TMC the metals Co Inc. 10-Q

Item 1. Financial Statements TMC the metals company Inc. Condensed Consolidated Balance Sheets (in thousands of US Dollars, except share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at ​ As at ​ ​ ​ March 31, December 31, ASSETS ​ Note ​ 2022 ​ 2021 Current ​ ​ ​ ​ ​ Cash ​ ​ ​ $ 69,048 $ 84,873 Receivables and prepayments ​ ​ ​ 3,041 ​ 3,686 ​ ​ ​ ​ 72,089 ​ 88,559 Non-current ​ ​ ​ ​ ​ ​ Exploration contracts 4 ​ 43,150 ​ 43,150 Equipment ​ ​ ​ 1,479 ​ 1,416 ​ ​ ​ ​ 44,629 ​ 44,566 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ASSETS ​ ​ ​ $ 116,718 $ 133,125 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ ​ ​ ​ ​ Current ​ ​ ​ ​ ​ ​ Accounts payable and accrued liabilities ​ ​ 18,004 ​ 26,573 ​ ​ ​ ​ 18,004 ​ 26,573 Non-current ​ ​ ​ ​ ​ ​ Deferred tax liability ​ ​ 10,675 ​ 10,675 Warrants liability 5 ​ 8,314 ​ 3,126 TOTAL LIABILITIES ​ ​ ​ $ 36,993 $ 40,374 ​ ​ ​ ​ ​ ​ ​ ​ ​ EQUITY ​ ​ ​ ​ ​ ​ Common shares (unlimited shares, no par value – issued: 226,780,843 (December 31, 2021 – 225,432,493 )) ​ ​ 298,263 ​ 296,051 Class A - J Special Shares ​ ​ ​ — ​ — Additional paid in capital ​ ​ ​ 107,952 ​ 102,073 Accumulated other comprehensive loss ​ ​ ​ ( 1,216 ) ​ ( 1,216 ) Deficit ​ ​ ​ ( 325,274 ) ​ ( 304,157 ) TOTAL EQUITY ​ ​ ​ 79,725 ​ 92,751 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL LIABILITIES AND EQUITY ​ ​ ​ $ 116,718 $ 133,125 ​ Nature of Operations (Note 1) Commitments and Contingent Liabilities (Note 9) ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents TMC the metals company Inc. Condensed Consolidated Statements of Loss and Comprehensive Loss (in thousands of US Dollars, except share and per share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Three months ended ​ ​ March 31, ​ March 31, ​ ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ (Restated 1 ) ​ ​ Note ​ ​ ​ (Note 1) Operating expenses ​ ​ ​ ​ Exploration and evaluation expenses 4 ​ $ 7,343 $ 38,107 General and administrative expenses ​ ​ ​ ​ 8,564 ​ 17,364 Operating loss ​ ​ ​ ​ 15,907 ​ 55,471 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other items ​ ​ ​ ​ ​ ​ Change in fair value of warrants liability 5 ​ ​ 5,188 ​ — Foreign exchange loss ​ ​ ​ ​ 22 ​ 19 Interest expense ​ ​ ​ ​ — ​ 220 ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss and comprehensive loss for the period ​ ​ ​ $ 21,117 $ 55,710 ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss per share ​ ​ ​ ​ ​ ​ ​ – Basic and diluted 7 ​ $ 0.09 $ 0.29 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding — basic and diluted 7 ​ ​ 226,075,389 ​ 192,378,436 ​ (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. 6 Table of Contents TMC the metals company Inc. Condensed Consolidated Statements of Changes in Equity (in thousands of US Dollars, except share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Preferred ​ Special ​ Paid in ​ Comprehensive ​ ​ ​ ​ ​ ​ Three months ended March 31, 2022 Shares ​ Amount Shares Shares Capital Loss Deficit ​ Total December 31, 2021 ​ 225,432,493 ​ $ 296,051 ​ $ — ​ $ — $ 102,073 $ ( 1,216 ) $ ( 304,157 ) $ 92,751 Conversion of restricted share units, net of shares withheld for taxes (Note 6) ​ 1,348,350 ​ ​ 2,212 ​ ​ — ​ ​ — ​ ( 2,290 ) ​ — ​ — ​ ( 78 ) Share-based compensation (Note 6) ​ — ​ ​ — ​ ​ — ​ ​ — ​ 8,124 ​ — ​ — ​ 8,124 Expenses to be settled in share-based payments ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 45 ​ ​ — ​ ​ — ​ ​ 45 Loss for the period ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ — ​ ( 21,117 ) ​ ( 21,117 ) March 31, 2022 ​ 226,780,843 ​ ​ 298,263 ​ ​ — ​ ​ — ​ 107,952 ​ ( 1,216 ) ​ ( 325,274 ) ​ 79,725 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ Three months ended March 31, 2021 ​ Common Shares ​ Preferred Special Paid in Comprehensive ​ ​ ​ ​ Restated 1 (Note 1) Shares ​ Amount Shares Shares Capital Loss ​ Deficit ​ Total December 31, 2020 ​ 189,493,593 ​ $ 154,431 ​ $ 550 ​ $ — ​ $ 45,347 ​ $ ( 1,216 ) ​ $ ( 162,858 ) ​ $ 36,254 Exercise of stock options (Note 6) 2,148,990 ​ ​ 2,542 ​ ​ — ​ — ​ ( 1,172 ) ​ — ​ — ​ 1,370 Common shares to be issued for exploration and evaluation expenses ​ 4,245,031 ​ ​ 25,664 ​ ​ — ​ ​ — ​ ​ ( 12,879 ) ​ ​ — ​ ​ — ​ ​ 12,785 Share-based compensation (Note 6) ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30,425 ​ ​ ​ ​ ​ ​ ​ ​ 30,425 Common shares to be issued for stock options exercise — ​ ​ — ​ ​ — ​ — ​ 7 ​ — ​ — ​ 7 Conversion of debentures 57,894 ​ ​ 500 ​ ​ — ​ — ​ — ​ — ​ — ​ 500 Loss for the period ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 55,710 ) ​ ​ ( 55,710 ) March 31, 2021 195,945,508 ​ $ 183,137 ​ $ 550 $ — $ 61,728 $ ( 1,216 ) $ ( 218,568 ) $ 25,631 ​ (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. 7 Table of Contents TMC the metals company Inc. Condensed Consolidated Statements of Cash Flows (in thousands of US Dollars) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ​ Three months ​ ​ ​ ​ ended ​ ended ​ ​ ​ ​ March 31, ​ March 31, ​ ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ (Restated 1 ) ​ ​ Note ​ ​ ​ (Note 1) Cash provided by (used in) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ ​ Loss for the period ​ ​ $ ( 21,117 ) $ ( 55,710 ) Items not affecting cash: ​ ​ ​ ​ ​ ​ Amortization ​ ​ ​ 95 ​ 98 Expenses settled with share-based payments 6 ​ ​ 6,393 ​ 43,211 Expenses to be settled with share-based payments ​ ​ ​ ​ 45 ​ ​ — Interest on convertible debentures ​ ​ ​ — ​ 220 Change in fair value of warrants liability 5 ​ ​ 5,188 ​ — Unrealized foreign exchange ​ ​ ​ ( 8 ) ​ ( 1 ) Changes in working capital: ​ ​ ​ ​ ​ ​ Receivables and prepayments ​ ​ ​ 619 ​ 8 Accounts payable and accrued liabilities ​ ​ ​ ( 6,744 ) ​ 2,114 Net cash used in operating activities ​ ​ ​ ​ ( 15,529 ) ​ ( 10,060 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Investing activities ​ ​ ​ ​ ​ ​ Settlement of deferred acquisition costs ​ ​ ​ ​ — ​ ​ ( 2,190 ) Acquisition of equipment ​ ​ ​ ​ ( 210 ) ​ ​ — Net cash used in investing activities ​ ​ ​ ​ ( 210 ) ​ ( 2,190 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Financing activities ​ ​ ​ ​ Proceeds from exercise of stock options ​ ​ ​ — ​ 1,377 Proceeds from issuance of convertible debentures ​ ​ ​ ​ — ​ ​ 26,000 Taxes withheld and paid on share-based compensation ​ ​ ​ ​ ( 78 ) ​ ​ — Net cash (used in) provided by financing activities ​ ​ ​ ​ ( 78 ) ​ 27,377 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Decrease) increase in cash ​ ​ ​ ( 15,817 ) ​ 15,127 Impact of exchange rate changes on cash ​ ​ ​ ( 8 ) ​ 1 Cash - beginning of period ​ ​ ​ 84,873 ​ 10,096 Cash - end of period ​ ​ $ 69,048 $ 25,224 ​ (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. 8 Table of Contents 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) (Unaudited) ​ 1. Nature of Operations TMC the metals company Inc. (“TMC” or the “Company”), formerly known as Sustainable Opportunities Acquisition Corporation (“SOAC”), was incorporated as a Cayman Islands exempted company limited by shares on December 18, 2019 and continued as a corporation under the laws of the province of British Columbia, Canada on September 9, 2021. On September 9, 2021, the Company completed its business combination (the “Business Combination”) with DeepGreen Metals Inc. (“DeepGreen”). The Company’s corporate office, registered address and records office is located at 10 th floor, 595 Howe Street, Vancouver, British Columbia, Canada, V6C 2T5. The Company’s common shares and warrants to purchase common shares are listed for trading on the Nasdaq Global Select Market (“Nasdaq”) under tickers “TMC” and “TMCWW”, respectively. In connection with closing of the Business Combination, DeepGreen merged with a wholly-owned subsidiary of SOAC and became a wholly-owned subsidiary of the Company. DeepGreen was determined to be the accounting acquirer and therefore, all information prior to the Business Combination, including the prior 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 (“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, through its subsidiary DeepGreen Engineering Pte. Ltd. (“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 and may not be fully under the Company's control. 9 Table of Contents 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) (Unaudited) ​ 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. 2. Basis of Presentation 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 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. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the notes thereto. Significant estimates and assumptions reflected in these 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. Fair Value of Financial Instruments Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. In accordance with U.S. GAAP, the Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: ● Level 1  - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. ● 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. 10 Table of Contents 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) (Unaudited) ​ ● 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 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. 3. Recent Accounting Pronouncements Issued and Adopted i. 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. 11 Table of Contents 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) (Unaudited) ​ 4. Exploration Contracts Strategic Partnerships Marine Vessel Services: 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 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. 12 Table of Contents 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) (Unaudited) ​ Exploration and Evaluation Expenses The detail of exploration and evaluation expenses is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI ​ Marawa ​ TOML ​ ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ Three months ended March 31, 2022 Contract Agreement Contract Total Exploration labor $ 1,017 $ 187 $ 190 $ 1,394 Offshore campaigns ​ 185 ​ 28 ​ 28 ​ 241 Share-based compensation (Note 6) ​ 1,993 ​ 451 ​ 455 ​ 2,899 Amortization ​ 94 ​ — ​ 1 ​ 95 External consulting ​ 1,140 ​ 29 ​ 11 ​ 1,180 Travel, workshop and other ​ 166 ​ 33 ​ 32 ​ 231 PMTS ​ 1,043 ​ 130 ​ 130 ​ 1,303 ​ $ 5,638 $ 858 $ 847 $ 7,343 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI Marawa TOML ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ Three months ended March 31, 2021 (Restated) ​ Contract ​ Agreement ​ Contract ​ Total Exploration labor $ 436 $ 188 $ 166 $ 790 Offshore campaigns ​ 13,330 ​ 1,666 ​ 1,666 ​ 16,662 Share-based compensation (Note 6) ​ 9,979 ​ 4,240 ​ 3,919 ​ 18,138 Amortization ​ 97 ​ — ​ 1 ​ 98 External consulting ​ 1,539 ​ 259 ​ 289 ​ 2,087 Travel, workshop and other ​ 150 ​ 80 ​ 102 ​ 332 ​ $ 25,531 $ 6,433 $ 6,143 $ 38,107 ​ ​ 5. Warrants 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 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. 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. 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. 13 Table of Contents 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) (Unaudited) ​ 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: ​ ​ ​ ​ ​ ​ Private ​ ​ Warrants Warrants liability as at December 31, 2021 ​ $ 3,126 Increase in fair value of warrants liability ​ 5,188 Warrants liability as at March 31, 2022 ​ $ 8,314 ​ As at March 31, 2022 and December 31, 2021, the fair value of the Private Warrants was estimated using the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Exercise price ​ $ 11.50 ​ $ 11.50 Share price ​ $ 2.59 ​ $ 2.08 ​ Volatility ​ ​ 82.5 % 64.6 % Term ​ ​ 4.4 years ​ 4.7 years ​ Risk-free rate ​ ​ 2.4 % 1.2 % Dividend yield ​ ​ 0.0 % 0.0 % ​ 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. 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. 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. ​ 14 Table of Contents 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) (Unaudited) ​ 6. 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 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 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). 7. Loss per Share Basic and diluted loss per share was the same for each period presented as the inclusion of all common share equivalents would have been anti-dilutive. Anti-dilutive equivalent common shares were as follows: ​ ​ ​ ​ ​ ​ ​ ​ Three months ​ Three months ​ ​ ended March 31, ​ ended March 31, ​ 2022 2021 Outstanding options to purchase common shares ​ 25,287,670 25,287,670 Outstanding RSUs ​ 4,843,825 — Outstanding warrants ​ 36,078,620 ​ — Outstanding Special Shares and options to purchase Special Shares ​ 136,239,964 ​ — Total anti-dilutive common equivalent shares ​ 202,450,079 25,287,670 ​ 15 Table of Contents 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) (Unaudited) ​ 8. Related Party Transactions The Company’s subsidiary, DGE, is engaged in a consulting agreement with SSCS Pte. Ltd. (“SSCS”) to manage offshore engineering studies. A director of DGE is employed through SSCS. Consulting services during the 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 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 ). 9. Commitments and Contingent Liabilities NORI Exploration Contract 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 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. 16 Table of Contents 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) (Unaudited) ​ 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. TMC The Metals Company Inc. F/K/A Sustainable Opportunities Acquisition Corp., Gerard Barron and Scott Leonard . The complaint alleges that all defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and Messrs. Barron and Leonard violated Section 20(a) of the Exchange Act, by making false and/or misleading statements and/or failing to disclose information about the Company’s operations and prospects during the period from March 4, 2021 and October 5, 2021. On November 15, 2021, a second complaint containing substantially the same allegations was filed, captioned Tran v. TMC the Metals Company, Inc. These cases have been consolidated. On March 6, 2022, a lead plaintiff was selected. The Company denies any allegations of wrongdoing and the Company has filed a motion to dismiss and intends to defend against this lawsuit. There is no assurance, however, that the Company or the other defendants will be successful in their defense of this lawsuit or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of this action. If the motion to dismiss is unsuccessful, there is a possibility that the Company may incur a loss in this matter. Such losses or range of possible losses either cannot be reliably estimated. A resolution of this lawsuit adverse to the Company or the other defendants, however, could have a material effect on the Company’s financial position and results of operations in the period in which the lawsuit is resolved. ​ 10. 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. ​ ​ ​ 17 ​ Table of Contents