TMC the metals Co Inc. 10-Q

Item 1. Financial Statements TMC the metals company Inc. Condensed Consolidated Balance Sheets (in thousands of US Dollars, except share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at ​ As at ​ ​ March 31, December 31, ASSETS Note 2023 2022 Current ​ ​ ​ ​ ​ Cash ​ ​ ​ $ 28,390 $ 46,842 Receivables and prepayments ​ ​ ​ 3,230 ​ 2,760 ​ ​ ​ ​ 31,620 ​ 49,602 Non-current ​ ​ ​ ​ ​ ​ Exploration contracts ​ ​ 42,900 ​ 43,150 Equipment ​ ​ ​ 1,997 ​ 2,025 Investment ​ 6 ​ ​ 8,781 ​ ​ — ​ ​ ​ ​ 53,678 ​ 45,175 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ASSETS ​ ​ ​ $ 85,298 $ 94,777 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ ​ ​ ​ ​ Current ​ ​ ​ ​ ​ ​ Accounts payable and accrued liabilities ​ ​ 17,544 ​ 41,614 ​ ​ ​ ​ 17,544 ​ 41,614 Non-current ​ ​ ​ ​ ​ ​ Deferred tax liability ​ ​ 10,675 ​ 10,675 Warrants liability 8 ​ 1,528 ​ 983 TOTAL LIABILITIES ​ ​ ​ $ 29,747 $ 53,272 ​ ​ ​ ​ ​ ​ ​ ​ ​ EQUITY ​ ​ ​ ​ ​ ​ Common shares (unlimited shares, no par value – issued: 280,618,285 (December 31, 2022 – 266,812,131 )) ​ ​ 345,090 ​ 332,882 Special Shares ​ ​ ​ — ​ — Additional paid in capital ​ ​ ​ 186,796 ​ 184,960 Accumulated other comprehensive loss ​ ​ ​ ( 1,216 ) ​ ( 1,216 ) Deficit ​ ​ ​ ( 475,119 ) ​ ( 475,121 ) TOTAL EQUITY ​ ​ ​ 55,551 ​ 41,505 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL LIABILITIES AND EQUITY ​ ​ ​ $ 85,298 $ 94,777 ​ Nature of Operations (Note 1) Contingent Liabilities (Note 13) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 5 Table of Contents TMC the metals company Inc. Condensed Consolidated Statements of Income/Loss and Comprehensive Income/Loss (in thousands of US Dollars, except share and per share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Three months ended ​ ​ March 31, ​ March 31, ​ Note 2023 2022 (1) ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ Exploration and evaluation expenses 7 ​ $ 7,169 $ 7,441 General and administrative expenses ​ ​ ​ ​ 6,214 ​ 8,466 Operating loss ​ ​ ​ ​ 13,383 ​ 15,907 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other items ​ ​ ​ ​ ​ ​ Equity-accounted investment loss ​ 6 ​ ​ 219 ​ ​ — Gain on disposition of asset ​ 6 ​ ​ ( 13,750 ) ​ ​ — Interest expense /(income) ​ ​ ​ ​ ( 454 ) ​ ​ — Change in fair value of private warrants liability 8 ​ ​ 544 ​ 5,188 Foreign exchange loss ​ ​ ​ ​ 29 ​ 22 Fees and interest on credit facility ​ 12 ​ ​ 27 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss (Income) and Comprehensive Loss (Income) for the period ​ ​ ​ $ ( 2 ) $ 21,117 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss (Income) per share - basic and diluted 10 ​ $ — $ 0.09 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding — basic ​ ​ ​ ​ 272,029,603 ​ ​ 226,075,389 Weighted average number of common shares outstanding — diluted ​ ​ ​ 300,376,133 ​ 226,075,389 ​ (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. ​ ​ 6 Table of Contents TMC the metals company Inc. Condensed Consolidated Statements of Changes in Equity (in thousands of US Dollars, except share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Preferred ​ Special ​ Paid in ​ Comprehensive ​ ​ ​ ​ ​ ​ Three months ended March 31, 2023 Shares Amount Shares Shares Capital Loss Deficit Total December 31, 2022 ​ 266,812,131 ​ $ 332,882 ​ $ — ​ $ — ​ $ 184,960 ​ $ ( 1,216 ) ​ $ ( 475,121 ) ​ $ 41,505 Conversion of restricted share units (Note 9) ​ 2,956,154 ​ ​ 2,814 ​ ​ — ​ ​ — ​ ​ ( 2,814 ) ​ ​ — ​ ​ — ​ ​ — Shares issued to Allseas (Note 6) ​ 10,850,000 ​ ​ 9,394 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 9,394 Expenses to be settled with share-based payments ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 15 ​ ​ — ​ ​ — ​ ​ 15 Expenses settled with share-based payments ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,860 ​ ​ — ​ ​ — ​ ​ 2,860 Share-based compensation (Note 9) — ​ — ​ — ​ — ​ 1,775 ​ — ​ — ​ 1,775 Net Income for the period — ​ — ​ — ​ — ​ — ​ — ​ 2 ​ 2 March 31, 2023 280,618,285 $ 345,090 $ — $ — $ 186,796 $ ( 1,216 ) $ ( 475,119 ) $ 55,551 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Preferred ​ Special ​ Paid in ​ Comprehensive ​ ​ ​ ​ ​ ​ Three months ended September 30, 2021 Shares Amount Shares Shares Capital Loss Deficit Total December 31, 2021 ​ 225,432,493 ​ $ 296,051 ​ $ — ​ $ — ​ $ 102,073 ​ $ ( 1,216 ) ​ $ ( 304,157 ) ​ $ 92,751 Conversion of restricted share units (Note 9) ​ 1,348,350 ​ ​ 2,212 ​ ​ — ​ ​ — ​ ​ ( 2,290 ) ​ ​ — ​ ​ — ​ ​ ( 78 ) Share-based compensation (Note 9) — ​ — ​ — ​ — ​ 8,124 ​ — ​ — ​ 8,124 Expenses to be settled with share-based payments — ​ — ​ — ​ — ​ 45 ​ — ​ — ​ 45 Net Loss for the period — ​ — ​ — ​ — ​ — ​ — ​ ( 21,117 ) ​ ( 21,117 ) March 31, 2022 226,780,843 $ 298,263 $ — $ — $ 107,952 $ ( 1,216 ) $ ( 325,274 ) $ 79,725 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ ​ 7 Table of Contents TMC the metals company Inc. Condensed Consolidated Statements of Cash Flows (in thousands of US Dollars) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Three months ended ​ ​ March 31, March 31, ​ ​ Note ​ 2023 ​ 2022 Cash resources provided by (used in) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ ​ ​ ​ ​ ​ Net Income (Loss) for the period ​ ​ $ 2 $ ( 21,117 ) Items not affecting cash: ​ ​ ​ ​ ​ ​ Equity-accounted investment loss ​ 6 ​ ​ 219 ​ ​ — Gain on disposition of asset ​ 6 ​ ​ ( 13,750 ) ​ ​ — Amortization ​ ​ ​ 88 ​ 95 Expenses settled with share-based payments 9 ​ ​ 1,775 ​ 6,393 Expenses to be settled with share-based payments ​ ​ ​ ​ 15 ​ ​ 45 Change in fair value of warrants liability 8 ​ ​ 545 ​ 5,188 Unrealized foreign exchange ​ ​ ​ ( 20 ) ​ ( 8 ) Changes in working capital: ​ ​ ​ ​ ​ ​ Receivables and prepayments ​ ​ ​ ( 469 ) ​ 619 Accounts payable and accrued liabilities ​ ​ ​ ( 11,877 ) ​ ( 6,744 ) Net cash used in operating activities ​ ​ ​ ​ ( 23,472 ) ​ ( 15,529 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Investing activities ​ ​ ​ ​ ​ ​ Acquisition of equipment ​ ​ ​ ​ — ​ ​ ( 210 ) Cash received from investment in Low Carbon Royalties ​ 6 ​ ​ 5,000 ​ ​ — Net cash provided by (used in) investing activities ​ ​ ​ ​ 5,000 ​ ( 210 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Financing activities ​ ​ ​ ​ ​ ​ Taxes withheld and paid on share-based compensation ​ ​ ​ ​ — ​ ​ ( 78 ) Net cash used in financing activities ​ ​ ​ ​ — ​ ​ ( 78 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Decrease in cash ​ ​ ​ ( 18,472 ) ​ ( 15,817 ) Impact of exchange rate changes on cash ​ ​ ​ 20 ​ ( 8 ) Cash - beginning of period ​ ​ ​ 46,842 ​ 84,873 Cash - end of period ​ ​ $ 28,390 $ 69,048 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ ​ 8 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ 1. Nature of Operations TMC the metals company Inc. (“TMC” or the “Company”) was incorporated as a Cayman Islands exempted company limited by shares on December 18, 2019 and continued as a corporation under the laws of the province of British Columbia, Canada on September 9, 2021. On September 9, 2021, the Company completed its business combination (the “Business Combination”) with DeepGreen Metals Inc. (“DeepGreen”). The Company’s corporate office, registered address and records office is located at 10 th floor, 595 Howe Street, Vancouver, British Columbia, Canada, V6C 2T5. The Company’s common shares and warrants to purchase common shares are listed for trading on the Nasdaq Global Select Market (“Nasdaq”) under tickers “TMC” and “TMCWW”, respectively. 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 6). The realization of the Company’s assets and attainment of profitable operations is dependent upon many factors including, among other things: financing being arranged by the Company to continue operations, development of a nodule collection system for the recovery of polymetallic nodules from the seafloor as well as development of processing technology for the treatment of polymetallic nodules, the establishment of mineable reserves, the commercial and technical feasibility of seafloor polymetallic nodule collection and processing, metal prices, and regulatory approvals and environmental permitting for commercial operations. The outcome of these matters cannot presently be determined because they are contingent on future events and may not be fully under the Company’s control. 9 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ 2. Basis of Presentation These unaudited condensed consolidated interim financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial statements. Accordingly, certain information and footnote disclosures required by U.S. GAAP have been condensed or omitted in these unaudited condensed consolidated interim financial statements pursuant to such rules and regulation. In management’s opinion, these unaudited condensed consolidated interim financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s statement of financial position, operating results for the periods presented, comprehensive loss, shareholder’s equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2023 or for any other period. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2022. The Company has applied the same accounting policies as in the prior year, except as disclosed below. Certain comparative figures in Note 8 have been reclassified to conform to the current period’s presentation. 3. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the notes thereto. Significant estimates and assumptions reflected in these condensed consolidated interim financial statements include, but are not limited to, the 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. 4. Fair Value of Financial Instruments Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. In accordance with U.S. GAAP, the Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: ● Level 1  - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. ● Level 2  - Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. ● 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. 10 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. There were no transfers between fair value measurement levels during the three-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. The warrants are valued at fair value, which is disclosed in Note 8. 5. Significant Accounting Policies Adopted During the Period Investments 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. 6. 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. and Allseas. 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 % 11 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ 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. ​ ​ ​ ​ ​ ​ Investment Fair value of NORI Royalty ​ $ 14,000 Cash received ​ $ ( 5,000 ) Cost of Investment on Transaction Date ​ $ 9,000 Equity-accounted investment loss for the period ​ ( 219 ) Investment as at March 31, 2023 ​ $ 8,781 ​ 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. ​ ​ ​ 12 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ 7. Exploration and Evaluation Expenses The detail of exploration and evaluation expenses is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI ​ Marawa ​ TOML ​ ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ For three months ended March 31, 2023 Contract Agreement Contract Total Environmental Studies $ 2,618 $ — $ — $ 2,618 Exploration Labor ​ 1,078 ​ 45 ​ 133 ​ 1,256 Share-Based Compensation (Note 9) ​ 828 ​ 26 ​ 83 ​ 937 Mining, Technological and Process Development ​ 1,018 ​ — ​ 105 ​ 1,123 Prefeasibility Studies ​ ​ 384 ​ ​ — ​ ​ — ​ ​ 384 Sponsorship, Training and Stakeholder Engagement ​ 414 ​ 76 ​ 237 ​ 727 Other ​ 92 ​ — ​ 32 ​ 124 ​ $ 6,432 $ 147 $ 590 $ 7,169 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI ​ Marawa ​ TOML ​ ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ For three months ended March 31, 2022 Contract Agreement Contract Total Environmental Studies $ 1,306 ​ $ — ​ $ — ​ $ 1,306 Exploration Labor ​ 794 ​ ​ 198 ​ ​ 181 ​ ​ 1,173 Share-Based Compensation (Note 9) ​ 1,993 ​ 451 ​ 455 ​ 2,899 Mining, Technological and Process Development ​ 289 ​ 8 ​ 18 ​ 315 PMTS ​ 1,110 ​ 132 ​ 132 ​ 1,374 Sponsorship, Training and Stakeholder Engagement ​ 144 ​ ​ 36 ​ ​ 42 ​ ​ 222 Other ​ ​ 130 ​ 5 ​ 17 ​ 152 ​ $ 5,766 ​ $ 830 ​ $ 845 ​ $ 7,441 ​ ​ 8 . Warrants 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 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 March 31, 2023, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital. 13 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ Private Warrants As at March 31, 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. The Private Warrants were valued using a Black-Scholes model, which resulted in a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants was the expected volatility of the Company’s common shares. The expected volatility was estimated using a binomial model based on consideration of the implied volatility from the Company’s Public Warrants adjusted to account for the call feature of the Public Warrants at prices above $ 18.00 during 20 trading days within any 30 -trading day period. As at March 31, 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: ​ ​ ​ ​ ​ ​ Private ​ ​ Warrants Warrants liability as at December 31, 2022 ​ $ 983 Increase in fair value of warrants liability ​ 544 Warrants liability as at March 31, 2023 ​ $ 1,527 ​ As at March 31, 2023, the fair value of the Private Warrants was estimated using the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2023 2022 Exercise price ​ $ 11.50 ​ $ 11.50 Share price ​ $ 0.83 ​ $ 0.77 ​ Volatility ​ ​ 99.52 % 88.05 % Term (years) ​ ​ 3.44 ​ 3.69 ​ Risk-free rate ​ ​ 3.68 % 4.04 % Dividend yield ​ ​ 0.0 % 0.0 % ​ 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. ​ 14 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ 9 . 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 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 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 by the Company during the three months ended March 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ Three Months Three Months ​ ​ ended March 31, ​ ended March 31, Vesting Period 2023 2022 Vesting Immediately (1) (2) ​ 3,237,710 ​ 1,457,404 Vesting in thirds on each anniversary of the grant date (3) 8,683,486 369,394 Vesting in fourths on each anniversary of the grant date 343,750 527,800 Total Units Granted 12,264,946 2,354,598 ​ (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). 15 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ 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: $nil). 10 . 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: ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Three months ended ​ ​ March 31, ​ March 31, ​ 2023 2022 Outstanding options to purchase common shares ​ 3,386,742 25,287,670 Outstanding RSUs ​ — 4,843,825 Outstanding shares under ESPP ​ — ​ — Outstanding warrants ​ 24,500,000 ​ 36,078,620 Outstanding Special Shares and options to purchase Special Shares ​ — ​ 136,239,964 Total anti-dilutive common equivalent shares ​ 27,886,742 202,450,079 ​ ​ ​ 16 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ 11 . Related Party Transactions The Company’s subsidiary, DGE, is engaged in a consulting agreement with SSCS Pte. Ltd. (“SSCS”) to manage offshore engineering studies. A director of DGE is employed through SSCS. Consulting services during the three months ended March 31, 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 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). 12 . 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. 17 Table of Contents TMC the metals company Inc. Notes to Condensed Consolidated Financial Statements (in thousands of US Dollars, except share and per share amounts and unless otherwise stated) (Unaudited) ​ 13. 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. 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 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. 14. 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. ​ ​ ​ 18 ​ Table of Contents