TMC the metals Co Inc. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TMC THE METALS COMPANY INC. ​ ​ ​ ​ ​ Page Index to Financial Statements and Financial Statement Schedules Number ​ ​ ​ Financial Statements: ​ ​ ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID: 1263 ) ​ 114 Consolidated Balance Sheets as at December 31, 2022 and 2021 ​ 115 Consolidated Statements of Loss and Comprehensive Loss for the Years Ended December 31, 2022 and 2021 ​ 116 Consolidated Statements of Changes in Equity for the Years Ended December 31, 2022 and 2021 ​ 117 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 ​ 118 Notes to Consolidated Financial Statements ​ 119 ​ ​ ​ 113 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of TMC the metals company Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of TMC the metals company Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP ​ We have served as the Company’s auditor since 2012. Vancouver, Canada March 27, 2023 ​ ​ 114 Table of Contents TMC the metals company Inc. Consolidated Balance Sheets (in thousands of US Dollars, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at ​ As at ​ ​ December 31, December 31, ​ ​ ​ ​ 2022 ​ 2021 ASSETS ​ Note ​ ​ ​ ​ Current ​ ​ Cash ​ $ 46,842 $ 84,873 Receivables and prepayments 8 ​ 2,760 ​ 3,686 ​ ​ ​ ​ 49,602 ​ 88,559 Non-current ​ ​ Exploration contracts 7,10 ​ 43,150 ​ 43,150 Equipment 9 ​ 2,025 ​ 1,416 ​ ​ ​ ​ 45,175 ​ 44,566 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ASSETS $ 94,777 $ 133,125 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ Current ​ ​ Accounts payable and accrued liabilities ​ 41,614 ​ 26,573 ​ ​ ​ ​ 41,614 ​ 26,573 Non-current ​ ​ Deferred tax liability 23 ​ 10,675 ​ 10,675 Warrants liability 13 ​ 983 ​ 3,126 TOTAL LIABILITIES $ 53,272 $ 40,374 ​ ​ ​ ​ ​ ​ ​ ​ ​ EQUITY ​ ​ Common shares (unlimited shares, no par value – issued: 266,812,131 (December 31, 2021 – 225,432,493 )) 14 ​ 332,882 ​ 296,051 Special Shares 14 ​ — ​ — Additional paid in capital ​ 184,960 ​ 102,073 Accumulated other comprehensive loss ​ ( 1,216 ) ​ ( 1,216 ) Deficit ​ ( 475,121 ) ​ ( 304,157 ) TOTAL EQUITY ​ 41,505 ​ 92,751 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL LIABILITIES AND EQUITY $ 94,777 $ 133,125 ​ Nature of Operations (Note 1) Commitments and Contingent Liabilities (Note 20) Subsequent Events (Note 24) ​ The accompanying notes are an integral part of these consolidated financial statements. 115 Table of Contents TMC the metals company Inc. Consolidated Statements of Loss and Comprehensive Loss (in thousands of US Dollars, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended For the year ended ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ ​ 2022 ​ 2021 ​ ​ Note ​ ​ ​ ​ Operating expenses ​ ​ Exploration and evaluation expenses 10 $ 144,599 $ 93,006 General and administrative expenses 11 ​ 29,518 ​ 56,583 Operating loss ​ ​ 174,117 ​ 149,589 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other items ​ ​ Change in fair value of private warrants liability 13 ​ ( 2,143 ) ​ ( 9,375 ) Foreign exchange loss ​ 24 ​ 82 Interest expense (income) 12 ​ ( 1,111 ) ​ 1,003 Loss and comprehensive loss for the year, before tax ​ ​ ​ $ 170,887 ​ $ 141,299 ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax expense ​ 23 ​ ​ 77 ​ ​ — Loss and comprehensive loss for the year, after tax $ 170,964 $ 141,299 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss per share - Basic and diluted 16 $ 0.71 ​ $ 0.69 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding – basic and diluted 16 ​ 239,867,019 ​ ​ 204,926,931 ​ ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. 116 Table of Contents TMC the metals company Inc. Consolidated Statements of Changes in Equity (in thousands of US Dollars, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Shares Preferred Special Additional Accumulated Other ​ ​ ​ ​ For the year ended December 31, 2022 Shares Amount Shares Shares Paid in Capital Comprehensive Loss Deficit Total December 31, 2021 225,432,493 ​ $ 296,051 $ — $ — $ 102,073 $ ( 1,216 ) $ ( 304,157 ) $ 92,751 Issuance of shares under PIPE Financing (Net Proceeds) (Note 19) ​ 38,266,180 ​ ​ 29,621 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 29,621 Exercise of stock options (Note 15) 118,461 ​ ​ 142 ​ — ​ — ​ ( 66 ) ​ — ​ — ​ 76 Conversion of restricted share units (Note 15) 2,877,068 ​ ​ 6,875 ​ — ​ — ​ ( 6,945 ) ​ — ​ — ​ ( 70 ) Share purchase under Employee Share Purchase Plan ​ 117,929 ​ ​ 193 ​ ​ — ​ ​ — ​ ​ ( 79 ) ​ ​ — ​ ​ — ​ ​ 114 Vesting of Allseas Warrant (Note 10, 13) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 69,900 ​ ​ — ​ ​ — ​ ​ 69,900 Share-based compensation (Note 15) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 20,077 ​ ​ — ​ ​ — ​ ​ 20,077 Loss for the year — ​ ​ — ​ — ​ — ​ — ​ — ​ ( 170,964 ) ​ ( 170,964 ) December 31, 2022 266,812,131 ​ $ 332,882 $ — $ — $ 184,960 $ ( 1,216 ) $ ( 475,121 ) $ 41,505 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Shares Preferred Special Additional Accumulated Other ​ ​ ​ ​ For the year ended December 31, 2021 Shares Amount Shares Shares Paid in Capital Comprehensive Loss Deficit Total December 31, 2020 189,493,593 ​ $ 154,431 $ 550 $ — $ 45,347 $ ( 1,216 ) $ ( 162,858 ) $ 36,254 Exercise of stock options (Note 15) 6,312,756 ​ ​ 14,297 ​ — ​ — ​ ( 10,061 ) ​ — ​ — ​ 4,236 Conversion of restricted share units (Note 15) ​ 173,216 ​ ​ 399 ​ — ​ — ​ ( 399 ) ​ — ​ — ​ — Common shares issued for exploration and evaluation expenses (Note 10) 4,245,031 ​ ​ 25,664 ​ — ​ — ​ ( 12,879 ) ​ — ​ — ​ 12,785 Conversion of debentures (Note 12) ​ 3,126,567 ​ ​ 27,003 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 27,003 Share-based compensation (Note 15) — ​ ​ — ​ ​ — ​ ​ — ​ ​ 60,565 ​ ​ — ​ ​ — ​ ​ 60,565 Common shares issued for services 187,575 ​ ​ 1,296 ​ — ​ — ​ — ​ — ​ — ​ 1,296 Net equity from Business Combination (Note 6) ​ 21,384,296 ​ ​ 72,411 ​ ​ — ​ ​ — ​ ​ 19,500 ​ ​ — ​ ​ — ​ ​ 91,911 Conversion of preferred shares to common shares ​ 509,459 ​ ​ 550 ​ ​ ( 550 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Loss for the year — ​ ​ — ​ — ​ — ​ — ​ — ​ ( 141,299 ) ​ ( 141,299 ) December 31, 2021 225,432,493 ​ $ 296,051 $ — $ — $ 102,073 $ ( 1,216 ) $ ( 304,157 ) $ 92,751 ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. 117 Table of Contents TMC the metals company Inc. Consolidated Statements of Cash Flows (in thousands of US Dollars) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended For the year ended ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ ​ 2022 ​ 2021 ​ ​ Note ​ ​ ​ ​ ​ Cash resources provided by (used in) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ Loss for the year $ ( 170,964 ) $ ( 141,299 ) Items not affecting cash: ​ ​ Amortization ​ 418 ​ 453 Expenses settled with share-based payments 15 ​ 18,394 ​ 74,571 Interest on convertible debentures 12 ​ — ​ 1,003 Change in fair value of warrants liability 13 ​ ( 2,143 ) ​ ( 9,375 ) Vesting of Allseas Warrant ​ 10, 13 ​ ​ 69,900 ​ ​ — Unrealized foreign exchange ​ ( 53 ) ​ ( 15 ) Changes in working capital: ​ ​ Receivables and prepayments ​ 851 ​ ( 3,479 ) Accounts payable and accrued liabilities ​ 16,960 ​ 22,049 Net cash used in operating activities ​ ( 66,637 ) ​ ( 56,092 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Investing activities ​ ​ Settlement of deferred acquisition costs ​ 7 ​ ​ — ​ ​ ( 3,440 ) Acquisition of equipment 9 ​ ( 1,169 ) ​ ( 402 ) Net cash used in investing activities ​ ( 1,169 ) ​ ( 3,842 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Financing activities ​ ​ Proceeds from PIPE financing ​ 19 ​ ​ 30,399 ​ ​ — Expenses paid for PIPE financing ​ 19 ​ ​ ( 797 ) ​ ​ — Proceeds from exercise of stock options 15 ​ 76 ​ 4,236 Proceeds from issuance of convertible debentures 12 ​ — ​ 26,000 Proceeds from employee share purchase plan ​ 15 ​ ​ 114 ​ ​ — Taxes withheld and paid on share-based compensation ​ ​ ​ ​ ( 70 ) ​ ​ — Proceeds from Business Combination (net of fees and other costs) 6 ​ — ​ 104,465 Net cash provided by financing activities ​ 29,722 ​ 134,701 ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (decrease) in cash ​ ( 38,084 ) ​ 74,767 Impact of exchange rate changes on cash ​ 53 ​ 10 Cash - beginning of year ​ 84,873 ​ 10,096 Cash - end of year $ 46,842 $ 84,873 ​ Supplemental cash flow information (Note 21) ​ ​ The accompanying notes are an integral part of these consolidated financial statements. 118 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 1. Nature of Operations TMC the metals company Inc. (“TMC” or the “Company”), formerly known as Sustainable Opportunities Acquisition Corporation (“SOAC”), was incorporated as a Cayman Islands exempted company limited by shares on December 18, 2019 and continued as a corporation under the laws of the province of British Columbia, Canada on September 9, 2021. On September 9, 2021, the Company completed its business combination (the “Business Combination”) with DeepGreen Metals Inc. (“DeepGreen”) (Note 6). The Company’s corporate office, registered address and records office is located at 10 th floor, 595 Howe Street, Vancouver, British Columbia, Canada, V6C 2T5. The Company’s common shares and warrants to purchase common shares are listed for trading on the Nasdaq Global Select Market (“Nasdaq”) under tickers “TMC” and “TMCWW”, respectively. In connection with closing of the Business Combination, DeepGreen merged with a wholly-owned subsidiary of SOAC and became a wholly-owned subsidiary of the Company. DeepGreen was determined to be the accounting acquirer and therefore, all information prior to the Business Combination, including the prior year financial information, represents the financial condition and operating results of DeepGreen. The Company is a deep-sea minerals exploration company focused on the collection 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 and cobalt sulfates, or intermediate nickel-copper-cobalt matte) for electric vehicles (“EV”) and renewable energy storage markets, (ii) copper cathode for EV wiring, clean energy transmission and other applications and (iii) manganese silicate for manganese alloy production required for steel production. Exploration and exploitation of seabed minerals in international waters is regulated by the International Seabed Authority (“ISA”), an intergovernmental organization established pursuant to the 1994 Agreement Relating to the Implementation of the United Nations Convention on the Law of the Sea. The ISA grants contracts 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”). In 2013, the Company through its subsidiary DeepGreen Engineering Pte. Ltd. (“DGE”) entered into an option agreement (the “Marawa Option Agreement”) with Marawa which granted DGE exclusive rights to manage and carry out all exploration and exploitation in 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 10). 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. 119 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 2. Basis of Presentation Statement of Compliance These consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) and include the accounts of TMC and its wholly-owned subsidiaries. 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 6). Certain comparative figures in Note 10 have been reclassified to conform to the current period’s presentation. Basis of Measurement These consolidated financial statements have been prepared under the historical cost convention, except for warrants liability that has been measured at fair value and are presented in United States (“US”) dollars. Consolidation These consolidated financial statements include the financial statements of the Company and its subsidiaries. The principal subsidiaries of the Company, their activities, and their geographic locations as at December 31, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proportion of ​ ​ ​ ​ ​ ​ Interest Held Subsidiary ​ Principal Activity ​ Location ​ by the Company DeepGreen Metals ULC Mineral exploration Canada 100 % DeepGreen Engineering Pte. Ltd. Mineral exploration Singapore 100 % DeepGreen Resources, LLC Holding Company USA 100 % Nauru Ocean Resources Inc. Mineral exploration Republic of Nauru 100 % Nauru Education and Training Foundation Inc. (“NEAT”) Holding Company Republic of Nauru 100 % Nauru Health and Environment Foundation Inc. (“NHEF”) Holding Company Republic of Nauru 100 % Tonga Offshore Mining Ltd. Mineral exploration Kingdom of Tonga 100 % Koloa Moana Resources Ltd. Holding Company Canada 100 % Offshore Minerals Pty. Ltd. Mineral exploration Australia 100 % DeepGreen TOML Singapore Pte. Ltd. Mineral exploration Singapore 100 % DeepGreen TOML Holding 1 Ltd. Holding Company British Virgin Islands 100 % DeepGreen TOML Holding 2 Ltd. Holding Company British Virgin Islands 100 % The Metals Company Australia Pty Ltd Holding Company Australia 100 % TMC The Metals Company UK Limited Holding Company United Kingdom 100 % ​ All inter-group balances have been eliminated on consolidation. 3. Significant Accounting Policies i. Foreign Currencies The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and all its subsidiaries is the U.S. Dollar, except for NEAT and NHEF, whose functional currency is the Australian Dollar. 120 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated into the functional currency at the rates prevailing at that date. Non-monetary assets and liabilities carried at fair value that are denominated in currencies other than the U.S. Dollar are translated at rates prevailing at the date when the fair value was determined. All gains and losses on translation of these foreign currency transactions are included in the statements of loss and comprehensive loss. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated. For consolidation purposes, the assets and liabilities of entities with functional currencies other than the US Dollar are translated at the period end rates of exchange, and the results of their operations are translated at average rates of exchange for the period. The resulting changes are recognized in accumulated other comprehensive loss within equity as currency translation differences. ii. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the notes thereto. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the valuation of share-based payments, including valuation of incentive stock options (Note 15), as well as the valuation of warrants liability (Note 13). Actual results could differ materially from those estimates. iii. Loss Per Share Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding during the year. The computation of diluted loss per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on the loss per share. The dilutive effect of convertible securities is reflected in the diluted loss per share by application of the “if converted” method. The dilutive effect of outstanding options and their equivalents is reflected in the diluted loss per share by application of the treasury stock method. iv. Financial Instruments Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired, or have been transferred, and the Company has transferred substantially all risks and rewards of ownership. A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled, or expires. The Company’s financial instruments consists of cash and cash equivalents, receivables, accounts payable and accrued liabilities, and deferred acquisition costs which are recorded at amortized cost as well as warrants to acquire common shares of the Company which are measured at fair value. v. Fair Value of Financial Instruments Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. 121 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 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. ● Level 3  - Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. There were no transfers between fair value measurement levels during the years ended December 31, 2022 and 2021. As at December 31, 2022 and 2021, the carrying values of cash, receivables, 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 13. vi. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and term deposits with a remaining term to maturity at acquisition of three months or less. As at December 31, 2022 and 2021, the Company had no cash equivalents. vii. Equipment Equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, when it is probable that future economic benefits from such assets will flow to the Company and the cost of such assets can be measured reliably. The carrying amount of an asset is derecognized when it is replaced or taken out of service. Repairs and maintenance costs are charged to the statement of loss and comprehensive loss during the period they are incurred. The major categories of equipment are amortized on a declining balance basis as follows: ​ ​ ​ ​ ​ Exploration and other equipment 30 % Office equipment 30 % ​ The Company allocates the amount initially recognized to each asset’s significant components and depreciates each component separately. Amortization methods and useful life of the assets are reviewed at each financial period end and adjusted on a prospective basis, if required. Gains and losses on disposals of equipment are determined by comparing the proceeds with the carrying amount of the asset and are included in the statement of loss and comprehensive loss. 122 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ viii. Leases The Company determines if an arrangement is or contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheet. The Company does not have any finance leases. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Differences between the calculated lease payment and actual payment are expensed as incurred. Amortization of finance lease assets is recognized over the lease term. Interest expense on finance lease liabilities is recognized over the lease term in interest expense. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The Company elected to apply the short-term lease recognition exemption to all of its lease arrangements and recorded an expense of $ 132 (2021: $ 132 ) for lease payments during the year ended December 31, 2022 relating to office premises and employee accommodations. Such lease expense is disclosed under general and administrative expenses within the statement of loss and comprehensive loss and forms part of cash flow from operating activities. ix. Exploration Contracts The Company is in the exploration stage with respect to its investment in exploration contracts and follows the practice of capitalizing costs related to the acquisition of such exploration contracts. The cost of exploration contracts will be charged to operations using a unit-of-production method based on proven and probable reserves once commercial production commences in the future. x. Exploration and Evaluation Expenses The Company expenses all costs related to exploration and development of exploration contracts. Such exploration and development costs include, but are not limited to, exploration contract management, geological, geochemical and geophysical studies, environmental studies and process development. xi. Share-Based Compensation Share-based compensation is measured at the grant date based on the fair value of the award and is recognized over the requisite service period. Share-based compensation costs are charged to exploration and evaluation expenses or general and administrative expenses in the statement of loss and comprehensive loss. The Company recognizes forfeiture of any awards as they occur. The Company records share-based compensation from the issuance of stock options and restricted share units (“RSUs”) to employees with service-based conditions using the accelerated attribution method. For stock options and restricted share units issued with performance conditions (Note 15), the Company recognizes share-based compensation cost when the specific performance targets become probable of being achieved using the accelerated attribution method. When these costs relate to equity financing, they are netted against share capital as a share issuance cost. The fair value of stock option awards with only service and/or performance conditions is estimated on the grant date using a Black-Scholes option-pricing model. 123 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ For stock options issued with market conditions (Note 15), the Company recognizes share-based compensation cost over the expected achievement period for the related market capitalization milestone determined on the grant date. If the related market capitalization milestone is achieved earlier than its expected achievement period, then any unamortized share-based compensation cost for that milestone is recognized at that time. The fair value of market-based stock option awards is estimated on the grant date using Monte-Carlo simulations. The Company at times grants common shares, stock options or RSUs in lieu of cash to certain vendors for their services to the Company. The Company recognizes the associated cost in the same period and manner as if the Company paid cash for the services provided. xii. Warrants Liability The Company evaluates all of its financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to U.S. GAAP Accounting Standard Coding (“ASC”) 480, Distinguishing Liability from Equity, and ASC 815, Derivatives and Hedging. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company accounts for the Public Warrants and Private Warrants (as defined below) in accordance with the guidance contained in ASC 815 (Subtopic 40), Derivative and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”), and the U.S. Securities and Exchange Commission (“SEC”) Division of Corporation Finance’s April 12, 2021 Public Statement, Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SEC Statement”), under which, subsequent to the Business Combination, the 15,000,000 common share warrants issued by SOAC as part of the units offered in its initial public offering (“Public Warrants”) were determined to meet the criteria for equity classification, while the 9,500,000 private placement common share warrants issued by SOAC in a private placement simultaneously with the closing of the initial public offering (“Private Warrants”) did not meet the criteria for equity classification and must be recorded as liabilities. Specifically, the terms of the Private Warrants provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and, because the holder of a Private Warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude the Private Warrants from being classified in equity and should be classified as a liability. Accordingly, the Company classified the Private Warrants as liabilities measured at fair value and adjusts the Private Warrants to their fair value at the end of each reporting period. The warrants 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. The Company granted warrants to Allseas on March 4, 2021 to acquire 11.6 million TMC common shares at a nominal value (the “Allseas Warrant”). The Allseas Warrant vested and became exercisable upon successful completion of the PMTS in the fourth quarter of 2022, and have been accounted for as equity, since the warrants do not meet the criteria to be classified as liability as defined in ASC Topic 480, Distinguishing Liabilities from Equity. xiii. Income Taxes Income tax expense represents the sum of current tax expense and deferred tax expense. Current tax expense is based on taxable profit for the year and includes any adjustments to tax payable in respect of previous years. Taxable profit differs from accounting profit or loss as reported in the consolidated income statement because it excludes (i) items of income or expense that are taxable or deductible in other years and (ii) items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date. The Company’s policy is to account for income tax related interest and penalties in income tax expense in the accompanying statements of loss and comprehensive loss. 124 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Deferred tax income taxes are accounted for using the asset and liability method. Deferred income tax assets and liabilities are based on temporary differences, which are differences between the accounting basis and tax basis of assets and liabilities, non-capital loss, capital loss, and tax credits carryforwards and are measured using the enacted tax rates and laws expected to apply when these differences reverse. Deferred tax benefits, including non-capital loss, capital loss, and tax credits carryforwards are recognized to the extent that realization of such benefits is considered more likely than not. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated income statement in the period that enactment occurs. When realization of deferred income tax assets does not meet the more likely than not criterion for recognition, a valuation allowance is provided. Significant Accounting Policies Adopted during the year Share-Based Compensation under the Employee Stock Purchase Plan During the second quarter of 2022, the Company adopted an employee stock purchase plan (the “ESPP”) whereby employees can purchase common shares of the Company at a 15 % discount to its share price at the time of purchase, through payroll deductions (Note 15). Employee contributions are converted into common shares at a discount to the lower of the share price at the beginning of the offering period and the share price at the end of the purchase period. The fair value of the shares purchased under the ESPP is estimated on the grant date using a Black-Scholes option-pricing model and is reported as share-based compensation over the offering period, using the accelerated attribution method. Share-based compensation costs are charged to exploration and evaluation expenses or general and administrative expenses in the statement of loss and comprehensive loss. 4. Significant Accounting Estimates and Judgements The preparation of financial statements in accordance with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Significant management judgments and estimates were applied to the following areas: i. Valuation of Share-Based Payments TMC recognized the cost of share-based awards granted to employees, non-employees and directors based on the estimated grant-date fair value of the awards. TMC determined the fair value of stock options and Restricted Share Units using the Black-Scholes option pricing model, which was impacted by the following assumptions: ● Fair Value of Common Shares on the Date of the Grant — The Company valued its common shares at the closing market price of the share as quoted on NASDAQ. ● Expected Term—TMC used the term of the award when calculating the expected term due to insufficient historical exercise data. ● Expected Volatility—As TMC’s shares were not actively traded prior to closing of the Business Combination, the volatility is based on a benchmark of comparable companies within the mining industry. ● Expected Dividend Yield—The dividend rate used is zero as TMC has never paid any cash dividends on common shares and does not anticipate doing so during the expected life of the stock options. ● Risk-Free Interest Rate—The interest rates used are based on the implied yield available on Canadian Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. 125 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ This valuation approach involves the use of estimates, judgments and assumptions that are subjective, such as those regarding the probability of future events. Changes in these estimates and assumptions impact the Company’s valuation as of the valuation date and may have a material impact on the valuation of the Company’s common shares. Changes in these assumptions used to determine the fair value of incentive stock options, including the vesting timeline of granted stock options, could have a material impact on the Company’s loss and comprehensive loss. Prior to closing of the Business Combination, TMC estimated the fair value of common shares issued for services using the Probability Weighted Expected Return Method (“PWERM”). The Company applied the PWERM by first defining the range of potential future liquidity outcomes, including the share price used for its most recent private placements and the share price used for the Business Combination, then allocating its value based on the probability of that event occurring. ii. Valuation of Warrants Liability The Company re-measures the fair value of the Private Warrants at the end of each reporting period. The fair value of the Private Warrants was estimated using a Black-Scholes option pricing model whereby the expected volatility was estimated using a binomial model based on consideration of the implied volatility from the Company’s Public Warrants adjusted to account for the call feature of the Public Warrants at prices above $ 18.00 during 20 trading days within any 30 -trading day period. iii. Evaluation of Going Concern The Company evaluates its ability to operate as a going concern at each reporting period. This evaluation requires the Company to estimate its cash flow commitments over a forecast period of twelve months and whether it has the financial ability to pay for such commitments. Changes in these estimates and assumptions may have a material impact on this assessment. 5. Recent Accounting Pronouncements Issued and Adopted 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 consolidated financial statements. 6. Business Combination On March 4, 2021, SOAC and DeepGreen entered into a business combination agreement (“BCA”) in which SOAC would combine with DeepGreen, relist on the Nasdaq and SOAC would be renamed to TMC. The Business Combination was consummated on September 9, 2021, whereby SOAC acquired all of the outstanding common shares of DeepGreen. 126 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Pursuant to the BCA, shareholders of DeepGreen exchanged their DeepGreen common shares at a ratio of 1.157862 TMC common shares per DeepGreen common share (“Exchange Ratio”) and received approximately 203.9 million TMC common shares and a total of 120.1 million Class A to H special shares (“Special Shares”). Each class of Special Shares automatically convert to TMC common shares if TMC common shares trade at a price on any 20 trading days within any 30 - trading day period that is greater than or equal to the specific trigger price for the respective class of Special Share. The trigger prices range from $ 15 per share to $ 200 per share. In connection with the Business Combination, the SOAC sponsors were entitled to an additional 0.5 million Class I Special Shares and 0.7 million Class J Special Shares which are convertible to TMC common shares if TMC common shares trade for a price on any 20 trading days within any 30 -trading day period that is greater than or equal to $ 50.00 per share and $ 12.00 per share, respectively. 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 A B C D E F G H I J Share Trigger price ($) 15 25 35 50 75 100 150 200 50 12 Special Shares (million) 5 10 10 20 20 20 25 25 0.5 0.7 ​ The following table reconciles the cash proceeds from the Business Combination: ​ ​ ​ ​ ​ Cash proceeds from SOAC $ 27,328 Cash proceeds from sale of equity securities ​ 110,300 Gross cash received by TMC from Business Combination ​ 137,628 Less: Transaction costs settled in cash ​ ( 33,163 ) Net contributions from Business Combination ​ $ 104,465 ​ In addition to the transaction costs settled in cash above, the Company incurred $ 3.5 million of transaction costs which were settled by the issuance of 873,953 common shares on October 7, 2021. Prior to the Business Combination, SOAC had 30.0 million Class A common shares with a par value of $ 0.0001 per share (“SOAC Class A Shares”) outstanding and 7.5 million Class B common shares with a par value of $ 0.0001 per share (“SOAC Class B Shares”) held by Sustainable Opportunities Holdings LLC (the “Sponsor”). In connection with the Business Combination, 27.3 million SOAC Class A Shares were redeemed by public shareholders. On September 9, 2021, each remaining issued and outstanding share of SOAC Class A Shares automatically converted, on a one-for- one basis, into TMC common shares and 6.8 million outstanding shares of SOAC Class B Shares automatically converted, on a one-for- one basis, into TMC common shares and 0.7 million outstanding shares of SOAC Class B Shares converted into Class J Special Shares. The TMC common shares also changed from having a par value of $ 0.0001 per share to no par value. 127 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The number of TMC common shares issued immediately following the consummation of the Business Combination is summarized as follows: ​ ​ ​ ​ ​ ​ Number of Shares by type shares SOAC Class A shares outstanding prior to the Business Combination 30,000,000 Less: Redemption of SOAC Class A shares ( 27,278,657 ) SOAC Class A shares outstanding and converted to TMC common shares 2,721,343 Shares issued in the Private Investment in Public Equity (“PIPE”) 11,030,000 Conversion of SOAC Class B shares to TMC common shares 6,759,000 Shares issued to SOAC and PIPE investors 20,510,343 Shares issued to the DeepGreen shareholders 203,874,981 Total TMC common shares outstanding at close of Business Combination 224,385,324 ​ The Company incurred transaction costs related to the Business Combination of approximately $ 42.1 million, of which $ 5.4 million, incurred prior to the closing of the Business Combination becoming probable, are included in general and administrative expenses on the consolidated statements of loss and other comprehensive loss. The remaining $ 36.7 million of transaction costs were capitalized to common shares on the consolidated balance sheet. The Business Combination was accounted for as a reverse acquisition with no goodwill or intangible assets being recorded. As SOAC had no operations, the net assets acquired were recorded at their historical cost. Adjustments related to the Business Combination including consideration paid to DeepGreen shareholders and any other adjustments to eliminate the historical equity of SOAC and recapitalize the equity of DeepGreen were recorded to common shares to reflect the effective issuance of common shares to SOAC and PIPE investors in the Business Combination. 7. TOML Acquisition On March 31, 2020, the Company entered into an acquisition agreement to wholly acquire TOML and other entities in the group from Deep Sea Mining Finance Ltd. (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 net assets acquired as part of the TOML Acquisition were as follows: ​ ​ ​ ​ ​ Net assets acquired ​ ​ ​ ​ ​ Total acquisition cost ​ $ 32,047 Allocated to: ​ ​ Equipment ​ ​ 21 Exploration contracts (Note 10) ​ ​ 42,701 Deferred tax liability 1 ​ ​ ( 10,675 ) Net assets acquired ​ $ 32,047 1. A deferred tax liability was recognized by the Company on the acquisition which related to differences between the book value and the tax basis of the TOML exploration contract. ​ ​ ​ ​ 128 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 8. Receivables and Prepayments The amounts of outstanding receivables and prepayments at December 31, 2022 and 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 2022 December 31 2021 Taxes and other receivables $ 117 $ 64 Prepayments ​ 2,643 ​ 3,622 ​ $ 2,760 $ 3,686 ​ ​ ​ 9. Equipment The movements in the Company’s capital equipment are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exploration and ​ ​ ​ ​ Cost ​ other equipment ​ Office equipment ​ Total December 31, 2020 $ 2,240 ​ $ 21 ​ $ 2,261 Additions ​ 560 ​ — ​ 560 December 31, 2021 ​ 2,800 ​ 21 ​ 2,821 Additions ​ 1,026 ​ — ​ 1,026 December 31, 2022 $ 3,826 ​ $ 21 ​ $ 3,847 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated depreciation ​ ​ ​ December 31, 2020 $ ( 933 ) ​ $ ( 18 ) ​ $ ( 951 ) Amortization for the year ​ ( 453 ) ​ ( 1 ) ​ ( 454 ) December 31, 2021 ​ ( 1,386 ) ​ ( 19 ) ​ ( 1,405 ) Amortization for the year ​ ( 416 ) ​ ( 1 ) ​ ( 417 ) December 31, 2022 $ ( 1,802 ) ​ $ ( 20 ) ​ $ ( 1,822 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net book value ​ ​ ​ As at December 31, 2021 $ 1,414 ​ $ 2 ​ $ 1,416 As at December 31, 2022 $ 2,024 ​ $ 1 ​ $ 2,025 ​ ​ ​ 10. Exploration Contracts Significant Exploration Agreements NORI Exploration Contract: The Company’s wholly-owned subsidiary, NORI, was granted the NORI Exploration Contract on July 22, 2011 under the sponsorship of Nauru. The contract application fee of $ 0.3 million, provides NORI with exclusive rights to explore for polymetallic nodules in the NORI Area for an initial term of 15 years (renewable for successive five-year periods) subject to complying with the exploration contract terms (Note 20) 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 20). 129 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Marawa Agreements: Marawa executed the Marawa Exploration Contract with the ISA on January 19, 2015. The Marawa Exploration Contract provides Marawa with exclusive rights to explore for polymetallic nodules in the Marawa Area for an initial term of 15 years (subject to renewal for successive five-year periods) subject to complying with the exploration contract terms and the priority right to apply for an exploitation contract to collect polymetallic nodules in the same area. On March 17, 2012, the Company’s wholly-owned subsidiary, DeepGreen Engineering Pte. Ltd. (“DGE”), entered into an Option Agreement (“Marawa Option Agreement”) with Marawa and Kiribati. Under the amended Marawa Option Agreement dated October 1, 2013, DGE paid an option fee of $ 0.3 million to acquire the right to purchase tenements, as may be granted to Marawa by the ISA or any other regulatory body, for the greater of $ 0.3 million or the value of any amounts owing to DGE by Marawa. The exercise period for the option is a maximum of 40 years after the date of the execution of the amended Marawa Option Agreement. On October 1, 2013, DGE also entered into a services agreement (“Marawa Services Agreement”) with Marawa and Kiribati, which grants DGE the exclusive right to carry out all exploration and collection in the Marawa Area. Under the Marawa Services Agreement, DGE will pay to the ISA, on behalf of Marawa, the following: $ 47 thousand annual exploration fees, ISA royalties and taxes, and the ISA exploitation application fee of $ 0.3 million. In addition, DGE will ensure that the activities carried out in the Marawa Area by DGE and any other service contractor complies with the ISA regulations and any other required regulations. The Marawa Services Agreement grants DGE the right to recover any and all polymetallic nodules from the Marawa Area by paying Kiribati a royalty per wet tonne of polymetallic nodules collected (adjusted for inflation from October 1, 2013 onwards). DGE has the right to terminate the Marawa Services Agreement at its sole discretion by giving written notice to Marawa and Kiribati, and such termination shall take effect two months following the date of the termination notice, provided that DGE shall pay to the ISA on behalf of Marawa the fees or payments legally owed to the ISA by Marawa (including the annual ISA exploration fee and ISA royalties and taxes) that are outstanding at the date of termination or that are incurred within 12 months after the date of such termination. There are no other longer-term commitments with respect to the Marawa Option Agreement and the Marawa Services Agreement. As at December 31, 2022, 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. 130 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Strategic Partnerships Strategic Alliance with Allseas Pilot Mining Test Project On March 29, 2019, the Company and Allseas entered into a Strategic Alliance Agreement (“SAA”) with the objective to develop and operate commercial nodule collection systems in the Company’s contract areas. The SAA included the intent to develop and deploy a Pilot Mining Test System (“PMTS”), the successful completion of which would support the Company’s application for an exploitation contract with the ISA. Allseas committed to a fixed price development contract and would own all intellectual property used and generated in the development of the PMTS. Upon successful completion of the pilot trial of the PMTS in NORI Area D, the Company and Allseas agreed to enter into a nodule collection and shipping agreement whereby Allseas would provide commercial services for the collection of the first 200 million metric tonnes of polymetallic nodules on a cost plus 50 % profit basis. Under the terms of the SAA, Allseas subscribed for and ultimately received 7.7 million common shares for a total of $ 20.0 million paid in cash to the Company. On July 8, 2019, as contemplated by the SAA, the Company and Allseas entered into the Pilot Mining Test Agreement (“PMTA”) which governs the terms, design specifications, procedures, and timetable under which Allseas agreed to complete a pilot trial of the PMTS in NORI Area D. Under the PMTA, in exchange for Allseas’ development efforts, upon successful delivery of the pilot trial of the PMTS in NORI Area D by Allseas, the Company agreed to pay Allseas: (a) $ 30.0 million in cash and (b) issue 11.6 million common shares. Contract Amendments On February 20, 2020, the PMTA was amended to recognize the acquisition by Allseas of the Hidden Gem , a former drillship to be converted into a surface production vessel that would first be used as part of the PMTS, and later as part of the commercial production system. The Company paid an additional: (a) $ 10.0 million in cash and (b) $ 10.0 million by issuing 3.2 million common shares valued at $ 3.11 per share. On March 4, 2021 and June 30, 2021, the Company and Allseas further amended the PMTA whereby, instead of issuing 11.6 million common shares upon successful delivery of the pilot trial of the PMTS in NORI Area D, the Company issued the Allseas Warrant (Note 13). The 2021 contract amendments also restructured the original $ 30.0 million lump sum cash payment upon successful delivery of the PMTS to: ● $ 10 million within 10 business days of the closing of the Business Combination and Allseas providing confirmation of placing an order for certain equipment and demonstrating certain progress on construction of the PMTS; ● $ 10 million on the later of (i) January 1, 2022, and (ii) confirmation of successful completion of the North Sea drive test; and ● $ 10 million upon successful completion of the pilot trial of the PMTS in NORI Area D. On October 5, 2021, the first $ 10 million payment was paid to Allseas for successfully reaching the first progress milestone, with the completion of the Business Combination and by confirming the order of certain equipment and demonstrating certain progress on construction of the PMTS. The Company made the second $ 10 million payment of the amended PMTA on April 25, 2022, upon successful completion of the North Sea drive test on March 25, 2022. 131 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The Company 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. Therefore, the Company records the expense on a straight-line basis over the life of the contract which resulted in total expenses of $ 5.8 million (2021: $ 14.3 million) recorded as exploration and evaluation expenses for the year ended December 31, 2022. On November 11, 2022, the Board approved the successful completion of the PMTS in NORI Area D and payment of the third milestone amounting to $ 10 million by issuing 10 million common shares to Allseas. On February 13, 2023, the contract was further amended to allow TMC to pay the third milestone payment to Allseas in shares and these shares were issued to Allseas on February 23, 2023. In relation to the third milestone payment, the Company has recorded an expense equal to $ 8.7 million based on the fair market value of the Company's shares on November 11, 2022. As at December 31, 2022, Allseas owned 23.7 million TMC common shares (2021: 16.2 million TMC common shares) which constituted 8.9 % (2021: 7.2 %) of total common shares outstanding. The Allseas total share ownership includes 3.2 million shares issued in a private placement in June 2020. On February 23, 2023 the Company settled the third milestone payment of $ 10 million and additional PMTS overage charges equal to $ 0.9 million by issuing 10.9 million common shares to Allseas (Note 24). Reconciliation – Exploration Contracts A reconciliation of the Company’s capitalized exploration contracts is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Marawa ​ ​ ​ ​ ​ ​ NORI ​ Option ​ TOML ​ ​ ​ ​ ​ Contract ​ Agreement ​ Contract ​ Total December 31, 2021 $ 250 ​ $ 199 ​ $ 42,701 ​ $ 43,150 December 31, 2022 $ 250 ​ $ 199 ​ $ 42,701 ​ $ 43,150 ​ Exploration and Evaluation Expenses The detail of exploration and evaluation expenses is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI Marawa TOML ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ For the year ended December 31, 2022 ​ Contract ​ Agreement ​ Contract ​ Total Environmental Studies ​ $ 38,022 ​ $ — ​ $ — ​ $ 38,022 Exploration Labor ​ ​ 4,420 ​ ​ 758 ​ ​ 842 ​ ​ 6,020 Share-Based Compensation (Note 15) ​ 6,086 ​ 1,167 ​ 1,235 ​ 8,488 Mining, Technological and Process Development ​ ​ 1,823 ​ ​ 47 ​ ​ 118 ​ ​ 1,988 PMTS ​ 15,603 ​ 670 ​ 1,546 ​ 17,819 Allseas Warrant (Note 13) ​ ​ 62,910 ​ ​ — ​ ​ 6,990 ​ ​ 69,900 Sponsorship, Training and Stakeholder Engagement ​ ​ 891 ​ ​ 194 ​ ​ 476 ​ ​ 1,561 Other ​ 706 ​ 16 ​ 79 ​ 801 ​ ​ $ 130,622 ​ $ 2,852 ​ $ 11,291 ​ $ 144,599 ​ 132 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI Marawa TOML ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ For the year ended December 31, 2021 ​ Contract ​ Agreement ​ Contract ​ Total Environmental Studies ​ $ 40,204 ​ $ — ​ $ — ​ $ 40,204 Exploration Labor ​ ​ 2,769 ​ ​ 606 ​ ​ 672 ​ ​ 4,047 Share-Based Compensation (Note 15) ​ 17,116 ​ 4,401 ​ 5,453 ​ 26,970 Mining, Technological and Process Development ​ ​ 5,054 ​ ​ 179 ​ ​ 179 ​ ​ 5,412 PMTS ​ 11,568 ​ 1,446 ​ 1,446 ​ 14,460 Sponsorship, Training and Stakeholder Engagement ​ ​ 760 ​ ​ 81 ​ ​ 281 ​ ​ 1,122 Other ​ ​ 673 ​ ​ 93 ​ ​ 25 ​ ​ 791 ​ ​ $ 78,144 ​ $ 6,806 ​ $ 8,056 ​ $ 93,006 ​ ​ 11. General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended For the year ended ​ ​ December 31, ​ December 31, ​ ​ 2022 ​ 2021 Professional and consulting fees (1) ​ $ 6,795 ​ $ 10,697 Investor relations (2) ​ 1,514 ​ 6,204 Office and sundry ​ 4,926 ​ 2,023 Salaries and wages ​ 5,921 ​ 3,412 Director fees ​ 788 ​ 404 Share-based compensation ​ 8,596 ​ 33,370 Transfer agent and filing fees ​ 378 ​ 82 Travel expenses ​ 600 ​ 341 Other expenses ​ — ​ 50 General and Administrative Expenses ​ $ 29,518 ​ $ 56,583 (1) Professional and consulting fees include $ 1 million of equity (RSU) settled expenses in 2022 (2021: Nil ). (2) Investor relations include $ 0.3 million of equity (RSU) settled expenses in 2022 (2021: $ 0.2 million). ​ 12. Convertible Debentures In February 2021, the Company issued a total of $ 26 million in convertible debentures. The convertible debentures had an interest rate of 7.0 % per annum, compounded annually, and had a maturity date of 24 months from the date of issuance. On September 9, 2021, the outstanding debentures were converted and as a result, the Company issued 3,068,673 common shares consisting of $ 25.5 million and $ 1.0 million of principal and accrued interest, respectively. ​ 13. Warrants For accounting purposes, the Company was considered to have issued the Public Warrants and Private Warrants as part of the Business Combination (Note 6). 133 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 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, subject to restrictions described below. As at December 31, 2022, 15,000,000 Public Warrants were outstanding. Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the units and only whole Public Warrants will trade. The Public Warrants will expire on September 9, 2026 or earlier upon redemption or liquidation. Public Warrant holders do not have the rights or privileges of holders of common shares nor any voting rights until they exercise their warrants and receive common shares. The Company will not be obligated to deliver any common shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act of 1933, as amended (“Securities Act”) with respect to the common shares underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No Public Warrants will be exercisable and the Company will not be obligated to issue a common share upon exercise of a Public Warrant unless the common share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any Public Warrants. In the event that a registration statement is not effective for the exercised Public Warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the common share underlying such unit. On July 1, 2022, the Company filed a post-effective amendment to the Registration Statement on Form S-1 with respect to the common shares underlying the Public Warrants and Private Warrants, which was declared effective by the SEC on July 12, 2022. The Company may call the Public Warrants for redemption: ● in whole and not in part; ● at a price of $ 0.01 per warrant; ● upon a minimum of 30 days ’ prior written notice of redemption; and ● if, and only if, the closing price of the common shares equals or exceeds $ 18.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 - day trading period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. If the Company calls the Public Warrants for redemption in certain circumstances, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a cashless basis, by surrendering the Public Warrants for a number of common shares per warrant equal to the lesser of: ● the quotient obtained by dividing (x) the product of the number of common shares underlying such warrant, multiplied by the excess of the average reported closing price of common shares for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders (“Fair Market Value”) over the warrant price by (y) the Fair Market Value, and ● 0.365 . As at December 31, 2022, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital. 134 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Private Warrants As at December 31, 2022, 9,500,000 Private Warrants were outstanding. The Private Warrants (including the common shares issuable upon exercise of the Private Warrants) were not transferable, assignable or salable until October 9, 2021, except to permitted transferees. The Private Warrants are identical to the Public Warrants, except that so long as they are held by the Sponsor or any of its permitted transferees: (i) the Private Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and (ii) the Private Warrants are not redeemable by the Company. The Private Warrants are subject to the Company’s redemption option at the price of $ 0.01 per warrant, if not held by the Sponsor or any of its permitted transferees, provided that the other conditions of such redemption are met, as described above. If holders of the Private Warrants elect to exercise the warrants on a cashless basis, the holder would pay the exercise price by surrendering their Private Warrants for a number of common shares equal to: ● the quotient obtained by dividing (x) the product of the number of common shares underlying the warrants, multiplied by the excess of the average reported closing price of the common shares for the ten trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent (“fair market value”) over the exercise price of the warrants by (y) the fair market value. If the Private Warrants are held by a holder other than the Sponsor or any of its permitted transferees, the Private Warrants are redeemable by the Company in all redemption scenarios applicable to the Public Warrants and exercisable by such holders on the same basis as the Public Warrants. In December 2021, the Private Warrants were transferred to permitted transferees. The Company evaluated the Private Warrants under ASC 815-40, in conjunction with the SEC Statement , and concluded that they do not meet the criteria to be classified in shareholders’ equity. Specifically, the terms of the warrants provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and, because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude the warrant from being classified in equity and thus the warrants should be classified as a liability. The Private Warrants were valued using a Black-Scholes model, which resulted in a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants was the expected volatility of the Company’s common shares. The expected volatility was estimated using a binomial model based on consideration of the implied volatility from the Company’s Public Warrants adjusted to account for the call feature of the Public Warrants at prices above $ 18.00 during 20 trading days within any 30 -trading day period. As at December 31, 2022, the fair value of outstanding Private Warrants of $ 1 million is recorded as warrants liability. The following table presents the changes in the fair value of warrants liability: ​ ​ ​ ​ ​ ​ Private ​ ​ Warrants Warrants liability as at December 31, 2021 ​ $ 3,126 Reduction in fair value of warrants liability ​ ( 2,143 ) Warrants liability as at December 31, 2022 ​ $ 983 ​ 135 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ As at December 31, 2022, the fair value of the Private Warrants was estimated using the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 ​ Exercise price ​ $ 11.50 ​ $ 11.50 ​ Share price ​ $ 0.77 ​ $ 2.08 ​ Volatility ​ 88.05 % ​ 64.6 % Term ​ 3.69 years ​ 4.7 years Risk-free rate ​ 4.04 % ​ 1.2 % Dividend yield ​ 0.0 % ​ 0.0 % ​ There were no exercises or redemptions of the Public Warrants or Private Warrants during the year ended December 31, 2022. Allseas Warrant The Allseas Warrant was granted on March 4, 2021, vested and became exercisable for 11.6 million common shares upon successful completion of the PMTS in November 2022, and will expire on September 30, 2026. The Company recognized a charge of $ 69.9 million in the fourth quarter of 2022 ( nil in 2021), representing the fair market value of the Allseas Warrant on the date it was granted. Fair market value was determined using the DeepGreen’s share price on the date the Allseas Warrant was granted to Allseas ($ 7.00 per share), reduced by the exercise price of $ 0.01 per share. ​ 14. Common Shares Authorized and Issued As at December 31, 2022, the authorized, issued and outstanding common shares and Special Shares of the Company are as follows: ​ ​ ​ ​ ​ ​ ​ Issued and ​ ​ Authorized ​ Outstanding Common shares Unlimited , with no par value 266,812,131 Class A Special Shares 5,000,000 , with no par value 4,448,259 Class B Special Shares 10,000,000 , with no par value 8,896,399 Class C Special Shares 10,000,000 , with no par value 8,896,399 Class D Special Shares 20,000,000 , with no par value 17,792,922 Class E Special Shares 20,000,000 , with no par value 17,792,922 Class F Special Shares 20,000,000 , with no par value 17,792,922 Class G Special Shares 25,000,000 , with no par value 22,241,179 Class H Special Shares 25,000,000 , with no par value 22,241,179 Class I Special Shares 500,000 , with no par value 500,000 Class J Special Shares 741,000 , with no par value 741,000 ​ The holders of the Company’s common shares are entitled to one vote for each common share held. Each class of Special Shares do not have voting rights and do not participate in earnings. The Special Shares automatically convert to TMC common shares if TMC common shares trade at a price on any 20 trading days within any 30 -trading day period that is greater than or equal to the specific trigger price for the respective class of Special Share. The trigger prices range from $ 15 per share to $ 200 per share (refer to Note 6 for details). As the Special Shares meet the indexation and equity classification criteria under ASC 815-40, the Special Shares have been classified as equity instruments at issuance. As at December 31, 2021, all 509,459 DeepGreen Class B Preferred Shares were converted to common shares. 136 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Common Share Continuity In accordance with ASC 805, under a reverse recapitalization, the equity structure reflects the equity structure of SOAC, as the legal acquirer, including the equity interests SOAC issued to affect the Business Combination. Accordingly, the Company has restated its equity structure using the Exchange Ratio of the Business Combination to reflect the number of shares of SOAC issued in the reverse acquisition. The share amounts stated below have been recast from the historical share totals of DeepGreen to reflect the Exchange Ratio. ​ ​ ​ ​ ​ ​ ​ Common shares Number Amount December 31, 2020 189,493,593 ​ $ 154,431 Issued for services (Note 10& 11) 4,432,606 ​ ​ 26,960 Exercise of stock options 6,312,756 ​ ​ 14,297 Conversion of restricted share units (Note 15) ​ 173,216 ​ ​ 399 Conversion of preferred shares to common shares 509,459 ​ ​ 550 Issued in Business Combination (Note 6) 21,384,296 ​ ​ 72,411 Conversion of debentures (Note 12) 3,126,567 ​ ​ 27,003 December 31, 2021 ​ 225,432,493 ​ $ 296,051 Issuance of shares under PIPE financing (Note 19) ​ 38,266,180 ​ ​ 29,621 Exercise of stock options ​ 118,461 ​ ​ 142 Conversion of restricted share units (Note 15) ​ 2,877,068 ​ ​ 6,875 Share purchase under Employee Stock Purchase Plan (Note 15) ​ 117,929 ​ ​ 193 December 31, 2022 266,812,131 ​ $ 332,882 ​ ​ 15. 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 as of December 31, 2022 is 33,699,685 common shares, provided that 2,243,853 of the outstanding common shares shall only be available for awards made to non-employee directors of the Company. On the first day of each fiscal year beginning in 2022 to the tenth anniversary of the closing of the Business Combination, the number of common shares that may be issued pursuant to the Plan is automatically increased by an amount equal to the lesser of 4 % of the number of outstanding common shares or an amount determined by the board of directors. Stock options Pursuant to the Company’s stock option plan, directors may, from time to time, authorize the issuance of stock options to directors, officers, employees, and consultants of the Company and its subsidiaries. The board of directors grants such options with vesting periods and exercise prices determined at its sole discretion. As described in Note 6, existing DeepGreen options were automatically adopted by TMC after application of the Exchange Ratio to both the underlying number of common shares and the exercise price and provided for additional Special Shares to be issued to option holders on a pro-rata basis, if exercised. The Rollover Options did not change in value as a result of the Business Combination. Comparative information below has been restated by adjusting for the number of options and exercise prices for the Exchange Ratio. As at December 31, 2022, there were 15,356,340 stock options outstanding under the Company’s Short-Term Incentive Plan (“STIP”) and 9,783,922 stock options outstanding under the Company’s Long-Term Incentive Plan (“LTIP”). The Company makes awards under the STIP and LTIP under its equity incentive plans in effect at the time of the award, which is currently the Plan. No new stock options were granted by the Company under the STIP or LTIP plans during 2022. 137 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Outstanding under STIP plan : A continuity schedule summarizing the movements in the Company’s stock options under the STIP plan is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Aggregate ​ Weighted ​ ​ average intrinsic average ​ ​ Number of ​ exercise ​ value of ​ contractual ​ ​ Options ​ price per ​ stock ​ life ​ ​ Outstanding ​ option ​ options ​ (years) Outstanding – December 31, 2020 15,549,977 ​ $ 0.80 $ 36,126 ​ 7.34 Granted 6,373,203 ​ ​ 2.10 ​ — ​ — Expired ( 50,946 ) ​ ​ 0.39 ​ — ​ — Cancelled/Forfeited ( 57,893 ) ​ ​ 0.65 ​ — ​ — Exercised ( 6,310,593 ) ​ ​ 0.67 ​ — ​ — Outstanding – December 31, 2021 15,503,748 ​ $ 1.40 $ 17,415 ​ 6.33 Granted — ​ ​ — ​ — ​ — Expired — ​ ​ — ​ — ​ — Cancelled/Forfeited ( 28,947 ) ​ ​ 2.60 ​ — ​ — Exercised ( 118,461 ) ​ ​ 0.65 ​ — ​ — Outstanding – December 31, 2022 15,356,340 ​ $ 1.40 $ 1,582 ​ 5.11 Vested and expected to vest – December 31, 2022 15,356,340 ​ $ 1.40 $ 1,582 ​ 5.11 Vested and exercisable – December 31, 2022 14,738,815 ​ $ 1.13 $ 1,582 ​ 5.10 ​ A summary of the Company’s stock options granted and outstanding under the Company’s STIP as at December 31, 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average Number of Number of ​ ​ ​ ​ ​ life to expiry ​ Options ​ Options Expiry Date ​ Exercise price ​ (years) ​ Outstanding ​ Exercisable June 30, 2023 ​ $ 0.87 0.5 162,100 162,100 March 31, 2024 ​ $ 0.65 1.25 73,811 73,811 December 31, 2025 ​ $ 0.65 3.00 11,578 11,578 January 27, 2026 ​ $ 0.52 - $ 2.59 3.08 1,075,229 1,075,229 February 2, 2026 ​ $ 0.65 3.09 57,893 57,893 February 17, 2026 ​ $ 0.22 - $ 0.52 3.13 431,494 431,494 June 1, 2028 ​ $ 0.65 - $ 8.64 5.42 12,849,518 12,231,993 June 30, 2028 ​ $ 2.59 5.50 694,717 694,717 ​ ​ ​ ​ ​ ​ 15,356,340 14,738,815 ​ The total grant date fair value of STIP stock options that vested during the year ended December 31, 2022, was $ 2.4 million. As at December 31, 2022, total unrecognized share-based compensation expense of $ 0.6 million is expected to be recognized over a weighted-average recognition period of approximately one year . On March 4, 2021, the Company granted 9,783,922 stock options under its LTIP. These stock options have an exercise price of $ 0.65 per option and expire on June 1, 2028. The aggregate intrinsic value of LTIP stock options as at December 31, 2022 was $ 1.2 million. None of the LTIP stock options were exercisable on December 31, 2022. The Company expects LTIP options to vest as and when the market and performance milestones described below are achieved. As at December 31, 2022, total unrecognized share-based compensation expense for the LTIP stock options was $ 23 million. As at December 31, 2022, the fair value of the Company’s common shares was $ 0.77 per share. As at December 31, 2022, the Company used the closing market price of its common shares to determine the intrinsic value of outstanding stock options. 138 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The aggregate intrinsic value of stock options exercised during the year ended December 31, 2022 was $ 62 thousand. Activity and Valuation During 2022, the board of directors approved the extension of the expiry dates of certain stock option grants to reflect the extension of various consulting contracts, resulting in share-based compensation expense of $ 0.4 million. The fair value of these modifications was calculated using Black-Scholes option pricing models. Outstanding under LTIP plan: The stock options granted under the Company’s LTIP plan have an exercise price of $ 0.65 per share and expire on June 1, 2028. The LTIP awards vest as follows: (1) Tranche 1 - 25 % when the Company’s market capitalization equals $ 3 billion; (2) Tranche 2 - 35 % when the Company’s market capitalization equals $ 6 billion; (3) Tranche 3 - 20 % upon the date that the ISA grants an exploitation contract to the Company; and (4) Tranche 4 - 20 % upon the commencement of the first commercial production following the grant of the exploitation contract. Tranche 1 and Tranche 2 vest based on the Company’s market capitalization of $ 3 billion and $ 6 billion, respectively. Accordingly, these options are determined to be market-based awards for which the Company has calculated fair value and derived a service period through which to expense the related fair value. The options included in Tranche 1 and Tranche 2 had a grant date fair value of $ 5.59 per share and $ 5.42 per share and derived service periods of 0.33 years and 1.41 years, respectively. The Company will expense these awards ratably over the remaining service period. Tranche 3 and Tranche 4 of the LTIP stock options vest based on the date the ISA grants an exploitation contract and the commencement of commercial production. These options are determined to be performance-based awards. The Company will recognize compensation costs for the performance-based awards if and when the Company concludes that it is probable that the performance conditions will be achieved. As at December 31, 2022, no compensation expense related to the performance based awards was recorded as the awarding of an ISA contract is outside the control of the Company. The Company will reassess the probability of the vesting of the performance-based awards at each reporting period and adjust the compensation cost when determined to be probable. The fair value of awards granted under the LTIP was estimated on the date of grant using the following weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tranche 1 and ​ ​ ​ ​ ​ ​ Tranche 2 1 ​ Tranche 3 2 ​ Tranche 4 2 Expected stock price volatility ​ 91.0 % ​ 91.2 % ​ 91.2 % Expected life of options (years) ​ ​ 7.3 years ​ 5.2 years ​ 5.4 years Risk-free interest rate ​ 1.3 % ​ 0.8 % ​ 0.9 % Expected dividend yield ​ 0.0 % ​ 0.0 % ​ 0.0 % Estimated per share fair value of the Company’s common shares $ 6.05 $ 6.05 $ 6.05 ​ 1. The fair value of the market-based awards granted under the LTIP was estimated on the date of grant using a Monte-Carlo model to simulate a distribution of future share prices. 2. The fair value of the performance-based awards granted under the LTIP was estimated on the date of grant using the Black-Scholes option pricing model. Changes in these assumptions could have a material impact on the Company’s loss and comprehensive loss. 139 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ During the year ended December 31, 2022, the Company recognized $ 9.5 million of share-based compensation expense for stock options (originally issued under STIP and LTIP plans) in the statement of loss and comprehensive loss (2021: $ 59.3 million). Share-based compensation expense for stock options totaling $ 4.8 million related to general and administration matters were charged to the statement of loss and comprehensive loss for the year ended December 31, 2022 (2021: $ 32.7 million). The Company recorded a total of $ 4.7 million of share -based compensation expense for stock options related to exploration and evaluation activities for the year ended December 31, 2022 (2021: $ 26.6 million). Restricted Share Units The Company may, from time to time, grant RSUs to directors, officers, employees, and consultants of the Company and its subsidiaries under the Plan, whether to the STIP, the LTIP or otherwise. During the year ended December 31, 2022, the Company granted 464,632 RSUs vesting in thirds on each anniversary of the grant date, 527,800 RSUs vesting in fourths on each anniversary of the grant date, 476,189 RSUs vesting in full one year from grant date and 1,721,729 RSUs vesting immediately on grant date. On each vesting date, RSU holders are entitled to receive common shares equivalent to the number of RSUs held provided the holder is providing service to the Company on such vesting date. The details of RSUs granted by the Company during the year are as follows: ​ ​ ​ ​ ​ ​ Vesting Period 2022 2021 Vesting Immediately 1,721,729 173,216 Vesting fully on the anniversary of the grant date 476,189 — Vesting in halves on each anniversary of the grant date — 54,687 Vesting in thirds on each anniversary of the grant date 464,632 3,556,225 Vesting in fourths on each anniversary of the grant date 527,800 343,750 Total Units Granted 3,190,350 4,127,878 ​ Of the 1,721,729 units vesting immediately on grant date, 1,072,572 units were issued to settle liabilities with a carrying amount of $ 1.8 million, at a weighted average grant date fair value of $ 1.64 per RSU. During 2022 476,189 units (2021: nil ) were granted to the Company’s non-employee directors under the Company’s Non-employee Director Compensation Policy, which vest upon the Company’s 2023 annual shareholders meeting. The total fair value of units granted as annual grants to the non-employee directors in 2022 amounted to $ 700,000 ($ nil in 2021). A summary of the RSU activity in 2022 is presented in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Number of ​ average grant- ​ ​ RSUs ​ date fair value ​ ​ Outstanding ​ per RSU Outstanding – December 31, 2021 3,946,630 $ 3.31 Granted (1) 3,190,350 ​ 1.73 Forfeited ​ ( 396,691 ) ​ ​ 2.94 Exercised ​ ( 2,925,146 ) ​ ​ 2.38 Outstanding – December 31, 2022 3,815,143 $ 2.75 (1) Granted units issued to consultants and which vest immediately include 477,740 and 171,417 units (2021: Nil and 118,528 units), resulting with $ 1 million and $ 0.3 million (2021: Nil and $ 0.2 million) charged to professional and consulting fees expense and to investor relations expense, respectively. 140 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The grant date fair value of RSUs is equivalent to the closing share price of the Company’s common shares on the date of grant. During the year, a total of $ 7.5 million was charged to the statement of loss and comprehensive loss as share-based compensation expense for RSUs (2021: $ 1.0 million). Share-based compensation expense for RSUs totaling $ 3.8 million related to general and administration matters was charged to the statement of loss and comprehensive loss for the year ended December 31, 2022 (2021: $ 0.6 million). The Company recorded a total of $ 3.7 million of share-based compensation expense for RSUs related to exploration and evaluation activities for the year ended December 31, 2022 (2021: $ 0.4 million). As at December 31, 2022, total unrecognized share-based compensation expense for RSUs was $ 6.1 million (December 31, 2021 - $ 12.3 million). As at December 31, 2022, an aggregate of 5,354 vested units were outstanding and due to be converted into common shares. Employee Stock Purchase Plan On May 31, 2022, TMC’s 2021 Employee Stock Purchase Plan (“ESPP”) was approved at the Company’s 2022 annual shareholders meeting. As of December 31, 2022, there were 5,254,324 common shares reserved for issuance under the ESPP. This included 2,254,324 shares added to the ESPP in January 2022 pursuant to the ESPP’s automatic annual increase provision discussed below. Under the ESPP, the number of shares reserved for issuance is subject to an annual increase provision which provides that on the first day of each of the Company’s fiscal years starting in 2022, common shares equal to the lesser of (i) 1 % percent of the common shares outstanding on the last day of the immediately preceding fiscal year, or (ii) such lesser number of shares as is determined by the board of directors will be added to the ESPP. Participation in the ESPP is available to all full-time and certain part-time employees. The ESPP comprises offering periods that are twenty-four (24) months in length, which begin on approximately every June 1 and December 1. Each offering period includes four purchase periods of six months each, which begin on approximately every June 1 and December 1, or at such other times designated by the board of directors or its compensation committee. At the exercise date, which is the last business day of each purchase period, the accumulated deductions from participating employees are used to purchase common shares of the Company. Shares are purchased at a price equal to 85 % of the lower of either the share price of the Company’s common shares on the first business day of the particular offering period or the last business day of the purchase period. The ESPP also has an automatic reset feature wherein, if the share price of the common share on any exercise date is less than the share price of the common share on the first business day of the applicable offering period, then such offering period shall automatically terminate immediately after the purchase of the common shares. In such case, a new offering period shall commence on the first business day following the exercise date. The ESPP includes the following limitations: ● an employee’s contribution is limited to 15 % of the employee’s annual gross earnings, not to exceed $ 25,000 per year, ● an employee’s purchases in any offering period cannot exceed 15,000 common shares, and ● an employee’s purchases are capped, not to exceed 5 % of the Company’s total outstanding common shares. During 2022, the Company issued 117,929 common shares to its employees as part of its ESPP program. A total of $ 0.1 million was charged to the statement of loss and comprehensive loss as share-based compensation expense for the year ended December 31, 2022, representing the share price purchase discount offered by the Company. From the amount charged in 2022, $ 35 thousand was recorded in exploration and evaluation expenses and $ 67 thousand was recorded in general and administrative expenses. ​ 16. Loss per Share Basic loss per share is computed by dividing the loss by the weighted-average number of common shares of the Company outstanding during the period. Diluted loss per share is computed by giving effect to all common share equivalents of the Company, including outstanding stock options, RSUs, warrants, Special Shares and options to purchase Special Shares, to the extent these are dilutive. Basic and diluted loss per share was the same for each period presented as the inclusion of all common share equivalents would have been anti-dilutive. 141 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Anti-dilutive equivalent common shares were as follows: ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ For the year ended ​ ​ December 31, ​ December 31, ​ 2022 2021 Outstanding options to purchase common shares ​ 25,140,262 ​ 25,287,670 Outstanding RSUs 3,815,143 3,946,630 Outstanding shares under ESPP ​ 12,212 ​ — Outstanding warrants 36,078,620 36,078,620 Outstanding Special Shares and options to purchase Special Shares 136,239,964 136,239,964 Total anti-dilutive common equivalent shares 201,286,201 201,552,884 ​ ​ 17. Financial Instruments Categories of Financial Instruments ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 2022 December 31 2021 Financial assets ​ ​ Amortized cost ​ ​ Cash $ 46,842 $ 84,873 Receivables and Prepayments ​ ​ 2,760 ​ ​ 3,686 ​ $ 49,602 $ 88,559 ​ ​ ​ ​ ​ ​ ​ Financial liabilities ​ ​ Amortized cost ​ ​ Accounts payable and accrued liabilities $ 41,614 $ 26,573 Fair value through profit or loss Warrants liability ​ 983 ​ ​ 3,126 ​ $ 42,597 $ 29,699 ​ ​ 18. Related Party Transactions The Company’s subsidiary, DGE, is engaged in a consulting agreement with SSCS Pte. Ltd. (“SSCS”) to manage offshore engineering studies. A director of DGE is employed through SSCS. Consulting services during the year ended December 31, 2022 totaled $ 275 thousand (2021: $ 275 thousand), out of which $ 220 thousand (2021: $ 275 thousand) is disclosed as exploration labor within exploration and evaluation expenses (Note 10) and $ 55 thousand (2021: Nil ) is disclosed as salaries and wages within general and administrative expenses (Note 11). As at December 31, 2022, the amount payable to SSCS was $ 46 thousand (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 year ended December 31, 2022 amounted to $ 375 thousand (2021: $ 375 thousand) out of which $ 188 thousand (2021: $ 375 thousand) is disclosed as exploration labor within exploration and evaluation expenses (Note 10) and $ 188 thousand (2021: Nil ) is disclosed as salaries and wages within general and administrative expenses (Note 11). As at December 31, 2022, the amount payable to Ocean Renaissance was $ Nil (2021: Nil ). 142 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ 19. PIPE Financing On August 12, 2022, the Company entered into three securities purchase agreements for the private placement of an aggregate of 37,978,680 of the Company’s common shares. The Company entered into a securities purchase agreement with the purchasers named therein for the issuance and sale of an aggregate of 31,625,000 common shares at a purchase price of $ 0.80 per share, a separate securities purchase agreement with Gerard Barron, the Company’s Chief Executive Officer and Chairman, for the issuance and sale of 103,680 Common Shares at $ 0.9645 per share, the consolidated closing bid price per Common Share on August 11, 2022, and a separate securities purchase agreement with ERAS Capital LLC, the family fund of the Company’s director, Andrei Karkar, for the issuance and sale of 6,250,000 common shares at a purchase price of $ 0.80 per share (. As at December 31, 2022, all of the 37,978,680 shares were issued and the Company received gross proceeds amounting to $ 30.4 million. The Company incurred $ 1.0 million as placement agent fees and offering expenses out of which expenses amounting to $ 0.2 million were settled by issuing 287,500 shares at issue price of $ 0.80 per share. 20. 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 the 2017-2021 period. 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 we are implementing the next five-year plan. NORI has estimated its work plan for 2023 to be approximately $ 25 million, 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 Area, Marawa and DGE committed to spend a defined amount of funds on exploration activities on an annual basis. The commitment for fiscal 2023 and 2024 is Australian dollar (“AUD”) $ 3 million and AUD $ 2 million, respectively. Such commitment is negotiated with the ISA as part of a five-year plan submission and is subject to regular periodic reviews. To date, limited offshore marine resource definition activities in the Marawa Contract Area have occurred. DGE expects to collaborate with Marawa to assess the viability of any potential project in the Marawa Contract Area, the timing of such assessment is uncertain. 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. The five-year period ending in 2021 included activities of both TOML (from its acquisition in 2020) and its predecessor. On December 23, 2022, the ISA accepted TOML’s proposed program of activities for the 2022-2026 five-year period. 143 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ Offtake Agreements On May 25, 2012, the Company’s wholly-owned subsidiary, DGE, and Glencore International AG (“Glencore”) entered into a copper offtake agreement and a nickel offtake agreement. DGE has agreed to deliver to Glencore 50 % of the annual quantity of copper and nickel produced at a DGE-owned processing facility from nodules derived from the NORI Area at London Metal Exchange referenced market pricing with allowances for product quality and delivery location. Both the copper and nickel offtake agreements are for the life of the Company’s rights to the NORI Area. Either party may terminate the agreement upon a material breach or insolvency of the other party. Glencore may also terminate the agreement by giving twelve months’ notice. Sponsorship Agreements On July 5, 2017, Nauru, the Nauru Seabed Minerals Authority and NORI entered into a sponsorship agreement formalizing certain obligations of the parties in relation to NORI’s exploration and potential exploitation of the NORI Area. Upon reaching the minimum recovery level within the exploitation contract area, NORI will pay Nauru a seabed mineral recovery payment based on the polymetallic nodules recovered from the exploitation contract area. In addition, NORI will pay an administration fee each year to Nauru for such administration and sponsorship, which is subject to review and increase in the event NORI is granted an ISA exploitation contract. NORI has begun discussions with the Government of Nauru to renegotiate the existing sponsorship agreement and has also committed to ensuring NORI pays corporate income tax within Nauru. On March 8, 2008, Tonga and TOML entered into a sponsorship agreement formalizing certain obligations of the parties in relation to TOML’s exploration and potential exploitation of the TOML Area (“TOML Sponsorship Agreement”). Upon reaching the minimum recovery level within the exploitation contract area, TOML has agreed to pay Tonga a seabed mineral recovery payment based on the polymetallic nodules recovered from the exploitation contract area. In addition, TOML has agreed to pay reasonable direct costs incurred by Tonga to administer the obligations of Tonga to the ISA. On September 23, 2021, the Company and Tonga updated the TOML Sponsorship Agreement harmonizing the terms of its engagement with TOML with those held by NORI with Nauru. TOML expects to renegotiate the existing sponsorship agreement with Tonga prior to entering into operations in the TOML area and has committed to paying corporate income tax within Tonga. 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. ​ 144 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ On January 23, 2023, an investor in the 2021 PIPE from the Business Combination filed a lawsuit against us in New York Supreme Court, New York County, captioned Atalaya Special Purpose Investment Fund II LP et al. v. Sustainable Opportunities Acquisition Corp. n/k/a TMC The Metals Company Inc ., Index No. 650449/2023 (N.Y. Sup. Ct.). The complaint alleges that we breached the representations and warranties in the plaintiff’s PIPE Subscription Agreement and breached the covenant of good faith and fair dealing. The Plaintiffs are seeking to recover compensable damages caused by the alleged wrongdoings. There have been no substantive developments in this case. The Company denies any allegations of wrongdoing and are preparing to file a motion to dismiss. There is no assurance, however, that we will be successful in our 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 we may incur a loss in this matter. Such losses or range of possible losses cannot be reliably estimated. ​ 21. Supplemental Cash Flow Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ For the year ended ​ ​ December 31, ​ December 31, Non-Cash Investing and Financing Activities 2022 2021 Common shares issued to settle previous services $ — $ 13,103 Conversion of debentures (Note 12) $ — $ 27,003 ​ ​ 22. Segmented Information The Company’s business consists of only one operating segment, namely exploration of seafloor polymetallic nodules, which includes the development of a metallurgical process to treat such seafloor polymetallic nodules. Details on the geographical basis of the Company’s long-lived assets based on where each legal entity is domiciled are as follows: ​ ​ ​ ​ ​ ​ ​ ​ Equipment December 31, 2022 December 31, 2021 Nauru $ 1,154 $ 1,246 Singapore ​ ​ 863 ​ ​ 158 Tonga ​ 7 ​ 10 North America ​ 1 ​ 2 Total $ 2,025 $ 1,416 ​ ​ ​ 23. Income Taxes Reconciliation of Effective Tax Rate The Company is subject to Canadian federal and provincial tax for the estimated assessable profit for the years ended December 31, 2022 and 2021 at a rate of 27 %. The Company had no assessable profit in Canada for all periods disclosed. 145 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ The income tax expense at statutory rates for the Company can be reconciled to the reported loss for the years 2022 and 2021 per the statement of loss and comprehensive loss as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ For the year ended ​ ​ ​ December 31, ​ December 31, ​ ​ 2022 2021 Net loss for the year, before taxes ​ $ ( 170,887 ) ​ $ ( 141,299 ) ​ Canadian Federal and Provincial income tax rates ​ 27.00 % ​ 27.00 % Income tax recovery based on the above rates $ ( 46,139 ) $ ( 38,151 ) ​ Permanent differences ​ 1,952 ​ 8,597 ​ Effect of differences in future and foreign tax rates ​ 37,490 ​ 22,721 ​ Foreign exchange and other ​ — ​ 1 ​ Expiry of losses as a result of the Business Combination (Note 6) ​ ​ — ​ ​ 9,181 ​ Valuation allowance changes affecting the provision of income taxes ​ 6,774 ​ ( 2,349 ) ​ Total income taxes $ 77 $ — ​ ​ The Company currently has no uncertain tax positions and is therefore not reflecting any adjustments. Components of the Company’s deferred income tax assets (liabilities) are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 Deferred Tax Assets ​ ​ Non-capital losses $ 16,074 $ 7,409 Capital losses and other ​ 172 ​ — Equipment ​ 79 ​ 90 Share issuance costs ​ 221 ​ 10 Total deferred income tax assets $ 16,546 $ 7,509 Valuation allowance ​ ( 16,546 ) ​ ( 7,509 ) Deferred tax asset recognized $ — $ — ​ ​ ​ ​ ​ ​ ​ Deferred Tax Liability ​ ​ ​ ​ ​ ​ Difference between the book value and the tax basis of the TOML exploration contract (Note 7) ​ $ ( 10,675 ) ​ $ ( 10,675 ) Deferred tax liability recognized $ ( 10,675 ) $ ( 10,675 ) ​ Deductible temporary differences, unused tax losses and unused tax credits are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 Expiry Date Range ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-capital losses $ 67,409 $ 33,645 See below Capital losses $ 1,273 $ — Not applicable Equipment $ 291 $ 333 Not applicable Share issuance costs $ 821 $ 37 Not applicable ​ As at December 31, 2022, the Company had non-capital loss carry-forwards of $ 67.4 million that may be used to offset future taxable income. Non-capital losses incurred in Canada prior to closing of the Business Combination (Note 6) have been restricted upon the acquisition of control event and may no longer be available to offset future taxable income. 146 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ These losses, if not utilized, will expire as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Canada Singapore United States Tonga 2035 $ — $ — $ 2 $ — 2041 ​ 4,100 ​ — ​ — ​ — 2042 ​ ​ 13,914 ​ ​ — ​ ​ 1 ​ ​ — No expiry ​ — ​ 14,231 ​ — ​ 35,158 Loss carry-forwards ​ $ 18,014 ​ $ 14,231 ​ $ 3 ​ $ 35,158 ​ The Company files income tax returns in Canada, the United States, Singapore and Tonga, and is subject to examination in these jurisdictions for all years since the Company’s inception in 2011. As at December 31, 2022, all tax years are subject to examination by the tax authorities and no tax authority audits are currently underway. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized. The timing of the resolution, settlement and closure of any income tax audits is highly uncertain, and the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits. It is possible that the balance of gross unrecognized tax benefits could significantly change in the next twelve months. As at December 31, 2022, the 2022 tax year filings for the Company and its subsidiaries (where applicable) remain unfiled and have not been assessed by the relative tax authorities. 24. Subsequent Events On February 13, 2023, the Company entered into a Fifth Amendment to Pilot Mining Test Agreement and Third Amendment to SAA (“Fifth Amendment”), which was effective as of February 8, 2023, with DGE, DeepGreen Metals ULC and Allseas. The Fifth Amendment relates to the Company’s intent to settle the third and final payment of $ 10 million due to Allseas upon successful completion of the pilot trial of the PMTS in NORI Area D and certain other costs due to Allseas under the PMTA through the issuance of 10,850,000 common shares to Allseas, priced at $ 1.00 per share. On February 23, 2023, the Company settled the third milestone payment of $ 10 million and additional PMTS overage charges amounting to $ 0.9 million by issuing 10.9 million common shares to Allseas (Note 10). On February 21, 2023, the Company and its wholly-owned subsidiary, NORI, entered into a strategic partnership with Low Carbon Royalties Inc. (“Low Carbon Royalties”), a private corporation formed under the laws of British Columbia, Canada to finance low carbon emitting energy production and technologies (natural gas, nuclear, renewables), transition metals and minerals required for energy storage and electrification (Cu, Li, Ni, Co, Mn), and the evolving environmental markets (the “Partnership”). In connection with the Partnership, NORI contributed a 2 % gross overriding royalty (the “NORI Royalty”) on the Company’s NORI project area in the Clarion Clipperton Zone of the Pacific Ocean in which NORI currently holds exclusive exploration rights for polymetallic nodules from the ISA, to Low Carbon Royalties. The Company retained the right to repurchase up to 75 % of the NORI Royalty at an agreed capped return, exercisable in two transactions, between the second and the tenth anniversary of the Partnership. If both repurchase transactions are executed, the NORI Royalty will be reduced to 0.5 %. Low Carbon Royalties also owns a 1.6 % gross overriding royalty on a producing natural gas field in Latin America. In consideration of the NORI Royalty, TMC received a 35.0 % common ownership interest in Low Carbon Royalties on a fully-diluted basis as of closing and $ 5 million in cash. In connection with the Partnership, (a) the Company and NORI entered into a Royalty Agreement with Low Carbon Royalties which governs the terms of the NORI Royalty and (b) the Company entered into an Investor Rights Agreement with Brian Paes-Braga (a shareholder of Low Carbon Royalties as well as the Company and Managing Partner of SAF Group, one of Canada’s largest alternative asset managers) and Low Carbon Royalties, pursuant to which the Company and Mr. Paes-Braga each has a right, subject to certain percentage maintenance, to nominate a director to Low Carbon Royalties’ board of directors, along with registration and information rights. Pursuant to the Investor Rights Agreement, the Company designated its Chairman and Chief Executive Officer, Gerard Barron, to be its designee on Low Carbon Royalties’ board of directors. Mr. Paes-Braga and Brian O’Neill, Vice President of SAF Group, are the other members of Low Carbon Royalties’ board of directors. 147 Table of Contents TMC the metals company Inc. Notes to Consolidated Financial Statements (in thousands of US Dollars, except share, per share amounts and unless otherwise stated) ​ On March 22, 2023, we entered into an Unsecured Credit Facility Agreement (“Credit Facility”) with Argentum Credit Virtuti GCV (the “Lender”), the parent of Allseas Investments S.A. and an affiliate of Allseas, pursuant to which, we may borrow from the Lender up to $ 25,000,000 in the aggregate, from time to time, subject to certain conditions. All amounts drawn under the Credit Facility will bear interest based on the 6-month Secured Overnight Financing Rate, 180-day average plus a margin of 4.0 % per annum payable in cash semi-annually (or plus 5 % if paid-in-kind at maturity, at our election) on the first business day of each of June and January. We will pay an underutilization fee equal to 4.0 % per annum payable semi-annually for any amounts that remain undrawn under the Credit Facility. We have the right to pre-pay the entire amount outstanding under the Credit Facility at any time, before the Credit Facility’s maturity of May 21, 2024. The Credit Facility also contains customary events of default. ​ ​ 148 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.