TMC the metals Co Inc. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ ​ ​ TMC THE METALS COMPANY INC. ​ ​ ​ ​ Page Index to Financial Statements and Financial Statement Schedules Number ​ ​ ​ Financial Statements: ​ ​ ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID: 1263 ) ​ 109 Consolidated Balance Sheets as at December 31, 2021 and 2020 ​ 110 Consolidated Statements of Loss and Comprehensive Loss for the Years Ended December 31, 2021 and 2020 ​ 111 Consolidated Statements of Changes in Equity for the Years Ended December 31, 2021 and 2020 ​ 112 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020 ​ 113 Notes to Consolidated Financial Statements ​ 114 ​ ​ ​ 108 Table of Contents ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of TMC the metals company Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of TMC the metals company Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP ​ We have served as the Company’s auditor since 2012. Vancouver, Canada March 25, 2022 ​ ​ 109 Table of Contents TMC the metals company Inc. Consolidated Balance Sheets (in thousands of US Dollars, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at ​ As at ​ ​ December 31, December 31, ​ ​ ​ ​ 2021 ​ 2020 ASSETS ​ Note ​ ​ ​ (Note 1) Current ​ ​ Cash ​ $ 84,873 $ 10,096 Receivables and prepayments 9 ​ 3,686 ​ 129 ​ ​ ​ ​ 88,559 ​ 10,225 Non-current ​ ​ Exploration contracts 7,11 ​ 43,150 ​ 43,150 Equipment 10 ​ 1,416 ​ 1,310 ​ ​ ​ ​ 44,566 ​ 44,460 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ASSETS $ 133,125 $ 54,685 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ Current ​ ​ Accounts payable and accrued liabilities ​ 26,573 ​ 4,316 Deferred acquisition costs 7 ​ — ​ 3,440 ​ ​ ​ ​ 26,573 ​ 7,756 Non-current ​ ​ Deferred tax liability 22 ​ 10,675 ​ 10,675 Warrants liability 14 ​ 3,126 ​ — TOTAL LIABILITIES $ 40,374 $ 18,431 ​ ​ ​ ​ ​ ​ ​ ​ ​ EQUITY ​ ​ Common shares (unlimited shares, no par value – issued: 225,432,493 (December 31, 2020 – 189,493,593 )) 15 ​ 296,051 ​ 154,431 Preferred shares (unlimited shares, no par value – issued: nil (December 31, 2020 – 509,459 )) 15 ​ — ​ 550 Class A - J Special Shares 15 ​ — ​ — Additional paid in capital ​ 102,073 ​ 45,347 Accumulated other comprehensive loss ​ ( 1,216 ) ​ ( 1,216 ) Deficit ​ ( 304,157 ) ​ ( 162,858 ) TOTAL EQUITY ​ 92,751 ​ 36,254 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL LIABILITIES AND EQUITY $ 133,125 $ 54,685 ​ Nature of Operations (Note 1) Commitments and Contingent Liabilities (Note 19) Subsequent Events (Note 23) ​ The accompanying notes are an integral part of these consolidated financial statements. 110 Table of Contents TMC the metals company Inc. Consolidated Statements of Loss and Comprehensive Loss (in thousands of US Dollars, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended For the year ended ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ ​ 2021 ​ 2020 ​ ​ Note ​ ​ ​ (Note 1) Operating expenses ​ ​ Exploration and evaluation expenses 11 $ 93,006 $ 48,881 General and administrative expenses 12 ​ 56,583 ​ 7,723 Operating loss ​ ​ 149,589 ​ 56,604 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other items ​ ​ Change in fair value of warrants liability 14 ​ ( 9,375 ) ​ — Foreign exchange loss ​ 82 ​ 80 Interest expense (income) 13 ​ 1,003 ​ ( 53 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss and comprehensive loss for the year $ 141,299 $ 56,631 ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss per share ​ ​ - Basic and diluted 17 $ 0.69 ​ $ 0.32 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding – basic and diluted 17 ​ 204,926,931 ​ ​ 178,570,876 ​ ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. 111 Table of Contents TMC the metals company Inc. Consolidated Statements of Changes in Equity (in thousands of US Dollars, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Shares Preferred Special Additional Accumulated Other ​ ​ ​ ​ For the year ended December 31, 2021 Shares Amount Shares Shares Paid in Capital Comprehensive Loss Deficit Total December 31, 2020 189,493,593 ​ $ 154,431 $ 550 $ — $ 45,347 $ ( 1,216 ) $ ( 162,858 ) $ 36,254 Exercise of stock options (Note 16) 6,312,756 ​ ​ 14,297 ​ — ​ — ​ ( 10,061 ) ​ — ​ — ​ 4,236 Conversion of restricted share units (Note 16) 173,216 ​ ​ 399 ​ — ​ — ​ ( 399 ) ​ — ​ — ​ — Common shares issued for exploration and evaluation expenses (Note 11) 4,245,031 ​ ​ 25,664 ​ — ​ — ​ ( 12,879 ) ​ — ​ — ​ 12,785 Conversion of debentures (Note 13) 3,126,567 ​ ​ 27,003 ​ — ​ — ​ — ​ — ​ — ​ 27,003 Share-based compensation (Note 16) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 60,565 ​ ​ — ​ ​ — ​ ​ 60,565 Common shares issued for services 187,575 ​ ​ 1,296 ​ — ​ — ​ — ​ — ​ — ​ 1,296 Net equity from Business Combination (Note 6) 21,384,296 ​ ​ 72,411 ​ — ​ — ​ 19,500 ​ — ​ — ​ 91,911 Conversion of preferred shares to common shares 509,459 ​ ​ 550 ​ ( 550 ) ​ — ​ — ​ — ​ — ​ — Loss for the year — ​ ​ — ​ — ​ — ​ — ​ — ​ ( 141,299 ) ​ ( 141,299 ) December 31, 2021 225,432,493 ​ $ 296,051 $ — $ — $ 102,073 $ ( 1,216 ) $ ( 304,157 ) $ 92,751 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Shares Preferred Special Additional Accumulated Other ​ ​ ​ ​ For the year ended December 31, 2020 (Note 1) Shares Amount Shares Shares Paid in Capital Comprehensive Loss Deficit Total December 31, 2019 163,331,904 ​ $ 79,824 $ 550 $ — $ 35,257 $ ( 1,216 ) $ ( 106,227 ) $ 8,188 Private placement (net of financing costs) 6,553,409 ​ ​ 20,376 ​ — ​ — ​ — ​ — ​ — ​ 20,376 Exercise of stock options (Note 16) 2,605,189 ​ ​ 1,790 ​ — ​ — ​ ( 871 ) ​ — ​ — ​ 919 Financing cost — ​ ​ ( 28 ) ​ — ​ — ​ — ​ — ​ — ​ ( 28 ) Common shares issued for acquisition of Tonga Offshore Minerals Limited (Note 7) 9,005,595 ​ ​ 28,000 ​ — ​ — ​ — ​ — ​ — ​ 28,000 Common shares to be issued for exploration and evaluation expenses (Note 11) — ​ ​ — ​ — ​ — ​ 12,879 ​ — ​ — ​ 12,879 Share-based compensation (Note 16) — ​ ​ ( 397 ) ​ — ​ — ​ 4,493 ​ — ​ — ​ 4,096 Common shares issued for services 7,997,496 ​ ​ 24,866 ​ — ​ — ​ ( 6,411 ) ​ — ​ — ​ 18,455 Loss for the year — ​ ​ — ​ — ​ — ​ — ​ — ​ ( 56,631 ) ​ ( 56,631 ) December 31, 2020 189,493,593 ​ $ 154,431 $ 550 $ — $ 45,347 $ ( 1,216 ) $ ( 162,858 ) $ 36,254 ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. 112 Table of Contents TMC the metals company Inc. Consolidated Statements of Cash Flows (in thousands of US Dollars) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended For the year ended ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ ​ 2021 ​ 2020 ​ ​ Note ​ ​ ​ ​ (Note 1) Cash resources provided by (used in) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ Loss for the year $ ( 141,299 ) $ ( 56,631 ) Items not affecting cash: ​ ​ Amortization ​ 453 ​ 563 Expenses settled with share-based payments 16 ​ 74,571 ​ 27,098 Interest on convertible debentures 13 ​ 1,003 ​ 53 Change in fair value of warrants liability 14 ​ ( 9,375 ) ​ — Unrealized foreign exchange ​ ( 15 ) ​ 8 Changes in working capital: ​ ​ Receivables and prepayments ​ ( 3,479 ) ​ ( 110 ) Accounts payable and accrued liabilities ​ 22,049 ​ 2,487 Net cash used in operating activities ​ ( 56,092 ) ​ ( 26,532 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Investing activities ​ ​ Settlement of deferred acquisition costs ​ 7 ​ ​ ( 3,440 ) ​ ​ — Acquisition of exploration contract 7 ​ — ​ ( 607 ) Acquisition of equipment 10 ​ ( 402 ) ​ — Net cash used in investing activities ​ ( 3,842 ) ​ ( 607 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Financing activities ​ ​ Proceeds from exercise of stock options 16 ​ 4,236 ​ 919 Proceeds from issuance of convertible debentures 13 ​ 26,000 ​ — Proceeds from issuance of common shares (net of fees and other costs) 15 ​ — ​ 20,373 Proceeds from Business Combination (net of fees and other costs) 6 ​ 104,465 ​ — Net cash provided by financing activities ​ 134,701 ​ 21,292 ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (decrease) in cash ​ 74,767 ​ ( 5,847 ) Impact of exchange rate changes on cash ​ 10 ​ ( 8 ) Cash - beginning of year ​ 10,096 ​ 15,951 Cash - end of year $ 84,873 $ 10,096 ​ Supplemental cash flow information (Note 20) ​ ​ The accompanying notes are an integral part of these consolidated financial statements. 113 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 1. Nature of Operations TMC the metals company Inc. (“TMC” or the “Company”), formerly known as Sustainable Opportunities Acquisition Corporation (“SOAC”), was incorporated as a Cayman Islands exempted company limited by shares on December 18, 2019 and continued as a corporation under the laws of the province of British Columbia, Canada on September 9, 2021. On September 9, 2021, the Company completed its business combination (the “Business Combination”) with DeepGreen Metals Inc. (“DeepGreen”) (Note 6). The Company’s corporate office, registered address and records office is located at 10 th floor, 595 Howe Street, Vancouver, British Columbia, Canada, V6C 2T5. The Company’s common shares and warrants to purchase common shares are listed for trading on the Nasdaq Global Select Market (“Nasdaq”) under tickers “TMC” and “TMCWW”, respectively. In connection with closing of the Business Combination, DeepGreen merged with a wholly-owned subsidiary of SOAC and became a wholly-owned subsidiary of the Company. DeepGreen was determined to be the accounting acquirer and therefore, all information prior to the Business Combination, including the prior year financial information, represents the financial condition and operating results of DeepGreen. The Company is a deep-sea minerals exploration company focused on the collection, processing and refining of polymetallic nodules found on the seafloor in international waters of the Clarion Clipperton Zone in the Pacific Ocean (“CCZ”), located approximately 1,300 nautical miles southwest of San Diego, California. These nodules contain high grades of four metals (nickel, copper, cobalt, manganese) critical for the transition to clean energy and infrastructure buildout. Exploration and exploitation of seabed minerals in international waters is regulated by the International Seabed Authority (the “ISA”), an intergovernmental organization established in 1994 pursuant to the United Nations Convention on the Law of the Sea (“UNCLOS”). ISA contracts are granted to sovereign states or have to be sponsored by a sovereign state. The Company’s wholly-owned subsidiary, Nauru Ocean Resources Inc. (“NORI”), was granted an exploration contract by the ISA in July 2011 under the sponsorship of the Republic of Nauru (“Nauru”) giving NORI exclusive rights to explore for polymetallic nodules in an area covering 74,830 km 2 in the CCZ (“NORI Area”). On March 31, 2020, the Company acquired Tonga Offshore Mining Limited (“TOML”), which was granted an exploration contract by the ISA in January 2012 and has exclusive rights to explore for polymetallic nodules covering an area of 74,713 km 2 in the CCZ (“TOML Area”) under the sponsorship of the Kingdom of Tonga (“Tonga”). Marawa Research and Exploration Limited (“Marawa”), an entity owned and sponsored by the Republic of Kiribati (“Kiribati”), was granted rights by the ISA to polymetallic nodules exploration in an area of 74,990 km 2 in the CCZ (“Marawa Area”). The Company entered into an option agreement with Marawa to purchase such tenements granted to exclusively collect nodules from the Marawa Area in return for a royalty payable to Marawa. The Company is working with its strategic partner, Allseas Group S.A. (“Allseas”), to develop a system to collect, lift and transport nodules from the seafloor to shore and to subsequently convert that system into an early commercial production system. Maersk Supply Service A/S (“Maersk”) previously provided marine vessel operations and project management services for resource definition and environmental offshore campaigns. The agreement with Maersk ended in January 2022, following the completion of the NORI Area D baseline campaigns. The realization of the Company’s assets and attainment of profitable operations is dependent upon many factors including, among other things: financing being arranged by the Company to continue operations, development of a nodule collection system for the recovery of polymetallic nodules from the seafloor as well as development of processing technology for the treatment of polymetallic nodules, the establishment of mineable reserves, the commercial and technical feasibility of seafloor polymetallic nodule collection and processing, metal prices, and regulatory approvals and environmental permitting for commercial operations. The outcome of these matters cannot presently be determined because they are contingent on future events and may not be fully under the Company’s control. Since March 2020, several measures have been implemented by the governments in Canada, the United States of America (“US”), Australia, and the rest of the world in the form of office closures and limiting the movement of personnel in response to the increased impact from the novel coronavirus (“COVID-19”). While the impact of COVID-19 has not been significant to the Company’s business operations to date, the current circumstances are dynamic and could negatively impact the Company’s business operations, exploration and development plans, results of operations, financial position, and cash flows. 114 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 2. Basis of Presentation Statement of Compliance These consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) and include the accounts of TMC and its wholly-owned subsidiaries. All share and per share amounts have been adjusted to reflect the impact of the Business Combination (Note 6). Basis of Measurement These consolidated financial statements have been prepared under the historical cost convention, except for warrants liability that has been measured at fair value, and are presented in US dollars. Consolidation These consolidated financial statements include the financial statements of the Company and its subsidiaries. The principal subsidiaries of the Company, their activities, and their geographic locations as at December 31, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proportion of ​ ​ ​ ​ ​ ​ Interest Held Subsidiary ​ Principal Activity ​ Location ​ by the Company DeepGreen Metals ULC Mineral exploration Canada 100 % DeepGreen Engineering Pte. Ltd. Mineral exploration Singapore 100 % DeepGreen Resources, LLC Holding Company USA 100 % Nauru Ocean Resources Inc. Mineral exploration Republic of Nauru 100 % Nauru Education and Training Foundation Inc. (“NEAT”) Holding Company Republic of Nauru 100 % Nauru Health and Environment Foundation Inc. (“NHEF”) Holding Company Republic of Nauru 100 % Tonga Offshore Mining Ltd. Mineral exploration Kingdom of Tonga 100 % Koloa Moana Resources Ltd. Holding Company Canada 100 % Offshore Minerals Pty. Ltd. Mineral exploration Australia 100 % DeepGreen TOML Singapore Pte. Ltd. Mineral exploration Singapore 100 % DeepGreen TOML Holding 1 Ltd. Holding Company British Virgin Islands 100 % DeepGreen TOML Holding 2 Ltd. Holding Company British Virgin Islands 100 % The Metals Company Australia Pty Ltd Dormant Australia 100 % TMC The Metals Company UK Limited Dormant United Kingdom 100 % ​ All inter-group balances have been eliminated on consolidation. 3. Significant Accounting Policies i. Foreign Currencies The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and all its subsidiaries is the U.S. Dollar, except for NEAT and NHEF, whose functional currency is the Australian Dollar. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated into the functional currency at the rates prevailing at that date. Non-monetary assets and liabilities carried at fair value that are denominated in currencies other than the U.S. Dollar are translated at rates prevailing at the date when the fair value was determined. All gains 115 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ and losses on translation of these foreign currency transactions are included in the statements of loss and comprehensive loss. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated. For consolidation purposes, the assets and liabilities of entities with functional currencies other than the US Dollar are translated at the period end rates of exchange, and the results of their operations are translated at average rates of exchange for the period. The resulting changes are recognized in accumulated other comprehensive loss within equity as currency translation differences. ii. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the notes thereto. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, accounting for the acquisition of TOML, the valuation of common share-based payments, including valuation of the incentive stock options (Note 16) and the common shares issued to Maersk (Notes 11 and 15), as well as the valuation of warrants liability (Note 14). Actual results could differ materially from those estimates. iii. Loss Per Share Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding during the year. The computation of diluted loss per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on the loss per share. The dilutive effect of convertible securities is reflected in the diluted loss per share by application of the “if converted” method. The dilutive effect of outstanding options and their equivalents is reflected in the diluted loss per share by application of the treasury stock method. iv. Financial Instruments Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired, or have been transferred, and the Company has transferred substantially all risks and rewards of ownership. A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled, or expires. The Company’s financial instruments consists of cash and cash equivalents, receivables, accounts payable and accrued liabilities, and deferred acquisition costs which are recorded at amortized cost as well as warrants to acquire common shares of the Company which are measured at fair value. v. Fair Value of Financial Instruments Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. In accordance with U.S. GAAP, the Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: ● Level 1  - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. 116 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ ● Level 2  - Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. ● Level 3  - Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. There were no transfers between fair value measurement levels during the years ended December 31, 2021 and 2020. As at December 31, 2021 and 2020, the carrying values of cash and cash equivalents, receivables, accounts payable and accrued expenses and deferred acquisition costs approximate their fair values due to the short-term nature of these instruments. vi. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and term deposits with a remaining term to maturity at acquisition of three months or less. As at December 31, 2021 and 2020, the Company had no cash equivalents. vii. Equipment Equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, when it is probable that future economic benefits from such assets will flow to the Company and the cost of such assets can be measured reliably. The carrying amount of an asset is derecognized when it is replaced or taken out of service. Repairs and maintenance costs are charged to the statement of loss and comprehensive loss during the period they are incurred. The major categories of equipment are amortized on a declining balance basis as follows: ​ ​ ​ ​ ​ Exploration and other equipment 30 % Office equipment 30 % ​ The Company allocates the amount initially recognized to each asset’s significant components and depreciates each component separately. Amortization methods and useful life of the assets are reviewed at each financial period end and adjusted on a prospective basis, if required. Gains and losses on disposals of equipment are determined by comparing the proceeds with the carrying amount of the asset and are included in the statement of loss and comprehensive loss. viii. Leases The Company determines if an arrangement is or contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheet. The Company does not have any finance leases. 117 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Differences between the calculated lease payment and actual payment are expensed as incurred. Amortization of finance lease assets is recognized over the lease term. Interest expense on finance lease liabilities is recognized over the lease term in interest expense. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The Company elected to apply the short-term lease recognition exemption to all of its lease arrangements and recorded an expense of $ 132 (2020: $ 117 ) for lease payments during the year ended December 31, 2021 relating to office premises and employee accommodations. Such lease expense is disclosed under general and administrative expenses within the statement of loss and comprehensive loss and forms part of cash flow from operating activities. ix. Exploration Contracts The Company is in the exploration stage with respect to its investment in exploration contracts and follows the practice of capitalizing costs related to the acquisition of such exploration contracts. The cost of exploration contracts will be charged to operations using a unit-of-production method based on proven and probable reserves once commercial production commences in the future. x. Exploration and Evaluation Expenses The Company expenses all costs related to exploration and development of exploration contracts. Such exploration and development costs include, but are not limited to, exploration contract management, geological, geochemical and geophysical studies, environmental studies and process development. xi. Share-Based Compensation Share-based compensation is measured at the grant date based on the fair value of the award and is recognized over the requisite service period. Share-based compensation costs are charged to exploration and evaluation expenses or general and administrative expenses in the statement of loss and comprehensive loss. The Company recognizes forfeiture of any awards as they occur. The Company records share-based compensation from the issuance of stock options and restricted share units (“RSUs”) to employees with service-based conditions using the accelerated attribution method. For stock options issued with performance conditions (Note 16), the Company recognizes share-based compensation cost when the specific performance targets become probable of being achieved using the accelerated attribution method. When these costs relate to equity financing, they are netted against share capital as a share issuance cost. The fair value of stock option awards with only service and/or performance conditions is estimated on the grant date using a Black-Scholes option-pricing model. For stock options issued with market conditions (Note 16), the Company recognizes share-based compensation cost over the expected achievement period for the related market capitalization milestone determined on the grant date. If the related market capitalization milestone is achieved earlier than its expected achievement period, then any unamortized share-based compensation cost for that milestone is recognized at that time. The fair value of market-based stock option awards is estimated on the grant date using Monte-Carlo simulations. The Company at times grants common shares, stock options or RSUs in lieu of cash to certain vendors for their services to the Company. The Company recognizes the associated cost in the same period and manner as if the Company paid cash for the services provided. 118 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ xii. Warrants Liability The Company evaluates all of its financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to U.S. GAAP Accounting Standard Coding (“ASC”) 480, Distinguishing Liability from Equity, and ASC 815, Derivatives and Hedging. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company accounts for the Public Warrants and Private Warrants (as defined below) in accordance with the guidance contained in ASC 815 (Subtopic 40), Derivative and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”), and the U.S. Securities and Exchange Commission (“SEC”) Division of Corporation Finance’s April 12, 2021 Public Statement, Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SEC Statement”), under which, subsequent to the Business Combination, the 15,000,000 common share warrants issued by SOAC as part of the units offered in its initial public offering (“Public Warrants”) were determined to meet the criteria for equity classification, while the 9,500,000 private placement common share warrants issued by SOAC in a private placement simultaneously with the closing of the initial public offering (“Private Warrants”) did not meet the criteria for equity classification and must be recorded as liabilities. Specifically, the terms of the Private Warrants provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and, because the holder of a Private Warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude the Private Warrants from being classified in equity and should be classified as a liability. Accordingly, the Company classified the Private Warrants as liabilities measured at fair value and adjusts the Private Warrants to their fair value at the end of each reporting period. The warrant liability is subject to re-measurement at each balance sheet date until exercised with any changes in fair value being recognized in the Company’s statement of loss and comprehensive loss. xiii. Income Taxes Income tax expense represents the sum of current tax expense and deferred tax expense. Current tax expense is based on taxable profit for the year and includes any adjustments to tax payable in respect of previous years. Taxable profit differs from accounting profit or loss as reported in the consolidated income statement because it excludes (i) items of income or expense that are taxable or deductible in other years and (ii) items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date. The Company’s policy is to account for income tax related interest and penalties in income tax expense in the accompanying statements of loss and comprehensive loss. Deferred tax income taxes are accounted for using the asset and liability method. Deferred income tax assets and liabilities are based on temporary differences, which are differences between the accounting basis and tax basis of assets and liabilities, non-capital loss, capital loss, and tax credits carryforwards and are measured using the enacted tax rates and laws expected to apply when these differences reverse. Deferred tax benefits, including non-capital loss, capital loss, and tax credits carryforwards are recognized to the extent that realization of such benefits is considered more likely than not. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated income statement in the period that enactment occurs. When realization of deferred income tax assets does not meet the more likely than not criterion for recognition, a valuation allowance is provided. 4. Significant Accounting Estimates and Judgements The preparation of financial statements in accordance with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the 119 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Significant management judgments and estimates were applied to the following areas: i. TOML Acquisition In March 2020, the Company completed the TOML Acquisition (Note 7) and applied guidance from ASC 805, Business Combinations , to understand the accounting treatment regarding this acquisition and make necessary judgements. ASC 805 defines a business as consisting of inputs and processes, which when the processes are applied to those inputs, have the ability to contribute to the creation of outputs. The key input acquired in connection with the TOML Acquisition is the TOML Exploration Contract (Note 7) and the related intellectual property. The TOML Exploration Contract is in the development stage and therefore does not produce outputs. ASC 805 requires that where there is no output, there must be both an input and substantive process which must include an organized workforce with the necessary skills, experience, and knowledge to develop and convert the inputs into outputs, for a group of assets to be considered a business. An organized workforce was not included in the TOML Acquisition and therefore the Company’s management deemed that the TOML Acquisition was not a business acquisition and only an acquisition of a group of assets. The Company’s position is supported by ASC 805’s guidance that if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not considered a business. The value of the TOML Acquisition is considered to be primarily in the TOML Exploration Contract. Management also determined that other assets acquired (which included other intangible assets such as patents and trademarks) were connected to the TOML Exploration Contract and would not hold value by themselves. The value of the total cost was therefore capitalized and reported as “Exploration contracts” on the Company’s balance sheet. ii. Valuation of Share-Based Payments TMC recognized the cost of share-based awards granted to employees, non-employees and directors based on the estimated grant-date fair value of the awards. Prior to closing of the Business Combination, TMC determined the fair value of stock options using the Black-Scholes option pricing model, which was impacted by the following assumptions: ● Fair Value of Common Shares on the Date of the Grant — The Company estimated the value of its common shares using the Probability Weighted Expected Return Method (“PWERM”). The Company applied the PWERM by first defining the range of potential future liquidity outcomes, including the share price used for its most recent private placements and the share price used for the Business Combination, then allocating its value based on the probability of that event occurring. ● Expected Term—TMC used the term of the award when calculating the expected term due to insufficient historical exercise data. ● Expected Volatility—As TMC’s shares were not actively traded prior to closing of the Business Combination, the volatility is based on a benchmark of comparable companies within the mining industry. ● Expected Dividend Yield—The dividend rate used is zero as TMC has never paid any cash dividends on common shares and does not anticipate doing so during the expected life of the stock options. ● Risk-Free Interest Rate—The interest rates used are based on the implied yield available on Canadian Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. 120 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ This valuation approach involves the use of estimates, judgments and assumptions that are subjective, such as those regarding the probability of future events. Changes in these estimates and assumptions impact the Company’s valuation as of the valuation date and may have a material impact on the valuation of the Company’s common shares. Changes in these assumptions used to determine the fair value of incentive stock options, including the vesting timeline of granted stock options, could have a material impact on the Company’s loss and comprehensive loss. Prior to closing of the Business Combination, TMC estimated the fair value of common shares issued for services using the PWERM described above. iii. Valuation of Warrants Liability The Company re-measures the fair value of the Private Warrants at the end of each reporting period. The fair value of the Private Warrants was estimated using a Black-Scholes option pricing model whereby the expected volatility was estimated using a binomial model based on consideration of the implied volatility from the Company’s Public Warrants adjusted to account for the call feature of the Public Warrants at prices above $ 18.00 during 20 trading days within any 30 -trading day period. 5. Recent Accounting Pronouncements Issued and Adopted i. Accounting for Debt with Conversion and Other Options In August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivative and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” , which simplifies the accounting for convertible instruments by reducing the number of accounting models and requiring that a convertible instrument be accounted for as a single liability measured at amortized cost. Further, ASU 2020-08 amended the earnings per share guidance by requiring the diluted earnings per share calculation for convertible instruments to follow the if-converted method, with the use of the treasury stock method no longer permitted. The ASU 2020-08 is effective for fiscal periods ending on or after December 15, 2021, with early adoption permitted, but no earlier than fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. The ASU 2020-08 allows either a modified retrospective method of transition or a fully retrospective method of transition, with any adjustments recognized as an adjustment to the opening balance of deficit. The Company adopted this standard on January 1, 2021. The standard did not have any impact on the Company’s historical financial statements but was applied to recognize the impact of the convertible debentures issued during February 2021 (Note 13). 6. Business Combination On March 4, 2021, SOAC and DeepGreen entered into a business combination agreement (“BCA”) in which SOAC would combine with DeepGreen, relist on the Nasdaq and SOAC would be renamed to TMC. The Business Combination was consummated on September 9, 2021, whereby SOAC acquired all of the outstanding common shares of DeepGreen. Pursuant to the BCA, shareholders of DeepGreen exchanged their DeepGreen common shares at a ratio of 1.157862 TMC common shares per DeepGreen common share (“Exchange Ratio”) and received approximately 203.9 million TMC common shares and a total of 120.1 million Class A to H special shares (“Special Shares”). Each class of Special Shares automatically convert to TMC common shares if TMC common shares trade at a price on any 20 trading days within any 30 - trading day period that is greater than or equal to the specific trigger price for the respective class of Special Share. The trigger prices range from $ 15 per share to $ 200 per share. In connection with the Business Combination, the SOAC sponsors were entitled to an additional 0.5 million Class I Special Shares and 0.7 million Class J Special Shares which are convertible to TMC common shares if TMC common shares trade for a price on any 20 trading days within any 30 -trading day period that is greater than or equal to $ 50.00 per share and $ 12.00 per share, respectively. 121 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Additionally, existing DeepGreen options were automatically adopted by TMC (the “Rollover Options”) after application of the Exchange Ratio to both the underlying number of common shares and the exercise price. These Rollover Options did not change in value as a result of the Business Combination. The Rollover Options also entitle holders thereof to a pro-rata portion of up to an aggregate of 14.9 million Special Shares if exercised. Lastly, the warrants granted to Allseas to acquire 10 million DeepGreen common shares at a nominal value (the “Allseas Warrants”) have been assumed by TMC and have become warrants to purchase 11.6 million TMC common shares, in accordance with its terms. Below is a summary of the Special Shares and their respective vesting thresholds, assuming the full amount of Special Shares from Rollover Options are issued: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special Share Class A B C D E F G H I J Share Trigger price ($) 15 25 35 50 75 100 150 200 50 12 Special Shares (million) 5 10 10 20 20 20 25 25 0.5 0.7 ​ The following table reconciles the cash proceeds from the Business Combination: ​ ​ ​ ​ ​ Cash proceeds from SOAC $ 27,328 Cash proceeds from sale of equity securities ​ 110,300 Gross cash received by TMC from Business Combination ​ 137,628 Less: Transaction costs settled in cash ​ ( 33,163 ) Net contributions from Business Combination ​ $ 104,465 ​ In addition to the transaction costs settled in cash above, the Company incurred $ 3.5 million of transaction costs which were settled by issuance of 873,953 common shares on October 7, 2021. Prior to the Business Combination, SOAC had 30.0 million shares of Class A common shares with a par value of $ 0.0001 per share (“SOAC Class A Shares”) outstanding and 7.5 million shares of Class B common shares with a par value of $ 0.0001 per share (“SOAC Class B Shares”) held by Sustainable Opportunities Holdings LLC (the “Sponsor”). In connection with the Business Combination, 27.3 million SOAC Class A Shares were redeemed by public shareholders. On September 9, 2021, each remaining issued and outstanding share of SOAC Class A Shares automatically converted, on a one-for- one basis, into TMC common shares and 6.8 million outstanding shares of SOAC Class B Shares automatically converted, on a one-for- one basis, into TMC common shares and 0.7 million outstanding shares of SOAC Class B Shares converted into Class J Special Shares. The TMC common shares also changed from having a par value of $ 0.0001 per share to no par value. 122 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The number of TMC common shares issued immediately following the consummation of the Business Combination is summarized as follows: ​ ​ ​ ​ ​ ​ Number of Shares by type shares SOAC Class A shares outstanding prior to the Business Combination 30,000,000 Less: Redemption of SOAC Class A shares ( 27,278,657 ) SOAC Class A shares outstanding and converted to TMC common shares 2,721,343 Shares issued in the Private Investment in Public Equity (“PIPE”) 11,030,000 Conversion of SOAC Class B shares to TMC common shares 6,759,000 Shares issued to SOAC and PIPE investors 20,510,343 Shares issued to the DeepGreen shareholders 203,874,981 Total TMC common shares outstanding at close of Business Combination 224,385,324 ​ The Company incurred transaction costs related to the Business Combination of approximately $ 42.1 million, of which $ 5.4 million, incurred prior to the closing of the Business Combination becoming probable, are included in general and administrative expenses on the consolidated statements of loss and other comprehensive loss. The remaining $ 36.7 million of transaction costs were capitalized to common shares on the consolidated balance sheet. The Business Combination was accounted for as a reverse acquisition with no goodwill or intangible assets being recorded. As SOAC had no operations, the net assets acquired were recorded at their historical cost. Adjustments related to the Business Combination including consideration paid to DeepGreen shareholders and any other adjustments to eliminate the historical equity of SOAC and recapitalize the equity of DeepGreen were recorded to common shares to reflect the effective issuance of common shares to SOAC and PIPE investors in the Business Combination. 7. TOML Acquisition On March 31, 2020, the Company entered into an acquisition agreement to wholly acquire TOML and other entities in the group (the “TOML Group”) from Deep Sea Mining Finance Ltd. (“DSMF”) (the “TOML Acquisition”). Total purchase price of the TOML Acquisition, before transaction costs, was $ 32.0 million. TOML holds an ISA exploration contract in the CCZ (“TOML Exploration Contract”) and some exploration related equipment. The TOML Group also holds various patents and an application right with respect to a prospecting exploration contract in Kiribati. The purchase price of $ 32.0 million was settled through initial cash payments in two tranches of $ 0.25 million each (paid on March 31, 2020 and May 31, 2020, respectively), issuance of 9,005,595 common shares, $ 0.1 million payment to the ISA on behalf of DSMF and deferred consideration of $ 3.4 million which was originally to be paid on January 31, 2021. The common share consideration paid by the Company was valued at $ 3.11 per common share, based on the private placements completed by DeepGreen around the time of the TOML Acquisition, for a total of $ 28.0 million. The Company had the option of settling the deferred consideration in either cash or common shares of the Company at its sole discretion. In January 2021, the arrangement with DSMF was amended to pay the entire deferred consideration with cash. The deferred consideration was fully settled on June 30, 2021. The Company determined that the value of the TOML Acquisition was substantially concentrated in the TOML Exploration Contract and therefore considered this to be an acquisition of a group of connected assets rather than an acquisition of a business. Consequently, the total cost of the transaction was primarily allocated to exploration contracts. 123 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The net assets acquired as part of the TOML Acquisition were as follows: ​ ​ ​ ​ ​ Net assets acquired ​ Cash payments ​ $ 560 Common shares issued ( 9,005,595 common shares @ $ 3.11 ) ​ ​ 28,000 Transaction costs paid ​ ​ 47 Deferred acquisition costs ​ ​ 3,440 Total acquisition cost ​ $ 32,047 Allocated to: ​ ​ Equipment ​ ​ 21 Exploration contracts (Note 11) ​ ​ 42,701 Deferred tax liability 1 ​ ​ ( 10,675 ) Net assets acquired ​ $ 32,047 1. A deferred tax liability was recognized by the Company on the acquisition which related to differences between the book value and the tax basis of the TOML exploration contract. 8. Financial Instruments Categories of Financial Instruments ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 2021 December 31 2020 Financial assets ​ ​ Amortized cost ​ ​ Cash $ 84,873 $ 10,096 Receivables ​ ​ — ​ ​ 38 ​ $ 84,873 $ 10,134 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities ​ ​ Amortized cost ​ ​ Accounts payable and accrued liabilities $ 26,573 $ 4,316 Deferred acquisition costs ​ — ​ 3,440 Fair value through profit or loss Warrants liability ​ ​ 3,126 ​ ​ — ​ $ 29,699 $ 7,756 ​ ​ ​ ​ 9. Receivables and Prepayments ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 2021 December 31 2020 Taxes and other receivables $ 64 $ 56 Prepayments ​ 3,622 ​ 73 ​ $ 3,686 $ 129 ​ ​ ​ 124 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 10. Equipment The movements in the Company’s capital equipment are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exploration and ​ ​ ​ ​ Cost ​ other equipment ​ Office equipment ​ Total December 31, 2019 $ 2,219 ​ $ 21 ​ $ 2,240 TOML Acquisition (Note 7) ​ 21 ​ — ​ 21 December 31, 2020 ​ 2,240 ​ 21 ​ 2,261 Additions ​ 560 ​ — ​ 560 December 31, 2021 $ 2,800 ​ $ 21 ​ $ 2,821 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated depreciation ​ ​ ​ December 31, 2019 $ ( 371 ) ​ $ ( 17 ) ​ $ ( 388 ) Amortization for the year ​ ( 562 ) ​ ( 1 ) ​ ( 563 ) December 31, 2020 ​ ( 933 ) ​ ( 18 ) ​ ( 951 ) Amortization for the year ​ ( 453 ) ​ ( 1 ) ​ ( 454 ) December 31, 2021 $ ( 1,386 ) ​ $ ( 19 ) ​ $ ( 1,405 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net book value ​ ​ ​ As at December 31, 2020 $ 1,307 ​ $ 3 ​ $ 1,310 As at December 31, 2021 $ 1,414 ​ $ 2 ​ $ 1,416 ​ ​ ​ 11. Exploration Contracts Significant Exploration Agreements NORI Exploration Contract: The Company’s wholly-owned subsidiary, NORI, was granted the NORI Exploration Contract on July 22, 2011 under the sponsorship of Nauru. The contract application fee of $ 0.3 million, provides NORI with exclusive rights to explore for polymetallic nodules in the NORI Area for an initial term of 15 years (renewable for successive five-year periods) subject to complying with the exploration contract terms (Note 19) and provides NORI with the priority right to apply for an exploitation contract to collect polymetallic nodules in the same area. NORI has a right to renounce, without penalty, in whole or part of its rights in the NORI Area at any time and therefore does not have a fixed commitment with relation to the NORI Exploration Contract (Note 19). Marawa Agreements: Marawa executed the Marawa Exploration Contract with the ISA on January 19, 2015. The Marawa Exploration Contract provides Marawa with exclusive rights to explore for polymetallic nodules in the Marawa Area for an initial term of 15 years (subject to renewal for successive five-year periods) subject to complying with the exploration contract terms and the priority right to apply for an exploitation contract to collect polymetallic nodules in the same area. 125 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ On March 17, 2012, the Company’s wholly-owned subsidiary, DeepGreen Engineering Pte. Ltd. (“DGE”), entered into an Option Agreement (“Marawa Option Agreement”) with Marawa and Kiribati. Under the amended Marawa Option Agreement dated October 1, 2013, DGE paid an option fee of $ 0.3 million to acquire the right to purchase tenements, as may be granted to Marawa by the ISA or any other regulatory body, for the greater of $ 0.3 million or the value of any amounts owing to DGE by Marawa. The exercise period for the option is a maximum of 40 years after the date of the execution of the amended Marawa Option Agreement. On October 1, 2013, DGE also entered into a services agreement (“Marawa Services Agreement”) with Marawa and Kiribati, which grants DGE the exclusive right to carry out all exploration and collection in the Marawa Area. Under the Marawa Services Agreement, DGE will pay to the ISA, on behalf of Marawa, the following: $ 47 thousand annual exploration fees, ISA royalties and taxes, and the ISA exploitation application fee of $ 0.3 million. In addition, DGE will ensure that the activities carried out in the Marawa Area by DGE and any other service contractor complies with the ISA regulations and any other required regulations. The Marawa Services Agreement grants DGE the right to recover any and all polymetallic nodules from the Marawa Area by paying Kiribati a royalty per wet tonne of polymetallic nodules collected (adjusted for inflation from October 1, 2013 onwards). DGE has the right to terminate the Marawa Services Agreement at its sole discretion by giving written notice to Marawa and Kiribati, and such termination shall take effect two months following the date of the termination notice, provided that DGE shall pay to the ISA on behalf of Marawa the fees or payments legally owed to the ISA by Marawa (including the annual ISA exploration fee and ISA royalties and taxes) that are outstanding at the date of termination or that are incurred within 12 months after the date of such termination. There are no other longer-term commitments with respect to the Marawa Option Agreement and the Marawa Services Agreement. As at December 31, 2021, Marawa had no amounts owing to DGE under the Marawa Services Agreement and no purchase tenements had been granted to Marawa. TOML Exploration Contract: TOML was granted the TOML Exploration Contract on January 11, 2012 under the sponsorship of Tonga. The TOML Exploration Contract provides TOML with exclusive rights to explore for polymetallic nodules in the TOML Area for an initial term of 15 years (renewable for successive five-year periods) subject to complying with the exploration contract terms and a priority right to apply for an exploitation contract to collect polymetallic nodules in the same area. Strategic Partnerships Marine Vessel Services: Effective March 15, 2017, the Company entered into a strategic partnership with Maersk to undertake the exploration, environmental baseline and offshore testing required to support development of pre-feasibility studies for economic production of polymetallic nodules from the CCZ (the “Participation Agreement”). Under the Participation Agreement, Maersk provided marine vessel services and project management services, which enabled TMC to undertake the various offshore campaigns to support required pre-feasibility studies. During these offshore campaigns, TMC undertook baseline studies required to complete an Environmental and Social Impact Assessment (“ESIA”), collected nodules for metallurgical test work and collected samples and survey data for resource evaluation. Prior to February 5, 2021, the costs related to the marine vessel use were settled through the issuance of DeepGreen common shares, the number of which was based on a contractual price of $ 1.08 per common share. Project management services provided by Maersk for managing these offshore campaigns are paid in cash. 126 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ On March 3, 2021, the Participation Agreement with Maersk was amended whereby all costs incurred on or after February 5, 2021 pertaining to the use of the marine vessel would be paid in cash rather than through issuance of common shares. By this amendment, Maersk irrevocably waived certain pro rata participation rights that it may have had under the Participation Agreement in connection with the Business Combination and acknowledged that all amounts owing to Maersk for services rendered through February 5, 2021 in the aggregate amount of $ 4.6 million had been satisfied by the issuance of 4.2 million common shares. During the year ended December 31, 2021, the Company incurred costs to Maersk for offshore campaigns of $ 33.9 million (2020: $ 25.6 million). These costs were settled with the issuance of 4.2 million TMC common shares to Maersk at $ 6.05 per common share (2020: 4.7 million TMC common shares at $ 3.11 per common share), with the balance of $ 21.3 million (2020: $ 4.4 million) settled or to be settled in cash. As at December 31, 2021, TMC had outstanding payables to Maersk of $ 11.3 million (2020: $ 1.8 million) included in accounts payable and accrued liabilities. Subsequent to December 31, 2021, $ 3.5 million of the $ 11.3 million was settled in cash. The agreement with Maersk ended in January 2022, following the completion of the NORI Area D baseline campaigns. As at December 31, 2021, Maersk owned 20.8 million TMC common shares (2020: 16.6 million TMC common shares) which constituted 9.2 % (2020: 8.8 %) of the total common shares outstanding of the Company. Strategic Alliance with Allseas Pilot Mining Test Project On March 29, 2019, the Company and Allseas entered into a Strategic Alliance Agreement (“SAA”) with the objective to develop and operate commercial nodule collection systems in the Company’s contract areas. The SAA included the intent to develop and deploy a Pilot Mining Test System (“PMTS”), the successful completion of which would support the Company’s application for an exploitation contract with the ISA. Allseas committed to a fixed price development contract and would own all intellectual property used and generated in the development of the PMTS. Upon successful completion of the pilot trial of the PMTS in NORI Area D, the Company and Allseas agreed to enter into a nodule collection and shipping agreement whereby Allseas would provide commercial services for the collection of the first 200 million metric tonnes of polymetallic nodules on a cost plus 50 % profit basis. Under the terms of the SAA, Allseas subscribed for and ultimately received 7.7 million common shares for a total of $ 20.0 million paid in cash to the Company. On July 8, 2019, as contemplated by the SAA, the Company and Allseas entered into the Pilot Mining Test Agreement (“PMTA”) which governs the terms, design specifications, procedures, and timetable under which Allseas agreed to complete a pilot trial of the PMTS in NORI Area D. Under the PMTA, in exchange for Allseas’ development efforts, upon successful delivery of the pilot trial of the PMTS in NORI Area D by Allseas, the Company agreed to pay Allseas: (a) $ 30.0 million in cash and (b) issue 11.6 million common shares. Contract Amendments On February 20, 2020, the PMTA was amended to recognize the acquisition by Allseas of the Hidden Gem , a former drillship to be converted into a surface production vessel that would first be used as part of the PMTS, and later as part of the commercial production system. The Company paid an additional: (a) $ 10.0 million in cash and (b) $ 10.0 million by issuing 3.2 million common shares valued at $ 3.11 per share. On March 4, 2021 and June 30, 2021, the Company and Allseas further amended the PMTA whereby, instead of issuing 11.6 million common shares upon successful delivery of the pilot trial of the PMTS in NORI Area D, the Company issued the Allseas Warrants (Note 14). 127 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The amendment on March 4, 2021 stipulated that if the market price of the Company’s common shares on June 1, 2022 is higher than $ 12.95 per common share, the aggregate value of the common shares underlying the Allseas Warrants above $ 150 million as at June 1, 2022 will automatically become a commercial credit from Allseas to the Company equal to the excess value. This commercial credit will be effective on the vesting date of the Allseas Warrants and the Company will be able to exchange this excess value for any future goods and services from Allseas under the nodule collection and shipping contract for one year after commercial production. There can be no assurance that such future goods and services from Allseas will occur. The 2021 contract amendments also restructured the original $ 30.0 million lump sum cash payment upon successful delivery of the PMTS to: ● $ 10 million within 10 business days of the closing of the Business Combination and Allseas providing confirmation of placing an order for certain equipment and demonstrating certain progress on construction of the PMTS; ● $ 10 million on the later of (i) January 1, 2022, and (ii) confirmation of successful completion of the North Sea drive test; and ● $ 10 million upon successful completion of the pilot trial of the PMTS in NORI Area D. On October 5, 2021, the first $ 10 million payment was paid to Allseas for successfully reaching the first progress milestone, with the completion of the Business Combination and by confirming the order of certain equipment and demonstrating certain progress on construction of the PMTS. The Company accounts for the first two milestone payments in accordance with ASC 730, Research and Development, as these payments represented progress payments. Accordingly, the Company expenses the payments according to when the services are performed. The research and development related services commenced in July 2019 and are expected to be performed through January 2023. Therefore, the Company records the expense on a straight-line basis over the life of the contract which resulted in total expenses of $ 14.3 million recorded as exploration and evaluation expenses for the year ended December 31, 2021. The Company will record the expense and liability for the third milestone payment upon successful completion of the pilot trial of the PMTS in the NORI Area D. The Company has not recorded a liability for the third payment as at December 31, 2021. As at December 31, 2021, Allseas owned 16.2 million TMC common shares (2020: 14.2 million TMC common shares) which constituted 7.2 % (2020: 7.5 %) of total common shares outstanding. The Allseas total share ownership includes 3.2 million shares issued in a private placement in June 2020. Reconciliation – Exploration Contracts A reconciliation of the Company’s exploration contracts is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Marawa ​ ​ ​ ​ ​ ​ NORI ​ Option ​ TOML ​ ​ ​ ​ ​ Contract ​ Agreement ​ Contract ​ Total December 31, 2019 $ 250 ​ $ 199 ​ $ — ​ $ 449 TOML Acquisition ( Note 7 ) ​ — ​ — ​ 42,701 ​ 42,701 December 31, 2020 $ 250 ​ $ 199 ​ $ 42,701 ​ $ 43,150 December 31, 2021 $ 250 ​ $ 199 ​ $ 42,701 ​ $ 43,150 ​ 128 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Exploration and Evaluation Expenses The detail of exploration and evaluation expenses is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI Marawa TOML ​ ​ ​ ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ For the year ended December 31, 2021 ​ General ​ Contract ​ Agreement ​ Contract ​ Total Exploration labor $ — ​ $ 2,769 ​ $ 606 ​ $ 672 ​ $ 4,047 Offshore campaigns ​ — ​ 38,956 ​ 33 ​ 43 ​ 39,032 Share-based compensation (Note 16) ​ — ​ 17,116 ​ 4,401 ​ 5,453 ​ 26,970 Amortization ​ — ​ 448 ​ — ​ 4 ​ 452 External consulting ​ 12 ​ 6,403 ​ 200 ​ 199 ​ 6,814 Travel, workshop and other ​ — ​ 1,064 ​ 123 ​ 254 ​ 1,441 PMTS ​ — ​ 11,400 ​ 1,425 ​ 1,425 ​ 14,250 ​ $ 12 ​ $ 78,156 ​ $ 6,788 ​ $ 8,050 ​ $ 93,006 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI Marawa TOML ​ ​ ​ ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ For the year ended December 31, 2020 ​ General ​ Contract ​ Agreement ​ Contract ​ Total Exploration labor $ — ​ $ 1,558 ​ $ 722 ​ $ 501 ​ $ 2,781 Offshore campaigns ​ — ​ 23,119 ​ 2,619 ​ 2,255 ​ 27,993 Share-based compensation (Note 16) ​ — ​ 449 ​ 276 ​ 108 ​ 833 Amortization ​ — ​ 556 ​ — ​ 6 ​ 562 External consulting ​ 40 ​ 2,829 ​ 650 ​ 649 ​ 4,168 Travel, workshop and other ​ — ​ 664 ​ 191 ​ 22 ​ 877 PMTS ​ — ​ 9,333 ​ 1,167 ​ 1,167 ​ 11,667 ​ $ 40 ​ $ 38,508 ​ $ 5,625 ​ $ 4,708 ​ $ 48,881 ​ ​ 12. General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended For the year ended ​ ​ December 31, ​ December 31, ​ ​ 2021 ​ 2020 Professional and consulting fees ​ $ 10,697 ​ $ 2,049 Investor relations ​ 6,204 ​ 858 Office and sundry ​ 2,023 ​ 303 Salaries and wages ​ 3,412 ​ 916 Director fees ​ 404 ​ 195 Share-based compensation ​ 33,370 ​ 3,263 Transfer agent and filing fees ​ 82 ​ 6 Travel expenses ​ 341 ​ 133 Other expenses ​ 50 ​ — General and Administration Expenses ​ $ 56,583 ​ $ 7,723 ​ ​ 13. Convertible Debentures In February 2021, the Company issued a total of $ 26 million in convertible debentures. The convertible debentures had an interest rate of 7.0 % per annum, compounded annually, and had a maturity date of 24 months from the date of issuance. 129 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The debentures were convertible into shares of the Company at anytime at the conversion price of $ 8.64 per common share. Unless any accrued interest was converted prior to the maturity date, all accrued and unpaid interest was payable at the maturity date in TMC common shares at a conversion price of $ 8.64 per common share. The terms of the convertible debentures provided that in the event that the Company completed the Business Combination (Note 6) or another change of control transaction at any time prior to the maturity date, the debenture value would be automatically converted into common shares at the conversion price immediately prior to the Business Combination or the change of control transaction. If the debentures, or any portion thereof, were not converted by the holder upon the earlier of the maturity date or the completion of the Business Combination or the change of control transaction, the outstanding debenture value would automatically convert into common shares at the conversion price of $ 8.64 per common share. On February 18, 2021, convertible debentures with a principal amount of $ 0.5 million were converted into 57,894 common shares of the Company. On September 9, 2021, the Company issued 3,068,673 common shares upon conversion of the outstanding debentures consisting of $ 25.5 million and $ 1.0 million of principal and accrued interest, respectively. 14. Warrants For accounting purposes, the Company was considered to have issued the Public Warrants and Private Warrants as part of the Business Combination (Note 6). Public Warrants Each whole Public Warrant entitles the holder to purchase one TMC common share at a price of $ 11.50 per share beginning on October 9, 2021. As at December 31, 2021, 15,000,000 Public Warrants were outstanding. Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the units and only whole Public Warrants will trade. The Public Warrants will expire on September 9, 2026 or earlier upon redemption or liquidation. Public Warrant holders do not have the rights or privileges of holders of common shares nor any voting rights until they exercise their warrants and receive common shares. The Company will not be obligated to deliver any common shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act of 1933, as amended (“Securities Act”) with respect to the common shares underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No Public Warrants will be exercisable and the Company will not be obligated to issue a common share upon exercise of a Public Warrant unless the common share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any Public Warrants. In the event that a registration statement is not effective for the exercised Public Warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the common share underlying such unit. On October 7, 2021, the Company filed a Registration Statement on Form S-1 with respect to the common shares underlying the Public Warrants, as well as the Private Warrants, which was declared effective by the SEC on October 22, 2021. The Company is required to file a post-effective amendment to this Registration Statement on Form S-1, which will need to be declared effective by the SEC, following the Company’s filing of its Annual Report on Form 10-K for the year ended December 31, 2021 in which these Notes to the Consolidated Financial Statements are included to update the information and financial statements included therein. 130 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The Company may call the Public Warrants for redemption: ● in whole and not in part; ● at a price of $ 0.01 per warrant; ● upon a minimum of 30 days ’ prior written notice of redemption; and ● if, and only if, the closing price of the common shares equals or exceeds $ 18.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 - day trading period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. If the Company calls the Public Warrants for redemption in certain circumstances, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a cashless basis, by surrendering the Public Warrants for a number of common shares per warrant equal to the lesser of: ● the quotient obtained by dividing (x) the product of the number of common shares underlying such warrant, multiplied by the excess of the average reported closing price of common shares for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders (“Fair Market Value”) over the warrant price by (y) the Fair Market Value, and ● 0.365 . As at December 31, 2021, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital. Private Warrants As at December 31, 2021, 9,500,000 Private Warrants were outstanding. The Private Warrants (including the common shares issuable upon exercise of the Private Warrants) were not transferable, assignable or salable until October 9, 2021, except to permitted transferees. The Private Warrants are identical to the Public Warrants, except that so long as they are held by the Sponsor or any of its permitted transferees: (i) the Private Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and (ii) the Private Warrants are not redeemable by the Company. The Private Warrants are subject to the Company’s redemption option at the price of $ 0.01 per warrant, if not held by the Sponsor or any of its permitted transferees, provided that the other conditions of such redemption are met, as described above. If holders of the Private Warrants elect to exercise the warrants on a cashless basis, the holder would pay the exercise price by surrendering their Private Warrants for a number of common shares equal to: ● the quotient obtained by dividing (x) the product of the number of common shares underlying the warrants, multiplied by the excess of the average reported closing price of the common shares for the ten trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent (“fair market value”) over the exercise price of the warrants by (y) the fair market value. If the Private Warrants are held by a holder other than the Sponsor or any of its permitted transferees, the Private Warrants are redeemable by the Company in all redemption scenarios applicable to the Public Warrants and exercisable by such holders on the same basis as the Public Warrants. In December 2021, the Private Warrants were transferred to permitted transferees. 131 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The Company evaluated the Private Warrants under ASC 815-40, in conjunction with the SEC Statement , and concluded that they do not meet the criteria to be classified in shareholders’ equity. Specifically, the terms of the warrants provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and, because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude the warrant from being classified in equity and thus the warrants should be classified as a liability. The Private Warrants were valued using a Black-Scholes model, which resulted in a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants was the expected volatility of the Company’s common shares. The expected volatility was estimated using a binomial model based on consideration of the implied volatility from the Company’s Public Warrants adjusted to account for the call feature of the Public Warrants at prices above $ 18.00 during 20 trading days within any 30 -trading day period. As at December 31, 2021, the fair value of outstanding Private Warrants of $ 3.1 million is recorded as warrants liability. The following table presents the changes in the fair value of warrants liability: ​ ​ ​ ​ ​ ​ Private ​ ​ Warrants Warrants liability as at September 9, 2021 ​ $ 12,501 Reduction in fair value of warrants liability ​ ( 9,375 ) Warrants liability as at December 31, 2021 ​ $ 3,126 ​ As at December 31, 2021, the fair value of the Private Warrants was estimated using the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 September 9, 2021 ​ Exercise price ​ $ 11.50 ​ $ 11.50 ​ Share price ​ $ 2.08 ​ $ 10.62 ​ Volatility ​ 64.6 % ​ 15.8 % Term ​ 4.7 years ​ 5.0 years Risk-free rate ​ 1.2 % ​ 0.8 % Dividend yield ​ 0.0 % ​ 0.0 % ​ There were no exercises or redemptions of the Public Warrants or Private Warrants during the year ended December 31, 2021. Allseas Warrants The Allseas Warrants will vest and become exercisable upon successful completion of the PMTS and will expire on September 30, 2026. A maximum of 11.6 million warrants to purchase common shares will vest if the PMTS is completed by September 30, 2023, gradually decreasing to 5.8 million warrants to purchase common shares if the PMTS is completed after September 30, 2025. Since the Allseas Warrants vest upon the achievement of a performance condition, being the completion of the PMTS, under U.S. GAAP, the vesting of the Allseas Warrants was not determined to be probable as at December 31, 2021. No expense or liability has been recorded as at and for the year ended December 31, 2021. ​ 132 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 15. Common Shares Authorized and Issued As at December 31, 2021, the authorized, issued and outstanding common shares and Special Shares of the Company are as follows: ​ ​ ​ ​ ​ ​ ​ ​ Issued and ​ ​ Authorized ​ Outstanding Common shares Unlimited, with no par value 225,432,493 Class A Special Shares 5,000,000 , with no par value 4,448,259 Class B Special Shares 10,000,000 , with no par value 8,896,399 Class C Special Shares 10,000,000 , with no par value 8,896,399 Class D Special Shares 20,000,000 , with no par value 17,792,922 Class E Special Shares 20,000,000 , with no par value 17,792,922 Class F Special Shares 20,000,000 , with no par value 17,792,922 Class G Special Shares 25,000,000 , with no par value 22,241,179 Class H Special Shares 25,000,000 , with no par value 22,241,179 Class I Special Shares 500,000 , with no par value 500,000 Class J Special Shares 741,000 , with no par value 741,000 ​ The holders of the Company’s common shares are entitled to one vote for each common share held. Each class of Special Shares do not have voting rights and do not participate in earnings. The Special Shares automatically convert to TMC common shares if TMC common shares trade at a price on any 20 trading days within any 30 -trading day period that is greater than or equal to the specific trigger price for the respective class of Special Share. The trigger prices range from $ 15 per share to $ 200 per share (refer to Note 6 for details). As the Special Shares meet the indexation and equity classification criteria under ASC 815-40, the Special Shares have been classified as equity instruments at issuance. As at December 31, 2020, the Company had 509,459 DeepGreen Class B Preferred Shares outstanding. Class B Preferred Shares were non-dividend earning and include voting rights similar to common shares. However, if any dividend was declared on common shares, the Company was required to concurrently declare and pay dividend on Class B Preferred Shares in the amount per share equal to the dividend per share paid on the common shares. These Class B Preferred Shares rank ahead of common shares in the event of liquidation. As at December 31, 2021, all Class B Preferred Shares have been converted to common shares. 133 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Common Share Continuity In accordance with ASC 805, under a reverse recapitalization, the equity structure reflects the equity structure of SOAC, as the legal acquirer, including the equity interests SOAC issued to affect the Business Combination. Accordingly, the Company has restated its equity structure using the Exchange Ratio of the Business Combination to reflect the number of shares of SOAC issued in the reverse acquisition. The share amounts stated below have been recast from the historical share totals of DeepGreen to reflect the Exchange Ratio. ​ ​ ​ ​ ​ ​ ​ Common shares Number Amount December 31, 2019 163,331,904 ​ $ 79,824 Private placement 6,553,409 ​ ​ 20,376 Financing cost incurred – Cash — ​ ​ ( 28 ) Financing cost incurred - Stock option-based payments — ​ ​ ( 397 ) Issued for TOML Acquisition ( Note 7 ) 9,005,595 ​ ​ 28,000 Issued for services (Note 11) 7,997,496 ​ ​ 24,866 Exercise of stock options 2,605,189 ​ ​ 1,790 December 31, 2020 189,493,593 ​ $ 154,431 Issued for services (Note 11) 4,432,606 ​ ​ 26,960 Exercise of stock options 6,312,756 ​ ​ 14,297 Conversion of restricted share units (Note 16) ​ 173,216 ​ ​ 399 Conversion of preferred shares to common shares 509,459 ​ ​ 550 Issued in Business Combination (Note 6) 21,384,296 ​ ​ 72,411 Conversion of debentures (Note 13) 3,126,567 ​ ​ 27,003 December 31, 2021 225,432,493 ​ $ 296,051 ​ ​ 16. Share-Based Compensation The Company’s 2021 Incentive Equity Plan (the “Plan”) provides that the aggregate number of common shares reserved for future issuance under the Plan is 24,682,386 common shares, provided that 2,243,853 of the outstanding common shares shall only be available for awards made to non-employee directors of the Company. On the first day of each fiscal year beginning in 2022 to the tenth anniversary of the closing of the Business Combination, the number of common shares that may be issued pursuant to the Plan is automatically increased by an amount equal to the lesser of 4 % of the number of outstanding common shares or an amount determined by the Board of Directors. Stock options Pursuant to the Company’s stock option plan, directors may, from time to time, authorize the issuance of stock options to directors, officers, employees, and consultants of the Company and its subsidiaries. The Board of Directors grants such options with vesting periods and exercise prices determined at its sole discretion. As described in Note 6, existing DeepGreen options were automatically adopted by TMC after application of the Exchange Ratio to both the underlying number of common shares and the exercise price and provided for additional Special Shares to be issued to option holders on a pro-rata basis, if exercised. The Rollover Options did not change in value as a result of the Business Combination. Comparative information below has been restated by adjusting for the number of options and exercise prices for the Exchange Ratio. As at December 31, 2021, there were 15,503,748 stock options outstanding under the Company’s Short-Term Incentive Plan (“STIP”) and 9,783,922 stock options outstanding under the Company’s Long-Term Incentive Plan (“LTIP”). The Company grants awards under the STIP and LTIP under its equity incentive plans in effect at the time of the award. The stock options currently outstanding were granted under DeepGreen’s equity incentive plan. No new stock options have been granted under the Company’s Plan. 134 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ A continuity schedule of the Company’s stock options in the Company’s STIP is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Aggregate ​ Weighted ​ ​ average intrinsic average ​ ​ Number of ​ exercise ​ value of ​ contractual ​ ​ Options ​ price per ​ stock ​ life ​ ​ Outstanding ​ option ​ options ​ (years) Outstanding – December 31, 2019 19,656,145 ​ $ 0.60 $ 49,231 ​ 7.28 Granted 1,610,776 ​ ​ 2.00 ​ ​ Expired ( 115,786 ) ​ ​ 0.30 ​ ​ Cancelled/Forfeited ( 2,995,968 ) ​ ​ 0.65 ​ ​ Exercised ( 2,605,190 ) ​ ​ 0.35 ​ ​ Outstanding – December 31, 2020 15,549,977 ​ $ 0.80 $ 36,126 ​ 7.34 Granted 6,373,203 ​ ​ 2.10 ​ ​ Expired ( 50,946 ) ​ ​ 0.39 ​ ​ Cancelled/Forfeited ( 57,893 ) ​ ​ 0.65 ​ ​ Exercised ( 6,310,593 ) ​ ​ 0.67 ​ ​ Outstanding – December 31, 2021 15,503,748 ​ $ 1.40 $ 17,415 ​ 6.33 Vested and expected to vest – December 31, 2021 15,503,748 ​ $ 1.40 $ 17,415 ​ 6.33 Vested and exercisable – December 31, 2021 14,175,425 ​ $ 0.94 $ 17,406 ​ 6.32 ​ A summary of the Company’s stock options granted and outstanding under the Company’s STIP as at December 31, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average Number of Number of ​ ​ ​ ​ ​ life to expiry ​ Options ​ Options Expiry Date ​ Exercise price ​ (years) ​ Outstanding ​ Exercisable March 5, 2022 ​ $ 0.65 0.18 634,541 634,541 March 5, 2023 ​ $ 2.59 1.18 405,251 270,167 March 31, 2024 ​ $ 0.65 2.25 73,811 73,811 March 5, 2025 ​ $ 8.64 3.18 405,251 — December 31, 2025 ​ $ 0.65 4.00 11,578 11,578 February 2, 2026 ​ $ 0.65 4.09 57,893 57,893 February 17, 2026 ​ $ 0.22 - $0.52 4.13 448,861 448,861 June 1, 2028 ​ $ 0.65 - $8.64 6.42 12,192,914 11,404,926 June 30, 2028 ​ $ 2.59 6.50 1,273,648 1,273,648 ​ ​ ​ ​ ​ ​ 15,503,748 14,175,425 ​ The total grant date fair value of STIP stock options that vested during the year ended December 31, 2021, was $ 30.7 million. As at December 31, 2021, total unrecognized share-based compensation expense of $ 2.7 million is expected to be recognized over a weighted-average recognition period of approximately one year . During the year ended December 31, 2021, the Company granted 9,783,922 stock options under its LTIP. These stock options have an exercise price of $ 0.65 per option and expire on June 1, 2028. The aggregate intrinsic value of LTIP stock options as at December 31, 2021 was $ 14.0 million. None of the LTIP stock options were exercisable on December 31, 2021. The Company expects LTIP options to vest as and when the market and performance milestones described below are achieved. As at December 31, 2021, total unrecognized share-based compensation expense for the LTIP stock options was $ 30.1 million. 135 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ As at December 31, 2021, the fair value of the Company’s common shares was $ 2.08 per share. As at December 31, 2021, the Company used the closing market price of its common shares to determine the intrinsic value of outstanding stock options. Prior to closing of the Business Combination on September 9, 2021, there was no quoted market price for the Company’s common shares. Accordingly, the Company estimated the fair value of common shares based on the PWERM by first defining the range of potential future liquidity outcomes, including the share price used for its most recent private placements and the share price used for the Business Combination, then allocating its value based on the probability of that event occurring. The approach involves estimates, judgments and assumptions that are highly complex and subjective. Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact the Company’s valuation of its common shares as of each valuation date which may have a material impact on the valuation of the Company’s common shares and equity awards for accounting purposes. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2021 was $ 39.4 million. Activity and Valuation On February 17, 2021, the Company granted a total of 568,120 incentive stock options to certain directors and non-employees. These options have an exercise price of between $ 0.22 per share and $ 0.65 per share, vested immediately upon grant, and expire between February 17, 2026 and February 26, 2026 . On February 26, 2021, the Company granted a total of 46,777 incentive stock options to a consultant. These options have an exercise price of $ 0.22 per share, vested immediately upon grant, and expire on February 26, 2026. On March 4, 2021, the Company granted 5,758,306 incentive stock options to certain employees, directors and consultants under the Company’s STIP, as well as 9,783,922 incentive stock options to the same individuals under its LTIP. The stock options granted under the STIP expire on June 1, 2028 or earlier, have exercise prices ranging between $ 0.65 per share and $ 8.64 per share, and have vesting periods with a maximum of three years . The fair value of the options granted under the Company’s STIP was estimated on the date of grant using the Black-Scholes option pricing model, with the following weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ 2021 Expected share price volatility ​ 89.4 % Expected life of options ​ 3.7 years Risk-free interest rate ​ ​ 0.5 % Expected dividend yield ​ ​ 0.0 % Estimated per share fair value of the Company’s common shares $ 6.05 ​ ​ The stock options granted under the LTIP have an exercise price of $ 0.65 per share and expire on June 1, 2028. The LTIP awards vest as follows: (1) Tranche 1 - 25 % when the Company’s market capitalization equals $ 3 billion; (2) Tranche 2 - 35 % when the Company’s market capitalization equals $ 6 billion; (3) Tranche 3 - 20 % upon the date that the ISA grants an exploitation contract to the Company; and (4) Tranche 4 - 20 % upon the commencement of the first commercial production following the grant of the exploitation contract. 136 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Tranche 1 and Tranche 2 vest based on the Company’s market capitalization of $ 3 billion and $ 6 billion, respectively. Accordingly, these options are determined to be market-based awards for which the Company has calculated fair value and derived a service period through which to expense the related fair value. The options included in Tranche 1 and Tranche 2 had a grant date fair value of $ 5.59 per share and $ 5.42 per share and derived service periods of 0.33 years and 1.41 years, respectively. The Company will expense these awards ratably over the remaining service period. Tranche 3 and Tranche 4 of the LTIP stock options vest based on the date the ISA grants an exploitation contract and the commencement of commercial production. These options are determined to be performance-based awards. The Company will recognize compensation costs for the performance-based awards if and when the Company concludes that it is probable that the performance conditions will be achieved. As at December 31, 2021, no compensation expense related to the performance based awards was recorded as the awarding of an ISA contract is outside the control of the Company. The Company will reassess the probability of the vesting of the performance-based awards at each reporting period and adjust the compensation cost when determined to be probable. The fair value of awards granted under the LTIP was estimated on the date of grant using the following weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tranche 1 and ​ ​ ​ ​ ​ ​ Tranche 2 1 ​ Tranche 3 2 ​ Tranche 4 2 Expected stock price volatility ​ 91.0 % ​ 91.2 % ​ 91.2 % Expected life of options (years) ​ ​ 7.3 years ​ 5.2 years ​ 5.4 years Risk-free interest rate ​ 1.3 % ​ 0.8 % ​ 0.9 % Expected dividend yield ​ 0.0 % ​ 0.0 % ​ 0.0 % Estimated per share fair value of the Company’s common shares $ 6.05 $ 6.05 $ 6.05 ​ 1. The fair value of the market-based awards granted under the LTIP was estimated on the date of grant using a Monte-Carlo model to simulate a distribution of future share prices. 2. The fair value of the performance-based awards granted under the LTIP was estimated on the date of grant using the Black-Scholes option pricing model. Changes in these assumptions could have a material impact on the Company’s loss and comprehensive loss. In September 2021, the Board of Directors approved amendments for certain stock option grants to extend their term beyond the retirement provisions in the Plan, resulting in an expense of $ 3.9 million. During the year ended December 31, 2021, the Company recognized $ 59.3 million of share-based compensation expense for stock options in the statement of loss and comprehensive loss (2020: $ 4.1 million). Share-based compensation expense for stock options totaling $ 32.7 million related to general and administration matters were charged to the statement of loss and comprehensive loss for the year ended December 31, 2021 (2020: $ 3.3 million). The Company recorded a total of $ 26.6 million of share -based compensation expense for stock options related to exploration and evaluation activities for the year ended December 31, 2021 (2020: $ 0.8 million). 137 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Restricted Share Units The Company may, from time to time, grant RSUs to directors, officers, employees, and consultants of the Company and its subsidiaries under the Plan, whether to the STIP, the LTIP or otherwise. During the year ended December 31, 2021, the Company granted 3,556,224 RSUs vesting in thirds on each anniversary of the grant date, 398,438 RSUs vesting in fourths on each anniversary of the grant date and 173,216 RSUs vesting immediately on grant date. On each vesting date, RSU holders are entitled to receive common shares equivalent to the number of RSUs held provided the holder is providing service to the Company on such vesting date. A total of $ 1.0 million was charged to the statement of loss and comprehensive loss as share-based compensation expense for the year ended December 31, 2021, of which $ 0.4 million was recorded in exploration and evaluation expenses and $ 0.6 million was recorded in general and administrative expenses. As at December 31, 2021, total unrecognized share-based compensation expense for RSUs was $ 12.3 million. A summary of the RSU activity is presented in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Number of ​ average grant- ​ ​ RSUs ​ date fair value ​ ​ Outstanding ​ per RSU Outstanding – December 31, 2020 — $ — Granted 4,127,878 ​ 3.29 Forfeited ​ ( 8,032 ) ​ ​ 12.45 Exercised ​ ( 173,216 ) ​ ​ 2.30 Outstanding – December 31, 2021 3,946,630 $ 3.31 ​ The grant date fair value of RSUs is equivalent to the closing share price of the Company’s common shares on the date of grant. As at December 31, 2021, there were no RSUs vested and exercisable. 17. Loss per Share Basic loss per share is computed by dividing the loss by the weighted-average number of common shares of the Company outstanding during the period. Diluted loss per share is computed by giving effect to all common share equivalents of the Company, including outstanding stock options, RSUs, warrants, Special Shares and options to purchase Special Shares, to the extent these are dilutive. Basic and diluted loss per share was the same for each period presented as the inclusion of all common share equivalents would have been anti-dilutive. Anti-dilutive equivalent common shares were as follows: ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ For the year ended ​ ​ December 31, ​ December 31, ​ 2021 2020 Outstanding options to purchase common shares ​ 25,287,670 ​ 15,549,977 Outstanding RSUs 3,946,630 — Outstanding warrants 36,078,620 — Outstanding Special Shares and options to purchase Special Shares 136,239,964 — Total anti-dilutive common equivalent shares 201,552,884 15,549,977 ​ ​ 138 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 18. Related Party Transactions The Company’s subsidiary, DGE, is engaged in a consulting agreement with SSCS Pte. Ltd. (“SSCS”) to manage offshore engineering studies. A director of DGE is employed through SSCS. Consulting services during the year ended December 31, 2021 totaled $ 275 thousand (2020: $ 275 thousand), and are disclosed as external consulting and exploration labor within exploration and evaluation expenses (Note 11). As at December 31, 2021, the amount payable to SSCS was $ 23 thousand (2020: $ 23 thousand). The Company’s Chief Ocean Scientist provides consulting services to the Company through Ocean Renaissance LLC (“Ocean Renaissance”) where he is a principal. Consulting services during the year ended December 31, 2021 amounted to $ 375 thousand (2020: $ 367 thousand), and are disclosed as exploration labor within exploration and evaluation expenses (Note 11). As at December 31, 2021, the amount payable to Ocean Renaissance was $nil (2020 - $nil ). 19. Commitments and Contingent Liabilities NORI Exploration Contract As part of the NORI Exploration Contract with the ISA (Note 11), NORI submitted a periodic review report to the ISA in 2021, covering the 2017-2021 period. NORI had committed to spend $ 5 million over the five-year period from 2017 to 2021, which it has exceeded. The periodic review report included a summary of work completed over the 5-year period and a program of activities and estimated budget for the next five-year period. The report is being reviewed by the ISA. Marawa Exploration Contract As part of DGE’s Marawa Option Agreement and Services Agreement with Marawa with respect to the Marawa Area (Note 11), Marawa committed to spend a defined amount of funds on exploration activities on an annual basis. The commitment for fiscal 2021 and 2020 was Australian dollar $ 2 million and Australian dollar $ 1 million, respectively. The spending commitment for both years has been exceeded. The commitment for fiscal 2022, 2023 and 2024 is Australian dollar $ 1 million, Australian dollar $ 3 million and Australian dollar $ 2 million, respectively. Such commitment is negotiated with the ISA as part of the five-year plans submissions and is subject to regular periodic reviews. TOML Exploration Contract As part of the TOML Exploration Contract, TOML submitted a periodic review report to the ISA in 2021, covering the 2017-2021 period. The periodic review report included a summary of work completed over the five-year period and a program of activities and estimated budget for the next five-year period. TOML had committed to spend $ 30.0 million over the five-year period from 2017 to 2021. Such commitment has flexibility where the amount can be reduced by the ISA and such reduction would be dependent upon various factors including the success of the exploration programs and the availability of funding. For the 2021 year, the Company has spent approximately $ 8.1 million in connection with the TOML Exploration Contract, bringing the five-year total spend to approximately $ 13.3 million, from 2017 to 2021. Discussions with the ISA are underway to review the progress achieved to date and agree on program activities for the next 5-years. 139 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Offtake Agreements On May 25, 2012, the Company’s wholly-owned subsidiary, DGE, and Glencore International AG (“Glencore”) entered into a copper offtake agreement and a nickel offtake agreement. DGE has agreed to deliver to Glencore 50 % of the annual quantity of copper and nickel produced at a DGE-owned processing facility from nodules derived from the NORI Area at London Metal Exchange referenced market pricing with allowances for product quality and delivery location. Both the copper and nickel offtake agreements are for the life of the Company’s rights to the NORI Area. Either party may terminate the agreement upon a material breach or insolvency of the other party. Glencore may also terminate the agreement by giving twelve months’ notice. Sponsorship Agreements On July 5, 2017, Nauru, the Nauru Seabed Minerals Authority and NORI entered into a sponsorship agreement formalizing certain obligations of the parties in relation to NORI’s exploration and potential exploitation of the NORI Area. Upon reaching the minimum recovery level within the exploitation contract area, NORI will pay Nauru a seabed mineral recovery payment based on the polymetallic nodules recovered from the exploitation contract area. In addition, NORI will pay an administration fee each year to Nauru for such administration and sponsorship, which is subject to review and increase in the event NORI is granted an ISA exploitation contract. On March 8, 2008, Tonga and TOML entered into a sponsorship agreement formalizing certain obligations of the parties in relation to TOML’s exploration and potential exploitation of the TOML Area (“TOML Sponsorship Agreement”). Upon reaching the minimum recovery level within the exploitation contract area, TOML has agreed to pay Tonga a seabed mineral recovery payment based on the polymetallic nodules recovered from the exploitation contract area. In addition, TOML has agreed to pay reasonable direct costs incurred by Tonga to administer the obligations of Tonga to the ISA. On September 23, 2021, the Company and Tonga updated the TOML Sponsorship Agreement harmonizing the terms of its engagement with TOML with those held by NORI with Nauru. Contingent Liability On October 28, 2021, a shareholder filed a putative class action against the Company and certain executives in federal district court for the Eastern District of New York, styled Caper v. TMC The Metals Company Inc. F/K/A Sustainable Opportunities Acquisition Corp., Gerard Barron and Scott Leonard . The complaint alleges that all defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and Messrs. Barron and Leonard violated Section 20(a) of the Exchange Act, by making false and/or misleading statements and/or failing to disclose information about the Company’s operations and prospects during the period from March 4, 2021 and October 5, 2021. On November 15, 2021, a second complaint containing substantially the same allegations was filed, captioned Tran v. TMC the Metals Company, Inc . These cases have been consolidated. On March 6, 2022, a lead plaintiff was selected. The Company denies any allegations of wrongdoing and the Company has filed a motion to dismiss and intends to defend against this lawsuit. There is no assurance, however, that the Company or the other defendants will be successful in their defense of this lawsuit or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of this action. If the motion to dismiss is unsuccessful, there is a possibility that the Company may incur a loss in this matter. Such losses or range of possible losses either cannot be reliably estimated. A resolution of this lawsuit adverse to the Company or the other defendants, however, could have a material effect on the Company’s financial position and results of operations in the period in which the lawsuit is resolved. ​ 140 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 20. Supplemental Cash Flow Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ For the year ended ​ ​ December 31, ​ December 31, Non-Cash Investing and Financing Activities 2021 2020 Common shares issued to settle previous services (Note 11) $ 13,103 $ 6,410 Common shares issued for TOML Acquisition (Note 7) $ — $ 28,000 Additional contribution from Allseas (Note 11) $ — $ 8,333 Conversion of debentures (Note 13) $ 27,003 $ — Financing stock options issued (Note 16) $ — $ 397 ​ ​ 21. Segmented Information The Company’s business consists of only one operating segment, namely exploration of seafloor polymetallic nodules, which includes the development of a metallurgical process to treat such seafloor polymetallic nodules. Details on the geographical basis of the Company’s long-lived assets based on where each legal entity is domiciled are as follows: ​ ​ ​ ​ ​ ​ ​ ​ Equipment December 31, 2021 December 31, 2020 Nauru $ 1,246 $ 1,292 Singapore ​ ​ 158 ​ ​ — Tonga ​ 10 ​ 15 North America ​ 2 ​ 3 Total $ 1,416 $ 1,310 ​ ​ ​ 22. Income Taxes Reconciliation of Effective Tax Rate The Company is subject to Canadian federal and provincial tax for the estimated assessable profit for the years ended December 31, 2020 and 2021 at a rate of 27 %. The Company had no assessable profit in Canada for all periods disclosed. The income tax expense at statutory rates for the Company can be reconciled to the reported loss for the years 2021 and 2020 per the statement of loss and comprehensive loss as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ For the year ended ​ ​ ​ December 31, ​ December 31, ​ ​ 2021 2020 Net loss for the year ​ $ ( 141,299 ) ​ $ ( 56,631 ) ​ Canadian Federal and Provincial income tax rates ​ 27.00 % ​ 27.00 % Income tax recovery based on the above rates $ ( 38,151 ) $ ( 15,290 ) ​ Permanent differences ​ 8,597 ​ 981 ​ Effect of differences in future and foreign tax rates ​ 22,721 ​ 11,152 ​ Foreign exchange and other ​ 1 ​ ( 142 ) ​ Expiry of losses as a result of the Business Combination (Note 6) ​ ​ 9,181 ​ ​ — ​ Valuation allowance changes affecting the provision of income taxes ​ ( 2,349 ) ​ 3,299 ​ Total income taxes $ — $ — ​ ​ The Company currently has no uncertain tax positions and is therefore not reflecting any adjustments. 141 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Components of the Company’s deferred income tax assets/(liabilities) are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2020 Deferred Tax Assets ​ ​ Non-capital losses $ 7,409 $ 10,925 Capital losses and other ​ — ​ 70 Equipment ​ 90 ​ 5 Share issuance costs ​ 10 ​ 75 Total deferred income tax assets $ 7,509 $ 11,075 Valuation allowance ​ ( 7,509 ) ​ ( 11,075 ) Deferred tax asset recognized $ — $ — ​ ​ ​ ​ ​ ​ ​ Deferred Tax Liability ​ ​ ​ ​ ​ ​ Difference between the book value and the tax basis of the TOML exploration contract (Note 7) ​ $ ( 10,675 ) ​ $ ( 10,675 ) Deferred tax liability recognized $ ( 10,675 ) $ ( 10,675 ) ​ Deductible temporary differences, unused tax losses and unused tax credits are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2020 Expiry Date Range ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-capital losses $ 33,645 $ 45,313 See below Capital losses $ — $ 520 Not applicable Equipment $ 333 $ 19 Not applicable Share issuance costs $ 37 $ 276 Not applicable ​ As at December 31, 2021, the Company had non-capital loss carry-forwards of $ 34 million that may be used to offset future taxable income. Non-capital losses incurred in Canada prior to closing of the Business Combination (Note 6) have been restricted upon the acquisition of control event and may no longer be available to offset future taxable income. These losses, if not utilized, will expire as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Canada United States Singapore Tonga 2035 $ — $ 2 $ — $ — 2041 ​ 2,675 ​ — ​ — ​ — No expiry ​ — ​ — ​ 13,230 ​ 17,738 Loss carry-forwards ​ $ 2,675 ​ $ 2 ​ $ 13,230 ​ $ 17,738 ​ As at December 31, 2020, the non-capital loss carry-forwards of $ 45 million pertained to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Canada United States Singapore Tonga Loss carry-forwards $ 20,704 $ 3 $ 10,214 $ 14,392 ​ The Company files income tax returns in Canada, the United States, Singapore and Tonga, and is subject to examination in these jurisdictions for all years since the Company’s inception in 2011. As at December 31, 2021, all tax years are subject to examination by the tax authorities and no tax authority audits are currently underway. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized. The timing of the resolution, settlement and closure of any income tax audits is highly uncertain, and the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax 142 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ benefits. It is possible that the balance of gross unrecognized tax benefits could significantly change in the next twelve months. As at December 31, 2021, the 2021 tax year filings for the Company and its subsidiaries (where applicable) remain unfiled and have not been assessed by the relative tax authorities. 23. Subsequent Event On March 16, 2022, the Company’s subsidiary NORI and Allseas entered into a non-binding term sheet which contemplates an upgrade of the PMTS into a commercial nodule collection system and commercial operation of this system in NORI Area D. The terms are subject to negotiation between NORI and Allseas and if successful, may result in amendments to the existing Strategic Alliance Agreement (Note 11). ​ ​ 143 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.