What changed in this filing

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Item 1. Financial Statements

2023-05-11 compared with 2022-11-14 · 162 added, 250 removed, 175 unchanged (70% of the section changed)

3 unchanged sentences

(in thousands of US Dollars, except share amounts)

September 30,

Receivables and prepayments

6 unchanged sentences

280,618,285 (December 31, 2022 – 266,812,131 ))

Class A - J Special Shares

Special Shares

Additional paid in capital

2 unchanged sentences

Nature of Operations (Note 1)

Commitments and Contingent Liabilities (Note 10)

Subsequent Event (Note 12)

Contingent Liabilities (Note 13)

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

TMC the metals company Inc.

Condensed Consolidated Statements of Loss and Comprehensive Loss

Condensed Consolidated Statements of Income/Loss and Comprehensive Income/Loss

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

Three months ended

Nine months ended

September 30,

Three months ended

Operating expenses

2 unchanged sentences

Operating loss

Change in fair value of warrant liability

Foreign exchange loss (gain)

Equity-accounted investment loss

Gain on disposition of asset

Interest expense /(income)

Loss and comprehensive loss for the period

Loss per share

– Basic and diluted

Weighted average number of common shares outstanding — basic and diluted

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

TMC the metals company Inc.

Condensed Consolidated Statements of Changes in Equity

(in thousands of US Dollars, except share amounts)

Common Shares

Comprehensive

Three months ended September 30, 2022

June 30, 2022

Issuance of shares under PIPE financing - net proceeds (Note 9)

Exercise of stock options (Note 6)

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

Share-based compensation (Note 6)

Loss for the period

September 30, 2022

Three months ended September 30, 2021

Common Shares

Comprehensive

June 30, 2021

Exercise of stock options (Note 6)

Share-based compensation (Note 6)

Conversion of debenture

Common shares issued for services

Net equity from Business Combination

Conversion of preferred shares to common shares

Loss for the period

September 30, 2021

Change in fair value of private warrants liability

Foreign exchange loss

Fees and interest on credit facility

Net Loss (Income) and Comprehensive Loss (Income) for the period

Net Loss (Income) per share - basic and diluted

Weighted average number of common shares outstanding — basic

Weighted average number of common shares outstanding — diluted

(1) The comparative figures in exploration and evaluation expenses and general and administrative expenses have been adjusted to conform to the current period’s presentation .

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

4 unchanged sentences

Comprehensive

Nine months ended September 30, 2022

Three months ended March 31, 2023

December 31, 2022

Issuance of shares under PIPE financing - net proceeds (Note 9)

Exercise of stock options (Note 6)

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

Share purchase under Employee Share Purchase Plan (Note 6)

Conversion of restricted share units (Note 9)

Shares issued to Allseas (Note 6)

Expenses to be settled with share-based payments

Expenses settled with share-based payments

Share-based compensation (Note 9)

Loss for the period

September 30, 2022

Nine months ended September 30, 2021

Net Income for the period

March 31, 2023

Common Shares

Comprehensive

Three months ended September 30, 2021

December 31, 2021

Exercise of stock options (Note 6)

Common shares to be issued for exploration and evaluation expenses

Conversion of restricted share units (Note 9)

Share-based compensation (Note 9)

Common shares issued for services

Net equity from Business Combination

Conversion of debentures

Conversion of preferred shares to common shares

Loss for the period

September 30, 2021

Expenses to be settled with share-based payments

Net Loss for the period

March 31, 2022

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

2 unchanged sentences

(in thousands of US Dollars)

Nine months ended

September 30,

Cash provided by (used in)

Three months ended

Cash resources provided by (used in)

Operating activities

Loss for the period

Net Income (Loss) for the period

Items not affecting cash:

Equity-accounted investment loss

Gain on disposition of asset

Expenses settled with share-based payments

Interest on convertible debentures

Expenses to be settled with share-based payments

Change in fair value of warrants liability

5 unchanged sentences

Investing activities

Settlement of deferred acquisition costs

Acquisition of equipment

Net cash used in investing activities

Cash received from investment in Low Carbon Royalties

Net cash provided by (used in) investing activities

Financing activities

Proceeds from PIPE financing

Expenses paid for PIPE financing

Proceeds from employee share purchase plan

Proceeds from exercise of stock options

Proceeds from issuance of convertible debentures

Taxes withheld and paid on share-based compensation

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

Net cash provided by financing activities

(Decrease) increase in cash

Net cash used in financing activities

Decrease in cash

Impact of exchange rate changes on cash

7 unchanged sentences

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.

(“TMC” or the “Company”) 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.

2 unchanged sentences

The Company’s common shares and warrants to purchase common shares are listed for trading on the Nasdaq Global Select Market (“Nasdaq”) under tickers “TMC” and “TMCWW”, respectively.

In connection with closing of the Business Combination, DeepGreen merged with a wholly-owned subsidiary of SOAC and became a wholly-owned subsidiary of the Company.

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

The Company is a deep-sea minerals exploration company focused on the collection and processing of polymetallic nodules found on the seafloor in international waters of the Clarion Clipperton Zone in the Pacific Ocean (“CCZ”), located approximately 1,300 nautical miles southwest of San Diego, California.

16 unchanged sentences

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

Since March 2020, several measures have been implemented by the governments in Canada, the United States of America (“US”), Australia, and the rest of the world in the form of office closures and limiting the movement of personnel in response to the increased impact from the novel coronavirus (“COVID-19”).

While the impact of COVID-19 has not been significant to the Company’s business operations to date, the current circumstances are dynamic and could negatively impact the Company’s business operations, exploration and development plans, results of operations, financial position, and cash flows.

Basis of Presentation

These unaudited condensed consolidated interim financial statements are prepared in accordance with US Generally Accepted Accounting Principles (“U.S.

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

Generally Accepted Accounting Principles (“U.S.

GAAP”) for interim financial statements.

4 unchanged sentences

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.

Certain comparative figures in Note 8 have been reclassified to conform to the current period’s presentation.

2 unchanged sentences

GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the notes thereto.

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

Significant estimates and assumptions reflected in these condensed consolidated interim financial statements include, but are not limited to, the evaluation of going concern, the valuation of share-based payments, including valuation of incentive stock options (Note 9), as well as the valuation of warrants liability (Note 8) and valuation of acquisition date investment in Low Carbon Royalties Inc.

(“Low Carbon Royalties”) (Note 6).

Actual results could differ materially from those estimates.

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In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2022 and 2021.

As at September 30, 2022 and December 31, 2021, the carrying values of cash, receivables, and accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

There were no transfers between fair value measurement levels during the three-month periods ended March 31, 2023, and 2022.

As at March 31, 2023, and 2022, 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.

1 unchanged sentence

Significant Accounting Policies Adopted During the Period

Share-Based Compensation on Employee Share Purchase Plan

During the second quarter of 2022, the Company implemented an employee share 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 6).

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.

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 condensed consolidated interim financial statements.

The Company consolidates investments over which it has control in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”).

Where the Company does not have control over the investment, but has significant influence, the Company records the investment in accordance with ASC 323, Investments-Equity Method and Joint Ventures (“ASC 323”) whereby, after recording the initial investment, the Company recognizes its proportional share of results of operations of the affiliate in its consolidated financial statements.

The value of the equity method investments are impaired if it is determined that there is an other-than-temporary decline in value.

Investments over which the Company does not have control nor significant influence are recorded at cost.

Strategic Partnerships

Strategic Alliance with Allseas Pilot Mining Test Project

On February 13, 2023, the Company entered into a Fifth Amendment to the Pilot Mining Test Agreement (the “PMTA”) and Third Amendment to SAA (“Fifth Amendment”), which was effective as of February 8, 2023, with DGE, DeepGreen Metals Inc.

The Fifth Amendment relates to the Company’s settlement of the third and final payment of $ 10 million due to Allseas upon successful completion of the pilot trial of the pilot mining test system (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 of its common shares to Allseas.

As at March 31, 2023, Allseas owned 33.5 million TMC common shares (2022:

23.7 million TMC common shares) which constituted 12 % (2022:

8.9 %) of total common shares outstanding.

The above-mentioned shareholding excludes 11,578,620 common shares issuable upon the exercise of the Allseas warrant (Note 8).

Investment in Low Carbon Royalties

On February 21, 2023 (the “Closing Date”), the Company and its wholly-owned subsidiary, NORI, entered into an investment agreement (the “Agreement”) with 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.

In connection with the Agreement, 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 anniversaries of the Partnership.

If both repurchase transactions are executed, the NORI Royalty will be reduced to 0.5 %.

At Closing Date, Low Carbon Royalties also owned a 1.6 %

TMC the metals company Inc.

1 unchanged sentence

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

Exploration Contracts

Strategic Partnerships

Pilot Mining Test Project with Allseas

The Company made the second $ 10 million payment of the amended Pilot Mining Test Agreement (“PMTA”) on April 25, 2022, upon successful completion of the North Sea drive test on March 25, 2022.

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

Completion of the pilot trial of the PMTS and third and final payment is expected to occur in the fourth quarter of 2022.

Total cost recorded as exploration and evaluation expenses for the PMTS during the three and nine months ended September 30, 2022 amounted to $ 1.3 million and $ 4 million, respectively (three and nine months ended September 30, 2021 amounted to $ 12.9 million).

The Company has not recorded a liability for the third payment as at September 30, 2022.

On March 16, 2022, the Company’s subsidiary, NORI, and Allseas entered into a non-binding term sheet which contemplates an upgrade of the PMTS into a commercial nodule collection system and commercial operation of this system in NORI Area D.

The terms are subject to negotiation between NORI and Allseas and if successful, may result in amendments to the existing Strategic Alliance Agreement.

As at September 30, 2022, Allseas owned 22.7 million TMC common shares (December 31, 2021 – 16.2 million TMC common shares) which constituted 8.6 % (December 31, 2021 – 7.2 %) of total common shares outstanding.

On November 9, 2022, the Company and Allseas agreed to settle the third and final payment of $ 10 million in either cash or shares of the Company, at the Company’s election.

With the successful completion of the pilot trial of the PMTS, as approved by the Company’s Board of Directors on November 11, 2022, the Company intends to satisfy the Allseas obligation through the issuance of common shares in the fourth quarter of 2022, subject to regulatory approval (Note 12).

Exploration and Evaluation Expenses

The detail of exploration and evaluation expenses is as follows:

For the three months ended September 30, 2022

Environmental Studies

Exploration Labor

Mining, Technological and Process Development

Share-based compensation (Note 6)

Sponsorship, Training and Stakeholder Engagement

gross overriding royalty on a producing natural gas field in Latin America.

In consideration of the NORI Royalty, TMC received 35.0 % of the common shares issued by Low Carbon Royalties and $ 5 million in cash, as of the Closing Date.

In connection with the Agreement the Company entered into an Investor Rights Agreement with a shareholder of Low Carbon Royalties and Low Carbon Royalties, pursuant to which the Company and this shareholder 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.

The Company has accounted for the investment in Low Carbon Royalties in accordance with ASC 323-10 and has thus applied the equity method of accounting to this investment.

When considering the royalty liability instrument as well as the embedded repurchase features, management has elected to account for the royalty liability under the fair value option in accordance with ASC 825-10.

On March 21, 2023, Low Carbon Royalties acquired additional gross overriding royalties on natural gas fields in Latin America, increasing its total gross overriding royalty on the existing first license block from 1.56 % to 3.13 % and acquiring a gross overriding royalty of 1.44 % on a new second license block.

The royalty acquisitions were financed through the issuance of Low Carbon Royalties common shares to the third-party vendor of such royalties, thereby reducing the Company’s ownership in the Partnership to 32 % as of March 31, 2023 from 35 % as of the Closing Date.

Based on the fair value of the NORI Royalty and the cash received on the Transaction Date, the Company recorded $ 9 million as investment in Low Carbon Royalties.

From the Transaction Date to March 31, 2023, the Company’s share of the net loss generated by the Low Carbon Royalties was $ 0.2 million.

Fair value of NORI Royalty

Cash received

Cost of Investment on Transaction Date

Equity-accounted investment loss for the period

Investment as at March 31, 2023

The net consideration received of $ 14 million exceeded NORI exploration contract’s carrying value of $ 0.3 million, resulting in a gain on disposition of asset of $ 13.75 million recorded in the Company’s Statements of Loss (Income) and Comprehensive Loss (Income).

NORI is in the exploration phase of the project and under the Company’s policy, exploration spending is expensed.

TMC the metals company Inc.

1 unchanged sentence

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

For the three months ended September 30, 2021

Exploration and Evaluation Expenses

The detail of exploration and evaluation expenses is as follows:

For three months ended March 31, 2023

Environmental Studies

Exploration Labor

Mining, Technological and Process Development

Share-Based Compensation (Note 9)

Sponsorship, Training and Stakeholder Engagement

For the nine months ended September 30, 2022

Environmental Studies

Exploration Labor

Mining, Technological and Process Development

Share-based compensation (Note 6)

Prefeasibility Studies

Sponsorship, Training and Stakeholder Engagement

For the nine months ended September 30, 2021

For three months ended March 31, 2022

Environmental Studies

Exploration Labor

Mining, Technological and Process Development

Share-Based Compensation (Note 9)

Mining, Technological and Process Development

Sponsorship, Training and Stakeholder Engagement

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

The Company issued 15,000,000 common share warrants as part of its predecessor’s initial public offering in May 2020 (“Public Warrants”) and 9,500,000 private placement common share warrants in a private placement simultaneously with the closing of its predecessor’s initial public offering (“Private Warrants”).

Public Warrants

As at September 30, 2022, 15,000,000 (December 31, 2021 - 15,000,000 ) Public Warrants were outstanding.

As at March 31, 2023, 15,000,000 (March 31, 2022 - 15,000,000 ) Public Warrants were outstanding.

Public Warrants may only be exercised for a whole number of shares.

As at September 30, 2022, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital.

As at March 31, 2023, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital.

TMC the metals company Inc.

2 unchanged sentences

Private Warrants

As at September 30, 2022, 9,500,000 Private Warrants were outstanding (December 31, 2021 - 9,500,000 ).

As at March 31, 2023, 9,500,000 Private Warrants were outstanding (December 31, 2022 - 9,500,000 ).

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

2 unchanged sentences

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 September 30, 2022, the fair value of outstanding Private Warrants of $ 2.2 million is recorded as warrants liability.

As at March 31, 2023, the fair value of outstanding Private Warrants of $ 1.5 million is recorded as warrants liability.

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

Warrants liability as at December 31, 2022

Decrease in fair value of warrants liability

Warrants liability as at September 30, 2022

As at September 30, 2022 and December 31, 2021, the fair value of the Private Warrants was estimated using the following assumptions:

September 30,

Increase in fair value of warrants liability

Warrants liability as at March 31, 2023

As at March 31, 2023, the fair value of the Private Warrants was estimated using the following assumptions:

Exercise price

1 unchanged sentence

Dividend yield

There were no exercises or redemptions of the Public Warrants or Private Warrants during the three and nine months ended September 30, 2022.

Allseas Warrants

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

A maximum of 11.6 million warrants to purchase common shares will vest if the PMTS is completed by September 30, 2023, gradually decreasing to 5.8 million warrants to purchase common shares if the PMTS is completed after September 30, 2025.

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

No expense or liability has been recorded as at and for the three and nine months ended September 30, 2022.

With the successful completion of the pilot trial of the PMTS, as approved by the Company’s Board of Directors on November 11, 2022, the 11.6 million Allseas Warrants have vested and are exercisable (Note 12).

There were no exercises or redemptions of the Public Warrants or Private Warrants during the period ended March 31, 2023.

Allseas Warrant

Allseas holds a warrant (the “Allseas Warrant”) to purchase 11.6 million common shares of the Company.

The Allseas Warrant vested and became exercisable upon the successful completion of the PMTS in November 2022 and will expire on September 30, 2026.

There were no exercises of any warrants during the first quarter of 2023.

TMC the metals company Inc.

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Share-Based Compensation

The Company’s 2021 Incentive Equity Plan (the “Plan”) provides that the aggregate number of common shares reserved for future issuance under the Plan is 33,699,685 common shares, including 9,017,299 shares added to the Plan in January 2022 pursuant to the Plan’s automatic annual increase provision described below, provided that 2,243,853 of the outstanding common shares shall only be available for awards made to non-employee directors of the Company.

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 March 31, 2023,is 44,732,170 common shares, including 10,672,485 shares added to the Plan in January 2023 pursuant to the Plan’s automatic annual increase provision, provided that 2,243,853 of the outstanding common shares shall only be available for awards made to non-employee directors of the Company.

On the first day of each fiscal year beginning in 2022 to the tenth anniversary of the closing of the Business Combination, the number of common shares that may be issued pursuant to the Plan is automatically increased by an amount equal to the lesser of 4 % of the number of outstanding common shares or an amount determined by the board of directors.

Stock options

As at September 30, 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”).

During the three and nine months ended September 30, 2022, 100,000 STIP stock options and 118,461 STIP stock options, respectively were exercised, and no new options were granted.

During the three and nine months ended September 30, 2022, the Company recognized $ 176 million and $ 9.2 million respectively (three and nine months ended September 30, 2021 - $ 9.5 million and $ 55.2 million, respectively) of share-based compensation expense for stock options in the statement of loss and comprehensive loss.

For the three and nine months ended September 30, 2022 a total of $ 0.7 million and $ 4.6 million respectively, was recorded in exploration and evaluation expenses (three and nine months ended September 30, 2021 - $ 3 million and $ 30.6 million, respectively).

The amount recorded in general and administration expenses for three and nine months ended September 30, 2022 was $ 1.0 million and $ 4.6 million respectively (three and nine months ended September 31, 2021 - $ 6.4 million and $ 24.7 million respectively).

During the third quarter of 2022, the Company extended the expiry dates of 1,237,329 of its issued stock options in recognition of the continued services provided by the option holders and as a result recorded $ 0.3 million of share-based compensation expense in general and administrative expenses for the three months and nine months ended September 30, 2022.

As at March 31, 2023, 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”).

No stock options were issued or exercised during the three months ended March 31, 2023.

During the three months ended March 31, 2023, the Company recognized $ 0.2 million (three months ended March 31, 2022 - $ 3.9 million) of share-based compensation expense for stock options in the statement of loss and comprehensive loss, of which $ 0.1 million (three months ended March 31, 2022 - $ 2 million) was recorded in exploration and evaluation expenses and $ 0.1 million (three months ended March 31, 2022 - $ 1.9 million) was recorded in general and administration expenses.

Restricted Share Units

The details of RSUs granted during the three and nine months ended September 30, 2022 are described below.

The details of RSUs granted by the Company during the three months ended March 31, 2023 and 2022 are as follows:

ended March 31,

Vesting Period

Three months ended September 30,

Nine months ended September 30,

Vesting Immediately (1) (2)

1 unchanged sentence

Vesting in fourths on each anniversary of the grant date

Vesting fully on the anniversary of the grant date

Out 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 $ 1.75 per RSU.

During the three and nine months ended September 30, 2022, an aggregate of nil and 476,189 units respectively 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 the first nine months of 2022 amounted to $ 700,000 ($ nil in the first nine months of 2021).

During the three and nine months ended September 30, 2022, a total of 339,007 and 396,691 units respectively were forfeited.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

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

During the three and nine months ended September 30, 2022, a total of $ 1.8 million and $ 5.7 million respectively (three and nine months ended September 30, 2021 - $ 35 thousand) was charged to the statement of loss and comprehensive loss as share-based compensation expense for RSUs.

For the three and nine months ended September 30, 2022, a total of $ 0.9 million and $ 2.8 million respectively, was recorded in exploration and evaluation expenses (three and nine months ended September 30, 2021 - $nil).

The amount recorded in general and administration expenses for three and nine months ended September 30, 2022 was $ 0.9 million and $ 3.0 million respectively (three and nine months ended September 30, 2021- $ 35 thousand).

As at September 30, 2022, total unrecognized share-based compensation expense for RSUs was $ 7.7 million (December 31, 2021 - $ 12.3 million).

As at September 30, 2022, an aggregate of 19,284 vested units were outstanding and due to be converted into common shares.

Employee Share Purchase Plan

On May 31, 2022, TMC’s 2021 Employee Share Purchase Plan was approved at the Company’s 2022 annual shareholders meeting, including the approval of the issuance of up to 5,254,324 common shares under the ESPP.

This included 2,254,324 shares added to the ESPP in January 2022 pursuant to the ESPP’s annual increase provision.

As per the annual increase provision on the first day of each of the Company’s fiscal years after 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 plan 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 the three and nine months ended September 30, 2022, a total of $ 39 thousand and $ 62 thousand respectively was charged to the condensed consolidated statement of loss and comprehensive loss.

For the three and nine months ended September 30, 2022, a total of $ 12 thousand and $ 21 thousand respectively, was recorded in exploration and evaluation expenses.

The amount recorded in general and administration expenses for three and nine months ended September 30, 2022 was $ 27 thousand and $ 41 thousand respectively.

During the three and nine months ended September 30, 2022, the Company issued nil and 42,426 common shares respectively to its employees as part of its ESPP program.

Total Units Granted

(1) Of the 3,237,710 units vesting immediately on grant date, 3,222,086 units were issued to settle liabilities with a carrying amount of $ 2.9 million, at a weighted average grant date fair value of $ 0.89 per RSU.

(2) During the three months ended March 31, 2023, units granted to consultants, which vest immediately, included 23,438 units (first quarter 2022:

384,832 units), resulting in $ 23 thousand (first quarter 2022:

$ 0.6 million) charged to professional and consulting fees under general and administration expenses.

(3) During the three months ended March 31, 2023, the Company granted 8,645,465 units as payment for the 2022 LTIP awards and 38,021 units as a sign-on grant.

The 2021 LTIP awards were granted in the fourth quarter of 2021 and totaled 3,500,000 units.

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.

A total of $ 1.6 million (three months ended March 31, 2022 - $ 1.9 million) was charged to the statement of loss and comprehensive loss as share-based compensation expense for the three months ended March 31, 2023, of which $ 0.9 million (three months ended March 31, 2022- $ 0.9 million) was recorded in exploration and evaluation expenses and $ 0.7 million (three months ended March 31, 2022 - $ 1 million) was recorded in general and administrative expenses.

As at March 31, 2023, total unrecognized share-based compensation expense for RSUs was $ 13.2 million (December 31, 2022 - $ 6.1 million).

TMC the metals company Inc.

1 unchanged sentence

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

Loss per Share

Basic and diluted loss per share was the same for each period presented as the inclusion of all common share equivalents would have been anti-dilutive.

As at March 31, 2023, an aggregate of 533,431 vested units were outstanding and due to be converted into common shares.

Employee Stock Purchase Plan

As of March 31, 2023, there were 7,922,445 common shares reserved for issuance under the Employee Stock Purchase Plan (the “ESPP”), including 2,668,121 shares added to the ESPP in January 2023 pursuant to the ESPP’s automatic annual increase provision.

An aggregate of 117,929 of the reserved common shares have been issued under the ESPP..

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.

During the first quarter of 2023, a total of $ 19 thousand (first quarter 2022:

$nil) was charged to the statement of loss and comprehensive loss as share-based compensation expense, representing the share price purchase discount offered by the Company.

From the amount charged during the first quarter of 2023, $ 7 thousand was recorded in exploration and evaluation expenses (first quarter 2022:

$nil) and $ 12 thousand was recorded in general and administrative expenses (first quarter 2022:

Net Loss (Income) per Share

Basic loss (income) per share is computed by dividing the loss (income) 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.

The diluted weighted-average number of common shares as at March 31, 2023 was 300,376,133 which for the most part included, over and above the basic weighted-average number of common shares of 272,029,603 units, the dilutive effect of share options ( 3,735,923 units), dilutive effect of RSUs ( 13,123,935 ) and the dilutive effect from the Allseas warrants ( 11,578,620 ).

The diluted weighted-average number of common shares does not include stock options, public warrants and private warrants as these instruments were out-of-the-money and anti-dilutive.

Additionally, stock options outstanding under the Company’s Long-Term Incentive Plan were also excluded from the diluted weighted-average number of common shares, as the performance and market conditions were not met.

Anti-dilutive equivalent common shares were as follows:

Nine months ended

September 30,

Three months ended

Outstanding options to purchase common shares

4 unchanged sentences

Total anti-dilutive common equivalent shares

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

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

Related Party Transactions

The Company’s subsidiary, DeepGreen Engineering Pte.

Ltd., is engaged in a consulting agreement with SSCS Pte.

The Company’s subsidiary, DGE, is engaged in a consulting agreement with SSCS Pte.

(“SSCS”) to manage offshore engineering studies.

A director of DGE is employed through SSCS.

Consulting services during the three and nine months ended September 30, 2022 totaled $ 69 thousand and $ 206 thousand (three and nine months ended September 30, 2021 - $ 75 thousand and $ 213 thousand respectively) out of which for three and nine months ended September 30, 2022 a total of $ 55 thousand and $ 165 thousand, respectively (three and nine months ended September 30, 2021 - $ 60 thousand and $ 170 thousand, respectively) is disclosed as exploration labor within exploration and evaluation expenses (Note 4) and $ 14 thousand and $ 41 thousand respectively for three and nine months ended September 30, 2022 is disclosed as general and administration expenses (three and nine months ended September 30, 2021 - $ 15 thousand and $ 43 thousand respectively).

As at September 30, 2022, the amount payable to SSCS was $nil (December 31, 2021 - $ 23 thousand).

Consulting services during the three months ended March 31, 2023, totaled $ 69 thousand (three months ended March 31, 2022 - $ 69 thousand), with $ 55 thousand disclosed as exploration labor within exploration and evaluation expenses (Note 7) and $ 14 thousand as general and administration expenses ($ 55 thousand and $ 14 thousand, respectively, in the comparative period of the prior year).

As at March 31, 2023, the amount payable to SSCS was $ 23 thousand (December 31, 2022 - $ 23 thousand).

The Company’s Chief Ocean Scientist provides consulting services to the Company through Ocean Renaissance LLC (“Ocean Renaissance”) where he is a principal.

Consulting services during the three and nine months ended September 30, 2022 amounted to $ 94 thousand and $ 281 thousand respectively (three and nine months ended September 30, 2021 $ 93 thousand and $ 281 thousand), evenly apportioned between exploration and evaluation expenses (Note 4) and general and administration expenses for three and nine months ended September 30, 2022 and September 30, 2021.

As at September 30, 2022, the amount payable to Ocean Renaissance was $nil (December 31, 2021 - $ nil ).

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 (the “PIPE Purchase Agreement”) with the purchasers named therein (the “PIPE Purchasers”) 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 (the “Barron Purchase Agreement”), 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 (the “ERAS Purchase Agreement”, together with the PIPE Purchase Agreement and the Barron Purchase Agreement, the “Purchase Agreements”).

As at September 30, 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.

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

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

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 2022 and 2023 to be approximately $ 40 million and $ 25 million, respectively, which may be settled in cash or equity.

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

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

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

Marawa Exploration Contract

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

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

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

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

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

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

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

TOML Exploration Contract

As part of the TOML Exploration Contract, TOML submitted a periodic review report to the ISA in 2021, covering the 2017-2021 period.

The periodic review report included a summary of work completed over the five-year period and a program of activities and estimated budget for the next five-year period.

TOML had committed to spend $ 30.0 million over the five-year period from 2017 to 2021.

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

The Company has spent approximately $ 13.3 million in connection with the TOML Exploration Contract from 2017 to 2021.

The ISA has reviewed TOML’s periodic review report for the 2017-2021 period and submitted its initial findings at the end of September 2022, which management is currently reviewing.

Consulting services during the three months ended March 31, 2023, totaled $ 94 thousand (three months ended March 31, 2022 - $ 94 thousand), with $ 42 thousand disclosed as exploration labor within exploration and evaluation expenses (Note 7) and $ 52 thousand as general and administration expenses ($ 47 thousand and $ 47 thousand, respectively, in the comparative period of the prior year).

As at March 31, 2023, the amount payable to Ocean Renaissance was $ nil thousand (December 31, 2022 - $ nil ).

During the three months ended March 31, 2023, Allseas provided the Company with engineering and project management services totaling $ 1 million, recorded as mining, technological and process development within exploration and evaluation expenses (Note 7).

For the three months ended March 31, 2022, Allseas managed and delivered the PMTS project, with services totaling $ 1.3 million, recorded as PMTS within exploration and evaluation expenses (Note 7).

As at March 31, 2023, the amount payable to Allseas was $ 1.8 million (March 31, 2022 - $ 5.5 million).

Credit Facility with Argentum Credit Virtuti GCV, Parent of Allseas Investments S.A.

On March 22, 2023, the Company 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, the Company may borrow from the Lender up to $ 25 million 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 the Company’s election) on the first business day of each of June and January.

The Company will pay an underutilization fee equal to 4.0 % per annum payable semi-annually for any amounts that remain undrawn under the Credit Facility.

The Company has 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.

During the first quarter of 2023, the Company had not drawn any amount from the Credit Facility and has incurred $ 27 thousand as underutilization fees, which would be payable only in the event the Credit Facility is not drawn down upon at the time such fees are payable.

TMC the metals company Inc.

1 unchanged sentence

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

Contingent Liability

On October 28, 2021, a shareholder filed a putative class action against the Company and certain of its 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.

An amended complaint was filed on May 12, 2022, reflecting substantially similar allegations.

The Company denies any allegations of wrongdoing and the Company has filed and served the plaintiff a motion to dismiss on July 12, 2022 and intends to defend against this lawsuit.

As of September 26, 2022, the motion to dismiss is fully briefed and the parties are awaiting a ruling.

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.

Contingent Liabilities

On January 23, 2023, an investor in the 2021 private placement 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.

Sustainable Opportunities Acquisition Corp.

n/k/a TMC The Metals Company Inc.

650449/2023 (N.Y.

The complaint alleges that we breached the representations and warranties in the plaintiff’s private placement 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.

The Company denies any allegations of wrongdoing and filed a motion to dismiss on March 31, 2023.

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 the range of possible losses cannot be reliably estimated.

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.

Subsequent Events

On November 11, 2022, the Company’s Board of Directors agreed with management’s assessment that the criteria for the successful completion of the pilot trial of the PMTS in the NORI Area D, as prescribed in the Strategic Alliance Agreement (SAA) with Allseas, had been met.

As a result, the Company intends to settle the third and final payment of $ 10 million of the amended PMTA through the issuance of common shares in the fourth quarter of 2022, at a price of $ 1.00 per share, subject to regulatory approval (Note 4).

Similarly, with the successful completion of the pilot trial of the PMTS, the 11.6 million Allseas Warrants have vested and are exercisable (Note 5).

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

What changed 10-Q

Item 1. Financial Statements