Item 9A. Controls and Procedures
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023, as a result of a material weakness in our internal control over financial reporting as described below.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
In light of the material weakness in our internal control over financial reporting, we performed additional procedures to ensure that our consolidated financial statements included in this Annual Report were prepared in accordance with U.S. GAAP. Following such additional procedures, our management, including our principal executive officer and principal financial officer, has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in this Annual Report, in conformity with U.S. GAAP.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act, as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The company’s internal control over financial reporting includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
As of December 31, 2023, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was not effective as management identified a material weakness in our internal control over the accounting for significant non-routine transactions that resulted from the inadequate and untimely involvement of stakeholders and technical advisors with an appropriate level of expertise to account for a non-routine, unusual and complex transaction. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
162
Table of Contents
This material weakness resulted in errors in the financial statements and related disclosures in our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2023, and for the six months ended June 30, 2023 and nine months ended September 30, 2023. The cumulative errors in the three periods were made by management in the financial statements as of and for the year ended December 31, 2023 included in this Annual Report, and as such, had no impact on our annual audited financial statements for the year ended December 31, 2023 included in this Annual Report. See Note 22 to the audited consolidated financial statements for the year ended December 31, 2023 included elsewhere in this Annual Report for more information about these changes.
In order to remediate this material weakness, we are in the process of developing and rolling out training on processes and controls related to non-routine transactions and evaluating the circumstances under which we use technical advisors in connections with evaluating non-routine transactions. We are also considering engaging the assistance of additional third-party resources as deemed appropriate to assist management in its remediation efforts.
Our internal control over significant non-routine transactions need to be in operation and tested for sufficient instances to be considered effective. Consequently, the controls for non-routine transactions were ineffective as of December 31, 2023.
Notwithstanding our material weakness, we have concluded that the financial statements and other financial information included in this Annual Report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Changes in Internal Control over Financial Reporting
Except as noted above, there were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal controls that occurred during the fourth quarter of the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Item 9B. OTHER INFORMATION
Amendment to Credit Facility with Allseas
On March 22, 2024, we entered into the Second Amendment to the Unsecured Credit Facility with Argentum Credit Virtuti GCV (the “Lender”), the parent of Allseas Investments S.A. and an affiliate of Allseas, to extend the credit facility to August 31, 2025 and to provide that the underutilization fee thereunder shall cease to be payable after the date on which we or the Lender gives notice of termination of the agreement. Under the amended credit facility, we may borrow from the Lender up to $25,000,000 in the aggregate through August 31, 2025. The foregoing description of the amendment to the Credit Facility does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the full text of the amendment to the Credit Facility attached as Exhibit 10.33 to this Annual Report and incorporated herein by reference.
163
Table of Contents
Credit Facility with ERAS Capital LLC and Gerard Barron
On March 22, 2024, we entered into an Unsecured Credit Facility (the “2024 Credit Facility”) with Gerard Barron, our Chief Executive Officer and Chairman, and ERAS Capital LLC, the family fund of our director, Andrei Karkar (collectively, the “2024 Lenders”), pursuant to which, we may borrow from the 2024 Lenders up to $20,000,000 in the aggregate ($10,000,000 from each of the 2024 Lenders), from time to time, subject to certain conditions. All amounts drawn under the 2024 Credit Facility will bear interest at the 6-month Secured Overnight Funding Rate (SOFR), 180-day average plus 4.0% per annum payable in cash semi-annually (or plus 5% if paid-in-kind at maturity, at our election) on the first business day of each of June and January. We will pay an underutilization fee equal to 4.0% per annum payable semi-annually for any amounts that remain undrawn under the 2024 Credit Facility. We have the right to pre-pay the entire amount outstanding under the 2024 Credit Facility at any time, before the 2024 Credit Facility’s maturity of September 22, 2025. The 2024 Credit Facility also contains customary events of default. The 2024 Credit Facility will terminate automatically if we or any of our subsidiaries raise at least USD $50,000,000 in the aggregate (i) through the issuance of any of our or our subsidiaries’ debt or equity securities, or (ii) in prepayments under an off-take agreement or similar commercial agreement. The foregoing description of the 2024 Credit Facility does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the full text of the 2024 Credit Facility attached as Exhibit 10.34 to this Annual Report and incorporated herein by reference.
Rule 10b5-1 Trading Arrangements
During the fiscal quarter ended December 31, 2023, none of our directors or officers (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1 (c) or any “ non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Management and Corporate Governance,” “Code of Business Conduct and Ethics” and “Delinquent Section 16(a) Reports” in the Company’s proxy statement for the 2024 annual meeting of shareholders (the “Proxy Statement”).
Item 11. EXECUTIVE COMPENSATION
The response to this item is incorporated by reference from the discussion responsive thereto under the caption “ Executive Officer and Director Compensation ” in the Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Certain Relationships and Related Person Transactions” and “Management and Corporate Governance” in the Proxy Statement.
164
Table of Contents
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The response to this item is incorporated by reference from the discussion responsive thereto under the caption “Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.
165
Table of Contents
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) Financial Statements.
See “Index to Financial Statements and Financial Statement Schedules” under Part II, Item 8 to this Annual Report.
(2) Financial Statement Schedules.
Financial Statement schedules have not been included because they are not applicable or the information is included in the financial statements or notes thereto.
(3) Exhibits.
Exhibit
Number
Exhibit Description
Filed
with this
Report
Incorporated by
Reference
herein from
Form or
Schedule
Filing Date
SEC File/Reg.
Number
2.1††
Business Combination Agreement, dated as of March 4, 2021, by and among Sustainable Opportunities Acquisition Corp., 1291924 B.C. Unlimited Liability Company and DeepGreen Metals Inc.
Form 8-K
(Exhibit 2.1)
3/4/2021
001-39281
3.1
Notice of Articles of TMC the metals company Inc.
Form 8-K
(Exhibit 3.1)
9/15/2021
001-39281
3.2
Articles of TMC the metals company Inc.
Form 8-K
(Exhibit 3.2)
9/15/2021
001-39281
4.1
Description of Securities
X
4.2
TMC the metals company Inc. Common Share Certificate
Form 8-K
(Exhibit 4.1)
9/15/2021
001-39281
4.3
Warrant Agreement, dated as of May 8, 2020, between Continental Stock Transfer & Trust Company and Sustainable Opportunities Acquisition Corp.
Form S-1
(Exhibit 4.2)
10/7/2021
333-260126
4.4
Form of Class A Warrant to Purchase Common Stock
Form 8-K
(Exhibit 4.1)
8/14/2023
001-39281
10.1
Amended and Restated Registration Rights Agreement, by and between Sustainable Opportunities Acquisition Corp., Sustainable Opportunities Holdings LLC, the parties listed under Sponsor Group Holders on the signature page(s) thereto and the parties listed under DeepGreen Holders on the signature page(s) thereto
Form S-4/A (Exhibit 10.5 – Annex H)
8/5/2021
333-255118
10.2†
Strategic Alliance Agreement, dated as of March 29, 2019, by and between DeepGreen Metals Inc. and Allseas Group S.A.
Form S-4
(Exhibit 10.7)
4/8/2021
333-255118
10.3†
Pilot Mining Test Agreement dated as of July 8, 2019, by and between DeepGreen Metals Inc. and Allseas Group S.A.
Form S-4
(Exhibit 10.8)
4/8/2021
333-255118
166
Table of Contents
10.4†
Third Amendment to Pilot Mining Test Agreement and First Amendment to Strategic Alliance Agreement, dated as of March 4, 2021, by and between DeepGreen Metals Inc. and Allseas Group S.A.
Form S-4
(Exhibit 10.9)
4/8/2021
333-255118
10.5
Fourth Amendment to Pilot Mining Test Agreement and Second Amendment to Strategic Alliance Agreement, dated as of June 30, 2021, by and between DeepGreen Metals Inc. and Allseas Group S.A.
Form S-4/A
(Exhibit 10.23)
7/14/2021
333-255118
10.6
Fifth Amendment to Pilot Mining Test Agreement and Third Amendment to Strategic Alliance Agreement, effective as of February 8, 2023, by and among DeepGreen Engineering Pte Ltd, DeepGreen Metals Inc., TMC the metals company Inc. and Allseas Group S.A.
Form 8-K
(Exhibit 10.1)
2/17/2023
001-39281
10.7†
Sponsorship Agreement, dated as of March 8, 2008, by and between the Kingdom of Tonga and Tonga Offshore Mining Limited
Form S-4
(Exhibit 10.13)
4/8/2021
333-255118
10.8†
Sponsorship Agreement, dated as of September 23, 2021, by and between the Kingdom of Tonga and Tonga Offshore Mining Limited
Form S-1
(Exhibit 10.13)
10/7/2021
333-260126
10.9†
Sponsorship Agreement, dated as of June 5, 2017, by and among the Republic of Nauru, the Nauru Seabed Minerals Authority, and Nauru Ocean Resources Inc.
Form S-4
(Exhibit 10.14)
4/8/2021
333-255118
10.10
Certificate of the Sponsorship signed by the Government of Nauru on April 11, 2011
Form S-4/A
(Exhibit 10.24)
7/28/2021
333-255118
10.11
ISA Contract for Exploration (Republic of Nauru) dated as of July 22, 2011
Form S-4
(Exhibit 10.15)
4/8/2021
333-255118
10.12
ISA Contract for Exploration (Kingdom of Tonga) dated as of January 11, 2012
Form S-4
(Exhibit 10.16)
4/8/2021
333-255118
10.13+
Form of Indemnity Agreement
Form 8-K
(Exhibit 10.18)
9/15/2021
001-39281
10.14+
Nonemployee Director Compensation Policy
Form 8-K
(Exhibit 10.19)
9/15/2021
001-39281
10.15+
Employment Agreement, dated December 15, 2017, by and between DeepGreen Metals Inc. and Gerard Barron
Form S-4/A
(Exhibit 10.17)
5/27/2021
333-255118
10.16+
Employment Agreement, dated September 1, 2018, by and between DeepGreen Metals Inc. and Erika Ilves
Form S-4/A
(Exhibit 10.19)
5/27/2021
333-255118
10.17
Amended and Restated Employment Agreement, dated May 8, 2022, by and between The Metals Company Australia Pty. Ltd. and Anthony O’Sullivan
Form 10-Q
(Exhibit 10.3)
5/9/2022
001-39281
10.18+
Amended and Restated Employment Agreement, dated May 6, 2022, by and between DeepGreen Resources, LLC and Craig Shesky
Form 10-Q
(Exhibit 10.2)
5/9/2022
001-39281
10.19.1+
TMC the metals company Inc. 2021 Incentive Equity Plan
Form 8-K
(Exhibit 10.23.1)
9/15/2021
001-39281
10.19.2+
Form of Stock Option Agreement under TMC the metals company Inc. 2021 Incentive Equity Plan
Form 8-K
(Exhibit 10.23.2)
9/15/2021
001-39281
167
Table of Contents
10.19.3+
Form of Restricted Stock Unit Agreement under TMC the metals company Inc. 2021 Incentive Equity Plan
Form 8-K
(Exhibit 10.23.3)
9/15/2021
001-39281
10.20.1+
DeepGreen Metals Inc. Stock Option Plan and Form of Stock Option Agreement thereunder
Form S-4/A
(Exhibit 10.20)
5/27/2021
333-255118
10.20.2+
Amendment to DeepGreen Metals Inc. Stock Option Plan
Form S-4/A
(Exhibit 10.21)
5/27/2021
333-255118
10.21+
TMC the metals company Inc. 2021 Employee Stock Purchase Plan
Form S-8
(Exhibit 99.1)
5/31/2022
333-265318
10.22
Form of Subscription Agreement for institutional investors, by and between Sustainable Opportunities Acquisition Corp. and the subscriber parties thereto
Form S-4/A
(Exhibit 10.1)
8/5/2021
333-255118
10.23
Form of Subscription Agreement for accredited investors, by and between Sustainable Opportunities Acquisition Corp. and the subscriber parties thereto
Form S-4/A
(Exhibit 10.2)
8/5/2021
333-255118
10.24
Form of Securities Purchase Agreement, dated August 12, 2022, by and among the Company and the Purchasers named therein.
Form 8-K
(Exhibit 10.1)
8/15/2022
001-39281
10.25
Securities Purchase Agreement, dated August 12, 2022, by and among the Company and Gerard Barron.
Form 8-K
(Exhibit 10.2)
8/15/2022
001-39281
10.26
Securities Purchase Agreement, dated August 12, 2022, by and among the Company and ERAS Capital LLC.
Form 8-K
(Exhibit 10.3)
8/15/2022
001-39281
10.27
At-The-Market Equity Distribution Agreement, dated December 22, 2022, by and among TMC the metals company Inc., Stifel, Nicolaus & Company, Incorporated and Wedbush Securities Inc.
Form 8-K
(Exhibit 10.1)
12/22/2022
001-39281
10.28
Amendment No. 1 to At-The-Market Distribution Agreement, dated as of December 21, 2023, by and among TMC the metals company Inc., Stifel, Nicolaus & Company, Incorporated and Wedbush Securities Inc.
Form 8-K
(Exhibit 10.1)
12/21/2023
001-39281
10.29†
Royalty Agreement, dated February 21, 2023 by and among TMC the metals company Inc., Nauru Ocean Resources Inc. and Low Carbon Royalties Inc.
Form 8-K
(Exhibit 10.1)
2/22/2023
001-39281
10.30†
Investor Rights Agreement dated February 21, 2023 by and among TMC the metals company Inc., Brian Paes-Braga and Low Carbon Royalties Inc.
Form 8-K
(Exhibit 10.2)
2/22/2023
001-39281
10.31†
Unsecured Credit Facility, dated March 22, 2023, by and between TMC the metals company Inc. and Argentum Credit Virtuti GCV
Form 10-K
(Exhibit 10.31)
3/27/2023
001-39281
10.32
Amendment to the Unsecured Credit Facility, dated July 31, 2023, by and between TMC the metals company Inc. and Argentum Credit Virtuti GCV
Form 8-K
(Exhibit 10.2)
8/01/2023
001-39281
10.33
Second Amendment to the Unsecured Credit Facility, dated March 22, 2024, by and between TMC the metals company Inc. and Argentum Credit Virtuti GCV
X
10.34†
Unsecured Credit Facility, dated March 22, 2024, by and among TMC the metals company Inc., Gerard Barron and ERAS Capital LLC
X
168
Table of Contents
10.35
Exclusive Vessel Use Agreement, dated August 1, 2023, by and between TMC the metals company Inc. and Allseas Group S.A.
Form 8-K
(Exhibit 10.1)
8/01/2023
001-39281
10.36
Form of Securities Purchase Agreement, dated August 14, 2023
Form 8-K
(Exhibit 10.1)
8/14/2023
001-39281
21.1
List of Subsidiaries
Form S-1
(Exhibit 21.1)
10/27/2021
333-260126
23.1
Consent of Ernst & Young LLP
X
31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32*
Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
96.1
Technical Report Summary — Initial Assessment of the NORI Property, Clarion Clipperton Zone, for Deep Green Metals Inc., effective as of March 17, 2021, by AMC Consultants Pty Ltd and other qualified persons.
Form S-4/A
(Exhibit 96.1)
8/5/2021
333-255118
96.2
Technical Report Summary — Initial Assessment of the TOML Mineral Resource, Clarion Clipperton Zone, Pacific Ocean, for Deep Green Metals Inc., effective as of March 26, 2021, by AMC Consultants Pty Ltd and other qualified persons.
Form S-4/A
(Exhibit 96.2)
8/5/2021
333-255118
97.1+
TMC the metals company Inc. Clawback Policy
X
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document
X
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
X
†
Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[***]”) because the identified confidential portions (i) are not material and (ii) is the type of information that the Company treats as private or confidential.
169
Table of Contents
††
Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
+
Management contract or compensatory plan or arrangement.
*
The certifications attached as Exhibit 32 that accompany this Annual Report are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of TMC the metals company Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of such Form 10-K), irrespective of any general incorporation language contained in such filing.
Item 16. FORM 10-K SUMMARY
Not applicable.
170
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized .
TMC THE METALS COMPANY INC.
Date: March 25, 2024
By:
/s/ Gerard Barron
Gerard Barron
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated below and on the dates indicated.
Signatures
Title
Date
By:
/s/ Gerard Barron
Chief Executive Officer and Chairman
March 25, 2024
Gerard Barron
(principal executive officer) and Director
By:
/s/ Craig Shesky
Chief Financial Officer
March 25, 2024
Craig Shesky
(principal financial and accounting officer)
By:
/s/ Andrew Greig
Director
March 25, 2024
Andrew Greig
By:
/s/ Christian Madsbjerg
Director
March 25, 2024
Christian Madsbjerg
By:
/s/ Andrew Hall
Director
March 25, 2024
Andrew Hall
By:
/s/ Sheila Khama
Director
March 25, 2024
Sheila Khama
By:
/s/ Andrei Karkar
Director
March 25, 2024
Andrei Karkar
By:
/s/ Amelia Kinahoi Siamomua
Director
March 25, 2024
Amelia Kinahoi Siamomua
By:
/s/ Kathleen McAllister
Director
March 25, 2024
Kathleen McAllister
171