months ended June 30, 2021 and 2020,~~ respectively.

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 July 14, 2014, which is related to ~~the Company’s~~our corporate bank account and credit card and includes all property, plant and equipment and intangible assets.

8. Long-term debt


	March 31, 2022		December 31, 2021
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 March 31, 2022, the amount drawn down on the loan, net of repayments, is CA$89,286 (December 31, 2021 - CA$107,143).	$	68,497	$	80,390
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 March 31, 2022, the amount drawn down on the loan is CA$2,924,615 (December 31, 2021 - CA$2,924,615).		1,728,368		1,666,764
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 March 31, 2022, the amount drawn down on the loan, net of repayments, is CA$2,687,500 (December 31, 2021 - CA$2,781,250).		1,313,195		1,319,130
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 March 31, 2022, the amount drawn down on the loan, net of repayments, is CA$86,111 (December 31, 2021 - CA$90,278).		41,466		42,011
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 March 31, 2022, the amount drawn down on the loan is CA$390,000 (December 31, 2021 - CA$390,000).		133,059		120,154
		3,284,585		3,228,449
Less: current portion		363,654		491,278
	$	2,920,931	$	2,737,171

~~Table~~ We were required to maintain a minimum balance of ~~Contents~~

~~7. Unsecured convertible promissory notes~~

Six months ended

June 30, 2021

$

Year ended

December 31, 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
   —   (258,480 ) (258,480 ) —      (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 ) —   (23,656,365 ) —      —   —
Elimination pursuant to Torchlight RTO (note 3)
   —   (11,322,637 ) (11,322,637 ) —      —   —




Ending balance


0

0

0

538,020



665,215

1,203,235

In November 2020, Meta entered into a commitment letter (the “Commitment Letter”) with a shareholder of MMI, 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 work

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~~positive equity throughout 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 stock, in accordance with the terms~~term of the ~~bridge financing. MMI has remeasured~~loan. However, on November 14, 2019, ACOA waived this requirement for the ~~instrument as~~period ending June 30, 2019 and for each period thereafter until the loan is fully repaid.

2 The carrying amount of the ~~conversion date~~ACOA AIF loan is reviewed each reporting period and ~~recognized a~~

~~non-cash~~

~~realized fair value loss~~adjusted as required to reflect management’s best estimate of ~~$19,163,417~~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 being recorded as deferred government assistance, which is being amortized over the ~~full amount~~useful life of ~~$23,656,365 was reclassified into~~the associated equipment. We recorded the amortization expense for the three months ended March 31, 2022 of $3,047 (three months ended March 31, 2021—$36,020) as government assistance in the condensed consolidated interim statements of ~~changes in stockholders’ equity.~~

~~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 Note 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 is 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

~~may~~

~~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 $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
8% 8% 8%
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 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~~

~~Table of Contents~~

~~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~~As of March 31, 2022, 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.

~~8. Secured convertible debentures~~

Six months ended
June 30, 2021
$

Year ended
December 31, 2020
$

Beginning balance
   5,545,470    0
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


0



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 monthly in cash. In addition to the cash interest, the Secured Debentures accrued a non-compounding payment in kind (“PIK”) of~~

~~% per annum. The PIK may get reduced by up to~~

~~3% (reduced to~~portion recorded 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 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 is required to maintain a working capital ratio of no less than 3:1. Working capital ratio excluded deferred revenue and~~ deferred government assistance ~~from current liabilities. MMI did not fulfil the ratio as required~~is amortized in ~~the contract and consequently, the secured debentures were reclassified as a current liability as at December 31, 2020~~

full.

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

9. Capital stock

Common stock

Authorized: 1,000,000,000 common ~~stock.~~

~~MMI remeasured the liability as of the conversion date and recognized a non-cash realized fair value loss of~~shares, $

16,408,482 and the full amount of $22,118,782 was reclassified into the condensed consolidated interim 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.~~

~~Table of Contents~~

~~9. Unsecured convertible debentures~~

~~Unsecured convertible debentures (the “Unsecured Debentures”) consist of the following:~~

Six months ended
June 30, 2021

Year ended
December 31, 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    54,978
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 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 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 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 stock in accordance with the terms of their debt instruments. MMI has 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 condensed consolidated interim statements of changes in stockholders’ equity.~~

~~In addition, the accumulated losses in OCI of $154,347 were recycled to the statements of operations.~~

~~Table of Contents~~

~~10. Long-term debt~~

June 30,
2021

$

December 31,
2020

$

ACOA Business Development Program (“BDP”) 2012 interest-free loan
1
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 June 30, 2021, the amount drawn down on the loan, net of repayments, is CA$160,715 (2020 - CA$178,571).
   107,965    129,384
ACOA Atlantic Innovation Fund (“AIF”) 2015 interest-free loan
1,2
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 June 30, 2021, the amount drawn down on the loan is $CA3,000,000 (2020 - CA$3,000,000).
   1,628,440    1,458,954
ACOA BDP 2018 interest-free loan
1,3
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 June 30, 2021, the amount drawn down on the loan, net of repayments, is CA$3,000,000 (2020 - CA$3,000,000).
   1,397,318    1,285,307
ACOA BDP 2019 interest-free loan
1
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 June 30, 2021, the amount drawn down on the loan is CA$62,165 (2020 - CA$62,165).
   45,166    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 June 30, 2021, the amount drawn down on the loan is CA$390,000 (2020 - $NaN).
   103,163    0
Shareholder loan bearing no interest. The loan proceeds are provided as collateral to a letter of credit and are recorded as restricted cash. The loan is repayable upon any reduction of the letter of credit. In the event that the bank draws on the collateral or the collateral has not been returned in full by December 31, 2021, then the outstanding balance of collateral will be considered a demand promissory note with 1% interest charge per month compounded monthly beginning January 1, 2022.
   806,842    0
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 share
4
. Pursuant to the conversion, CAIXA Capital was issued 67,597 MMI common stock.
   0      130,265






4,088,894



3,034,048

Less: current portion
   1,349,274    290,544






2,739,620



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.

~~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 six months ended June 30, 2021 of $73,306 (six months ended June 30, 2020—$66,729) as government assistance in the condensed consolidated interim statements of operations and comprehensive loss.

MMI has recognized the common stock issued 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 condensed consolidated interim statements of operations and comprehensive loss.

~~Table of Contents~~

~~11. Capital stock~~

~~Common stock~~

~~Authorized: 1,000,000,000 common stock, $0.001~~0.001 par value.

All references to numbers of common ~~stock~~shares and amounts in the condensed consolidated interim statements of changes in stockholder’s equity and in the notes to the condensed consolidated interim financial statements 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 common ~~stock~~shares issued ~~pre-CPM~~pre-Torchlight RTO have been multiplied by the

~~2.75 CPM conversion ratio and~~

1.845 Torchlight conversion ~~ratio while the numbers of common stock issued~~ratio.

~~post-CPM~~

~~RTO have been multiplied by~~•

~~the~~

~~1.845 Torchlight conversion ratio. In addition, the~~The amounts of common ~~stock~~shares issued

~~pre-CPM~~

pre-Torchlight RTO were calculated by multiplying the number of ~~stock~~shares by 0.001 ~~2.75 CPM conversion ratio~~ and

the

1.845 Torchlight conversion ratio and the difference were recognized in additional paid in ~~capital while~~capital.

During the ~~amounts~~three months ended March 31, 2022, 1,988,617 warrants and were exercised to purchase 1,623,700 common shares where most warrant holders elected cashless exercise and consequently, the difference of 364,917 shares was withheld to cover the exercise cost.

During the three months ended March 31, 2022, 730,249 stock options were exercised to purchase an equal number of common ~~stock issued~~shares.

Warrants

~~post-CPM~~

~~RTO were calculated by multiplying the number of stock by 0.001 and~~

~~the~~

~~1.845 Torchlight conversion ratio and the difference were recognized in additional paid in capital~~

During the six months ended June 30, 2021, the Company converted unsecured convertible promissory notes of $23,656,365, secured convertible debentures of $22,118,782, 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 stock issued w

~~calculated as the total outstanding principal and interest of each liability multiplied by the conversion price stated in each respective instrument’s agreement.~~

During the six months ended June 30, 2021, the Company converted long-term debt of $133,080 and due to related party of $295,419 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 condensed consolidated interim statements of operations and comprehensive loss. The number of stock issued w

~~calculated as the total outstanding principal and interest of each liability multiplied by the agreed upon conversion price.~~

~~During the six months ended June 30, 2021, the Company issued 286,292 common stock at CA$0.58 per stock as compensation in exchange for~~

~~fairness opinion~~

~~obtained~~

~~with respect to the Torchlight RTO. The Company paid~~

~~$90,000~~

in cash in 2020 and agreed to settle the remaining
C

$90,000 in common stock. The Company recognized the share-based payment in trade and other payables in 2020 until the stock were issued in
2021.

~~During the six months ended June 30, 2021, and pursuant to the Torchlight acquisition, the Company recognized $357,289,644~~

~~in equity~~

~~as the fair value of 82,813,994 common stock that was deemed to~~

~~have been ssued~~

~~Torchlight as part of the Torchlight RTO (note 3).~~

~~Warrants~~

~~Prior to completion of the CPM RTO on March 5, 2020, every two warrants had the right to purchase 1 MTI common stock for CA$2.475 per share.~~

~~Pursuant to the completion o~~

~~the RTO on March 5, 2020, MTI warrants were adjusted such that one warrant has the right to purchase 1 MMI Common Stock 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 in warrants of 426,639 and for~~

~~amount being recorded at $2,943,370 in additional paid in capital as part of the consideration transferred.~~

~~Table of Contents~~

The following table summarizes the changes in ~~warrants of the Company:~~our warrants:


	Three months ended
	March 31, 2022
	Number of
	warrants (#)			Amount
Outstanding, December 31, 2021		5,264,959		$	6,957,974
Exercised		(1,988,617	)		(251,915	)
Expired		(692,462	)		(101,156	)
Outstanding, March 31, 2022		2,583,880		$	6,604,903

Six months ended

June 30, 2021

Year ended
December 31, 2020


Number of

Number of


warrants
1

Amount
1

warrants
1

Amount
1


#

$

#

$

Balance, beginning of period
   3,046,730    402,883    1,590,866    132,299
Issued


—



—

   1,455,864    166,916
Adjustment to 2019 warrants


—



—

   —      103,668
Exercised
   (238,806 )    (35,603 )    —      —
Fair value of deemed issuance to Torchlight
   426,639    2,943,370    —      —








Balance, end of period


3,234,563



3,310,650



3,046,730



402,883

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~~

~~1.845 Torchlight conversion ratio. There were no warrants issued post CPM RTO except for Torchlight warrants.~~

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 stock for CA$~~

~~1.70~~

~~per share.~~

~~Pursuant to the completion~~

~~the RTO on March 5, 2020, each MTI broker warrant was converted into 1.845 MMI warrants, and 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 our broker ~~warrants~~warrants:


	Three months ended
	March 31, 2022
	Number of
	warrants (#)			Amount
Outstanding, December 31, 2021		13,887		$	1,826
Expired		(13,887	)		(1,826	)
Outstanding, March 31, 2022		—		$	—

10. Stock-based payments

On December 3, 2021, our shareholders 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 ~~Company:~~

Six months ended

Year ended


June 30, 2021

December 31, 2020


Number of

Number of


warrants
1

Amount
1

warrants
1

Amount
1


#

$

#

$

Balance, beginning of period
   97,542    16,144    0      0
Issued
   —      —      97,542    16,144
Exercised
   (61,331 )    (10,892 )    —      —








Balance, end of period


36,211



5,252



97,542



16,144

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.~~

2021 Equity Incentive Plan at 34,945,745 shares.

The ~~fair value~~2021 Equity Incentive Plan allows the grants of ~~warrants~~non-statutory stock options, restricted stock, restricted stock units ("RSUs"), stock appreciation rights, performance units and ~~broker warrants issued were estimated using the Black-Scholes option pricing model with the following inputs~~performance shares to employees, directors, and ~~assumptions:~~

Six months ended

Year ended

June 30, 2021

December 31, 2020
Risk free interest rate
   0.45% - 0.86% 0.80% -

1.43%
Expected volatility
   93% 134%
Expected dividend yield
   0% 0%
Expected forfeiture rate
   0% 0%
Common
stock
price
   7.96 1.70
Exercise price per common
stock
   $0.85 - $2.80 $1.70 - $2.475
Expected term of warrants
   2.20

- 3.90 years 2 years

~~12.~~

~~Stock~~

~~-based payments~~

consultants.

DSU Plan

~~Each share option is convertible at the option of the holder into one common stock of the Company.~~

On March 28, 2013, ~~the Company~~we implemented a Deferred Stock Unit (DSU) Plan for ~~its~~our 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 ~~stock of the Company.~~share. Eligible individuals are entitled to receive all DSUs (including dividends and other adjustments) no later than December 11st of the first calendar year commencing after the time of termination of their ~~services~~

Onservices.

As of March ~~5, 2020~~31, 2022, there were 3,647,026 outstanding DSUs. There were 0 new DSUs issued, 0 DSUs exercised and ~~pursuant~~0 DSUs expired during the three months ended March 31, 2022.

RSU Plan

Each unit is convertible at the option of the holder into one common share of our shares upon meeting the vesting conditions.

Total stock-based compensation expense related to RSUs included in the ~~CPM RTO, each MTI DSU~~condensed consolidated interim statements of operations was ~~converted into 2.75 MMI DSUs.~~as follows:


	Three months ended
	March 31,
	2022
Cost of sales	$	50,653
Selling & marketing		15,493
General & administrative		120,165
Research & development		97,211
	$	283,522

~~On June 28, 2021 and pursuant to the Torchlight RTO, each MMI DSU was converted into 1.845 META DSUs.~~

The following table summarizes the change in outstanding ~~DSUs of the Company:~~RSUs:


	Number of RSUs (#)		Weighted Average grant date fair value
Outstanding, December 31, 2021		300,000	$	6.43
Granted		3,832,278		1.71
Outstanding, March 31, 2022		4,132,278	$	2.05
X
Vested, March 31, 2022		300,000	$	6.43

Six months ended
June 30, 2021

Year ended
December 31, 2021


#
1

#
1

Outstanding, beginning of period
   3,455,224    3,977,820
Converted into common stock
   0    (522,596 )




Outstanding, end of period


3,455,224



3,455,224

~~Information concerning units outstanding is as follows:~~

Issue price

June 30, 2021

December 31, 2020


Number of units

#
1

Number of units

#
1

CA$0.27
   3,348,675    3,348,675
CA$0.51
   106,549    106,549






3,455,224



3,455,224

~~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. There were no DSUs issued~~

~~post-CPM~~

~~RTO.~~

Employee Stock Option Plan

Each stock option is convertible at the option of the holder into one common

~~stock~~

share upon payment of ~~the Company.~~

The Company has an Employee Stock Option Plan [the “Plan”] for directors, officers, and 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 stock 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 exercise price of the stock options is equal to the market price of the underlying stock on the date of the grant. The contractual term of the stock options is 10 years and there are 0 cash settlement alternatives for the employees.

price.

During the year ended December 31, 2020, the Company’s existing MTI options were converted at a ratio of 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 six months ended June 30, 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

-1

~~resulting in~~

~~out~~

~~standing~~

~~options of 1,500,000 and~~

~~amount of $9,397,988~~

~~was~~

~~recorded in additional paid in capital as part of the consideration transferred.~~

~~Table of Contents~~

Total stock-based compensation expense related to stock options included in the condensed consolidated interim statements of operations was as follows:


	Three months ended
	March 31,
	2022		2021
Selling & marketing	$	4,393	$	11,269
General & administrative		3,283,469		243,890
Research & development		424,058		171,635
	$	3,711,920	$	426,794

Three months ended

Six months ended


June 30,

June 30,


2021

2020

2021

2020

Selling & Marketing
   9,690    18,523    20,959    37,651
General & Administrative
   104,727    230,085    348,617    522,222
Research & Development
   110,507    117,156    282,142    148,595


224,924



365,764



651,718



708,468

The following table summarizes the change in our outstanding stock ~~options of the Company:~~

options:


	Number of Options (#)			Weighted Average exercise price per stock option		Weighted Average exercise remaining contractual term (years)		Aggregate intrinsic value
Outstanding, December 31, 2021		21,404,641		$	0.36	$	7.34	$	56,924,556
Granted		6,839,449			2.02
Forfeited		(8,732	)		0.27
Exercised		(730,249	)		0.27
Outstanding, March 31, 2022		27,505,109		$	0.78	$	5.34	$	27,675,251
X
Exercisable, March 31, 2022		19,407,982		$	0.73	$	7.31	$	21,320,991

Weighted
Average
exercise
price per
stock
option

$

Six months
ended

June 30,
2021

Number of
options

#
1

Weighted
Average
exercise
price per
stock
option

$

Year ended

December 31,

2020

Number of
options

#
1

Outstanding, beginning of period
   CA$0.33    24,477,507    CA$0.33    14,502,303
Issued to CPM executives and directors pursuant to CPM RTO
      —      CA$0.19    1,291,500
Granted
      —      CA$0.34    13,402,080
Exercised
   CA$0.34    (413,917 )       —
Forfeited
   CA$0.34    (33,825 )    CA$0.34    (2,627,510 )
Expired
      —      CA$0.27    (2,090,866 )
Fair value of deemed issuance to Torchlight
   US$1.75    1,500,000       —




Outstanding, end of period
   CA$0.44

25,529,765

   CA$0.33

24,477,507

Below is a summary of the outstanding options as ~~at June 30, 2021:~~

Exercise price
$

Number outstanding

#
1

Number exercisable

#
1

CA$0.34
   23,102,653    13,562,029
CA$0.15
   558,112    558,113
CA$0.19
   369,000    369,000
US$2.00
   1,125,000    1,125,000
US$1.00
   375,000    375,000






25,529,765



15,989,142

~~Below is a summary~~ of ~~the outstanding options as at~~March 31, 2022 and December 31, ~~2020:~~

2021:


		March 31,				December 31,
		2022				2021
Exercise price		Number outstanding #		Number exercisable #		Number outstanding #		Number exercisable #
$	0.27		18,328,548		14,034,258		19,067,529		10,893,918
	0.12		518,112		518,113		518,112		518,112
	0.15		369,000		369,000		369,000		369,000
	2.00		1,075,000		1,075,000		1,075,000		1,125,000
	1.00		375,000		375,000		375,000		325,000
	3.47		200,000		200,000		—		—
	7.96		300,000		300,000		—		—
	1.97		1,894,111		1,894,111		—		—
	1.58		4,445,338		642,500		—		—
			27,505,109		19,407,982		21,404,641		13,231,030

Exercise price
$

Number outstanding

#
1

Number exercisable

#
1

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

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.~~

~~Table of Contents~~

The weighted average remaining contractual life for the stock options outstanding as at June 30, 2021 was 7.52 (December 31, 2020 – 8.36) years. There were 1,500,000 and 13,402,080 stock options granted with a weighted-average grant date fair value of $6.27 and $0.39 per share respectively during the six months ended June 30, 2021 and the year ended December 31, 2020.

The fair value of options granted was estimated at the grant date using the following weighted-average assumptions:


	Three months ended
	March 31, 2022
Grant date fair value		1.16
Weighted average expected volatility	87%
Weighted average risk-free interest rate	1.78%
Weighted average expected life of the options	5.43 years

Six months

Year ended


ended

December 31,


June 30, 2021

2020

Dividend yield [%]
   —      —
Volatility
   84
%

52%-134
%

Risk-free interest rate
   0.73
%
0.73
%

Expected term (in years)
   1 year 7.48 years

Where possible, we use the simplified method to estimate the expected term of employee stock options. We do not have adequate historical exercise data to provide a reasonable basis for estimating the expected term for the current share options granted. The ~~expected life of~~simplified method assumes that employees will exercise share options evenly between the ~~stock~~period when the share options ~~is based~~are vested and ending on ~~historical data and current expectations and is not necessarily indicative of exercise patterns that may occur.~~ the date when the options would expire.

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.

~~13.~~

11. Income taxes

~~The Company estimates its~~

We estimate our annual effective income tax rate in recording ~~its~~our quarterly provision for income taxes in the various jurisdictions in which it operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

~~The Company’s~~

Our effective tax rate for the three ~~and six~~ months ended ~~June 30, 2021 and 2020~~March 31, 2022 differs from the statutory rates due to valuation allowance as well as different domestic and foreign statutory tax rates.

~~The Company recorded the following deferred~~

Deferred tax recovery for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 was $NaN (three months ended March 31, 2021 ~~and 2020 as follows:~~- $44,679).


	Three months ended
	March 31,
	2022		2021
Deferred tax recovery	$	—	$	44,679

Three months ended

Six months ended


June 30,

June 30,


2021

2020

2021

2020

Deferred tax recovery
   57,847    10,425    102,526    54,347

~~The Company has~~

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

~~14.~~

12. Net loss per share

The following table sets forth the calculation of basic and diluted net loss per share during the periods presented:


	Three months ended
	March 31,
	2022			2021
Numerator:
Net loss	$	(18,434,541	)	$	(44,158,519	)
Denominator:
Weighted-average shares, basic		285,224,469			168,864,762
Weighted-average shares, diluted		285,224,469			168,864,762
Net loss per share
Basic	$	(0.06	)	$	(0.26	)
Diluted	$	(0.06	)	$	(0.26	)

Three months ended

Six months ended


June 30,

June 30,


2021

2020

2021

2020

Numerator:

Net loss
   (5,181,392 )    (1,816,741 )    (49,339,912 )    (3,234,029 )
Denominator:

Weighted-average shares, basic
   197,911,144    155,931,625    183,485,933    120,093,443
Weighted-average shares, diluted
   197,911,144    155,931,625    183,485,933    120,093,443
Net loss per share

Basic
   (0.03 )    (0.01 )    (0.27 )    (0.03 )
Diluted
   (0.03 )    (0.01 )    (0.27 )    (0.03 )

~~Table of Contents~~

The following potentially dilutive shares were not included in the calculation of diluted shares above as the effect would have been anti-dilutive:


	Three months ended
	March 31,
	2022		2021 1
Options	$	27,505,109	$	24,264,957
Warrants		2,583,880		3,000,844
DSUs		3,647,026		3,455,224
RSUs		4,132,278		-
	$	37,868,293	$	30,721,025

1All references to numbers in comparative figures have been retroactively restated to reflect the number of stock of the legal parent (accounting acquiree) issuable following the reverse acquisition. The numbers of options, warrants, and DSUs issued pre-Torchlight RTO have been multiplied by 1.845 Torchlight conversion ratio.

Three months ended

Six months ended


June 30,

June 30,


2021

2020

2021

2020

Convertible debt
   —      7,918,988    —      7,918,988
Options
   25,529,765    22,905,604    25,529,765    22,905,604
Warrants
   3,270,774    3,144,272    3,270,774    3,144,272
DSUs
   3,455,224    3,455,224    3,455,224    3,455,224










32,255,763



37,424,088



32,255,763



37,424,088

~~15.~~

13. Additional cash flow information

The net changes in

non-cash

working capital balances related to operations consist of the following:


	Three months ended
	March 31,
	2022			2021
Grants receivable	$	146,950		$	30,436
Inventory		(96,285	)		126,939
Other receivables		(821,774	)		(66,258	)
Prepaid expenses		74,343			30,782
Other current assets		(417,054	)		(13,208	)
Trade payables		(5,062,908	)		(11,694	)
Due from (to) related party		(54,051	)		(8,878	)
Operating lease Right-of-use Asset		(56	)		-
Operating lease liabilities		(76,022	)		-
	$	(6,306,857	)	$	88,119

Six months ended
June 30, 2021

Six months ended
June 30, 2020

   $    $
Grants receivable
   (74,552 )    95,718
Inventory
   104,540    (146,872 )
Other receivables
   (37,092 )    15,148
Prepaid expenses
   (135,402 )    68,185
HST receivable
   5,830    108,901
Trade payables
   514,644    (1,620,827 )
Due from (to) related party
   (17,839 )    (523 )
Operating lease
Right-of-use
Asset
   408,201    —
Operating lease liabilities
   (9,949 )    —






758,381



(1,480,270
)

~~16.~~

14. Fair value measurements

~~The Company uses~~

We use 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 ~~are classified at level 1 as they~~ 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 ~~and preferred stock dividends are~~is classified at level 3 as ~~they are assessed on provisional~~the fair value of the O&G assets was estimated by obtaining a valuation study performed by Roth Capital Inc. and a subsequent engineering reserve report by Petech.

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 ~~until~~for the ~~company has additional information necessary to finalize those~~ fair ~~values. The company expects to complete~~value measurement of the ~~purchase price allocation~~preferred stock liability as ~~soon as practicable but no later than one year from the acquisition date (note 3).~~

of March 31, 2022.

The fair values of the funding obligation, operating lease liabilities, and long-term debt ~~are~~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:


	March 31, 2022				December 31, 2021
Financial liability	Carrying value		Fair value		Carrying value		Fair value
Funding obligation	$	286,182	$	172,819	$	268,976	$	170,338
Operating lease liabilities		4,459,159		5,088,149		4,370,635		6,149,369
Long-term debt		3,284,585		2,201,679		3,228,449		2,303,648

15. Revenue

We have 1 operating segment based on how management internally evaluates separate financial information, business activities and management responsibility.

June 30, 2021

December 31, 2020


Carrying value

Fair value

Carrying value

Fair value

Financial liability

$

$

$

$

Funding obligation
   859,828    625,413    776,884    571,839
Operating lease liabilities
   1,424,881    1,076,063    270,581    270,641
Long-term debt
   4,088,894    3,326,454    3,034,048    2,734,931

~~Table of Contents~~

~~17. Revenue~~

Revenue is disaggregated as follows:


	Three months ended
	March 31,
	2022		2021
Product sales	$	168,127	$	22,047
Contract revenue 1		2,706,568		408,920
Other development revenue		100,000		165,336
Development revenue		2,806,568		574,256
	$	2,974,695	$	596,303

1 A portion of contract revenue represents previously recorded deferred revenue that was recognized as revenue after satisfaction of performance obligations either through passage of time or after completion of specific performance milestones.

Customer concentration

A significant amount of our revenue is derived from contracts with major customers. For the three months ended March 31, 2022, revenue from 1 customer accounted for $2,668,144 or 90% of total revenue. Nanotech currently derives a significant portion of its revenue from 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.

For the three months ended March 31, 2021, we had 1 customer that accounted for $245,229 or 41% of total revenue.

Three months ended

Six months ended


June 30,

June 30,


2021

2020

2021

2020

Product sales
   1,953    —      24,000    1,922








Contract revenue
1
   545,547    152,667    954,467    306,138
Other development revenue
   76,820    57,677    242,156    342,623








Development revenue
   622,367    210,344    1,196,623    648,761










624,320



210,344



1,220,623



650,683

1	Contract revenue represents previously recorded deferred revenue that was recognized as revenue after satisfaction of performance obligation either through passage of time or after completion of specific performance milestones. Refer to note 18 for outstanding contracts.

~~18. Deferred revenue~~

~~Deferred revenue consists of the following:~~

June 30, 2021

December 31, 2020


$

$

Covestro - Cooperation Framework
   373,215    —
Satair
A/S-exclusive
rights
   786,491    815,310
Satair
A/S-advance
against PO
   502,179    488,847
LM Aero-MetaSOLAR commercialization
   379,289    646,135
US Deferred Revenue
   75,000    75,000
Innovate
UK-R&D
tax credit
   19,007    18,778






2,135,181



2,044,070





Less current portion
   1,453,556    1,239,927






681,625



804,143

~~19. (Loss) Gain~~

16. Loss on financial instruments, net


	Three months ended
	March 31,
	2022		2021
Loss on unsecured convertible promissory notes – Bridge loan	$	—	$	(19,163,417	)
Gain on unsecured convertible promissory notes – Torchlight notes		—		191,973
Loss on secured convertible debentures		—		(16,957,029	)
Loss on unsecured convertible debentures		—		(4,076,448	)
	$	—	$	(40,004,921	)

Three months ended

Six months ended


June 30,

June 30,


2021

2020

2021

2020

Gain on secured convertible promissory notes
   —      —      —    5,235
Loss on unsecured convertible promissory notes – Bridge loan
   —      —      (19,163,417 )    —
Gain (Loss) on unsecured convertible promissory notes – Torchlight notes
   535,170    —    (343,197 )    —
Gain (Loss) on secured convertible debentures
   —      782,723    (16,957,029 )    782,723
Gain (Loss) on unsecured convertible debentures
   —      260,205    (4,076,448 )    508,277










(535,170
)



1,042,928



(40,540,091
)



1,285,765

~~20.~~

17. Leases

~~On August 31, 2020, MMI signed a~~

~~ten-year~~

~~lease with a lessor in Halifax, Canada, commencing January 1, 2021, for an approximate~~

~~ly 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~~

We entered into ~~a loan~~the following lease during the three months ended March 31, 2022:

Burnaby lease expansion

On February 25, 2022, our subsidiary Nanotech entered into an agreement ~~with the lessor in the amount of~~

~~CA$500,000~~ to ~~fund leasehold improvements.~~

~~Table of Contents~~

~~The Company has accounted for the~~amend its Burnaby lease ~~as an operating lease and recorded a right-of-use (“ROU”~~("expansion") ~~asset in the amount of~~

~~$1,021,499.~~

The ROU asset is being amortized over the remaining lease term in an amount equal to the difference between the calculated straight-line expense of 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~~premises by ~~approximately~~

~~15,000~~

an additional 1,994square feet, ~~reduce~~commencing on June 1, 2022, for a period of two years and eleven months. The agreement provides 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 stock valued at~~

~~CA$3.40~~

~~per share. As of June 30, 2021, the Company did not yet have~~with early access to the ~~additional leased space~~premises at least three months prior to the commencement date to conduct leasehold improvements. We obtained access to the premises on March 25, 2022 and ~~therefore, the Company has not recorded~~consequently recognized a right-of-use asset and ~~corresponding lease~~ liability for ~~this additional leased space. Instead,~~ the ~~Company has recognized a prepaid expense for~~

~~$601,192 equivalent to 219,152 common stock.~~

~~The Lease Amendment was accounted for~~expansion as ~~a lease modification. As such, the operating lease liability was remeasured and the difference was recorded in ROU assets.~~

~~On June 3, 2021, MMI signed lease amendment with its lessor in Pleasanton, California to expand the leased space~~ of ~~the facility in the United States to include additional office space~~March 31, 2022, of 5,475 square feet, commencing from June 2021 onwards. 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 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 from June 2021.

$146,822.

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 from June 2021.

~~The Company has one other noncancellable operating lease in the United States and United Kingdom.~~

Total operating lease expense included in the condensed consolidated interim statements of operations and comprehensive loss is as follows:


	Three months ended
	March 31,
	2022		2021
Operating lease expense	$	426,428	$	45,437
Short term lease expense		81,638		26,150
Variable and other lease expense		58,817		12,710
Total	$	566,883	$	84,297

We have elected the practical expedient in ASC 842 "Leases" to not capitalize any leases with initial terms of less than twelve months on our balance sheet and include them as short-term lease expense in the condensed consolidated interim statements of operations and comprehensive loss.

Three months ended

Six months ended


2021

2020

2021

2020

Operating lease expense
   175,107    68,897    318,537    138,353

Future minimum payments under

non-cancelable

operating lease obligations were as follows as of ~~June 30, 2021:~~

March 31, 2022:


Remainder of 2022	$	819,471
2023		1,230,530
2024		1,235,980
2025		1,114,417
2026		961,099
Thereafter		2,987,718
Total minimum lease payments		8,349,215
Less: interest		(3,890,056	)
Present value of net minimum lease payments		4,459,159
Less: current portion of lease liabilities		(782,901	)
Total long-term lease liabilities	$	3,676,258

Remainder of 2021
   186,002
2022
   444,258
2023
   433,594
2024
   360,971
2025
   166,774
Thereafter
   1,208,757


Total minimum lease payments


2,800,356

Less: interest
   (1,375,475 )
Present value of net minimum lease payments
   1,424,881
Less: current portion of lease liabilities
   (279,832 )



Total long-term lease liabilities


1,145,049

~~21.~~

18. Commitments and contingencies

Legal Matters

On April 30, 2020, our 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 our 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. We have added the manufacturer of one of the tool components that we contend 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 we 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. Our 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, we 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. We are 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, we 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 we produce certain documents and information related to, among other things, the merger involving Torchlight Energy Resources, Inc. and Metamaterial Inc. We are cooperating and intend to continue to cooperate with the SEC’s investigation. We can offer no assurances as to the outcome of this investigation or its potential effect, if any, on us or our results of operation.

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 us, our Chief Executive Officer, our Chief Financial Officer, Torchlight’s former Chairman of the Board of Directors, and Torchlight’s former Chief Executive Officer. 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. The McMillan complaint names the same defendants and asserts the same claims on behalf of the same purported class as the Maltagliati complaint. The complaints, purportedly brought on behalf of all purchasers of our publicly traded securities from September 21, 2020 through and including December 14, 2021, assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) arising primarily from a short-seller report and statements related to our business combination with Torchlight. The complaints seek unspecified compensatory damages and reasonable costs and expenses, including attorneys’ fees. On April 11, 2022, the Court held a hearing on motions to consolidate the two actions and to appoint a lead plaintiff or lead plaintiffs, but has not yet ruled on the motions.

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 our current officers and directors, certain former Torchlight officers and directors, and us (as nominal defendant). The complaint, purportedly brought on behalf of the Company, asserts claims under Section 14(a) of the Exchange Act, contribution claims under Sections 10(b) and 21D of the Exchange Act, and various state law claims such as breach of fiduciary duties and unjust enrichment. The complaint seeks, among other things, unspecified compensatory damages in favor of the Company, certain corporate governance related actions, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. On March 9, 2022, the Court entered a stipulated order staying this action until there is a ruling on a motion to dismiss in the Securities Class Action.

Contractual Commitments and Purchase Obligations

On January 29, 2021, we arranged an irrevocable standby letter of credit with Toronto Dominion Bank (“TD”) in favor of Covestro Deutschland AG (“Covestro”) for EUR 600,000 in relation to Cooperation Framework Agreement (“CFA”). In the event we fail to meet the performance milestones under the CFA, Covestro shall draw from the letter of credit with TD. The letter of 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. We have assessed the performance milestones against ASC 606 and recognized the full contract amount as development revenue in the year ended December 31, 2021. As of March 31, 2022, Covestro has issued certificates of reduction totaling EUR 325,000 and the letter of credit had an outstanding amount of EUR 275,000.

During 2020, we signed a three-year supply deal with Covestro Deutschland AG, which provides early access to new photo-sensitive holographic film materials, the building block of MMI’s holographic product. This agreement will not only allow early access to Covestro’s R&D library of photopolymer films but will also accelerate MMI’s product development and speed of innovation. Target markets include photonics/optical filters and holographic optical elements, diffusers, laser eye protection, optical combiners, and AR (augmented reality) applications. The agreement is valid till October 31, 2023.

On January 29, 2021, the Company arranged an irrevocable standby letter of credit with Toronto Dominion Bank (“TD”) in favour of Covestro Deutschland AG (“Covestro”) for EUR600,000 in relation to Cooperation Framework Agreement (“CFA”). In the event the Company fails to meet the performance milestones under the CFA, Covestro shall draw from the letter of credit with TD. The letter of 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 June 2021, Covestro issued a certificate of reduction of~~

~~$283,228 (EUR 225,000)~~

to reduce the letter of credit after completion of certain performance milestones and an equal amount has been transferred from restricted cash to cash and cash equivalents. The Company recorded development revenue in an amount equal to the certificate of reduction in the condensed consolidated interim statement of operations and comprehensive loss. As at June 30, 2021, the letter of credit has an outstanding amount of

~~EUR375,000.~~

During 2020, the Company signed a three-year supply deal with Covestro Deutschland AG, which provides early access to new photo-sensitive holographic film materials, the building block of MMI’s holographic product. This agreement will not only allow early access to Covestro’s R&D library of photopolymer films but will also accelerate MMI’s product development and speed of innovation. Target markets include photonics/optical filters and holographic optical elements, diffusers, laser eye protection, optical combiners, and AR (augmented reality) applications.

~~During 2018, the Company arranged a guarantee/standby letter of credit with RBC in favour of Satair A/S for $500,000 in relation to an advance payment received. In the event the Company fails~~During 2018, we arranged a guarantee/standby letter of credit with RBC in favor of Satair A/S for $500,000 in relation to an advance payment received. In the event we fail 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, 2021. As at June 30, 2021, 0 amount has been drawn from the letter of credit with RBC.

~~Table of Contents~~

~~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.

~~22. Subsequent events~~

~~On July 13, 2021, the Company issued~~

~~553,500 warrants at an exercise price of $4.50~~

~~per share to a consultant and on July 12, 2021, the Company issued~~

~~300,000 warrants at an exercise price~~

~~$3.94 per share to a consultant.~~

~~On August 5, 2021, the Company announced the signing of a definitive agreement to indirectly acquire Nanotech Security Corp. (“Nanotech”). Subject to the terms and~~ conditions of the ~~definitive~~ 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 ~~wholly-owned~~performance security guarantee cover issued by Export Development of Canada. Further, this guarantee/standby letter of credit expires on October 5, 2021. As at March 31, 2022, 0 amount has been drawn from the letter of credit with RBC.

On December 8, 2016, we 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 us 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 us on gross profit after sales and distribution costs. The total royalty fee to be paid may be adjusted based on the timing of our sales and the amount ultimately paid to us 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 three months ended March 31, 2022 (2021 - $296). In 2014,

our wholly owned subsidiary, Nanotech, prepaid royalties that would offset against future royalties owed as part of ~~META will purchase~~

~~100%~~

the transfer of ~~Nanotech’s common~~the intellectual property from SFU, of which $197,016 remains prepaid as at March 31, 2022 (December 31, 2021 - $197, 016).

Product revenue associated with 6 patents acquired by Nanotech is subject to royalties. We agreed to share 10% of any revenues related to the patents received from a specific customer for a period of two years and ongoing royalties of 3% and 6% on other revenues derived from the patents for a period of five years. There were 0 royalties during the three months ended March 31, 2022 (March 31, 2021 - $NaN).

As at March 31, 2022, we had ongoing commitments for maintenance contracts and asset purchases as follows:


Remainder of 2022	$	976,157
2023		43,872
2024		3,115
	$	1,023,144

19. Subsequent events

Subsequent to March 31, 2022, 10,310 stock options were exercised.

On April 5, 2022, Meta Materials Inc. acquired Plasma App Ltd. in a stock for stock transaction valued at

~~CA$1.25~~

~~per share. In addition, Nanotech will repurchase restricted share units (“RSU”)~~ $20 million. Plasma App Ltd. is the developer of PLASMAfusion™, a first of its kind, proprietary manufacturing platform technology, which enables high speed coating of any solid material on any type of substrate. Plasma App Ltd.’s team is located at the Rutherford Appleton Laboratories in Oxford, UK.

Due to ~~acquire~~

~~538,516~~

~~Nanotech common stock at a~~the timing of when the transaction closed, there remains insufficient information available to management to be able to complete the initial accounting for the business combination, and as such, the provisional purchase price ofallocation has not been disclosed.

~~CA$1.25 per RSU and~~

~~in-the-money~~

~~options to acquire 4,579,000 Nanotech common~~

~~stock~~

~~at a purchase price equal to CA$1.25~~

~~per option less the exercise price thereof. The consideration payable to securityholders under the arrangement will be payable in cash resulting in an estimated total purchase price of~~

~~$90.8 million.~~

~~Table of Contents~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of the operations of Meta Materials Inc. ~~(“META”~~(also referred to herein as the “Company”, “META”, “we”, “us”, “our”, or ~~the “Company”~~“Resulting Issuer”) constitutes management’s review of the factors that affected ~~the Company’s~~our financial and operating performance for the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022. The condensed consolidated interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, ~~2020~~2021 which are contained in Form ~~8-K/~~10-K/A filed with the Securities and Exchange Commission ~~or the SEC,~~ on ~~August 12, 2021.~~May 2, 2022. All financial information is stated in U.S. dollars unless otherwise specified. ~~The Company’s~~Our condensed consolidated interim financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

Further information about ~~the Company~~us and ~~its~~our operations can be obtained from the offices of ~~the Company,~~META, from the ~~Company’s~~META’s website or on EDGAR at www.sec.gov/edgar.shtml.

This MD&A contains certain forward-looking information and forward-looking statements, as defined 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. ~~(collectively~~(Collectively referred to herein as “forward- looking statements”). These statements relate to future events or ~~the Company’s~~our future performance. All statements other than statements of historical fact are forward- looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements. The ~~forward- looking~~forward-looking statements in this MD&A speak only as of the date of this MD&A or as of the date specified in such statements.

~~This information includes, but is not limited to, comments regarding:~~

~~the Company’s business strategy;~~

~~the Company’s strategy for protecting its intellectual property;~~

~~the Company’s ability to obtain necessary funding on favorable terms or at all;~~

~~the Company’s plan and ability to secure revenues;~~

~~the risk of competitors entering the market;~~

~~the Company’s ability to hire and retain skilled staff;~~

~~the ability to obtain financing to fund future expenditures and capital requirements;~~

~~the Company’s plans with respect to its new facility;~~

~~the impact of adoption of new accounting standards.~~

Although ~~the Company believes~~we believe that the plans, intentions and expectations reflected in this forward-looking information are reasonable, ~~the Company~~we cannot be certain that these plans, intentions, or expectations will be achieved. Actual results, performance, or achievements could differ materially from those contemplated, expressed or implied by the forward-looking information contained in this report. Disclosure of important factors that could cause actual results to differ materially from ~~the Company’s~~our plans, intentions, or expectations are included in this report under the heading Risk Factors.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause ~~the Company’s~~our actual results, performance or achievements to be materially different from any of ~~its~~our future results, performance or achievements expressed or implied by ~~forward- looking~~forward-looking statements. All forward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward- looking statements. ~~The Company undertakes~~We undertake no obligation to update publicly or otherwise revise any ~~forward- looking~~forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If ~~the Company does~~we do update one or more

forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements, unless required by law.

This Report on Form 10-Q contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Report on Form 10-Q, 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 we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

~~Table of Contents~~

~~OVERVIEW~~

BUSINESS OVERVIEW

Meta Materials Inc. ~~(the~~(also referred to herein as the “Company” or, “META”, “we”, “us”, “our”, or “Resulting Issuer”) is a ~~smart~~developer of high-performance functional materials and ~~photonics company specializing in metamaterial research and products, nanofabrication, and computational electromagnetics. The Company’s~~nanocomposites. Our registered office is located at ~~5700 West Plano Pkwy, Plano, Texas 75093~~85 Swanson Road, Boxborough, Massachusetts 01719, and ~~its~~our principal executive office is located at 1 Research Drive, Halifax, Nova Scotia, Canada.

~~Business combinations~~

~~On December 14, 2020, Torchlight Energy Resources, Inc. (“Torchlight”) and its subsidiaries, Metamaterial Exchangeco Inc. (formerly named 2798832~~

Ontario Inc., “Canco”) and 2798831 Ontario Inc. (“Callco”), entered into an Arrangement Agreement (the “Arrangement Agreement”) with MMI to acquire all of its outstanding common stock by way of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations

Act (Ontario), on and subject to the terms and conditions of the Arrangement Agreement (the “Torchlight RTO”). On June 25, 2021, Torchlight 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 completion, the Company began trading on the NASDAQ under the symbol “MMAT” while MMI common stock were delisted from the Canadian Securities Exchange (“CSE”) and at the same time, Metamaterial Exchangeco Inc., a wholly-owned subsidiary of META, started trading under the symbol “MMAX” on the CSE.

For accounting purposes, the legal subsidiary, MMI, 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 as per ASC 805. Accordingly, The information disclosed in the financial statements as well as the MD&A is a continuation of MMI’s financial statements and MD&A.

Prior to the Torchlight RTO, and on March 5, 2020, Metamaterial Inc. (formerly known as Continental Precious Minerals Inc., “CPM”) and Metamaterial Technologies Inc. (“MTI”) completed a business combination by way of a three-cornered amalgamation pursuant to which MTI amalgamated with Continental Precious Minerals Subco Inc. (“CPM Subco”), a wholly owned subsidiary of CPM to become “Metacontinental Inc.” (the “RTO”). The 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 completion of the RTO, Metacontinental Inc. carried on the business of the former MTI, as a wholly-owned subsidiary of CPM and changed its name effective February 3, 2021 to “Metamaterial Technologies Canada Inc.”. In connection with the RTO, CPM changed its name effective March 2, 2020, from Continental Precious Minerals Inc. to Metamaterial Inc.. The common stock of CPM were delisted from the TSX Venture Exchange on March 4, 2020 and were 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.

~~Impact of COVID-19 on the Company’s Business~~

We have 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 OVERVIEW~~

~~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~~Our platform technology includes holography, lithography, and medical wireless sensing. The underlying approach that powers ~~all of the Company’s~~our 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~~Our 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 ~~heat~~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 ~~our~~the understanding of how light and other types of energy naturally behave, and how it is possible to manipulate them.

~~Table of Contents~~

Over the past 20 years, techniques for producing nanostructures have matured, resulting in a wide range of ~~ground- breaking~~groundbreaking solutions that can control light, heat, and ~~heat~~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, ~~that~~which are engineered by ~~Company~~ 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 ~~of light~~ to create material properties that are not easily achievable with conventional materials.

The Company’s platform technology (holography, lithography, and medical wireless sensing) is being used to develop potentially transformative and innovative products for: aerospace and defence, automotive, energy, healthcare, consumer electronics, and data transmission. The Company has

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

Holography Technology

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

Our principal products that employ holography technology are ~~its METAAIR~~

our metaAIR®

laser glare protection eyewear, ~~METAAIR~~

metaAIR®

laser glare protection films for law enforcement and ~~metaOPTIXTM~~holoOPTIXTM notch filters. ~~Meta~~We co-developed ~~its METAAIR~~

our metaAIR®

laser glare protection eyewear product with Airbus S.A.S. ~~that~~It has been engineered to provide laser glare protection for pilots, military and law enforcement using ~~Meta’s~~our holography technology. ~~METAAIR~~

metaAIR®

is a holographic optical filter developed using nano-patterned designs that block and deflect specific colors or wavelengths of light. ~~Meta~~We launched ~~METAAIR~~

metaAIR®

with strategic and exclusive distribution partner, Satair, a wholly owned Airbus company and started producing and selling ~~METAAIR~~

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~~We launched ~~its~~our 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~~

metaAIR®

glasses while preserving peripheral vision critical to law enforcement duties. ~~metaOPTIXTM~~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. ~~metaOPTIXTM~~holoOPTIXTM notch filters were commercially launched ~~by the Company~~ in November 2020.

~~Meta has~~

We have additional products in development that utilize ~~its~~our proprietary holography technology. Included in the ~~metaOPTIXTM~~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 Technology

Lithography is a process commonly used in the fabrication of integrated circuits, in which a light-sensitive polymer (photoresist), is exposed and developed to form 3D relief images on the substrate, typically a silicon wafer of up to 300mm (11.8 inches) in diameter. In order to meet the performance, fabrication-speed, and/or cost criteria required for many potential applications that require large area and low cost nanopatterning, ~~the Company has~~we have developed a new nanolithography method called “Rolling Mask” lithography (registered trademark RML

), which combines the best features of photolithography, soft lithography and roll-to-plate/roll-to-roll printing capability technologies. Rolling Mask Lithography utilizes a proprietary UV light exposure method where a master pattern is provided in the form of a cylindrical mask. ~~These~~We designed these master patterns ~~are designed by the Company~~ and over the years, they have become part of a growing library of patterns, enriching ~~the~~our 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 ~~light-sensitive material (a photoresist),~~photoresist, creating patterned grooves, metal is then evaporated and fills the patterned grooves. The excess metal is then removed by a known ~~post- process~~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~~

Our current principal prototype product in lithography technology is ~~its~~our transparent conductive film, NANOWEB

. The lithography division operates out of ~~the Company’s~~our wholly owned U.S. subsidiary, ~~which~~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, We have been ordering and upgrading our equipment at our California facility to efficiently supply NANOWEB® samples in larger volumes. In late 2021, we installed our first roll-to-roll, NANOWEB® pilot scale production line at our 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~~ including:

•

NANOWEB

for Transparent EMI Shielding

•

NANOWEB

for Transparent Antennas

•

NANOWEB

for 5G signal enhancement

•

NANOWEB

for Touch Screen Sensors

•

NANOWEB

for Solar cells ~~and~~

•

NANOWEB

for Transparent Heating to de-ice and ~~de-fog.~~ de-fog

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

~~Table of Contents~~

~~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~~

We have 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 - In October 2021, we acquired 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. Our nano-optic security technology platforms include:

•

KolourOptik®, a patented visual technology that is exclusive to the government and banknote market and combines sub-wavelength nanostructures and microstructures to create modern overt security features with a unique and customizable optical effect. KolourOptik® pure plasmonic color pixels produce full color, 3D depth, and movement used in security stripes and threads that are nearly impossible to replicate.

•

LiveOptik™, a patented visual technology that utilizes innovative nano-optics one tenth the size of traditional holographic structures to create next generation overt security features customized to Nanotech’s customers’ unique requirements. LiveOptik™ delivers multi-color, 3D depth, movement and image switches for secure brand protection stripes, threads and labels that are nearly impossible to replicate.

•

LumaChrome™ optical thin film security features are manufactured using precision engineered nanometer thick layers of metals and ceramics to form filters designed to uniquely manipulate visible and non-visible light. This unique manipulation of light properties is used to create specialized security features in the form of threads, stripes, and patches that are applied to banknotes and other secure documents. By using sophisticated electron beam and sputtered deposition methods, Nanotech

precisely controls the construction and inherent properties to provide custom color-shifting solutions. An individual looking at these threads, stripes and patches sees an obvious color shift (e.g. green to magenta) when the document or bank note is tilted or rotated

Wireless Sensing and Radio Wave Imaging Technology

Our Wireless Sensing isplatform uses infrared and radio frequency (RF) transmitters and receivers to collect and measure a variety of biological information intended to enable non-invasive and safe medical diagnostics. The platform entails the ability to cancel reflections (anti-reflection) from the skin to reduce the natural impedance the skin provides to such signals and increase the ~~Signal-to-Noise-~~Signal-to-Noise Ratio (“SNR”) ~~transmitted through body tissue to enable better medical diagnostics.~~of certain diagnostic instruments used in conjunction with the platform. This ~~breakthrough wireless sensing technology~~reflection-cancelling requirement is ~~made~~satisfied using our proprietary metamaterial films that employ patterned designs, printed on metal-dielectric structures on flexible substrates that act as anti-reflection (impedance-matching) coatings when placed over the human skin in combination with medical diagnostic modalities, such as MRI, ultrasound systems, non-invasive glucometers etc. We are developing a number of medical products that employ this proprietary technology. glucoWISE®, is in development as a completely non-invasive glucose measurement device. It is being developed first as a tabletop medical device product, followed by a portable, pocket-size product and ultimately as a wearable. In magnetic resonance imaging (MRI), increasing the SNR by orders of magnitude has been demonstrated to produce much higher resolution images with significant increases in imaging speed resulting in better patient throughput and potentially more accurate diagnoses in imaging clinics. For example, ~~as a medical imaging application, the Company is~~we are developing metaSURFACE™ (also known as ~~RadiWise™~~radiWISE™) an innovation which allows an improvement in signal to noise ratio of up to 40 times ~~more energy to be transmitted through the human tissue, instead of being reflected. The benefit is increased diagnostic speed and imaging accuracy leading to patient throughput increases~~ for ~~healthcare providers.~~MRI scans. The metaSURFACE™ device consists of proprietary non-ferrous metallic and dielectric layers that are exactingly designed to interact (resonate) with radio waves ~~allowing~~increasing the ~~waves to “see-through~~SNR. We are also researching the ~~skin”.~~

~~The Company is~~use of our Radio Wave Imaging technology in breast cancer and stroke diagnosis.

We are developing wireless sensing and radio wave imaging applications from ~~its~~our London, UK office and ~~advancing~~our newly established Athens, Greece office.

Oil and Gas operations

As part of the ~~wireless sensing technology~~Arrangement Agreement with ~~Innovate UK~~Torchlight Energy Resources, Inc. ("Torchlight"), we acquired a group of oil and gas assets ("O&G assets") and had interest in them as follows:

•

the Orogrande Project in Hudspeth County, Texas

•

~~grants.~~the Hazel Project in Sterling, Tom Green, and Irion Counties, Texas

•

the Hunton wells in partnership with Kodiak in Central Oklahoma

We have classified these assets as assets held for sale pursuant to our 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 us 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. For more information on these assets, see the description in Note 5, “Assets Held for Sale” of the financial statements for the year ended December 31, 2021 and Item 1A, risk Factors in Form 10-K/A filed with the Securities and Exchange Commission on May 2, 2022.

BUSINESS AND OPERATIONAL HIGHLIGHTS

~~The Company’s lease at~~

Throughout 2021, our activities were focused on our research and development efforts as well as expansion of our intellectual property estate. As we moved into 2022, new emphasis was, and will continue to be, placed on investments in pilot scale manufacturing of NANOWEB® products and expansion of our production capacity in our banknote and brand security lines. Through the remainder of 2022, we will also place emphasis on more aggressive design, development and clinical testing of our array of medical products. We believe these efforts represent an efficient approach to monetizing our intellectual property assets.

Highfield Park ~~for~~facility

We leased approximately 53,000 square foot facility ~~commenced~~in Dartmouth, Nova Scotia, with the lease commencing on January ~~1st,~~1, 2021. The facility will host ~~the Company’s~~our holography and lithography R&D labs and manufacturing operations. ~~The Company has thus far spent a total of $0.55 million on leasehold improvements, of which $0.4 million was spent during the six months ended June 30, 2021. The Company~~We also amended this lease agreement on June 9, 2021 to expand the leased space by approximately 15,000 square feet, reduce the annual rent for the 10-year term of the lease and obtain from the landlord CA$~~500,000~~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.

~~In addition, in the six months ended June 30, 2021, the Company~~ During Q1 2022, we purchased equipment for ~~$1.9~~approximately $0.4 million ~~for the Highfield Park facility~~ as well as ~~equipment for $1.86~~spent $1.76 million ~~for its California facility. The Company~~on construction work. We will ~~be incurring~~continue to incur additional construction and equipment costs ~~over~~through the ~~coming quarters.~~

Inremainder of 2022.

Pleasanton facility

During 2021, we signed multiple lease amendments with our lessor in Pleasanton, California to expand the six months ended June 30, 2021, the Company has executed its agreement to acquire specialized lens casting production equipment and intellectual property, including more than 70 patents, from Interglass Technology AG (Switzerland) for $800,000. META will invest and expand its capabilities in design, development, and manufacturing of metaFUSION™ products for smart eyewear.

~~Pursuant to the closing~~leased space of the Torchlight acquisition, The Company has reclassified the Oil and Gas assets as held for sale and has hired a consultant to help determine the best path to maximize value for the Series A Preferred shareholders. all aspects of lease obligations for the Torchlight oil and gas assets are in compliance The CDC (Continuing Drilling Clause) with University Lands on the Orogrande asset isfacility in the ~~process~~United States to include additional space of 14,379 square feet as well as extend the duration of the leased spaces until September 30, 2026. We have spent approximately $0.3 million on additional equipment for our first pilot scale roll-to-roll line which is expected to be ready for low volume production during the second half of fiscal year 2022. We have also spent $0.2 million on leasehold improvements.

Thurso facility

As part of the Nanotech acquisition in October 2021, we acquired property, plant, and 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 ~~satisfied. Four wells must be drilled~~utilized for existing production capacity, and the remaining 70,000 square feet is available to expand output to facilitate future growth. We are currently developing a facility expansion plan for 2022.

In April 2022, we have been awarded $2.2 million in additional purchase orders under the ~~project in 2021 in order to hold the lease for sale or spinout.~~

development contract between our wholly owned subsidiary, Nanotech, and a confidential central bank client.

RESULTS OF OPERATIONS

Revenue and Gross Profit

Three months ended June 30,

Six months ended June 30,


2021

2020

Change

2021

2020

Change


$

$

$

%

$

$

$

%

Product sales
   1,953    —      1,953 100 % 24,000    1,922    22,078 1149 %
Development revenue
   622,367    210,344    412,023 196 % 1,196,623    648,761    547,862 84 %










Total Revenue


624,320



210,344



413,976

197
%

1,220,623



650,683



569,940

88
%
Cost of goods sold
   706    1,336    (630 ) -47 % 1,106    2,160    (1,054 ) -49 %










Gross Profit


623,614



209,008



414,606

198
%

1,219,517



648,523



570,994

88
%


	Three months ended March 31,
	2022		2021		Change
Product sales	$	168,127	$	22,047	$	146,080	663	%
Development revenue		2,806,568		574,256		2,232,312	389	%
Total Revenue		2,974,695		596,303		2,378,392	399	%
Cost of goods sold		778,712		400		778,312	194578	%
Gross Profit	$	2,195,983	$	595,903	$	1,600,080	269	%

The increase in product sales is due to the revenue generated primarily from Nanotech amounting to $91,653 and Metamaterial Technologies Canada Inc. and Metamaterial Technologies USA Inc. amounting $15,774, and $60,700, respectively, for the three months ended March 31, 2022. Product sales include products, components, and samples sold to ~~various~~multiple customers. ~~The Company has not generated significant product sales for the three and six months ending June 30, 2021 since most of the company’s products remain under development.~~

The increase in development revenue for the three months ended ~~June 30, 2021~~March 31, 2022 of ~~$412,023~~$2.2 million is due to an increase in contract revenue of ~~$392,880~~$2,297,648 and ~~increase~~decrease in other development revenue of ~~$19,143.~~$65,336. The increase in contract revenue is primarily due to revenue ~~recognition of $377,637 in Q2 2021~~generated by Nanotech from contract services subsequent to ~~achieving certain milestones~~its acquisition by the Company. Nanotech currently derives a significant portion of ~~the cooperation framework agreement~~its revenue from contract services with ~~Covestro Deutschland AG.~~

~~Table~~a confidential G10 central bank. In 2021, Nanotech entered into a development contract for up to $41.5 million over a period of ~~Contents~~

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.

The increase in ~~development revenue for the six months ended June 30,~~cost of goods sold in 2022 compared to 2021, ~~of $547,862 is due to an increase in contract revenue of $648,329 partially offset by a decrease in other development revenue of $100,467. The increase in contract revenue~~ is primarily due to the production costs of $727,835 from Nanotech pertaining to contract revenue ~~recognition of $620,846 in Q2 2021 subsequent to achieving certain milestones of~~during the ~~cooperation framework agreement with Covestro Deutschland AG.~~

period.

Operating expenses

Three months ended June 30,

Six months ended June 30,


2021

2020

Change

2021

2020

Change


$

$

$

%

$

$

$

%

Operating Expenses

Selling & Marketing
   298,871    153,962    144,909    94 % 695,465    324,528    370,937    114 %
General & Administrative
   3,145,368    1,553,118    1,592,250    103 % 5,738,251    3,157,652    2,580,599    82 %
Research & Development
   1,633,653    960,430    673,223    70 % 3,412,909    1,892,601    1,520,308    80 %













Total operating expenses


5,077,892



2,667,510



2,410,382



90
%

9,846,625



5,374,781



4,471,844



83
%


	Three months ended March 31,
	2022		2021		Change
Operating Expenses
Selling & Marketing	$	1,035,986	$	396,594	$	639,392	161	%
General & Administrative		14,597,913		2,592,885		12,005,028	463	%
Research & Development		3,971,139		1,779,256		2,191,883	123	%
Total operating expenses	$	19,605,038	$	4,768,735	$	14,836,303	311	%

The increase in selling and marketing expenses for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, compared to the same period of ~~2020,~~2021, is primarily due to:

•

$0.3 million increase in salaries and benefits ~~of $91,538 and $180,671 respectively~~ due to new hires in the latter part 2021 ~~as part of~~along with the ~~Company’s expansion.~~

Torchlight and Nanotech acquisitions.

•

$0.3 million increase in ~~consulting~~conference fees ~~of $58,509~~ and ~~$175,778 respectively for market research and various promotional campaigns as~~travel expenses relating to the ~~Company sought to list on the NASDAQ.~~

~~increase~~participation in trade shows and ~~travel and entertainment for $4,421 and $31,681 respectively.~~conferences in Q1 2022.

The increase in general and administrative expenses for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, compared to the same period of ~~2020,~~2021, is primarily due to:

•

$4.2 million increase in ~~legal and audit expense of $1,125,751 and $1,812,254 respectively~~professional fees mainly due to legal ~~cost~~costs associated with the ~~Torchlight RTO.~~

pending SEC investigation, ongoing lawsuits as well as other consulting fees.

•

$3.2 million increase in ~~consulting fees~~share-based compensation mainly in relation to the quarterly vesting cost of ~~$154,284~~RSUs and ~~$379,543 respectively for market research, investment banking and investor related expenses most of which are associated with the Torchlight RTO, NASDAQ and CSE listing.~~

stock options granted during Q1 2022.

•

$1.8 million increase in salaries and benefits associated with the increase in our head count through all locations including as a result of ~~$216,243~~1) Our continuous growth and ~~$201,276 respectively~~talent acquisition 2) the acquisition of Nanotech in Q4 2021 3) Contractors hired to manage the O&G assets in the latter part of 2021.

•

$1.1 million increase in depreciation and amortization expenses mainly due to ~~management expansion~~acquired intangible assets in Q4 2021 as part of the Nanotech acquisition as well as the increase in depreciation expense due to acquired equipment in different facilities in 2021.

•

$0.6 million increase in insurance expense due to the new insurance requirements in the US resulting from our NASDAQ listing.

•

$0.5 million increase in rent and utilities ~~of $90,445 and $169,890 respectively~~ due to the ~~new~~ lease ~~for~~expansion of our Highfield Park ~~effective January 1, 2021.~~facility in Nova Scotia, Canada and the Pleasanton facility in California, new operational facilities from Nanotech, and the opening of administrative locations in Boxborough, Massachusetts and Plano, Texas.

Decrease in stock-based payments expense of $104,850 and $122,668 respectively due to the issuance of fully vested options in Q1 and Q2 2020 in addition to the change in fair value of certain warrants as a result of changing their maturity date past the CPM RTO.

The increase in research and development expenses for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, compared to the same period of ~~2020,~~2021, is primarily due to:

•

$1.1 million increase in salaries and benefits ~~of $507,744 and $829,376 respectively~~primarily due to ~~R&D new hires in 2021 in both Halifax and California locations.~~

the expansion of headcount through Nanotech acquisition.

•

$0.4 million increase in ~~R&D materials~~share-based compensation mainly in relation to the quarterly vesting cost of ~~$169,440~~RSUs and ~~$632,585 respectively mainly~~stock options granted during Q1 2022.

•

$0.3 increase in rent and utilities primarily due to ~~inventory write-off of Covestro material of $432,638~~leases acquired during 2021 and 2022 in ~~Q1 2021 to be utilized in R&D as well as other R&D material purchases as a result of the R&D department expansion.~~Canada, USA and Greece.

~~decrease/increase in stock-based payments~~

Other expense ~~of $6,649 and $133,547 respectively due to issuance of 4.6~~


	Three months ended March 31,
	2022			2021			Change
Other expense:
Interest expense, net	$	(164,434	)	$	(450,908	)	$	286,474		-64	%
Gain (Loss) on foreign exchange, net		148,391			(166,444	)		314,835		-189	%
Loss on financial instruments, net		—			(40,004,921	)		40,004,921		-100	%
Other (loss) income, net		(1,009,443	)		591,907			(1,601,350	)	-271	%
Total other expense	$	(1,025,486	)	$	(40,030,366	)	$	39,004,880		-97	%

The $0.3 million ~~stock options (as adjusted for Torchlight RTO) in December 2020 for all employees which increased the quarterly expense in Q1 and Q2 2021.~~

~~Decrease in depreciation and amortization expense for R&D assets of $31,297 and $88,217 respectively.~~

~~Table of Contents~~

~~Other income (expense)~~

Three months ended June 30,

Six months ended June 30,

2021

2020

Change

2021

2020

Change

$

$

$

%

$

$

$

%

Other income (expense):

Interest expense, net
(427,809 ) (324,421 ) (103,388 ) 32 % (878,717 ) (516,225 ) (362,492 ) 70 %
(Loss) Gain on foreign exchange, net
(163,941 ) (323,172 ) 159,231 -49 % (330,385 ) 256,673 (587,058 ) -229 %
(Loss) Gain on financial instruments, net
(535,170 ) 1,042,928 (1,578,098 ) -151 % (40,540,091 ) 1,285,765 (41,825,856 ) -3253 %
Other income, net
341,958 236,001 105,957 45 % 933,864 411,669 522,195 127 %

Total other income (expense)

(784,962
)

631,336

(1,416,298
)

-224
%

(40,815,329
)

1,437,882

(42,253,211
)

-2939
%

~~The increase~~decrease in net interest expense for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, compared to the same period of ~~2020,~~2021, is primarily due ~~to:~~

~~increase~~to reduced interest accretions in ~~non-cash interest accretion of $62,620 and $106,777 respectively~~Q1 2022 due to ~~accretion~~all of ~~long-term~~the convertible debt ~~and funding obligation.~~

~~increase in interest expense of $43,987 and $259,387 respectively due~~instruments being converted to interest carrying promissory notes and convertible debts outstanding at December 31, 2020 of $8,574,094 and additional financing obtained during Q1 2021 of $13,963,386. All convertible notes and promissory notes were converted into common stock in Q1 2021, except Torchlight promissory notes which ~~have been~~were eliminated June 30, 2021, subsequent to completion of the Torchlight RTO.

The change in net loss/gain on foreign exchange for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, compared to the same period of ~~2020,~~2021, is primarily driven by ~~fluctuations~~revaluations of intercompany balances in ~~global~~different currencies, ~~as a result of COVID-19, especially relating to the~~mainly Canadian dollars and US ~~Dollar in relation to Canadian dollar.~~

dollars.

The ~~net loss/gain~~$40 million loss on financial ~~instruments for the three and six months ended June 30,~~statements in Q1 2021 ~~compared to the same period of 2020,~~ is primarily due to the remeasurement of convertible financial liabilities of carrying value of $12,003,142 at the conversion dates and recognition of $40,340,460 non-cash realized loss in the statements of ~~operations.~~operations in Q1 2021. This significant increase in the fair value of the convertible financial liabilities is due to the significant increase of ~~the Company’s~~our stock price from CA$0.66 as at December 31, 2020 to:

•

CA$3.01 aton February 16, 2021 when ~~the Company~~we converted unsecured convertible promissory notes of $4,356,734 principal and interest at share price of CA$0.50 in accordance with the terms of the bridge financing;

•

CA$3.01 aton February 16, 2021 when ~~the Company~~we converted unsecured convertible debentures of $1,527,108 principal and interest at share price of CA$0.70 as per terms of the agreement and;

•

CA$3.80 aton March 3, 2021 when ~~the Company~~we converted secured convertible debentures of $4,252,059 principal and interest at share price of CA$0.70 pursuant to the terms of the agreement with BDC.

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 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 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, in this case $40,340,460, be recorded in Common Stock thus having no impact on shareholder’s deficit despite the recording of the loss in the profit and loss.

The recorded loss is a non-cash expense and had no impact on shareholder’s equity at June 30, 2021. 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 stock 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.

~~Table of Contents~~

The increase in net other income for the three and six months ended June 30, 2021, compared to the same period of 2020, is primarily due to increase in government assistance of due to grants received from the Canadian and United Kingdom Government of $105,857 in the three months ended June 30, 2021 and $552,856 in the six months ended June 30, 2021.

Deferred Tax recovery

Three months ended June 30,

Six months ended June 30,


2021

2020

Change

2021

2020

Change


$

$

$

%

$

$

$

%

Income tax recovery
   57,847    10,425    47,422    455 % 102,526    54,347    48,179    89 %

~~The Company records~~


	Three months ended March 31,
	2022		2021		Change
Income tax recovery	$	-	$	44,679	$	(44,679	)	-100	%

We record deferred income tax liabilities ~~only~~ for ~~its~~some of our foreign ~~operation~~operations in ~~the~~Canada and United Kingdom. ~~The decrease in~~There were no income tax recovery or expense ~~for the three and six months ended June 30, 2021, compared~~recorded in Q1 2022 due to the ~~same periods in 2020 was driven by an increase in accumulated losses as well as changes in foreign exchange rates.~~

~~The Company has~~valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

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

~~At June 30, 2021, the Company~~

On March 31, 2022, we had cash and cash equivalents of ~~$155.0~~$30.2 million including ~~$0.4~~$0.5 million in restricted cash compared to ~~$1.4 million at~~

~~December 31, 2020.~~

~~For the six months ended June 30, 2021, the Company’s principal sources of liquidity included $147 million of cash obtained through the Torchlight RTO, $14~~$47.4 million in cash ~~obtained through convertible debt, $1.2 million in~~and 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~~equivalents at December 31, 2021.

During the three months ended March 31, 2022, our primary uses of liquidity included salaries of $3$5 million, ~~legal and audit~~professional fees of ~~$2.4~~$5.7 million, ~~consulting fees~~rent and utilities of ~~$0.8~~$1 million and, ~~R&D materials~~Oil and Gas drilling costs of ~~$0.8 million.~~

At June 30, 2021, META had a working capital surplus of $143 million compared to a deficit of $9.7 million at June 30, 2020 which represents an improvement in working capital of $152.7 million. This is primarily due to a $153.7 million increase in cash and restricted cash as a result of the Torchlight acquisition, a $1.1 million ~~increase in prepayments mainly due to stock issued to a lessor for $0.6 million~~ as ~~prepaid expense relating to the extension~~well as settling trade and other payables of leased space (see Highfield Park amendment above), a $5 million net decrease in working capital as a result of the acquisition of Torchlight’s assets held for sale and preferred stock liability, $2.3 million increase in accounts payables mainly due to construction of the Highfield Park facility in Canada and equipment purchases in the United States, $1 million increase in long term debt current portion, and $6.7 million decrease in convertible debt as a result of conversions into equity in Q1 2021.

~~META believes~~$5.1 million.

We believe that ~~its~~our existing cash will be sufficient to meet ~~its~~our working capital and capital expenditure needs ~~for the foreseeable future. However, META~~as production capacity begins to come online. We may need to raise additional capital to expand the commercialization of ~~its~~our products, fund ~~its~~our operations and further ~~its~~our research and development activities. ~~META’s future~~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~~our facilities in Halifax and California and the ongoing investments to support the growth of ~~its~~our business.

~~Table~~

We also have the option to raise equity through issuing common stock of ~~Contents~~

up to approximately $112.5 million under an existing At-The-Market equity program where our 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 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~~our cash flows for the periods ~~presented;~~

Six months ended June 30,


2021

2020

Net cash used in operating activities
   (5,607,851 )    (4,461,287 )
Net cash provided by investing activities
   143,639,858    2,486,266
Net cash provided by financing activities
   15,483,993    4,955,785




Net increase in cash, cash equivalents and restricted cash


153,516,000



2,980,764

presented:


	Three months ended March 31,
	2022			2021
Net cash used in operating activities	$	(18,745,199	)	$	(2,393,475	)
Net cash provided by (used in) investing activities		1,138,063			(1,605,538	)
Net cash provided by financing activities		275,101			15,367,402
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(17,332,035	)	$	11,368,389

Net cash used in operating activities

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, net cash used in operating activities of ~~$5.6~~$18.8 million was primarily driven by ~~$49.3~~$18.4 million of net loss reported for the period, and non-cash adjustments of ~~$43~~$6 million mainly due to depreciation and amortization, stock-based compensation, and non-cash consulting expense. In addition, there was $6.3 million cash used by working capital primarily due to a $5.1 million decrease in trade and other payables and $1.3 million increase in accounts receivable and other assets.

During the three months ended March 31, 2021, net cash used in operating activities of $2.4 million was primarily driven by $44.2 million of net loss reported for the period, and non-cash adjustments of $41.7 million related to fair value losses on financial instruments, depreciation and amortization, interest expense and stock-based ~~compensation, and other items.~~compensation. In addition, there was ~~$0.76 million cash provided by working capital primarily due to $0.5 million increase in accounts payable, $0.4 million cash received for tenant inducement,~~ $0.1 ~~million inventory sold and written off to R&D offset by $0.24 million increase in receivables and prepayments.~~

During the six months ended June 30, 2020, net cash used in operating activities of $4.5 million was primarily driven by $3.2 million of net loss reported for the period, and non-cash adjustments of $0.45 million related to fair value losses on financial instruments, depreciation and amortization, interest expense, stock-based compensation, and other items. In addition, there was $1.48 million cash used in working ~~capital primarily due to $1.6 million decrease in accounts payable, $0.15 million increase in inventory due to raw materials purchases offset by $0.29 million decrease in receivables and prepayments.~~

capital.

Net cash provided by (used in) investing activities

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, net cash provided by investing activities of ~~$143.6~~$1.1 million was primarily driven by ~~cash acquired as a result of the Torchlight acquisition of $147 million, $3~~proceeds from short-term investments, offset by $1.8 million purchases of property plant and equipment associated with the construction of the Highfield Park Facility in Canada as well as the equipment purchases for ~~META’s~~our facility in California, United ~~States and $0.27 increase in intangibles as a result of capitalized legal cost of patents as well as patents acquired as part of the interglass assets.~~

States.

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, net cash used in investing activities of $1.6 million was primarily driven by $1.5 million equipment purchases for our facility in California, United States.

Net cash provided by financing activities

During the three months ended March 31, 2022, net cash provided by ~~investing~~financing activities of ~~$2.5~~$0.3 million was primarily driven by proceeds from ~~CPM acquisition of $3.1 million~~options and ~~$0.5 million equipment purchases for META’s facility in California, United States.~~

~~Net cash provided by financing activities~~

warrants conversion.

During the ~~six~~three months ended ~~June 30,~~March 31, 2021, net cash provided by financing activities of ~~$15.3~~$15.4 million was primarily driven by ~~$10 million~~ proceeds from ~~issuance of~~ unsecured ~~convertible~~ promissory notes ~~to Torchlight that was eliminated upon consolidation at June 30, 2021, $3.9 million proceeds from issuance~~ of ~~unsecured convertible promissory notes to a shareholder that was subsequently converted into common stock in Q1 2021, $1.1~~$14 million, proceeds from long-term debt ~~and $0.2~~of $1.1 million as well as proceeds from ~~options and warrants conversion.~~

~~During the six months ended June 30, 2020, net cash provided by financing activities~~government grants of $4.8 million was primarily driven by $3.6 million proceeds from issuance of secured convertible debentures to BDC Capital that was subsequently converted into common stock in Q1 2021, $0.7 million proceeds from issuance of unsecured convertible debentures that was subsequently converted into common stock in Q1 2021, $0.6 million proceeds from common stock and warrants issuances offset by $0.2 ~~million repayments of long-term debt.~~

million.

Commitments and contractual obligations

For a description of our commitments and contractual obligations, please ~~see“Note 21—~~see “Note 18 — Commitments and contingencies” in the Notes to the Condensed Consolidated Interim Financial Statements of this Form 10-Q.

Off-Balance Sheet Arrangements

Off-balance sheet firm commitments relating to outstanding letters of credit amounted to approximately ~~$945,000~~$0.8 million as of ~~June 30, 2021.~~March 31, 2022. These letters of credit and bank guarantees are collateralized by ~~$433,627 of~~$0.5 million in restricted cash. Please see “Note ~~21—~~18 – Commitments and contingencies” in the Notes to ~~Condensed~~the Consolidated ~~Interim~~ Financial Statements of this Form 10-Q. ~~The Company~~We do not maintain any other off-balance sheet arrangements.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated interim financial statements, please see “Note 2—Significant accounting policies” in the Notes to Condensed Consolidated Interim Financial Statements of this Form 10-Q.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Interest rate risk~~

~~Interest rate risk is the risk that the fair value or future cash flows of a~~

For financial ~~instrument will fluctuate because of~~market risks related to changes in interest rates and foreign currency exchange rates, reference is made to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in Part II of our Annual Report on Form 10-K/A for the year ended December 31, 2021. Our exposure to market ~~interest rates. Interest rate~~ risk is minimized through management’s decision to primarily obtain fixed rate or interest free debt. Funding obligation and long-term debt are at a nil interest rate and the interest on the cash balances is insignificant. As a result, the Company ishas 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 foreign exchange rates. The Company has transactional currency exposures that arise from loans and receivables as well as purchases in currencies other than their functional currency such as United States Dollars, Euros and Great Britain Pound. The Company does not enter into derivatives to hedge the exposure.

changed materially since December 31, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Our management,~~

Management, with the participation of ~~our~~the Chief Executive Officer and ~~our~~ Chief Financial Officer, has evaluated the effectiveness ~~of the design and operation~~ of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~the end of the period covered by this quarterly report.~~ March 31, 2022.

Based ~~upon~~on this evaluation, our management including the Chief Executive Officer and Chief Financial Officer have concluded that, due to the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of March 31, 2022.

However, giving full consideration to the material weaknesses, and the progress made in addressing them since December 31, 2021, we have concluded that the condensed consolidated interim financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, the results of our operations and our 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

Our management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined ~~under~~in Securities Exchange Act ~~Rules 13a-15(e)~~Rule 13a‑15(f). Our internal control over financial reporting is a process designed by and ~~15d- 15(e)~~under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, and effected by our 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. Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our 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 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 our 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 operational personnel with the appropriate skills and knowledge 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 our 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 relevance, timeliness and quality of information used in control activities.

•

As a consequence of the above, we had ineffective control activities related to the design, implementation and operation of process level and financial statement close controls which had a pervasive impact on our 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 ~~effective~~corrected prior to 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.

Plan for Remediation of Material Weaknesses

Management is continuing to evaluate and strengthen our internal controls over financial reporting to ensure that management can routinely prepare our financial statements under GAAP, meet the requirements of our independent auditors and remain in compliance with the SEC reporting requirements. These efforts are time consuming and require significant resource investment that we are committed to making.

We are 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.

•

Training the newly hired Chief Information Officer.

•

Identifying and hiring additional key positions necessary to support our initiatives related to internal controls over financial reporting, including but not limited to Technical Accounting and, Transactional Accounting.

•

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 our 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 ~~the reasonable assurance.~~an appropriate frequency.

•

Implementing a newly established 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 ~~Control Over Financial Reporting~~

~~There~~Controls.

Except for the remediation activities which remain ongoing to address the material weaknesses described above, there were no changes in our internal control over financial reporting ~~identified~~(as defined in ~~management’s evaluation pursuant to~~ Rules ~~13a or 15(d) of~~13a-15(f) and 15d-15(f) under the Exchange ~~Act that~~Act) occurred during the ~~three months~~quarter ended ~~June 30, 2021,~~March 31, 2022 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

However, as a result of the closing of the Arrangement, our internal control over financial reporting may change. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process.

~~Inherent Limitation~~

Limitations on ~~the~~ Effectiveness of Internal ~~Control~~

~~The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations,~~Controls

Management, including the ~~exercise of judgment in designing, implementing, operating,~~Chief Executive Officer and ~~evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the~~Chief Financial Officer, does not expect that disclosure controls or internal controls, when effective, will prevent all error and ~~procedures, management recognizes that any~~all fraud. A control system, ~~of internal control over financial reporting, including ours,~~ no matter how well ~~designed~~conceived and operated, can provide only ~~provide~~ reasonable, not absolute, assurance that the objectives of ~~achieving~~ the ~~desired~~ control ~~objectives.~~system are met. In addition, the design of ~~disclosure controls and procedures~~a control system must reflect the fact that there are resource constraints, and ~~that management is required to apply its judgment in evaluating~~ the benefits of ~~possible~~ controls ~~and procedures~~must be considered relative to their costs. ~~Moreover, projections~~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 ~~evaluation~~systems of ~~effectiveness to~~controls is based in part upon certain assumptions about the likelihood of future ~~periods are subject to the risk~~events, and there can be no assurance that ~~controls~~any design will succeed in achieving our stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or ~~that~~ the degree of compliance with the policies or procedures may deteriorate. ~~We intend~~Because of these inherent limitations in a cost-effective control system, misstatements due to ~~continue~~error or fraud may occur and not be detected. Individual persons may perform multiple tasks which normally would be allocated to ~~monitor~~separate persons and ~~upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will~~therefore extra diligence must be ~~sufficient to provide us with effective internal control over financial reporting.~~

exercised during the period these tasks are combined.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

~~On January 31, 2020, Torchlight Energy Resources, Inc.~~

Refer to “Note 18 — Commitments 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.~~

,contingencies” 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 amendmentNotes 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~~Condensed Consolidated Interim Financial Statements of limitations, that the claims had been released, and that the claims were barred because of contractual disclaimers between sophisticated parties. Torchlight also asserted counterclaims for attorney fees. On January 14, 2021, Goldstone Holding Company, LLC dismissed its claims without prejudice, leaving Torchlight’s counterclaims for attorney fees as the only pending claim in the case. On February 26, 2021, Torchlight filed a non-suit without prejudice on its counterclaims for attorney fees, leaving no claims in the case. The court signed a final order disposing of the entire case on March 5, 2021. However, Goldstone Holding Company, LLC asked the court to re-instate its claims, and a hearing was held on April 13, 2021. On June 16, 2021, the court signed an order denying the motion to reinstate Goldstone Holding Company’s, LLC’s claims, and the case is closed.

~~Table of Contents~~

On April 30, 2020, our 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 our Chairman Gregory McCabe, is a co-plaintiff in that action. After the suit was filed, Cordax filed a mineral lien in the amount of $104,500.01 against the Orogrande Field and has sued the operator and counterclaimed against Hudspeth for breach of contract, seeking the same amount as the lien. We have added the manufacturer of one of the tool components that we contend 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 we 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 parties are currently engaged in preliminary discovery.

this Form 10-Q.

Item 1A. Risk Factors

~~The following~~

For risk factors ~~could materially affect META’s~~related to our business, ~~financial condition or results~~reference is made to Item 1A, "Risk Factors," contained in Part I of ~~operations and should be carefully considered in evaluating the Company and its business, in addition to other information presented elsewhere in this report.~~

~~Limited Operating History~~

The 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 investment in the Company.

~~The Company is expected to be subject to many of the risks common to early-stage enterprises~~our Annual Report on Form 10-K/A for the foreseeable future, including challenges related to laws, regulations, licensing, integrating and retaining qualified employees; making effective use of limited resources; achieving market acceptance of existing and future products; competing against companies with greater financial and technical resources; acquiring and retaining customers; and developing new solutions.

~~Holography Market-Aviation Industry~~

~~The Company launched its first product, a laser 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

year ended December 31, 2021. There have been no material changes to the ~~aviation market. Since 2016, Airbus and Satair invested a total of $2,000,000~~risk factors disclosed in our Annual Report on Form 10-K/A for the ~~product development and exclusive distribution rights. Since the launch of METAAIR~~

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

~~Despite the Company’s close collaboration with the Airbus Group, with the impact of COVID-19 there can be no assurance that the aviation market will accept the METAAIR~~

product at the expected market penetration rates and a slower than forecasted market acceptance may have a material adverse effect on the Holography laser protection related products and the Company’s financial position. The Company is pursuing ancillary markets outside of the Aviation Industry for its METAAIR

~~laser protection eyewear such as in law enforcement and defense.~~

~~Table of Contents~~

~~Lithography Product and Market-Automotive~~

The Lithography related products have not yet reached the required technical maturity and are expected to be launched in two to three years’ time after a successful product development completion. Despite the Company’s close collaboration with two 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 the Lithography de-icing related products and the Company’s financial position.

~~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 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 METAAIR~~

~~market evolves further.~~

~~Currency Fluctuations~~

The Company’s revenues and expenses are denominated in Canadian dollars, US dollars, and British Pounds, and therefore are exposed to significant currency exchange fluctuations. Recent events in the global financial markets have been coupled with increased volatility in the currency markets. Fluctuations in the exchange rate between the US dollar, the Canadian dollar and the British pound may have a material adverse effect on the Company’s business, financial condition, and operating results. The Company may, in the future, establish a program to hedge a portion of its foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. However, even if the Company develops a hedging program, there can be no assurance that it will effectively mitigate currency risks.

~~New Facility and Permits for Lithography Production~~

The Company’s plans to scale its lithography production in Canada is dependent on obtaining adequate additional funding. The Company is in process of moving into a larger facility suitable to host the Holography and Lithography production scale up. 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 launch and/or development of related products, and also may have a material adverse effect on the Lithography and Holography related products and consequently on the Company’s financial position.

~~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 may cause a material adverse effect on the Holography related products.

~~Intellectual Property~~

The success of the Company will depend, in part, on the ability of the Company to maintain and enhance intellectual property and trade secret protection over various existing and potential proprietary techniques and products. The Company may be vulnerable to competitors who develop competing technology, whether independently or as a result of acquiring access to the proprietary products and trade secrets. In addition, effective future patent, copyright, trademark, and trade secret protection may be unavailable or limited in certain foreign countries and may be unenforceable under the laws of certain jurisdictions.

~~Research and Market Development~~

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

~~Costs of Maintaining a Public Listing~~

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

~~Table of Contents~~

~~Conflicts of Interest~~

Certain of the 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 a material interest in or who are a party to a material contract or a proposed material contract with the Company are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the contract. In addition, the directors and officers are required to act honestly and in good faith with a view to the Company’s best interests. However, in conflict of 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 manner that is unfavorable to the Company.

~~Product Liability Claims~~

~~The Company’s wireless sensing technology to enhance MRI imaging 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.

Any product liability claims or regulatory action against the Company related to wireless sensing products could have a material adverse effect on this business segment of the Company and/or on the Company.

~~Reliance on Management~~

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

~~Resale of Shares~~

There can be no assurance that, an active and liquid market for the Company’s common stock will develop or be maintained and an investor may find it difficult to resell any securities of the Company. In addition, there can be no assurance that the publicly traded price of the Company’s common stock (META’s common stock) will be high enough to create a positive return for investors. Further, there can be no assurance that META’s common stock will be sufficiently liquid so as to permit investors to sell their position in META without adversely affecting the stock price. In such event, the probability of resale of META’s common stock would be diminished.

~~Price Volatility of Publicly Traded Securities~~

In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continuing fluctuations in price will not occur. It may be anticipated that any quoted market for META’s common stock will be subject to market trends generally, notwithstanding any potential success of the Company in creating revenues, cash flows or earnings. The value of META’s common stock will be affected by such volatility.

~~Dividends~~

The Company has not paid dividends in the past, and the Company does not anticipate paying any dividends in the foreseeable future. Dividends paid by the Company would be subject to tax and, potentially, withholdings.

~~Insurance Coverage~~

The Company will require insurance coverage for a number of risks. Although the 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 resources, results of operations and prospects could be adversely affected.

~~Table of Contents~~

~~Litigation~~

The Company may become party to litigation from time to time in the ordinary course of business which could adversely affect its business. Should any litigation in which the Company becomes involved be determined against the Company, such a decision could adversely affect the Company’s ability to continue operating and the market price for the common stock and could use significant resources. Even if the Company is involved in litigation and wins, litigation can redirect significant resources.

year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).


Exhibit Number		~~Description~~

31.1* Exhibit Number	Description
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
~~101.INS~~		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
~~101.SCH~~		Inline XBRL Taxonomy Extension Schema Document
101.CAL
~~101.CAL~~		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
~~101.DEF~~		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
~~101.LAB~~		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
~~101.PRE~~		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
~~104~~		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	~~Filed herewith.~~

* Filed herewith.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


		~~Meta Materials Inc.~~

	Meta Materials Inc.

Dated: ~~August 13, 2021~~May 10, 2022	By:	~~By:~~	/s/ George Palikaras
			George Palikaras
			President and Chief Executive Officer
			(Principal Executive Officer)

Dated: ~~August 13, 2021~~May 10, 2022	By:	~~By:~~	/s/ ~~Ken~~Kenneth Rice
			Ken Rice
			Chief Financial Officer and Chief Operating Officer
			(Principal Financial and Accounting Officer)


Nevada		74-3237581
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 Research Drive Dartmouth, Nova Scotia		B2Y 4M9
(Address of principal executive offices)		(Zip Code)


Large accelerated filer	☒	☐	Accelerated filer	☐
Non-accelerated filer	☐
~~Non-accelerated~~ ~~filer~~		☒	Smaller reporting company	☒ ☐

			Emerging growth company	☐


	As of June 30, 2021			As of December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	154,634,423		$	1,395,683
Restricted C ash		433,627			—
Grants receivable		407,523			327,868
Accounts receivable		207,760			22,833
Inventory		368,293			463,382
Prepaid expenses and other current assets		1,604,710			514,204
Assets held for sale		72,797,392			—
Due from related parties		57,658			—
Total current assets		230,511,386			2,723,970
Intangible assets, net		4,389,607			4,476,614
Property, plant and equipment, net		5,382,196			2,761,171
Operating lease right-of-use assets		2,994,424			270,581
Goodwill		217,613,966			—
Total assets	$	460,891,579		$	10,232,336
Liabilities and stockholders’ equity (deficit)
Current liabilities
Trade and other payables	$	5,377,375		$	2,940,452
Due to related party		0			245,467
Current portion of long-term debt		1,349,274			290,544
Current portion of deferred revenues		1,453,556			1,239,927
Current portion of deferred government assistance		866,011			779,578
Preferred stock lia bilit y		77,906,354			—
Current portion of operating lease liabilities		279,832			150,802
Asset retirement obligations		21,937			—
Unsecured convertible promissory notes		—			1,203,235
Secured convertible debentures		—			5,545,470
Total current liabilities		87,254,339			12,395,475
Deferred revenues		681,625			804,143
Deferred government assistance		76,807			146,510
Deferred tax liability		219,962			318,054
Unsecured convertible debentures		—			1,825,389
Long-term operating lease liabilities		1,145,049			119,779
Funding obligation		859,828			776,884
Long-term debt		2,739,620			2,743,504
Total liabilities		92,977,230			19,129,738
Stockholders’ equity (deficit)
Common stock - $0.001 par value; 1,000,000,000 shares authorized, 279,782,854 shares issued and outstanding at June 30, 2021, and $ NaN par value; unlimited shares authorized, 154,236,692 shares issued and outstanding at December 31, 2020		257,966			132,347
Additional paid-in capital		454,259,192			29,021,974
Accumulated other comprehensive income (loss)		133,946			(654,880	)
Accumulated deficit		(86,736,755	)		(37,396,843	)
Total stockholders’ equity (deficit)		367,914,349			(8,897,402	)
Total liabilities and stockholders’ equity (deficit)	$	460,891,579		$	10,232,336


	As of			As of
	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	29,749,773		$	46,645,704
Restricted cash		478,897			788,768
Short-term investments		—			2,875,638
Grants receivable		29,150			175,780
Accounts receivable		2,514,443			1,665,700
Inventory		366,959			265,718
Prepaid expenses and other current assets		3,843,663			3,451,367
Assets held for sale		72,000,000			75,500,000
Due from related parties		10,314			10,657
Total current assets		108,993,199			131,379,332
Intangible assets, net		28,306,272			28,971,824
Property, plant and equipment, net		29,977,784			27,018,114
Operating lease right-of-use assets		6,230,735			6,278,547
Goodwill		240,769,981			240,376,634
Total assets	$	414,277,971		$	434,024,451
Liabilities and stockholders’ equity
Current liabilities
Trade and other payables	$	9,944,822		$	13,335,470
Current portion of long-term debt		363,654			491,278
Current portion of deferred revenues		695,160			779,732
Current portion of deferred government assistance		858,942			846,612
Preferred stock liability		72,000,000			75,500,000
Current portion of operating lease liabilities		782,901			663,861
Asset retirement obligations		21,937			21,937
Total current liabilities		84,667,416			91,638,890
Deferred revenues		660,297			637,008
Deferred government assistance		—			3,038
Deferred tax liability		329,205			324,479
Long-term operating lease liabilities		3,676,258			3,706,774
Funding obligation		286,182			268,976
Long-term debt		2,920,931			2,737,171
Total liabilities		92,540,289			99,316,336
Stockholders’ equity
Common stock - $0.001 par value; 1,000,000,000 shares authorized, 286,927,265 shares issued and outstanding at March 31, 2022, and $0.001 par value; unlimited shares authorized, 284,573,316 shares issued and outstanding at December 31, 2021		265,106			262,751
Additional paid-in capital		467,692,775			463,136,404
Accumulated other comprehensive income (loss)		608,446			(296,936	)
Accumulated deficit		(146,828,645	)		(128,394,104	)
Total stockholders’ equity		321,737,682			334,708,115
Total liabilities and stockholders’ equity	$	414,277,971		$	434,024,451


~~PART I—FINANCIAL INFORMATION~~		3

PART I—FINANCIAL INFORMATION	3

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		27	20

INTRODUCTION		27	20

FORWARD-LOOKING STATEMENTS		27	20

OVERVIEW		28	20

BUSINESS AND OPERATIONAL OVERVIEW		28	20

Holography Technology		29	21

Lithography Technology		29	22

Wireless Sensing Technology		30	23

RESULTS OF OPERATIONS		30	24

LIQUIDITY AND CAPITAL RESOURCES		33	26

Item 3. Quantitative and Qualitative Disclosures About Market Risk		35	28

Item 4. Controls and Procedures		35	28

PART II—OTHER INFORMATION		35	31

Item 1. Legal Proceedings		35	31

Item 1A. Risk Factors		36	31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		39	31

Item 3. Defaults Upon Senior Securities		39	31

Item 4. Mine Safety Disclosures		39	31

Item 5. Other Information		39	31

Item 6. Exhibits		39	32

SIGNATURES		40	33


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenue:
Product sales		1,953			—			24,000			1,922
Development revenue		622,367			210,344			1,196,623			648,761
Total Revenue		624,320			210,344			1,220,623			650,683
Cost of goods sold		706			1,336			1,106			2,160
Gross Profit		623,614			209,008			1,219,517			648,523
Operating Expenses:
Selling & Marketing		298,871			153,962			695,465			324,528
General & Administrative		3,145,368			1,553,118			5,738,252			3,157,652
Research & Development		1,633,653			960,430			3,412,909			1,892,601
Total operating expenses		5,077,892			2,667,510			9,846,626			5,374,781
Other income (expense):
Interest expense, net		(427,809	)		(324,421	)		(878,717	)		(516,225	)
(Loss) Gain on foreign exchange, net		(163,941	)		(323,172	)		(330,385	)		256,673
(Loss) Gain on financial instruments, net		(535,170	)		1,042,928			(40,540,091	)		1,285,765
Other income, net		341,958			236,001			933,864			411,669
Total other income (expenses)		(784,962	)		631,336			(40,815,329	)		1,437,882
Loss before income taxes		(5,239,240	)		(1,827,166	)		(49,442,438	)		(3,288,376	)
Income tax recovery		57,847			10,425			102,526			54,347
Net loss		(5,181,393	)		(1,816,741	)		(49,339,912	)		(3,234,029	)

Other Comprehensive Income (Loss) net of tax
Foreign currency translation gain (loss)		87,087			160,012			108,648			(159,248	)
Fair value gain (loss) on changes of own credit risk		9,011			(388,332	)		680,178			(365,208	)
Total Other Comprehensive Income (Loss)		96,098			(228,320	)		788,826			(524,456	)
Comprehensive loss		(5,085,295	)		(2,045,061	)		(48,551,086	)		(3,758,485	)
Basic and diluted loss per share (1)		(0.03	)		(0.01	)		(0.27	)		(0.03	)
Weighted average number of shares outstanding - basic and diluted (1)		197,911,144			155,931,625			183,485,933			120,093,443


	Six Months Ended
	June 30, 2021			June 30, 2020
	$			$

Cash flows from operating activities:
Net loss		(49,339,912	)		(3,234,029	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash finance income		—			(14,002	)
Non-cash interest expense		742,174			378,485
Non-cash lease expense		160,437			—
Deferred income tax		(102,526	)		(54,347	)
Depreciation and amortization		1,173,884			1,197,123
Unrealized foreign currency exchange loss (gain)		230,837			(304,973	)
Loss (gain) on financial instruments, net		40,540,091			(1,285,765	)
Change in deferred revenue		18,302			(232,986	)
Non-cash government assistance		(472,499	)		(182,664	)
Loss on debt s ettlement		19,253			—
Stock-based compensation		651,718			708,468
Non-cash consulting expense		12,009			43,673
Changes in operating assets and liabilities		758,381			(1,480,270	)
Net cash used in operating activities		(5,607,851	)		(4,461,287	)
Cash flows from investing activities:
Purchases of intangible assets		(274,579	)		(46,977	)
Purchases of property, plant and equipment		(3,040,296	)		(538,893	)
Proceeds from reverse takeover		146,954,733			3,072,136
Net cash provided by invest ing activities		143,639,858			2,486,266
Cash flows from financ ing activities:
Proceeds from long-term debt		1,127,151			25,783
Repayments of long-term debt		(53,331	)		(190,633	)
Proceeds from government grants		223,384			198,286
Proceeds from unsecured promissory notes		13,963,386			—
Proceeds from secured convertible debentures		—			3,630,019
Proceeds from unsecured convertible debentures		—			693,784
Proceeds from issuance of common stock and warrants, net		—			598,546
Proceeds from stock option exercises		113,155			—
Proceeds from warrants exercises		93,993			—
Proceeds from broker warrants exercises		16,255			—

Net cash provided by financing activities		15,483,993			4,955,785
Net increase in cash, cash equivalents and restricted cash		153,516,000			2,980,764
Cash, cash equivalents and restricted cash at beginning of the period		1,395,683			407,061
Effects of exchange rate changes on cash, cash equivalents and restricted cash		156,367			3,931
Cash, cash equivalents and restricted cash at end of the period		155,068,050			3,391,756
Supplemental cash flow information
Accrued purchases of property, equipment and patents		297,345			35,724
Right-of-use assets obtained in exchange for lease liabilities		1,730,743			—
Right-of-use assets and prepaid expenses recognized in exchange for common stock		2,149,381			—
Settlement of liabilities in common stock		52,063,432			—
Interest paid on debt		64,528			18,124


	June 30, 2021		December 31, 2020
	$		$

Raw materials		281,065		378,265
Supplies		14,786		14,414
Work in process		72,442		69,381
Finished goods		0		1,322

Total inventory		368,293		463,382


	Useful life (years)		June 30, 2021 $			December 30, 2021 $

Computer equipment		3-5		187,131			163,856
Computer software		1		263,549			256,554
Manufacturing equipment		2-5		7,932,152			6,645,986
Office furniture		5-7		108,408			99,234
Enterprise Resource Planning software		5		215,987			210,254
Assets under construction		N/ A		2,545,012			424,393

				11,252,239			7,800,277
Accumulated depreciation and impairment				(5,870,043	)		(5,039,106	)

				5,382,196			2,761,171


	Six months ended June 30, 2021 $									Year ended December 31, 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		—			(258,480	)		(258,480	)		—		(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	)		—			(23,656,365	)		—		—			—
Elimination pursuant to Torchlight RTO (note 3)		—			(11,322,637	)		(11,322,637	)		—		—			—

Ending balance		0			0			0			538,020		665,215			1,203,235


	Tranche 1	Tranche 2	Tranche 3
Face value of notes issued	$500,000	$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	8%	8%	8%
Conversion price	CA$0.35	CA$0.62	CA$2.80

	Six months ended June 30, 2021 $			Year ended December 31, 2020 $

Beginning balance		5,545,470			0
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		0			5,545,470


	Six months ended June 30, 2021			Year ended December 31, 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			54,978
Conversion to common stock		(5,769,475	)		—

Ending balance		—			1,825,389


	June 30, 2021 $		December 31, 2020 $
ACOA Business Development Program (“BDP”) 2012 interest-free loan 1 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 June 30, 2021, the amount drawn down on the loan, net of repayments, is CA$160,715 (2020 - CA$178,571).		107,965		129,384
ACOA Atlantic Innovation Fund (“AIF”) 2015 interest-free loan 1,2 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 June 30, 2021, the amount drawn down on the loan is $CA3,000,000 (2020 - CA$3,000,000).		1,628,440		1,458,954
ACOA BDP 2018 interest-free loan 1,3 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 June 30, 2021, the amount drawn down on the loan, net of repayments, is CA$3,000,000 (2020 - CA$3,000,000).		1,397,318		1,285,307
ACOA BDP 2019 interest-free loan 1 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 June 30, 2021, the amount drawn down on the loan is CA$62,165 (2020 - CA$62,165).		45,166		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 June 30, 2021, the amount drawn down on the loan is CA$390,000 (2020 - $NaN).		103,163		0
Shareholder loan bearing no interest. The loan proceeds are provided as collateral to a letter of credit and are recorded as restricted cash. The loan is repayable upon any reduction of the letter of credit. In the event that the bank draws on the collateral or the collateral has not been returned in full by December 31, 2021, then the outstanding balance of collateral will be considered a demand promissory note with 1% interest charge per month compounded monthly beginning January 1, 2022.		806,842		0
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 share 4 . Pursuant to the conversion, CAIXA Capital was issued 67,597 MMI common stock.		0		130,265

		4,088,894		3,034,048
Less: current portion		1,349,274		290,544

		2,739,620		2,743,504


	Six months ended June 30, 2021						Year ended December 31, 2020
	Number of						Number of
	warrants 1			Amount 1			warrants 1		Amount 1
	#			$			#		$
Balance, beginning of period		3,046,730			402,883			1,590,866		132,299
Issued		—			—			1,455,864		166,916
Adjustment to 2019 warrants		—			—			—		103,668
Exercised		(238,806	)		(35,603	)		—		—
Fair value of deemed issuance to Torchlight		426,639			2,943,370			—		—

Balance, end of period		3,234,563			3,310,650			3,046,730		402,883


	Six months ended						Year ended
	June 30, 2021						December 31, 2020
	Number of						Number of
	warrants 1			Amount 1			warrants 1		Amount 1
	#			$			#		$
Balance, beginning of period		97,542			16,144			0		0
Issued		—			—			97,542		16,144
Exercised		(61,331	)		(10,892	)		—		—

Balance, end of period		36,211			5,252			97,542		16,144


	Six months ended June 30, 2021		Year ended December 31, 2021
	# 1		# 1

Outstanding, beginning of period		3,455,224		3,977,820
Converted into common stock		0		(522,596	)

Outstanding, end of period		3,455,224		3,455,224


Issue price	June 30, 2021		December 31, 2020
Issue price	Number of units # 1		Number of units # 1
CA$0.27		3,348,675		3,348,675
CA$0.51		106,549		106,549

		3,455,224		3,455,224


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020


Selling & Marketing		9,690		18,523		20,959		37,651
General & Administrative		104,727		230,085		348,617		522,222
Research & Development		110,507		117,156		282,142		148,595
		224,924		365,764		651,718		708,468


	Weighted Average exercise price per stock option $	Six months ended June 30, 2021 Number of options # 1			Weighted Average exercise price per stock option $	Year ended December 31, 2020 Number of options # 1

Outstanding, beginning of period	CA$0.33		24,477,507		CA$0.33		14,502,303
Issued to CPM executives and directors pursuant to CPM RTO			—		CA$0.19		1,291,500
Granted			—		CA$0.34		13,402,080
Exercised	CA$0.34		(413,917	)			—
Forfeited	CA$0.34		(33,825	)	CA$0.34		(2,627,510	)
Expired			—		CA$0.27		(2,090,866	)
Fair value of deemed issuance to Torchlight	US$1.75		1,500,000				—

Outstanding, end of period	CA$0.44		25,529,765		CA$0.33		24,477,507


Exercise price $	Number outstanding # 1		Number exercisable # 1
CA$0.34		23,102,653		13,562,029
CA$0.15		558,112		558,113
CA$0.19		369,000		369,000
US$2.00		1,125,000		1,125,000
US$1.00		375,000		375,000

		25,529,765		15,989,142


	Six months		Year ended
	ended		December 31,
	June 30, 2021		2020
Dividend yield [%]		—		—

Volatility		84 %		52%-134 %
Risk-free interest rate		0.73 %		0.73 %
Expected term (in years)		1 year		7.48 years


	Six months ended June 30, 2021			Six months ended June 30, 2020
	$			$
Grants receivable		(74,552	)		95,718
Inventory		104,540			(146,872	)
Other receivables		(37,092	)		15,148
Prepaid expenses		(135,402	)		68,185
HST receivable		5,830			108,901
Trade payables		514,644			(1,620,827	)
Due from (to) related party		(17,839	)		(523	)
Operating lease Right-of-use Asset		408,201			—
Operating lease liabilities		(9,949	)		—

		758,381			(1,480,270	)


	June 30, 2021		December 31, 2020
	$		$
Covestro - Cooperation Framework		373,215		—
Satair A/S-exclusive rights		786,491		815,310
Satair A/S-advance against PO		502,179		488,847
LM Aero-MetaSOLAR commercialization		379,289		646,135
US Deferred Revenue		75,000		75,000
Innovate UK-R&D tax credit		19,007		18,778

		2,135,181		2,044,070

Less current portion		1,453,556		1,239,927

		681,625		804,143


Remainder of 2021	186,002
2022	444,258
2023	433,594
2024	360,971
2025	166,774
Thereafter	1,208,757

Total minimum lease payments	2,800,356
Less: interest	(1,375,475	)
Present value of net minimum lease payments	1,424,881
Less: current portion of lease liabilities	(279,832	)

Total long-term lease liabilities	1,145,049


	Three months ended June 30,										Six months ended June 30,
	2021		2020		Change						2021		2020		Change
	$		$		$			%			$		$		$			%
Product sales		1,953		—		1,953			100	%		24,000		1,922		22,078			1149	%
Development revenue		622,367		210,344		412,023			196	%		1,196,623		648,761		547,862			84	%

Total Revenue		624,320		210,344		413,976			197	%		1,220,623		650,683		569,940			88	%
Cost of goods sold		706		1,336		(630	)		-47	%		1,106		2,160		(1,054	)		-49	%

Gross Profit		623,614		209,008		414,606			198	%		1,219,517		648,523		570,994			88	%