Q3 2022 Meta Materials Inc Earnings Call
So plasma fusion, which is our branded name is our patented high speed energy efficient vacuum coating technology.
And it's able to quote any solid material onto any subsidies, including plastics.
Solid copper foil current collector is used on the anode.
<unk> accounts basically for more than 10% of the total weight of a typical battery cell.
We demonstrated that the coated corporate current collectors deposited on polyester substrates with our plasma fusion technology for a prestigious U K government funded projects.
Has been able to reduce the weight by about 80% improved.
Improving safety by retarding thermal runaway in improving sustainability by reducing corporate content.
This was a partnership with Dupont.
And a couple of universities in the U K.
Now we are developing or altered all capabilities and we are already working on a mini roll to roll system, producing 12 centimeter wide webs by 20 meter long roles as you can see pictured here.
This month, we have secured key partners that are global leaders in their respective industries, specifically, we signed an Mou with Dupont packaging films and Mitsubishi electric for a multi year multi stage project to industrialize this process.
We'll develop a pilot scale system, followed by industrial scale equipment.
And then apply plasma fusion to solid state battery production.
What's very important here to state is that plasma fusion is very versatile it's a platform technology with which we expect to increase productivity not only for batteries, but also for nano web and other applications.
So talking about <unk> earlier this year, we installed the world's first 300 millimeter web with roll to roll pilot production line for nano web transparent conductive film.
Our Pleasanton office in California.
We have been growing our manufacturing capacity, which is the key to launching a wide range of applications for nano web.
For Q2, we are making five G reflect their films that were functionally equivalent to the wafer based standard parts.
But they had some cosmetic non uniformities.
We're pleased to tell you.
But we are now making beautiful uniform five year reflect our films that you can see pictured here.
Assembles now exceed customer specs.
Then mats and exceed wafer based parts.
Now, let's talk a little bit more about some of the applications.
Today's sophisticated a desk a best means advanced driver assistant systems help to make our safer and easier to drive using a range of cameras such as.
Commerce, you've seen electric vehicles, but also radar and other types of sensors like lidar.
This advanced technology becomes useless, if the sensors are obscured by phone or ice or humidity and just general bad weather.
To efficiently service the growing number of Oems, who are interested in testing our nano Webb for example, if an inspiring heaters.
Antenna or electrochromic applications, we have designed a range of standardized demo kits.
Which use a common controller with multiple programs.
Pictured on the left you can see nano where Peter it's powered by a battery in the controller and some logic.
The IR camera image as you can see there on the far left shows the heated window in operation. So the controller can also be connected to a USB power supply.
On the right you can see typical packaging.
Our enclosure.
And moving onto the electrochromic and <unk>, what you see here.
You can see basically a different version of the nano web demo kits. This time uses the electrochromic of your antenna application designed and embedded in there in Atlanta.
So nano web.
Electrochromic layer can quickly suites of lens or a surface from transparent to shaded.
With applications, such as augmented reality eyewear and smart lenses.
So byproduct timing this demo kits are timken.
Efficiently servicing a larger number of potential tier one and OEM customers and move them from the application of evaluation phase two custom designs and paid programs.
With a 300 millimeter wide web pilot line, we can produced on the web for sensor windows and eyewear as well as other obligations.
As we grow nano web the capacity and the width of the web role, we expect to drive down the cost per square meter and address a larger number of applications.
Alright.
So another application with nano web.
The smart roof.
So now here's where we can add multiple functions. This is very exciting has never been done before to have compact functions all within the same layer or stack on top of each other.
Having for example, compact and power efficient dicing, and defaulting saves battery power and frees up space within the cabin the dashboard design.
An electrochromic sunroof.
Quickly adjusted transparency and it's embedded with an invisible nano web antenna can offer high speed.
Connectivity, while at the same time protecting you from the Sun.
So now let's look at some other met us developing obligations.
Yes.
<unk> fusion is met US platform technology for smartphone managed reality eyewear fusion combines precision cast lens fabrication tools with functional metal materials in volume holograms to provide a our wearable developers with a platform a one stop shop for seamlessly integrating smart technology seem to.
Thin lightweight prescription glasses on the left you can see the RF fusion automated land cost line, which is our Gen. Five machine, which was recently moved to its own dedicated clean room in our high field headquarters facility.
And now let me show you a quick demonstration of our holographic free space combining our display.
It's embedded within an <unk> fusion cast lens.
And what you see here is basically a very sneak preview of what it would look like.
One of the things that is very high value to say here is that our displays are more efficient than the competitor displace.
Efficiency means that you can turn lights.
Two information far better far easier than the competition, but also.
Nobody has all of these technologies under one roof.
This one stop shop approach that we've talked about has been a critical missing piece in the industry.
So let's look at some applications beyond.
Fusion.
For example health care.
So blucher wise is our noninvasive glucose monitoring system, which uses dual RF radio frequency and optical signals. So these are the types of sensors, we're transmitting signal through the skin noninvasively to measure glucose without penetrating and drawing bloods.
In the second quarter, we were awarded a key U S patent for buccal wise and today. The system is covered by 16 active patents of which five are issued.
Picture here on the right you see Doctor Elena kind of Garcia to the Coinventor and she has served US one of the longest.
The times and the company we are developing here a new preclinical prototype that is using this is not a mockup. This is a working system.
And of course, we expect to make the final design slicker and smaller.
As our desktop version, which will launch as a form factor as a desktop merger. So the next round.
We're doing currently is a preclinical human study.
Which should be completed before the year end.
And we plan to have this desktop version ready for market in the next two and a half.
Two or three years.
So I will now provide a little bit of an update on our nano security products.
As you can see in this slide we continue to make progress in our development work with the new anti counterfeiting security features for our confidential Central Bank.
Since September 21, we have been working under a framework agreement for up to $41 5 million U S dollars over the next five years.
We announced.
That $4 3 million in purchase orders.
Has been secured in September , bringing the total orders to $13 5 million U S dollars.
Under this agreement to date.
The customer may choose to expand the scope of the work with new purchase orders.
They were designed into a new banknote with this flagship customer we expect that this would lead to more denomination currency eliminations as well as follow on business with other central banks.
We're also preparing for the commercial launch of our new unique plasmonic nano optics technology called color optic stripe.
We have already delivered 10000 meters of material for customer trials with good test results for our season and durability, which is a critical gate.
The product launch.
The short video shows color optics right samples on the production line.
As we have.
As we have demonstrated we are making progress.
But we have.
A lot of things to cover.
Our strong portfolio of solutions that have very meaningful positive impacts.
On multiple industries.
In the coming years will provide mehta with a pastor significant revenue and cash flows in the near future. We see these applications as catalysts and each one will enable us to gain market traction.
Big customer contracts and more importantly.
The confidence to continue building up our production capacity.
I will now pass the call over to Ken Rice, our COO and CFO .
Thank you George and good morning, everyone.
Turning to slide 15.
In Q3, our revenues grew meaningfully year to year to $2 5 million versus 600 K in the same quarter of last year, while Q3 revenue was lower than in Q1 and Q2, it's important to remember that at this stage. Most of our revenue is driven by development and nonrecurring engineering, which is generally non linear and hard.
But to predict.
For the nine months year to date this year revenue grew substantially to $8 $8 million.
Majority of our call.
Third quarter revenue was from nano optics security for development work for our Central Bank clients and some other banknote business.
Operating expenses were just under 24 million $23 9 million in Q3 versus $12 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 $24 5 million.
<unk> quarter compared to $11 4 million in the quarter, the same quarter, a year ago and $21 million in Q2 of 'twenty two the loss per share was seven <unk>.
Versus four cents last year and seven cents in Q2 'twenty two.
As of September 30, we had $32 2 million in cash and cash equivalents met I still have no debt, except for $2 9 million and interest free unsecured long term debt from our color, which is the Atlantic Canada opportunities agency.
During the third quarter, we used $19 5 million in cash for operations.
<unk> to $48 million in the first nine months of 2022 noncash expenses were $7 2 million in the second quarter, and we used $2 2 million for working capital, we invested $3 million in capital expenditures during the third quarter.
We believe our cash on hand, combined with our projected revenues and expense expense management capabilities will.
Will be sufficient to support our needs for the next 12 months. However, we may need to raise additional capital to expand the commercialization of our products fund our operations and further our research and development activities.
Capital requirements.
Very materially and will depend on many factors, including the timing and extent of our research and development efforts the capital expansion of our facilities and the ongoing investments necessary to support the growth of our business.
It is our intent to find capital solutions that are effective and timely for the business in the future given management's alignment with our shareholders. We are working hard to drive the success of the business in a prudent manner now I'll pass the call back to George for some concluding remarks.
Thank you Ken.
So as you can see today.
In summary, meta is continuing to execute on multiple applications in large market opportunities as we pioneer metal materials at production scale.
Meta materials enabled breakthrough applications to do more with less more performance less energy more sustainable materials lower cost.
We are investing and growing an extremely diverse and talented global team and the last count. We now have 42 spoken languages within the met the family but.
We own only speak as a team we all speak the same language.
Our patent portfolio continues to expand rapidly we are broadening and progressing on all of our platform technologies, including plasma fusion fusion and <unk>.
I'm excited to mention that our grand opening.
Big catalyst of our new 60000 square foot headquarter facility in high feel park, which features 12 clean rooms will take place in November 17th due to capacity limitations. Unfortunately. This is an invitation only event today. However, we will.
Some other of our Influencers, we will be creating content to share with all of you.
So we will be able to see and learn more about this beautiful new facility.
In the near term.
<unk> as a category defining company, we are all energized to continue to build value as we move ahead as the first metal materials company on the NASDAQ.
So now let's take some questions from our analysts.
Thank you George.
We will now take our first question from Macmurray whale of core Mark Mark. Please go ahead.
Can you hear me.
Yes, okay, great excuse me.
Would you discuss George on the ceramic separator projects.
That you are talking with the Oems what are those collaborations what do you expect those to look like in terms of say cost sharing or timelines.
Thank you Mike.
In terms of timelines.
We've just completed our first production run yesterday.
So this particular.
The OEM is a contract manufacturing.
Company, It's a global company.
And the.
The way it looks like we provide the chemistry, the let's say the special sauce and they provide the service to quoted.
In.
Foil or film kind of formats. So the way that this is.
It's called a slot die grocery so basically you go through it.
And.
Apply the thickness of your needs and our thickness typically varies from 15 microns down to six microphone, so theres different product.
Different thickness and different chemistry.
So we are excited about this because as we saw yesterday not only this was a successful production run but there is a lot of interest.
From the industry and now we can provide.
Hundreds of kilometers.
To.
To meet the needs.
And the way that this cost sharing will happen.
As a.
Typical markup on the service and eventually.
The technology can be also licensed to very large scale.
Giga factory type productions, so what we're doing with this OEM.
We're seeding the market at very large scales. So that they in turn can take this product.
Test.
Thousands if not tens of thousands of batteries to make sure that they're happy with the chemistry.
And then eventually.
Just doing some basic math one.
40 gigawatt factory would require.
Almost 500 million meters square of product. So there's not a single one contract manufacturer that could handle all of that volume and this is where the model the business model can evolve to both a licensing model.
And obviously earlier.
We have goals that you can buy in the small medium and extra large convergence.
So if I understand that process, then would be would you.
Would it be sort of a year to continue to do sort of the level Youre working at now and then is it another year.
Year I kind of wondering on the timeline in terms of like a.
<unk> seen at 40 gigawatt hour flat sort of having this.
Better than it does that is that like a five year thing or is it a two year thing.
So that's a great question.
Different giga factories are coming online as we speak and there's others that are coming online in five years, our chemistry can be tested immediately we have been testing.
Very large battery companies since this is an acquisition.
The company that developed this technology called opt adults, they're now part of our group.
There has been relationships with companies like LG for a long time, so theres been six or seven years in the making for our first generation material. We're now in the second generation.
Technology of this type and we see that there's going to be more exciting.
Gartner ships, so the canvas that it can be customized we can very quickly customize the Jama study since we have all this experience in the team.
Takes several months.
A new engagement once that customers happy and they have taken the product and tested it.
And they can let's say readily put it in their factory.
The tech transfer that takes place it can be as short as one year and we believe that this is not.
According to our base, but according to the recipients pace, but just to give you an idea.
You think of the battery market being valued at or around.
Think about $60 billion in 2021.
The current collectors make up about 25% of the battery cost and the separate there's about 8%. So it gives you an idea from a kind of overall size.
So just on that copper that was the second question I just want to ask on the copper.
Copper coating.
Our current collector.
Opportunity do you when you if you were to rank them is that an opportunity do you think that that will that will arise or be adopted more quickly than a ceramic separate or just by the nature of that the disruption that you're bringing or what's your view on that.
So what I believe is the first thing is that the current collector market is about three times larger than the separate there that's.
Kind of effect and as you may have seen publicly you know theres been a huge amount of articles from Bloomberg and other places that there is a up and coming corporate assortments that could derail this energy transition that to cleantech.
And what I believe is that.
Is not just the current collectors, but all the different raw materials availability. This is like the biggest constrained right now for the production of lithium ion batteries.
<unk>.
Unfortunately people think that you can just find more queries.
Basically dig further and wider.
In mind more but when you have a low producing mine the cost of getting from that lower.
Quality mine these raw materials grows.
Most exponentially.
So there has to be a better way so what we're proposing here and thats part of the disruption that we have not only invented.
A way to make our current collectors more efficient by reducing the corporate content, but we have made an actual machine, which we called plasma fusion.
As you saw recently, we announced a beautiful Mou with two exciting companies one of which is B selectric. The other one is Dupont and <unk>.
Together, we are trying to scale. This technology to also address the next generation of batteries solid state batteries, where the coating process is one of the key.
Areas of innovation, so not only the raw material, but how do you apply that raw materials in the most efficient way.
So yes, we are excited about this we believe that the separate their market is a must have in every battery for battery safety and our talented collector also adds an additional layer of safety. So you get.
What we believe will be the safest battery in the World. If you include both of our products in the same battery.
Okay, great. Thanks, I'll jump back in the queue look forward to seeing that.
Next week so.
I will talk that thanks. Thank.
Thank you Mike Our next question will be from Gerry Sweeney of Roth capital.
Good morning, George can Bob Thanks for.
Taking my questions.
Wanted to focus in a little bit on nano web congrats for hitting the specs just wanted to maybe.
Here you can just talk about the next steps with that.
Technology and process, obviously, you I think you have some build out.
Projections for Corso on nano web and I, just want to see where that's going.
In the short and medium term thanks.
Thank you.
Yes, so <unk>.
Is a flagship product for us.
Because we can we have shown and demonstrated that we can charge.
All the way from.
Thousands of dollars per square meter for the aerospace industry.
The industry all.
All the way down to tens of dollars for consumer electronics markets.
And everything in between so theirs.
A platform technology that can be applicable to a wide range of applications, replacing indium tin oxide.
As a better improve the solution. So when it comes to production we as I mentioned, we have an operational 300 millimeter line and Theres discussions right now with.
Very large co.
Contract manufacturing and similar to our battery separator product.
We are looking at how can we scale nano web faster and bigger than previously.
Thought of.
And so we have a plan for <unk> to put in a new line next year, but also we are exploring how can we go wide. There. So the 300 millimeters either doing it in sir so or doing it outside under a contract.
Since we.
We have identified the very important.
Global contract manufacturing company, and I will hope to have more updates probably in Q1 of next year about the direction that will take.
If we choose to go down the path of contract manufacturing that means that we can accelerate and go much wider in terms of web widths, which will cover even more applications and if we go on.
Our current production line will depend on.
Some of the key factors with our customers.
Lineup of customers there.
We expect volumes, we have a specific product roadmap.
With product launches next year and the year after and we try to make sure that we have the the.
The volumes to fulfill the demand.
Yeah.
The decision to go there so internal versus third party manufacturing does that change August I would assume that changed maybe some capex projections.
Does that decision.
Change.
<unk> Arthur so meaning.
If you wait until Q1 or first half of next year, what have you for the third party manufacturer and make that decision does that hold off on some of the capex and pushed back there. So are they sort of going hand in hand.
Yeah.
Sure.
I was going to say something quick and then you can.
It does not really change.
The capex will be.
For either option.
Similar for the simple reason that.
Sir so has the capability to host a very large machines like we have done that in the bank loan business.
As an expertise right there.
And what we want to do is make sure that there is.
The redundancy so having for example, a contract manufacturer with one line is not enough for an automotive application which needs to have.
Backup so there is.
So.
Industry requirements.
Good news here is that if we can bring in an additional.
Production line that is why there in web.
Then what we currently have the cost will significantly reduce and of course, the ability to take on more customers will significantly increase.
I don't know if Ken do you want to add that yes.
Yes, I think I think the way to think about it Jerry is that we have.
Our goal here is to come up with a mix of in house and outside.
<unk> manufacturing.
In house decisions about new lines, and web with and such will drive capex, especially in <unk>, because we're centralizing things there as you know the flip side, though is to the extent that we minimize or reduce capex and first of all because we buy a smaller line with ourselves when we go with wider web with on the hour.
Site for contract manufacturing, we're very likely to have to make financial commitments to the contract manufacturers to get the best pricing. So were spent will still spend cash it will just be in a different partner got it great Alright, I. Appreciate you asking the questions and I'll see them Halifax next week.
Thank you. Thanks, Jeremy our next question will be from Graham Madison of water Tower Research Hi.
Hi, good morning, everyone.
Just a question on the nano aka security products I know you spoke a little bit about that during the presentation gave some color there but are there any milestones that we should be looking for you guys can point to that you are trying to hit to get to the next level and that contractor, perhaps see it expand beyond that.
Thank you yes. In fact, there is a major product launch that we are gearing towards is for our color optic stripe.
The color of the stripe is.
Featuring 5 billion nano Arctic features over the size or the weeds of.
Of our bank note in a stripe.
<unk> format. This product has been in development in the last.
Almost three years.
Ben.
Now one of our flagship products and.
Just like nano web, where we have been scaling production and ramping up.
The quality of that product.
Today, we have been sampling our product with what we call in the industry printers, Theres about 20 global printers, and we are working with some of the top.
<unk> topped five printers as we speak.
It's been already one full assessment and evaluation on the quality.
And durability of our product, which we have passed there's going to be a second.
Ron in the coming weeks and weeks expects over the first half of <unk>.
Maybe as early as Q1 next year to be launching this product and launching means that it's now available for sampling across everyone and as well as every central bank.
Out there. So we are very excited.
The one key thing is that we are producing this nano optic feature in the kilo meet their scale already in house.
Great. So then really after this it opens you up to all the other banks out there and expand the market considerably for Ya.
Absolutely yes.
Great and then just one question housekeeping question on the G&A there was a small bump quarter over quarter is it the right way to think about that is that this deal our legal spending related to the <unk>.
With the spinoff Rod I think more business related.
Yes, and I think that's accurate.
G&A this year has been we've.
We've been investing in a couple of things we had a lot of we did three act three I'm actually four to count.
The Aqua hire we did.
Number of acquisitions this year that that.
Triggered additional spending in the G&A in the G&A side.
And so that's what you're seeing in the bumps.
And our plan for next year has that dropped dropping back again to.
More.
Rational levels and as you know there is some there's some ongoing.
Investigation from the SEC Thats taken legal fees and all of that is going to drop ins in the 'twenty three time frame from a cost standpoint.
So answer to your question, yes, no absolutely that makes sense exactly thanks ill jump back in queue I appreciate it.
Okay. Thank you Graham will now take a question from Christopher <unk> of singular research.
Chris are you with us.
Everybody.
Yes, hi, good morning.
Can you hear me, yes, we can.
Okay, Great I guess the go on.
One of the last analyst question.
As far as the man on security.
<unk> and new orders there can you provide some color as far as what.
What you've seen.
Could there possibly be.
Greater order from the future.
I think we have to be a little careful.
The new orders that were referenced in the in the announcements work coming from the frame agreement that George spoke about that.
The $41 5 million dollar agreement and is composed of a number of contract line items and the way that process works, Chris is that we as we progressed through the process with this customer we get releases of new work to get done and asked as to work accomplishes internal.
While stones in the contract they issue new Pos to us. So the short answer is since we've only delivered or received orders so far for $13 5 million of that contract we have the opportunity to get another.
Yes.
<unk> 30, or so million dollars over the next few years.
The timing of that is what's difficult to predict because as we make breakthroughs in the development work, we're doing with this customer they accelerate so we're doing everything we can to make sure that we continue to push the process forward with them and as George mentioned in his comments, what we expect to happen is that.
As we move the product process forward with this particular customer. This is focused on a single currency denomination, we expect a couple of.
Things could be catalyzed by that first well.
Consistent nomination that will trigger the need for other denominations from one customer and as we've done. This this is a this is a major central bank. We expect that we can get similar work from other central banks in other in other geographies around the world.
Okay. Thanks for that answer.
And as far as that's concerned and revenue generation.
After the nano security.
Like what what would be your next greatest a revenue generator and then near future.
That's a great question, what we see driving revenues into especially into 2023 are in a couple of the verticals that we play and we play is as we've mentioned a number of times in very large vertical markets in the vertical markets.
Revenue pace at which we're able to achieve is driven by a few things one is our ability to produce materials as George spent a lot of time talking about today that the volumes that each of the customer sets in those vertical needs. So for example in the automotive section we can produce material now for a number of the applications without the wire.
Web with.
Production capability, we can do it better with the wide web with but we're in a position now where we expect to see some.
Currently interesting revenues coming out of that sector next year.
Next area that we would focus on it would be another area of nano web, which is and we've mentioned a number of times.
Electronics and communications and then we are looking forward at this point to having.
Some some announced events.
Second half of next year in the augmented reality space.
Okay. Thanks for your answers.
Thank you Chris.
Ken I think you had some closing comments, yes I think.
A couple of we've had a number of our shareholders inquire over the last day or two about a few things one of which is that we filed.
And that's one again last night and that S. One was filed for one purpose and one purpose only the numbers that were in the original filing yes, one is related to the spin out of the oil and gas assets and we were we filed an update to the S. One with the SEC last evening to do.
One thing, which is to roll forward the financials that were in the previous filing to make them current because the financials that were in the previous filing expired yesterday, so we needed to update them to the third quarter.
And what we're waiting for now.
Is two things the SEC will get back to us on that filing we don't expect anything major there and then the last piece of the process is once the SEC declares that S. One.
<unk> then we go with FINRA, who has to help us.
Actually implement the.
Spinoff itself and the major thing that they need to do is ensure that when we do the spin off the trading and M. M. T. L. P seasons, because the stock won't be there anymore. So that's number one number two last night.
As well, we filed a quarter of a $1 billion.
Our shelf registration statement.
Now what I'll say at the very beginning as we said in our in our comments that there's a likelihood that in the in the future will need to raise more money in the company, we don't need to do that this minute or even this quarter, but what we wanted to do was make take advantage of the fact that our business is really growing rapidly.
One of the things that sort of escape books at times is that we have more than trebled, our revenue 2021 to 'twenty two over 'twenty, one and we did that in spite of Covid and we're doing it in very unique.
Areas and so what we want to do is we want to have as many tools available to us as possible to raise capital going forward when the market conditions are right a.
A shelf registration for a company like ours is one of the best tools. We can have it's the most flexible it allows us to sell stock that's pre registered into the primary market. It also allows us in certain circumstances to sell stock into the secondary market shares that are already issued and what we can do in that case is we put that sure.
Alf registration up it doesn't commit us to do anything but it gives us three years to raise money and as little or as large pieces as the market.
It makes sense for us to do so since the fourth quarter is always a crazy busy time for us and we had capacity we decided we would put the shelf up now the SEC still has the right to look at it we expect that they will and once that's done.
Then we can use the shelf going forward for the next three years.
For whatever we need for future capital.
Great. Thank you Karen and thank you all for joining US today. If you have any additional questions you may reach us at IR at Minto material Dot Com. This concludes today's call.
Yeah.