META MATERIALS INC. - Annual Report: 2022 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

WASHINGTON, DC 20549

(Mark One)

For the fiscal year ended December 31, 2022

OR

Commission File Number: 001-36247

Meta Materials Inc.

(Exact Name of Registrant as Specified in its Charter)

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

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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 a 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 a 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, a 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.

If an emerging growth company, indicate by a 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on June 30, 2022, was $371,634,314.

The number of shares of Registrant’s Common Stock outstanding as of March 20, 2023 is 382,152,643.

Table of Contents

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this Annual Report on Form 10-K other than statements of historical fact, including statements regarding our future results of operations and financial position, its business strategy and plans, and its objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," “potential," “expect," and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Moreover, 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 Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

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Item 1. Business.

Business Overview

Meta Materials Inc. (also referred to herein as the “Company”, “META®”, “META” “we”, “us”, “our”, or “Resulting Issuer”) 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 Central Bank customers 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.

At META, we create nanostructures on the surfaces that everyone is surrounded by and interacts with - windows, windshields, screens on our devices, even the glasses we wear on our heads – and we believe that the materials we are developing can open up an entirely new world of performance and efficiency.

We specialize in the design and fabrication of metamaterials, a new class of multi-functional surfaces that require less raw material and energy compared to traditional solutions and are able to do things that were previously unachievable.

META in the last decade has developed and acquired a portfolio of intellectual property, and we are now moving toward commercializing products at a performance and price point combination that we believe have the potential to be disruptive in multiple market verticals. Our platform technology includes holography, lithography, electro-optics, nano-optics, battery materials, and medical wireless sensing. In 2021, we acquired the assets and IP which comprise ARfusion®, our platform technology for smart, augmented reality (AR) prescription eyewear, and we added nano-optic security products with the acquisition of Nanotech Security Corp. In 2022, we acquired nanoporous ceramic battery separator technology and high-speed vacuum coating capabilities. 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.

Throughout 2022, we focused our resources on the pilot scale manufacturing of our NANOWEB® transparent conductive film applications, expansion of our production capacity in our ARfusion® smart lenses for AR eyewear, as well as the banknote and brand security lines, and more aggressive design, development and pre-clinical testing of certain medical products.

We have 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.

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META’s customers can benefit from:

What is a Metamaterial?

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.

Controlling light, heat, electricity, and radio waves have played key roles in technological advancements throughout history. Advances in electrical and electromagnetic technologies, semiconductors, 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.

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

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some product lines that require large surface areas, this is combined with a proprietary scanning technique, where the lasers, optically or mechanically, directly write nano-patterns to cover large surface areas with nanometer accuracy.

META’s principal products that employ holography technology are its metaAIR® laser glare protection eyewear, metaAIR® laser glare protection films for law enforcement and holoOPTIX® notch filters. META co-developed its metaAIR® laser glare protection eyewear product with Airbus S.A.S. It has been engineered to provide laser glare protection for pilots, military and law enforcement using META’s holography technology. metaAIR® is a holographic optical filter developed using nano-patterned designs that block and deflect specific colors or wavelengths of light. META launched metaAIR® with strategic and exclusive distribution partner, Satair, a wholly owned Airbus company and started producing and selling metaAIR® in April 2019. The scale-up and specification for the raw photopolymer material used to produce the eyewear was successfully finalized in late 2019 and commercialized in 2020. META launched its laser glare protection films for law enforcement use in late 2020. These films are designed to be applied to face shields and helmet visors providing the wearer with the same type of laser glare eye protection afforded to pilots by metaAIR® glasses while preserving peripheral vision critical to law enforcement duties. holoOPTIX® 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. We commercially launched holoOPTIX® notch filters in November 2020.

META has additional products in development that utilize its proprietary holography technology. Included in the holoOPTIX® 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.

Additionally, our ARfusion® technology combines precision cast lens fabrication tools with functional metamaterials and volume holograms, to provide AR wearable developers with a platform for seamlessly integrating smart technologies into thin lightweight prescription glasses. To achieve widespread commercial adoption and ultimately become as ubiquitous as smartphones, AR glasses must be comfortable, affordable, natural looking, and easy to use. A successful solution needs to achieve high-quality images and a large field of view (FOV) in a fashionable, compact form factor, without adding excess weight. This means that the smart technologies (displays, filters, active dimming) must be embedded within a rugged, cast prescription lens.

Our ARfusion® system was first developed by a Swiss company, Interglass Technology (“Interglass”), which we acquired in February 2021. Interglass designed the automated lens casting system as a more sustainable solution to producing prescription lenses, using a fraction of the material and energy compared to conventional processes. The lenses were directly cast into the final correction using an extensive library of reusable front and back molds. Acrylic monomer injected between the two molds is cured with UV light in seconds. The molds are automatically separated, and the lens substrate is ready in as quick as 1 minute, with no cleaning, polishing or post-production for a simple corrective lens. To accommodate precisely formed and embedded smart AR elements in prescription lenses, ARfusion® produces an optimized, minimal thickness, semi-finished blank lens, ready to be ground to the final curvature on standard ophthalmic processing equipment.

In a traditional cast plastic lens, up to 80% of the original lens blank material is wasted as the prescription is ground into the blank. With the same amount of material, ARfusion® can produce several optimized semi-finished lenses. In a standard thermal process, curing of semi-finished lens blanks for up to 50 hours requires much more energy and process time compared to the UV curable materials and associated processes used by ARfusion®.

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. These master patterns are designed by us and over the years they have become part of a growing library of patterns, enriching the intellectual property (“IP”) of the Company. The nanostructured pattern on the mask is then rolled over a flat surface area writing a nano-pattern into the volume of a photoresist, creating patterned grooves, metal is then evaporated and fills the patterned grooves. The excess metal is then removed by a known post-process called lift-off. The result is conductive metal mesh-patterned surface (registered trademark NANOWEB®) that is not visible to the unaided eye, and which can be fabricated onto any glass or plastic transparent surface in order to offer high transparency, high conductivity and low haze smart materials.

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Our current principal prototype product in lithography technology is 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 2021 and 2022, we have been ordering and upgrading our equipment at MTI US's California facility to efficiently supply NANOWEB® samples in larger volumes. In early 2022, 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. Our roll-to-roll production now matches or exceeds functional performance of wafer-based samples. We have achieved cosmetic uniformity and transparency in our samples and they now exceed customer specifications for transmission, haze and sheet resistance.

There are six NANOWEB®-enabled applications that are currently in early stages of development including:

We have entered into a collaboration agreement with Crossover Solutions Inc. to assist with commercialization of the NANOWEB® enabled products and applications for the automotive industry and with ADI Technologies to help secure contracts with the US Department of Defense.

Nano-optic Structures and Color-shifting Foils

During 2021 we acquired Nanotech Security Corp. "Nanotech" which specializes in designing, originating, recombining, and mass-producing nanotechnology-based films with application for a wide variety of products and markets. Nanotech develops and produces nano-optic structures and color-shifting foils used in authentication and brand protection applications including banknotes, secure government documents, and commercial branding. Our nano-optic security technology platforms include:

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Wireless Sensing and Radio Wave Imaging Technology
 

META’s Wireless Sensing platform uses infrared and radio frequency (RF) transmitters and receivers to collect and measure a variety of biological information enabling non-invasive and safe medical diagnostics. The platform requires 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 META’s 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, which are subject to FDA approval prior to marketing as described in more detail below. glucoWISE®, is in development as a completely non-invasive glucose measurement device. It is being developed first as a tabletop system for use in the home or clinic, 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 began developing metaSURFACE™ (also known as radiWISE™) an innovation which allows an improvement in SNR 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. META is also researching the use of its Radio Wave Imaging technology in breast cancer and stroke diagnosis. We also are developing wireless sensing and radio wave imaging applications from our London, UK and Athens, Greece offices.

During 2022, we developed new prototypes utilizing glucoWISE® technology for new pre-clinical studies and human trials. These prototypes are for a non-invasive glucose monitor that incorporates metamaterial antireflective film as well as dual radio wave and optical sensors which provides for enhanced signal penetration through the skin.

Battery Materials

We acquired the assets and IP of Optodot Corporation, a developer of advanced materials technologies in June 2022, and we began focusing on developing and licensing ceramic separator technology for lithium-ion batteries. The separator is a critical component for battery performance and safety. Ceramic coated plastic separators (CCS) are widely used today. They are prone to failure at high temperatures, leading to battery fires thus aggravating a tenuous safety profile as energy density and battery size increase. Our next-generation NPORE®is the world’s first flexible, free-standing ceramic nanoporous membrane separator for lithium-ion batteries. NPORE® separators eliminate the use of plastic substrate, provide superior functionality and outstanding heat resistance for current and next generation lithium-ion batteries. NPORE®all-ceramic separators (CSP) offer increased safety and performance by eliminating the plastic layer entirely, and exhibit less than 1% heat shrinkage at temperatures up to 200 degrees C. Our third generation electrode coated separators (ECS) combine what are presently two discrete functions in Lithium-ion batteries and offer a simpler, faster, lower-cost assembly process compatible with current and future battery chemistries (siliconanode, lithium metal, and solid state).

The global market for Lithium-ion battery separators was estimated at $5.1 billion in 2021 and is projected to reach $9.0 billion in 2025 (Source: Yano Research Institute Ltd.). Separator shipments were about 5.5 billion square meters in 2021 and are projected to reach 15.9 billion square meters in 2025 (Source: SNE Research). About 15 million square meters are required per GWh of battery capacity.

Additionally, electric vehicle (EV) consumers desire increased range and fast charging to get back on the road quickly. Storing more energy relative to weight and volume and accepting higher charge rates increase the requirements for material performance, stability, and safety. Wider EV adoption demands improved material utilization along the supply chain.

In April 2022, we acquired UK-based Plasma App Ltd., developer of a proprietary, high-speed, pulsed plasma deposition technology. With the combination of these acquired technologies, we plan to develop new battery materials and manufacturing techniques to address all these challenges. PLASMAfusion® high-speed vacuum coating technology has been used to produce prototype NCORE™ thin polymer-metal composite copper current collectors, significantly reducing weight, with a fuse-like feature for increased safety. Lighter batteries increase energy density and vehicle range. Lower copper content makes battery production and recycling more sustainable.

High Speed Coating

PLASMAfusion® is a first of its kind, patented manufacturing platform technology developed by our Oxford, UK based Plasma App Ltd, a wholly owned subsidiary which was acquired during 2022. PLASMAfusion® enables high speed coating of any solid material on any substrate. It uniquely enables doping, multilayering, or mixing of materials in vacuum with controlled stoichiometry distribution within the deposited film at low substrate temperature.

We expect to apply PLASMAfusion® to the metallization step in our roll-to-roll production process for NANOWEB® films as well as KolourOptik® security films. This is expected to significantly accelerate line speed and increase annual capacity. Large scale and efficient metallization is a critical step for volume production of NANOWEB® and many other high volume potential applications such

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as lithium-ion battery components. Large scale metallization is expected to leverage capital equipment investment and substantially reduce cost per square meter of output. META intends to continue to industrialize and scale up PLASMAfusion® including applications for its high volume factory in Thurso, Quebec. Additionally, PLASMAfusion® will be available for licensing and co-development for strategic partners.

PLASMAfusion® creates unprecedented new high-performance nanocomposites in real time by using multiple, time sequenced targets. We believe this is a unique process enabler, likely to facilitate META’s entry into multiple high-growth markets. High energy beam deposition of materials, at low temperature, without solvents and other toxic chemicals, promises highly sustainable, breakthrough performance. Compared to traditional coating technologies, we estimate PLASMAfusion® is approximately 60x more energy efficient compared to Plasma Laser Deposition (PLD) and 8x more efficient compared to Magnetron Sputtering to produce each 100nm of coating on each square cm area of the substrate, while also offering higher adhesion, deposition rates, and overall coating uniformity.

PLASMAfusion® enables design of surfaces and a path to industrial surface manufacturing for a variety of applications including batteries, semiconductors and metamaterials, printed circuit boards and protective optical coatings.

Electro-Optic and IR

We produce high-precision thin film coatings, optics, holographic and lithographic gratings, and optomechanical assemblies for ultraviolet, visible, and infrared applications. For example, we are developing an advanced, electro-optical motion imagery system with applications in the aerospace and defense sectors, and for potential smart city, disaster recovery, wildlife preservation and natural resource monitoring applications.

Customers

Our customers are OEM providers in multiple industries including aerospace, automotive, consumer electronics, communications, energy, banknote and brand security, and medical devices. We organize our development and support efforts around these different vertical markets to enable us to effectively penetrate these markets and to develop products specific to the needs of these OEM customers.

Marketing and Sales

We operate under a Business-to-Business model. Our marketing and sales functions are organized to support and grow this operating model. We utilize a combination of field-based and in-house selling resources to promote and sell our standard off-the-shelf products and a vertical market focused Business Development group to develop and support long-term customer relationships in the vertical market of interest. Our marketing efforts are focused on technical education of our customer base regarding our products, support of a meaningful presence at trade shows and industry events and routine production of collateral materials to support our sales and business development efforts throughout the year.

Manufacturing

We employ a hybrid model for manufacturing our high-performance functional materials and nanocomposites.

We provide research scale production of our products in-house to our customers in the lithography and holography business areas. We are scaling up pilot scale production of in our Pleasanton and Highfield Park facilities. We have current capacity in our Thurso facility to produce 7.5 million square meters per year of our banknote security and brand security product at commercial scale and we are expanding this capacity. In certain instances where volume warrants, we will make available on a license basis, our equipment and proprietary processes to our customers or to third party contractors to produce our products for their needs.

We are constantly improving and investing in our manufacturing capabilities and the associated quality control and resource planning infrastructure. We hold ISO9001 certification for our Highfield Park facility and our Thurso facility.

Research And Development

We operate in a rapidly evolving industry subject to significant technological change and new product introductions and enhancements. We believe that our continued commitment to research and development is a critical element of our ability to introduce new and enhanced products and technologies. In 2022 we invested approximately twenty-five percent (25%) of our operating expenses in our research and development efforts and these activities are integral to maintaining and enhancing our competitive position. We also increasingly seek to deploy our resources to solve fundamental challenges that are both common to, and provide competitive advantage across, our high-performance functional materials and nanocomposites.

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We believe that our success depends in part on our ability to achieve the following in a cost-effective and timely manner:

Intellectual Property

During 2022, we significantly expanded our patent and trademark portfolios in a wide range of applications including holography, lithography, wireless sensing technology, nano-optic structures as well as battery safety, battery separator technology, and high-speed coating capabilities. We added more than 10 patent documents from the Plasma acquisition, and 101 patent documents from the Optodot acquisition. We currently have over 500 active patent documents, of which 315 patents have issued, compared with 269 active patent documents and 163 issued patents one year ago. Our patent portfolio is comprised of 126 patent families, of which 68 include at least one issued patent. During 2022 we also filed 44 trademark registration applications and 15 trademarks were registered, resulting in a total of 60 registered trademarks and 98 pending applications. We believe that our combination of patents, trademarks, and trade secrets provides us with an important competitive advantage, marketing benefits, and licensing revenue opportunities.

Regulation

We are subject to significant regulation by local, state, federal and international laws in all jurisdictions in which we operate. Compliance with these requirements can be costly and time consuming. We believe that our operations, products, services, and actions substantially comply with applicable regulations in all jurisdictions. However, the risk of non-compliance cannot be eliminated and therefore there is no assurance that future costs related to these regulations will not be incurred. There is also the possibility that regulations will be retroactively applied, interpreted, or applied differently to our operations, products, services, and actions which will require significant time and resources.

The development, testing, manufacturing, marketing, post-market surveillance, distribution, advertising, and labeling of certain medical devices are subject to regulation in the United States by the Center for Devices and Radiological Health of the U.S. Food and Drug Administration (FDA) under the Federal Food, Drug, and Cosmetic Act (FDCA) and comparable state and foreign regulatory agencies. FDA defines a medical device as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component part or accessory, which is (i) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or (ii) intended to affect the structure or any function of the body of man or other animals and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes. Medical devices to be commercially distributed in the United States must receive from the FDA either clearance of a premarket notification, known as 510(k), or premarket approval pursuant to the FDC Act prior to marketing, unless subject to an exemption.

In the U.S., if we market our products for medical purposes, such products would be subject to regulation by the FDA under premarket and post-market control as medical devices, unless an exemption applies, and we would be required to obtain either prior 510(k) clearance or prior premarket approval from the FDA before commercializing the product. Obtaining the requisite regulatory approvals can be expensive and may involve considerable delay. Some countries have regulatory review processes that are substantially longer than U.S. processes. Failure to obtain regulatory approval in a timely manner and meet all of the local regulatory requirements where we plan to market our products could prevent us from marketing products in such countries or subject us to sanctions and fines. Changes to the current regulatory framework, including the imposition of additional or new regulations, could arise at any time during the development or marketing of our products.

FDA classifies medical devices into one of three classes. Devices deemed to pose lower risk to the patient are placed in either class I or II, which, unless an exemption applies, requires the manufacturer to submit a premarket notification requesting FDA clearance for commercial distribution pursuant to Section 510(k) of the FDCA. This process, known as 510(k) clearance, requires that the manufacturer demonstrate that the device is substantially equivalent to a previously cleared and legally marketed 510(k) device or a “pre-amendment” class III device for which premarket approval applications (“PMAs”) have not been required by the FDA. This FDA review process typically takes from four to twelve months, although it can take longer. Most Class I devices are exempted from this 510(k) premarket submission requirement. If no legally marketed predicate can be identified for a new device to enable the use of the 510(k) pathway, the device is automatically classified under the FDCA as Class III, which generally requires premarket approval, or PMA approval. However, the FDA can reclassify or use “de novo classification” for a device that meets the FDCA standards for a Class II device, permitting the device to be marketed without PMA approval. To grant such a reclassification, FDA must determine that the

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FDCA’s general controls alone, or general controls and special controls together, are sufficient to provide a reasonable assurance of the device’s safety and effectiveness. The de novo classification route is generally less burdensome than the PMA approval process. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or those deemed not substantially equivalent to a legally marketed predicate device, are placed in class III. Class III devices typically require PMA approval. To obtain PMA approval, an applicant must demonstrate the reasonable safety and effectiveness of the device based, in part, on data obtained in clinical studies. All clinical studies of investigational medical devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption (“IDE”) regulations, including the requirement for the study sponsor to submit an IDE application to the FDA, unless exempt, which must become effective prior to commencing human clinical studies. PMA reviews generally last between one and two years, although they can take longer. Both the 510(k) and the PMA processes can be expensive and lengthy and may not result in clearance or approval. If we are required to submit our products for premarket review by the FDA, we may be required to delay marketing and commercialization while we obtain premarket clearance or approval from the FDA. There would be no assurance that we could ever obtain such clearance or approval.

All medical devices that are regulated by the FDA are also subject to the quality system regulation. Obtaining the requisite regulatory approvals, including the FDA quality system inspections that are required for PMA approval, can be expensive and may involve considerable delay. The regulatory approval process for such products may be significantly delayed, may be significantly more expensive than anticipated, and may conclude without such products being approved by the FDA. Without timely regulatory approval, we will not be able to launch or successfully commercialize such diagnostic products. Changes to the current regulatory framework, including the imposition of additional or new regulations, could arise at any time during the development or marketing of our products. This may negatively affect our ability to obtain or maintain FDA or comparable regulatory clearance or approval of our products in the future. In addition, regulatory agencies may introduce new requirements that may change the regulatory requirements for us or our customers, or both.

If our products become subject to FDA regulation as medical devices, the regulatory clearance or approval and the maintenance of continued and postmarket regulatory compliance for such products will be expensive, time-consuming, and uncertain both in timing and outcome. Commercialization of such regulated medical devices can increase our exposure under additional laws. For example, medical device companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business and may constrain the financial arrangements and relationships through which we research, as well as sell, market and distribute any medical products for which we obtain marketing authorization. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, data privacy and security, and transparency laws and regulations related to payments and other transfers of value made to physicians and other healthcare providers. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply, we may be subject to penalties, including, without limitation, administrative, civil, and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and imprisonment.

Additionally, we must comply with complex foreign and U.S. laws and regulations, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other local laws prohibiting corrupt payments to governmental officials, anti-competition regulations and sanctions imposed by the U.S. Office of Foreign Assets Control, and other similar laws and regulations. Violations of these laws and regulations could result in fines and penalties, criminal sanctions, restrictions on our business conduct, and on our ability to offer our products in one or more countries, and could also materially affect our brand, our ability to attract and retain employees, our international operations, our business, and our operating results. As we continue to expand our business into multiple international markets, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. Any of these risks could harm our international operations and negatively impact our sales, adversely affecting our business, results of operations, financial condition, and growth prospects.

Human Capital Resources

As of February 28, 2023, we had 239 employees. Approximately 86% of our employees are located in Canada and the United States. Of the total workforce, 114 employees are involved in research and development; 45 employees are involved in operations, manufacturing, service and quality assurance; and 80 employees are involved in sales and marketing, information technology, general management and other administrative functions.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports and proxy and information statements are accessible free of charge on our website at www.metamaterial.com as soon as reasonably practicable after we electronically file such material with, or furnish them to, the SEC. The SEC also maintains an internet site that

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contains reports, proxy and information statements and other information regarding our filings at www.sec.gov. The reference to our company website does not constitute incorporation by reference of the information contained at the site.

Business Combinations

Torchlight RTO

On December 14, 2020, the Company (formerly known as “Torchlight Energy Resources, Inc.” or “Torchlight”) and its subsidiaries, Metamaterial Exchangeco Inc. (formerly named 2798832 Ontario Inc., “Canco”) and 2798831 Ontario Inc. (“Callco”), entered into an Arrangement Agreement (the “Arrangement Agreement”) with Metamaterial Inc. ("MMI"), an Ontario corporation headquartered in Nova Scotia, Canada, to acquire all of the outstanding common stock of MMI by way of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (Ontario), on and subject to the terms and conditions of the Arrangement Agreement (the “Torchlight RTO”). On June 25, 2021, we implemented a reverse stock split, 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, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed.

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

For accounting purposes MMI, the legal subsidiary, has been treated as the accounting acquirer and we the legal parent, have been treated as the accounting acquiree. The transaction has been accounted for as a reverse acquisition in accordance with ASC 805 Business Combination. Accordingly, the consolidated financial statements are a continuation of MMI consolidated financial statements prior to June 28, 2021 and exclude the balance sheets, statements of operations and comprehensive loss, statement of changes in stockholders’ equity and statements of cash flows of Torchlight prior to June 28, 2021. See note 4 of our audited consolidated financial statements for additional information.

On December 14, 2022, we distributed all of our 165,472,241 outstanding shares of Common Stock of Next Bridge Hydrocarbons Inc. (“Next Bridge”) to holders of our Series A Non-Voting Preferred Stock on a pro rata basis. Next Bridge was originally incorporated in Nevada on August 31, 2021 as OilCo. Holdings, Inc. (and changed its name to Next Bridge Hydrocarbons, Inc. pursuant to its Amended and Restated Articles of Incorporation filed on June 30, 2022) and was previously our wholly owned subsidiary. Immediately after the distribution, Next Bridge became an independent company, and as a result, we have deconsolidated the financial results of Next Bridge from our consolidated financial results from December 14, 2022 onwards. See note 5 of our audited consolidated financial statements for additional information on this transaction.

Nanotech acquisition

On August 5, 2021, we announced the signing of a definitive agreement to acquire Nanotech. On October 5, 2021, a wholly owned subsidiary of META purchased 100% of Nanotech’s common stock at CA$1.25 per share. In addition, the transaction price included the settlement of certain Nanotech share awards outstanding immediately prior to the closing of the agreement, including the repurchase and cancellation of 303,391 Nanotech restricted share units ("RSU") at a purchase price of CA$1.25 per RSU and the settlement of 4,359,000 Nanotech in-the-money stock options at a purchase price equal to CA$1.25 per option, less the exercise price thereof. The consideration payable to securityholders under the arrangement was payable in cash, resulting in a total purchase price of $72.1 million.

Nanotech is incorporated under the laws of British Columbia, Canada. Nanotech’s head office is located at #505 - 3292 Production Way, Burnaby, BC, Canada V5A 4R4. In addition, Nanotech owns and operates a manufacturing facility located in Thurso, Quebec.

Plasma App Ltd acquisition

On April 1, 2022, we completed the purchase of 100% of the issued and outstanding shares of Plasma App Ltd. ("PAL"). 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.

We issued an aggregate of 9,677,419 shares of our common stock to PAL's shareholders at closing, representing a number of shares of common stock equal to $18,000,000 divided by $1.86 (the volume weighted average price for the ten trading days ending on March 31, 2022), with an additional deferral of common stock equal to $2,000,000 divided by $1.86 to be issued subject to satisfaction of certain claims and warranties.

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Optodot acquisition

We completed an asset purchase agreement with Optodot Corporation (“Optodot”) on June 22, 2022). Optodot, based in Devens, Massachusetts, USA, is a developer of advanced materials technologies for the battery and other industries.

The consideration transferred included the following: A cash payment of $3,500,000 as well as unrestricted common stock equal to $37,500,000 divided by our common stock's daily volume weighted average trading price per share on the Nasdaq Capital Market for a period of twenty trading days ending on June 21, 2022 and restricted common stock, subject to milestones as set forth in the Purchase Agreement, equal to $7,500,000 divided by the daily volume weighted average trading price per share of our Common Stock on the Nasdaq Capital Market for the consecutive period of twenty trading days ending on June 21, 2022.

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Item 1A. Risk Factors.

The following factors could materially affect our business, financial condition or results of operations and should be carefully considered in evaluating us and our business, in addition to other information presented elsewhere in this report.

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 after the summary of risk factors and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission ("SEC") before making an investment decision regarding our common stock.

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Risks Related to our Business

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 incurred recurring consolidated net losses since our inception and expects our operating costs to continue to increase in future periods as we expend substantial financial and other resources on, among other things, business and headcount expansion in operations, sales and marketing, research and development, and administration as a public company. These expenditures may not result in additional revenues or the growth of our business. If we fail to grow revenues or to achieve profitability while our operating costs increase, our business, financial condition, results of operations and growth prospects will be materially, adversely affected.

We are expected to be subject to many of the risks common to early-stage enterprises for the foreseeable future, including challenges related to laws, regulations, licensing, integrating and retaining qualified employees; making effective use of limited resources; achieving market acceptance of existing and future products; competing against companies with greater financial and technical resources; acquiring and retaining customers; and developing new solutions; and challenges relating to identified material weaknesses in internal control.

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 have incurred losses from operations since our inception and expect to continue to incur losses from operations for the foreseeable future. We reported net losses of $79.1 million and $91.0 million for the years ended December 31, 2022 and 2021, respectively. As a

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result of these losses, as of December 31, 2022, we had an accumulated deficit of $207.5 million. We expect to continue to incur significant sales and marketing, research and development, regulatory and other expenses as we grow our business. In addition, we expect our general and administrative expenses to increase due to the additional costs associated with being a public company. The net losses that we incur may fluctuate significantly from period to period. We will need to generate significant additional revenue in order to achieve and sustain profitability. Even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time.

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 anticipate incurring additional losses until such time, if ever, we can achieve profitability. Substantial additional financing will be needed to fund our development, marketing and sales activities and generally to commercialize our technology. These factors raise substantial doubt about our ability to continue as a going concern.

We will seek to obtain additional capital through the issuance of debt or equity financings or other arrangements to fund operations; however, there can be no assurance we will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing shareholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit our ability to pay dividends or make other distributions to shareholders. If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in our ability to raise capital, we believe that there is substantial doubt as to our ability to continue as a going concern.

We will need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.

We will need to raise additional capital to expand the commercialization of our products, fund our operations and further our research and development activities. We will pursue sources of additional capital through various financing transactions or arrangements, including the sale/leaseback of certain properties, joint venturing of projects, debt financing, equity financing, or other means. We may not be successful in identifying suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means.

Our ability to obtain financing, if and when necessary, may be impaired by such factors as the capital markets and our limited operating history.

Any additional capital raised through the sale of equity may dilute the ownership percentage of our stockholders. Raising any such capital could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.

In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, which may adversely impact our financial condition.

If we are unable to maintain effective disclosure controls and procedures, our business, financial position and results of operations could be adversely affected

We are subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our management has concluded that a material weakness in our internal control over financial reporting exists at December 31, 2022. Management has further concluded that this material weakness resulted in our disclosure controls and procedures not being effective as of December 31, 2022. Please see Item 9A of Part II, Controls and Procedures, for more information about the material weakness that we identified.

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We may be unable to develop new products, applications, and end markets for our products.

Our future success will depend in part on our ability to generate sales of our products as well as generating development revenue. Current and potential customers may have substantial investment in, and know-how related to our technologies. Customers may be reluctant to change from incumbent suppliers or cease using their own solutions, or our products may miss the design and procurement cycles of our customers. Many target markets have historically been slow to adopt new technologies. These markets often require long testing and qualification periods or lengthy government approval processes before admitting new suppliers or adopting new technologies.

Introduction of new products and product enhancements will require that we effectively transfer production processes from research and development to manufacturing and coordinate efforts with those suppliers to achieve increased production volume rapidly. If we are unable to implement this strategy to develop new applications and end markets for products or develop new products, the business, financial condition, results of operations and growth prospects could be materially adversely affected. In addition, any newly developed or enhanced products may not achieve market acceptance or may be rendered obsolete or less competitive by the introduction of new products by other companies.

Our research and marketing development activities and investments may not result in profitable, commercially viable or successfully produced and marketed products.

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

Disruption in supply from our single source supplier of our holographic raw materials may cause a material adverse effect on our Holography-related products.

We purchase our holographic raw materials from a tier 1 German manufacturer, which is a single source supplier. Disruption in supply from this supplier for any number of factors may cause a material adverse effect on our Holography-related products, which would negatively impact our financial condition and results of operations.

Impairment of our goodwill or other intangible assets could materially and adversely affect our business, operating results, and financial condition.

Events or changes in circumstances, such as declines in our stock price or market capitalization, could increase the likelihood that we will be required to recognize an impairment charge against our goodwill and/or intangible assets. In particular, these or other adverse events or changes in circumstances may affect the estimated undiscounted future operating cash flows expected to be derived from our goodwill and intangible assets. We have recently experienced substantial declines in our stock price, and continued weakness or further declines in our stock price increase the likelihood that we may be required to recognize impairment charges. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge. We cannot provide assurances that we will not in the future be required to recognize impairment charges. Please see Item 7 of Part II, Management’s Discussion and Analysis of Financial Condition and Results of Operation – Goodwill, for more information.

For example, a sustained decline in market capitalization below book value is an indicator that goodwill and other intangible assets should be tested for impairment under ASC 350 Intangibles – Goodwill and Other. During the period from January 1, 2022 to December 31, 2022, our stock price ranged between a high of $2.95 and a low of $0.63 and as of December 31, 2022 our market capitalization was $431.1 million and the book value of our goodwill was $281.7 million. While our market capitalization exceeded the book value of our goodwill as of December 31, 2022, as of March 17, 2023, our market capitalization is approximately $191.1 (based on a closing price of $0.50 per share) million and the book value of our goodwill is $281.7 million, and as such we may be required to recognize an impairment loss in the future if the drop in our market capitalization is deemed to be sustained.

We depend on our OEM customers and system integrators to incorporate our products into their systems.

Our revenues depend, in part, on our ability to maintain existing and secure new OEM customers. Our revenues also depend, in part, on the ability of our current and potential OEM customers and system integrators to incorporate our products into their systems, and to sell such systems successfully. Limited marketing resources, reluctance to invest in research and development and other factors affecting these OEM customers and third-party system integrators could have a substantial impact upon demand for our products, and in turn upon our revenues and financial results. If OEM customers or integrators are not able to adapt existing tools or develop new systems to

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take advantage of the features and benefits of our products or if they perceive us to be an actual or potential competitor, then the opportunities to expand our revenues and increase our margins may be severely limited or delayed. In addition, some of our OEM customers are developing their own competitive products. If they are successful, this may reduce our revenues from these customers.

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.

We rely on a few customers for a significant portion of our revenues. For the year ended December 31, 2022, revenue from one customer accounted for $8.6 million or 84% of total revenue.

We currently derive a significant portion of our revenue from contract services with a G10 central bank. Although we are developing a new security feature under a framework contract with this customer, there can be no assurance that this project will be successful, or that will result in long-term production revenue for this security feature.

Our agreements with various national governments and suppliers to such governments subject us to unique risks.

We must comply with, and are affected by, laws and regulations relating to the award, administration, and performance of various national government contracts. Awards received from such governments may be cancelled or lose funding. Such government contracting parties may require us to increase or decrease production of certain products sold to such governments due to changes in strategy, priorities or other reasons, which could impact production of other products or sales to other customers to meet the requirements of such governments. In addition, such governments routinely retain rights to intellectual property developed in connection with government contracts. Such governments could exercise these rights in certain circumstances in the future, which could have the effect of decreasing the benefit we are able to realize commercially from such intellectual property.

National government agencies routinely audit and investigate government contractors and can decrease or withhold certain payments when it deems systems subject to its review to be inadequate. Additionally, any costs found to be misclassified may be subject to repayment. If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines and suspension, or prohibition from doing business with such governments. In addition, we could suffer serious reputational harm if allegations of impropriety were made against it. Any such imposition of penalties, or the loss of such government contracts, could materially adversely affect our business, financial condition, results of operations and growth prospects

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.

Our business activities may be subject to the U.S. Foreign Corrupt Practices Act (the FCPA), and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate. These laws generally prohibit companies and their employees and third-party business partners, representatives and agents from engaging in corruption and bribery, including offering, promising, giving or authorizing the provision of anything of value, either directly or indirectly, to a government official or commercial party in order to influence official action, direct business to any person, gain any improper advantage, or obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with government officials, including potentially officials of non-U.S. governments.

In addition to our own employees, we may in the future leverage third parties to conduct our business abroad, such as obtaining government licenses and approvals. We and our third-party business partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies, state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of our employees, our third-party business partners, representatives and agents, even if we do not explicitly authorize such activities. There is no certainty that our employees or the employees of our third-party business partners, representatives and agents will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, debarment from U.S. government contracts, substantial diversion of management’s attention, significant legal fees and fines, severe criminal or civil sanctions against us, our officers, or our employees, disgorgement and other sanctions and remedial measures, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, financial condition and stock price.

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The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of certain products, technologies, and software. We must export our products in compliance with U.S. export controls and we may not always be successful in obtaining necessary export licenses. Our failure to obtain required import or export approval for our products or limitations on our ability to export or sell our products imposed by these laws may harm our international and domestic revenues. Noncompliance with these laws could have negative consequences, including government investigations, penalties and reputational harm.

Changes in our products or changes in export, import and economic sanctions laws and regulations may delay our introduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the export or import of our products to or from certain countries altogether. In addition to the tariffs imposed by the U.S. Government on certain items imported from China, it is possible that additional sanctions or restrictions may be imposed by the United States on items imported into the United States from China. Similarly, in addition to the tariffs imposed by China on certain items imported from the United States, it is possible that additional sanctions or restrictions may be imposed by China on items imported into China from the United States. Any such measures could further adversely affect our ability to sell our products to existing or potential customers and harm our ability to compete internationally and grow our business. In addition, generally, tariffs may materially increase the cost of our raw materials and finished goods, may negatively impact our margins as we may not be able to pass on the additional cost through increasing the prices of our products, and may cause the contraction of certain industries, including the Industrial market. Any change in export or import regulations or legislation, shift or change in enforcement, or change in the countries, persons or technologies targeted by these regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations. In such event, our business, financial condition, results of operations and growth prospects could be materially adversely affected.

We may experience delays in providing sufficient product for future testing of our products due to ongoing supply chain limitations.

Due to current supply chain disruptions, our contract manufacturing organizations may experience an inability to manufacture and produce sufficient quantities of our products as we progress through our regulatory testing and/or approval. Should this happen, we may not be able to provide sufficient quantities of our products which could delay our ability to bring products to market. Such a delay would cause us to use more capital than currently planned which may have a material adverse effect on our projected timing of product launches and financials.

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Change in laws, regulations or guidelines relating to our business plan and activities could adversely affect our business.

Our current and proposed operations are subject to a variety of laws, regulations and guidelines relating to production, the conduct of operations, transportation, storage, health and safety, medical device regulation and the protection of the environment. These laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter certain aspects of our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of our business plan and result in a material adverse effect on certain aspects of our planned operations.

As an example, we launched a new product metaAIR® in March 2019 to provide laser glare protection to pilots in the airline industry. Currently, metaAIR® is not subject to any Federal Aviation Administration regulations. However, metaAIR® has yet to receive FDA approval/clearance and could become subject to evolving regulation by governmental authorities as the metaAIR® market evolves further.

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.

We have completed a number of acquisitions during our operating history. We have spent and may continue to spend significant resources identifying and pursuing future acquisition opportunities. Acquisitions involve numerous risks including: (1) difficulties in integrating the operations, technologies and products of the acquired companies; (2) the diversion of management’s attention from other business concerns; and (3) the potential loss of key employees of the acquired companies. Failure to achieve the anticipated benefits of any prior and future acquisitions or to successfully integrate the operations of the acquired companies could have a material and adverse effect on our business, financial condition, and results of operations. Any future acquisitions could also result in potentially dilutive issuance of equity securities, acquisition or divestiture-related write-offs or the assumption of debt and contingent liabilities.

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, or at all. Additionally, we may lose regulatory approval and/or our products may become subject to new and unanticipated foreign regulations.

Our wireless sensing technologies to enhance MRI and glucoWISE® non-invasive glucose_monitoring are under research and development. We have performed many pre-clinical experiments and we are preparing to perform clinical experiments as needed to continue the development of the related products. These products have not yet entered the clinical phase, and we have not engaged with any regulatory authorities regarding any medical uses subject to regulatory approval processes. We can provide no assurance that any clinical trials we commence will be successful, or that we will be successful in obtaining any regulatory approvals for any medical products we may develop in the future.

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.

Any medical devices that we may develop in the future and related operations are subject to extensive regulation in the United States and elsewhere, including by the FDA and by the FDA’s foreign counterparts. The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices: design, development, manufacturing, and release; laboratory, preclinical, and clinical testing; labeling, packaging, content, and language of instructions for use and storage; product safety and efficacy claims; establishment, registration, and device listing; marketing, sales, and distribution; pre-market clearances, approvals, and certifications; service operations; record keeping procedures; advertising and promotion; recalls and field safety corrective actions; post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; post-market studies; and product import and export.

The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales. The FDA and foreign counterparts enforce these regulatory requirements through, among other means, periodic unannounced inspections and periodic reviews of public marketing and promotion materials. We do not know whether we will be found compliant in connection with any future FDA or foreign counterparts’ inspections or reviews. Failure to comply with applicable regulations could jeopardize our ability to sell our medical devices and result in enforcement actions such as: warning letters; untitled letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, approvals, or certifications; withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our medical devices; and in the most serious cases, criminal penalties.

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Legislative or regulatory reforms in the United States or other countries may make it more difficult and costly for us to obtain regulatory clearances, approvals, or certifications for our products or to manufacture, market, or distribute our products after clearance, approval, or certification is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulation of medical devices. In addition, the FDA may change its clearance and approval policies, adopt additional regulations, or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis. The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be promulgated that could prevent, limit, or delay regulatory clearance or approval of our product candidates. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare system, could harm our business, financial condition, and results of operations.

In the United States, there have been, and continue to be, a number of legislative initiatives to contain healthcare costs. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (ACA) was enacted in the United States, which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers. We expect additional state and federal healthcare policies and reform measures to be adopted in the future. Any of these could make it more difficult and costly for us to obtain regulatory clearances or approvals for our products or to manufacture, market, or distribute our products after clearance or approval is obtained. Any such reforms could have a material adverse effect on our industry generally and on our customers. In addition, any healthcare reforms that expand the government’s role in the U.S. healthcare industry may result in decreased sale of our products and lower reimbursement by payors for procedures using our products, any of which could affect demand for our products and/or result in additional pricing pressure, which in turn could impact our ability to successfully commercialize our products and could have an adverse material effect on our business, financial condition, and results of operations. Changes and reforms in the EU and other countries where we may decide to commercialize could have similar effects.

If coverage and reimbursement from third-party payors for procedures using our medical products, if authorized by a regulatory authority, significantly decline, physicians, hospitals, and other healthcare providers may be reluctant to use our products and our sales may decline.

In the United States, healthcare providers who purchase medical products generally rely on third-party payors, including Medicare, Medicaid, and private health insurance plans, to pay for all or a portion of the cost of the medical products that we may commercialize upon regulatory approval or clearance. Any decline in the amount payors are willing to reimburse our medical products, if cleared or approved for commercial use and distribution, may make it difficult for customers to adopt our products and could create additional pricing pressure for us. We may be unable to sell our products on a profitable basis if third-party payors deny coverage or reduce their current levels of reimbursement.

To contain costs of new technologies, governmental healthcare programs and third-party payors are increasingly scrutinizing new and existing treatments by requiring extensive evidence of favorable clinical outcomes. Physicians, hospitals, and other healthcare providers may not purchase our products if they do not receive satisfactory reimbursement from these third-party payors for the cost of using our products. If third-party payors issue non-coverage policies or if our customers are not reimbursed at adequate levels, this could adversely affect sales of our products. Outside of the United States, reimbursement systems vary significantly by country. The marketability of our products may suffer if government and commercial third-party payors fail to provide adequate coverage and reimbursement. Even if favorable coverage and reimbursement status is attained, less favorable coverage policies and reimbursement rates may be implemented in the future.

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.

We are subject to certain federal, state, and foreign fraud and abuse laws, health information privacy and security laws, and transparency laws regarding payments and other transfers of value made to physicians and other healthcare professionals that could subject us to substantial penalties. Additionally, any challenge to, or investigation into, our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business. Our arrangements with physicians, hospitals and medical centers could expose us to broadly applicable fraud and abuse laws and other laws and regulations that may restrict the financial arrangements and relationships through which we may market, sell, and distribute our medical products after we receive the applicable marketing authorization. Our employees, consultants, and commercial partners may engage in misconduct or other improper activities, including

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non-compliance with regulatory standards and requirements. Federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation:

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If our operations are found to be in violation of any of the federal, state and foreign laws described above or any other current or future fraud and abuse or other healthcare laws and regulations that apply to us, we may be subject to penalties, including significant criminal, civil, and administrative penalties, damages, fines, imprisonment for individuals, exclusion from participation in government programs, such as Medicare and Medicaid, and we could be required to curtail or cease our operations. Any of the foregoing consequences could seriously harm our business and our financial results.

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.

Our medical products are subject to extensive regulation by the FDA in the United States and by regulatory agencies in other countries outside of the United States. Government regulations specific to medical devices are wide ranging and govern, among other things:

Before a new medical device, or a new intended use for an existing product, can be marketed in the United States, a company must first submit and receive 510(k) clearance pursuant to Section 510(k) of the Food, Drug and Cosmetic Act (FDCA), approval of a PMA by the FDA, or grant of a de novo classification request from the FDA, unless an exemption applies.

In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, in order to clear the proposed device for marketing. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence. In the PMA approval process, the FDA must determine that a proposed device is safe and effective for its intended use based on extensive data, including technical, pre-clinical, clinical trial, manufacturing, and labeling data. The PMA process is typically required for devices for which the 510(k) process cannot be used and that are deemed to pose the greatest risk, such as life sustaining, life supporting, or implantable devices. In the de novo classification process, a manufacturer whose novel device under the FDCA would otherwise be automatically classified as Class III and require the submission and approval of a PMA prior to marketing is able to request down-classification of the device to Class I or Class II on the basis that the device presents a low or moderate risk. If the FDA grants the de novo classification request, the applicant will receive authorization to market the device. This device type may be used subsequently as a predicate device for future 510(k) submissions. Modifications to products that are approved through a PMA application generally need prior FDA approval of a PMA supplement. Similarly, some modifications made to products cleared through a 510(k) submission may require a new 510(k) clearance, or such modification may put the device into Class III and require PMA approval or the grant of a de novo classification request.

The PMA approval, 510(k) clearance, and de novo classification processes can be expensive, lengthy, and uncertain. Any delay or failure to obtain necessary regulatory approvals, clearances or certifications would have a material adverse effect on our business, financial condition, and results of operations.

The FDA and foreign bodies can delay, limit, or deny clearance, approval, or certification of a device for many reasons, including:

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Upon commercialization of any medical devices for which we receive FDA clearance or approval, we are required to investigate all product complaints we receive, and timely file reports with the FDA, including MDRs that require that we report to regulatory authorities if our products may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not submitted in a timely manner, regulators may impose sanctions and we may be subject to product liability or regulatory enforcement actions, including warning letters, untitled letters, fines, civil penalties, recalls, seizures, operating restrictions, denial of requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products, withdrawal of current 510(k) clearances or premarket approvals, and narrowing of approved or cleared product labeling, all of which could harm our business. In addition, the FDA may provide notice of and conduct additional inspections, such as “for cause” inspections, of our business, sites, and facilities as part of its review process. Similar requirements may apply in foreign countries.

If we initiate a correction or removal action for our products to reduce a significant risk to health posed by our products, we would be required to submit a publicly available correction and removal report to the FDA and, in many cases, similar reports to other regulatory agencies. This report could be classified by the FDA as a device recall which could lead to increased scrutiny from the FDA, other international regulatory agencies, and our customers regarding the quality and safety of our products. Furthermore, the submission of these reports could be used by competitors against us and cause physicians to delay or cancel orders, which could harm our reputation.

The FDA and the Federal Trade Commission (FTC) also regulate the advertising, promotion, and labeling of our products to ensure that the claims we make are consistent with our regulatory authorizations, that there is adequate and reasonable scientific data to substantiate the claims, and that our promotional labeling and advertising is neither false nor misleading in any respect. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated, or not permissible, we may be subject to enforcement actions, including adverse publicity and/or warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions.

The FDA, state authorities, and foreign counterparts have broad investigation and enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state agencies, or foreign counterparts, which may include any of the following sanctions:

If any of these events were to occur, our business and financial condition could be harmed. In addition, the FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our products. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval or certification that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, financial condition, and results of operations.

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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.

We are exposed to the risk that our employees, consultants, and other commercial partners and business associates may engage in fraudulent or illegal activity. Misconduct by these parties could include intentional, reckless, or negligent conduct or other unauthorized activities that violate the regulations of the FDA and other regulators (both domestic and foreign), including those laws requiring the reporting of true, complete, and accurate information to such regulators, manufacturing standards, healthcare fraud and abuse laws, and regulations in the United States and internationally or laws that require the true, complete, and accurate reporting of financial information or data. In particular, sales, marketing, and business arrangements in the healthcare industry, including the sale of medical devices, are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. It is not always possible to identify and deter misconduct by our employees, consultants, and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal, and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of operations, any of which could adversely affect our business, financial condition and results of operations. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees and reputational harm, and divert the attention of management in defending ourselves against any of these claims or investigations.

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 research and development and manufacturing operations involve the use of some hazardous substances and are subject to a variety of federal, state, local, and foreign environmental laws and regulations relating to the storage, use, discharge, disposal, remediation of, and human exposure to, hazardous substances and the sale, labeling, collection, recycling, treatment, and disposal of products containing hazardous substances. Liability under environmental laws and regulations can be joint and several and without regard to fault or negligence. Compliance with environmental laws and regulations may be expensive and noncompliance could result in substantial liabilities, fines and penalties, personal injury and third-party property damage claims and substantial investigation and remediation costs. Environmental laws and regulations could become more stringent over time, imposing greater compliance costs, and increasing risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes. The expense associated with environmental regulation and remediation could harm our financial condition and operating results.

Our insurance coverage strategy may not be adequate to protect us from all business risks.

We will require insurance coverage for numerous risks related to our business. Although our management believes that the events and amounts of liability covered by our insurance policies will be reasonable, taking into account the risks relevant to our business, and the fact that agreements with users contain limitations of liability, there can be no assurance that such coverage will be available or sufficient to cover claims to which we may become subject. If insurance coverage is unavailable or insufficient to cover any such claims, our financial resources, results of operations and prospects could be adversely affected.

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.

Cyberattacks or data breaches could compromise confidential, business-critical information, cause disruptions in our operations, expose us to potential litigation, or harm our reputation. We have important assets, including intellectual property, trade secrets, and other sensitive, business-critical and/or confidential information which may be vulnerable to such incidents. While we are in the process of implementing a cybersecurity program that is continually reviewed, maintained, and upgraded, no assurance can be made that we are invulnerable to cyberattacks and data breaches which, if significant, could negatively impact our business and financial results.

Cybersecurity breaches and information technology failures could harm our business by increasing our costs and negatively impacting our business operations.

We rely extensively on information technology systems, including internet sites, computer software, data hosting facilities and other hardware and platforms, some of which are hosted by third parties, to assist in conducting our business. Our information technology systems, as well as those of third parties we use in our business operations, may be vulnerable to a variety of evolving cybersecurity

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risks, such as those involving unauthorized access or control, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues. Moreover, cybersecurity threat actors, whether internal or external, are becoming more sophisticated and coordinated in their attempts to access companies’ information technology systems and data, including the information technology systems of cloud providers and other third parties with whom we conduct our business.

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.

Personal privacy, information security and data protection are significant issues worldwide. The regulatory framework governing the collection, use, and other processing of personal data and other information is rapidly evolving. The United States federal and various state and foreign governments have adopted or proposed requirements regarding the collection, distribution, use, security and storage of personally identifiable information and other data relating to individuals, and federal and state consumer protection laws are being applied to enforce regulations related to the online collection, use and dissemination of data.

The costs of compliance with and other burdens imposed by laws, regulations, standards and other actual or asserted obligations relating to privacy, data protection and information security may be substantial, and they may require us to modify our data processing practices and policies. Any actual or alleged noncompliance with any of these laws, regulations, standards, and other actual or asserted obligations may lead to claims and proceedings by governmental actors and private parties, and significant fines, penalties or liabilities.

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.

We are a U.S. parented multinational group subject to income and other taxes in Canada, the United States, the United Kingdom, and other jurisdictions in which we do business. As a result, our provision for (benefit from) income taxes is derived from a combination of applicable tax rates in the various jurisdictions in which we operate. Significant judgment is required in determining our global provision for (benefit from) income taxes, value added and other similar taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. It is possible that our tax positions may be challenged by tax authorities, which may have a significant impact on our global provision for (benefit from) income taxes. If such a challenge were to be resolved in a manner adverse to us, it could have a material adverse effect on our business, financial condition and results of operations.

Recent or future changes to U.S., Canadian, United Kingdom and other non-U.S. tax laws could impact the tax treatment of our earnings. For example, the Inflation Reduction Act of 2022, enacted on August 16, 2022, imposes a one-percent non-deductible excise tax on repurchases of stock that are made by U.S. publicly traded corporations on or after January 1, 2023. In addition, as of January 1, 2022, the Tax Cuts and Jobs Act of 2017 requires research and experimental expenditures attributable to research conducted within the United States to be capitalized and amortized ratably over a five-year period. Any such expenditures attributable to research conducted outside the United States must be capitalized and amortized over a 15-year period. We generally conduct our international operations through wholly owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. The intercompany relationships between our legal entities are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. Although we believe we are compliant with applicable transfer pricing and other tax laws in the United States, Canada, the United Kingdom and other relevant countries, due to changes in such laws and rules, we may have to modify our international structure in the future, which will incur costs and may adversely affect our business, financial condition and results of operations.

If U.S., Canadian, United Kingdom or other non-U.S. tax laws change further, if our current or future structures and arrangements are challenged by a taxing authority, or if we are unable to appropriately adapt the manner in which we operate our business, we may have to undertake further costly modifications to our international structure, which may cause our tax liabilities to increase and adversely 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.

As of December 31, 2022, a valuation allowance has been recorded against our deferred tax assets that are more likely than not to be realized in the U.S. federal and state tax jurisdictions. We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Certain of our deferred tax assets may expire unutilized or underutilized, which could prevent us from offsetting future taxable income. We continue to assess the realizability of our deferred tax assets in the future. Future adjustments in our valuation allowance may be required, which may have a material impact on our quarterly and annual operating results.

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Risks Related to Intellectual Property

If we fail to protect and enforce our intellectual property rights and our confidential information, our business could be adversely affected.

We rely on a combination of nondisclosure agreements and other contractual provisions and patent, trade secret and copyright laws to protect our technologies, products, product development and manufacturing activities from unauthorized use by third parties. Our patents do not cover all of our technologies, systems, products and product components and our competitors or others may design around our patented technologies. We cannot guarantee that these mechanisms will adequately protect our technology and intellectual property, nor can we guarantee that a court will enforce our intellectual property rights.

In addition, the laws and enforcement regimes of certain countries do not protect our technology and intellectual property to the same extent as do the laws and enforcement regimes of the U.S. In certain jurisdictions, we may be unable to protect our technology and intellectual property adequately against unauthorized use, which could adversely affect our business.

We may become involved in material legal proceedings in the future to enforce or protect our intellectual property rights, which could harm our business.

From time to time, we may identify products that we believe infringes on our patents and may have to initiate litigation to enforce our patent rights against those products. Litigation stemming from such disputes could harm our ability to gain new customers, who may postpone licensing decisions pending the outcome of the litigation or who may, as a result of such litigation, choose not to adopt our technologies. Such litigation may also harm our business relationships with existing customers, who may, because of such litigation, cease making royalty or other payments to us or challenge the validity and enforceability of our patents or the scope of our related agreements.

In addition, the costs associated with legal proceedings are typically high, relatively unpredictable and not completely within our control. These costs may be materially higher than expected, which could adversely impair our working capital, affect our operating results and lead to volatility in the price of our common stock. Whether or not determined in our favor or ultimately settled, litigation would divert managerial, technical, legal and financial resources from our business operations. Furthermore, an adverse decision in any of these legal actions could result in a loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from others, limit the value of our technology or otherwise negatively impact the price of our common stock, business and financial position, results of operations and cash flows.

Even if we prevail in a legal action, significant contingencies may exist to the settlement and final resolution, including the scope of the liability of each party, our ability to enforce judgments against the parties, the ability and willingness of the parties to make any payments owed or agreed upon, and the dismissal of the legal action by the relevant court, none of which are completely within our control. Parties that may have financial obligations to us could be insolvent or decide to alter their business activities or corporate structure, which could affect our ability to collect royalties from such parties.

Our technologies may infringe on the intellectual property rights of others, which could lead to costly disputes or disruptions.

Various business segments in which we operate are characterized by frequent allegations of intellectual property infringement. Any allegation of infringement could be time consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause suspension of operations or force us to enter into royalty, license, or other agreements rather than dispute the merits of such allegation. Furthermore, third parties making such claims may be able to obtain injunctive or other equitable relief that could block our ability to further develop or commercialize some or all of our technologies, and the ability of our customers to develop or commercialize their products incorporating our technologies, in the U.S. and abroad. If patent holders or other holders of intellectual property initiate legal proceedings, we may be forced into protracted and costly litigation. We may not be successful in defending such litigation and may not be able to procure any required royalty or license agreements on acceptable terms or at all.

Risk Related to Industry Adoption of our Products

We cannot provide assurance that markets will accept our various products at the expected market penetration rates, which may adversely affect our business operations and financial position.

We launched our first product, a laser glare protection eyewear named metaAIR®, in March 2019, with a primary focus on the aviation market. We have co-developed this product with Airbus through a strategic partnership. Airbus further extended its support by introducing us to Satair, an Airbus-owned company, which became the global distribution partner for metaAIR® to the aviation market.

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Since 2016, Airbus and Satair have invested a total of $2,000,000 for the product development and exclusive distribution rights to metaAIR®.

Despite our close collaboration with the Airbus Group and future plans for marketing and sales expansion, there can be no assurance that the aviation market will accept the metaAIR® product at the expected market penetration rates and a slower than forecasted market acceptance may have a material adverse effect on Holography laser glare protection related products and our financial position.

Slower than forecasted market acceptance of Lithography related products, partially in the automotive market, may have a material adverse effect on our financial position.

Our NANOWEB® applications have not yet reached the required manufacturing scale to enable us to address the volume demands of a number of our target vertical markets. We currently have only our first pilot scale, 300mm wide, roll-to-roll line, and we will need to add additional capacity and wider substrates to support our target applications. Broader sales and production are expected to be launched in two to three years’ time after successful completion of automotive and other vertical market product qualification and product introductions. We believe that the automotive market is a strategic high growth opportunity however, despite our close collaboration with automotive partners, there can be no assurance that the automotive market will accept the NANOWEB® product at the expected market penetration rates and a slower than forecasted market acceptance may have a material adverse effect on Lithography de-icing/de-fogging, transparent antenna and other related products and our financial position.

If products incorporating our technologies are used in defective products, we may be subject to product liability or other claims.

If our technology is used in defective or malfunctioning products, we could be sued for damages, especially if the defect or malfunction causes physical harm to people. While we will endeavor to carry product liability insurance, contractually limit our liability and obtain indemnities from our customers, there can be no assurance that we will be able to obtain insurance at satisfactory rates or in adequate amounts or that any insurance and customer indemnities will be adequate to defend against or satisfy any claims made against us. The costs associated with legal proceedings are typically high, relatively unpredictable and not completely within our control. Even if we consider any such claim to be without merit, significant contingencies may exist, similar to those summarized in the above risk factor concerning intellectual property litigation, which could lead us to settle the claim rather than incur the cost of defense and the possibility of an adverse judgment. Product liability claims in the future, regardless of their ultimate outcome, could have a material adverse effect on our business, financial condition and reputation, and on our ability to attract and retain customers.

We participate in markets that are subject to rapid technological change and require significant research and development expenses to develop and maintain products that can achieve market acceptance.

We operate in a rapidly evolving industry subject to significant technological change and new product introductions and enhancements. Our future performance depends in part on the successful development, introduction and market acceptance of new and enhanced products that address these changes and current and potential customer requirements. To the extent customers defer or cancel orders for existing products due to a slowdown in demand or in the expectation of a new product release, or if there is any delay in development or introduction of our new products or enhancements of our products, our business and financial conditions, results of operations, and growth prospects would be materially adversely affected. We also may not be able to develop the underlying core technologies necessary to create new products and enhancements, or to license these technologies from third parties.

Risks Related to Facilities and Human Resources

We have ongoing environmental costs, which could have a material adverse effect on our financial position or results of operations.

Certain of our operations and assets are subject to extensive environmental, health and safety regulations, including laws and regulations related to waste disposal and remediation of contaminated sites. The nature of our operations and products, including the raw materials we handle, exposes us to the risk of liabilities, obligations or claims under these laws and regulations due to the production, storage, use, transportation and sale of materials that can adversely impact the environment or cause personal injury, including, in the case of chemicals, unintentional releases into the environment. Environmental laws may have a significant effect on the costs of use, transportation and storage of raw materials and finished products, as well as the costs of storage, transportation and disposal of wastes.

The ultimate costs and timing of environmental liabilities are difficult to predict. Liabilities under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis. One liable party could be held responsible for all costs at a site, regardless of fault, percentage of contribution to the site or the legality of the original disposal. We could incur significant costs, including clean-up costs, natural resource damages, civil or criminal fines and sanctions and third-party lawsuits claiming, for example, personal injury and/or property damage, as a result of past or future violations of, or liabilities under, environmental or other laws.

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In addition, future events, such as changes to or more rigorous enforcement of environmental laws, could require us to make additional expenditures, modify or curtail our operations and/or install additional pollution control equipment. It is possible that regulatory agencies may enact new or more stringent clean-up standards for chemicals of concern, including chlorinated organic products that we manufacture. This could lead to expenditures for environmental remediation in the future that are additional to existing estimates.

We may incur claims relating to our use, manufacture, handling, storage or disposal of hazardous materials.

Our research and development and manufacturing processes require the transportation, storage and use of hazardous materials, including chemicals, and may result in the generation of hazardous waste. National and local laws and regulations in many of the jurisdictions in which we operate impose substantial potential liability for the improper use, manufacture, handling, storage, transportation and disposal of hazardous materials as well as for land contamination, and, in some cases, this liability may continue over long periods of time. Despite our compliance efforts, we cannot eliminate the risk of industrial accidents that may lead to discharges or releases of hazardous materials and any resultant injury, property damage or environmental contamination from these materials. For example, real properties that we owned or used in the past or that we own or use now or in the future may contain detected or undetected contamination resulting from our operations at those sites or the activities of prior owners or occupants. We may suffer from expenses, claims or liability which may fall outside of or exceed our insurance coverage.

Furthermore, changes to current environmental laws and regulations may impose further compliance requirements on us that may impair our research, development and production efforts as well as our other business activities. New and evolving regulatory requirements include producer responsibility frameworks and regulations related to addressing climate change or other emerging environmental areas. Increased environment, health and safety laws, regulations and enforcement could result in substantial costs and liabilities to us and could subject our use, manufacture, handling, storage, transportation, and disposal of hazardous materials to additional constraints. Consequently, compliance with these laws could result in capital expenditures as well as other costs and liabilities, thereby adversely affecting business, financial position and results of operations.

Our failure to comply with applicable laws and regulations material to our operations, such as export control, environmental and climate related laws and regulations, or the inability to timely obtain requisite approvals necessary for the conduct of our business, such as fab land and construction approvals, could harm our business and operational results or subject us to potential significant legal liability.

Because we engage in manufacturing activities in multiple jurisdictions and conduct business with our customers located worldwide, such activities are subject to a myriad of governmental regulations. Our failure to comply with any such laws or regulations, as amended from time to time, and our failure to comply with any information and document sharing requests from the relevant authorities in a timely manner could result in:

Complying with applicable laws and regulations, such as environmental and climate related laws and regulations, could also require us, among other things, to do the following: (a) purchase, use or install remedial equipment; (b) implement remedial programs such as climate change mitigation programs; (c) modify our product designs and manufacturing processes, or incur other significant expenses such as obtaining renewable energy sources, renewable energy certificates or carbon credits, substitute raw materials or chemicals that may cost more or be less available for our operations.

Our inability to timely obtain approvals necessary for the conduct of our business could impair our operational and financial results. For example, if we are unable to timely obtain environmental related approvals needed to undertake the development and construction of a

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new fab or expansion project, then such inability may delay, limit, or increase the cost of our expansion plans that could also in turn adversely affect our business and operational results. In light of increased public interest in environmental issues, our operations and expansion plans may be adversely affected or delayed responding to public concern and social environmental pressures even if we comply with all applicable laws and regulations.

Delays in setting up facilities or receiving required permits could have an adverse effect on our financial position.

We are in the process of moving into a larger facility suitable to host the scale-up of production relating to Holography and Lithography. Lithography requires specific local government approvals to allow use of certain chemicals and their disposal. Any delay in setting up the facility and receiving permits may impact launch and/or development of related products and may have a material adverse effect on related products and consequently on our financial position.

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to successfully manage and grow the business and to develop new products depends, in large part, on our ability to recruit and retain qualified employees, particularly highly skilled technical, sales, service, management, and key staff personnel. Competition for qualified resources is intense and other companies may have greater resources available to provide substantial inducements and to offer more competitive compensation packages. If we are not successful in attracting and retaining highly qualified personnel, it could have a material adverse effect on our business, financial condition, and results of operations.

Our results of operations could be adversely affected by labor shortages, turnover, labor cost increases and inflation.

A number of factors may adversely affect the labor force available to us in one or more of our geographies, including high employment levels, increasing market wages and other compensation costs, federal unemployment subsidies, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices and immigration. These factors can also impact the cost of labor. Increased turnover rates within our employee base can lead to decreased efficiency and increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees. An overall labor shortage or lack of skilled labor, increased turnover or labor inflation could have a material adverse effect on results of operations.

Certain directors and officers may be subject to conflicts of interest.

Certain of our directors and officers may be involved in other business ventures through their direct and indirect participation in corporations, partnerships, joint ventures, etc. that may become potential competitors of the technologies, products and services we intend to provide. Situations may arise in connection with potential acquisitions or opportunities where the other interests of these directors' and officers' conflict with or diverge from our interests. In accordance with applicable corporate law, directors who have a material interest in or who are a party to a material contract or a proposed material contract with us are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the contract. In addition, the directors and officers are required to act honestly and in good faith with a view to our best interests. However, in conflict-of-interest situations, our directors and officers may owe the same duty to another company and will need to balance their competing interests with their duties to us. Circumstances (including with respect to future corporate opportunities) may arise that may be resolved in a manner that is unfavorable to us.

Risks Related to Legal Matters

We are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business and which could adversely affect our business.

We are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business. We cannot predict the outcome of these proceedings or provide an estimate of potential damages, if any. We believe that the claims in the securities class actions are without merit and intend to defend against them vigorously. Regardless, failure by us to obtain a favorable resolution of the claims set forth in the complaints could require us to pay damage awards or otherwise enter into settlement arrangements for which our insurance coverage may be insufficient. Any such damage awards or settlement arrangements in current or future litigation could have a material adverse effect on our business, operating results or financial condition. Even if plaintiffs’ claims are not successful, defending against class action litigation is expensive and could divert management’s attention and resources, all of which could have a material adverse effect on our financial condition and operations, operating results and financial condition and negatively affect the price of our common stock. In addition, such lawsuits may make it more difficult for us to finance our operations in the future. See Part 1, Item 3, "Legal Proceedings" in this Annual Report on Form 10-K for more information regarding our legal proceedings.

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Current and future investigations by the SEC have and could continue to have an adverse impact on our business.

We are cooperating and intend to continue to cooperate with the SEC’s investigation as described elsewhere in this Annual Report on Form 10-K. Investigations can be inherently uncertain and their results and timing cannot be predicted. Regardless of the outcome, SEC investigations have and could continue to have an adverse impact us by resulting in legal costs, diversion of management resources, and other negative factors. SEC investigations could also result in reputational harm to us, which, among other things, may limit our ability to obtain new customers and enter into new agreements with our existing customers, or our ability to obtain financing, and have a material adverse effect on our current and future business, financial condition, results of operations and prospects. See Part 1, Item 3, "Legal Proceedings" in this Annual Report on Form 10-K for more information regarding the SEC’s investigation.

Risks Related to our Common Stock

You may experience future dilution as a result of future equity offerings or other equity issuances.

We will have to raise additional capital in the future. To raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may be lower than the price you paid per share. In addition, investors purchasing shares or other securities in the future could have rights superior to those of other investors. Any such issuance could result in substantial dilution to investors.

Subject to various spending levels approved by our board of directors, our management will have broad discretion in the use of the net proceeds from our capital raises and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from our capital raises, and our stockholders will not have the opportunity as part of their investment decision to assess whether the net proceeds from our capital raises are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from our capital raises, their ultimate use may vary substantially from their currently intended use. You may not agree with our decisions, and our use of the proceeds from our capital raises may not yield any return to stockholders. Our failure to apply the net proceeds of our capital raises effectively could compromise our ability to pursue our growth strategy and we might not be able to yield a significant return, if any, on our investment of those net proceeds. Stockholders will not have the opportunity to influence our decisions on how to use our net proceeds from our capital raises. Pending their use, we may invest the net proceeds from our capital raises in interest and non-interest-bearing cash accounts, short-term, investment-grade, interest-bearing instruments and U.S. government securities. These temporary investments are not likely to yield a significant return.

An active, liquid and orderly trading market may not be sustained for our common stock, and, as a result, it may be difficult for you to sell your shares of our common stock.

The trading market for our common stock on the Nasdaq Capital Market may not be sustained. If the market for our common stock is not sustained, it may be difficult for you to sell your shares of common stock at an attractive price or at all. We cannot predict the prices at which our common stock will trade. It is possible that in one or more future periods our results of operations may not meet the expectations of public market analysts and investors, and, as a result of these and other factors, the price of our common stock may fall.

Our failure to satisfy certain Nasdaq listing requirements may result in our common stock being delisted from the Nasdaq Capital Market, which could eliminate the trading market for our common stock.

On March 20, 2023, we received written notice (“The Bid Price Letter”) from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we are not in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until September 18, 2023, to regain compliance with the Bid Price Rule. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period. The Bid Price Letter was a notice of deficiency, not delisting, and does not currently affect the listing or trading of shares of our common stock on The Nasdaq Capital Market, which continues to trade under the symbol “MMAT.” We intend to continue actively monitoring the closing bid price of shares of our common stock and may, if appropriate, consider implementing available options to regain compliance with the Bid Price Rule.

If we do not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our common stock will be subject to delisting. We would then be entitled to appeal that determination to a Nasdaq hearings panel. If the stock is delisted, we may trade on the over-the-counter market, or even in the pink sheets, which would significantly decrease the liquidity of an investment in our common stock. In addition, the stock may be deemed to be penny stock. If

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our common stock is considered penny stock, we would be subject to rules that impose additional sales practices on broker-dealers who sell our securities. For example, broker-dealers would have to make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. Also, a disclosure schedule must be prepared prior to any transaction involving a penny stock and disclosure is required about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Monthly statements are also required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock. Because of these additional obligations, some brokers may be unwilling to effect transactions in penny stocks. This could have an adverse effect on the liquidity of our common stock and the ability of investors to sell the common stock.

If equities or industry analysts do not publish research or reports about our company, or if they issue adverse or misleading opinions regarding us or our stock, our stock price and trading volume could decline.

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. If no or few analysts commence coverage of us or if such coverage is not maintained, the market price for our stock may be adversely affected. Our stock price also may decline if any analyst who covers us issues an adverse or erroneous opinion regarding us, our business model, our intellectual property or our stock performance, or if our operating results fail to meet analysts’ expectations. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline and possibly adversely affect our ability to engage in future financings.

The market price of our common stock has been and may continue to be volatile, and the value of your investment could decline significantly.

The trading price of our common stock has been and is likely to continue to be volatile. The trading price of our common stock since June 28, 2021 (the date of completion of the Arrangement) up to March 17, 2023, has ranged from a high of $ 7.96 to a low of $0.48. Factors that have caused, and could continue to cause, fluctuations in the trading price of our common stock include, but are not limited to, the following:

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The stock market in general, and market prices for the securities of similar companies in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance, which might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. In several recent situations when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and materially adversely affect our results of operations. We currently have ongoing lawsuits. See Part 1, Item 3, "Legal Proceedings" in this Annual Report on Form 10-K for more information regarding these lawsuits and the SEC’s investigation.

Future sales and issuances of a substantial number of shares of our common stock or rights to purchase common stock by our stockholders in the public market could result in additional dilution of the percentage ownership of our stockholders and cause our stock price to fall.

If our stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline.

We have and will continue to issue equity, convertible securities or other securities to investors in public and private offerings. In addition, we currently have effective resale shelf registration statements which enable the selling stockholders thereunder to sell shares in the public market pursuant thereto.

We also have outstanding as of December 31, 2022, warrants to purchase 39,920,919 shares of our common stock at a weighted average exercise price of $1.93 per share. These warrants include 37,037,039 warrants issued in the June 2022 registered direct offering with an exercise price of $1.75 per share that are now eligible for exercise, and, if exercised, will have a dilutive effect on the percentage ownership held by holders of our common stock.

Further, additional capital will be needed in the future to continue our planned operations, including commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner, we determine from time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our common stock. Additional issuances and sales of our common stock, including shares of our common stock available for issuance to our employees, directors and consultants, or a perception that such shares will be sold in the public market, could result in additional dilution and the trading price of our common stock could decline.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Our board of directors is authorized, without further stockholder action, and subject to Nasdaq rules, to issue preferred stock in one or more series and to designate the dividend rate, voting rights and other rights, preferences and restrictions of each such series. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. Also, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our common stock.

Anti-takeover provisions in our articles of incorporation and bylaws, as amended, as well as provisions in Nevada law, might discourage, delay, or prevent a change of control of us or changes in our management and, therefore, depress the trading price of our securities.

Our articles of incorporation and bylaws, as amended, as well as provisions in Nevada law, contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board. Our corporate governance documents include provisions:

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These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our management.

As a Nevada corporation, we are also subject to provisions of Nevada corporate law, including Section 78.411, et seq. of the Nevada Revised Statutes, which, among other things, prohibits a publicly-held Nevada corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last two years has owned, 10% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner, and, unless otherwise provided in our articles of incorporation or by-laws, restricts the ability of an acquiring person to obtain a controlling interest of 20% or more of our voting shares. Our articles of incorporation and by-laws, as amended, do not contain any provision which would currently keep the change of control restrictions of Section 78.378 from applying to it.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of us, thereby reducing the likelihood that our stockholders could receive a premium for their common stock in an acquisition.

We are a smaller reporting company. We cannot be certain whether the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors or otherwise limit our ability to raise additional funds.

As of December 31, 2022, we are a “smaller reporting company” under applicable U.S. securities regulations. A smaller reporting company is a company that, as of the last business day of its most recently completed second fiscal quarter, has (i) an aggregate market value of the company’s voting stock held by non-affiliates, or public float, of less than $250 million or (ii) less than $100 million in revenue and less than $700 million in public float. In addition, a smaller reporting company is able to provide simplified executive compensation disclosures in our filings and has certain other reduced disclosure obligations in our SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Reduced disclosure in our SEC filings due to our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects.

We have not paid cash dividends in the past and have no immediate plans to pay dividends.

Our current plan is to reinvest earnings, if any, to cover operating costs and otherwise remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend. Therefore, you should not expect to receive cash dividends on our common stock.

General Risk Factors

We are exposed to fluctuations in currency exchange rates.

Our revenues and expenses are denominated in U.S. dollars, Canadian dollars, EURO, and Great British Pounds, and therefore are exposed to significant currency exchange fluctuations. Recent events in the global financial markets have been coupled with increased volatility in the currency markets. Fluctuations in the exchange rate between the U.S. dollar, the Canadian dollar and the British Pound may have a material adverse effect on our business, financial condition, and operating results. We may, in the future, establish a program to hedge a portion of our foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. With appropriate risk management and oversight this may be able to offset future risk, however a hedging strategy will result in additional operating costs.

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Operating as a public company requires us to incur substantial costs and requires substantial management attention. In addition, certain members of our management team have limited experience managing a public company.

As a public company, we incur substantial legal, accounting and other expenses that we did not incur as a private company. For example, we are subject to the reporting requirements of the Exchange Act, the applicable requirements of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market. For example, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business, financial condition and results of operations. We are also required to maintain effective disclosure controls and procedures and internal control over financial reporting. Compliance with these rules and regulations has increased and will continue to increase our legal and financial compliance costs and increase demand on our systems. In addition, as a public company, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management and impact the manner in which we operate our business in ways we cannot currently anticipate. As a result of disclosure of information in filings required of a public company, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors.

Additionally, certain members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and results of operations.

Increased scrutiny of our environmental, social and governance responsibilities and practices may result in additional costs, liability risks, and may adversely impact our reputation, our ability to attract and retain a skilled workforce and willingness of customers and suppliers to do business with us.

Investor advocacy groups, institutional investors, proxy advisory services, stockholders, government, regulators, employees, customers and other stakeholders are increasingly focused on environmental, social and governance (“ESG”) practices of companies. Additionally, public interest and legislative pressure related to public companies’ ESG practices continues to grow. If our ESG practices fail to meet regulatory requirements or investor or other stakeholders' evolving expectations and standards for responsible business practices in numerous areas, including climate change and greenhouse gas emissions, environmental stewardship, support for communities where we operate, human and civil rights, director and employee diversity, human capital management, employee health and safety practices, product quality and safety, data security, supply chain management, regulatory compliance corporate governance and transparency and employing ESG strategies within business operations, our brand, reputation and employee retention may be negatively impacted and customers and suppliers may be unwilling to do business with us. As we work to align our ESG practices with industry standards, we will be dealing with uncertainties and risks resulting from the forward-looking nature of many ESG issues, In addition, we will continue to expand our disclosures in these areas and doing so may result in additional costs and require additional resources to monitor, report, and comply with our various ESG practices. If we fail to adopt ESG standards or practices as quickly as stakeholders desire, report on our ESG efforts or practices accurately, or satisfy the expectations of stakeholders, our reputation, business, financial performance and growth may be adversely impacted.

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Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

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

Our principal facilities include the following:

Item 3. Legal Proceedings.

In December 2022 we completed the spin-off of our oil and gas assets and operations by distributing shares of common stock of our wholly owned subsidiary, Next Bridge, to the holders of our Series A Preferred Stock. All previously disclosed legal proceedings relating to our oil and gas assets and related operations were assumed by NBH and no longer involve us.

SEC Subpoena

In September 2021, we received a subpoena from the Securities and Exchange Commission, Division of Enforcement, in a matter captioned In the Matter of Torchlight Energy Resources, Inc. The subpoena requests that we produce certain documents and information related to, among other things, the merger involving Torchlight Energy Resources, Inc. and Metamaterial Inc. We are cooperating and intend to continue to cooperate with the SEC’s investigation. We can offer no assurances as to the outcome of this investigation or its potential effect, if any, on us or our results of operation.

Securities Class Action

On January 3, 2022, a putative securities class action lawsuit was filed in the U.S. District Court for the Eastern District of New York captioned Maltagliati v. Meta Materials Inc., et al., No. 1:21-cv-07203, against us, our Chief Executive Officer, our Chief Financial Officer, Torchlight’s former Chairman of the Board of Directors, and Torchlight’s former Chief Executive Officer. On January 26, 2022, a similar putative securities class action lawsuit was filed in the U.S. District Court for the Eastern District of New York captioned McMillan v. Meta Materials Inc., et al., No. 1:22-cv-00463. The McMillan complaint names the same defendants and asserts the same claims on behalf of the same purported class as the Maltagliati complaint. The complaints, purportedly brought on behalf of all purchasers of our publicly traded securities from September 21, 2020 through and including December 14, 2021, assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) arising primarily from a short-seller report and statements related to our business combination with Torchlight. The complaints seek unspecified compensatory damages and reasonable costs and expenses, including attorneys’ fees. On July 15, 2022, the Court consolidated these actions under the caption In re Meta Materials Inc. Securities Litigation, No. 1:21-cv-07203, appointed lead plaintiffs and approved the lead plaintiffs’ selection of lead counsel. Lead plaintiffs filed a consolidated complaint on August 29, 2022. We moved to dismiss that complaint on October 13, 2022. The motion was fully briefed on January 12, 2023. The Court held a hearing on the motion to dismiss on February 27, 2023 and took the motion under submission.

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Shareholder Derivative Action

On January 14, 2022, a shareholder derivative action was filed in the U.S. District Court for the Easter District of New York captioned Hines v. Palikaras, et al., No. 1:22-cv-00248. The complaint names as defendants certain of our current officers and directors, certain former Torchlight officers and directors, and us (as nominal defendant). The complaint, purportedly brought on behalf of the Company, asserts claims under Section 14(a) of the Exchange Act, contribution claims under Sections 10(b) and 21D of the Exchange Act, and various state law claims such as breach of fiduciary duties and unjust enrichment. The complaint seeks, among other things, unspecified compensatory damages in favor of the Company, certain corporate governance related actions, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. On March 9, 2022, the Court entered a stipulated order staying this action until there is a ruling on a motion to dismiss in the securities class action.

Westpark Capital Group

On July 25, 2022, WestPark Capital Group, LLC filed a complaint in Los Angeles County Superior Court against us for breach of contract, alleging that it is owed a $450,000 commission as a placement agent with respect to our June 2022 registered direct offering. On August 31, 2022, we filed an answer to the complaint. We dispute that WestPark Capital Group placed the investor in the direct registered offering and is owed a commission.

Item 4. Mine Safety Disclosures.

Not Applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information for Common Stock

Our common stock is quoted on the NASDAQ Stock Market LLC ("NASDAQ") under the symbol, “MMAT”. As of December 31, 2022, we had outstanding common shares of 362,247,867 which includes 79,605,384 Exchangeable Shares held by certain shareholders in Canada and which are traded on the Canadian Securities Exchange ("CSE") under the symbol "MMAX", and that are exchangeable for shares of MMAT on a 1-for-1 basis.

The Exchangeable Shares were listed in connection with the completion of the Torchlight RTO where former holders of Metamaterial Inc.’s common shares (that were previously traded on the CSE) were entitled to receive 1.845 of our common shares for each previously held common share of Metamaterial Inc. or in Exchangeable Shares of a wholly-owned subsidiary of META that reflect the same exchange ratio on issuance.

Holders of Record

As of December 31, 2022, there were 154 holders of record of the Company's common stock listed on NASDAQ the majority of our common stock is held by brokers and other institutions on behalf of stockholders, accordingly, we are unable to estimate the total number of beneficial owners of our common stock.

Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.

Holders of our common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our Board, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board may deem relevant.

Issuer Purchases of Equity Securities

None.

Recent Sales of Unregistered Securities

There were no unregistered securities issued by us during the fiscal year 2022 not previously reported on a Form 8-K or Form 10-Q.

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Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with its consolidated financial statements and related notes, each included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in or implied by these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A and elsewhere in this Annual Report. See “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report.

This Report on Form 10-K 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-K, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that 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 for 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.

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 specializing in metamaterial research and products, nanofabrication, and computational electromagnetics. Our principal executive office is located at 60 Highfield Park Drive, Dartmouth, Nova Scotia, Canada.

BUSINESS AND OPERATIONAL HIGHLIGHTS

Throughout 2022, we emphasized new investments in pilot scale manufacturing of our NANOWEB® applications, expansion of our production capacity in our banknote and brand security lines, and more aggressive design, development and testing of our broad array of medical products. For more information regarding our business, see Part I, Item I (Business). of this Form 10-K.

As of December 31, 2022, we have substantially completed the construction of our Highfield Park Facility in Dartmouth, Nova Scotia and expanding our facility in Thurso, Quebec.

Nasdaq Potential Delisting

On March 20,2023, we received a notice (the “Notice”) from The Nasdaq Stock Market LLC (the "Nasdaq Exchange”) informing us that for the last 30 consecutive business days, the bid price of our common stock had closed below $1.00 per share, which is the minimum required closing bid price for continued listing on the Nasdaq Exchange pursuant to Listing Rule 5450(a)(1). The Notice has no immediate effect on our Nasdaq listing or trading of our common stock. We have 180 calendar days, or until September 18, 2023 (the “Compliance Date”), to regain compliance. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of ten consecutive business days. If we do not regain compliance by the Compliance Date, we may be eligible for additional 180 days to regain compliance or if we are otherwise not eligible, we may request a hearing before a Nasdaq Hearings Panel.

Known Trends and Uncertainties

Inflation

A prolonged period of inflation in Europe, for energy costs in particular, could cause shortages or material cost increases for certain key raw materials, for which we depend on European suppliers. In particular, shortages or cost increases in certain polymers used in our Holography products could result in higher costs for these products that may not be able to be passed on to our customers.

Inflation in North America, for labor costs and transportation costs in particular, could elevate our costs of hiring new team members and cause increases in our labor costs for existing team members. In addition, rising transportation costs are likely to increase our costs for shipping our products and the costs associated with our material purchases. Further, inflation could cause increases in the cost of routine borrowing for the purchase of equipment.

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Vehicle Electrification

The transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) may be accelerated by recent disruptions in global oil supply, reduced investment in new domestic oil exploration, and increased government support for domestic EV production, battery and battery materials supply chain, and EV charging infrastructure. This may increase the opportunity for META to scale up battery materials production, acquire new battery component customers, and obtain government funding for capital projects. It could also accelerate demand for certain of our NANOWEB® products targeting EV’s.

Global Chip Shortage

A global shortage of computer chips has triggered significant delays in product launches in the automotive industry. Should these shortages continue, META could experience on-going delays in orders for our NANOWEB® applications from this vertical market since these products are intended to be incorporated into planned new models.

Expanding Operations, Facilities and Staffing

META is expanding capacity and facilities to support a growing range of market opportunities. This includes a new headquarters facility in Dartmouth, Nova Scotia; expanded production capacity in Thurso, Quebec; and new development facilities in Maryland for Electro Optics and IR, and in Massachusetts for the Battery Materials team. These activities require capital investments, increased overhead for leased facilities, and higher operating expenses for personnel additions. The timing of new customer programs and revenues associated with these expansions is uncertain and META will require additional financing to support the related cash consumption.

Expanding Focus and Emphasis on Information Technology

With the rapid growth of our global business, our data protection and cyber security needs have become a significant element of our business. Failure on our part to invest in the tools, equipment and personnel required to adequately manage these elements could result in regulatory issues, claims by customers and potential financial liabilities. Further, customer prospects identifying such failures could decide to delay or abandon orders from us.

NANOWEB® Capacity

Our NANOWEB® products have not yet reached the required manufacturing scale to enable us to address the volume demands of a number of our target vertical markets. We must either design, develop and procure additional internal capacity to produce NANOWEB® in higher volume and larger formats or identify outsourced suppliers capable of producing our designs. Internal capacity expansion may require higher capital expenditures and faces risk of supply chain delays. Outsourced production may increase variable costs and put pressure on gross margins as we scale volumes.

Recent Acquisitions

Plasma App Ltd

On April 1, 2022, we completed the purchase of 100% of the issued and outstanding shares of Plasma App Ltd. ("PAL"). 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.

We issued an aggregate of 9,677,419 shares of our common stock to PAL's shareholders at closing, representing a number of shares of common stock equal to $18,000,000 divided by $1.86 (the volume weighted average price for the ten trading days ending on March 31, 2022), with an additional deferral of common stock equal to $2,000,000 divided by $1.86 to be issued subject to satisfaction of certain claims and warranties.

Optodot

We completed an asset purchase agreement with Optodot Corporation ("Optodot") on June 22, 2022. Optodot, based in Devens, Massachusetts, USA, is a developer of advanced materials technologies for the battery and other industries.

The consideration transferred included the following: A cash payment of $3,500,000 as well as unrestricted common stock equal to $37,500,000 divided by our common stock's daily volume weighted average trading price per share on the Nasdaq Capital Market for a period of twenty trading days ending on June 21, 2022 and restricted common stock, subject to milestones as set forth in the Purchase

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Agreement, equal to $7,500,000 divided by the daily volume weighted average trading price per share of our Common Stock on the Nasdaq Capital Market for the consecutive period of twenty trading days ending on June 21, 2022.

RESULTS OF OPERATIONS

We have incurred recurring losses to date, and we anticipate incurring additional losses until such time, if ever, we can achieve profitability. Substantial additional financing will be needed to fund our development, marketing and sales activities and generally to commercialize our technology, and we expect to raise additional capital through various financing transactions or arrangements, including sale/leaseback of certain properties, joint venturing of projects, debt financing, equity financing, or other means. These factors raise substantial doubt about our ability to continue as a going concern. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

Revenue and Gross Profit

Our revenue is generated from product sales as well as development revenue. We recognize revenue when we satisfy performance obligations under the terms of our contracts, and control of our products is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products or services.

Product Sales

Product sales include products, components, and samples sold to our customers. Revenue from the sale of prototypes and finished products is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of goods. We consider whether there are other obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of prototypes, we consider the effects of variable consideration, the existence of significant financial components, non-cash consideration and consideration payable to the customer (if any).

Development Revenue

Development Revenue consists of revenues from contract services and research services, including non-recurring engineering services. Revenue from development activities is recognized over time, using an output method to measure progress towards complete satisfaction of the research activities and whether associated performance obligations identified within each contract have been satisfied.

Cost of Goods Sold

Cost of Goods Sold consists of direct material used in production, depreciation expenses of machinery and equipment used in production, salaries and benefits relating to the production staff, and other overhead costs allocated to production.

Product Sales

The increase in product sales of $0.8 million for the year ended December 31, 2022, as compared to the same period of 2021, is primarily due to increase in sales revenue from our nanoimprint-lithography revenue - banknotes applications.

Development Revenue

The increase in development revenue for the year ended December 31, 2022, of $5.3 million compared to the year ended December 31, 2021, is mainly due to our nanoimprint-lithography revenue - banknotes applications during 2022 of $6.8 million, offset by $1.5 million decrease due to the completion of certain development contracts in 2021. We derive a significant portion of our revenue from contract

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services with a confidential G10 central bank. In 2021, we acquired Nanotech which had 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.

Cost of Goods Sold

The increase in cost of goods sold for the year ended December 31, 2022, of $2.4 million compared to the year ended December 31, 2021, is mainly due our production cost associated with the nanoimprint-lithography revenue - banknotes applications.

Gross Profit

The increase in gross profit for the year ended December 31, 2022, of $3.8 million compared to the year ended December 31, 2021, is again mainly due to our increased revenue from contract services with a confidential G10 central bank during 2022.

Operating expenses

Selling & Marketing

The increase in selling & marketing expenses for the year ended December 31, 2022, of $4.0 million compared to the year ended December 31, 2021, is mainly due to a $3.1 million increase in salaries and benefits, including a $0.5 million increase in non-cash equity compensation due to increases in headcount in the latter part of 2021, and early part of 2022, to acquire talent and grow the sales and marketing team. The remaining increase of $0.9 million is due to increases in travel and other sales and marketing costs year over year.

General & Administrative

The increase in general & administrative expenses for the year ended December 31, 2022 ,of $31.8 million compared to the year ended December 31, 2021, is primarily due to a $15.1 million increase in salaries and benefits including a $6.8 million increase in non-cash equity compensation due to 1) management and support functions growth to keep pace with our overall growth and acquisitions, 2) the acquisition of Nanotech in Q4 2021, PAL and Optodot in Q2 2022, and 3) Contractors hired in Q3 2021, to manage the disposition of our O&G assets, a $7.9 million increase in professional fees due to the ongoing SEC investigation and lawsuits, acquisition related costs and consulting fees, $5.2 million in depreciation and amortization expenses mainly due to acquired intangible assets in Q4 2021, as part of the Nanotech acquisition as well as the increase in depreciation expense due to acquired equipment in different facilities, a $1.5 million increase in insurance and stock exchange costs associated with our listing on Nasdaq in June 2021, a $0.5 million increase in rent due to lease expansion of different locations, and $1.4 million increase in travel, subscription and other expenses.

Research & Development

The increase in research & development expenses for the year ended December 31, 2022, of $13.1 million compared to the year ended December 31, 2021, is primarily due to an $8.1 million increase in salaries and benefits including a $4.1 million increase in non-cash equity compensation due to increase in our head count through all locations as a result of (i) expansion in facilities and laboratories, and (ii) the acquisition of Nanotech in Q4 2021, PAL and Optodot in Q2 2022, a $2.0 million increase in R&D materials, Intellectual Property

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maintenance fees and consulting expense, a $1.3 million in rent due to lease expansion in different R&D facilities in Canada, USA and Greece, as well as a $1.7 million increase in travel, depreciation, subscription and other expenses.

Other Expenses

Interest Expense, net

The decrease in net interest expense for the year ended December 31, 2022, of $0.9 million compared to the year ended December 31, 2021, is primarily due to settlement of the convertible debentures and promissory notes in the first half of year 2021.

Loss on Foreign Exchange, net

The change in net loss on foreign exchange of $1.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, is primarily driven by revaluations of intercompany balances in different currencies, mainly as a result of the devaluation of different currencies against the US dollar during 2022.

Gain on deconsolidation of wholly-owned subsidiary

A gain of $4.0 million for the year ended December 31, 2022 was recognized as a result of the deconsolidation of Next Bridge on December 14, 2022. The gain is comprised of the recognition of a note receivable at estimated fair value from Next Bridge for $2.2 million and a $1.8 million gain resulting from the derecognition of Next Bridge working capital (or a decrease in our consolidated net liabilities) on December 14, 2022. See note 5 to the Consolidated Financial Statements for further details.

Loss on Financial Instruments, net

No loss on financial instruments was recorded for the year ended December 31, 2022, as there were no revaluations of financial instruments during the period. The losses in 2021 were due to non-cash gains/losses resulting from remeasurement of the fair value of convertible financial liabilities at each balance sheet date or on conversion date using the fair value option.

Other expenses, net

The decrease in other expenses of $8.5 million for the year ended December 31, 2022,, as compared to the year ended December 31, 2021, is primarily due to a reduction of $10.3 million in costs incurred in relation to certain drilling activity we carried out at our O&G properties, to remain in compliance with all aspects of our lease obligations and to satisfy the Continuous Drilling Clause ("CDC") with University Lands net of $1.5 million decrease in cash and non-cash government grants received.

Deferred Tax recovery

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Income Tax recovery

The increase in our income tax recovery for the year ended December 31, 2022 of $5.0 million, as compared to the year ended December 31, 2021, was driven by:

a) utilization of previously fully reserved tax assets in relation to the Optodot acquisition. We recognized a deferred tax liability as of acquisition date of $4.9 million in accordance with ASC Topic 740, and in conjunction, reduced our valuation allowance resulting in a net income tax recovery of $4.9 million.

b) income tax recovery of $0.1 million as a result of purchase price allocation adjustments in relation to the Nanotech and PAL acquisitions and subsequent recovery.

We have provided a valuation allowance for various jurisdictions as a result of our historical net losses. We continue to assess our future taxable income by jurisdiction based on our recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that we may be able to implement, the impact of potential operating changes on our business and our forecast results from operations in future periods based on available information at the end of each reporting period.

To the extent that we are able to reach the conclusion that deferred tax assets are realizable based on any combination of the above factors in a single, or multiple, taxing jurisdictions, a reversal of the related portion of our existing valuation allowances may occur.

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 CAPITAL RESOURCES

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

On December 31, 2022, we had cash, cash equivalents and short-term investments of $11.8 million including $1.7 million in restricted cash and $Nil in short-term investments compared to $50.3 million in cash, cash equivalents and short-term investments on December 31, 2021, including $0.8 million in restricted cash and $2.9 million in short-term investments.

During the year ended December 31, 2022, our principal sources of liquidity included $46.3 million of net proceeds obtained through the issuance of common stock and warrants, proceeds from a below-market capital government loan of $1.1 million and revenue of approximately $10.2 million.

During the year ended December 31, 2022, our primary uses of liquidity included $26.5 million in salaries, $25.1 million mainly in legal, consulting, investor relations, auditing and accounting fees, $19.6 million in capital expenditures, $4.6 million in acquisitions cost, $4.0 million in rent and utilities, $3.5 million in R&D material and patent fees, $3.1 million in travel, advertising, travel show cost and dues and subscriptions, and $2.5 million in insurance.

June 2022 Registered Direct Offering

On June 24, 2022, we entered into a securities purchase agreement, as amended and restated on June 27, 2022, with certain institutional investors (the “SPA”) for the purchase and sale in a registered direct offering of 37,037,039 shares of our common stock at a purchase price of $1.35 per share and warrants to purchase 37,037,039 shares at an exercise price of $1.75 per share. This resulted in gross proceeds from the offering of $50.0 million and net proceeds of $46.3 million.

Shelf Registration

On November 9, 2022, we filed a “universal” shelf registration statement File No. (333-268282) on Form S-3 allowing us to issue certain securities with an aggregate offering price not to exceed $250 million. This registration statement was declared effective by the SEC on November 18, 2022.

On February 10, 2023, we entered into a sales agreement (the "ATM Agreement") with investment banks to establish an “at-the-market” offering program under which we may sell up to an aggregate of $100 million of shares of common stock (the “ATM Shares”) from

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time to time. The sales agents are entitled to compensation at a fixed commission rate of 3.0% of the gross proceeds of each sale of shares of our common stock.

Under the ATM Agreement, we set the parameters for the sale of ATM Shares, including the number of ATM Shares to be issued, the time period during which sales are requested to be made, limitations on the number of ATM Shares that may be sold in any one trading day and any minimum price below which sales may not be made. Sales of the ATM Shares, if any, under the ATM Agreement may be made in transactions that are deemed to be “at-the-market offerings” as defined in Rule 415 under the Securities Act.

As of March 20, 2023, we have sold an aggregate of 17,573,969 shares of our common stock pursuant to the ATM Agreement for aggregate gross proceeds of approximately $10.5 million.

Going Concern

In accordance with Accounting Standards Codification ("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 the consolidated financial statements included in this Form 10-K 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 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 that the consolidated financial statements are issued. In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the receipt of potential funding from future partnerships, equity or debt issuances, potential achievement of milestones from customer agreements and reductions in workforce cannot be considered probable at this time 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 issuance of the consolidated financial statements.

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. 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. 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 the consolidated financial statements.

The accompanying 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 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.

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

Net cash used in operating activities

During the year ended December 31, 2022, net cash used in operating activities of $62.2 million was primarily driven by a net loss of $79.1 million for the period, and non-cash adjustments of $17.2 million mainly due to depreciation and amortization of $9.3 million, stock-based compensation of $13.9 million, and unrealized foreign exchange loss of $2.1 million offset by $4.0 million gain on deconsolidation of Next Bridge, and $5.8 million deferred income tax recovery, along with other less material line items. In addition, there was $0.4 million cash used by working capital primarily due to a $5.4 million increase of trade and other payables, offset by decrease in prepaid and other current assets $4.8 million, along with other changes in working capital.

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During the year ended December 31, 2021, net cash used in operating activities of $34.8 million was primarily driven by a $91.0 million net loss reported for the year, and non-cash adjustments of $51.6 million mainly due to $40.5 million in fair value losses on financial instruments, $8.1 million stock based compensation and non-cash consulting fees, $3.7 million in depreciation, amortization and impairment, and non-cash interest and accretion of $0.9 million, along with other less material line items. Change in operating assets and liabilities totaled $4.7 million primarily due to a $6.9 million increase of trade and other payables.

Net cash (used in) provided by investing activities

During the year ended December 31, 2022, net cash used in investing activities of $19.5 million was primarily driven by proceeds from short-term investments of $2.8 million and proceeds from below-market capital government loan of $1.1 million offset by $19.6 million of capital expenditure associated with the construction of the Highfield Park Facility in Canada as well as the equipment purchases for our facility in Pleasanton, California, United States and $3.5 million cash consideration for the Optodot acquisition.

During the year ended December 31, 2021, net cash provided by investing activities of $65.1 million was primarily driven by cash acquired as a result of the Torchlight RTO of $147.0 million, offset by $66.1 million in cash paid for the Nanotech acquisition, $2.9 million purchase of short-term investments, $11.7 million in property plant and equipment purchases associated with the construction of the Highfield Park Facility as well as equipment purchases for both the Highfield Park and Pleasanton facilities, and a $1.1 million increase in intangibles as a result of capitalized legal cost for certain patents, as well as the acquisition of certain intellectual property assets from Interglass Technology AG (Switzerland).

Net cash provided by financing activities

During the year ended December 31, 2022, net cash provided by financing activities of $46.4 million was primarily driven by the cash obtained through the proceeds from the issuance of common stock and warrants through the Securities Purchase Agreements with institutional investors for the purchase and sale in a registered direct offering, $0.4 million from stock option exercises net of $0.6 million loan repayments.

During the year ended December 31, 2021, net cash provided by financing activities of $15.7 million was primarily driven by $10.0 million in proceeds received from the issuance of unsecured convertible promissory notes to Torchlight, subsequently eliminated upon consolidation at December 31, 2021, $4 million in proceeds from the issuance of unsecured convertible promissory notes to an affiliate that was subsequently converted into common stock during the year and $1.4 million in proceeds from options and warrants exercise net of $1.1 million loan repayments.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern. In connection with the preparation of the consolidated financial statements for the years ended December 31, 2022 and 2021, we conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to our ability to continue as a going concern within one year after the date of the issuance of such financial statements, and concluded that substantial doubt existed as to our ability to continue as a going concern as further discussed in Note 2 to the consolidated financial statements.

Under ASC 205-40, the receipt of potential funding from future partnerships, equity or debt issuances, potential achievement of milestones from customer agreements and reductions in workforce cannot be considered probable at this time 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 issuance of the consolidated financial statements.

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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. 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.

Goodwill

We have one operating segment in accordance with ASC 280 Segment Reporting. We have similarly determined that we have one reporting unit, to which all goodwill is assigned, in accordance with ASC 350 Intangibles – Goodwill and Other.

Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. The carrying amount of goodwill is periodically reviewed for impairment and at a minimum annually and whenever events or changes in circumstances indicate that the carrying value of this asset may not be recoverable.

We first perform a qualitative assessment to test the reporting unit's goodwill for impairment. Based on the qualitative assessment, if it is determined that the fair value of our reporting unit is more likely than not (i.e. a likelihood of more than 50 percent) to be less than its carrying amount, the quantitative assessment of the impairment test is performed. In the quantitative assessment, we compare the fair value of our reporting unit to its carrying value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired and we are not required to perform further testing. If the carrying value of the net assets of the reporting unit exceeds its fair value, then an impairment loss equal to the difference, but not exceeding the total carrying value of goodwill allocated to the reporting unit, would be recorded.

For example, a sustained decline in market capitalization below book value is an indicator that goodwill and other intangible assets should be tested for impairment under ASC 350 Intangibles – Goodwill and Other. During the period from January 1, 2022 to December 31, 2022, our stock price ranged between a high of $2.95 and a low of $0.63 and as of December 31, 2022 our market capitalization was $431.1 million and the book value of our goodwill was $281.7 million. While our market capitalization exceeded the book value of our goodwill as of December 31, 2022, as of March 17, 2023, our market capitalization is approximately $191.1 (based on a closing price of $0.50 per share) million and the book value of our goodwill is $281.7 million, and as such we may be required to recognize an impairment loss in the future if the drop in our market capitalization is deemed to be sustained.

Next Bridge Note Receivable

Notes receivable consists of an amount due from Next Bridge, which was previously a wholly-owned subsidiary of Meta, until the completion of the spin-off transaction on December 14, 2022. One note is partially secured by a combination of Meta’s common shares and an interest in the Orogrande Project Property. The note receivables have been recognized at their fair value, as of December 14, 2022, subsequent to the deconsolidation of Next Bridge from our consolidated financial results.

We have assessed the fair value of the notes receivable on the deconsolidation date in accordance with ASC 820, Fair Value Measurement. In particular, we assessed the likelihood of our ability to receive the aggregate amount of the $24.2 million of notes receivable and determined that except for the security interest in our shares held by the Pledgor for the secured loan, the other collateral is not substantive and therefore should not serve as the basis for concluding that that loan is well secured and collateralized; the other loan is unsecured. As a result, we reserved $22 million of the Next Bridge note receivables, resulting in $2.2 million being shown on our balance sheet as of December 31, 2022.

At subsequent reporting periods to December 14, 2022, including December 31, 2022, the note is measured net of any credit losses in accordance with ASC 326 Financial Instruments – Credit Losses. If our judgment regarding these note receivables is incorrect and such notes are repaid in full or in an amount more than we show on our balance sheet, we will record a recovery of these notes upon receiving repayment. See note 5 for further details.

We are currently in negotiations with Next Bridge to extend the maturity date of each Next Bridge note receivable.

Revenue recognition – Our revenue is generated from product sales as well as development revenue. We recognize revenue when it satisfies performance obligations under the terms of its contracts, and control of its products is transferred to its customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products or services.

Revenue from the sale of prototypes and finished products is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of goods. We consider whether there are other obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the

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sale of prototypes, we consider the effects of variable consideration, the existence of significant financial components, non-cash consideration and consideration payable to the customer (if any).

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

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

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

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

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

Commitments and contractual obligations

For a description of our commitments and contractual obligations, please see “note 25 – Leases” as well as “note 26 – Commitments and contingencies” in the notes to the Consolidated Financial Statements of this Form 10-K.

Off-balance sheet arrangements

Off-balance sheet firm commitments relating to an outstanding letter of credit amounted to approximately $0.5 million as of December 31, 2022 which is secured by a performance security guarantee cover issued by Export Development of Canada. Further, this guarantee/standby letter of credit expires on October 5, 2023. Please see “note 26 – Commitments and contingencies” in the notes to the Consolidated Financial Statements of this Form 10-K. We do not maintain any other off-balance sheet arrangements.

Recent accounting pronouncements

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our Consolidated Financial Statements, please see “note 2 – Significant accounting policies” in the notes to the Consolidated Financial Statements of this Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

This item is not required for a smaller reporting company.

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Item 8. Financial Statements and Supplementary Data.

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Report of Independent Registered Public Accounting Firm

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

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Meta Materials Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two‑year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two‑year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and requires additional financing to fund its operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

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

Critical Audit Matters
 

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

Acquisition date fair value of a developed technology intangible asset in the acquisition of Plasma App Ltd.

As discussed in Note 4 to the consolidated financial statements, on April 1, 2022, the Company completed the purchase of 100% of the issued and outstanding shares of Plasma App Ltd. for $16,989,246. The acquisition was accounted for as a business combination. The Company allocated the consideration transferred based upon the fair value of the assets acquired and liabilities assumed on the acquisition date. This resulted in the recognition of a developed technology intangible asset of $12,600,000. As discussed in Note 4 to

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the consolidated financial statements, the significant estimates and assumptions used by the Company in the determination of the fair value of the acquired developed technology intangible asset includes the revenue growth rate and the discount rate.

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

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

Acquisition date fair value of a developed technology intangible asset in the acquisition of assets of Optodot Corporation

As discussed in Note 4 to the consolidated financial statements, on June 22, 2022, the Company completed an asset purchase agreement with Optodot Corporation to acquire certain assets related to patents and intellectual property for the battery and other industries. The total consideration was $53,633,267. The acquisition was accounted for as a business combination. The Company allocated the consideration transferred based upon the fair value of the assets acquired and liabilities assumed on the acquisition date. This resulted in the recognition of a developed technology intangible asset of $23,300,000. As discussed in Note 4 to the consolidated financial statements, the significant estimates and assumptions used by the Company in the determination of the fair value of the acquired developed technology intangible asset includes the revenue growth rate and the discount rate.

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

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

/s/ KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

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

Vaughan, Canada

March 23, 2023

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

META MATERIALS INC.

CONSOLIDATED BALANCE SHEETS

Commitments and contingencies (note 26)

Subsequent events (note 27)

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

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META MATERIALS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(1) Retroactively restated for the year ended December 31, 2021 for the Torchlight reverse acquisition (“Torchlight RTO”)

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

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META MATERIALS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY