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spk01: Good morning, ladies and gentlemen, and welcome to the Meta Materials Inc. call to discuss Q1 financial year 2022 results. My name is Mark Kaminosky with Integris Communications, Meta's investor relation advisor, and I will be introducing management on today's call. A replay of today's presentation will be available via the link provided in Meta's press release announcing the webcast and on the IR calendar in the investor section of the Meta website. Joining me on today's call are Mr. George Palacaris, Ph.D., Meta's founding president and CEO, and Mr. Ken Rice, Meta's COO and CFO. On today's call, we will start with Ken Rice reviewing the Q1 financial year 2022 financial highlights and providing an update on the oil and gas assets. Then George Palacaris will summarize Meta's market opportunity, position in the value chain, expanding technology platform, and global presence. George will provide some operational updates regarding Meta's nano-optic security products business and expanding global facilities, a progress report on the first pilot scale roll-to-roll production line of NanoWeb at the company's Pleasanton, California facility, a review of some details on the recent acquisition of Plasma App, which added proprietary Plasma Fusion vacuum coating to Meta's broad technology platform, an update on Meta's rapidly growing intellectual property portfolio, some recent key executive additions, and an overview of Meta's expanding sales, marketing, and business development efforts. Before we begin forward-looking statements, I would like to intend to remind you today, today's presentation may include forward-looking information or statements within the meeting of the Canadian Securities Law and with the meeting of Section 27A of the Securities Act of 1933 as amended, Section 21E of the Securities Exchange Act of 1934 as amended, and the Private Securities Litigation Reform Act of 1995 regarding the company and its business, including its statements with respect to business strategies, product development, expansion plans and operational activities of the company, and the benefits to the company of further investment in product development and manufacturing capacity. We caution you not to put undue reliance on these forward-looking statements. as they involve risk and uncertainties that can cause actual results to differ materially from those anticipated by these statements as described in our risk factors in our reports filed with the SEC. Any forward-looking statement made on this call reflect our analysis as of today only. We have no plans or duty to update them except as required by law. Yesterday, we distributed a press release detailing the announcement of Q1 financial year 2022 results. which included a link to our Q1 2022 letter to shareholders, and we filed Meta's form 10-Q for Q1 2022. For your convenience, a copy of the press release is available on our website, and a replay of today's webcast regarding this announcement will be available following the presentation in the investor relations section of our website. Unless otherwise stated, all dollar amounts referred to are in U.S. dollars. Now I will pass the call to Ken Rice, Meta's COO and CFO. Ken.
spk02: Thank you, Mark. And good morning, everyone. We appreciate your time and attention today. Now I'll provide a few highlights of our Q1 2022 financial results. Meta is an early stage growth stage platform company moving toward volume production for applications in multiple markets. In Q122, total revenue grew 399% year over year to approximately $3 million for the first quarter compared to $600,000 in Q121. The company relies on a few customers for a significant portion of its revenues. Our nano-optic security business generates a majority of its revenue from development work for a G10 central bank. Our development programs include the contract with the confidential G10 central bank, and they account for most of our revenue. But we expect a growing contribution from product revenue over the next 12 months. Meta is pursuing multi-year, multi-million dollar contracts with several OEMs. For the first quarter of 22, the net loss was approximately 18.4 million, or six cents per share, on 285 million outstanding shares. Operating and other expenses for Q122 included several non-cash items, approximately $4 million of stock-based compensation, $200,000 of non-cash consulting expenses, and 1.7 million of depreciation and amortization, as well as $400,000 of non-cash lease and interest expense. Net cash was used in operations for the first quarter, and that totaled 18.8 million, compared to 2.4 million in the same quarter of 21. That included about $6.3 million used in operating assets and liabilities. At the end of Q122, our cash and cash equivalents totaled $30.2 million, including half a million in restricted cash. We have no debt except for $3.3 million in various interest-free loans from Atlantic Canada. The company believes that its existing cash is sufficient to meet its working capital and capital expenditure needs as production capacity begins to come online. The company may need to raise additional capital to expand commercialization of our products, fund our operations, and fund our research and development activities. Future capital requirements may vary materially from period to period, and that will depend on many factors, including the timing and extent of spending on R&D, the capital expansion of our facilities in Halifax and California, and the ongoing investments required to support the growth of our business. As George will describe later in the presentation, we received $2.2 million in additional orders under the development contract with our confidential central bank customer, and other bookings in the first quarter continue to trend higher. At the end of March, we provided an update on the Special Series A Preferred Stock Dividend. I'll review a few important points now. With the completion of work on four wells in the Ore Grande property in late 2021, Meta believes that we're in compliance with all aspects of the lease obligations. The disposition of the oil and gas assets is now planned as a share exchange where the Series A shareholders will exchange their Series A shares for common stock in a separate company called OilCo. OilCo is a subsidiary that we created for this purpose. That will then be owned by the Series A preferred stockholders. To complete the necessary regulatory filings, an audit of the oil and gas operations through the end of 2021 was required, and it's now complete. A number of required SEC filings must be finalized to complete the exchange. Upon completion of the exchange, Series A holders will exchange their Series A shares for oil co-com and stock. Costs incurred by Meta in 2021 and up to the spin-out associated with oil and gas operations will be carried by Oilco as debt to Meta. Oilco is exploring options to secure additional short-term funding and financing. Financing may not be completed and repayment of debt may not occur. Investors should refer to additional risk factors in the company's SEC filings. I will now pass the call to George Pelicaris, Meta's founding president and CEO.
spk00: Thank you, Ken. Good morning, ladies and gentlemen. I'm delighted to be providing you another update today. It's been a very busy quarter. Although it has only been about seven weeks since we announced Meta's fiscal year 2021 results, there has been some very exciting developments since then. Just wanted to give you a general update on what's happening around our market segments. At Meta, as you know, we are developing sustainable solutions to meet market opportunities driven by several megatrends. These megatrends continue to excite the world and create opportunities for both us and our partners. We are seeking to help address global supply chain challenges, which have arisen in the last several years. Fundamentally, metamaterials are all about doing more with less. Two of our largest market drivers we see, number one is the 5G infrastructure initiative, which is more than $2 trillion being deployed right now across the world, and vehicle electrification, which is growing at remarkable rates to be close to $1 trillion by 2028. 5G networks promise broadband speeds wirelessly, but require enormous investment to make this happen. These higher speed, higher frequency signals have shorter ranges than prior generation, for example, 4G and 3G, and they're easily blocked and absorbed by any object in the environment. Think of your glass windows, your building materials, et cetera. Now, if you go inside the building, propagation there is a major problem for 5G. Meta's award-winning 5G reflectors help address these issues with a sustainable solution and a big partnership with Sekisui Chemical that we have already announced. Vehicle electrification, on the other side, represents a major shift in transportation. The shift from conventional vehicles to electric vehicles will require not only huge capacity investments, not just to make the vehicles, but for every component and even down to the raw material supply chains to support them. So this creates concerns, not only that the existing supplies are heavily concentrated in Asia, but there's the fact that there's not enough materials around the world to support this work and this growth. We are working on applications to make EVs safer to operate in all weather conditions, make them more efficient, and to develop also battery components and materials that will help increase rains and improve battery safety. Meta is a business-to-business company that focuses on supporting OEM suppliers with breakthrough innovations and solutions. Here's a graph of where we fit in the supply chain. But there is something new. We operate and started operating in the middle of the value chain between the raw material suppliers and the final product assemblies. together with our OEM customers and strategic partners, providing the interface to final consumers. Today, Meta is becoming more vertically integrated, moving toward integrated products, design and assembly, driven by the demand of our customers. If you look at this technology, we have, number one, a design software AI-driven solutions and testing platform, This is where we innovate quickly. We can design materials faster than anybody else. Then we have invented and acquired proprietary nanopatterning technologies. We take our designs and print them at low cost, very large scales. And as I mentioned, we are moving towards integrated products, design and assembly, towards more vertical integration, all the way to becoming a trusted tier one to our customers. Our AR fusion technology platform, for example, integrates prescription lenses and foils with smart AR technology. We see opportunities that provide more value added going beyond components to systems and devices. We recently added a new head of engineering to lead this effort, as I will explain in more detail later in this presentation. So why do I focus so much on the technology platform capability? As you can see, this is where I can kind of demonstrate the shift towards integration here. we continue to expand our technology platform capabilities to meet customer demand. Customers want a one-stop shop. Supply chains are so diversified that create problems for end users. And when supply chains are not optimal, you create problems in quality, you create problems in cost. So having the ability to deliver more assembled products with more value is becoming a growth potential for our business. Meta became, with holographic technology, focusing on our first product, which was laser glare protection for pilots. Last year alone, we had the record for laser strikes in this market. Since then, we have added rolling mask lithography, which enables large-area, low-cost, roll-to-roll production for nanomaterials with metals. We added key capabilities with the nanotech acquisition, including electron beam lithography, which can print down to a few nanometers of resolution, and nano-imprint lithography for roll-to-roll large-scale reproduction of these materials. Wireless sensing forms the foundation for several of our medical applications in development. GlucoWise, for example, will be a complete system with associated hardware, software, and services. Our other medical applications should follow a similar model, And finally, on the precision integration, AR fusion and plasma fusion provide us with unique proprietary manufacturing and integration capabilities. We expect to use all of these technologies in-house and to sell and license some systems to others. I will have a lot more to say about plasma fusion in a few minutes. Meta is expanding. not only by people, but geographic presence. Meta is a truly global company today. With our various locations, we are able to take advantage of proximity to potential customers and partners, draw on additional pools of talent, and gain access to government funding to help support our R&D. Our two newest locations are good examples. In Athens, we are able to access Greek and European government programs and add cost-effective engineering talent. Athens has been announced the top five cities in Europe for 5G development. In Maryland, where we will open a new office soon, we should enjoy proximity to key OEMs and government agencies. Now, here's an update on nano-optic security products. As you know, in October last year, we closed the acquisition of Nanotech Security Corporation, a developer and manufacturer of secure and memorable nano-optic security features used for counterfeiting for banknotes and government documents and to provide protection for brands. We gained access to e-beam lithography, nano-imprint lithography equipment, UV casting, roll-to-roll coating equipment, but more importantly, a team with decades of roll-to-roll production experience. NaoTech was a key contributor to the best revenue quarter yet, as Ken will detail or has already detailed earlier in this presentation. On the top right of this slide, you'll see an image. This is our color optic stripe. It's a new technology. It has been featured on the annual banknote technology report number eight. Now, color optic is a patented visual technology that is exclusive to the government and banknote market. It combines sub-wavelength nanostructures and microstructures, which we call metamaterials, to create modern, overt, security features with a unique and customizable optical effect. When we introduce this, color optic stripe will be the latest in a line of plasmonic technology products following the M2 and the color depth and is expected to be one of the highest volume applications in the history of optical metamaterials industry. I'm personally excited because what you see here on this strip is a 50K resolution. If you think of a TV monitor, a TV at your home, which is 4K, 8K, this is 50K. It means 50,000 dots per inch, which translates to 2.5 billion nanostructures. Let me underline this last point. We can take nano optic security products, deliver kilometers of this product with extremely high resolution and nanometer accuracy at the cost point that enables us to penetrate a $2 billion market. One thing that I'm excited about this is that it's a very sticky business. Typically contracts last between five and seven years. And just before the acquisition closed, Nanotech renewed its frame agreement with a confidential G10 central bank for up to $42 almost million in development over a period of up to five years. This was the largest contract in our knowledge in history of banknote security. We started in fiscal year 2022 with a $7 million in purchase orders under the frame agreement. we received $2.2 million in new orders in April, including $1.2 million for sample products, bringing the fiscal year 22 orders to $9.2 million US. If we are successful in winning a production contract with a central bank customer, which we are confident we will, We should then have the opportunity to compete on security features for additional denominations for that customer. And we should be in a position to attract additional business opportunities with other leading central banks. So here's a little update on our factory and our production. What you see here on top of the photo is the top view of our Thurso manufacturing facility in Quebec. We invested $66.1 million in the nanotech acquisition, net of cash acquired, to accelerate and de-risk our meta manufacturing scale-up. We added approximately 8,000 square foot of R&D facility in Burnaby, B.C., And we now own this lovely 105,000 square foot production facility on 11 acres of land in Thurso, Quebec, which is right outside of Ottawa. Approximately 35,000 square foot of this facility are currently being used for production with the rest configured as a warehouse. We are expanding not only the production space, We are preparing for doubling our nano optic security production capacity to 15 million meters square per year. And we're also reserving space for our next generation nano web, which is 500 millimeters roll to roll line web widths planned for 2023. In this picture, you can see the sections marked P1 and P2, where we're expanding production space. And as you can see, there's plenty of room to expand further. Finally, a key point to make about our Thurso facility is that our production is powered by Hydro-Québec, giving us a sustainable source of low-cost, clean, 99% renewable energy. Expanding production in Thurso, therefore, not only having the room to grow, but also to grow sustainably, becomes part of our growth strategy. Another update I would like to share is what's happening in Halifax with our especially AR Fusion lens casting line. In February 2021, we acquired the assets and IP of a Swiss lens manufacturer, Interglas, forming the foundation of our AR Fusion platform technology for smart augmented reality eyewear with prescription lenses. We have moved all the equipment to our Halifax facility, and we have been running, calibrating and refining our process and materials in partnership with Covestro. Pictured here, you can see two complete automated lens casting lines. Our in-house capabilities encompass hologram recording, the foils that are coming through the raw materials through Covestro, The stack assembly, the film forming, the lens casting, the metrology, and the final setup to basically ship to customers. In January 2022, we joined the Laser Scanning for Augmented Reality, or otherwise called Laser Alliance. As a member of the program, which is the Institute of Electrical and Electronics Engineering Industry Standards and Technology Organizations. So IEEE is the world's largest technical professional organization dedicated to advancing technology for the benefit of humanity. To be successful in this industry, we believe that any AR eyewear solution must deliver two things. Number one, a thin lightweight display with a wide field of view that is comfortable and fashionable. So you don't kind of look like a robot. and integrated prescription lenses, which more than half of the adult population right now requires. We believe that Meta is one of the very few companies who can deliver both of these in a one-stop-shop solution for the AR eyewear OEMs. The AR fusion process is highly sustainable using less energy and less materials than conventional lens casting and grinding. we are able to embed a number of smart technologies into the CAST prescription lens, including optical combiners, which would be the display, waveguides, which will also be the display, eye tracking sensors, which reduce the computational power for this eyewear, active layers based on our nano web transparent conductive film think of a 5g antenna on the lenses think of defogging on the lenses think of electrochromic changing basically the darkness level of the lenses so i spoke a little bit about nano web let's go into a little bit more detail here what's happening Last quarter, we announced a very important milestone. We installed a first-of-a-kind roll-to-roll line to produce nanoweb transparent conductive films at our facility in Pleasanton, California. We installed it with a two-week delay based on our schedule, which was, I think, a record considering what happened last year with supply chains. And I just want to say publicly thank you to our CTO, Jonathan Waldron, for delivering on that promise. Scaling up Meta's proprietary rolling mass lithography, we call it RML for short, process from a wafer scale substrates to 300 millimeter web width enables much higher volumes and it greatly reduced our cost per square meter, supporting large area applications for a wide range of end markets. The NanoWeb line comprises the same process steps which have been proven on the wafer scale line, where we have been producing development samples for customers for quite some time. Since installing the roll-to-roll equipment, we have been optimizing the line. We're focused on key tests right now and comparing the performance of the materials produced on the roll-to-roll substrates against the golden samples that we have from the wafer line. I'm very pleased to report that the first roll-to-roll sample of 5G reflector film demonstrated performance, which was within 1% of our wafer-based golden samples. We already understand the minor artifacts which account for the 1% variance, and we expect to achieve roll-to-roll golden samples soon. Recently, Sekisui Chemical has published results from indoor propagation measurements using our 5G reflector film, and we expect increased sample shipments to them in the second half of this year. In addition to 5G reflectors, another key application for NanoWeb is EMI shielding. We have recently completed internal demonstration and testing of a transparent microwave oven door which provides equal or superior EMI shielding while allowing a perfectly clear view inside the oven while the food is cooking. As you can see here, the photo in the bottom, we have chosen a retro style. This was also an exciting achievement. We are presently building a number of these demonstrator units and we will provide them to prospective OEM customers for their own independent demonstrations and testing. And I personally look forward to the day where every single location in our meta growing geographies will have one or more of these meta microwave ovens. I mentioned this already, but I can't overstate the importance of scaling up NanoWeb to higher volume and larger areas. This will support the additional customers and enable new applications as the cost per square meters decline. For example, another key application for NanoWeb, which we have a lot of interest from several OEMs, is de-icing and defogging for electric vehicles and the ADAS, the advanced driver assistance systems, like camera sensors and LiDAR type devices. Success here will require routine production of high volume, low cost NanoWeb product. In April, we announced the acquisition of UK-based Plasma App Limited, the developer of Plasma Fusion, a first-of-a-kind proprietary manufacturing platform technology, which enables high-speed coating of any solid material on any type of substrate. PAL's team is located in the Rutherford Appleton Laboratories in Oxford, UK. The gentleman you see in the picture above is the founder, Dr. Dimitri Yarmolich, and he has joined Meta as the vice president and managing director for Plasma Technologies. In 2014, he developed the first working prototype in just six months, working alone. The acquisition of Plasma App contributed to nine issued patents and one new patent family to our IP portfolio. We expect to apply plasma fusion to the metallization step in our roll-to-roll production process for nanoweb films, as well as color optic 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 as battery materials. requiring hundreds of millions of square meters per year. Large scale metallization is expected to leverage capital equipment investment and substantially reduce cost per square meter of output. Plasma fusion uniquely combines the benefits of sputtering and evaporation while using zero volatile organic compounds, chemistries, PALS technology works in a more sustainable, customizable, and efficient way by producing new materials in vacuum at low substrate temperatures with higher adhesion. We intend to continue to industrialize and scale up plasma fusion, including applications for our high-volume factory in Thurso, Quebec. Additionally, plasma fusion will be available for licensing and co-development for strategic partners. So I have a little short video, which is a good demonstration of how this amazing technology works. What you see here in this 10 seconds, it has coated 100 nanometers of stainless steel into an ordinary golf ball. Metal golf balls may not sound very practical, but the point is the ability to coat metals on plastic substrates. Plasma fusion is even able to coat copper on Teflon, making it adhere to a non-stick surface. So looking a little bit further on how this works, plasma fusion operates in a vacuum chamber. What you see here, there's concentrated energy coming from an electron beam that creates a plasma. When the plasma strikes the target material, it creates small amounts that are ablated and the material moves across the chamber towards the substrate at very high speed, 10,000 meters per second. The materials here at the beginning get to become evaporated at 1 million Kelvin degrees. By the time the plume reaches the substrate, it's cool enough to be safe for plastics. At the same time, it is moving with enough speed and force to penetrate into and bond with the surface. So this is not just a simple coating technology. It impregnates basically the materials. It creates and fuses materials together. The process is controlled by computers repeatedly pulsing and depositing more or less material at controlled paces and depths. So to summarize, PlasmaFusion is a unique patented technology platform tool. We expect it will improve our internal processes for NanoWeb and nano-optic security products, but also open numerous new markets and opportunities. A key support for Meta's technology platform and our future competitiveness is our IP portfolio. Since the Q4 and fiscal year 21 report, we have reached yet another major milestone with 302 active utility and design patent documents compared to 269 on March 1st. We now have 175 issued patents, including one design patent compared to 163 issued patents last quarter. These include 38 issued US patents, 137 issued patents in 24 other countries. Patent families have increased to 81 versus 74, of which 48 include at least one issued patent. So let's talk a little bit about the team and the future. Meta is a platform technology company with a growing range of opportunities in multiple market verticals. And in order to capture Meta's full growth potential, we're building a world-class organization, recruiting top executives who bring decades of experience from larger successful organizations. In April, we added two senior executives in addition to Dimitri, the founder of Plasma App and created new positions. George Francis joined Meta as our chief information officer. He brings over 25 years of experience in a range of different industries, including manufacturing, retail, distribution services, and software as a service. Mr. Francis is leading the design of Meta's IT architecture, systems, and cybersecurity. He will ensure that our systems support all of our regulatory and compliance needs. And another opportunity is the potential to monetize the data generated by our emerging products, especially in the medical field and in the imaging field. We are confident that George Francis will support our growth as a global organization. In his last position, he managed a team of 120 personnel integrated multiple acquisitions and implemented IT solutions, best practices for data and asset protection and regulatory compliance. On the right, you see Dr. John Yiannis Antoniadis. He joined Meta as our EVP and head of engineering, electro-optical and infrared systems. I believe that Meta is very good at developing breakthrough new applications in the lab together with leading OEMs. We have been doing this for several years. Now we are at this inflection point as we begin to commercialize multiple applications in different end markets. As the new head of engineering, Yanis brings over 35 years of experience in advanced systems, hardware, software, AI, and other type of advanced technology development systems. Yannis has been a leader in the academic government and private sectors. He's building and leading a team to drive product engineering and vertical integration of all technology portfolio. In addition, we are adding a new strategic office location in Maryland which will provide us proximity to targeted verticals in aerospace and defense government and another pool of skilled personnel. So to conclude, in addition to the key executives that I just mentioned, we are also expanding on our marketing and sales team. and our business development efforts. As you can see, Q1 has been very busy and Q2 continues to keep us very busy with a lot of trade shows, conferences, where we are participating, meeting customers, demonstrating, and also speaking about the benefits of our technology at the global audiences and international events. So let me summarize where we are and where we're going. Number one, we have assembled and continue to grow a team of multinational subject matter experts. Number two, our intellectual property portfolio is rapidly expanding and should provide a durable competitive advantage. Number three, we are developing breakthrough applications for multiple end markets driven by mega trends. Number four, we are scaling manufacturing with a first of a kind large area metamaterials production. Number five, we are, and we will continue to expand capacity and lower our costs as we integrate plasma fusion technology. And last but not least, our platform keeps growing, becoming broader and more vertically integrated. Thank you very much for your time and attention this morning. I will now pass the call back to Mark Komunoski.
spk01: Thank you, George. Thank you everyone for joining us today. We appreciate your interest in Meta. If you have any questions, you can reach us by email at ir at metamaterial.com.
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