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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36247

Meta Materials Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada

74-3237581

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

60 Highfield Park Drive

Dartmouth, Nova Scotia, Canada

B3A 4R9

(Address of principal executive offices)

(Zip Code)

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

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

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

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

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 May 12, 2023, the registrant had 467,206,322 shares of common stock, $0.001 par value per share, outstanding.

 


TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

3

 

 

SUMMARY OF RISK FACTORS

5

 

 

PART I—FINANCIAL INFORMATION

7

Item 1. Financial Statements

7

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

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

34

Item 4. Controls and Procedures

34

 

PART II—OTHER INFORMATION

36

Item 1. Legal Proceedings

36

Item 1A. Risk Factors

36

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

63

Item 3. Defaults Upon Senior Securities

63

Item 4. Mine Safety Disclosures

63

Item 5. Other Information

63

Item 6. Exhibits

64

 

SIGNATURES

65

 

2


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include statements about:

our business strategy;
our future performance;
our strategy for protecting our intellectual property;
our ability to obtain necessary funding on favorable terms or at all;
our ability to retain and increase sales to existing customers;
our plan and ability to secure revenues;
the risk of competitors entering the market;
our ability to expand operations, facilities and hire and retain skilled staff;
our ability to obtain financing to fund future expenditures and capital requirements;
our plans with respect to new facilities and the scaling of our manufacturing capabilities;
the impact of adoption of new accounting standards;
statements relating to the acquisition of Plasma App Ltd., or PAL, including but not limited to the effect the acquisition will have on significantly accelerating line speed and increase our annual capacity for NANOWEB® films as well as KolourOptik®security films;
statements relating to the acquisition of Optodot Corporation, including but not limited to the effect that the acquisition will have on improving the performance of our medical products for signal to noise improvement in MRI scanning and offering simpler, faster, lower-cost assembly processes compatible with current and future battery chemistries;
expectations regarding vehicle electrification;
the capabilities of our technology, including but not limited to expectations regarding NANOWEB® capacity;
our ability to maintain an adequate rate of revenue growth and our future financial performance, including our expectations regarding our revenue, gross profit or gross margin and operating expenses;
our ability to expand our business, including to expand globally and into other markets;
the sufficiency of our present cash and cash equivalents balances and cash flows;
the effect of foreign currency fluctuation; and
the effect of a global chip shortage.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based these forward-looking statements contained in this Quarterly Report on Form 10-Q largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

3


The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

4


SUMMARY OF RISK FACTORS

 

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

We expect to continue to incur losses from operations and negative cash flows, which raise substantial doubt about our ability to continue as a going concern.
We have a limited operating history, which can make it difficult for investors to evaluate our operations and prospects and may increase the risks associated with investing in us.
We have a history of net losses, and we expect to continue to incur losses for the foreseeable future. If we ever achieve profitability, we may not be able to sustain it.
We will need additional financing to execute our business plan and fund operations, for which additional financing may not be available on reasonable terms or at all.
Our ability to obtain financing, if and when necessary, may be impaired by such factors as the capital markets and our limited operating history.
Our operating results fluctuate significantly because of a number of factors, many of which are beyond our control.
If we are unable to maintain effective disclosure controls and procedures, our business, financial position and results of operations could be adversely affected.
We may be unable to develop new products, applications, and end markets for our products.
Our research and marketing development activities and investments may not result in profitable, commercially viable or successfully produced and marketed products.
Because our products typically have lengthy sales cycles, we may experience substantial delays between incurring expenses related to research and development and the generation of revenues.
Disruption in supply from our single source supplier of our holographic raw materials may cause a material adverse effect on our Holography-related products.
Fluctuations in the mix of products sold may adversely affect our financial results.
Variations in the amount of time it takes for us to sell our systems may cause fluctuations in our operating results, which could cause our stock price to decline.
Material weaknesses or significant deficiencies in our internal controls could materially and adversely affect our business, results of operations and financial condition.
Impairment of our goodwill or other intangible assets could materially and adversely affect our business, operating results, and financial condition.
We depend on our OEM customers and system integrators to incorporate our products into their systems.
Our revenues may be concentrated in a few customers, and if we lose any of these customers, or these customers do not pay us, our revenues could be materially adversely affected.
The markets in which we participate are intensely competitive.
Our agreements with various national governments and suppliers to such governments subject us to unique risks.
We are subject to the Foreign Corrupt Practices Act and similar anti-bribery and anti-corruption laws, as well as governmental export and import controls, all of which could subject us to liability or impair our ability to compete in international markets.
We may experience delays in providing sufficient product for future testing of our products due to ongoing supply chain limitations.
Change in laws, regulations or guidelines relating to our business plan and activities could adversely affect our business.
If we are unable to make acquisitions, or successfully integrate them into our business, our results of operations and financial condition could be adversely affected.
The regulatory approval process for our medical products in the United States and other countries around the world is time-consuming and complicated, and we may not obtain the approval required to market a product within the timeline required,

5


or at all. Additionally, we may lose regulatory approval and/or our products may become subject to new and anticipated foreign regulations.
Development of medical devices and related operations are subject to extensive government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could harm our business.
Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare system, could harm our business, financial condition, and results of operations.
If coverage and reimbursement from third-party payors for procedures using our medical products significantly decline, physicians, hospitals, and other healthcare providers may be reluctant to use our products and our sales may decline.
If we or our contractors fail to comply with healthcare and other governmental regulations, we could face substantial fines and penalties and our business, results of operations and financial condition could be adversely affected.
If we fail to obtain and maintain necessary regulatory clearances, approvals, or certifications for our products, or if clearances, approvals or certifications for future products and indications are delayed or not issued, our commercial operations would be harmed.
Semiconductors for inclusion in consumer products have shorter product life cycles.
We may not be able to increase production capacity to meet the present and future demand for our products.
Our gross margin is dependent on a number of factors, including our level of capacity utilization.
Our success depends on our ability to manufacture our products efficiently.
Increasing raw material prices could impact our profitability.
Our revenues are dependent upon our products being designed into our customers’ products.
We rely on our distributors and sales representatives to sell some of our products.
Costs related to product defects and errata may harm our results of operations and business.
We order materials and commence production in advance of anticipated customer demand. Therefore, revenue shortfalls may also result in inventory write-downs.
Our international operations expose us to material risks.
Business interruptions may damage our facilities or those of our suppliers.
We are exposed to risks that our employees, consultants, or other commercial partners and business associates may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
Compliance with environmental laws and regulations could be expensive, and failure to comply with these laws and regulations could subject us to significant liability.
Our insurance coverage strategy may not be adequate to protect us from all business risks.
The risk of loss of our intellectual property, trade secrets or other sensitive business or customer confidential information or disruption of operations due to cyberattacks or data breaches could negatively impact our financial results.
Cybersecurity breaches and information technology failures could harm our business by increasing our costs and negatively impacting our business operations.
Changes in laws or regulations relating to privacy, information security and data protection, or any actual or perceived failure by us to comply with such laws and regulations or any other obligations, could adversely affect our business.
We are subject to taxation-related risks in multiple jurisdictions, and the adoption and interpretation of new tax legislation, tax regulations, tax rulings, or exposure to additional tax liabilities could materially affect our business, financial condition and results of operations.
Our ability to use our deferred tax assets to offset future taxable income is subject to certain limitations, which may have a material impact on our business, financial condition or results of operations.

6


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

META MATERIALS INC.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (UNAUDITED)

 

 

 

As of

 

 

As of

 

 

 

March 31, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,032,996

 

 

$

10,090,858

 

Restricted cash

 

 

508,627

 

 

 

1,720,613

 

Accounts and other receivables

 

 

837,832

 

 

 

902,718

 

Notes receivable, net of allowance for credit losses

 

 

621,150

 

 

 

2,211,900

 

Inventory

 

 

459,619

 

 

 

468,027

 

Prepaid expenses and other current assets

 

 

8,008,047

 

 

 

7,202,099

 

Due from related parties

 

 

8,521

 

 

 

8,461

 

Total current assets

 

 

16,476,792

 

 

 

22,604,676

 

Intangible assets, net

 

 

54,894,466

 

 

 

56,313,317

 

Property, plant and equipment, net

 

 

43,668,481

 

 

 

42,674,699

 

Operating lease right-of-use assets

 

 

5,380,817

 

 

 

5,576,824

 

Goodwill

 

 

281,945,633

 

 

 

281,748,466

 

Total assets

 

$

402,366,189

 

 

$

408,917,982

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

$

15,770,279

 

 

$

16,694,211

 

Current portion of long-term debt

 

 

655,485

 

 

 

483,226

 

Current portion of deferred revenues

 

 

730,952

 

 

 

730,501

 

Current portion of deferred government assistance

 

 

805,207

 

 

 

799,490

 

Current portion of operating lease liabilities

 

 

986,811

 

 

 

967,126

 

Total current liabilities

 

 

18,948,734

 

 

 

19,674,554

 

Deferred revenues

 

 

475,628

 

 

 

479,808

 

Deferred government assistance

 

 

388,455

 

 

 

319,017

 

Deferred tax liabilities

 

 

3,022,870

 

 

 

3,253,985

 

Long-term operating lease liabilities

 

 

3,244,799

 

 

 

3,375,031

 

Funding obligation

 

 

186,352

 

 

 

180,705

 

Long-term debt

 

 

3,129,219

 

 

 

3,070,729

 

Total liabilities

 

 

29,396,057

 

 

 

30,353,829

 

Stockholders’ equity

 

 

 

 

 

 

Common stock - $0.001 par value; 1,000,000,000 shares authorized, 383,744,889 shares issued and outstanding at March 31, 2023, and $0.001 par value; 1,000,000,000 shares authorized, 362,247,867 shares issued and outstanding at December 31, 2022

 

 

361,922

 

 

 

340,425

 

Additional paid-in capital

 

 

603,693,239

 

 

 

590,962,866

 

Accumulated other comprehensive loss

 

 

(4,920,023

)

 

 

(5,242,810

)

Accumulated deficit

 

 

(226,165,006

)

 

 

(207,496,328

)

Total stockholders’ equity

 

 

372,970,132

 

 

 

378,564,153

 

Total liabilities and stockholders’ equity

 

$

402,366,189

 

 

$

408,917,982

 

Commitments and contingencies (Note 20)

Subsequent events (Note 21)

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

7


META MATERIALS INC.

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

 

 

Three months ended March 31,

 

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

Product sales

 

$

58,699

 

 

$

168,127

 

Development revenue

 

 

1,353,560

 

 

 

2,806,568

 

Total revenue

 

 

1,412,259

 

 

 

2,974,695

 

Cost of goods sold

 

 

740,980

 

 

 

778,712

 

Gross profit

 

 

671,279

 

 

 

2,195,983

 

Operating expenses:

 

 

 

 

 

 

Selling & marketing

 

 

2,525,446

 

 

 

1,035,986

 

General & administrative

 

 

10,185,571

 

 

 

14,597,913

 

Research & development

 

 

6,519,464

 

 

 

3,971,139

 

Total operating expenses

 

 

19,230,481

 

 

 

19,605,038

 

Loss from operations

 

 

(18,559,202

)

 

 

(17,409,055

)

Interest expense, net

 

 

(112,998

)

 

 

(164,434

)

Gain on foreign exchange, net

 

 

284,911

 

 

 

148,391

 

Other expenses, net

 

 

(578,120

)

 

 

(1,009,443

)

Total other expenses, net

 

 

(406,207

)

 

 

(1,025,486

)

Loss before income taxes

 

 

(18,965,409

)

 

 

(18,434,541

)

Income tax recovery

 

 

296,731

 

 

 

 

Net loss

 

$

(18,668,678

)

 

$

(18,434,541

)

Other comprehensive income net of tax

 

 

 

 

 

 

Foreign currency translation gain

 

 

322,787

 

 

 

905,382

 

Total other comprehensive income

 

 

322,787

 

 

 

905,382

 

Comprehensive loss

 

$

(18,345,891

)

 

$

(17,529,159

)

Basic and diluted loss per share

 

$

(0.05

)

 

$

(0.06

)

Weighted average number of shares outstanding - basic and
   diluted

 

 

368,879,341

 

 

 

285,224,469

 

 

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

8


META MATERIALS INC.

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

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (loss)

 

 

Deficit

 

 

Equity

 

Balance, January 1, 2023

 

 

362,247,867

 

 

$

340,425

 

 

$

590,962,866

 

 

$

(5,242,810

)

 

$

(207,496,328

)

 

$

378,564,153

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,668,678

)

 

 

(18,668,678

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

322,787

 

 

 

 

 

 

322,787

 

Proceeds from issuance of common stock

 

 

17,573,969

 

 

 

17,574

 

 

 

10,459,495

 

 

 

 

 

 

 

 

 

10,477,069

 

Stock issuance costs

 

 

 

 

 

 

 

 

(438,785

)

 

 

 

 

 

 

 

 

(438,785

)

Proceeds from exercise of stock options

 

 

2,634,244

 

 

 

2,634

 

 

 

708,612

 

 

 

 

 

 

 

 

 

711,246

 

Settlement of restricted stock units

 

 

1,288,809

 

 

 

1,289

 

 

 

(1,289

)

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,002,340

 

 

 

 

 

 

 

 

 

2,002,340

 

Balance, March 31, 2023

 

 

383,744,889

 

 

$

361,922

 

 

$

603,693,239

 

 

$

(4,920,023

)

 

$

(226,165,006

)

 

$

372,970,132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Proceeds from exercise of stock options

 

 

730,249

 

 

 

730

 

 

 

196,437

 

 

 

 

 

 

 

 

 

197,167

 

Proceeds from 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

 

 

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

9


META MATERIALS INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

Three months ended March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(18,668,678

)

 

$

(18,434,541

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Non-cash finance income

 

 

 

 

 

(12,920

)

Non-cash interest expense

 

 

137,657

 

 

 

126,714

 

Non-cash interest income

 

 

(391,111

)

 

 

 

Non-cash lease expense

 

 

401,528

 

 

 

240,548

 

Deferred income tax

 

 

(296,731

)

 

 

 

Depreciation and amortization

 

 

3,244,511

 

 

 

1,672,969

 

Loss from disposal of property and equipment

 

 

18,843

 

 

 

 

Credit loss expense

 

 

981,861

 

 

 

 

Unrealized foreign currency exchange gain

 

 

(221,535

)

 

 

(140,902

)

Change in deferred revenue

 

 

(4,580

)

 

 

(79,146

)

Non-cash government assistance

 

 

 

 

 

(3,047

)

Stock-based compensation

 

 

2,002,343

 

 

 

3,995,442

 

Non-cash consulting expense

 

 

 

 

 

196,541

 

Changes in operating assets and liabilities

 

 

(2,724,270

)

 

 

(6,306,857

)

Net cash used in operating activities

 

 

(15,520,162

)

 

 

(18,745,199

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(1,693,768

)

 

 

(1,746,936

)

Proceeds from short-term investments

 

 

 

 

 

2,884,999

 

Proceeds from below-market capital government loan

 

 

256,240

 

 

 

 

Proceeds from collection of notes receivable

 

 

1,000,000

 

 

 

 

Net cash (used in) provided by investing activities

 

 

(437,528

)

 

 

1,138,063

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

10,477,069

 

 

 

 

Stock issuance costs paid on the issuance of common stock

 

 

(438,785

)

 

 

 

Repayments of long-term debt

 

 

(85,457

)

 

 

(91,641

)

Proceeds from stock option exercises

 

 

711,246

 

 

 

197,167

 

Proceeds from warrants exercises

 

 

 

 

 

169,575

 

Net cash provided by financing activities

 

 

10,664,073

 

 

 

275,101

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(5,293,617

)

 

 

(17,332,035

)

Cash, cash equivalents and restricted cash at beginning of the period

 

 

11,811,471

 

 

 

47,434,472

 

Effects of exchange rate changes on cash, cash equivalents and restricted cash

 

 

23,769

 

 

 

126,233

 

Cash, cash equivalents and restricted cash at end of the period

 

$

6,541,623

 

 

$

30,228,670

 

Supplemental cash flow information

 

 

 

 

 

 

Accrued purchases of property and equipment

 

 

1,998,469

 

 

 

1,772,821

 

Right-of-use assets obtained in exchange for lease liabilities

 

 

 

 

 

146,822

 

 

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

10


META MATERIALS INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

1. Corporate information

 

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

 

Our principal executive office is located at 60 Highfield Park Drive, Dartmouth, Nova Scotia, Canada.

2. Significant accounting policies

Basis of presentation

These unaudited condensed consolidated interim financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America, or US GAAP. Our fiscal year-end is December 31. The condensed consolidated interim financial statements include the accounts of Meta Materials Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation.

These unaudited condensed consolidated interim financial statements do not include all of the information and notes required by US GAAP for annual financial statements. Accordingly, these unaudited condensed consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements and notes for the years ended December 31, 2022 and 2021, filed with the SEC on Forms 10-K and 10-K/A, respectively.

 

Recently Adopted Accounting Pronouncements

 

ASU 2021-08:

In October 2021, the Financial Accounting Standards Board, or FASB, issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. We adopted the guidance on January 1, 2023 and its adoption did not have a material effect on our condensed consolidated interim financial statements and related disclosures.

 

Recently Issued Accounting Pronouncements

 

We currently have no material recent accounting pronouncements yet to be adopted.

3. Going Concern

 

At each reporting period, we evaluate whether there are conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. Our evaluation entails analyzing prospective operating budgets and forecasts for expectations of our cash needs and comparing those needs to the current cash and cash equivalent balances. We are required to make certain additional disclosures if we conclude substantial doubt exists and it is not alleviated by our plans or when our plans alleviate substantial doubt about our ability to continue as a going concern.

In accordance with Accounting Standards Codification, or ASC, 205-40, Going Concern, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the condensed consolidated interim financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date

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that these condensed consolidated interim financial statements are issued. In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable.

We have incurred net losses of $18.7 million and $79.1 million for the three months ended March 31, 2023 and the twelve months ended December 31, 2022, respectively, and have an accumulated deficit of $226.2 million as of March 31, 2023. Our expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support our planned operations, raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that these condensed consolidated interim financial statements are issued. Management's plans to alleviate the conditions that raise substantial doubt include reduced spending, and the pursuit of additional capital. Management has concluded the likelihood that its plan to successfully obtain sufficient funding from one or more of these sources, or adequately reduce expenditures, while highly possible, is less than probable because these plans are not entirely within our control and/or have not been approved by our Board of Directors as of the date of these condensed consolidated interim financial statements. If we are unsuccessful in obtaining financing, we will be required to assess alternative forms of action. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed consolidated interim financial statements.

The accompanying condensed consolidated interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated interim financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. These adjustments may be material.

4. Acquisitions

 

Plasma App Ltd acquisition

 

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

 

The acquisition was accounted for as a business combination in accordance with ASC 805.

 

The following table presents the preliminary allocation of consideration paid for the PAL acquisition and fair value of the assets and liabilities acquired:

 

Amount
(USD)

 

Fair value of common stock issued

$

15,290,320

 

Fair value of deferred consideration

 

1,698,926

 

 

$

16,989,246

 

Net assets of PAL:

 

 

Cash and cash equivalents

$

13,822

 

Other assets

 

36,104

 

Intangibles

 

12,600,000

 

Deferred tax liability

 

(3,150,000

)

Goodwill

 

7,489,320

 

 

$

16,989,246

 

 

Acquired intangible assets totaling $12.6 million relate to a developed technology intangible asset. The significant estimates and assumptions used by us in the determination of the fair value of the acquired developed technology intangible asset includes the revenue growth rate and the discount rate. The goodwill resulting from the transaction is attributable to assembled workforce, synergies, technical know-how and expertise. The fair value of acquired assets and liabilities was measured as at the acquisition date based on a valuation report provided by a third-party valuation expert.

 

Losses from the PAL acquisition since the acquisition date included in the condensed consolidated interim statements of operations and comprehensive loss for the three months ended March 31, 2023 were $0.6 million.

 

There were no changes to the preliminary purchase price allocation during the three months ended March 31, 2023. The preliminary purchase price allocation continues to remain subject to change as additional information becomes available concerning the tax basis of the assets acquired. Any additional adjustments, if applicable, to the purchase price allocation will be finalized during the three months ended June 30, 2023.

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Optodot acquisition

On June 22, 2022, we completed a purchase agreement with Optodot Corporation, or Optodot, a developer of advanced materials technologies, to acquire certain assets related to patents and intellectual property for the battery and other industries, or the Optodot acquisition. The consideration transferred included the following:

 

The acquisition was accounted for as a business combination in accordance with ASC 805. The transaction was structured as a tax-free re-organization pursuant to Internal Revenue Code Section 368(a)(1)(c). Accordingly, the tax basis of net assets acquired retain their carryover tax basis and holding period.

The following table presents the preliminary allocation of consideration paid for the Optodot acquisition and fair value of the assets and liabilities acquired:

 

 

Amount
(USD)

 

Fair value of unrestricted common stock issued or to be issued

 

$

41,791,115

 

Fair value of restricted common stock issued

 

 

8,342,152

 

Cash consideration

 

 

3,500,000

 

Total consideration

 

$

53,633,267

 

 

 

 

 

Net assets of Optodot:

 

 

 

Intangibles