This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts. Forward-looking statements may appear throughout this report, including without limitation, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report and in our Annual Report on Form 10-K for the year ended December 31, 2020 and in particular, the risks discussed in our Form 10-K under the caption “Risk Factors” in Item 1A therein, and those discussed in other documents we file with the Securities and Exchange Commission (“SEC”). Important factors that in our view could cause material adverse effects on our financial condition and results of operations include, but are not limited to,

obtaining additional capital in the future to fund planned expansion, the demand for oil and natural gas which demand could be materially affected by the economic impacts of COVID-19 and possible increases in supply from Russia and OPEC, the proposed business combination transaction with Metamaterial, Inc., general economic factors, competition in the industry, our ability to maintain compliance with the minimum bid price requirement of the Nasdaq Stock Market and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. We undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

~~As used herein, the “Company,” “Torchlight,” “we,” “our,” and similar terms include Torchlight Energy Resources, Inc. and its subsidiaries, unless the context indicates otherwise.~~

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

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

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

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

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

On December 14, 2020, we (formerly known as “Torchlight Energy Resources, Inc. ~~was incorporated~~” or “Torchlight”) and 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 ~~October 2007~~Nova Scotia, Canada (“MMI”), to acquire all of the outstanding common stock of MMI by way of a statutory plan of arrangement (the “Arrangement”) under the ~~laws~~Business Corporations Act (Ontario), on and subject to the terms and conditions of the ~~State~~Arrangement Agreement (the “Torchlight RTO”). On June 25, 2021, we implemented a reverse stock split. On June 28, 2021, following the satisfaction of ~~Nevada as Pole Perfect Studios,~~the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed, and we changed our name from “Torchlight Energy Resources, Inc. ~~(“PPS”). From its incorporation~~” to ~~November 2010, the company was primarily engaged in business start-up activities.~~“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, we began trading on the NASDAQ under the symbol “MMAT” while MMI common stock 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 shares of META.

~~We are engaged in~~For accounting purposes, the ~~acquisition, exploitation and/or development of oil~~legal subsidiary, MMI, has been treated as the accounting acquirer and natural gas properties in the United States. We operate our business through our subsidiaries Torchlight Energy Inc., Torchlight Energy Operating, LLC, Hudspeth Oil Corporation, and Torchlight Hazel LLC.

~~At March 31, 2021,~~ the Company, ~~had not yet achieved profitable operations. We had a net loss of $2,055,688~~the legal parent, has been treated as the accounting acquiree. The transaction has been accounted for ~~the three months ended March 31, 2021 and had accumulated losses of $113,991,285~~ ~~since our inception. We expect to incur further losses in the development of our business. These conditions raise substantial doubt about the Company’s ability to continue~~ as a ~~going concern.~~reverse acquisition in accordance with ASC 805

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

~~These~~continuation of MMI consolidated financial statements ~~have been prepared assuming that~~prior to June 28, 2021 and exclude the ~~Company will continue as a going concern~~balance sheets, statements of operations and ~~therefore, the~~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.

2. Significant accounting policies

Basis of presentation— These unaudited condensed consolidated interim financial statements ~~do not include any adjustments to reflect the possible future effects on the recoverability~~ and ~~classification of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.~~

3.	~~SIGNIFICANT ACCOUNTING POLICIES~~

~~The Company maintains its accounts on the accrual method of accounting~~related notes are presented in accordance with accounting principles generally accepted in the United States of America. Accounting principles followed and the methods of applying those principles, which materially affect the determination of financial position, results of operations and cash flows are summarized below:

~~Use of estimates~~ –America (“US GAAP”). Our fiscal year-end is December 31. The ~~preparation of~~condensed consolidated interim financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and certain assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

~~Basis of presentation~~ ~~– The financial statements are presented on a consolidated basis and~~ include ~~all of~~ the accounts of ~~Torchlight Energy Resources~~Meta Materials Inc. and its ~~wholly owned subsidiaries, Torchlight Energy, Inc., Torchlight Energy Operating, LLC, Hudspeth Oil Corporation, and Torchlight Hazel LLC.~~wholly-owned subsidiaries. All significant intercompany balances and transactions have been ~~eliminated.~~

eliminated on consolidation.

These unaudited condensed consolidated interim financial statements ~~are~~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 our audited consolidated financial statements and ~~have been prepared pursuant to~~notes for the ~~rules~~years ended December 31, 2021, 2020 and ~~regulations of~~2019, filed with the Securities and Exchange Commission (“SEC”) ~~regarding interim financial reporting. Certain disclosures~~on Form 10-K/A.

Recently Adopted Accounting Pronouncements: We currently have no material recently adopted accounting pronouncements.

Recently Issued Accounting Pronouncements: We currently have no material recent accounting pronouncements yet to be adopted.

3. Acquisitions and preferred stock liability

Torchlight RTO

On June 28, 2021, We and our subsidiaries, Canco and Callco, completed an arrangement agreement where we acquired all of the outstanding common stock of MMI and the former shareholders of MMI acquired approximately 70% of our Common Stock. Accordingly, the former shareholders of MMI, as a group, retained control of the Company, and while the Company was the legal acquirer of MMI, MMI was deemed to be the acquirer for accounting purposes. Pursuant to ASC 805 Business Combinations, the transaction was accounted for as a reverse acquisition. Consideration transferred was measured to be $358 million and the difference between the consideration transferred and fair value of net assets resulted in the recognition of goodwill of $213 million.

Nanotech acquisition

On October 5, 2021, a wholly-owned subsidiary of the Company purchased 100% of the common stock of Nanotech Security Corp. ("Nanotech") at CA$1.25 per share. In addition, the transaction price included the settlement of certain Nanotech share awards outstanding immediately prior to the closing of the agreement. 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 difference between the consideration paid and fair value 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 ~~condensed or omitted from these financial statements. Accordingly, they do not include all~~made to the ~~information~~provisional purchase price allocations of the Torchlight RTO and ~~notes required by accounting principles generally accepted~~the Nanotech acquisition, as disclosed in ~~the United States of America (“GAAP”) for complete consolidated financial statements, and should be read in conjunction with~~ the audited consolidated financial statements and notes ~~thereto included in our Annual Report on Form 10-K~~ for the ~~year~~years ended December 31, ~~2020.~~

In the opinion of management, the accompanying unaudited financial condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations for, all periods presented. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results.

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

3.	~~SIGNIFICANT ACCOUNTING POLICIES~~ ~~- continued~~

~~Risks and uncertainties~~ – The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating an emerging business, including the potential risk of business failure.

~~Concentration of risks~~ – At times the Company’s cash balances are in excess of amounts guaranteed by the Federal Deposit Insurance Corporation. The Company’s cash is placed with a highly rated financial institution, and the Company regularly monitors the credit worthiness of the financial institutions with which it does business.

~~Fair value of financial instruments~~ – Financial instruments consist of cash, receivables, convertible note receivable, payables and promissory notes, if any. The estimated fair values of cash, receivables, and payables approximate the carrying amount due to the relatively short maturity of these instruments. The carrying amounts of any promissory notes approximate their fair value giving affect for the term of the note and the effective interest rates. The recorded value of the Company’s convertible note receivable reflects the amount which management believes approximates fair value.

~~For assets and liabilities that require re-measurement to fair value the Company categorizes them in a three-level fair value hierarchy as follows:~~

●	~~Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.~~

●	Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration.

●	~~Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value.~~

~~A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.~~

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

~~Accounts receivable~~ – Accounts receivable consist of uncollateralized oil and natural gas revenues due under normal trade terms, as well as amounts due from working interest owners of oil and gas properties for their share of expenses paid on their behalf by the Company. Management reviews receivables periodically and reduces the carrying amount by a valuation allowance that reflects management’s best estimate of the amount that may not be collectible. As of March 31, 2021 and ~~December 31,~~ 2020 ~~no valuation allowance was considered necessary.~~

~~Oil and gas properties~~ ~~– The Company uses the full cost method of accounting for exploration and development activities as defined by~~contained in form 10K/A filed with the Securities and Exchange Commission (“SEC”). Under this method of accounting, the costs of unsuccessful, as well as successful, exploration and development activities are capitalized as properties and equipment. This includes any internal costs that are directly related to property acquisition, exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities.

Oil and gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs excluded represent investments in unevaluated properties and include non-producing leasehold, geological, and geophysical costs associated with leasehold or drilling interests and exploration drilling costs. The Company allocates a portion of its acquisition costs to unevaluated properties based on relative value. Costs are transferred to the full cost pool as the properties are evaluated over the life of the reservoir. Unevaluated properties are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions.

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

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

3.	~~SIGNIFICANT ACCOUNTING POLICIES~~ ~~- continued~~

~~Capitalized interest~~ – The Company capitalizes interest on unevaluated properties during the periods in which they are excluded from costs being depleted or amortized. During the three months ended March 31, 2021 and 2020, the Company capitalized $~~141,048~~ ~~and $614,479, respectively, of interest on unevaluated properties.~~

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

~~Ceiling test~~ – Future production volumes from oil and gas properties are a significant factor in determining the full cost ceiling limitation of capitalized costs. Under the full cost method of accounting, the Company is required to periodically perform a “ceiling test” that determines a limit on the book value of oil and gas properties. If the net capitalized cost of proved oil and gas properties, net of related deferred income taxes, plus the cost of unproved oil and gas properties, exceeds the present value of estimated future net cash flows discounted at 10 percent, net of related realizable tax affects, plus the cost of unproved oil and gas properties, the excess is charged to expense and reflected as additional accumulated DD&A. No impairment expense was recorded for the three months ended March 31, 2021 and 2020.

The ceiling test calculation uses a commodity price assumption which is based on the unweighted arithmetic average of the price on the first day of each month for each month within the prior 12-month period and excludes future cash outflows related to estimated abandonment costs.

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

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

Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.

~~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.

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

3.	~~SIGNIFICANT ACCOUNTING POLICIES~~ ~~- continued~~

Estimated interest and penalties related to potential underpayment on any unrecognized tax benefits are classified as a component of tax expense in the statements of operation. The Company has not recorded any interest or penalties associated with unrecognized tax benefits for any periods covered by these financial statements.

~~Share-based compensation~~ – Compensation cost for equity awards is based on the fair value of the equity instrument on the date of grant and is recognized over the period during which an employee is required to provide service in exchange for the award.

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

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

The Company also issues equity awards to non-employees. The fair value of these option awards is estimated when the award recipient completes the contracted professional services. The Company recognizes expense for the estimated total value of the awards during the period from their issuance until performance completion.

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

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

~~Revenues from oil and gas sales~~ ~~are detailed as follows:~~

Three Months Three Months
March 31, 2021 March 31, 2020
Revenues

Oil sales $ 1,166 $ 82,113

Gas sales 1,305 2,507

Total $ 2,471 $ 84,620

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

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

3.	~~SIGNIFICANT ACCOUNTING POLICIES~~~~- continued~~

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

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

~~Basic and diluted earnings (loss) per share~~ – Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed in the same way as basic earnings (loss) per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares had been issued and if the additional common shares were dilutive. The calculation of diluted earnings per share excludes ~~8,741,060~~ ~~shares issuable upon the exercise of outstanding warrants and options because their effect would be anti-dilutive.~~

~~Environmental laws and regulations~~ – The Company is subject to extensive federal, state, and local environmental laws and regulations. Environmental expenditures are expensed or capitalized depending on their future economic benefit. The Company believes that it is in compliance with existing laws and regulations. The Company accrued no liability as of March 31, 2021 and December 31, 2020.

~~Recently adopted accounting pronouncements~~ –

Effective January 1, 2021, we 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 as well as provides simplification by clarifying and amending existing guidance. The adoption of this ASU did not have a material impact on our consolidated financial statements.

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.

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.

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

~~Subsequent events~~ – ~~The Company evaluated subsequent events through~~ May ~~14, 2021, the date of issuance of these financial statements. Subsequent events are disclosed in Note 11.~~

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

4.	~~OIL & GAS PROPERTIES~~

~~The following table presents the~~ ~~capitalized costs for oil & gas properties~~ ~~of the Company as of March 31, 2021 and December 31, 2020:~~

March 31, 2021 December 31, 2020
Evaluated costs subject to amortization $ 15,656,182 $ 15,656,182
Unevaluated costs 31,441,701 30,857,959
Total capitalized costs 47,097,883 46,514,141
Less accumulated depreciation, depletion and amortization (15,656,182 ) (15,656,182 )
Total oil and gas properties $ 31,441,701 $ 30,857,959

~~Unevaluated costs as of March 31, 2021 include cumulative costs on developing projects including the Orogrande and Hazel projects in West Texas.~~

The Company periodically adjusts for the separation of evaluated versus unevaluated costs within its full cost pool to recognize any value impairment related to the expiration of, or changes in market value, of unevaluated leases. The impact of reclassifications as they become necessary is to increase the basis for calculation of future period’s depletion, depreciation and amortization which effectively recognizes any impairment on the consolidated statement of operations over future periods.

Reclassified costs also become evaluated costs for purposes of ceiling tests and which may cause recognition of increased impairment expense in future periods. The remaining cumulative unevaluated costs which have been reclassified within our full cost pool totals $~~5,881,635~~ ~~as of March 31, 2021 and December 31, 2020. As of March 31, 2021, evaluated costs are $-0- since we have no proved reserve value associated with our properties.~~

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

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

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

~~Current Projects~~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 we are ~~an energy company engaged~~waiting for additional information necessary to finalize these fair values including assessment of any tax assets and liabilities and tax position in different jurisdictions. Therefore, the provisional measurements of fair value are subject to change. We expect to complete the purchase price allocations as soon as practicable but no later than one year from the acquisition exploration, exploitation and/or development of oil and natural gas properties in the United States. We are primarily focused on the acquisition of early stage projects, the development and delineation of these projects, and then the monetization of those assets once these activities are completed.dates.

4. Related party transactions

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

Since 2010, our primary focus has been the development of interests in oil and gas projects we hold in the Permian Basin in West Texas. We also hold minor interests in certain other oil and gas projects in Central Oklahoma that we are in the process of divesting.5. Assets held for sale

As of March 31, 2022 and December 31, 2021, ~~we had interests in three~~assets held for sale represent the acquired oil and natural gas ~~projects:~~properties from the ~~Orogrande Project in Hudspeth County, Texas, the Hazel Project in Sterling, Tom Green, and Irion Counties, Texas, and two wells in Central Oklahoma.~~Torchlight RTO.

Orogrande Project, West Texas

~~On August 7, 2014, we entered into a Purchase Agreement with Hudspeth Oil Corporation (“Hudspeth”), McCabe Petroleum Corporation (“MPC”),~~Our outstanding drilling obligation includes 5 wells in 2022 and ~~Gregory McCabe, our Chairman. Mr. McCabe was the sole owner of both Hudspeth and MPC. Under the terms and conditions of the Purchase Agreement, we purchased~~ ~~100%~~ of the capital stock of Hudspeth which held certain oil and gas assets, including a 100% working interest in approximately 172,000 predominately contiguous acres in the Orogrande Basin in West Texas. Mr. McCabe has, at his option, a 10% working interest back-in after payout and a reversionary interest if drilling obligations are not met, all under the terms and conditions of a participation and development agreement among Hudspeth, MPC and Mr. McCabe. Mr. McCabe also holds a 4.5% overriding royalty interest in the Orogrande acreage, - which he obtained prior to, and was not a part of the August 2014 transaction. As of March 31, 2021, leases covering approximately 134,000 acres remain in effect.

~~We believe all~~2023. All drilling obligations through ~~March~~December 31, 2021 have been met.

Effective March 27, 2017, the property became subject to a DDU Agreement which allows for all 192 existing leases covering approximately 134,000 net acres leased from University Lands to be combined into one drilling and development unit for development purposes. The term of the DDU Agreement expires on December 31, 2023, and the time to drill on the drilling and development unit continues through December 2023. The DDU Agreement also grants the right to extend the DDU Agreement through December 2028 if compliance with the DDU Agreement is met and the extension fee associated with the additional time is paid.

~~Our drilling obligations include~~ 4 ~~wells in year 2020 and 2021 and~~ 5 ~~wells per year in years 2022, 2023 and 2024. We received a waiver of the requirement to develop four wells in 2020.~~ The drilling obligations are minimum yearly requirements and may be exceeded if acceleration is desired.

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

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

On July 25, 2018, we and Hudspeth entered into a Settlement & Purchase Agreement (the “Settlement Agreement”) with Founders (and Founders Oil & Gas Operating, LLC, former Operator), Wolfbone and MPC (entities controlled by our Chairman), which agreement provided for Founders assigning all of its working interest in the oil and gas leases of the Orogrande Project to Hudspeth and Wolfbone equally. Future well capital spending obligations remained the same 50% contribution from Hudspeth and 50% from Wolfbone until such time as the $40.5 million to be spent on the project. The Company estimates that there is still approximately $8.7 million remaining to be spent on the project until such time as the capital expenditures revert back to the percentages of the working interest owners.

~~The Company has drilled nine test wells~~During the three months ended March 31, 2022, we have incurred an additional $1.1 million in ~~the Orogrande in order~~cost to ~~stay in~~ensure that compliance with ~~University Lands D&D Unit Agreement, as well as, to test for potential shallow pay zones and deeper pay zones that may be present on structural plays. Development of~~ the wells continued through March 31, 2021 to further capture and document the scientific base in support of demonstrating the production potential of the property. The Company is currently marketing the project for an outright sale or farm in partner. This marketing process has been long and arduous as the overall market is quite soft. Due to the size and scope of the project, we are dealing with very large companies that have multitudes of people reviewing our material, which in itself is extensive. Should a farm out partner or sale not occur, the Company and Wolfbone will continue to drill additional wells in the play in order to fulfill the obligations under the DDU Agreement.relevant leases was maintained.

On March 9, 2020, holders of notes payable by the Company entered into a Conversion Agreement under which the noteholders elected to convert principal of $6,000,000 and approximately $1,331,000 of accrued interest on the notes, in accordance with their terms, into an aggregate 6% working interest (of all such holders) in the Orogrande Project.

The Orogrande Project ownership as of March 31, ~~2021~~2022 is detailed as follows:

Revenue Working
Interest Interest
University Lands - Mineral Owner 20.000 % n/a

ORRI - Magdalena Royalties, LLC, an entity controlled by Gregory McCabe, Chairman 4.500 % n/a

ORRI - Unrelated Party 0.500 % n/a

Hudspeth Oil Corporation, a subsidiary of Torchlight Energy Resources Inc. 49.875 % 66.500 %

Wolfbone Investments LLC, an entity controlled by Gregory McCabe, Chairman 18.750 % 25.000 %

Conversion by Note Holders in March, 2020 4.500 % 6.000 %

Unrelated Party 1.875 % 2.500 %
100.000 % 100.000 %


	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	%

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

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

Hazel Project in the Midland Basin in West Texas

As part of our review of the fair value of the 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 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 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 of March 31, 2022 is $NaN.

6. 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

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

Depreciation expense was $754,957 and $361,773 for the three months ended March 31, 2022, and March 31, 2021, respectively.

~~Effective April 4, 2016, TEI acquired from MPC~~Property, plant and equipment is pledged as security under a ~~66.66% working interest~~General Security Agreement (a “GSA”) signed in ~~approximately 12,000 acres in~~favor of the ~~Midland Basin. A back-in after payout~~Royal Bank of Canada (“RBC”) on July 14, 2014, which is related to 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

1 We were required to maintain a ~~25% working interest was retained by MPC~~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 ~~another unrelated working interest owner.~~for each period thereafter until the loan is fully repaid.

~~In October 2016,~~2 The carrying amount of the ~~holders~~ACOA AIF loan is reviewed each reporting period and adjusted as required to reflect management’s best estimate of ~~all of our then-outstanding shares of Series C Preferred Stock (which were issued in July 2016) elected to convert into a total 33.33% working~~future cash flows, discounted at the original effective interest ~~in our Hazel Project, reducing our ownership from 66.66% to a 33.33% working interest.~~rate.

~~Acquisition~~3 A portion of ~~Additional Interests~~the ACOA BDP 2018 loan was used to finance the acquisition and construction of manufacturing equipment resulting in ~~Hazel Project~~$425,872 was being recorded as deferred government assistance, which is being amortized over the useful life of 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 operations and comprehensive loss. As of March 31, 2022, the portion recorded as deferred government assistance is amortized in full.

9. Capital stock

Common stock

Authorized: 1,000,000,000 common shares, $0.001 par value.

All references to numbers of common 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 shares issued pre-Torchlight RTO have been multiplied by the 1.845 Torchlight conversion ratio.

•

The amounts of common shares issued pre-Torchlight RTO were calculated by multiplying the number of shares by 0.001 and the 1.845 Torchlight conversion ratio and the difference were recognized in additional paid in capital.

During the 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 shares.

Warrants

The following table summarizes the changes in 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

Broker warrants

The following table summarizes the changes in our broker 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 ~~January 30, 2017, we entered into~~December 3, 2021, our shareholders approved the 2021 Equity Incentive Plan to utilize the 3,500,000 shares reserved and ~~closed an Agreement~~unissued under the Torchlight 2015 Stock Option and Grant Plan of Reorganization and a Plan of Merger with an entity which was wholly-owned by Mr. McCabe, which resulted in the acquisition of approximately 40.66% working interest in the 12,000 gross acres, 9,600 net acres, in the Hazel Project.

Also, on January 30, 2017, the Company entered into and closed a Purchase and Sale Agreement with Wolfbone. Under the agreement, we acquired certain of Wolfbone’s Hazel Project assets, including its interest in the Flying B Ranch #1 well and the ~~40-acre unit surrounding~~6,445,745 shares reserved and unissued under the ~~well.~~MMI 2018 Stock Option and Grant plan to set the number of shares reserved for issuance under the 2021 Equity Incentive Plan at

34,945,745

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

Effective June 1, 2017, we acquired an additional 6% working interest from unrelated working interest owners increasing our working interest in the Hazel project to 80%, and an overall net revenue interest of 74-75%.shares.

The ~~Company has drilled six test wells on~~2021 Equity Incentive Plan allows the ~~Hazel Project~~grants of non-statutory stock options, restricted stock, restricted stock units ("RSUs"), stock appreciation rights, performance units and performance shares to ~~capture~~employees, directors, and ~~document the scientific base in support of demonstrating the production potential of the property.~~consultants.

~~Lease Modifications~~DSU Plan

In May 2019 we entered into agreements with two of the three mineral owners on the northern section of the leases to keep the entire acreage block as one lease with a one-year extension. We issued each of them 50,000 shares of our common stock as consideration for this extension. As of December 31, 2020, we have structured the extension agreement retroactively with the third mineral owner for cash consideration. Due to this extension, our obligation for 2019 reduced to one obligation well. We finished that obligation well targeting a shallow zone that showed oil potential. For the remainder of 2020 the Company must drill one well in June and two wells by the December 31, 2020. Development of the June well was initiated during June 2020. The December obligation was met under the terms of the Option Agreement. See below.

~~Option Agreement with Masterson Hazel Partners, LP~~

On ~~August 13, 2020,~~March 28, 2013, we implemented a Deferred Stock Unit (DSU) Plan for our ~~subsidiaries Torchlight Energy, Inc.~~directors, employees and ~~Torchlight Hazel, LLC (collectively, “Torchlight”) entered into an~~officers. Directors, employees and officers are granted DSUs with immediate vesting as a form of compensation. Each unit is convertible at the option agreement (the “Option Agreement”) with Masterson Hazel Partners, LP (“MHP”) and McCabe Petroleum Corporation. Under the agreement, MHP was obligated to drill and complete, or cause to be drilled and completed, at its sole cost and expense, a new lateral well (the “Well”) on our Hazel Project, sufficient to satisfy Torchlight’s continuous development obligations on the southern half of the ~~prospect~~holder into one common share. Eligible individuals are entitled to receive all DSUs (including dividends and other adjustments) no later than ~~September 30, 2020. MHP has satisfied this drilling obligation. MHP paid to Torchlight $1,000 as an option fee at~~December 1st of the first calendar year commencing after the time of ~~execution~~termination of the Option Agreement. MHP is entitled to receive, as its sole recourse for the recoupment of drilling costs, the revenue from production of the Well attributable to Torchlight’s interest until such time as it has recovered its reasonable costs and expenses for drilling, completing, and operating the well.their services.

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED~~)

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

In exchange for MHP satisfying the above drilling obligations, Torchlight granted to MHP the exclusive right and option to perform operations, at MHP’s sole cost and expense, on the Hazel Project sufficient to satisfy Torchlight’s continuous development obligations on the northern half of the prospect. Because MHP exercised this drilling option and satisfied the continuous development obligations on the northern half of the prospect, under the terms of the Option Agreement (as amended in September 2020 and in April 2021) MHP now has the option to purchase the entire Hazel Project no later than September 30, 2021; provided, however, that the Option Price increases by $500,000 on the first of every calendar month beginning on June 1, 2021, without proration, during the option period. Further, the option period will expire upon the occurrence of the earlier of following: (1) if MHP fails to, no later than 30 days prior to the date of any drilling obligation on the Hazel Project, deliver notice of intent to conduct operations sufficient to satisfy such obligation; or (2) if MHP fails to commence operations sufficient to satisfy any drilling obligation on the Hazel Project seven days prior to the deadline for satisfying the applicable drilling obligation.11

Such purchase would be under the terms of a form of Purchase and Sale Agreement included as an exhibit to the Option Agreement, at an aggregate purchase price of $12,690,704 (subject to additions as described above) for approximately 9,762 net mineral acres, and not less than 74% net revenue interest (approximately $1,300 per net mineral acre).

In the event MHP exercises its option to purchase the entire Hazel Project, McCabe Petroleum Corporation, which is owned by our chairman Gregory McCabe, has agreed to reduce its reversionary interest in the Hazel Project from 20% to not more than 12.5%.

~~Hunton Play, Central Oklahoma~~

~~Presently, we are producing from one well in the Viking Area of Mutual Interest and one well in Prairie Grove.~~

~~Assessment for Assets Held for Sale Classification~~

With respect to marketing oil and natural gas properties, the Company has evaluated the properties being marketed to determine whether any should be reclassified as held-for-sale at March 31, 2021. The held-for-sale criteria include: management commits to a plan to sell; the asset is available for immediate sale; an active program to locate a buyer exists; the sale of the asset is probable and expected to be completed within one year; the asset is being actively marketed for sale; and it is unlikely that significant changes to the plan will be made. If each of these criteria is met, the property would be reclassified as held-for-sale on the Company’s consolidated balance sheets and measured at the lower of their carrying amount or estimated fair value less costs to sell. Fair values are estimated using accepted valuation techniques, such as a discounted cash flow model, valuations performed by third parties, earnings multiples, or indicative bids, when available. Management considers historical experience and all available information at the time the estimates are made; however, the fair value that is ultimately realized upon the sale of the assets to be divested may differ from the estimated fair values reflected in the consolidated financial statements. If each of these criteria is met, DD&A expense would not be recorded on assets to be divested once they are classified as held for sale. Based on management’s assessment, certain criteria have not been met and no assets are classified as held for sale as of March 31, 2021.

5.	~~RELATED PARTY PAYABLES~~

As of March 31, ~~2021~~2022, there were 3,647,026 outstanding DSUs. There were 0 new DSUs issued, 0 DSUs exercised and ~~December~~0 DSUs expired during the three months ended March 31, ~~2020,~~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 ~~party payables were $~~to RSUs included in the condensed consolidated interim statements of operations was as follows:

~~45,000~~


	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

The following table summarizes the change in outstanding 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

~~and $~~

~~98,805~~Employee Stock Option Plan~~, respectively, due to our executive officers and directors. Accrued payroll was $-~~0~~- and $1,213,779, respectively, consisting of accrued and unpaid compensation due to our executive officers.~~

AsEach stock option is convertible at the option of the holder into one common share upon payment of exercise price.

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

The following table summarizes the change in our outstanding stock 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

Below is a summary of the outstanding options as of March 31, ~~2021~~2022 and December 31, ~~2020, there was $99,820~~ ~~and $92,320, respectively, for an account receivable due from McCabe Petroleum Corporation for amounts advanced related to the Orogrande development cost sharing agreement.~~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

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

6.
	~~COMMITMENTS AND CONTINGENCIES~~	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

~~Leases~~13

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 simplified method assumes that employees will exercise share options evenly between the period when the share options are vested and ending on the date when the options would expire.

The ~~Company~~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.

11. Income taxes

We estimate our annual effective income tax rate in recording 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.

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

Deferred tax recovery for the three months ended March 31, 2022 was $NaN (three months ended March 31, 2021 - $44,679).


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

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

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	)

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.

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

14. Fair value measurements

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 related parties and trade and other payables approximate their carrying values due to the short-term nature of these instruments. The current portion of long-term debt has been included in the below table.

The fair value of assets held for sale is classified at level 3 as the fair value of the O&G assets was estimated by obtaining a ~~month to month~~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 for the ~~occupancy~~fair value measurement of ~~its office premises subject to a sublease agreement through October~~the preferred stock liability as of March 31, ~~2021 for occupancy of its office premises which requires monthly rent payments of $3,512.~~2022.

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

~~COMMITMENTS AND CONTINGENCIES~~ ~~- continued~~

~~Legal Matters~~The fair values of the funding obligation, operating lease liabilities, and long-term debt would be classified at Level 3 in the fair value hierarchy, as each instrument is estimated based on unobservable inputs including discounted cash flows using the market rate, which is subject to similar risks and maturities with comparable financial instruments as at the reporting date.

Carrying values and fair values of financial instruments that are not carried at fair value are as follows:


	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.

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.

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	)

17. Leases

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

Burnaby lease expansion

On ~~January~~February 25, 2022, our subsidiary Nanotech entered into an agreement to amend its Burnaby lease ("expansion"), to expand the premises by an additional 1,994 square feet, commencing on June 1, 2022, for a period of two years and eleven months. The agreement provides the tenant with early access to the 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 consequently recognized a right-of-use asset and liability for the expansion as of March 31, 2020, Torchlight Energy Resources, Inc. and its wholly owned subsidiaries Torchlight Energy, Inc. and Torchlight Energy Operating, LLC were served with a lawsuit brought by Goldstone Holding Company, LLC (~~Goldstone Holding Company, LLC v. Torchlight Energy, Inc., et al.~~,2022, of $146,822.

Total operating lease expense included in the ~~160th Judicial District Court~~condensed consolidated interim statements of ~~Dallas County, Texas). On February 24, 2020, Torchlight Energy Resources, Inc., Torchlight Energy, Inc.,~~operations and ~~Torchlight Energy Operating, LLC timely filed their answer, affirmative defenses,~~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 requests for disclosure. The suit, which seeks monetary relief over $1 million, makes unspecified allegations of misrepresentations involving a November 2015 participation agreement and a 2016 amendment to the participation agreement. Torchlight has denied the allegations and has asserted several affirmative defenses including but not limited to, that the suit is barred by the applicable statute of limitations, that the claims have been released, and that the claims are barred because of contractual disclaimers between sophisticated parties. Torchlight has 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 feesinclude them as ~~the only pending claim~~short-term lease expense 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. However, Goldstone Holding Company, LLC asked the court to re-instate its claims,condensed consolidated interim statements of operations and a hearing was held on April 13, 2021. As of the date of this filing, the Court has not issued an order granting or denying Goldstone Holding Company, LLC’s request to re-instate its claims. If the court does reinstate the case, Torchlight intends to re-assert its attorney fees claim and to contest Goldstone’s claims.comprehensive loss.

Future minimum payments under non-cancelable operating lease obligations were as follows as of 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

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~~$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 ~~$104,500.01~~$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~~$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.

~~Environmental Matters~~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 ~~Company is subject to contingencies as~~letter of credit was secured by restricted cash of CA$1,000,000 under a result of environmental laws and regulations. Present and future environmental laws and regulations applicable to the Company’s operations could require substantial capital expenditures or could adversely affect its operations in other ways that cannot be predicted at this time. As of March 31, 2021, and December 31, 2020, no amounts hadcash use agreement which has been recorded ~~because no specific liability has been identified that is reasonably probable of requiring~~as long-term debt in the ~~Company to fund any future material amounts.~~

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

~~STOCKHOLDERS’ EQUITY~~

~~Common Stock~~

~~On January 13, 2021,~~consolidated balance sheets. We have assessed the ~~Company sold~~ ~~300,000~~ ~~shares of common stock for cash at $0.80~~ ~~per share for total proceeds of $240,000~~performance milestones against ASC 606 and recognized the full contract amount as development revenue in ~~a private placement.~~

~~On February 10, 2021 the Company closed its underwritten public offering of~~ ~~23,000,000~~ ~~shares of its common stock at a public offering price of $1.20~~ ~~per share, for total proceeds of $25,689,649~~ ~~after deducting underwriting discounts and other offering expenses payable by the Company.~~

~~On February 16, 2021, the Company issued~~ ~~186,329~~ ~~shares of common stock in satisfaction of the payment in kind valued at $248,479~~ ~~in connection with the final conversion into common stock of the promissory notes previously held by the Straz Foundation and the Straz Trust (see Note 9 below).~~

~~During the three months ended March 31, 2021, the Company issued~~ ~~25,000~~ ~~shares of common stock with a fair value of $34,250~~ ~~as compensation for services.~~

~~During the three months ended March 31, 2021, the Company issued~~ ~~16,725,797~~ ~~shares of common stock to promissory note holders with a fair value of $17,183,624~~ ~~in conversion of principal and accrued interest on notes payable.~~

~~Warrants and Options~~

~~During the three months ended March 31, 2021, the Company issued 1,803,277 shares of common stock in warrant and option exercises.~~

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

~~STOCKHOLDERS’ EQUITY~~ ~~- continued~~

A ~~summary of warrants outstanding~~ ~~as of March 31, 2021 by exercise price and year of expiration is presented below:~~

Exercise Expiration Date in
Price 2021 2022 2023 2024 2025 Total

$ 0.425 - - - - 10,760 10,760
$ 0.70 - - - - 965,000 965,000
$ 0.80 - - - - 1,666,667 1,666,667
$ 1.03 120,000 - - - - 120,000
$ 1.14 - - 600,000 - - 600,000
$ 1.21 - - 120,000 - - 120,000
$ 1.63 - - - 100,000 - 100,000

120,000 - 720,000 100,000 2,642,427 3,582,427

A ~~summary of stock options outstanding~~ ~~as of March 31, 2021 by exercise price and year of expiration is presented below:~~

Exercise Expiration Date in
Price 2021 2022 2023 2024 2025 Total

$ 0.50 - - - - 750,000 750,000
$ 1.00 - - - - 2,250,000 2,250,000
$ 0.85 - - - 600,000 - 600,000
$ 0.97 129,871 - - - - 129,871
$ 1.10 - 600,000 - - - 600,000
$ 1.19 - - 700,000 - - 700,000
$ 1.63 - 58,026 - - - 58,026
129,871 658,026 700,000 600,000 3,000,000 5,087,897

~~At March 31, 2021, the Company had reserved~~ ~~8,670,324~~ ~~common shares for future exercise of warrants and options.~~

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

~~STOCKHOLDERS’ EQUITY~~ ~~- continued~~

~~Warrants and options granted were valued using the Black-Scholes Option Pricing Model.~~ ~~The assumptions used in calculating the fair value of the warrants and options issued~~ ~~during~~ 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.

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 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 ~~as follows:~~$

NaN

~~No warrants or options were issued~~ during the three months ended March 31, ~~2021.~~2022 (2021 - $296). In 2014,

~~2020~~ our wholly owned subsidiary, Nanotech, prepaid royalties that would offset against future royalties owed as part of the transfer of the intellectual property from SFU, of which $197,016

~~Risk-free interest rate~~		~~.13%~~ - ~~1.61%~~
~~Expected volatility of common stock~~		~~90%~~ - ~~205%~~
~~Dividend yield~~		~~0.00%~~
~~Discount due to lack of marketability~~		~~20%~~
~~Expected life of option/warrant~~		~~Three Years~~ to ~~Five Years~~

~~INCOME TAXES~~

~~The Company recorded no income tax provision~~remains prepaid as at March 31, 2022 (December 31, 2021 - $197, 016).

~~Promissory Notes Issued in 2017~~19. Subsequent events

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

On April ~~10, 2017, we sold two 12% unsecured promissory notes with a total of $8,000,000~~ ~~in principal amount to David A. Straz, Jr. Foundation (the “Straz Foundation”) and the David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986 (the “Straz Trust”)~~5, 2022, Meta Materials Inc. acquired Plasma App Ltd. in a ~~private transaction. Interest only~~stock for stock transaction valued at $20 million. Plasma App Ltd. is ~~due and payable~~the developer of PLASMAfusion™, a first of its kind, proprietary manufacturing platform technology, which enables high speed coating of any solid material on ~~the notes each month~~any type of substrate. Plasma App Ltd.’s team is located at the ~~rate of~~ ~~12%~~ ~~per annum, with a balloon payment of the outstanding principal due and payable at maturity on~~ ~~April 10, 2020~~. The holders of the notes will also receive annual payments of common stock at the rate of 2.5% of principal amount outstanding, based on a volume-weighted average price. Both notes were sold at an original issue discount of 94.25% and accordingly, we received total proceeds of $~~7,540,000~~ from the investors. We used the proceeds for working capital and general corporate purposes, which includes, without limitation, drilling capital, lease acquisition capital and repayment of prior debt. The notes were amendedRutherford Appleton Laboratories in ~~April 2020 to, among other thing, extend the maturity date to April 10, 2021 and provide conversion rights at a conversion price of $1.50 per share of common stock.~~ Oxford, UK.

During the quarter ended March 31, 2021 the notes were retired in full by conversion into the Company’s common stock. Unamortized debt issuance cost related to these notes of $80,040 was transferred to Additional Paid in Capital.

~~Promissory Notes Issued in 2018~~

~~On February 6, 2018, we sold~~Due to the ~~Straz Trust in a private transaction a 12% unsecured promissory note with a principal amount~~timing of $~~4,500,000. Interest only was due and payable on the note each month at the rate of 12% per annum, with a balloon payment of the outstanding principal due and payable at maturity on~~ ~~April 10, 2020~~. The holder of the note will also receive annual payments of common stock at the rate of 2.5% of principal amount outstanding, based on a volume-weighted average price. We sold the note at an original issue discount of 96.27% and accordingly, we received total proceeds of $~~4,332,150~~ from the investor. We used the proceeds for working capital and general corporate purposes, which includes, without limitation, drilling capital, lease acquisition capital and repayment of prior debt. The note was amended in April 2020 to, among other thing, extend the maturity date to April 10, 2021 and provide conversion rights at a conversion price of $1.50 per share of common stock.

~~During the quarter ended March 31, 2021 the note was retired in full by conversion into the Company’s common stock.~~

~~Convertible Notes Issued in October 2018~~

~~On October 17, 2018, we sold to certain investors in a private transaction 16% Series C Unsecured Convertible Promissory Notes with a total principal amount of $6,000,000. Interest and principal were due and payable on the notes in one balloon payment at maturity on~~ ~~April 17, 2020~~. The notes were convertible, at the election of the holders, into an aggregate 6% working interest in certain oil and gas leases in Hudspeth County, Texas, known as our “Orogrande Project.” After an analysis ofwhen the transaction ~~and a review of applicable~~closed, there remains insufficient information available to management to be able to complete the initial accounting pronouncements, management concluded that the notes issued on October 17, 2018 which contain a conversion right for holders to convert into a working interest in the Orogrande Project of the Company, meet a specific scope exception to the provisions requiring derivative accounting.

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

~~PROMISSORY NOTES~~ ~~- continued~~

On March 9, 2020, each of the noteholders entered into a Conversion Agreement with us and our subsidiary Hudspeth Oil Corporation (“Hudspeth”), under which the noteholders elected to convert the notes, in accordance with their terms, into an aggregate 6% working interest (of all such holders) in certain oil and gas leases in Hudspeth County, Texas, known as our “Orogrande Project.” Principal of $6,000,000 and approximately $1,331,000 of accrued interest were converted at March 9, 2020 to retire the notes in full.

The Conversion Agreements also provided additional consideration to the noteholders including a limited carry, a top-off obligation of us and Hudspeth, and warrants to purchase a total of 750,000 restricted shares of our common stock, which warrants will have a term of five years and an exercise price of $0.70 per share. The limited carry provides that for the remainder of the 2020 calendar year, Hudspeth will pay all costs and expenses attributable to the assigned working interests, except where prohibited by law or regulation. The top-off obligation provides that, subject to the terms and conditions of the Conversion Agreements, if (a) we sell our entire working interest in the Orogrande Project, (b) as part of such sale, the holder’s entire working interests are sold, and (c) the gross proceeds received by all the holders in such transaction are equal to less than $9,000,000; then we must pay the holders an amount equal to $9,000,000, (i) less gross proceeds the holders received in the transaction, (ii) less the amount of the carry the holders received under the Conversion Agreements, and (iii) less any gross proceeds the holders received in any farmouts occurring prior to the transaction.

~~The transaction was treated as an extinguishment of debt. The fair value of the working interest transferred in the conversion of the debt was $8,778,000~~ ~~and the value of warrants issued to the holders was $382,500. The Company recognized a Loss on extinguishment of debt in the amount of $1,829,651 for the three months ended March 31, 2020.~~

~~Convertible Notes Issued in First Quarter 2019~~

~~On February 11, 2019 the Company raised a total of $2,000,000~~ ~~from investors through the sale of two 14% Series D Unsecured Convertible Promissory Notes. Principal was payable in a lump sum at maturity on~~ ~~May 11, 2020with payments of interest payable monthly at the rate of~~ ~~14%~~ ~~per annum. Holders of the notes have the right to convert principal and interest at any time into common stock at a conversion price of $1.08~~ ~~per share. The Company has the right to redeem the notes at any time, provided that the redemption amount must include all interest that would have been earned through maturity.~~

On April 21, 2020, Torchlight Energy Resources, Inc. entered into agreements to amend the two 14% Series D Unsecured Convertible Promissory Notes that were originally issued on February 11, 2019. Under the amendment agreements, (a) the maturity dates were extended from May 11, 2020 to ~~November 11, 2021, (b) the conversion price under which the noteholders may convert into our common stock was changed from $1.08 to $0.43~~, and (c) the noteholders were provided the right, at each noteholder’s election, to convert their notes into either (i) a working interest in the Orogrande Project at the rate of one acre per $1,100 of principal and unpaid interest converted, or (ii) a working interest in the Hazel Project at the rate of one acre per $1,300 of principal and unpaid interest converted; provided, that the noteholders’ right to convert into either such working interest is subject to approval of the collateral agent of the Note Amendment Agreement with the Straz parties. Under the note amendments, the noteholders agreed to forebear demand or collection on all interest payments due and payable under the Note, including any past due interest payments, for 20 days after the execution of the Note Amendment Agreement. Further, we agreed to (a) issue each holder 20,000 restricted shares of common stock immediately and (b) pay each holder a fee of $10,000, at the same time as the payment of past due interest is paid. The past due interest and fee was paid.

During the quarter ended December 31, 2020, $1,000,000 was converted into common stock. During the quarter ended March 31, 2021 the remaining balance of the notes was retired in full by conversion into the Company’s common stock.

~~TORCHLIGHT ENERGY RESOURCES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~~~(UNAUDITED)~~

~~PROMISSORY NOTES~~ ~~- continued~~

~~Convertible Notes Issued in Third Quarter 2019~~

~~In July 2019, the Company issued 8% Unsecured Convertible Promissory Notes in the amount of $2,010,000~~ ~~together with warrants to purchase our common stock. Principal and~~ 8% ~~interest are due at maturity on~~ ~~May 21, 2021. The principal and accrued interest on the notes are convertible into shares of common stock at $1.10~~ per common share at any time after the original issue date. Along with the notes, the three year warrants equal to 20% of the number of shares of common stock issuable upon the conversion of the notes were issued to note holders. The warrants are exercisable at $~~1.35~~ ~~per share.~~

During the quarter ended March 31, 2021 the notes were retired in full by conversion into the Company’s common stock. Unamortized debt issuance costs related to these notes of $505,957 was transferred to interest expense.

~~Paycheck Protection Program Loan~~

In response to the COVID-19 pandemic, the U.S. Small Business Administration (the “SBA”) made available low-interest rate loans to qualified small businesses, including under its Paycheck Protection Program (the “PPP”). On April 10, 2020, in order to supplement its cash balance, the Company submitted an application for a loan (“SBA loan”) in the amount of $~~77,477. On May 1, 2020, Company’s SBA loan application was approved, and the Company received the loan proceeds. The SBA loan had an interest rate of~~ ~~0.98%~~ ~~with a maturity date of April 2022.~~

Section 1106 of the CARES Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the PPP. The PPP and loan forgiveness are intended to provide economic relief to small businesses, such as the Company, that are adversely impacted under the COVID-19 Emergency Declaration issued by President Trump on March 13, 2020. On March 31, 2021, the U.S Small Business Administration notified the Company that the Company’s PPP loan was forgiven in full, including all principal and interest outstanding as of the date of forgivenessbusiness combination, and as such, ~~$77,477~~the provisional purchase price allocation has not been ~~recognized as an other income on the Company’s consolidated statement of operations.~~disclosed.

On September 18, 2020, McCabe Petroleum Corporation, a company owned by our chairman Gregory McCabe (“MPC”), loaned us $1,500,000, evidenced by a 6% Secured Convertible Promissory Note (the “MPC Note”). The note bore interest at the rate of 6% per annum and provided for payment of the principal amount along with all accrued and unpaid interest in one lump sum payment on its maturity date of May 10, 2021. In connection with the proposed business combination transaction with Metamaterial Inc. (“Metamaterial”), the note provided the following requirements on the use of proceeds of the loan as follows: (i) we will lend $500,000 to Metamaterial pursuant to an 8% Unsecured Convertible Promissory Note (the “Metamaterial Note”); (ii) we will retain and use $500,000 for general corporate purposes, including without limitation, expenses incurred by us in connection with the proposed business combination transaction; and (iii) we will deposit $500,000 into an escrow account, to be held in escrow. Under the terms of the note, the $500,000 from this escrow account was released to us, and we lent this amount to Metamaterial pursuant to another convertible promissory note (the “Second Metamaterial Note”).

The MPC Note was secured by our pledge of the Metamaterial Note and the Second Metamaterial Note. The MPC Note also provided that if (i) we and Metamaterial do not enter into a definitive agreement by the later of November 30, 2020 or such later date that is agreed to in writing, or (ii) we and Metamaterial enter into a definitive agreement but the proposed transaction is terminated prior to closing or otherwise does not close by the maturity date of the MPC Note, then at such time and until the maturity date, MPC will have the right, at its option, to convert up to $500,000 of the remaining principal amount of the MPC Note, plus all unpaid interest accrued under the MPC Note, into shares of our common stock at a conversion price of $0.375 per share. Additionally, if the proposed transaction with Metamaterial closes, all principal and interest under the MPC Note will automatically convert into shares of our common stock at $0.375 per share. On January 29, 2021, we and MPC agreed to amend the MPC note to allow MPC to convert at any time, including prior to closing of the Metamaterial transaction.

In addition, Greg McCabe loaned the Company $100,000 on December 30, 2020. The Company evaluated the notes for a beneficial conversion feature (“BCF”) and derivative accounting criteria and concluded that there was no BCF or derivative accounting treatment applicable.

~~During the quarter ended March 31, 2021 both the MPC Note and the $100,000 note were retired in full by conversion into the Company’s common stock.~~

On September 20, 2020, we loaned Metamaterial $500,000, evidenced by an 8% Unsecured Convertible Promissory Note. An additional $500,000 was loaned on December 16, 2020. The notes bear interest at the rate of 8% per annum and provide for payment of the principal amount along with all accrued and unpaid interest in one lump sum payment on its maturity date of September 20, 2022. Metamaterial has the right to redeem after 120 days. The notes are convertible at the price of $0.35 (CAD) per share at the option of the holder if the Arrangement Agreement with Metamaterial is terminated or expires without closing.

On February 18, 2021, Torchlight loaned to Meta $10,000,000, evidenced by a convertible promissory note issued by Meta (the “Promissory Note”), to satisfy Torchlight’s requirement to provide additional bridge financing to Meta pursuant to the Arrangement Agreement. The Promissory Note is unsecured and bears interest at a rate of 8% per annum. The outstanding principal amount, all accrued and unpaid interest, and all other amounts accrued under the Promissory Note will be due and payable in one lump sum payment on February 18, 2022 (the “Maturity Date”). On or after June 18, 2021, the outstanding principal amount of the Promissory Note, in whole or in part, plus any accrued and unpaid interest, may be repaid at the option of Meta at any time upon not less than 10 nor more than 30 days written notice to Torchlight. If the Arrangement Agreement is terminated or expires without the completion of the Arrangement, Torchlight will have the right to convert all or any portion of the principal amount and any accrued but unpaid interest under the Promissory Note into Common Shares at a conversion price of CAD$2.80 per Common Share (subject to adjustment as described in the Promissory Note). Further, if the Arrangement is not completed, Meta will be obligated to repay to Torchlight the total unpaid balance of the principal and interest under the Promissory Note, to the extent not converted into Common Shares, on the Maturity Date.

~~The Company evaluated the notes for a beneficial conversion feature (“BCF”) and derivative accounting criteria and concluded that there was no BCF or derivative accounting treatment applicable.~~

~~The following is a~~ ~~reconciliation of the asset retirement obligations liability~~ ~~through March 31, 2021:~~

~~In May 2021 the company issued~~ ~~250,000~~ ~~shares of common stock in exercise of warrants.~~

~~ITEM~~Item 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~We are engaged in the acquisition, exploration, exploitation, and/or development of oil~~Management’s Discussion and ~~natural gas properties in the United States, principally in West Texas.~~

The West Texas properties demonstrate significant potential and future production capabilities based upon the analysis of scientific data being gathered in the day by day development activity. Therefore, the Board has determined to focus its efforts and capital on these projects to maximize shareholder value for the long run.

During 2019 and 2020 the Company continued development in the Orogrande Project. Additional development of test wells was continued to capture additional science data to support lease value. Our Warwink project was sold in 2020 and an Option Agreement was executed in 2020 for the proposed sale of our Hazel project.

In August 2020, our subsidiaries entered into an option agreement with a third party (which was amended in September 2020 and in April 2021), under which, in exchange for satisfying certain drilling obligations, the third party will have the option to purchase the entire Hazel Project by a date no later than September 30, 2021.

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

~~On December 14, 2020, we and our newly formed subsidiaries, Metamaterial Exchangeco Inc.~~Analysis (“~~Canco”~~MD&A”) and 2798831 Ontario Inc. (“Callco”), both Ontario corporations, entered into an arrangement agreement (the “Arrangement Agreement”) with Metamaterial Inc., an Ontario corporation headquartered in Nova Scotia, Canada (“Meta”). Under the Arrangement Agreement, Canco is to acquire all of the ~~outstanding common shares of Meta by way of a statutory plan of arrangement under the~~ ~~Business Corporations Act~~ (Ontario) (the “Arrangement”), on and subject to the terms and conditions of the Arrangement Agreement. The Arrangement Agreement was amended on February 3, 2021, March 11, 2020, March 31, 2021, April 15, 2021 and May 2, 2021.

On May 7, 2021, we filed a definitive proxy statement for the special meeting of the stockholders (the “Stockholder Meeting”) in connection with the Arrangement. The record date of stockholders entitled to vote is May 5, 2021 and the meeting date is June 11, 2021 (the meeting will be virtual). The Arrangement is expected to close in the first half of 2021.

~~The following discussion of our~~ financial condition and results of the operations of Meta Materials Inc. (also referred to herein as the “Company”, “META”, “we”, “us”, “our”, or “Resulting Issuer”) constitutes management’s review of the factors that affected our financial and operating performance for the three months ended 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 ~~our unaudited~~the consolidated financial statements ~~included herewith~~and notes thereto for the year ended December 31, 2021 which are contained in Form 10-K/A filed with the Securities and Exchange Commission on May 2, 2022. All financial information is stated in U.S. dollars unless otherwise specified. 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 us and our ~~audited~~operations can be obtained from the offices of META, from the 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 referred to herein as “forward- looking statements”). These statements relate to future events or 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 statements in this MD&A speak only as of the date of this MD&A or as of the date specified in such statements.

Although we believe that the plans, intentions and expectations reflected in this forward-looking information are reasonable, 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 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 our actual results, performance or achievements to be materially different from any of our future results, performance or achievements expressed or implied by 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. We undertake no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If 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.

Meta Materials Inc. (also referred to herein as the “Company”, “META”, “we”, “us”, “our”, or “Resulting Issuer”) is a developer of high-performance functional materials and nanocomposites. Our registered office is located at 85 Swanson Road, Boxborough, Massachusetts 01719, and our principal executive office is located at 1 Research Drive, Halifax, Nova Scotia, Canada.

We have 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. Our platform technology includes holography, lithography, and medical wireless sensing. The underlying approach that powers 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. 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 radio waves have played key roles in technological advancements throughout history. Advances in electrical and electromagnetic technologies, wireless communications, lasers, and computers have all been made possible by challenging the understanding of how light and other types of energy naturally behave, and how it is possible to manipulate them.

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

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

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

Holography is a technique where collimated visible wavelength lasers are used to directly write an interference pattern inside the volume of light-sensitive material (photopolymer) in order to produce highly transparent optical filters and holographic optical elements. For some product lines that require large surface areas, this is combined with a proprietary scanning technique, where the lasers, optically or mechanically, directly write nano-patterns to cover large surface areas with nanometer accuracy.

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

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

Lithography is a process commonly used in the fabrication of integrated circuits, in which a light-sensitive polymer (photoresist), is exposed and developed to form 3D relief images on the substrate, typically a silicon wafer of up to 300mm (11.8 inches) in diameter. In order to meet the performance, fabrication-speed, and/or cost criteria required for many potential applications that require large area and low cost nanopatterning, 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. We designed these master patterns and over the years, they have become part of a growing library of patterns, enriching our intellectual property (“IP”). The nanostructured pattern on the mask is then rolled over a flat surface area writing a nano-pattern into the volume of a photoresist, creating patterned grooves, metal is then evaporated and fills the patterned grooves. The excess metal is then removed by a known post-process called lift-off. The result is an invisible conductive metal mesh-patterned surface (registered trademark NANOWEB®) that can be fabricated onto any glass or plastic transparent surface in order to offer high transparency, high conductivity and low haze smart materials.

Our current principal prototype product in lithography technology is our transparent conductive film, NANOWEB®. The lithography division operates out of our wholly owned U.S. subsidiary, Metamaterial Technologies USA Inc. ("MTI US"). MTI US can produce meter-long samples of NANOWEB®, at a small volumes scale, for industry customers/partners. Throughout 2020 and 2021, 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:

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

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:

Our Wireless Sensing platform 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 Ratio (“SNR”) of certain diagnostic instruments used in conjunction with the platform. This reflection-cancelling requirement is 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, we are developing metaSURFACE™ (also known as radiWISE™) an innovation which allows an improvement in signal to noise ratio of up to 40 times for MRI scans. The metaSURFACE™ device consists of proprietary non-ferrous metallic and dielectric layers that are exactingly designed to interact (resonate) with radio waves increasing the SNR. We are also researching the use of our Radio Wave Imaging technology in breast cancer and stroke diagnosis.

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

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

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, ~~2020. This discussion should not~~2021 and Item 1A, risk Factors in Form 10-K/A filed with the Securities and Exchange Commission on May 2, 2022.

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, ~~construed~~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 imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment bymonetizing our ~~management.~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~~~- continued~~intellectual property assets.

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, ~~2021~~2022. Product sales include products, components, and ~~2020:~~samples sold to multiple customers.

~~For the three months ended March 31, 2021, we had production~~The increase in development revenue ~~of $2,471 compared to $84,620~~ for the three months ended March 31, ~~2020. Refer~~2022 of $2.2 million is due to an increase in contract revenue of $2,297,648 and decrease in other development revenue of $65,336. The increase in contract revenue is primarily due to revenue generated by Nanotech from contract services subsequent to its acquisition by the Company. Nanotech currently derives a significant portion of its revenue from contract services with a confidential G10 central bank. In 2021, Nanotech entered into a development contract for up to $41.5 million over a period of up to five years. These contract services incorporate both nano-optic and optical thin film technologies and are focused on developing authentication features for future banknotes.

The increase in cost of goods sold in 2022 compared to 2021, is primarily due to the ~~table~~production costs of ~~production and~~$727,835 from Nanotech pertaining to contract revenue ~~presented below for quarterly changes in revenue. Our cost of revenue, consisting of lease operating~~during the period.

Operating expenses ~~and production taxes, was $14,492 and $67,858 for the three months ended March 31, 2021 and 2020, respectively.~~

~~We recorded depreciation, depletion,~~The increase in selling and ~~amortization expense of $421 for the three months ended March 31, 2021 compared to $447,405 for the three months ended March 31, 2020.~~

~~Our general and administrative~~marketing expenses for the three months ended March 31, 2022, compared to the same period of 2021, is primarily due to:

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

•

$4.2 million increase in professional fees mainly due to legal costs associated with the pending SEC investigation, ongoing lawsuits as ~~follows:~~

Increase(decrease) in non cash stock and warrant compensation $ (196,400 )
Increase(decrease) in consulting expense 73,600
Increase(decrease) in investor relations (59,210 )
Increase(decrease) in travel expense (18,312 )
Increase(decrease) in salaries and compensation 68,745
Increase(decrease) in legal fees 662,133
Increase(decrease) in insurance (1,176 )
Increase(decrease) in rent (236 )
Increase(decrease) in accounting and audit fees 46,345
Increase(decrease) in general corporate expenses 99,692

Total Increase in General and Administrative Expenses $ 675,181

well as other consulting fees.

•

$3.2 million increase in share-based compensation mainly in relation to the quarterly vesting cost of RSUs and 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 1) Our continuous growth and 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 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 due to the lease expansion of our Highfield Park 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.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~~~- continued~~

~~Liquidity~~The increase in research and ~~Capital Resources~~

~~At March 31, 2021, we had working capital of $22,846,631 and total assets of $56,014,724. Stockholders’ equity was $55,303,071.~~

~~Cash flows from operating activities~~development expenses for the three months ended March 31, ~~2021 was $(3,536,713)~~2022, compared to ~~$(321,342)~~the same period of 2021, is primarily due to:

•

$1.1 million increase in salaries and benefits primarily due to the expansion of headcount through Nanotech acquisition.

•

$0.4 million increase in share-based compensation mainly in relation to the quarterly vesting cost of RSUs and stock options granted during Q1 2022.

•

$0.3 increase in rent and utilities primarily due to leases acquired during 2021 and 2022 in Canada, USA and Greece.

Other expense


	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 $0.3 million decrease in net interest expense for the three months ended March 31, ~~2020, a decrease~~2022, compared to the same period of ~~$ 3,215,732. Cash flows from operating activities~~2021, is primarily due to reduced interest accretions in Q1 2022 due to all of the convertible debt instruments being converted to common stock in Q1 2021, except Torchlight promissory notes which were eliminated June 30, 2021, subsequent to completion of the Torchlight RTO.

The change in net loss/gain on foreign exchange for the three months ended March 31, 2022, compared to the same period of 2021, ~~can~~is primarily driven by revaluations of intercompany balances in different currencies, mainly Canadian dollars and US dollars.

The $40 million loss on financial statements in Q1 2021 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 in Q1 2021. This significant increase in the fair value of the convertible financial liabilities is due to the significant increase of our stock price from CA$0.66 as at December 31, 2020 to:

•

CA$3.01 on February 16, 2021 when 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 on February 16, 2021 when 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 on March 3, 2021 when 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.

Deferred Tax recovery


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

We record deferred income tax liabilities for some of our foreign operations in Canada and United Kingdom. There were no income tax recovery or expense recorded in Q1 2022 due to the valuation allowance.

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

LIQUIDITY AND CAPITAL RESOURCES

Liquidity risk is the risk that we will not meet our financial obligations as they become due after use of currently available cash. 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, our ability to generate revenue from ~~operations~~current and prospective customers, general and administrative requirements and the availability of ~~$2,055,688, a decrease~~equity or debt capital and government funding. As these variables change, we may be required to issue equity or obtain debt financing.

On March 31, 2022, we had cash and cash equivalents of $30.2 million including $0.5 million in ~~accounts payable~~restricted cash compared to $47.4 million in cash and ~~accrued expenses and other noncash expense adjustments. Cash flows from operating activities for~~cash equivalents at December 31, 2021.

During the three months ended March 31, ~~2020 can be primarily attributed to net loss from operations~~2022, our primary uses of ~~$3,693,863, depreciation~~liquidity included salaries of $5 million, professional fees of $5.7 million, rent and ~~depletion~~utilities of ~~$447,405, a loss on extinguishment~~$1 million and, Oil and Gas drilling costs of ~~debt~~$1.1 million as well as settling trade and other payables of $1,829,651 and changes in other noncash expense adjustments. Reference the Consolidated Statements of Cash Flows for additional detail of the components that comprise the net use of cash in operations. We expect to continue to use cash flow in operating activities until such time as we achieve sufficient commercial oil and gas production to cover all of our cash costs.$5.1 million.

~~Cash~~We believe that our existing cash will be sufficient to meet our working capital and capital expenditure needs as production capacity begins to come online. We may need to raise additional capital to expand the commercialization of our products, fund our operations and further our research and development activities. Future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the capital expansion of our facilities in Halifax and California and the ongoing investments to support the growth of our business.

We also have the option to raise equity through issuing common stock of up to approximately $112.5 million under an existing At-The-Market equity program where 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 our cash flows ~~from investing~~for the periods 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 three months ended March 31, 2022, net cash used in operating activities of $18.8 million was primarily driven by $18.4 million of net loss reported for the period, and non-cash adjustments of $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 $2.4 million was ~~$(10,689,022) compared~~primarily driven by $44.2 million of net loss reported for the period, and non-cash adjustments of $41.7 million related to ~~$(2,212,852) for~~fair value losses on financial instruments, depreciation and amortization, interest expense and stock-based compensation. In addition, there was $0.1 million cash used in working capital.

Net cash provided by (used in) investing activities

During the three months ended March 31, ~~2020. Cash flows from~~2022, net cash provided by investing activities ~~principally consists~~ of ~~investment~~$1.1 million was primarily driven by 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 ~~oil and gas properties~~Canada as well as the equipment purchases for our facility in ~~Texas and an increase of $10,109,589 in convertible notes receivable.~~California, United States.

~~Cash flows from financing activities for~~During the three months ended March 31, 2021, net cash used in investing activities of $1.6 million was ~~$27,248,988 as compared to $2,527,118~~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, ~~2020. Cash flows from financing activities consists of proceeds from issuance of our common stock and proceeds from exercise of warrants into common stock. We expect to continue to have~~2022, net cash ~~flow~~ provided by financing activities ~~as we seek new rounds~~ of ~~financing~~$0.3 million was primarily driven by proceeds from options and ~~continue to develop our oil and gas investments.~~warrants conversion.

During the three months ended March 31, 2021, net cash provided by financing activities of $15.4 million was primarily driven by proceeds from unsecured promissory notes of $14 million, proceeds from long-term debt of $1.1 million as well as proceeds from government grants of $0.2 million.

~~We will require additional debt or equity financing to meet our plans~~Commitments and needs. We face obstacles in continuing to attract new financing due to industry conditions and our history and current record of net losses. Despite our efforts, we can provide no assurance that we will be able to obtain the financing required to meet our stated objectives or even to continue as a going concern.contractual obligations

For a description of our commitments and contractual obligations, please 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 $0.8 million as of March 31, 2022. These letters of credit and bank guarantees are collateralized by $0.5 million in restricted cash. Please see “Note 18 – Commitments and contingencies” in the Notes to the Consolidated Financial Statements of this Form 10-Q. We do not ~~expect to pay cash dividends~~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 ~~common stock~~condensed consolidated interim financial statements, please see “Note 2—Significant accounting policies” in the ~~foreseeable future.~~Notes to Condensed Consolidated Interim Financial Statements of this Form 10-Q.

~~Commitments and Contingencies-~~

~~Leases~~

The Company is a subtenant on a month to month basis for the occupancy of its office premises subject to a sublease agreement through October 31, 2021 for occupancy of its office premises which requires monthly rent payments of $3,512.

~~Environmental Matters~~

We are subject to contingencies as a result of environmental laws and regulations. Present and future environmental laws and regulations applicable to our operations could require substantial capital expenditures or could adversely affect our operations in other ways that cannot be predicted at this time. As of March 31, 2021, and December 31, 2020, no amounts have been recorded because no specific liability has been identified that is reasonably probable of requiring us to fund any future material amounts.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~For financial 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 risk has not changed materially since December 31, 2021.

~~Not Applicable~~

Item 4. Controls and Procedures~~ITEM 4. CONTROLS AND PROCEDURES~~

Evaluation of Disclosure Controls and Procedures

~~Disclosure Controls and Procedures~~

~~Under the supervision and~~Management, with the participation of ~~our management, including our~~the Chief Executive Officer ~~(principal executive officer)~~ and Chief Financial Officer, ~~(principal financial officer), we~~has evaluated the effectiveness ~~of the design and operation~~ of our disclosure controls and procedures as(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange ~~Act,~~Act) as of March 31, ~~2021.~~ 2022.

Based 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 in Securities Exchange Act Rule 13a‑15(f). Our internal control over financial reporting is a process designed by and under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, ~~concluded that~~and effected by our ~~disclosure controls~~management and ~~procedures were effective~~other personnel, to ~~ensure that~~provide reasonable assurance regarding the ~~information required to be disclosed by us~~reliability of financial reporting and the preparation of consolidated financial statements for external purposes in ~~the reports we submit~~accordance with U.S. generally accepted accounting principles. Our management, under the ~~Exchange Act is recorded, processed, summarized~~supervision and ~~reported within~~with the ~~time periods specified in the applicable rules and forms and that such information was accumulated and communicated to~~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 ~~manner~~timely manner.

These material weaknesses resulted in material misstatements, which were 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 ~~allowed for~~a material misstatement to the consolidated financial statements will not be prevented or detected on a timely ~~decisions regarding disclosure.~~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 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~~Controls.

~~There~~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 (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended March 31, ~~2021~~2022 that has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Internal Controls

Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that disclosure controls or internal controls, when effective, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management’s override of the control. The design of any systems of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Individual persons may perform multiple tasks which normally would be allocated to separate persons and therefore extra diligence must be exercised during the period these tasks are combined.

PART II II—OTHER INFORMATION

Item 1. Legal Proceedings

Refer to “Note 18 — Commitments and contingencies” in the Notes to the Condensed Consolidated Interim Financial Statements of this Form 10-Q.

~~ITEM 1. LEGAL PROCEEDINGS~~

On January 31, 2020, Torchlight Energy Resources, Inc. and its wholly owned subsidiaries Torchlight Energy, Inc. and Torchlight Energy Operating, LLC were served with a lawsuit brought by Goldstone Holding Company, LLC (~~Goldstone Holding Company, LLC v. Torchlight Energy, Inc., et al.~~, in the 160th Judicial District Court of Dallas County, Texas). On February 24, 2020, Torchlight Energy Resources, Inc., Torchlight Energy, Inc., and Torchlight Energy Operating, LLC timely filed their answer, affirmative defenses, and requests for disclosure. The suit, which seeks monetary relief over $1 million, makes unspecified allegations of misrepresentations involving a November 2015 participation agreement and a 2016 amendment to the participation agreement. Torchlight has denied the allegations and has asserted several affirmative defenses including but not limited to, that the suit is barred by the applicable statute of limitations, that the claims have been released, and that the claims are barred because of contractual disclaimers between sophisticated parties. Torchlight has 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. However, Goldstone Holding Company, LLC asked the court to re-instate its claims, and a hearing was held on April 13, 2021. As of the date of this filing, the Court has not issued an order granting or denying Goldstone Holding Company, LLC’s request to re-instate its claims. If the court does reinstate the case, Torchlight intends to re-assert its attorney fees claim and to contest Goldstone’s claims.

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.

~~ITEM~~Item 1A. ~~RISK FACTORS~~Risk Factors

For risk factors related to our business, reference is made to Item 1A, "Risk Factors," contained in Part I of our Annual Report on Form 10-K/A for the year ended December 31, 2021. There ~~were~~have been no material changes to the risk factors disclosed in our Annual Report on Form ~~10-K~~10-K/A for the ~~fiscal~~ year ended December 31, 2020. The risks described in the Annual Report on Form 10-K and in this Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we deem to be immaterial, also may have a material adverse impact on our business, financial condition or results of operations.2021.

~~ITEM~~Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

~~On January 13, 2021, the Company sold 300,000 shares of common stock for cash at $0.80 per share for total proceeds of $240,000 in a private placement.~~Item 3. Defaults Upon Senior Securities

None

On February 16, 2021, the Company issued 186,329 shares of common stock in satisfaction of the payment in kind valued at $248,479 in connection with the final conversion into common stock of the promissory notes previously held by the Straz Foundation and the Straz Trust. Item 4. Mine Safety Disclosures

Not applicable.

~~On January 15, 2021, the Company issued 25,000 shares of common stock as compensation for services.~~Item 5. Other Information

None

~~During the three months ended March~~ 31 2021, the Company issued a total of 1,473,406 shares of common stock in warrant exercises, including (i) 329,091 shares at the exercise price of $1.35 per share, (ii) 600,000 shares at the exercise price of $0.80 per share, (iii) 36,364 shares at the exercise price of $1.35 per share, (iv) and a total of 507,951 shares during the three months ended March 31, 2021 in cashless exercises.

All of the above sales of securities were sold under the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and the rules and regulations promulgated thereunder. The issuances of securities did not involve a “public offering” based upon the following factors: (i) the issuances of securities were isolated private transactions; (ii) a limited number of securities were issued to a limited number of purchasers; (iii) there were no public solicitations; (iv) the investment intent of the purchasers; and (v) the restriction on transferability of the securities issued.

~~ITEM~~Item 6. ~~EXHIBITS~~Exhibits

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

~~Exhibit No.~~		~~Description~~
Exhibit Number	Description
~~2.1~~31.1*		Share Exchange Agreement dated November 23, 2010. (Incorporated by reference from Form 8-K filed with the SEC on November 24, 2010.) *

~~2.2~~		Arrangement Agreement with Metamaterial Inc., dated December 14, 2020 (Incorporated by reference from Form 8-K filed with the SEC on December 14, 2020.) *

~~2.3~~		Amendment to Arrangement Agreement dated February 3, 2021 (Incorporated by reference from Form 8-K filed with the SEC on February 4, 2021.) *

~~2.4~~		Amendment to Arrangement Agreement dated March 11, 2021 (Incorporated by reference from Form 8-K filed with the SEC on March 15, 2021.) *

~~2.5~~		Amendment to Arrangement Agreement dated March 31, 2021 (Incorporated by reference from Form 8-K filed with the SEC on April 1, 2021.) *

~~2.6~~		Amendment to Arrangement Agreement dated April 15, 2021 (Incorporated by reference from Form 8-K filed with the SEC on April 15, 2021.) *

~~2.7~~		Amendment to Arrangement Agreement dated May 2, 2021 (Incorporated by reference from Form 8-K filed with the SEC on May 4, 2021.) *

~~3.1~~		Articles of Incorporation. (Incorporated by reference from Form 10-K filed with the SEC on March 18, 2019.) *

~~3.2~~		Certificate of Amendment to Articles of Incorporation dated December 10, 2014. (Incorporated by reference from Form 10-Q filed with the SEC on May 15, 2015.) *

~~3.3~~		Certificate of Amendment to Articles of Incorporation dated September 15, 2015. (Incorporated by reference from Form 10-Q filed with the SEC on November 12, 2015.) *

~~3.4~~		Certificate of Amendment to Articles of Incorporation dated August 18, 2017 (Incorporated by reference from Form 10-Q filed with the SEC on August 9, 2018.) *

~~3.5~~		Amended and Restated Bylaws (Incorporated by reference from Form 8-K filed with the SEC on October 26, 2016.) *

~~10.1~~		Farmout Agreement between Hudspeth Oil Corporation, Founders Oil & Gas, LLC and certain other parties (Incorporated by reference from Form 8-K filed with the SEC on September 29, 2015) *

~~10.2~~		Purchase and Sale Agreement with Husky Ventures, Inc. (Incorporated by reference from Form 8-K filed with the SEC on November 12, 2015) *

~~10.3~~		Purchase Agreement with McCabe Petroleum Corporation for acquisition of “Hazel Project” (Incorporated by reference from Form 10-Q filed with the SEC on August 15, 2016) *

~~10.4~~		Agreement and Plan of Reorganization and Plan of Merger with Line Drive Energy, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 31, 2017) *

~~10.5~~		Purchase and Sale Agreement with Wolfbone Investments, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 31, 2017) *

~~10.6~~		Agreement and Plan of Reorganization and Plan of Merger with McCabe Petroleum Corporation and Warwink Properties, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~10.7~~		Purchase Agreement with Torchlight Energy, Inc. and McCabe Petroleum Corporation (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~10.8~~		Promissory Note for $3,250,000 by Torchlight Energy, Inc. to McCabe Petroleum Corporation (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~10.9~~		Assignment of Farmout Agreement between Hudspeth Oil Corporation, Founders Oil & Gas, LLC and Wolfbone Investments, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2018) *

~~10.10~~		Underwriting Agreement, dated April 19, 2018, between Torchlight Energy Resources, Inc. and Roth Capital Partners, LLC (Incorporated by reference from Form 8-K filed with the SEC on April 19, 2018) *

~~10.11~~		Purchase & Settlement Agreement, dated July 24, 2018, between Torchlight Energy Resources, Inc., Hudspeth Oil Corporation, Founders Oil & Gas, LLC, Founders Oil & Gas Operating, LLC, Wolfbone Investments, LLC and McCabe Petroleum. Corporation (Incorporated by reference from Form 10-Q filed with the SEC on August 9, 2018) *

~~10.12~~		16% Series C Unsecured Convertible Promissory Note (form of) dated October 17, 2018 (Incorporated by reference from Form 8-K filed with the SEC on October 18, 2018)*

~~10.13~~		Underwriting Agreement, dated January 14, 2020, between Torchlight Energy Resources, Inc. and Aegis Capital Corp. (Incorporated by reference from Form 8-K filed with the SEC on January 14, 2020) *

~~10.14~~		Conversion Agreement (form of) dated March 9, 2020 between Torchlight Energy Resources, Inc., Hudspeth Oil Corporation and the previous holders of 16% Series C Unsecured Convertible Promissory Notes (Incorporated by reference from Form 10-K filed with the SEC on March 16, 2020) *

~~10.15~~		Underwriting Agreement, dated May 18, 2020, between Torchlight Energy Resources, Inc. and ThinkEquity, a division of Fordham Financial Management, Inc. (Incorporated by reference from Form 8-K filed with the SEC on May 18, 2020) *

~~10.16~~		~~Foundation Note Amendment Agreement dated April 24, 2020 with the David A. Straz, Jr Foundation (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020)~~

~~10.17~~		~~Amendment to Foundation Note Amendment Agreement dated May 12, 2020 with David A. Straz, Jr. Foundation (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020)~~

~~10.18~~		~~Trust Note Amendment Agreement dated April 24, 2020 with The David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986 (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020)~~

~~10.19~~		Amendment to Trust Note Amendment Agreement dated May 12, 2020 with the David A. Straz Jr. Irrevocable Trust DTD 11/11/1986 (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020)

~~10.20~~		Amended and Restated Note dated April 24, 2020 in the amount of $4,000,000 with The David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986 (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020)

~~10. 21~~		Amended and Restated Note dated April 24, 2020 in the amount of $4,500,000 with THE David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986 (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020)

~~10.22~~		~~Amended and Restated Note dated April 24, 2020 in the amount of $4,000,000 with David A. Straz, Jr. Foundation (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020)~~

~~10.23~~		Form of Securities Purchase Agreement, dated June 12, 2020, between Torchlight Energy Resources, Inc. and the investor (Incorporated by reference from Form 8-K filed with the SEC on June 12, 2020) *

~~10.24~~		Employment Agreement with John A. Brda dated July 15, 2020 (Incorporated by reference from Form 8-K filed with the SEC on July 16, 2020) *

~~10.25~~		Employment Agreement with Roger Wurtele dated July 15, 2020 (Incorporated by reference from Form 8-K filed with the SEC on July 16, 2020) *

~~10.26~~		Stock Option Agreement with John A. Brda dated July 15, 2020 (Incorporated by reference from Form 8-K filed with the SEC on July 16, 2020) *

~~10.27~~		Stock Option Agreement with Roger Wurtele dated July 15, 2020 (Incorporated by reference from Form 8-K filed with the SEC on July 16, 2020) *

~~10.28~~		Sales Agreement, dated July 20, 2020, between Torchlight Energy Resources, Inc. and Roth Capital Partners, LLC (Incorporated by reference from Form 8-K filed with the SEC on July 20, 2020) *

~~10.29~~		Option Agreement with Masterson Hazel Partners, LP and McCabe Petroleum Corporation dated August 13, 2020 (Incorporated by reference from Form 10-Q filed with the SEC on November 9, 2020) *

~~10.30~~		First Amendment to Option Agreement with Masterson Hazel Partners, LP and McCabe Petroleum Corporation dated September 18, 2020 (Incorporated by reference from Form 10-Q filed with the SEC on November 9, 2020) *

~~10.31~~		6% Secured Convertible Promissory Note for $1,500,000 to McCabe Petroleum Corporation dated September 18, 2020 (and Amendment to Promissory Note) (Incorporated by reference from Form 10-Q filed with the SEC on November 9, 2020) *

~~10.32~~		Letter agreement with McCabe Petroleum Corporation and MECO IV, LLC, dated November 11, 2020 (Incorporated by reference from Form 8-K filed with the SEC on November 16, 2020) *

~~10.33~~		Form of Metamaterial Voting and Support Agreement (Incorporated by reference from Form 8-K filed with the SEC on December 14, 2020.) *

~~10.34~~		6% Unsecured Convertible Promissory Note for $100,000 to Gregory McCabe, dated December 30, 2020 (Incorporated by reference from Form 8-K filed with the SEC on January 6, 2021.) *

~~10.35~~		Second Amendment to Promissory Note of McCabe Petroleum Corporation dated January 29, 2021 (Incorporated by reference from Form 8-K filed with the SEC on February 1, 2021.) *

~~10.36~~		Addendum #1 to Stock Option Agreement of John Brda dated January 29, 2021 (Incorporated by reference from Form 8-K filed with the SEC on February 1, 2021.) *

~~10.37~~		Addendum #1 to Stock Option Agreement of Roger Wurtele dated January 29, 2021 (Incorporated by reference from Form 8-K filed with the SEC on February 1, 2021.) *

~~10.38~~		Underwriting Agreement, dated February 8, 2021, between Torchlight Energy Resources, Inc. and Roth Capital Partners, LLC (Incorporated by reference from Form 8-K filed with the SEC on February 8, 2021.) *

~~10.39~~		8% Convertible Promissory Note for $10,000,000 issued by Metamaterial Inc. on February 18, 2021 (Incorporated by reference from Form 8-K filed with the SEC on February 22, 2021.) *

~~10.40~~		Amendment to Option Agreement dated April 15, 2021 (Incorporated by reference from Form 8-K filed with the SEC on April 15, 2021.) *

~~31.1~~		Certification of ~~principal executive officer required by Rule 13a 14(1) or Rule 15d 14(a) of~~Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as ~~adopted pursuant~~Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
~~31.2~~		Certification of ~~principal financial officer required by Rule 13a 14(1) or Rule 15d 14(a) of~~Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as ~~adopted pursuant~~Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
~~32.1~~		Certification of ~~principal executive officer and principal financial officer pursuant~~Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002 and~~2002.
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of ~~18 U.S.C. 63.~~the Sarbanes-Oxley Act of 2002.

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* Filed herewith.

~~Incorporated by reference from our previous filings with the SEC~~

~~SIGNATURES~~

SIGNATURES

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

	~~Torchlight Energy Resources,~~Meta Materials Inc.

~~Date:~~Dated: May ~~14, 2021~~10, 2022		By:	/s/ ~~John A. Brda~~George Palikaras
	~~By: John A. Brda~~		George Palikaras
			President and Chief Executive Officer
			(Principal Executive Officer)
~~Date:~~
Dated: May ~~14, 2021~~10, 2022		By:	/s/ ~~Roger Wurtele~~Kenneth Rice
	~~By: Roger Wurtele~~		Ken Rice
			Chief Financial Officer and Chief Operating Officer
			(Principal Financial and Accounting ~~Officer~~Officer)

~~Nevada~~	~~74-3237581~~
Nevada	74-3237581
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~ incorporation or ~~Organization)~~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	☐	Smaller reporting company	☐
		Emerging growth company	☐