This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good morning, everyone. I'm Rob Stone, META's Vice President, Corporate Development and Communications. Joining the presentation today are George Palakaris, META's Founding President and CEO, and Ken Rice, META's COO and CFO. Yesterday, META filed its Form 10-Q for the quarter ending June 30, 2022, issued a press release with the Q2 2022 results, and published the Q2 shareholder letter. Each of these documents and today's presentation slides will be posted to the Investors section of the Meta website. A replay of today's presentation will be available via the link provided in the press release and on the IR calendar in the Investors section of the Meta website. Next slide, please. Please note on this call, we will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views as of today, should not be relied upon as representative about views of any subsequent date, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC, including our annual report on Form 10-K filed March 1st, our Form 10-Q filed on August 9th, and subsequent filings with the SEC. Next slide, please. On today's call, George Palakaris will start with an update on the planned share exchange for the oil and gas assets and the filing of an S-1 for Nexbridge Hydrocarbons. He will then review Meta's expanding technology platform and markets and how the recent acquisitions enable our entry into the large and rapidly growing battery materials market. This will be followed by an update on roll-to-roll production of NanoWeb, Meta's proprietary transparent conductive film, followed by an update on Meta's Glucowise non-invasive glucose monitoring system, which was recently awarded a key US patent. Ken Rice will review the Q2 22 financial results, including the important contribution of our nano optic security products for bank notes and government documents. We will conclude the call by taking some questions from the analysts who cover the company. With that, I will now turn the call over to George, Metis CEO.
spk02: Thank you, Rob, and good morning to everyone joining us on the call today. I would like to provide an update for holders on this next slide on the Series A preferred shares. The disposition of the oil and gas assets is now planned as a share exchange. NextBridge hydrocarbons will become a separate private company with a new management team owned by the Series A preferred stockholders. The registration statement, the form S1, which was filed on July 15th, must become effective to complete the exchange. Timing for this depends on the SEC review and comment process. Typical timing for a first response is 45 days, but after the process becomes subject to further review and comments, if any. Costs for the oil and gas operations will be carried by NextBridge as to approximately $20 million of debt to Meta. This includes $15 million loan last year and up to 5 million in 2022. NextBridge, the new management for NextBridge is exploring financing options and we are supporting their efforts. However, there cannot be any assurances that financing will be obtained and repayment of the debt to Meta may not occur. Please refer to the risk factors under our SEC filings and in the S-1. Now let's turn to the ongoing and expanding operations at Meta. Next slide, please. As you may know, Meta is a platform technology company with a broad range of capabilities and related products and trademarks addressing large and growing end markets. These include, as you can see on the top, aerospace, augmented reality, automotive banknote and brand protection, batteries and clean energy, communication, consumer electronics, as well as health and wellness. We are a horizontal company. Our competitive position is supported by 450 active patent documents, of which 288 patents are issued. Our portfolio now comprises of 103 patent families of which 62 include at least one issued patent. For comparison, this is three times as many patent documents as we reported a year ago when we had just 149 active patent documents and 46 patent families. Next slide, please. One of the fastest growing industries we address is electric vehicles, which is in dire need of providing consumers with increased range and faster charging. To achieve this, battery makers need improved material performance, stability, and in particular, safety. As more energy is packed into the battery, to enable longer range and stress on the battery increases. with faster charging rates, the risk of something going wrong increases. Safety is a major issue, including fires that have started from overheated batteries. There are several examples of this. Meta is developing new cutting edge materials and manufacturing techniques to improve safety and efficiency, as well as helping to reduce battery cost. There are two components, separators and current collectors, used in every lithium ion battery, regardless of chemistry. Our solutions will make batteries safer and more efficient. Next page, please. So let's start with the battery separators. The separator is a porous membrane that's placed between the anode and the cathode. It must be thin and light while maintaining thermal and mechanical stability. Controlling the pore size facilitates ion transport during charging and discharging. The lithium ion battery separator market was about $5 billion and used 5.5 billion meter square of material in 2021 alone. demand is expected to grow at 30% CAGR, with each gigawatt hour of battery capacity requiring about 15 million square meters of separator. Next slide, please. So let's take a closer look to NPOR. NPOR is a patented solution made with a solid layer of nanoporous ceramic materials. There's no plastic inner layer. The pore size is tightly controlled and less than 100 nanometers, which offers superior performance, just like metamaterials. NPore has less than 1% heat shrinkage, even up to 200 degrees centigrade. So it does not fail during a thermal runaway. This provides unique safety advantages, as you will see in this short video. Let's take a look. So you can see a nail penetrating test.
spk01: And again.
spk02: Thank you. That was an amazing demonstration. Now let's turn to the next slide. So OptoDot was founded in 2001. It has been developing and licensing two technologies, battery separators and infrared optical coatings. OptoDoc has development relationships with leading OEMs and tier one suppliers, innovative early stage battery companies, as well as the US government and a few agencies. We recently acquired substantially all the assets of this company, including the large IP portfolio with 107 issued and 26 patents pending, including two recently US listed patents, with covering the second and third generation of the NPOR and NPOR ECS. The entire R&D team joined META and brings decades of experience in nanomaterials and coatings. In addition to batteries, this was a strategic acquisition as it complements META's medical metamaterial device portfolio and also allows us to expand in new markets such as wireless power transfer and ultrafiltration. The testing and validation of NPore separators with Coolometrics has been announced. Coolometrics is a leading provider of battery materials and development and testing services. We are underway with independent testing and the results will help us market to a wider range of potential customers. Finally, we believe that we can scale Nanopore the production can be done quickly with minimal capex by working with contract manufacturing partners that we have already selected. Next, current collectors, another essential component for battery performance and safety. Let's turn to the slide. So what we see here is a current collector. A current collector can be an aluminum or copper foil. They're both used on the cathode and the anode, respectively. Together, these account for about 15% of the battery mass, with a heavier copper foil accounting actually for more than 10% of the total weight. We have demonstrated coated copper current collectors on thin plastic films made with our plasma fusion technology through a prestigious UK government funded program, reducing weight by about 80%, improving safety by retarding thermal runaway and improving sustainability by reducing copper content. The next phase is to develop a role to role capabilities. And that effort is starting to get underway, securing key partners that are global leaders in their respective industries. Reducing battery weight translates directly to increased range. So we see strong interest in this technology by several OEMs. Importantly, PlasmaFusion is a versatile platform technology with many uses besides coated current collectors.
spk01: Next slide, please.
spk02: So let's take a closer look into plasma fusion. Plasma fusion is a unique high speed coating technology, able to coat any solid material on any substrate. It is faster and more energy efficient than any other methods and operates at low temperatures, which makes it suitable for plastic substrates. plasma fusion has already been used to deposit prototype lithium ion battery anodes directly onto the separators and then deposit the copper current collector, as you can see pictured on the lower right of this slide. We're also planning to use plasma fusion internally for metallizing NanoWeb transparent conductors and color optic security films, increasing our capacity by accelerating line speed and leveraging our CapEx. Now let's take a look at NanoWeb on the next slide. Our work continues in our Pleasanton, California facility to scale up the world's first 300 millimeter roll-to-roll pilot production line for NanoWeb transparent conductive films. Growing our manufacturing capacity is the key to launching a wide range of applications and form factors. The roll-to-roll 5G reflector film for which we are producing samples for our customer, Sekisui Chemical, has now achieved functional performance equal to the wafer-based standard. Our team is busy producing nanoweb heating for automotive customers to be used in sensor enclosures and windscreens, but also EMI shielding for aerospace and consumer electronic customers. In addition, we are now shipping a number of demo microwave ovens with our transparent NanoWeb on the doors to OEMs for their independent testing. As we continue to expand into new form factors for NanoWeb, our next objective is to increase the line to 600 millimeters of web width, which will be installed in the expanded production area in Thurso, Quebec facility towards the end of next year. Now let's look at some of our healthcare applications. Next slide, please. Among all the other exciting new developments, we were recently awarded a key US patent for GlucoWise, our non-invasive glucose monitoring system. Picture here is Dr. Elena Cano-Garcia as our co-inventor. And GlucoWise continues to progress, and we plan to have a desktop version ready for market in the next two to three years. As we have shown, we have a strong portfolio of solutions that can have meaningful, positive impacts on multiple industries in the coming years. So we can build a better world for all. I will now pass the call to Ken Rice, our COO and CFO.
spk04: Thank you, George, and good morning, everyone. Turning to slide 14. Our Q2-22 revenue grew meaningful year over year to 3.3 million versus 600,000 in the same quarter of 2021. We also grew 12% versus last quarter of Q1-22. The majority of our Q2 revenue was from nano optic security for development work for our confidential central bank customer and other banknote business. Development is progressing under our $41.5 million frame agreement toward our goal of securing a production contract. A flagship win with this customer should lead to additional denominations and other new customers, but we do not yet have a target date at this point for this decision. Operating expenses were $22.1 million in Q2 versus $5.8 million in the prior year as we continue to invest and assemble a world-class team to support our many business opportunities. Our net loss was $21 million compared to $5.9 million in the year-ago quarter and $18.4 million in Q1-22. The loss per share was $0.07 versus $0.03 last year and $0.05 in Q1-22. As of June 30th, we had $55.3 million in cash and equivalents, which includes the proceeds from a registered direct offering closed in late June. META has no debt except for 3.2 million in interest-free unsecured long-term debt from ACOA, the Atlantic Canada Opportunities Agency. We use 10.3 million in cash for operations compared to 18.8 million in Q1-22. Non-cash expenses were 7.1 million in Q2 and we generated 3.8 million from changes in working capital. We use 7.2 million for capital expenditures and invested 3.5 million for the Optidot asset acquisition. We believe that cash on hand is sufficient to support our needs for the next 12 months. Now I'll pass the call back to George for some concluding remarks.
spk02: Thank you, Ken. So as you can see, Meta continues to pioneer Meta materials at scale. We are executing on multiple fronts, We are investing and growing a global team, attracting some very experienced key executives, including the recent additions of a new chief marketing officer and chief business officer. They are already making an impact. Our patent portfolio continues to expand rapidly, and we are adding new platform technologies that complement each other. We expect to begin moving our production team into our new headquarter facility in Highfield Park in Nova Scotia in August, and then plan to have everyone else moved in before our grand opening, which is expected to take place in November. Meta is a category creating company, the first of its kind in Meta materials on the NASDAQ. Now let's take some questions from the analysts. Rob.
spk00: Thank you, George. We will take our first question from McMurray Whale of Cormark Securities. Mac, go ahead.
spk07: Hi, can you hear me?
spk00: Yes.
spk07: Yeah, okay. Great progress on the IP, building up the IP. As you mentioned, George, you have a broad range of technologies. I'm wondering, and you spoke about how you plan on merging things like nanopore and plasma fusion. Can you speak to a little more detail about the progress and actually merging those together? I mean, is it, are we still at early days? Like what are the milestones that we should be looking for over the next few quarters to understand the progress and actually bringing those together?
spk06: Thank you. Excuse me.
spk02: Thank you, Mac. This is a great question. So looking at the synergies between the reduction of cost was one of the key drivers for some of these acquisitions. So as you know, in nanotechnology, things take time. But I'm happy to report that in the last 12 months, just using the nanotech security acquisition technology, One of the fundamental key tools was a technology called e-beam lithography, or what we call the origination. So when our software engineers and our metamaterial scientists come up and dream about applications or a customer shows up and says, here's what I want. One of the bottlenecks in the past was that we would have to ship out the design to be originated by a third party. That is not the case anymore. So we have a huge acceleration because of that one single tool. But it's not just the tool, it's the people. So the people in both our Silicon Valley office and our Burnaby office are collaborating right now. They're working on advancing things that were kind of falling behind, like the solar program, and coming up with new ideas on the augmented reality side, helping basically the business unit advance. That's already happening. Now, we have not publicized it. What I can say is that over the next 12 months, you will see products that are being launched as a result of this collaboration between the synergies of the different platforms. The same goes for the OptoDot, where the OptoDot specifically was looked at favorably because it touched two different product lines. One was our medical MRI application, and the second one was our banknote, where it has optical properties for covert banknote applications, separate, of course, to the battery key applications. So that's really found across the platforms. And even just a couple of months ago, we were at the AWE, where we showed and demonstrated the world's first most transparent antenna that was embedded on augmented reality eyewear. That was a collaboration between our holography team in Halifax and our Silicon Valley office, where they basically worked together on a very unique product offering. And I'm happy to report that there is a paying customer for that application already. So that's kind of how I can describe that. Hopefully that answers the question.
spk07: Yeah, and you touched on the second question I had was about the nature of merging those teams. So you touched on that. It sounds as if you sort of keep the R&D focus in the various locations and then your engineering, like production engineering would sort of be located in Halifax. Is that how you plan or are you consolidating all that under one roof?
spk02: So you can imagine that every single location is like a center of excellence. So in Silicon Valley, it drives applications. In Burnaby, we're driving the originations. And once you have the design from, let's say, one team gets to be prototyped by another team, It all comes together in production in Quebec in a role to role fashion, and then it gets integrated in Halifax. So Halifax is where you would see a lot of integration of the technologies into semi-finished or fully finished products.
spk07: Okay, that makes sense. On the nano web, you spoke of the 300 millimeter pilot in operation, and then in 23, you'll have the 600 millimeter in Thurso. Should we be expecting that the pilot facility, does that imply that you'll get to sort of 100% capacity utilization or whatever the level is expected on the pilot relatively quickly? Or are there different applications for the 600?
spk02: So when it comes to the size of the film, the web width, it definitely unlocks additional use cases. So going larger and wider means that we can go to different form factors, but also in the use cases that we are currently serving, like the microwave oven, the door is smaller than 300 millimeters. And that's a very nice use case and low hanging fruit per se. Now, When you look at the 300 millimeter line, what we're going to be doing over the next few weeks, we are beefing up the team in the Pleasanton office so that we basically have advanced manufacturing. Remember, we have a wafer line there. So we can take on projects and guide them. This is our business model through selection and material selection program that then scales to roles of film that then scales again into high volume roles in the Thurso facility. Now, the Thurso facility is already producing films. amazing things for the banknote industry they have the expertise we have capacity for like seven and a half million meters square so we still have a lot of capacity what happens is the time consuming process of guiding us through a product all the way qualifying it you know it's automotive consumer electronics each one has its own standard And as a B2B company, we have to rely on the customer when they feel that we have reached a certain level of technical maturity. The business case is well advanced so that that's where I kind of, we rely on our partners as well.
spk07: Okay. That's great. And the last question I think is probably for Rob on the GNA. There's just a, there's that large litigation amount in there. Does that, And now, like, what's the outlook for that? And then just in terms of outlook, what would a sort of total OpEx, like once you do all this, you know, you merge the companies that you've acquired together, what do you expect that to come in at sort of on a quarterly basis on the OpEx?
spk04: Sure. So first off, the big blip in GNA for the first half of this year, as you observed, Mac, is related to the whole SEC investigation and the litigation that's underway. I would love to be able to sit here today and say I know what that's going to end at for the year. I don't yet. Okay. We're doing everything we can to cooperate with the SEC and things are moving at a slightly faster pace now. But the numbers are large and I think the expectation or hope is that this would be resolved towards late this year or at the latest early next year. We'll know better at the end of next quarter as to how we're actually doing. coming out there. In terms of what that means for total 2022 OPEX, it's really hard to predict. As you could see, our cash burn dropped quite a bit in the second quarter over the first quarter, and we're continuing to focus on that rather than on the P&L reported operating expenses because a lot of it is non-cash in the form of stock compensation that sort of thing okay okay no that's great okay that's all my questions thanks guys thank you mac uh our next question will be from jerry sweeney of roth capital uh jerry please go ahead uh good morning george ken and rob thanks for taking uh my questions
spk05: So I wanted to follow up, dig a little deeper on the battery side. I was just curious, obviously, you're making some great progress and made those recent acquisitions, but interested to see if you had a desire or need to maybe expand the technology family around the batteries to better position the products on a go-forward basis.
spk02: Great question. So, Jerry, I can happily say that there's a number of third-party supporters in terms of our technology out there. There is a number of already publicized relationships with, you know, before we acquired the two companies had major OEM backings. We are already making batteries available with Coolometrics. Over the next two to three months, you'll see reports of how our batteries fare versus standard chemistries. So we are hoping that, you know, once those reports are out, we'll have even more support from the industry. At this stage, you know, we are in evaluation mode. So the company is focusing around licensing opportunities. As I mentioned earlier, It's relatively cheap to scale the OptoDot technology because it uses a slot die approach. So there's lots of slot die third-party manufacturers out there. So the chemistry is what makes a difference. On the plasma fusion side, there is some capex, but the good news here is that it complements our nanoweb production and product line. So we have been working on Expanding the technology, yes, in terms of scale, but ultimately we see this as a licensing opportunity as we go forward, unless something else comes along the way and changes that view.
spk05: Got it. And then just a little bit more on the nano web side. You discussed in your prepared remarks that the nano web, you'd hit functional performance of the wafers, but I think working on cosmetic uniformity, does this pose any challenges or roadblocks to getting to full commercialization or is this something that should not be too challenging?
spk02: Yeah, so when it comes to anything in nanotechnology, there's always room for optimization. And our engineers have done a fantastic job getting the most important thing done, which is the functionality of the film for the 5G. So we wanted to reflect the 5G signal, and we have achieved that. The cosmetic side is a... It's a matter of optimizing the chemistry, the process, windows. So imagine, just to give you an example, if you're baking something in your oven and suddenly you bake it at a higher temperature for a little longer, well, it makes it a bit more crispy. Well, you need to, again, optimize that window to just get it right. And that's what we're doing right now. So I don't feel there's any challenges ahead. It's just a matter of time. The team is working very hard to get us moving.
spk05: Got it. And then one more question. This really revolves around resources. Going after lots of opportunities across the you know, the battery side, nano web, EV, and you've added some additional people, human capital. What's the playing field look like going forward? Do you have enough resources to chase these, to pursue these opportunities, or are you still needing to add some more human capital and people? We do know there's CapEx coming, but what about on the people side?
spk02: On the people side, the key additions you will see are in the manufacturing department, but also in the sales department. So there's discussions internally of how we can geographically expand our reach from a BD and sales perspective. And you have to understand that as a B2B company, we have been quite blessed internally. We have had major companies reach out to us. So we were not really out there pushing EMI shielding for microwave ovens. There was a major OEM that showed up at our doorstep and said, hey, can you do this? And this is a repeating formula, let's say, that has happened to us over the years. So as we are now changing that and we have capacity, we have products coming online, we're going to take a much more active role, basically promoting and pushing those products out. And of course, partnering with the right teams to deliver. So that's kind of optimizing the team a little bit, but nothing hugely, you know, we're not going to double the size of the team.
spk05: Got it. And then this one may be a little bit more for Ken. Just looking balance sheet investments and different requirements going forward. Is there an opportunity for some, you know, quote, unquote, alternative finance? You talk about grants, but maybe investments by strategics, especially as Georgia just said, companies are coming to you. Is there anything potentially on that front?
spk04: Absolutely, there's opportunity. I think the approach we're taking is to take, first of all, as our balance sheet has improved, especially on the heels of the financing that we did the end of June, it's enabled us to start thinking much more seriously about pursuing additional support from the Canadian government, which, as you know, is very, very lucrative for for us, and the terms tend to be quite favorable. The second thing is, since a lot of the investment we're making now is in CapEx, we're also pursuing what most of the world would consider traditional financing for that kind of equipment. We've not historically financed our equipment using something as simple as debt. So we're starting to think about that, to use collateralized debt to finance the equipment. With regard to investment by strategics, we're always interested in that type of investment. I think if you go back in the history of the company, Georgia in particular was very successful at attracting investment from strategics very early on. And we see over the last few months, we've attended a number of trade shows and we're starting to see some renewed interest from a certain number of strategics in a couple of our verticals and doing that again. So I think we're looking at all of those alternatives.
spk02: And Jerry, to add one thing here is that we are in discussions with government agencies in four different countries.
spk05: Got it. I appreciate it. That's it for me. Thank you.
spk00: Thank you, Jerry. Now we will take some questions from Chris Sakai of Singular Research. Chris, go ahead.
spk03: Hi, good morning. To piggyback on that last question, You know, as as we've seen some recent bills being passed in the US about on climate change and electric vehicles, you know, how how would that be? Would it be possible that you'd receive some funding from the United States?
spk04: I think the answer to that is it's possible. And as we were working as George said with with agencies of multiple governments right now, especially in the battery space it's a it's a very burgeoning space and the governments are all interested in. Two things in expanding production capacity. for the things that we already do, which are separators and carbon collectors, and also to a certain degree, competing with each other to attract as much capacity to their particular geography as they can. And that's ultimately gonna be beneficial to Meta as well. We don't have anything to announce right now, but it's nice to say that we're in discussions and we expect that those will move somewhat rapidly.
spk02: And one thing I wanted to add is that if you look at the landscape, you'll see that recently, a couple of weeks ago or 10 days ago, Japan and the US kind of joined hands in the semiconductor industry. This is very positive for us. We have customers and partners in Japan. That opens up additional opportunities for joint work in the United States and beyond.
spk03: Okay, and next question I have is, you know, of the revenue for this quarter, how much was that from nanotech security, Corb?
spk04: The vast majority of it, well over 95% was from nanotech security, and we planned it that way. As you may recall, when we merged with nanotech, over a little under a year ago now, they brought with them a 40 million plus frame agreement with a central bank client. That work is accelerating actually. And so we're taking full advantage of the work that the team in particular in Burnaby and Thurso has been able to do. And that's so the revenue that we're seeing is accelerated by many, many percentage points. as a result of the work on the bank note security. And we expect that over the course of the rest of this year, that trend will continue. And as we go into next year, the balance will be a little bit more even between the bank note security and the other work that we're doing in the interweb and some of the battery business.
spk02: And to add one thing here, Chris, the work that has been going on under the security films business, which is the nanotech side. When we were going through the negotiations in the summer of last year, the contract at that point in time was much smaller than what it ended up being. So we helped Nanotech achieve that much larger, more than twice the size in the end. This contract was announced within 24 hours after we announced the kind of definitive agreement and closing of our deal. But what is more important here is the type of technology that we are executing on. This is a true metamaterial technology. Now, what excites me about this and what I wrote in the shareholder letter, that this could become the highest volume blockbuster application for now in the space of optical metamaterials. And this is a proof point. that not only you can have metamaterials out there that are not just aerospace and defense related, most of our competitors in the metamaterial space is just narrowly focused on aerospace and defense, where price per square meter doesn't matter. On the other side, we are working in a space where price is extremely sensitive in the banknote business, volume is extremely sensitive, and more importantly, quality and accuracy matters. at the nanoscale is very, very important. So if we can achieve that in the banknote space, the repeatability, the scale, we're talking about millions of meters square, that's where we can take all of that and translate it to any industry beyond banknotes.
spk03: Okay, thanks. And then last for me, You talked about your glucoized product. Can you give us a sense of when that would possibly be earning a revenue, starting a revenue stream?
spk04: Sure. As George said, our plan is to have the first incarnation of that product on the market in two to three years with the objective of trying to be faster than that. It is a medical device, so it will be regulated in the geographies we launch it in. So I think the way to think about it is if we can accelerate it, we will, but at a minimum. it should be generating revenues in the two to three year timeframe. How we commercialize it is still a bit up in the air. It's most likely to be via a partnership with a larger medical device company, but we're not sure of that yet.
spk03: Okay. Thanks for your answers. Okay.
spk00: Thank you, Chris. Do we have any follow-ups from Mac or Jerry?
spk06: Okay. Hearing no follow-ups.
spk02: Maybe just one thing, Rob. I know that there was no question about the assets. So I just wanted to make just a little note here. You know, we put the first slide in the agenda was the asset updates in the S1. I just wanted to say that we stand by ready to maintain these assets. According to our agreement with the university lands, we are eager to make sure that these assets produce and further develop and basically enabling the assets to be sold at the highest price possible. Timing is fantastic for this right now, as we're in a kind of this super cycle for oil and natural gas in particular. I think the team has extensive experience drilling long laterals and optimizing for production from those laterals. And I think that's where you'll see more information and updates as we go through this S1 process. Thank you.
spk00: Thank you, George. Thank you, everyone, for joining us today. If you have questions, you may reach us at ir.metamaterial.com.
Disclaimer