What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-11 · 224 added, 128 removed, 209 unchanged (63% of the section changed)

17 unchanged sentences

Contingent Liabilities (Note 13)

Subsequent Events (Note 15)

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

TMC the metals company Inc.

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

Condensed Consolidated Statements of Loss and Comprehensive Loss

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

Three months ended

Six months ended

Operating expenses

4 unchanged sentences

Gain on disposition of asset

Interest expense /(income)

Change in fair value of private warrants liability

Foreign exchange loss

Change in fair value of warrants liability

Foreign exchange loss (gain)

Interest income

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

Net Loss and comprehensive loss for the period

Net Loss per share - basic and diluted

Weighted average number of common shares outstanding – basic and 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.

5 unchanged sentences

Comprehensive

Three months ended March 31, 2023

Three months ended June 30, 2023

March 31, 2023

Conversion of restricted share units, net of shares withheld for taxes (Note 9)

Share purchase under Employee Share Purchase Plan (Note 9)

Share-based compensation (Note 9)

Loss for the period

June 30, 2023

Common Shares

Comprehensive

Three months ended June 30, 2022

March 31, 2022

Exercise of stock options (Note 9)

Conversion of restricted share units, net of shares withheld for taxes (Note 9)

Share purchase under Employee Share Purchase Plan (Note 9)

Share-based compensation (Note 9)

Expenses to be settled in share-based payments

Loss for the period

June 30, 2022

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

Six months ended June 30, 2023

December 31, 2022

Conversion of restricted share units (Note 9)

Shares issued to Allseas (Note 6)

Expenses to be settled with share-based payments

Conversion of restricted share units, net of shares withheld for taxes (Note 9)

Share purchase under Employee Share Purchase Plan (Note 9)

Expenses settled with share-based payments

Shares issued to Allseas (Note 6)

Share-based compensation (Note 9)

Net Income for the period

March 31, 2023

Loss for the period

June 30, 2023

Common Shares

Comprehensive

Three months ended September 30, 2021

Six months ended June 30, 2022

December 31, 2021

Conversion of restricted share units (Note 9)

Exercise of stock options (Note 9)

Conversion of restricted share units, net of shares withheld for taxes (Note 9)

Share purchase under Employee Share Purchase Plan (Note 9)

Share-based compensation (Note 9)

Expenses to be settled with share-based payments

Net Loss for the period

March 31, 2022

Loss for the period

June 30, 2022

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

2 unchanged sentences

(in thousands of US Dollars)

Three months ended

Cash resources provided by (used in)

Six months ended

Cash provided by (used in)

Operating activities

Net Income (Loss) for the period

Loss for the period

Items not affecting cash:

Equity-accounted investment loss

Gain on disposition of asset

Expenses settled with share-based payments

Expenses to be settled with share-based payments

Equity-accounted investment loss

Change in fair value of warrants liability

Gain on disposition of asset

Unrealized foreign exchange

4 unchanged sentences

Investing activities

Acquisition of equipment

Cash received from investment in Low Carbon Royalties

Acquisition of equipment

Net cash provided by (used in) investing activities

Financing activities

Proceeds from employee stock plans

Proceeds from exercise of stock options

Proceeds from issuance of shares

Taxes withheld and paid on share-based compensation

Net cash used in financing activities

Net cash provided by (used in) financing activities

Decrease in cash

40 unchanged sentences

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.

Certain comparative figures for exploration and evaluation expenses (Note 7) and general and administrative expenses have been reclassified to conform to the current period’s presentation.

Use of Estimates

1 unchanged sentence

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).

5 unchanged sentences

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date.

In accordance with U.S.

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

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

● Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

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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-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.

There were no transfers between fair value measurement levels during the three and six months ended June 30, 2023, and 2022.

As at June 30, 2023, and December 31, 2022, the carrying values of cash, receivables, and accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

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

The warrants are valued at fair value, which is disclosed in Note 8.

These warrants are valued at fair value, which is disclosed in Note 8.

Significant Accounting Policies Adopted During the Period

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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.

The value of the equity method investments is 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

Strategic Alliance with Allseas

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.

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 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:

As at June 30, 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).

The above-mentioned shareholding excludes 11,578,620 common shares which were issued to Allseas on August 9, 2023, upon the exercise of the warrant and receipt of the exercise fee of $ 115.8 thousand.

The warrant vested and became exercisable on successful completion of the PMTS in November 2022 (refer “Allseas Warrant”, Note 8).

The above shareholding also excludes 4.15 million common shares which will be issued to Allseas, as consideration on the closing of the Exclusive Vessel Use Agreement (Note 15).

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)

Investment in Low Carbon Royalties

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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.

Notes to Condensed Consolidated Financial Statements

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

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

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

In connection with the Agreement the Company entered into an Investor Rights Agreement with Low Carbon Royalties and a shareholder of 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.

1 unchanged sentence

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.

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

For the three and six months ended June 30, 2023, the Company’s share of the net loss generated by the Low Carbon Royalties was $ 0.1 million and $ 0.4 million, respectively.

Fair value of NORI Royalty

Cash received

Cost of Investment on Transaction Date

Cost of Investment on Closing 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).

Investment as at June 30, 2023

The net consideration received of $ 14 million exceeded the NORI Exploration Contract’s carrying value of $ 0.25 million, resulting in a gain on disposition of asset of $ 13.75 million recorded in the Company’s first quarter of 2023 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.

4 unchanged sentences

The detail of exploration and evaluation expenses is as follows:

For three months ended March 31, 2023

For the three months ended June 30, 2023

Environmental Studies

4 unchanged sentences

Sponsorship, Training and Stakeholder Engagement

For three months ended March 31, 2022

For the three months ended June 30, 2022

Environmental Studies

3 unchanged sentences

Sponsorship, Training and Stakeholder Engagement

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.

For the six months ended June 30, 2023

Environmental Studies

Exploration Labor

Share-Based Compensation (Note 9)

Mining, Technological and Process Development

Prefeasibility Studies

Sponsorship, Training and Stakeholder Engagement

For the six months ended June 30, 2022

Environmental Studies

Exploration Labor

Share-Based Compensation (Note 9)

Mining, Technological and Process Development

Sponsorship, Training and Stakeholder Engagement

TMC the metals company Inc.

1 unchanged sentence

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

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.

Public Warrants

As at June 30, 2023, 15,000,000 (June 30, 2022 - 15,000,000 ) Public Warrants were outstanding.

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

As at June 30, 2023, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital.

Private Warrants

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

As at June 30, 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.

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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.

As at June 30, 2023, the fair value of outstanding Private Warrants of $ 2.3 million is recorded as warrants liability.

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

1 unchanged sentence

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:

Warrants liability as at June 30, 2023

As at June 30, 2023 and December 31, 2022, 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 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.

There were no exercises or redemptions of the Public Warrants or Private Warrants during the three and six months ended June 30, 2023.

TMC the metals company Inc.

1 unchanged sentence

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

Allseas Warrant

The Allseas warrant vested and became exercisable upon the successful completion of the PMTS in November 2022.

On July 26, 2023, the Allseas warrant was exercised resulting in the issuance of 11,578,620 common shares of the Company on August 9, 2023, once the payment of $ 115.8 thousand warrant fee was received from Allseas.

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.

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 June 30, 2023, is 44,372,170 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.

As at June 30, 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 exercised or granted during the three and six months ended June 30, 2023.

During the three and six months ended June 30, 2023, the Company recognized $ 0.1 million and $ 0.3 million, respectively (three and six months ended June 30, 2022 - $ 3.6 million and $ 7.4 million, respectively), of share-based compensation expense for stock options in the statement of loss and comprehensive loss.

For the three and six months ended June 30, 2023, a total of $ 56 thousand and $ 138 thousand, respectively, of this share-based compensation expense recognized was related to exploration and evaluation activities (three and six months ended June 30, 2022 - $ 1.9 million and $ 3.9 million, respectively).

The amount of this share-based compensation expense recognized related to general and administration matters for three and six months ended June 30, 2023 was $ 60 thousand and $ 176 thousand, respectively (three and six months ended June 30, 2022 - $ 1.7 million and $ 3.5 million, respectively).

Restricted Share Units

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

ended March 31,

The details of restricted share units (“RSUs”) granted during the three and six months ended June 30, 2023 are described below.

ended June 30,

Vesting Period

Vesting immediately (1)(2)

Vesting fully on the anniversary of the grant date (3)

Vesting in thirds on each anniversary of the grant date (4)

Vesting in fourths on each anniversary of the grant date

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).

(1) Of the 3,237,710 units vesting immediately granted during the first quarter of 2023, 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.

TMC the metals company Inc.

1 unchanged sentence

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

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.

(2) Of the 3,237,710 units vesting immediately granted during the first quarter of 2023, 23,438 units granted to consultants, (three and six months ended June 30, 2022:

255,749 units and 640,581 units, respectively) resulting in $ 23 thousand (three and six months ended June 30, 2022:

$ 0.6 million and $ 1.2 million, respectively) charged to professional and consulting fees under general and administration expenses.

The Company also granted 15,625 immediately vesting units to consultants during the first quarter of 2023 as a prepayment for the services (three and six months ended June 30, 2022:

The amortization of the prepayment amounting to $ 15 thousand was recorded in second quarter of 2023 as professional and consulting fees under general and administration expenses (three and six months ended June 30, 2022:

(3) During the three and six months ended June 30, 2023, an aggregate of 1,014,349 RSUs were granted to the Company’s non-employee directors under the Company’s Non-employee Director Compensation Policy, which vest upon the Company’s 2024 annual shareholders meeting.

The total fair value of units granted as annual grants to the non-employee directors amounted to $ 700,000 .

(4) During the three and six months ended June 30, 2023, the Company granted nil and 8,645,465 units, respectively, 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.

During the three and six months ended June 30, 2023, a total of $ 2.4 million and $ 4.0 million, respectively (three and six months ended June 30, 2022 - $ 2.1 million and $ 4.0 million, respectively), was charged to the statement of loss and comprehensive loss as share-based compensation expense for RSUs.

For the three and six months ended June 30, 2023, a total of $ 1.4 million and $ 2.3 million, respectively, of this share-based compensation expense recognized was related to exploration and evaluation activities (three and six months ended June 30, 2022 - $ 1 million and $ 1.9 million respectively).

The amount of this share-based compensation expense recognized related to general and administration matters for three and six months ended June 30, 2023 was $ 1 million and $ 1.7 million, respectively (three and six months ended June 30, 2022 - $ 1.1 million and $ 2.1 million, respectively).

As at June 30, 2023, total unrecognized share-based compensation expense for RSUs was $ 11.5 million (December 31, 2022 - $ 6.1 million).

As at June 30, 2023, an aggregate of 551,075 vested units were outstanding and due to be converted into common shares.

Employee Share Purchase Plan

As of June 30, 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 201,501 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.

During the three and six months ended June 30, 2023, a total of $ 28 thousand and $ 47 thousand, respectively, was charged to the condensed consolidated statement of loss and comprehensive loss (for three and six months ended June 30, 2022:

$ 23 thousand) as share-based compensation expense for ESPP issuances.

For the three and six months ended June 30, 2023, a total of $ 19 thousand and $ 26 thousand, respectively, of this recognized share-based compensation expense was related to exploration and evaluation activities (three and six months ended June 30, 2022 - $ 8 thousand).

The amount of this share-based compensation expense related to general and administration matters for three and six months ended June 30, 2023 was $ 9 thousand and $ 21 thousand, respectively (three and six months ended June 30, 2022 - $ 15 thousand).

On May 31, 2023, the Company issued 83,572 common shares to its employees, thereby converting employee payroll contributions over the previous six months into shares, as prescribed in its ESPP program (in the three and six months ended June 30, 2022, 42,426 common shares were issued).

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)

Loss per Share

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

Anti-dilutive equivalent common shares were as follows:

Three months ended

Six months ended

Outstanding options to purchase common shares

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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, 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 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).

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.

Credit Facility with Allseas Affiliate

On March 22, 2023, the Company entered into an Unsecured Credit Facility Agreement, which was amended on July 31, 2023 (“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.

1 unchanged sentence

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 Company has the right to pre-pay the entire amount outstanding under the Credit Facility at any time before the Credit Facility’s maturity.

On July 31, 2023, the maturity date of this Credit Facility was extended to November 30, 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.

During the three and six months ended June 30, 2023, the Company had not drawn any amount from the Credit Facility and has incurred $ 0.3 million 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.

Related Party Transactions

The Company’s subsidiary, DeepGreen Engineering Pte.

Ltd., 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 six months ended June 30, 2023 totaled $ 69 thousand and $ 138 thousand, respectively (three and six months ended June 30, 2022 - $ 69 thousand and $ 138 thousand, respectively), out of which for three and six months ended June 30, 2023 a total of $ 55 thousand $ 110 thousand, respectively (three and six months ended June 30, 2022 - $ 55 thousand and $ 110 thousand, respectively), is disclosed as exploration labor within exploration and evaluation expenses (Note 7) and $ 14 thousand and $ 28 thousand, respectively, for three and six months ended June 30, 2023 is disclosed as general and administration expenses (three and six months ended June 30, 2022 - $ 14 thousand and $ 28 thousand, respectively).

As at June 30, 2023, the amount payable to SSCS was $nil (December 31, 2022 - $ 23 thousand).

TMC the metals company Inc.

1 unchanged sentence

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

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.

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 six months ended June 30, 2023 amounted to $ 94 thousand and $ 188 thousand, respectively (three and six months ended June 30, 2022 -$ 94 thousand and $ 188 thousand, respectively), out of which for three and six months ended June 30, 2023 a total of $ 42 thousand $ 84 thousand, respectively (three and six months ended June 30, 2022 - $ 47 thousand and $ 94 thousand, respectively), is disclosed as exploration labor within exploration and evaluation expenses (Note 7) and $ 52 thousand and $ 103 thousand, respectively, for three and six months ended June 30, 2023 is disclosed as general and administration expenses (three and six months ended June 30, 2022 - $ 47 thousand and $ 94 thousand, respectively).

As at June 30, 2023, the amount payable to Ocean Renaissance was $nil (December 31, 2022 - $nil).

During the three and six months ended June 30, 2023, Allseas provided the Company with engineering and project management services totaling $ 1.9 million and $ 2.9 million respectively, recorded as mining, technological and process development within exploration and evaluation expenses (Note 7).

For the three and six months ended June 30, 2022, Allseas managed and delivered the PMTS project, with services totaling $ 1.3 million and $ 2.6 million, respectively, recorded as PMTS within exploration and evaluation expenses (Note 7).

As at June 30, 2023, the amount payable to Allseas was $ 3.7 million (June 30, 2022 – prepaid amount of $ 3.1 million).

During the three and six months ended June 30, 2023, the Company had not drawn from the Credit Facility with the affiliate of Allseas, and has incurred $ 0.3 million as underutilization fees which would be payable only in the event the Credit Facility is not drawn down at the time such fees are payable (Note 11),

Commitments and Contingent Liabilities

NORI Exploration Contract

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

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

NORI has estimated its work plan for 2023 to be approximately $ 25 million, which may be settled in cash or equity with its various vendors.

The cost of the estimated work plan for 2024 onwards is dependent 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 Option Agreement and Services Agreement

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

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

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

To date, limited offshore marine resource definition activities in the Marawa Contract Area have occurred.

The Company expects to collaborate with Marawa to assess the viability of any potential project in the Marawa Contract Area, although the timing of such assessment is unclear.

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

TMC the metals company Inc.

Notes to Condensed Consolidated Financial Statements

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

TOML Exploration Contract

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

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

On December 23, 2022, the ISA accepted TOML’s proposed program of activities for the 2022-2026 five-year period, which included an estimated five-year expenditure of up to $ 44 million.

The five-year estimated expenditure is indicative and subject to change, TOML will review the program regularly and TOML will inform the ISA of any changes through its annual reports.

Contingent Liability

On October 28, 2021, a shareholder filed a putative class action against the Company, one of our executives and a former director in federal district court for the Eastern District of New York, captioned 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 Exchange Act of 1934 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 our 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 Plaintiff is seeking to recover compensable damages caused by the alleged wrongdoings.

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

On September 26, 2022, the motion to dismiss was fully briefed and on July 12, 2023, an oral hearing on the motion to dismiss was held.

The parties are currently awaiting a ruling.

There is no assurance, however, that the Company or the other defendants 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 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.

On January 23, 2023, an investor in the 2021 private placement from the Business Combination filed a lawsuit against the Company 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.

n/k/a TMC The Metals Company Inc., Index No.

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 Company filed a motion to dismiss on March 31, 2023, after which the plaintiffs filed an amended complaint on June 5, 2023.

The amended complaint alleges that the Company 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.

The Company denies any allegations of wrongdoing and filed a motion to dismiss the amended complaint on July 28, 2023.

There is no assurance, however, that the Company 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 the Company may incur a loss in this matter.

Such losses or 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.

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)

Subsequent Events

On August 14, 2023, the Company entered into a securities purchase agreement for a registered direct offering of 13,461,540 common shares and the issuance of Class A warrants to purchase 6,730,770 common shares for expected gross proceeds received of approximately $ 26.9 million and expected net proceeds received of approximately $ 25.9 million, after deducting underwriting discounts and commissions and other offering expenses payable.

In addition, certain investors may purchase up to an aggregate of 5,500,000 additional common shares and accompanying Class A warrants to purchase up to an aggregate of 2,750,000 additional common shares upon notice to the Company on or before September 15, 2023, if the closing price of the common shares on the trading day before such investor’s notice is $ 3.00 or less for an aggregate of up to an additional $ 11 million.

On August 1, 2023, the Company entered into an Exclusive Vessel Use Agreement with Allseas pursuant to which Allseas will give exclusive use of the Hidden Gem to the Company in support of the development of the Project Zero Offshore System until the system is completed or December 31, 2026, whichever is earlier.

In consideration of the exclusivity term, the Company will issue 4.15 million common shares to Allseas.

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