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MMATF and TRCH
This is my initial research on Metamaterial Technologies, Torchlight Energy and their upcoming reverse merger. . This may be the longest DD you've ever read primarily because it is three DDs in one. The merger is complicated for many reasons, and I am personally thinking of it more as a PIPE/SPAC play- to be clear we are talking about a publicly traded company providing capital and NASDAQ access to another through a merger.
My standard disclaimer -Before you read any further, I want you to understand what I look for in an investment; I invest in companies that are undervalued, possess world changing technology and have a large potential catalyst upcoming, whether it be financial changes, a market inflection point, buy out or pending regulatory approval. For it to make sense to me, the company must provide me with a large near-term upside and continued long-term growth. Basically, I am looking for penny stocks that should not be. Metamaterials and Torchlight Energy both fit these requirements, I am not a financial advisor, I am a mom and a professional firefighter, do your own DD.
I believe that if you find the technology, the money will follow. I have not been this excited about a company since my discovery of Microvision. While they are completely different companies there is some industry and technology overlap. Both are solidly positioned to change our world in this new technological revolution that is just beginning. For reference my old DDs can be found at r/PennyQueen – Penny Queen with assistance from u/Here_Two_Stay
Part 1: META
Upcoming catalysts – merger vote, up-listing to NASDAQ, access to large capital markets and scaled production
Metamaterials Technologies, known as META (MMATF:US MMAT:CAN) is currently trading at $2.66 as of 02.27.2021. After the merger and up-listing to the NASDAQ, I expect META to be trading no lower than $5. With and end of year range of $8-$20 depending on production numbers and new partnerships. Therefore, this is a short term 2x and midterm 3-6x play. (There has been a lot of speculation over META's co-location at a Canadian incubator facility with TESLA and several cryptic Tweets sent out by Elon Musk. While I see how a partnership between the two could be promising for both companies, my price targets exclude these rumors).
*Important note–Metamaterials is currently listed in Canada as MMAT, but you can buy it on some US brokers as MMATF. There is currently low volume at these prices so your order may not fill immediately, if there is an increase in price action the volume will also increase and orders will fill quicker.
If you are unable to buy Meta, you can still buy Torchlight TRCH and after the reverse merger you will have an interest in MMATF. There is more to this, explaining in the merger section below.
Meta is a major innovator in materials science, they are creating the disruptive technologies that are on the leading edge of the next industrial revolution. They are currently manufacturing products on a large scale that utilize carbon nanotubes, graphene, and several other exotic materials that have been talked about for the past decade. They have a strong research and development team, the industrial production facilities, proprietary processes and now they have the capital necessary to scale their products.
They have three primary technologies 1. holographic technology enables the company to modify the properties of proprietary polymer films at the molecular level to achieve desired effects implemented at nano scale in a thin film. 2. META's lithographic technology enables the printing of conductive patterns, fine enough to be invisible on a transparent film. 3. META's wireless sensing technology enables the sensing and control of electromagnetic waves through metallodielectric structures printed on flexible substrates.
NanoWeb
META is currently in several booming sectors – Energy, Green Tech, Aerospace, Defense, Automotive, Medical and AR/VR.
Their products have many applications including:
· augmented reality
· radar and lidar
· transparent 5G antennas
· photovoltaic films
· automotive heads-up displays
· consumer electronics
· IoT
· transparent electromagnet shielding
· MRI signal enhancement
· de-icing/defogging
· radio wave imaging
· non-invasive medical monitoring
Each of these applications alone is probably worth your investment in terms of market size and growth. This is just the beginning of smart materials, and in the next few years there probably will not be a sector that is not be involved. META claims a 3 trillion-dollar total addressable market opportunity. I have been able to validate these claims through Research and Markets published projections and I believe META numbers to be considerably downplayed, but it is important to recognize that addressable markets do not translate into directly into market share.
· Augmented Reality and Virtual Reality market are currently a 37B year expected to grow to 1.27Trillion by 2030 (2020-2030 42.9% CAGR) Source: (Research and Markets)
· EMI shielding market projected to be valued at 6.8Bn in 2020 9.2B by 2025 CAGR 6.3% 2020-2025 Source: (Research and Markets)
Augmented Reality applications- META has been developing the necessary technology while also acquiring other companies and their patents. In 2019 META acquired North, Inc and their roll-to-roll holographic manufacturing tech. The company stated that it believes it will be "positioned to capture a significant portion of this market by being able to mass manufacture, on a cost-effective basis, the required holographic optical components" for the augmented reality smart glasses market.
According to META, the 2nd generation manufacturing line is capable of 100,000+ units per month, to support AR and other holographic products, such as automotive HUD displays, laser glare protection, optical filters, diffractive optics, and other photonic applications. The company added that capacity could be increased to 200,000 units per month with the addition of a second, eight-hour shift.
This February META acquired Interglass Technology AG of Switzerland, their IP and over 70 patents. This will allow them to apply their embedded metamaterial and functional film elements with precision cast corrective lenses. CTO Jonathan Waldern stated, "Under a new brand name, metaFUSION™, we are now applying that proven technology and other functionality directly encapsulated into eyeglasses, to compliment waveguide-based displays similar to HoloLens®."
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Automotive Applications – These applications are the root of current Tesla rumors, but these technologies can and will be applied across the next generation of cars. METAs unique Nanoweb films are 98% transparent, meaning that they can be placed on any glass. They can provide a heads-up display across the windshield with almost immediate defogging and de-icing. Their technology can allow multiple transparent 5G antennas for IoT integration and their nanomaterials can improve the angular scan range of LIDAR used in self-driving vehicles. Which will lower the costs and mass of self-driving vehicles.
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Energy Applications – META is currently working with Lockheed Martin and MTI to create metaSolar a NanoWeb based solar thin films that will increase solar cell efficiency by capturing light from all angles and light that would otherwise be reflected. These will be ultra-thin, light, flexible, can be applied to flat or curved surfaces and will be able to add onboard power and charging.
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Medical Applications – META has a strong research base in photonics as well as wireless technologies, they are currently able to enhance the signals 200-500% on MRIs with their resonators and intensity correction algorithms. They have also created a radio-wave imaging sytsem that has a wide array of uses but can be utilized as a safe, initial-step screening for breast cancers. Biosensors - they are in the development process of a non-puncture blood glucose monitoring system.
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Aerospace and Defense- META has extensive experience providing laser protection, de-icing and de-fogging products to aviation companies. They have also created electromagnetic interference protection that can play a large roll in infrastructure defense.
Financials – The finances of META do not, in my opinion, create an accurate picture. They have been investing money into research and development, IP acquisitions and scaling their operations. They just received a 10m loan from Torchlight to continue this expansion. While they do have revenue and have partnered with major companies (Samsung, Boeing, Airbus), I am thinking of them more in terms of a pre-revenue IPO. Google finance notes a 21.48% year over year revenue increase and META claims a $121m a year revenue potential over the next 18 months.
As Cathie Wood stated in the last ARK webinar, she is anticipating a bifurcated V-shaped recovery which will reward companies that have invested in innovation rather than in pandering to shareholders.
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META is currently trading at $2.66 – I anticipate a near doubling with a successful merger vote.
83.6m shares outstanding
42.71m float
222.4m Market cap
35.56% held by insiders
The recent loan from Torchlight does not figure into the numbers below.
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META Executive Team has an extremely deep educational background in the hard sciences with a lot of experience creating innovative products. At this point I think their customer service reps probably have PhDs
CEO and Founder -George Palikaras Ph.D. Founded META in 2011, prior to that he founded MediWise, a wireless medical sensor company, he was also an antenna design engineer with AceAxis.
CTO and Chairman Dr. Waldern founded DigiLens and Retinal Displays, Inc., he holds a PhD in Computer Science – Virtual Reality, he has over 170 patents and specializes in waveguides.
CSO and co-Founder Themos Kallos is Chief Science Officer with Ph.D. in Electrical Engineering with expertise in applied physics, metamaterials, wireless communications, and electromagnetic simulations.
CFO & EVP - Ken Rice has a JD, MBA and a Master of Laws in taxation, he works as in-house counsel and is charge of financing efforts and progressing Meta's medical products initiatives.
Essential Links
(5) NanoWeb - A Revolutionary Transparent Conductive Film - YouTube
META overview - YouTube
META Investors deck
META Torchlight definitive agreement
Torchlight Investor Presentation
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Part II: Torchlight
Torchlight Energy is currently an oil and gas exploration company. They have three major oil and gas assets. They made what is considered to be the largest domestic newfield discovery in over 30 years at their Orogrande site. This discovery coincided with economic collapse of oil due to Covid crisis. In March of 2020, Torchlight decided to pivot their entire operation and and to divest all of oil and gas assets and to embark on a reverse merger with a future focused company.
Torchlight Energy (TRCH) is currently trading at $2.48, with a 356.15m market cap, 143.61m shares
The assets of Torchlight energy include three project sites, an experienced management team, access to capital, and a NASDAQ listing. Two of the project sites are under contract to be sold and the largest asset, the Orogrande site, is likely an extension of the Permian Basin and is being marketed to major and super major oil companies. Once these assets are sold their net proceeds will be divided among shareholders in the form of a special dividend.
Oil and Gas Assets
- Orogrande Basin – 134,000 acre lease 72.5% interest (97,150 net acres), the site has had several successful test wells drilled.
3rd party valuation of potential recoverable hydrocarbons
· Low Side Case 2.3 billion barrels
· Medium BTE Case 3.7 billion barrels
· High Side Case 5.0 billion barrels
Hazel-Midland Basin -12,000 gross (9,600 net acres) 80% WI (operated) under contract for 12.4m ($1300 acre)
Winkler Project 1,080 gross acres, 12.5% WI (non-operated) under contract for $450k (350k to Torchlight)
The difficulty for TRCH investor is in determining the sale value of the oil and gas assets of Torchlight.
I have spoken with many industry experts and received varying price targets that trended toward the upper side of the values I am presenting. I could not find anyone willing to go on record. As this is not investment advice anyways, here are some possible valuations. I was told that 50 cents a barrel was a valid price for the amount of potential oil with the limited studies that have been done. I was also advised that the merger and acquisition market for oil and gas companies is still soft but that is expected to change quickly with the rise in oil demand and subsequent price.
Valuation :
Valuation – The value oil drilling acreage is a moving target after the price of crude oil started collapsing in March of 2020. The current price of West Texas Intermediate (WTI)is currently $61.50 barrel. Oil prices are expected to rise to $80-$100 a barrel in the next six months.
The last major purchase in the Permian Basin was in October 2020 when Conoco Phillips acquired Concho Resources in a $9.7 BN all stock transaction, adding 550,000 acres in the Permian basin and 200,000 b/d. They acquired this land at $10,471 per acre, this land was 74% proved and developed . Oil averaged $40.75 that month
Conoco Phillips acquires Concho resources in 9.7 BN all stock transaction, adding 550,000 acres in the Permian basin and 200,000 b/d. They acquired this land at $10,471 per acre. Oil averaged $40.75 that month
Drilling rights in the Permian Basin of West Texas and New Mexico averaged about $24,000 an acre in recent deals, down 67% from 2018, according to Rystad Energy, an Oslo-based research firm.
Date announced Permian deal Value per acre (USD)
March 2018 Concho Resources-RSP Permian $75,504
August 2018 Diamondback Energy-Ajax Resources $33,008
July 2019 Callon Petroleum-Carrizo Oil & Gas $16,547
December 2019 WPX Energy-Felix Energy $11,965
October 2020 ConocoPhillips-Concho Resources $10,471
Plunging shale acreage values may create a new Permian M&A wave 11.12.2020
2021 Oil and Gas M&A Outlook | Deloitte US
Orogrande Basin Potential Calculations
The following calculations are based off numbers present by the company in March of 2020. For reference WTI is currently at $61.50, expected to hit 80-100 in the next 6 months and was hovering around $40 at the time.
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134,000 acres *72.5% interest at $1000 acre=97.15m + 12.75m (Hazel/Winkler) =109.9m/143.6m shares= 76.5 cent share
Medium Case estimate 3.7 billion recoverable barrels * 72.5% interest at 5 cents per barrel= 134m+12.75m (Hazel/Winkler) =146.75m= $1.00 per share
134,000 acres *72.5% interest at $1000 acre=97.15m + 12.75m (Hazel/Winkler) =109.9m/143.6m shares= 76.5 cent share
134,000 acres *72.5% interest at $1300 acre=126.3m +12.75m (Hazel/Winkler) =126.3m/143.6m shares=96 cent share
134,000 acres *72.5% interest at $2500 acre=242.88m +12.75m (Hazel/Winkler) =255.63m/143.6m shares= $1.78 per share
134,000 acres *72.5% interest at $5000 acre=485.75m+12.75m (Hazel/Winkler) =500.25/143.6m shares=$3.48 per share
134,000 acres *72.5% interest at $7500 acre=728.63m+12.75m (Hazel/Winkler) =741.38/143.6m shares=$5.16 per share
Medium Case estimate 3.7 billion recoverable barrels * 72.5% interest at 50 cents per barrel= 1.34bn+12.75m (Hazel/Winkler) =1.3527b = $9.42 per share
High Case estimate 5.0 billion recoverable barrels * 72.5% interest at 50 cents per barrel= 3.625+12.75m (Hazel/Winkler) =3.638b =$25.33 per share
As you can see, there are many possible valuations.
Here is a DD write up and estimate by user u/Mr_Delmont
Torchlight Investor Presentation
The Merger: This merger is in and of itself proof of the economic transition taking us from destructive technology to disruptive technology. (you can quote me on this). This is an arranged marriage of sorts, it is the catalyst that will allow META to bring their disruptive technology to the forefront of several growing sectors, each at or near their inflection point. The board of Torchlight realized that their resource rich holdings were not enough to survive and thrive in the changing economy, and that a new path was necessary. Through this reverse merger Torchlight receives a 25% stake in META. This will also trigger a special dividend to shareholders of Torchlight. The dividend will be one preferred share on a pro rata basis of the holding company holding the net proceeds (or assets if they have not yet sold).
If the merger is approved, a shareholder with 100 shares of Torchlight would receive 100 shares of the preferred stock in the holding company and 100 shares of the new company. Torchlight shares will be static, METAs shares will be adjusted to maintain the ratio of 75% META share ownership and 25% Torchlight share ownership. (Edited after IR clarification) The special dividend will be as of the record date, which has not been determined. It sounds like the merger vote will occur sometime around mid-March. After the merger is complete META will be the company name and it will be listed on the NASDAQ.
As of this date certain stockholders of each of Torchlight and Metamaterial have executed customary voting and support agreement pursuant to which persons representing approximately 16% of Torchlight's and approximately 48% of Metamaterial's outstanding voting power have agreed to vote in favor of the transaction.
I am long in TRCH at 36K shares and long in MMATF at 60K shares. I intend to hold my shares for a minimum of two years. - PennyQueen
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