What happened

Shares of Meta Materials (MMAT), a developer of materials for use in various high-tech applications, plunged after the company reported earnings on Wednesday morning.

As of 10 a.m. ET, Meta Materials stock is down 11.5%.

Red down arrow on a black backdrop of tickertape prices.

Image source: Getty Images.

So what

In a press release, Meta Materials reported that its quarterly sales grew 738% year over year to $2.3 million and annual sales grew 264% to $4.1 million. Nevertheless, Meta Materials lost $0.13 per share for the quarter, and $0.38 per share for the year. Both losses were up significantly from the equivalent periods in 2021.

Free cash flow, on the other hand, was bad -- but not quite as bad as those numbers suggest. Instead of losing $91 million (translated from per share losses, this is the GAAP loss for the full year), Meta Materials noted that its cash burn was only about $47.5 million.

Also noteworthy is the fact that almost all of the company's gains in revenue in Q4, approximately $1.8 million, came from the acquisition of Nanotech Security Corp -- not organic sales growth.

Now what

Now as if that weren't bad enough, Meta Materials added to investor concern with this statement in a separate filing it made simultaneous with its earnings release: "Meta Materials ... is unable, without unreasonable effort or expense, to file its annual report on Form 10-K for its fiscal year ended December 31, 2021 ('Annual Report') within the prescribed time period [because] the Company's management concluded that ... the Company's internal control over financial reporting was not effective as of December 31, 2021, due to material weaknesses in internal control over financial reporting."

This suggests that Meta Materials may need to restate its financials -- and that no matter how bad the above news already looks, it could still get worse. No wonder investors are selling today.