What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2021-11-15 · 187 added, 688 removed, 137 unchanged (86% of the section changed)

3 unchanged sentences

(in thousands of US Dollars, except share amounts)

Cash and cash equivalents

Receivables and prepayments

1 unchanged sentence

Accounts payable and accrued liabilities

Deferred acquisition costs

Deferred tax liability

Warrant liability

Warrants liability

TOTAL LIABILITIES

1 unchanged sentence

226,780,843 (December 31, 2021 – 225,432,493 ))

Preferred shares (unlimited share, no par value – issued:

nil (December 31, 2020 - 509,459 ))

Class A - J Special Shares

3 unchanged sentences

Nature of Operations (Note 1)

Commitments (Note 13)

Subsequent Event (Note 16)

Commitments and Contingent Liabilities (Note 9)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 unchanged sentences

Three months ended

Nine months ended

September 30,

Three months ended

(Restated 1 )

Operating expenses

Exploration expenses

Exploration and evaluation expenses

General and administrative expenses

Operating loss

Change in fair value of warrant liability

Change in fair value of warrants liability

Foreign exchange loss

Interest expense (income)

Interest expense

Loss and comprehensive loss for the period

2 unchanged sentences

Weighted average number of common shares outstanding — basic and diluted

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TMC the metals company Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(in thousands of US Dollars)

Accumulated Other

Three months ended September 30, 2021

Paid in Capital

Comprehensive Loss

June 30, 2021 (restated - Note 2)

Exercise of stock options (Note 10)

Conversion of debentures (Note 7)

Common share options–payments (Note 10)

Common shares issued for services

Net equity from Business Combination (Note 4)

Conversion of preferred shares to common shares

Loss for the period

September 30, 2021

Accumulated Other

Three months ended September 30, 2020

Paid in Capital

Comprehensive Loss

June 30, 2020

Private placements (net of financing costs)

Common shares to be issued for exploration expenses (Note 6)

Common share options–payments (Note 10)

Loss for the period

September 30, 2020

(1) The condensed consolidated statements of loss and comprehensive loss for the three months ended March 31, 2021 was restated.

Refer to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 filed with the Securities and Exchange Commission on November 15, 2021.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TMC the metals company Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(in thousands of US Dollars)

Accumulated Other

Nine months ended September 30, 2021

Paid in Capital

Comprehensive Loss

Condensed Consolidated Statements of Changes in Equity

(in thousands of US Dollars, except share amounts)

Common Shares

Comprehensive

Three months ended March 31, 2022

December 31, 2021

Exercise of stock options (Note 10)

Common shares issued for exploration expenses (Note 6)

Conversion of debentures (Note 7)

Common share options–payments (Note 10)

Common shares issued for services

Net equity from Business Combination (Note 4)

Conversion of preferred shares to common shares

Conversion of restricted share units, net of shares withheld for taxes (Note 6)

Share-based compensation (Note 6)

Expenses to be settled in share-based payments

Loss for the period

September 30, 2021

Accumulated Other

Nine months ended September 30, 2020

Paid in Capital

Comprehensive Loss

March 31, 2022

Three months ended March 31, 2021

Common Shares

Comprehensive

Restated 1 (Note 1)

December 31, 2020

Private placement (net of financing costs)

Financing cost

Common shares issued for acquisition of Tonga Offshore Minerals Limited (Note 5)

Common shares to be issued for exploration expenses (Note 6)

Common share options–payments (Note 10)

Common shares issued for services

Exercise of stock options (Note 6)

Common shares to be issued for exploration and evaluation expenses

Share-based compensation (Note 6)

Common shares to be issued for stock options exercise

Conversion of debentures

Loss for the period

September 30, 2020

March 31, 2021

(1) The condensed consolidated statements of changes in equity for the three months ended March 31, 2021 was restated.

Refer to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 filed with the Securities and Exchange Commission on November 15, 2021.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands of US Dollars)

Nine months ended

September 30,

Cash resources provided by (used in)

(Restated 1 )

Cash provided by (used in)

Operating activities

1 unchanged sentence

Items not affecting cash:

Expenses settled in share-based payments

Expenses settled with share-based payments

Expenses to be settled with share-based payments

Interest on convertible debentures

Change in fair value of warrant liability

Change in fair value of warrants liability

Unrealized foreign exchange

4 unchanged sentences

Investing activities

Acquisition of exploration contract

Settlement of deferred acquisition costs

Acquisition of equipment

1 unchanged sentence

Financing activities

Exercise of stock options

Proceeds from exercise of stock options

Proceeds from issuance of convertible debentures

Proceeds from issuance of common shares (net of fees and other costs)

Proceeds from Business Combination (net of fees and other costs)

Net cash provided by financing activities

Net change in cash and cash equivalents

Impact of exchange rate changes on cash and cash equivalents

Cash and cash equivalents – beginning of period

Cash and cash equivalents – end of period

Supplemental cash flow information (Note 14)

Taxes withheld and paid on share-based compensation

Net cash (used in) provided by financing activities

(Decrease) increase in cash

Impact of exchange rate changes on cash

Cash - beginning of period

Cash - end of period

(1) The condensed consolidated statements of cash flows for the three months ended March 31, 2021 was restated.

Refer to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 filed with the Securities and Exchange Commission on November 15, 2021.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

Nature of Operations

2 unchanged sentences

On September 9, 2021, the Company completed its business combination (the “Business Combination”) with DeepGreen Metals Inc.

(“DeepGreen”) (Note 4).

(“DeepGreen”).

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.

1 unchanged sentence

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, the prior period 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 of the Pacific Ocean (“CCZ”), located about 1,300 nautical miles south-west 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.

The Company is considered to have mining operations and mining properties in accordance with regulations of the U.S.

Securities and Exchange Commission (“SEC”).

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.

DeepGreen was determined to be the accounting acquirer and therefore, all information prior to the Business Combination, including the prior period financial information, represents the financial condition and operating results of DeepGreen.

The Company is a deep-sea minerals exploration company focused on the collection and processing 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) which can be used as (i) feedstock for battery cathode precursors (nickel-copper-cobalt matte and/or nickel and cobalt sulfates) for electric vehicles (“EV”) and renewable energy storage markets, (ii) nickel-copper-cobalt matte and/or copper cathode for EV wiring, clean energy transmission and other applications and (iii) manganese silicate for manganese alloy production require for steel production.

Exploration and exploitation of seabed minerals in international waters is regulated by the International Seabed Authority (“ISA”), an intergovernmental organization established in 1994 pursuant to the United Nations Convention on the Law of the Sea.

ISA contracts are granted to sovereign states or to private contractors who are 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 Kingdom of Tonga (“Tonga”).

(“NORI”), was granted an exploration contract (“the “NORI 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 (the “TOML Exploration Contract”) by the ISA in January 2012 under the sponsorship of the Kingdom of Tonga (“Tonga”) and has exclusive rights to explore for polymetallic nodules covering an area of 74,713 km 2 in the CCZ (“TOML Area”).

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 with its strategic partner, Maersk Supply Service A/S (“Maersk”) to undertake resource definition and environmental baseline campaigns.

The Company, through its subsidiary DeepGreen Engineering Pte.

(“DGE”) entered into an option agreement (the “Marawa Option Agreement”) with Marawa to acquire the right to purchase tenements, as may be granted to Marawa by the ISA or any other regulatory body, 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 and investor, 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 (Note 4).

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.

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 may negatively impact the Company’s business operations, exploration and development plans, results of operations, financial position, and cash flows.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Restatement of Previously Issued Quarterly Financial Statements

The Company has restated its financial statements as of and for the three month period ended March 31, 2021, and as of and for the six month period ended June 30, 2021 (the “Affected Periods”) in this Quarterly Report on Form 10-Q.

The restatement resulted from the following items identified while preparing the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021:

(a) certain invoices for exploration expenses were not appropriately accrued as of June 30, 2021, resulting in a $ 2.7 million understatement of each of exploration expenses and accounts payable and accrued liabilities as of and for the six month period ended June 30, 2021;

(b) the Company’s expensing of options granted in the first quarter of 2021 under the Company's Short-Term Incentive Plan (“STIP”) based on the grantee’s historical start date with the Company rather than the grant date of the options on March 4, 2021, as required by US Generally Accepted Accounting Principles (“US GAAP”), resulting in a $ 1.8 million overstatement of stock-based compensation expenses as of and for the three month period ended March 31, 2021, and $ 0.3 million understatement and $ 1.5 million overstatement of stock-based compensation expenses as of and for the six month period ended June 30, 2021, respectively.

Therefore, the Company is restating its financial statements for the Affected Periods (the “Restatement”).

The Company considered the guidance in Accounting Standard Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections , and ASC Topic 250-10-S99-1, Assessing Materiality and ASC Topic 250-10-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , in evaluating whether the Company’s previously issued quarterly financial statements were materially misstated.

The Company concluded the items set forth above were not material individually or in the aggregate to the quarterly financial statements presented for the Affected Periods.

Therefore, amendments of the previously filed report and registration statements in which such quarterly financial statements were included was not required.

The following summarizes the effect of the Restatement on each financial statement line item for each period presented.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Condensed Consolidated Balance Sheets

As at March 31,

As at June 30,

Accounts payable and accrued liabilities

As previously reported

Adjustments 1

Total liabilities

As previously reported

Adjustments 1

Additional paid in capital

As previously reported

Adjustments 2

As previously reported

Adjustments 1,2

Total shareholders' equity

As previously reported

Adjustments 1

Reflects increase of $ 2.7 million in exploration expenses for the six months ended June 30, 2021 to accrue for certain exploration invoices as at June 30, 2021.

Reflects decrease of $ 1.8 million and $ 1.5 million of stock-based compensation expenses for the three months ended March 31, 2021 and six months ended June 30, 2021, respectively.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Condensed Consolidated Statements of Loss and Comprehensive Loss

Three Months Ended

Six Months Ended

March 31, 2021

June 30, 2021 4

June 30, 2021

Exploration expenses

As previously reported

Adjustments 1,2

General and administrative expenses

As previously reported

Adjustments 3

Operating loss

As previously reported

Adjustments 1,2,3

Loss and comprehensive loss for the period

As previously reported

Adjustments 1,2,3

Loss per share - Basic and diluted

As previously reported

Adjustments 1,2,3

Reflects decrease of $ 1.3 million for the three months ended March 31, 2021 and increase of $ 0.2 million and decrease of $ 1.1 million for the three and six months ended June 30, 2021, respectively, related to stock-based compensation expense.

Reflects increase of $ 2.7 million to accrue for certain exploration invoices for the three and six months ended June 30, 2021.

Reflects decrease of $ 0.6 million for the three months ended March 31, 2021 and increase of $ 0.1 million and decrease of $ 0.5 million for the three and six months ended June 30, 2021, respectively, related to stock-based compensation expense.

Results for the three month period ended June 30, 2021 have not been previously reported on a standalone basis.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Condensed Consolidated Statements of Changes in Equity

As at March 31,

As at June 30,

Additional paid in capital

As previously reported

Adjustments 1

As previously reported

Adjustments 1,2

Total shareholders' equity

As previously reported

Adjustments 2

Reflects decrease of $ 1.8 million for the three months ended March 31, 2021 and decrease of $ 1.5 million for the six months ended June 30, 2021 related to stock-based compensation expense.

Reflects increase of $ 2.7 million to accrue for certain exploration invoices for the six months ended June 30, 2021.

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

March 31, 2021

June 30, 2021

Loss for the period

As previously reported

Adjustments 1,2

Expenses settled in share-based payments

As previously reported

Adjustments 1

Accounts payable and accrued liabilities

As previously reported

Adjustments 2

Reflects decrease of $ 1.8 million for the three months ended March 31, 2021 and decrease of $ 1.5 million for the six months ended June 30, 2021 related to stock-based compensation expense.

Reflects increase of $ 2.7 million to accrue for certain exploration invoices for the six months ended June 30, 2021.

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.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Summary of Significant Accounting Policies

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

Since March 2020, several measures have been implemented by the governments in Canada, the United States of America (“U.S.”), 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.

Basis of Presentation

These unaudited condensed consolidated financial statements are prepared in accordance with US GAAP for interim financial statements.

Accordingly, certain information and footnote disclosures required by US GAAP have been condensed or omitted in these unaudited condensed consolidated financial statements pursuant to such rules and regulation.

These unaudited condensed consolidated interim financial statements are prepared in accordance with U.S.

Generally Accepted Accounting Principles (“U.S.

GAAP”) for interim financial statements.

Accordingly, certain information and footnote disclosures required by U.S.

GAAP have been condensed or omitted in these unaudited condensed consolidated interim financial statements pursuant to such rules and regulation.

In management’s opinion, these unaudited condensed consolidated interim financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s statement of financial position, operating results for the periods presented, comprehensive loss, shareholder’s equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2022 or for any other period.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2020.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2021.

The Company has applied the same accounting policies as in the prior year, except as disclosed below.

All share and per share amounts have been adjusted to reflect the impact of the Business Combination (Note 4).

Basis of Measurement

These unaudited condensed consolidated financial statements have been prepared under the historical cost convention and are presented in US dollars.

All share and per share amounts have been adjusted to reflect the impact of the Business Combination.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements and the notes thereto.

Significant estimates and assumptions reflected in these unaudited condensed 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 10) and the common shares issued to Maersk (Notes 6 and 9), as well as the valuation of warrant liability (Note 8).

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 condensed consolidated interim financial statements include, but are not limited to, the valuation of share-based payments, including valuation of incentive stock options (Note 6) and the common shares issued to Maersk Supply Service A/S (“Maersk”) (Note 4), and warrants liability (Note 5).

Actual results could differ materially from those estimates.

4 unchanged sentences

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 US GAAP, the Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

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.

● 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.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

● 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 three and nine months ended September 30, 2021 and 2020.

As of September 30, 2021 and December 31, 2020, the carrying values of cash and cash equivalents, accounts payable and accrued expenses and deferred acquisition costs, approximate their fair values due to the short-term nature of these instruments.

Warrant Liabilities

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 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.

Prior to the Business Combination, SOAC issued 15,000,000 common share warrants (“Public Warrants”) as part of the units offered in its initial public offering and, simultaneously with the closing of initial public offering, SOAC issued an aggregate of 9,500,000 private placement common share warrants (“Private Warrants”) in a private placement.

For accounting purposes, the Company was considered to have issued the Public and Private Warrants as part of the Business Combination (Note 4).

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 based on consideration of the implied volatility from the Company’s Public Warrants market price.

There were no transfers between fair value measurement levels during the three months ended March 31, 2022 and 2021.

As at March 31, 2022 and December 31, 2021, the carrying values of cash, receivables, and accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

The financial instruments also include public and private warrants issued by the Company.

The warrants are valued at fair value which is disclosed in Note 5.

Recent Accounting Pronouncements Issued and Adopted

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 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 7).

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

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 twenty trading days within any thirty 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.

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 Warrant”) 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

Share Trigger price ($)

Special Shares (million)

In connection with the Business Combination, the SOAC sponsors were entitled to 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 twenty trading days within any thirty trading day period that is greater than or equal to $ 50.00 per share and $ 12.00 per share, respectively.

The following table reconciles the cash proceeds from the Business Combination:

Cash proceeds from SOAC

Cash proceeds from sale of equity securities

Gross cash received by TMC from Business Combination

Transaction costs settled in cash

Net contributions from Business Combination

In addition to the amounts above, the Company incurred $ 8.7 million of transaction costs which were settled by issuance of 873,953 common shares on October 7, 2021.

As at September 31, 2021, these transaction costs were offset against proceeds with the unissued shares being recorded in additional paid in capital.

Prior to the Business Combination, SOAC had 30.0 million shares of Class A common stock with a par value of $ 0.0001 per share (“SOAC Class A Shares”) outstanding and 7.5 million shares of Class B common stock with a par value of $ 0.0001 per share (“SOAC Class B Shares”) held by Sustainable Opportunities Holdings LLC (the “Sponsor”).

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

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.

The number of TMC common shares issued immediately following the consummation of the Business Combination is summarized as follows:

Shares by type

SOAC Class A shares outstanding prior to the Business Combination

Redemption of SOAC Class A shares

( 27,278,657 )

SOAC Class A shares outstanding and converted to TMC common shares

Shares issued in the Private Investment in Public Equity (“PIPE”)

Conversion of SOAC Class B shares to TMC common shares

Shares issued to SOAC and PIPE investors

Shares issued to the DeepGreen shareholders

Total TMC common shares outstanding at close of Business Combination

The Company incurred transaction costs related to the Business Combination of approximately $ 46.8 million, of which $ 0.6 million and $ 4.9 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 for the three and nine months ended September 30, 2021, respectively.

The remaining $ 41.9 million of transaction costs were capitalized to common shares on the condensed consolidated balance sheet as of September 30, 2021.

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 the 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.

TOML Acquisition

On March 31, 2020, the Company entered into an acquisition agreement to acquire the polymetallic nodules business unit of 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 after adjustment for the Exchange Ratio, $ 0.1 million payment to the ISA on behalf of DSMF and deferred consideration of $ 3.4 million which was to be paid on January 31, 2021.

The common share consideration paid by the Company was valued at $ 3.11 per common share, after adjustment for the Exchange Ratio, based on the private placements completed by DeepGreen around the time of the TOML Acquisition, for a total of $ 28.0 million.

Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

In May 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” , which clarified and reduced diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.

Specifically, an issuer should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument.

Modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument should be measured as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged.

The effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction should be recognized in the same manner as if cash had been paid as consideration.

ASU 2021-04 is effective for fiscal periods ending on or after December 15, 2021, with early adoption permitted.

ASU 2021-04 is applied prospectively to modifications or exchanges occurring on or after the effective date.

The adoption of ASU 2021-04 on January 1, 2022 did not have a material impact on the Company’s condensed consolidated interim financial statements.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

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 incurred legal and regulatory fees to complete the acquisition totalling $ 47 thousand.

The Company determined that the value of 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 business.

Consequently, the total cost of the transaction was primarily allocated to exploration contracts.

The net assets acquired as part of the TOML Acquisition were as follows:

Net assets acquired

Cash payments

Common shares issued ( 9,005,595 common shares @ $ 3.11 , after adjustment for the Exchange Ratio)

Transaction costs paid

Deferred consideration

Total acquisition cost

Allocated to:

Exploration contracts (Note 6)

Deferred tax liability 1

Net assets acquired

A deferred tax liability was recognized by the Company on acquisition related to differences between the book value and the tax basis of the TOML exploration contract.

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

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 was $ 0.3 million, and 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 13) 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 13).

Marawa Agreements:

Marawa was granted the Marawa Exploration Contract on May 30, 2012.

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.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

On March 17, 2012, the Company’s wholly-owned subsidiary, DeepGreen Engineering Pte.

(“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 September 30, 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.

Under the agreement, Maersk provides marine vessel services and project management services, enabling 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, after adjustment for the Exchange Ratio.

Project management services provided by Maersk for managing these offshore campaigns are paid in cash.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Common shares transactions with Maersk since the inception of the strategic partnership were as follows:

Marine vessel

Fair value per

Marine vessel

cost invoiced

shares issued

cost recognized

Year of Service

The fair value of the common shares was determined based on the private placements completed by DeepGreen around the time of common shares issued to Maersk, including the application of weighted average probability for the closing of the Business Combination.

The number of common shares issued was based on a contractual price of $ 1.08 per common share, after adjustment for the Exchange Ratio.

During the nine months ended September 30, 2021, the Company issued 4,245,031 common shares, after adjustment for the Exchange Ratio, to Maersk of which 4,142,270 common shares, after adjustment for the Exchange Ratio, pertained to the marine vessel use during the year ended December 31, 2020.

These DeepGreen common shares were recognized at their estimated fair value of $ 6.05 per common share, after adjustment for the Exchange Ratio (December 31, 2020 - $ 3.11 per common share, after adjustment for the Exchange Ratio).

As at September 30, 2021, Maersk owned 20.8 million TMC common shares (December 31, 2020 – 16.6 million TMC common shares after adjustment for the Exchange Ratio) which constituted 9.3 % (December 31, 2020 – 8.8 %) of the total common shares outstanding.

Maersk is considered a related party to the Company.

Total cost incurred to Maersk for offshore campaigns during the three and nine months ended September 30, 2021 amounted to $ 4.8 million and $ 29.5 million, respectively (three months and nine months ended September 30, 2020 - $ 2.3 million and $ 17.9 million, respectively).

On March 4, 2021, the 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.

The amended agreement is in place until January 8, 2022, at which point the parties will negotiate any potential future offshore engagements on a case-by-case basis.

As at September 30, 2021, TMC had outstanding payables to Maersk of $ 9.3 million (December 31, 2020 - $ 1.8 million) included within accounts payable and accrued liabilities.

The agreement with Maersk ended in January 2022, following the completion of the D block of the NORI Area (“NORI Area D”) environmental baseline campaigns.

During the three months ended March 31, 2022, the Company incurred costs to Maersk for offshore campaigns of $ nil (three months ended March 31, 2021 - $ 16.2 million).

As at March 31, 2022, TMC had outstanding payables to Maersk of $ 5.8 million (December 31, 2021 - $ 11.3 million) included in accounts payable and accrued liabilities.

Subsequent to March 31, 2022, $ 4.7 million of the $ 5.8 million was settled in cash.

As at March 31, 2022, Maersk owned 20.8 million TMC common shares (December 31, 2021 – 20.8 million TMC common shares) which constituted 9.2 % (December 31, 2021 – 9.2 %) of the total common shares outstanding of the Company.

Strategic Alliance with Allseas Pilot Mining Test Project

On March 29, 2019, TMC 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 TMC’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 PMTS, TMC and Allseas have also 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.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

On July 8, 2019, as contemplated by the SAA, TMC and Allseas entered into the PMTS agreement (“PMTS Agreement”) which governs the terms, design specifications, procedures, and timetable under which Allseas agreed to complete the PMTS.

Under the PMTS Agreement, in exchange for Allseas’ development efforts, upon successful delivery of the PMTS by Allseas, TMC agreed to pay Allseas:

(a) $ 30.0 million in cash and (b) issue 11.6 million common shares.

Contract Amendments

On February 29, 2020, the original PMTS Agreement 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 PMTS, and later as part of the commercial production system.

TMC 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, TMC and Allseas further amended the original PMTS Agreement whereby, instead of issuing 11.6 million common shares upon successful delivery of the PMTS, TMC issued the Allseas Warrant.

The Allseas Warrant 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 Warrant vests upon the achievement of a performance condition, being the completion of the PMTS, under US GAAP, the vesting of the Allseas Warrant was not determined to be probable as at September 30, 2021.

No expense or liability has been recorded as at and for the nine month period ended September 30, 2021.

The amendment on March 4, 2021 stipulated that if the market price of the TMC common shares on June 1, 2022 is higher than $ 12.95 per common share, the aggregate value of the common shares underlying the Allseas Warrant above $ 150 million as at June 1, 2022 will automatically become a commercial credit from Allseas to TMC equal to the excess value.

This commercial credit will be effective on the vesting date of the Allseas Warrant 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;

● $ 10 million upon successful completion of the PMTS.

As at September 30, 2021, Allseas has successfully reached the first progress milestone by confirming the order of certain equipment and demonstrating certain progress on construction of the PMTS and the Business Combination was completed.

Accordingly, the first $ 10 million payment was paid to Allseas on October 5, 2021.

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 expense of $ 12.9 million recorded within exploration expenses for the three and nine months ended September 30, 2021.

The third milestone payment is determined to be a milestone and is accounted for in accordance with ASC 450, Contingencies .

The Company will record the expense and liability when the milestone becomes probable.

The Company has not recorded a liability as of September 30, 2021.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

As at September 30, 2021, Allseas owned 16.2 million TMC common shares (December 31, 2020 – 14.2 million TMC common shares) which constituted 7.2 % (December 31, 2020 – 7.5 %) of total common shares outstanding.

The total share ownership included 3.2 million shares issued in a private placement in June 2020.

Allseas is considered a related party to the Company.

Exploration Expenses

The detail of exploration expenses is as follows:

For the three months ended

September 30, 2021

Exploration labor

Offshore campaigns

Common share options-based payments (Note 10)

External consulting

Travel, workshop and other

The Company made the second $ 10 million payment to Allseas under the Company’s amended Pilot Mining Test Agreement with Allseas (“PMTA”) on April 25, 2022 , following successful completion of the North Sea drive test.

The third and final $ 10 million payment to Allseas under the PMTA will be payable upon successful completion of the pilot trial of the Pilot Mining Test System (“PMTS”) in NORI Area D.

The Company recorded $ 1.3 million as exploration and evaluation expenses for the three months ended March 31, 2022 (three months ended March 31, 2021 - $nil) for the PMTS.

The Company will record the expense and liability for the third milestone payment upon successful completion of the pilot trial of the PMTS in NORI Area D.

The Company has not recorded a liability for the third payment as at March 31, 2022.

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.

As at March 31, 2022, Allseas owned 17.2 million TMC common shares (December 31, 2021 – 16.2 million TMC common shares) which constituted 7.6 % (December 31, 2021 – 7.2 %) of total common shares outstanding.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

For the three months ended

September 30, 2020

Exploration labor

Offshore campaigns

Common share options-based payments (Note 10)

External consulting

Travel, workshop and other

For the nine months ended

September 30, 2021

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

Exploration and Evaluation Expenses

The detail of exploration and evaluation expenses is as follows:

Three months ended March 31, 2022

Exploration labor

Offshore campaigns

Common share options-based payments (Note 10)

Share-based compensation (Note 6)

External consulting

Travel, workshop and other

For the nine months ended

September 30, 2020

Three months ended March 31, 2021 (Restated)

Exploration labor

Offshore campaigns

Common share options-based payments (Note 10)

Share-based compensation (Note 6)

External consulting

Travel, workshop and other

Convertible Debentures

In February 2021, the Company issued a total of $ 26 million of convertible debentures.

The convertible debentures had an interest rate of 7.0 % per annum, compounded annually, and had a maturity date that is 24 months from the date of issuance.

The debentures were convertible into shares of the Company at anytime at the conversion price of $ 8.64 per common share after adjustment for the Exchange Ratio.

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 after adjustment for the Exchange Ratio.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

The terms of the convertible debentures provided that in the event that the Company completed the Business Combination (Note 4) or another change of control transaction at any time prior to the maturity date, the debenture value would be automatically converted into the 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 the common shares at the conversion price of $ 8.64 per common share, after adjustment for the Exchange Ratio.

On February 18, 2021, convertible debentures with a principal amount of $ 0.5 million were converted into 57,894 common shares of the Company, after adjustment for the Exchange Ratio.

During the three and nine months ended September 30, 2021, the Company accrued $ 0.3 million and $ 1.0 million as interest expense on the convertible debentures, respectively.

On September 9, 2021, the Company issued 3,068,673 common shares, after adjustment for the Exchange Ratio, upon conversion of the outstanding debentures consisting of $ 25.5 million and $ 1.0 million of principal and accrued interest, respectively.

Warrant Liability

The Company accounts for the Public and Private Warrants in accordance with the guidance contained in ASC 815 (Subtopic 40), Derivative and Hedging – Contracts in Entity’s Own Equity, and the 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 the Public Warrants are determined to meet the criteria for equity classification, while the Private Warrants do 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.

For accounting purposes, the Company was considered to have issued the 15,000,000 common share warrants issued by SOAC as part of the units offered in its initial public offering (“Public Warrants”) and the 9,500,000 private placement common share warrants issued by SOAC in a private placement simultaneously with the closing of its initial public offering (“Private Warrants”) as part of the Business Combination.

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 September 30, 2021, 15,000,000 Public Warrants were outstanding.

As at March 31, 2022, 15,000,000 (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.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

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 (“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 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;

● 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

Private Warrants

As at September 30, 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.

Following the Company’s filing of its Annual Report on Form 10-K for the year ended December 31, 2021, the Company has filed a post-effective amendment to the Registration Statement on Form S-1, which has not yet been declared effective by the SEC.

As at March 31, 2022, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

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.

The Company evaluated the Private Warrants under ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity , 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 warrant should be classified as a liability.

The following table presents the changes in the fair value of warrant liabilities:

Warrant liability as at September 9, 2021

Gain on change in fair value of warrant liability

Warrant liability as at September 30, 2021

There were no exercises or redemptions of the Public Warrants or Private Warrants during the three and nine months ended September 30, 2021.

The fair value of the Private Warrants were estimated with the following assumptions:

September 30,

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

Private Warrants

As at March 31, 2022, 9,500,000 Private Warrants were outstanding (December 31, 2021 - 9,500,000 ).

The Company re-measures the fair value of the Private Warrants at the end of each reporting period.

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 March 31, 2022, the fair value of outstanding Private Warrants of $ 8.3 million is recorded as warrants liability.

The following table presents the changes in the fair value of warrants liability:

Warrants liability as at December 31, 2021

Increase in fair value of warrants liability

Warrants liability as at March 31, 2022

As at March 31, 2022 and December 31, 2021, the fair value of the Private Warrants was estimated using the following assumptions:

Exercise price

1 unchanged sentence

Dividend yield

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Common Shares

Authorized and Issued

As at September 30, 2021, the authorized, issued and outstanding common shares and Special Shares of the Company are as follows:

Common shares

Unlimited, with no par value

Class A Special Shares

5,000,000 , with no par value

Class B Special Shares

10,000,000 , with no par value

Class C Special Shares

10,000,000 , with no par value

Class D Special Shares

20,000,000 , with no par value

Class E Special Shares

20,000,000 , with no par value

Class F Special Shares

20,000,000 , with no par value

Class G Special Shares

25,000,000 , with no par value

Class H Special Shares

25,000,000 , with no par value

Class I Special Shares

500,000 , with no par value

Class J Special Shares

741,000 , with no par value

The holders of the Company's common shares are entitled to one vote for each share of 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 twenty trading days within any thirty 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 4 for details).

There were no exercises or redemptions of the Public Warrants or Private Warrants during the three months ended March 31, 2022.

Allseas Warrants

Allseas holds warrants to purchase common shares (the “Allseas Warrants”), which will vest and become exercisable upon successful completion of the PMTS and will expire on September 30, 2026.

The Company will record the expense for the Allseas Warrant upon successful completion of the pilot trial of the PMTS in the NORI Area D.

No expense or liability has been recorded as at and for the three months ended March 31, 2022.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Common Share Continuity

In accordance with ASC 805, Business Combinations , 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

Balance – December 31, 2019

Private placement

Financing cost incurred – Cash

Financing cost incurred - Stock option-based payments

Issued for TOML acquisition ( Note 5 )

Issued for services (Note 6)

Exercise of stock options

Balance – December 31, 2020

Issued for services (Note 6)

Exercise of stock options

Conversion of preferred shares to common shares

Issued in Business Combination (Note 4)

Conversion of debentures (Note 7)

Balance – September 30, 2021

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

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.

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 33,699,685 common shares, including 9,017,299 shares added to the Plan in January 2022 pursuant to the Plan’s automatic annual increase provision described below, 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 the exercise prices determined at its sole discretion.

As described in Note 4, 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 optionholders 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 have been restated by adjusting for the number of options and exercise prices for the Exchange Ratio.

As at September 30, 2021, there were 15,503,755 stock options outstanding under the Company’s STIP and 9,783,922 stock options outstanding under the Company’s Long-Term Incentive Plan (“LTIP”).

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

A continuity schedule of the Company’s stock options in the Company’s STIP is as follows:

Outstanding – December 31, 2020

Cancelled/Forfeited

( 6,310,588 )

Outstanding – September 30, 2021

Vested and expected to vest – September 30, 2021

Vested and exercisable – September 30, 2021

A summary of the Company’s stock options granted and outstanding under TMC’s STIP as at September 30, 2021 is as follows:

Weighted average

life to expiry

Exercise price

March 5, 2022

March 5, 2023

March 31, 2024

March 5, 2025

December 31, 2025

February 2, 2026

February 17, 2026

$0.22 - $0.52

$0.65 - $8.64

June 30, 2028

The total grant date fair value of STIP stock options that vested during the nine months ended September 30, 2021, was $ 29.6 million.

As of September 30, 2021, total unrecognized stock-based compensation expense of $ 3.7 million is expected to be recognized over a weighted-average recognition period of approximately 1.70 years.

During the nine months ended September 30, 2021, the Company also granted 9,783,922 stock options under its LTIP.

Such 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 September 30, 2021 was $ 38.4 million.

None of the LTIP stock options were exercisable on September 30, 2021.

The Company expects LTIP options to vest as and when the market and performance milestones described below are achieved.

As at September 30, 2021, total unrecognized stock-based compensation expense for the LTIP stock options was $ 33.2 million.

As at September 30, 2021, the fair value of the Company’s common shares was $ 4.57 per share.

As at September 30, 2021, the Company used the closing market price of its common shares to estimate the intrinsic value of outstanding stock options.

Prior to 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 observable transactions in the Company’s common shares and by applying a probability-weighted approach to various outcomes.

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.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

The aggregate intrinsic value of stock options exercised during the period ended September 30, 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 and exercise prices ranging between $ 0.65 per share and $ 8.64 per share, and have vesting periods to 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:

Expected dividend yield

Expected stock price volatility

Risk-free interest rate

Expected life of options (years)

Estimated per share fair value of the Company’s common shares

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;

(4) Tranche 4 - 20 % upon the commencement of the first commercial production following the grant of the exploitation contract.

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.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

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 September 30, 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 with the following weighted average assumptions:

Tranche 1 and

Expected dividend yield

Expected stock price volatility

Risk-free interest rate

Expected life of options (years)

Estimated per share fair value of the Company’s common shares

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 stock prices.

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 three and nine months ended September 30, 2021, the Company recognized $ 9.5 million and $ 55.2 million as common share option-based payments expense, respectively, in the statement of loss and comprehensive loss (three and nine months ended September 30, 2020 - $ 1.5 million and $ 1.7 million, respectively).

A total of $ 6.4 million and $ 24.7 million related to general and administration matters was charged to the statement of loss and comprehensive loss as common share options-based payments for the three and nine months ended September 30, 2021, respectively (three and nine months ended September 30, 2020 – $ 1.2 million and $ 1.2 million, respectively).

The Company allocated a total of $ 3.0 million and $ 30.6 million of common share options-based payments related to exploration activities within exploration expenses for the three and nine months ended September 30, 2021, respectively (three and nine months ended September 30, 2020 – $ 0.3 million and $ 0.5 million, respectively).

Restricted Stock Units (“RSUs”)

During the nine months ended September 30, 2021, the Company granted 56,224 RSUs to non-executive directors of the Company vesting in thirds on each anniversary of the grant date.

On each vesting date, RSU holders are entitled to receive TMC 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 $ 35 thousand was charged to the statement of loss and comprehensive loss as common share options-based payments for the three and nine months ended September 30, 2021.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

A summary of the RSU activity is presented in the table below:

average grant-

date fair value

Outstanding – December 31, 2020

Outstanding – September 30, 2021

The grant date fair value of RSUs is equivalent to the closing share price of TMC common shares on the date of grant.

As at March 31, 2022, 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”).

No stock options were issued or exercised during the three months ended March 31, 2022.

During the three months ended March 31, 2022, the Company recognized $ 3.9 million (three months ended March 31, 2021 - $ 30.4 million) of share-based compensation expense for stock options in the statement of loss and comprehensive loss, of which $ 2.0 million (three months ended March 31, 2021 - $ 18.1 million) was related to exploration and evaluation activities and $ 1.9 million (three months ended March 31, 2021 - $ 12.3 million) was related to general and administration matters.

Restricted Share Units (“RSUs”)

During the three months ended March 31, 2022, the Company granted 369,394 RSUs one-third of which vest on each anniversary of the grant date, 527,800 RSUs one-fourth of which vest on each anniversary of the grant date and 1,457,404 RSUs which vested immediately on the grant date, including 1,072,572 RSUs issued to settle liabilities with a carrying amount of $ 1.8 million, at a weighted average grant date fair value of $ 1.75 per RSU.

A total of $ 1.9 million (three months ended March 31, 2021 - $nil) was charged to the statement of loss and comprehensive loss as share-based compensation expense for the three months ended March 31, 2022, of which $ 0.9 million (three months ended March 31, 2021 - $nil) was recorded in exploration and evaluation expenses and $ 1.0 million (three months ended March 31, 2021 - $nil) was recorded in general and administrative expenses.

As at March 31, 2022, total unrecognized share-based compensation expense for RSUs was $ 12.1 million (December 31, 2021 - $ 12.3 million).

Loss per Share

Basic loss per share is computed by dividing the loss by the weighted-average number of shares of common share 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 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 common equivalent shares were as follows:

Three months ended

Nine months ended

September 30,

Anti-dilutive equivalent common shares were as follows:

ended March 31,

Outstanding options to purchase common shares

3 unchanged sentences

Total anti-dilutive common equivalent shares

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

Related Party Transactions

2 unchanged sentences

A director of DGE is employed through SSCS.

Consulting services during the three and nine months ended September 30, 2021 amounted to $ 75 thousand and $ 213 thousand, respectively (three months and nine months ended September 30, 2020 - $ 80 thousand and $ 218 thousand, respectively), and are disclosed as external consulting and exploration labor within exploration expenses (Note 6).

As at September 30, 2021, the amount payable to SSCS was $ 30 thousand (December 31, 2020 - $ 23 thousand).

Consulting services during the three months ended March 31, 2022 totaled $ 69 thousand (three months ended March 31, 2021 - $ 74 thousand), with $ 55 thousand disclosed as exploration labor within exploration and evaluation expenses (Note 4) and $ 14 thousand as general and administration expenses ($ 59 thousand and $ 15 thousand, respectively, in the comparative period).

As at March 31, 2022, the amount payable to SSCS was $ 23 thousand (December 31, 2021 - $ 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 three and nine months ended September 30, 2021 amounted to $ 93 thousand and $ 0.3 million, respectively (three months and nine months ended September 30, 2020 - $ 92 thousand and $ 0.3 million, respectively), and are disclosed as exploration labor within exploration expenses (Note 6).

As at September 30, 2021, the amount payable to Ocean Renaissance was $ nil (December 31, 2020 - $ nil ).

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Consulting services during the three months ended March 31, 2022 amounted to $ 94 thousand (three months ended March 31, 2021 - $ 93 thousand), evenly apportioned between exploration and evaluation expenses (Note 4) and general and administration expenses, in both the first quarter of 2022 and 2021.

As at March 31, 2022, the amount payable to Ocean Renaissance was $nil (December 31, 2021 - $ nil ).

Commitments and Contingent Liabilities

NORI Exploration Contract

As part of the NORI Exploration Contract with the ISA (Note 6), NORI committed to spending $ 5 million over the five-year period from 2017 to 2021.

The commitment has already been met.

As part of the NORI Exploration Contract with the ISA, NORI submitted a periodic review report to the ISA in 2021, covering its intended work plan for the 2017-2021 period.

The periodic review report included a summary of work completed over the previous 5-year period (2017 to 2021) and a work plan and estimated budget for the next five-year period (2022 to 2026).

NORI had committed to spend approximately $ 5 million to deliver on its intended work plan from 2017 to 2021, which it has exceeded.

The periodic review report, which included a proposed work plan and estimated budget for 2022 to 2026, has been reviewed by and agreed with the ISA, and the Company is implementing the next five-year plan.

NORI has estimated its work plan for 2022 and 2023 to be approximately $ 40 million and $ 25 million, respectively, which may be settled in cash or equity.

The cost of the estimated work plan for 2024 onwards is contingent on the ISA’s approval of the NORI Area D exploitation application.

Should the approval of NORI’s exploitation application for NORI Area D be delayed or rejected, NORI intends to revise its estimated future work plan in respect of its NORI Area.

Work plans are reviewed annually by the Company, agreed with the ISA and may be subject to change depending on the Company’s progress to date.

Marawa Exploration Contract

As part of DGE’s Marawa Option Agreement and Services Agreement with Marawa with respect to the Marawa Area (Note 6), Marawa committed to spending funds on exploration activities on an annual basis.

The commitment for fiscal 2020 was Australian dollar $ 1 million and for 2021 is Australian dollar $ 2 million.

Such commitment is negotiated with the ISA for five-year plans and is subject to regular periodic reviews.

TOML Exploration Contract

As part of the TOML Exploration Contract (Note 6), TOML has committed to spending $ 30 million for a five-year period from 2016 to 2021 in the first five-year review finalized in 2016.

Such commitment has flexibility where the amount can be reduced by the ISA and any reduction would be dependent upon various factors including the success of the exploration programs and the availability of funding.

As at September 30, 2021, the Company expended approximately $ 17.2 million in connection with the TOML Exploration Contract.

TOML will submit a five-year review to the ISA in 2021 which will summarize the work completed by TOML from 2017 to 2021, as well as propose TOML’s next year work program.

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 the TOML 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 the reasonable direct costs incurred by Tonga to administer the ISA obligations of Tonga to the ISA.

On September 23, 2021, Tonga updated the TOML Sponsorship Agreement harmonizing the terms of its engagement with TOML with those held by Nauru.

Through DGE’s Marawa Option Agreement and Services Agreement with Marawa with respect to the Marawa Contract Area, DGE committed to spend a defined amount of funds on exploration activities on an annual basis.

The commitment for fiscal 2022, 2023 and 2024 is Australian dollars (“AUD”) $ 1 million, AUD $ 3 million and AUD $ 2 million, respectively.

Such commitment is negotiated with the ISA as part of a five-year plan submissions and is subject to regular periodic reviews.

To date, very limited offshore marine resource definition activities in the Marawa Contract Area have occurred and DGE expects to commit future resources as contractually agreed with Marawa to evaluate the future commercial viability of any project in such area.

Marawa has not completed adequate exploration to establish the economic viability of any project in the Marawa Contract Area.

Further work will need to be conducted in order to assess the viability of any potential project in the Marawa Contract Area and such work may take several years until such assessment can be made.

Marawa has delayed certain of its efforts in the Marawa Contract Area while it determines how it will move forward with additional assessment work.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of US Dollars unless otherwise stated, except share and per share amounts)

Supplemental Cash Flow Information

Nine months ended

September 30,

Non-Cash Investing and Financing Activities

Common shares issued to settle accounts payable and accrued liabilities (Note 6)

Common shares issued for TOML Acquisition (Note 5)

Conversion of debentures (Note 7)

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:

September 30,

Republic of Nauru

North America

Subsequent Event

(in thousands of US Dollars, except share and per share amounts and unless otherwise stated)

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.

The Company has spent approximately $ 13.3 million in connection with the TOML Exploration Contract 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, at which point the next five-year commitment will be finalized.

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.

3 unchanged sentences

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.

The Company denies any allegations of wrongdoing and intends to vigorously defend against this lawsuit.

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.

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 resolve.

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.

Segmented Information

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements