UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ Quarterly report under SectionQUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2017
OR
☐ Transition report under SectionTRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number
Meta Materials Inc.
(Exact Name of registrantRegistrant as Specified in its charter)
Nevada | 74-3237581 |
(State or incorporation or | (I.R.S. Employer Identification No.) |
1 Research Drive Dartmouth, Nova Scotia | B2Y 4M9 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (Address902) 482-5729
Securities registered pursuant to Section 12(b) of Principal Executive Offices)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.001 per share | MMAT | Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. LargeSee the definitions of “large accelerated filer, ☐ Accelerated” “accelerated filer, ☐ Non-accelerated filer ☐ Smaller” “smaller reporting company, ☒ ” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of
Table of voting common stock).
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3 | ||
20 | ||
20 | ||
20 | ||
20 | ||
20 | ||
21 | ||
22 | ||
23 | ||
24 | ||
26 | ||
Quantitative and Qualitative Disclosures About Market Risk | 28 | |
Controls and Procedures | 28 | |
II—OTHER INFORMATION | 31 | |
Legal Proceedings | 31 | |
31 | ||
Unregistered Sales of Equity Securities and Use of Proceeds | 31 | |
31 | ||
31 | ||
31 | ||
32 | ||
33 |
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, 2016 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, risks associated with the company's ability to obtain additional capital in the future to fund planned expansion, the demand for oil and natural gas, general economic factors, competition in the industry and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. We undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
PART I I—FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
TORCHLIGHT ENERGY RESOURCES, INC. | ||
CONSOLIDATED BALANCE SHEETS (Unaudited) | ||
September 30, | December 31, | |
2017 | 2016 | |
ASSETS | ||
Current assets: | ||
Cash | $385,935 | $1,769,499 |
Accounts receivable | 609,258 | 603,446 |
Production revenue receivable | 7,514 | 7,325 |
Prepayments - development costs | - | 583,347 |
Prepaid expenses | 52,142 | 26,829 |
Total current assets | 1,054,849 | 2,990,446 |
Oil and gas properties, net | 21,181,020 | 9,392,288 |
Office equipment, net | 20,565 | 29,848 |
Other assets | 6,362 | 21,066 |
TOTAL ASSETS | $22,262,796 | $12,433,648 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Accounts payable | $3,434,877 | $422,684 |
Funds received pending settlement | 520,400 | 520,400 |
Accrued payroll | 650,176 | 565,176 |
Related party payables | 45,000 | 237,044 |
Convertible promissory notes, (Series B) net of discount of | ||
$91,379 at December 31, 2016 | - | 3,478,121 |
Due to working interest owners | 54,320 | 54,320 |
Accrued interest payable | 147,821 | 6,049 |
Total current liabilities | 4,852,594 | 5,283,794 |
Unsecured promissory notes, net of discount and financing costs of $880,679 | ||
at September 30, 2017 | 7,183,618 | - |
Asset retirement obligation | 8,788 | 7,051 |
Total liabilities | 12,045,000 | 5,290,845 |
Commitments and contingencies | - | - |
Stockholders’ equity: | ||
Preferred stock, par value $.001, 10,000,000 shares authorized; | ||
-0- issued and outstanding at September 30, 2017 and December 31, 2016 | - | - |
Common stock, par value $0.001 per share; 150,000,000 shares authorized; | 60,216 | 55,100 |
60,211,935 issued and outstanding at September 30, 2017 | ||
55,096,503 issued and outstanding at December 31, 2016 | ||
Additional paid-in capital | 95,871,849 | 89,675,488 |
Accumulated deficit | (85,714,269) | (82,587,785) |
Total stockholders' equity | 10,217,796 | 7,142,803 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $22,262,796 | $12,433,648 |
META MATERIALS INC.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (UNAUDITED)
|
| As of |
|
| As of |
| ||
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 29,749,773 |
|
| $ | 46,645,704 |
|
Restricted cash |
|
| 478,897 |
|
|
| 788,768 |
|
Short-term investments |
|
| — |
|
|
| 2,875,638 |
|
Grants receivable |
|
| 29,150 |
|
|
| 175,780 |
|
Accounts receivable |
|
| 2,514,443 |
|
|
| 1,665,700 |
|
Inventory |
|
| 366,959 |
|
|
| 265,718 |
|
Prepaid expenses and other current assets |
|
| 3,843,663 |
|
|
| 3,451,367 |
|
Assets held for sale |
|
| 72,000,000 |
|
|
| 75,500,000 |
|
Due from related parties |
|
| 10,314 |
|
|
| 10,657 |
|
Total current assets |
|
| 108,993,199 |
|
|
| 131,379,332 |
|
Intangible assets, net |
|
| 28,306,272 |
|
|
| 28,971,824 |
|
Property, plant and equipment, net |
|
| 29,977,784 |
|
|
| 27,018,114 |
|
Operating lease right-of-use assets |
|
| 6,230,735 |
|
|
| 6,278,547 |
|
Goodwill |
|
| 240,769,981 |
|
|
| 240,376,634 |
|
Total assets |
| $ | 414,277,971 |
|
| $ | 434,024,451 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
| ||
Current liabilities |
|
|
|
|
|
| ||
Trade and other payables |
| $ | 9,944,822 |
|
| $ | 13,335,470 |
|
Current portion of long-term debt |
|
| 363,654 |
|
|
| 491,278 |
|
Current portion of deferred revenues |
|
| 695,160 |
|
|
| 779,732 |
|
Current portion of deferred government assistance |
|
| 858,942 |
|
|
| 846,612 |
|
Preferred stock liability |
|
| 72,000,000 |
|
|
| 75,500,000 |
|
Current portion of operating lease liabilities |
|
| 782,901 |
|
|
| 663,861 |
|
Asset retirement obligations |
|
| 21,937 |
|
|
| 21,937 |
|
Total current liabilities |
|
| 84,667,416 |
|
|
| 91,638,890 |
|
Deferred revenues |
|
| 660,297 |
|
|
| 637,008 |
|
Deferred government assistance |
|
| — |
|
|
| 3,038 |
|
Deferred tax liability |
|
| 329,205 |
|
|
| 324,479 |
|
Long-term operating lease liabilities |
|
| 3,676,258 |
|
|
| 3,706,774 |
|
Funding obligation |
|
| 286,182 |
|
|
| 268,976 |
|
Long-term debt |
|
| 2,920,931 |
|
|
| 2,737,171 |
|
Total liabilities |
|
| 92,540,289 |
|
|
| 99,316,336 |
|
Stockholders’ equity |
|
|
|
|
|
| ||
Common stock - $0.001 par value; 1,000,000,000 shares authorized, 286,927,265 shares issued and outstanding at March 31, 2022, and $0.001 par value; unlimited shares authorized, 284,573,316 shares issued and outstanding at December 31, 2021 |
|
| 265,106 |
|
|
| 262,751 |
|
Additional paid-in capital |
|
| 467,692,775 |
|
|
| 463,136,404 |
|
Accumulated other comprehensive income (loss) |
|
| 608,446 |
|
|
| (296,936 | ) |
Accumulated deficit |
|
| (146,828,645 | ) |
|
| (128,394,104 | ) |
Total stockholders’ equity |
|
| 321,737,682 |
|
|
| 334,708,115 |
|
Total liabilities and stockholders’ equity |
| $ | 414,277,971 |
|
| $ | 434,024,451 |
|
Commitments and contingencies (note 18)
Subsequent events (note 19)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.statements
3
META MATERIALS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
|
| Three months ended |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Revenue: |
|
|
|
|
|
| ||
Product sales |
| $ | 168,127 |
|
| $ | 22,047 |
|
Development revenue |
|
| 2,806,568 |
|
|
| 574,256 |
|
Total Revenue |
|
| 2,974,695 |
|
|
| 596,303 |
|
Cost of goods sold |
|
| 778,712 |
|
|
| 400 |
|
Gross Profit |
|
| 2,195,983 |
|
|
| 595,903 |
|
Operating Expenses: |
|
|
|
|
|
| ||
Selling & Marketing |
|
| 1,035,986 |
|
|
| 396,594 |
|
General & Administrative |
|
| 14,597,913 |
|
|
| 2,592,885 |
|
Research & Development |
|
| 3,971,139 |
|
|
| 1,779,256 |
|
Total operating expenses |
|
| 19,605,038 |
|
|
| 4,768,735 |
|
Loss from operations |
|
| (17,409,055 | ) |
|
| (4,172,832 | ) |
Interest expense, net |
|
| (164,434 | ) |
|
| (450,908 | ) |
Gain (Loss) on foreign exchange, net |
|
| 148,391 |
|
|
| (166,444 | ) |
Loss on financial instruments, net |
|
| — |
|
|
| (40,004,921 | ) |
Other (loss) income, net |
|
| (1,009,443 | ) |
|
| 591,907 |
|
Total other expense, net |
|
| (1,025,486 | ) |
|
| (40,030,366 | ) |
Loss before income taxes |
|
| (18,434,541 | ) |
|
| (44,203,198 | ) |
Income tax recovery |
|
| — |
|
|
| 44,679 |
|
Net loss |
| $ | (18,434,541 | ) |
| $ | (44,158,519 | ) |
Other Comprehensive Income net of tax |
|
|
|
|
|
| ||
Foreign currency translation gain |
|
| 905,382 |
|
|
| 21,128 |
|
Fair value gain on changes of own credit risk |
|
| — |
|
|
| 671,600 |
|
Total Other Comprehensive Income |
|
| 905,382 |
|
|
| 692,728 |
|
Comprehensive loss |
| $ | (17,529,159 | ) |
| $ | (43,465,791 | ) |
Basic and diluted loss per share (1) |
| $ | (0.06 | ) |
| $ | (0.26 | ) |
Weighted average number of shares outstanding - basic and |
|
| 285,224,469 |
|
|
| 168,864,762 |
|
TORCHLIGHT ENERGY RESOURCES, INC. | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||
Three Months | Three Months | Nine Months | Nine Months | |
Ended | Ended | Ended | Ended | |
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |
Revenue | ||||
Oil and gas sales | $18,296 | $34,284 | $44,548 | $337,798 |
Cost of revenue | (16,499) | (49,908) | (32,632) | (295,208) |
Gross profit | 1,797 | (15,624) | 11,916 | 42,590 |
Operating expenses: | ||||
General and administrative expense | 866,131 | 787,228 | 2,808,576 | 5,534,933 |
Depreciation, depletion and amortization | 21,980 | 18,005 | 72,415 | 740,059 |
Impairment expense | - | - | - | 57,912 |
Loss on sale | - | - | - | 146,138 |
Total operating expenses | 888,111 | 805,233 | 2,880,991 | 6,479,042 |
Other (income) expense | ||||
Other income | - | (30) | - | (30) |
Interest income | (145) | - | (439) | - |
Interest and accretion expense | 129,302 | 54,662 | 257,849 | 224,520 |
Total other (income) expense | 129,157 | 54,632 | 257,410 | 224,490 |
Loss before taxes | (1,015,471) | (875,489) | (3,126,485) | (6,660,942) |
Provision for income taxes | - | - | - | - |
Net loss | $(1,015,471) | $(875,489) | $(3,126,485) | $(6,660,942) |
Loss per share: | ||||
Basic and Diluted | $(0.02) | $(0.02) | $(0.08) | $(0.17) |
Weighted average shares outstanding: | ||||
Basic and Diluted | 60,208,946 | 48,158,456 | 38,775,843 | 40,228,810 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.statements
4
META MATERIALS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) (1)
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
|
| Total |
| ||||||
|
| Common Stock |
|
| Paid-in |
|
| Comprehensive |
|
| Accumulated |
|
| Stockholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income (loss) |
|
| Deficit |
|
| Equity |
| ||||||
Balance, January 1, 2022 |
|
| 284,573,316 |
|
| $ | 262,751 |
|
| $ | 463,136,404 |
|
| $ | (296,936 | ) |
| $ | (128,394,104 | ) |
| $ | 334,708,115 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18,434,541 | ) |
|
| (18,434,541 | ) |
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 905,382 |
|
|
| — |
|
|
| 905,382 |
|
Exercise of stock options |
|
| 730,249 |
|
|
| 730 |
|
|
| 196,437 |
|
|
| — |
|
|
| — |
|
|
| 197,167 |
|
Exercise of warrants |
|
| 1,623,700 |
|
|
| 1,625 |
|
|
| 167,950 |
|
|
| — |
|
|
| — |
|
|
| 169,575 |
|
Stock-based compensation |
|
| — |
|
| �� | — |
|
|
| 4,191,984 |
|
|
| — |
|
|
| — |
|
|
| 4,191,984 |
|
Balance, March 31, 2022 |
|
| 286,927,265 |
|
| $ | 265,106 |
|
| $ | 467,692,775 |
|
| $ | 608,446 |
|
| $ | (146,828,645 | ) |
| $ | 321,737,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, January 1, 2021 |
|
| 154,163,975 |
|
| $ | 132,347 |
|
| $ | 29,022,977 |
|
| $ | (655,884 | ) |
| $ | (37,396,843 | ) |
| $ | (8,897,403 | ) |
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (44,158,519 | ) |
|
| (44,158,519 | ) |
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 692,728 |
|
|
| — |
|
|
| 692,728 |
|
Conversion of promissory notes |
|
| 20,391,239 |
|
|
| 20,391 |
|
|
| 23,635,974 |
|
|
| — |
|
|
| — |
|
|
| 23,656,365 |
|
Conversion of secured debentures |
|
| 14,155,831 |
|
|
| 14,156 |
|
|
| 22,104,626 |
|
|
| — |
|
|
| — |
|
|
| 22,118,782 |
|
Conversion of unsecured debentures |
|
| 5,105,338 |
|
|
| 5,105 |
|
|
| 5,764,370 |
|
|
| — |
|
|
| — |
|
|
| 5,769,475 |
|
Conversion of long-term debt |
|
| 124,716 |
|
|
| 125 |
|
|
| 221,718 |
|
|
| — |
|
|
| — |
|
|
| 221,843 |
|
Conversion of payable to related party |
|
| 150,522 |
|
|
| 151 |
|
|
| 225,835 |
|
|
| — |
|
|
| — |
|
|
| 225,986 |
|
Exercise of stock options |
|
| 178,720 |
|
|
| 179 |
|
|
| 48,450 |
|
|
| — |
|
|
| — |
|
|
| 48,629 |
|
Exercise of warrants |
|
| 82,097 |
|
|
| 82 |
|
|
| 31,502 |
|
|
| — |
|
|
| — |
|
|
| 31,584 |
|
Exercise of broker warrants |
|
| 61,331 |
|
|
| 61 |
|
|
| 16,194 |
|
|
| — |
|
|
| — |
|
|
| 16,255 |
|
Stock-based compensation |
|
| 286,292 |
|
|
| 286 |
|
|
| 497,489 |
|
|
| — |
|
|
| — |
|
|
| 497,775 |
|
Balance, March 31, 2021 |
|
| 194,700,061 |
|
| $ | 172,883 |
|
| $ | 81,569,135 |
|
| $ | 36,844 |
|
| $ | (81,555,362 | ) |
| $ | 223,500 |
|
TORCHLIGHT ENERGY RESOURCES, INC. | ||
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) | ||
Nine Months | Nine Months | |
Ended | Ended | |
September 30, 2017 | September 30, 2016 | |
Cash Flows From Operating Activities | ||
Net loss | $(3,126,485) | $(6,660,942) |
Adjustments to reconcile net loss to net cash from operations: | ||
Stock based compensation | 1,039,679 | 3,410,731 |
Accrued interest payable in stock | 94,795 | - |
Accretion of promissory note discounts | 158,486 | 142,867 |
Depreciation, depletion and amortization | 72,415 | 740,059 |
Impairment expense | - | 57,912 |
Loss on sale of assets | - | 146,138 |
Change in: | ||
Accounts and note receivable | (5,813) | 86,649 |
Production revenue receivable | (189) | 194,104 |
Prepayment of development costs | 583,347 | (1,000,000) |
Prepaid expenses | (25,313) | 38,776 |
Other assets | 11,999 | 53,721 |
Accounts payable and accrued liabilities | 89,571 | (290,229) |
Due to working interest owners | - | (36,519) |
Funds received pending settlement | - | 520,400 |
Interest payable | 54,867 | (176,933) |
Net cash from operating activities | (1,052,641) | (2,773,266) |
Cash Flows From Investing Activities | ||
Investment in oil and gas properties | (5,189,642) | (1,677,980) |
Proceeds from sale of leases | - | 1,572,000 |
Net cash from investing activities | (5,189,642) | (105,980) |
Cash Flows From Financing Activities | ||
Proceeds from sale of preferred stock | - | 1,000,000 |
Preferred dividends paid in cash | - | (320,724) |
Proceeds from warrant exercise | 29,250 | 1,486,942 |
Proceeds from promissory notes | 7,338,969 | 518,527 |
Repayment of promissory notes | (2,509,500) | (613,629) |
Net cash from financing activities | 4,858,719 | 2,071,116 |
Net change in cash | (1,383,564) | (808,130) |
Cash - beginning of period | 1,769,499 | 1,026,600 |
Cash - end of period | $385,935 | $218,470 |
Supplemental disclosure of cash flow information: (Non Cash Items) | ||
Common stock issued for services | $579,754 | $587,473 |
Common stock issued for lease interests | $373,431 | $1,816,096 |
Accounts payable increase- investment in oil and gas properties | $3,057,621 | $- |
Common stock issued in warrant exercise | $29,250 | $1,557,004 |
Common stock issued in conversion of preferred stock | $- | $13,399,991 |
Common stock issued in conversion of promissory note | $1,007,890 | $- |
Mineral interests received in warrant exercise | $3,229,431 | $- |
Warrants issued in connection with promissory notes | $- | $80,750 |
Warrants issued for mineral interests | $- | $1,630,761 |
Cash paid for interest | $576,190 | $536,410 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
META MATERIALS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)
|
| Three months ended |
| |||||
|
| March 31, 2022 |
|
| March 31, 2021 |
| ||
|
| $ |
|
| $ |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (18,434,541 | ) |
| $ | (44,158,519 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
| ||
Non-cash finance income |
|
| (12,920 | ) |
|
| — |
|
Non-cash interest expense |
|
| 126,714 |
|
|
| 358,562 |
|
Non-cash lease expense |
|
| 240,548 |
|
|
| 73,383 |
|
Deferred income tax |
|
| — |
|
|
| (44,679 | ) |
Depreciation and amortization |
|
| 1,672,969 |
|
|
| 590,201 |
|
Unrealized foreign currency exchange (gain) loss |
|
| (140,902 | ) |
|
| 31,339 |
|
Loss on financial instruments, net |
|
| — |
|
|
| 40,004,921 |
|
Change in deferred revenue |
|
| (79,146 | ) |
|
| 565,801 |
|
Non-cash government assistance |
|
| (3,047 | ) |
|
| (348,650 | ) |
Loss on debt settlement |
|
| — |
|
|
| 19,253 |
|
Stock-based compensation |
|
| 3,995,442 |
|
|
| 426,794 |
|
Non-cash consulting expense |
|
| 196,541 |
|
|
| — |
|
Changes in operating assets and liabilities |
|
| (6,306,857 | ) |
|
| 88,119 |
|
Net cash used in operating activities |
|
| (18,745,199 | ) |
|
| (2,393,475 | ) |
Cash flows from investing activities: |
|
|
|
|
|
| ||
Purchases of intangible assets |
|
| — |
|
|
| (128,209 | ) |
Purchases of property, plant and equipment |
|
| (1,746,936 | ) |
|
| (1,477,329 | ) |
Proceeds from short-term investments |
|
| 2,884,999 |
|
|
| — |
|
Net cash provided by (used in) investing activities |
|
| 1,138,063 |
|
|
| (1,605,538 | ) |
Cash flows from financing activities: |
|
|
|
|
|
| ||
Proceeds from long-term debt |
|
| — |
|
|
| 1,096,262 |
|
Repayments of long-term debt |
|
| (91,641 | ) |
|
| (12,098 | ) |
Proceeds from government grants |
|
| — |
|
|
| 223,384 |
|
Proceeds from unsecured promissory notes |
|
| — |
|
|
| 13,963,386 |
|
Proceeds from stock option exercises |
|
| 197,167 |
|
|
| 48,629 |
|
Proceeds from warrants exercises |
|
| 169,575 |
|
|
| 47,839 |
|
Net cash provided by financing activities |
|
| 275,101 |
|
|
| 15,367,402 |
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
| (17,332,035 | ) |
|
| 11,368,389 |
|
Cash, cash equivalents and restricted cash at beginning of the period |
|
| 47,434,472 |
|
|
| 1,395,683 |
|
Effects of exchange rate changes on cash, cash equivalents and restricted cash |
|
| 126,233 |
|
|
| 108,578 |
|
Cash, cash equivalents and restricted cash at end of the period |
| $ | 30,228,670 |
|
| $ | 12,872,650 |
|
Supplemental cash flow information |
|
|
|
|
|
| ||
Accrued purchases of property, equipment and patents |
| $ | 1,772,821 |
|
| $ | 127,456 |
|
Right-of-use assets obtained in exchange for lease liabilities |
|
| 146,822 |
|
|
| 1,300,573 |
|
Settlement of liabilities in common stock |
|
| — |
|
|
| 52,063,431 |
|
Interest paid on debt |
|
| — |
|
|
| 64,528 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements
6
META MATERIALS INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
1. NATURE OF BUSINESS
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.” or “Torchlight”) and our subsidiaries, Metamaterial Exchangeco Inc. (formerly named 2798832 Ontario Inc., “Canco”) and 2798831 Ontario Inc. (“Company”Callco”), entered into an Arrangement Agreement (the “Arrangement Agreement”) was incorporatedwith Metamaterial Inc., an Ontario corporation headquartered in October 2007Nova 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 lawsBusiness Corporations Act (Ontario), on and subject to the terms and conditions of the StateArrangement Agreement (the “Torchlight RTO”). On June 25, 2021, we implemented a reverse stock split. On June 28, 2021, following the satisfaction of Nevadathe closing conditions set forth in the Arrangement Agreement, the Arrangement was completed, and we changed our name from “Torchlight Energy Resources, Inc.” to “Meta Materials Inc.” and changed our trading symbol from “TRCH” to “MMAT”.
On June 28, 2021, and pursuant to the completion of the Arrangement Agreement, 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.
For accounting purposes, the legal subsidiary, MMI, has been treated as Pole Perfect Studios, Inc. (“PPS”). From its incorporation to November 2010,the accounting acquirer and the Company, was primarily engaged in business start-up activities.
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.
These unaudited condensed consolidated interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, theystatements do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”)US GAAP for completeannual financial statements. Accordingly, these unaudited condensed consolidated interim financial statements and should be read in conjunction with our audited consolidated financial statements and notes for the years ended December 31, 2021, 2020 and 2019, filed with the Securities and Exchange Commission (“SEC”) 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.
7
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 made to the provisional purchase price allocations of the Torchlight RTO and the Nanotech acquisition, as disclosed in the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the yearyears ended December 31, 2016. The financial statements are presented on a consolidated basis2021 and include all of the accounts of Torchlight Energy Resources Inc. and its wholly owned subsidiaries, Torchlight Energy, Inc., Torchlight Energy Operating, LLC, Hudspeth Oil Corporation, and Torchlight Hazel, LLC. All intercompany transactions have been eliminated2020 contained in consolidation. Certain reclassifications have been made to the prior year’s consolidated financial statements and related footnotes to conform them to the current year presentation. In the opinion of the Company’s management, the accompanying unaudited 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 condensed consolidated financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated 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.
We believe that information gathered to date provides a reasonable basis for estimating the fair value of accounting,assets acquired and liabilities assumed, however we are 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 costsprovisional measurements 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. Gain or loss on the sale or other disposition of oil and gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.
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.
5. Assets held for sale
As of March 31, 2022 and December 31, 2021, assets held for sale represent the periods in which they are excluded from costs being depleted or amortized. During nine months ended September 30, 2017 and 2016, the Company capitalized $703,740 and $106,388, respectively, of interest on unevaluated properties.
Orogrande Project, West Texas
Our outstanding drilling obligation includes the sum of all capitalized costs net of accumulated depreciation, depletion,5 wells in 2022 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.2023. All drilling obligations through December 31, 2021 have been met. The depreciable base of oil and natural gas properties is amortized on a unit-of-production method.
2017 | 2016 | |
Evaluated costs subject to amortization | $2,721,503 | $1,470,939 |
Unevaluated costs | 23,980,225 | 13,376,742 |
Total capitalized costs | 26,701,728 | 14,847,681 |
Less accumulated depreciation, depletion and amortization | (5,520,708) | (5,455,393) |
Total oil and gas properties | $21,181,020 | $9,392,288 |
Year Ending December 31, | Rent |
Remainder of 2017 | $23,430 |
2018 | 93,720 |
2019 | 93,720 |
To 2019 Expiration | 85,910 |
Total | $296,780 |
During the three months ended March 31, 20172022, we have incurred an additional $1.1 million in cost to ensure that compliance with the Company issued 41,322relevant leases was maintained.
The Orogrande Project ownership as of March 31, 2022 is detailed as follows:
|
| Revenue Interest |
|
| Working Interest |
| ||
University Lands - Mineral Owner |
|
| 20.00 | % |
| n/a |
| |
ORRI - Magdalena Royalties, LLC, and entity controlled by Gregory McCabe, Chairman |
|
| 4.50 | % |
| n/a |
| |
ORRI - Unrelated Party |
|
| 0.50 | % |
| n/a |
| |
Hudspeth Oil Corporation, a subsidiary of Meta Materials Inc. |
|
| 49.88 | % |
|
| 66.50 | % |
Wolfbone Investments LLC, and entity controlled by Gregory McCabe, Chairman |
|
| 18.75 | % |
|
| 25.00 | % |
Conversion by Note Holders in March, 2020 |
|
| 4.50 | % |
|
| 6.00 | % |
Unrelated Party |
|
| 1.88 | % |
|
| 2.50 | % |
|
|
| 100.00 | % |
|
| 100.00 | % |
Hazel Project in the 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.
8
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, |
|
| December 31, |
| ||
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, |
|
| December 31, |
| ||
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.
Property, plant and equipment is pledged as security under a General Security Agreement (a “GSA”) signed in favor of the Royal Bank of Canada (“RBC”) on July 14, 2014, which is related to our corporate bank account and credit card and includes all property, plant and equipment and intangible assets.
9
8. Long-term debt
|
| March 31, |
|
| December 31, |
| ||
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 minimum balance of positive equity throughout the term of the loan. However, on November 14, 2019, ACOA waived this requirement for the period ending June 30, 2019 and for each period thereafter until the loan is fully repaid.
2 The carrying amount of the ACOA AIF loan is reviewed each reporting period and adjusted as required to reflect management’s best estimate of future cash flows, discounted at the original effective interest rate.
3 A portion of the ACOA BDP 2018 loan was used to finance the acquisition and construction of manufacturing equipment resulting in $425,872 was 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 stockshares 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 a reductionif the Torchlight RTO had taken place as of the beginning of the earliest period presented.
During the three months ended March 31, 20172022, 1,988,617 warrants and were exercised to purchase 1,623,700 common shares where most warrant holders elected cashless exercise and consequently, the Company issued 3,301,739difference of 364,917 shares of common stock in connection withwas withheld to cover the Line Drive merger transaction in which the Company acquired oil and gas lease related costs valued at $3,229,431.
10
During the three months ended March 31, 2017, the Company issued 200,000 warrants for services which resulted in $24,908 of recognized expense.
Warrants
The following table summarizes the changes in our warrants:
|
| Three months ended |
| |||||
|
| March 31, |
| |||||
|
| 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, |
| |||||
|
| Number of |
|
|
|
| ||
|
| warrants (#) |
|
| Amount |
| ||
Outstanding, December 31, 2021 |
|
| 13,887 |
|
| $ | 1,826 |
|
Expired |
|
| (13,887 | ) |
|
| (1,826 | ) |
Outstanding, March 31, 2022 |
|
| — |
|
| $ | — |
|
10. Stock-based payments
On December 3, 2021, our shareholders approved the 2021 Equity Incentive Plan to utilize the 3,500,000 shares reserved and unissued under the Torchlight 2015 Stock Option and Grant Plan and the 6,445,745 shares reserved and unissued under the MMI 2018 Stock Option and Grant plan to set the number of shares reserved for issuance under the 2021 Equity Incentive Plan at 34,945,745 shares.
The 2021 Equity Incentive Plan allows the grants of non-statutory stock valued at $373,430 to certain working interest owners in exchange for an aggregate 6% working interest in the Hazel Project.
DSU Plan
On March 28, 2013, we implemented a director whichDeferred Stock Unit (DSU) Plan for our directors, employees and officers. Directors, employees and officers are subject togranted DSUs with immediate vesting as a form of compensation. Each unit is convertible at specified future events. The valuethe option of the director award has been fully recognized in expense accordingholder into one common share. Eligible individuals are entitled to its terms.
11
As of March 31, 2022, there were 3,647,026 outstanding DSUs. There were 0 new DSUs issued, 25,000 shares of common stock for services to a director which are subject to vesting at specified future events. The value of the director award has been fully recognized in expense according to its terms.
Exercise | Expiration Date in | |||||
Price | 2017 | 2018 | 2019 | 2020 | 2021 | Total |
$0.50 | - | 528,099 | - | - | - | 528,099 |
$0.70 | - | - | - | 420,000 | - | 420,000 |
$0.77 | - | - | 100,000 | - | - | 100,000 |
$1.00 | 150,000 | - | 25,116 | - | - | 175,116 |
$1.03 | - | - | - | - | 120,000 | 120,000 |
$1.08 | - | - | 37,500 | - | - | 37,500 |
$1.40 | - | - | - | 1,121,736 | 1,121,736 | |
$1.64 | - | - | - | - | 200,000 | 200,000 |
$1.73 | - | 100,000 | - | - | - | 100,000 |
$1.80 | - | - | - | 1,250,000 | - | 1,250,000 |
$2.00 | 126,000 | 1,906,249 | - | - | - | 2,032,249 |
$2.03 | - | 2,000,000 | - | - | - | 2,000,000 |
$2.09 | - | 2,800,000 | - | - | - | 2,800,000 |
$2.23 | - | - | - | 832,512 | 832,512 | |
$2.29 | - | 120,000 | - | - | - | 120,000 |
$2.50 | - | - | 35,211 | - | - | 35,211 |
$2.82 | - | 38,174 | - | - | - | 38,174 |
$3.50 | - | - | 15,000 | - | - | 15,000 |
$4.50 | - | - | 700,000 | - | - | 700,000 |
$5.00 | 75,000 | - | - | - | - | 75,000 |
$6.00 | - | 523,123 | 22,580 | - | - | 545,703 |
$7.00 | - | - | 700,000 | - | - | 700,000 |
351,000 | 8,015,645 | 1,635,407 | 3,624,248 | 320,000 | 13,946,300 |
RSU Plan
Each unit is convertible at the Company recognized $287,250option of the holder into one common share of our shares upon meeting the vesting conditions.
Total stock-based compensation expense related to previously issuedRSUs included in the condensed consolidated interim statements of operations was as follows:
|
| Three months ended |
| |
|
| March 31, |
| |
|
| 2022 |
| |
Cost of sales |
| $ | 50,653 |
|
Selling & marketing |
|
| 15,493 |
|
General & administrative |
|
| 120,165 |
|
Research & development |
|
| 97,211 |
|
|
| $ | 283,522 |
|
The following table summarizes the change in outstanding RSUs:
|
| Number of |
|
| Weighted |
| ||
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 |
|
12
Employee Stock Option Plan
Each 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 |
|
| Weighted |
|
| Weighted |
|
| Aggregate intrinsic |
| ||||
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, 2022 and December 31, 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:
Three months ended | ||||
March 31, | ||||
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 |
13
Where possible, we use the simplified method to estimate the expected term of employee stock options.
The expected volatility reflects the assumption that the historical volatility over a $54,544 account payable to directors for 2016 director fees.
Exercise | Expiration Date in | ||||||
Price | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | Total |
$0.97 | - | - | - | - | 259,742 | - | 259,742 |
$1.10 | - | - | - | - | - | 800,000 | 800,000 |
$1.57 | - | - | - | 5,997,163 | - | - | 5,997,163 |
$1.63 | - | - | - | - | 58,026 | - | 58,026 |
$1.79 | - | - | - | 300,000 | - | - | 300,000 |
- | - | - | 6,297,163 | 317,768 | 800,000 | 7,414,931 |
11. Income taxes
We estimate our annual effective income tax rate in recording itsour quarterly provision for income taxes in the various jurisdictions in which it operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur. The Company recorded no income
Our effective tax expenserate for the ninethree months ended September 30, 2017 becauseMarch 31, 2022 differs from the Company expectsstatutory rates due to incur avaluation allowance as well as different domestic and foreign statutory tax loss in the current year. Similarly, no incomerates.
Deferred tax expense was recognizedrecovery for the ninethree months ended September 30, 2016 for this same reason.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 asset relatedassets are more likely than not to federal net operating loss carryforwards of $53,297,588 and $51,028,330 at September 30, 2017 and December 31, 2016, respectively. The federal net operating loss carryforward will beginbe realized. Therefore, we continue to expire in 2032. Realization of the deferred tax asset is dependent, in part, on generating sufficient taxable income prior to expiration of the loss
12. Net loss per share
The following table sets forth the calculation of these assets isbasic 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 assured.
|
| 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 notes also contain certain covenants under which wenumbers of options, warrants, and DSUs issued pre-Torchlight RTO have agreed that, except for financing arrangementsbeen multiplied by 1.845 Torchlight conversion ratio.
14
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 established commercial banking or financial institutionsLevel 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 debts and liabilities incurredpayables 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 normal coursebelow 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 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 fair value measurement of the preferred stock liability as of March 31, 2022.
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, |
|
| December 31, |
| ||||||||||
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
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 will not issue any other noteshad 1 customer that accounted for $245,229 or debt offerings which have41% 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 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 maturity dateperiod of two years and eleven months. The agreement provides the tenant with early access to the premises at least three months prior to the paymentcommencement 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, 2022, of $146,822.
16
Total operating lease expense included in fullthe condensed consolidated interim statements of operations and comprehensive loss is as follows:
|
| Three months ended |
| |||||
|
| March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Operating lease expense |
| $ | 426,428 |
|
| $ | 45,437 |
|
Short term lease expense |
|
| 81,638 |
|
|
| 26,150 |
|
Variable and other lease expense |
|
| 58,817 |
|
|
| 12,710 |
|
Total |
| $ | 566,883 |
|
| $ | 84,297 |
|
We have elected the practical expedient in ASC 842 "Leases" to not capitalize any leases with initial terms of less than twelve months on our balance sheet and include them as short-term lease expense in the condensed consolidated interim statements of operations and comprehensive loss.
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 million in costs incurred as a result of a tool failure during drilling activities on the University Founders A25 #2 well that is located in the Orogrande Field. Working interest owner Wolfbone Investments, LLC, a company owned by our former Chairman Gregory McCabe, is a co-plaintiff in that action. After the suit was filed, Cordax filed a mineral lien in the amount of $104,500 against the Orogrande Field and has sued the operator and counterclaimed against Hudspeth for breach of contract, seeking the same amount as the lien. We have added the manufacturer of one of the 12% notes, unless consented to by the holders.
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 Series B Notes plus accrued interest was converted into 1,007,890 shares205th Judicial District Court of common stockHudspeth County, Texas. We are contesting the lien in good faith and $60,000 was rolled intofiled a Plea in Abatement on May 10, 2021, seeking a stay in the new debt financing.
17
In September 30, 2017:
On January 3, 2022, a putative securities class action lawsuit was filed in the special committee engagedU.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 investment bank which rendered a fairness opinion on November 13, 2017 deeming that the transactions were fairaward of costs and expenses to the company, fromderivative plaintiff, including attorneys’ fees. On March 9, 2022, the Court entered a financial pointstipulated order staying this action until there is a ruling on a motion to dismiss in the Securities Class Action.
Contractual Commitments and Purchase Obligations
18
Remainder of 2022 |
| $ | 976,157 |
|
2023 |
|
| 43,872 |
|
2024 |
|
| 3,115 |
|
|
| $ | 1,023,144 |
|
19. Subsequent events
Subsequent to March 31, 2022, 10,310 stock options were exercised.
On April 5, 2022, Meta Materials Inc. acquired Plasma App Ltd. in a stock for stock transaction valued at $20 million. Plasma App Ltd. is the developer of PLASMAfusion™, a first of its kind, proprietary manufacturing platform technology, which enables high speed coating of any solid material on any type of substrate. Plasma App Ltd.’s team is located at the Rutherford Appleton Laboratories in Oxford, UK.
Due to the timing of when the transaction closed, there remains insufficient information available to management to be able to complete the initial accounting for the business combination, and as such, the provisional purchase price allocation has not been disclosed.
19
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Torchlight Hazel, LLC.
Further information about us and our operations can be obtained from the offices of META, from the META’s website or on EDGAR at www.sec.gov/edgar.shtml.
This discussionMD&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 construedrequired 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.
BUSINESS OVERVIEW
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.
20
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 results discussed herein will necessarily continuepotential 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 Technology
Holography is a technique where collimated visible wavelength lasers are used to directly write an interference pattern inside the volume of light-sensitive material (photopolymer) in order to produce highly transparent optical filters and holographic optical elements. For some product lines that require large surface areas, this is combined with a proprietary scanning technique, where the lasers, optically or mechanically, directly write nano-patterns to cover large surface areas with nanometer accuracy.
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.
21
Lithography Technology
Lithography is a process commonly used in the fabrication of integrated circuits, in which a light-sensitive polymer (photoresist), is exposed and developed to form 3D relief images on the substrate, typically a silicon wafer of up to 300mm (11.8 inches) in diameter. In order to meet the performance, fabrication-speed, and/or cost criteria required for many potential applications that require large area and low cost nanopatterning, 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 future,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 any conclusion reached herein will necessarilyare currently in early stages of development including:
More details of these products and applications can be indicativefound 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 actual operating resultsDefense.
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:
22
Wireless Sensing and Radio Wave Imaging Technology
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 management.
Oil and Gas operations
As part of September 30, 2017 the Company had interests in threeArrangement Agreement with Torchlight Energy Resources, Inc. ("Torchlight"), we acquired a group of oil and gas projects: 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 sole owner of both Hudspeth and MPC. Under the terms and conditions of the Purchase Agreement, at closing, we purchased 100% of the capital stock of Hudspeth which holds certain oil and gasO&G assets including a 100% working interest in 172,000 mostly contiguous acres in the Orogrande Basin in West Texas. This acreage is in the primary term under five-year leases that carry additional five-year extension provisions. As consideration, at closing we issued 868,750 shares of our common stock to Mr. McCabe and paid a total of $100,000 in geologic origination fees to third parties. Additionally, Mr. McCabe has, at his option, a 10% 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. All drilling obligations through September 30, 2017 have been met.
BUSINESS AND OPERATIONAL HIGHLIGHTS
Throughout 2021, our activities were focused on our research and development efforts as well as expansion of Stateour intellectual property estate. As we moved into 2022, new emphasis was, and will continue to be, placed on investments in pilot scale manufacturing of TexasNANOWEB® products and expansion of our production capacity in our banknote and brand security lines. Through the remainder of 2022, we will also place emphasis on more aggressive design, development and clinical testing of our array of medical products. We believe these efforts represent an efficient approach to monetizing our intellectual property assets.
23
Highfield Park facility
We leased approximately 53,000 square foot facility in Dartmouth, Nova Scotia, with the lease commencing on January 31, 2017. Subsequent1, 2021. The facility will host our holography and lithography R&D labs and manufacturing operations. We also amended this lease agreement on June 9, 2021 to expand the leased space by approximately 15,000 square feet, reduce the annual rent for the 10-year term of the lease and obtain from the landlord CA$0.5 million in cash to fund ongoing tenant improvements. In exchange, the landlord received 993,490 shares of MMI common stock at CA$3.40 per share. During Q1 2022, we purchased equipment for approximately $0.4 million as well as spent $1.76 million on construction work. We will continue to incur additional construction and equipment costs through the remainder of 2022.
Pleasanton facility
During 2021, we signed multiple lease amendments with our lessor in Pleasanton, California to expand the leased space of the facility in the United States to include additional space of 14,379 square feet as well as extend the duration of the leased spaces until September 30, 2026. We have spent approximately $0.3 million on additional equipment for our first pilot scale roll-to-roll line which is expected to be ready for low volume production during the second half of fiscal year 2022. We have also spent $0.2 million on leasehold improvements.
Thurso facility
As part of the Nanotech acquisition in October 2021, we acquired property, plant, and equipment with an estimated fair value of $25.8 million including a 105,000 square foot facility in Thurso, Quebec. Approximately 35,000 square feet is being utilized for existing production capacity, and the remaining 70,000 square feet is available to expand output to facilitate future growth. We are currently developing a facility expansion plan for 2022.
In April 2022, we have been awarded $2.2 million in additional purchase orders under the development contract between our wholly owned subsidiary, Nanotech, and a confidential central bank client.
RESULTS OF OPERATIONS
Revenue and Gross Profit
|
| Three months ended March 31, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
|
| Change |
| |||||||
Product sales |
| $ | 168,127 |
|
| $ | 22,047 |
|
| $ | 146,080 |
|
|
| 663 | % |
Development revenue |
|
| 2,806,568 |
|
|
| 574,256 |
|
|
| 2,232,312 |
|
|
| 389 | % |
Total Revenue |
|
| 2,974,695 |
|
|
| 596,303 |
|
|
| 2,378,392 |
|
|
| 399 | % |
Cost of goods sold |
|
| 778,712 |
|
|
| 400 |
|
|
| 778,312 |
|
|
| 194578 | % |
Gross Profit |
| $ | 2,195,983 |
|
| $ | 595,903 |
|
| $ | 1,600,080 |
|
|
| 269 | % |
The increase in product sales is due to the closing the name of Line Drive Energy, LLC was changedrevenue generated primarily from Nanotech amounting to Torchlight Hazel, LLC.
Property | Quarter | Oil Production {BBLS} | Gas Production {MCF} | Oil Revenue | Gas Revenue | Total Revenue |
Marcelina (TX) | Q1 - 2016 | 3,000 | 0 | $92,546 | $- | $92,546 |
Oklahoma | Q1 - 2016 | 2,026 | 21,148 | 54,289 | 38,624 | 92,913 |
Kansas | Q1 - 2016 | 312 | 0 | 8,854 | - | 8,854 |
Total Q1-2016 | 5,338 | 21,148 | $155,689 | $38,624 | $194,313 | |
Marcelina (TX) | Q2 - 2016 | 917 | 0 | $38,812 | $- | $38,812 |
Oklahoma | Q2 - 2016 | 675 | 9,689 | 30,411 | 11,142 | 41,553 |
Kansas | Q2 - 2016 | 731 | 0 | 24,855 | - | 24,855 |
Total Q2-2016 | 2,323 | 9,689 | $94,078 | $11,142 | $105,220 | |
Marcelina (TX) | Q3 - 2016 | 464 | 0 | $20,189 | $- | $20,189 |
Oklahoma | Q3 - 2016 | 180 | 2,830 | 7,925 | 6,170 | 14,095 |
Kansas | Q3 - 2016 | 0 | 0 | - | - | - |
Total Q3-2016 | 644 | 2,830 | $28,114 | $6,170 | $34,284 | |
Marcelina (TX) | Q4 - 2016 | 0 | 0 | $- | $- | $- |
Oklahoma | Q4 - 2016 | 184 | 2,845 | 8,024 | 8,569 | 16,593 |
Kansas | Q4 - 2016 | 0 | 0 | - | - | - |
Total Q4-2016 | 184 | 2,845 | $8,024 | $8,569 | $16,593 | |
Oklahoma | Q1 - 2017 | 101 | 2,303 | $5,346 | $7,604 | $12,950 |
Hazel (TX) | Q1 - 2017 | 0 | 0 | - | - | - |
Total Q1-2017 | 101 | 2,303 | $5,346 | $7,604 | $12,950 | |
Oklahoma | Q2 - 2017 | 140 | 2,332 | 6,594 | 6,709 | 13,303 |
Hazel (TX) | Q2 - 2017 | 0 | 0 | - | - | - |
Total Q2-2017 | 140 | 2,332 | $6,594 | $6,709 | $13,303 | |
Oklahoma | Q3 - 2017 | 132 | 2,041 | 5,733 | 3,727 | 9,460 |
Hazel (TX) | Q3 - 2017 | 204 | 0 | 8,836 | - | 8,836 |
Total Q3-2017 | 336 | 2,041 | $14,569 | $3,727 | $18,296 |
The increase in development revenue of $18,296 compared to $34,284 for the three months ended September 30, 2016. ReferMarch 31, 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 tableproduction costs of production$727,835 from Nanotech pertaining to contract revenue during the period.
24
Operating expenses
|
| Three months ended March 31, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
|
| Change |
| |||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling & Marketing |
| $ | 1,035,986 |
|
| $ | 396,594 |
|
| $ | 639,392 |
|
|
| 161 | % |
General & Administrative |
|
| 14,597,913 |
|
|
| 2,592,885 |
|
|
| 12,005,028 |
|
|
| 463 | % |
Research & Development |
|
| 3,971,139 |
|
|
| 1,779,256 |
|
|
| 2,191,883 |
|
|
| 123 | % |
Total operating expenses |
| $ | 19,605,038 |
|
| $ | 4,768,735 |
|
| $ | 14,836,303 |
|
|
| 311 | % |
The increase in selling and revenue included above for quarterly changes in revenue. Our cost of revenue, consisting of lease operating expenses and production taxes, was $16,499 and $49,908 for the three months ended September 30, 2017 and 2016, respectively.
The changeincrease in general and administrative expenses for the three months ended September 30, 2017March 31, 2022, compared to 2016the same period of 2021, is detailedprimarily due to:
$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. | |
The increase in research and development expenses for the three months ended March 31, 2022, compared to the same period of 2021, is primarily due to:
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 | % |
25
The $0.3 million decrease in net interest expense for the three months ended March 31, 2022, compared to the same period of 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, 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:
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 realized. Therefore, we continue to maintain a valuation allowance against our deferred tax assets.
LIQUIDITY AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- continued
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 Capital Resources
On March 31, 2022, we had cash and cash equivalents of $30.2 million including $0.5 million in restricted cash compared to $47.4 million in cash and cash equivalents at December 31, 2021.
During the three months ended March 31, 2022, our primary uses of liquidity included salaries of $5 million, professional fees of $5.7 million, rent and utilities of $1 million and, Oil and Gas drilling costs of $1.1 million as well as settling trade and other payables of $5.1 million.
We believe that our existing cash will be sufficient to meet our working capital (deficit)and capital expenditure needs as production capacity begins to come online. We may need to raise additional capital to expand the commercialization of $(3,797,745)our products, fund our operations and total assetsfurther 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 $22,262,796. Stockholders’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 was $10,217,796.
26
The following table summarizes our cash flows 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 nineperiod, 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 September 30, 2017March 31, 2021, net cash used in operating activities of $2.4 million was $(1,052,641) compared to $(2,773,266)primarily driven by $44.2 million of net loss reported for the nine months ended September 30, 2016, an increaseperiod, and non-cash adjustments of $1,720,625. Cash flow$41.7 million related to 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) operatinginvesting activities for
During the ninethree months ended September 30, 2017 can beMarch 31, 2022, net cash provided by investing activities of $1.1 million was primarily attributed to net lossdriven by proceeds from operationsshort-term investments, offset by $1.8 million purchases of $3,126,485. Cash flow (used in) operating activitiesproperty plant and equipment associated with the construction of the Highfield Park Facility in Canada as well as the equipment purchases for our facility in California, United States.
During the ninethree months ended September 30, 2016 can be primarily attributed toMarch 31, 2021, net loss from operations of $6,660,942. Reference the Consolidated Statements of Cash Flow 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.
Net cash provided by financing activities for
During the ninethree months ended September 30, 2017 was $4,858,719 as compared to $2,071,116 for the nine months ended September 30, 2016. Cash flowMarch 31, 2022, net cash provided by financing activities consistsof $0.3 million was primarily ofdriven by proceeds from promissory notesoptions and warrant exercises. We expect to continue to havewarrants conversion.
During the three months ended March 31, 2021, net cash flow 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 we seek new roundswell as proceeds from government grants of financing$0.2 million.
Commitments and continuecontractual obligations
For a description of our commitments and contractual obligations, please see “Note 18 — Commitments and contingencies” in the Notes to develop our oilthe 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 gas investments.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our common stockcondensed consolidated interim financial statements, please see “Note 2—Significant accounting policies” in the foreseeable future.
Year Ending December 31, | Rent |
Remainder of 2017 | $23,430 |
2018 | $93,720 |
2019 | $93,720 |
To 2019 Expiration | $85,910 |
Total | $296,780 |
27
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.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our management, including ourthe Chief Executive Officer (principal executive officer) and Chief Financial Officer, (principal financial officer), wehas 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 September 30, 2017. March 31, 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 thatand effected by our disclosure controlsmanagement and procedures were effectiveother personnel, to ensure thatprovide reasonable assurance regarding the information required to be disclosed by usreliability of financial reporting and the preparation of consolidated financial statements for external purposes in the reports we submitaccordance with U.S. generally accepted accounting principles. Our management, under the Exchange Act is recorded, processed, summarizedsupervision and reported withinwith the time periods specified in the applicable rules and forms and that such information was accumulated and communicated toparticipation 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:
28
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 alloweda material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis.
Plan for timely decisions regarding disclosure.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:
Changes in Internal Control over Financial ReportingThereControls.
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 September 30, 2017March 31, 2022 that has materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.
29
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.
30
PART II II—OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Refer to the subsection titled “Legal Proceeding” under Note 6, “Commitments“Note 18 — Commitments and Contingencies,” ofcontingencies” in the Notes to the Condensed Consolidated Interim Financial Statements includedof this Form 10-Q.
Item 1A. Risk Factors
For risk factors related to our business, reference is made to Item 1A, "Risk Factors," contained in Part I Item 1 of this Quarterlyour Annual Report on Form 10-Q, which is incorporated herein by reference.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
Item 3. Defaults Upon Senior 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.
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
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Item 6. EXHIBITS
Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).
Exhibit | Description | |
31.1* | ||
31.2* | ||
32.1* | ||
32.2* |
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Incorporated by reference from our previous filings with the SEC
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this reportReport to be signed on its behalf by the undersigned, thereunto duly authorized.
Meta Materials Inc. | |||
Dated: May 10, 2022 | By: | /s/ George Palikaras | |
George Palikaras | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Dated: May 10, 2022 | By: | /s/ Kenneth Rice | |
Ken Rice | |||
Chief Financial Officer and Chief Operating Officer | |||
(Principal Financial and Accounting |
33