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 ​ ​ June 30, December 31, ASSETS Note 2024 2023 Current ​ ​ ​ ​ ​ Cash ​ ​ ​ $ 474 $ 6,842 Receivables and prepayments ​ ​ ​ 1,237 ​ 1,978 ​ ​ ​ ​ 1,711 ​ 8,820 Non-current ​ ​ ​ ​ ​ ​ Exploration contracts ​ ​ 43,150 ​ 43,150 Right of use asset ​ 6 ​ ​ 4,767 ​ ​ 5,721 Equipment ​ ​ ​ 936 ​ 1,133 Software ​ ​ ​ ​ 1,793 ​ ​ 1,643 Investment ​ 7 ​ ​ 8,290 ​ ​ 8,429 ​ ​ ​ ​ 58,936 ​ 60,076 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ASSETS ​ ​ ​ $ 60,647 $ 68,896 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ ​ ​ ​ ​ Current ​ ​ ​ ​ ​ ​ Accounts payable and accrued liabilities ​ ​ 37,784 ​ 31,334 Short-term debt ​ 6,14 ​ ​ 5,875 ​ ​ — ​ ​ ​ ​ 43,659 ​ 31,334 Non-current ​ ​ ​ ​ ​ ​ Deferred tax liability ​ ​ 10,675 ​ 10,675 Royalty liability ​ 7 ​ ​ 14,000 ​ ​ 14,000 Warrants liability 10 ​ 1,920 ​ 1,969 TOTAL LIABILITIES ​ ​ ​ $ 70,254 $ 57,978 ​ ​ ​ ​ ​ ​ ​ ​ ​ EQUITY ​ ​ ​ ​ ​ ​ Common shares(unlimited shares, no par value – issued: 322,241,883 (December 31, 2023 – 306,558,710 )) ​ ​ 460,573 ​ 438,239 Class A - J Special Shares ​ ​ ​ ​ — ​ ​ — Additional paid in capital ​ ​ ​ 125,300 ​ 122,797 Accumulated other comprehensive loss ​ ​ ​ ( 1,216 ) ​ ( 1,216 ) Deficit ​ ​ ​ ( 594,264 ) ​ ( 548,902 ) TOTAL EQUITY ​ ​ ​ ( 9,607 ) ​ 10,918 ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL LIABILITIES AND EQUITY ​ ​ ​ $ 60,647 $ 68,896 ​ Nature of Operations (Note 1) Contingent Liabilities (Note 15) Subsequent Event (Note 17) 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 Loss and Comprehensive Loss (in thousands of US Dollars, except share and per share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Six months ended ​ ​ June 30, ​ June 30, ​ Note 2024 2023 2024 2023 Operating expenses ​ ​ ​ ​ ​ ​ Exploration and evaluation expenses 8 ​ $ 12,403 $ 8,098 $ 30,526 $ 15,267 General and administrative expenses ​ ​ ​ ​ 7,892 ​ 5,131 ​ 14,451 ​ 11,345 Operating loss ​ ​ ​ ​ 20,295 ​ 13,229 ​ 44,977 ​ 26,612 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other items ​ ​ ​ ​ ​ ​ ​ ​ Equity-accounted investment loss ​ 7 ​ ​ 61 ​ ​ 137 ​ ​ 139 ​ ​ 356 Change in fair value of warrant liability ​ 10 ​ ​ ( 580 ) ​ ​ 787 ​ ​ ( 49 ) ​ ​ 1,331 Foreign exchange loss (gain) ​ ​ ​ ( 84 ) ​ 23 ​ ( 350 ) ​ 52 Interest income ​ ​ ​ ​ ( 16 ) ​ ( 319 ) ​ ( 118 ) ​ ( 773 ) Fees and interest on borrowings and credit facilities ​ 6,14 ​ ​ 492 ​ 250 ​ 763 ​ 277 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss and comprehensive loss for the period ​ ​ ​ $ 20,168 $ 14,107 $ 45,362 $ 27,855 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss per share - Basic and diluted ​ ​ $ 0.06 $ 0.05 $ 0.14 $ 0.10 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding – basic and diluted ​ ​ ​ 320,891,977 ​ 281,323,151 ​ 316,206,916 ​ 276,702,050 ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred ​ Special ​ Paid in ​ Comprehensive ​ ​ ​ ​ ​ ​ Three months ended June 30, 2024 Shares ​ Amount Shares Shares Capital Loss Deficit Total April 1, 2024 ​ 318,291,383 ​ $ 454,431 ​ $ — ​ $ — $ 122,691 $ ( 1,216 ) $ ( 574,096 ) $ 1,810 Conversion of restricted share units, net of shares withheld for taxes (Note 11) ​ 1,777,466 ​ ​ 1,884 ​ ​ — ​ ​ — ​ ​ ( 1,884 ) ​ ​ — ​ ​ — ​ ​ — Shares issued from ATM (Note 12) ​ 1,634,588 ​ ​ 2,587 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,587 Exercise of stock options (Note 11) ​ 511,052 ​ ​ 1,617 ​ ​ — ​ ​ — ​ ​ ( 1,398 ) ​ ​ — ​ ​ — ​ ​ 219 Share purchase under Employee Share Purchase Plan (Note 11) ​ 27,394 ​ ​ 54 ​ ​ — ​ ​ — ​ ​ ( 30 ) ​ ​ — ​ ​ — ​ ​ 24 Share-based compensation and expenses settled with equity (Note 11) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,921 ​ ​ — ​ ​ — ​ ​ 5,921 Loss for the period ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ — ​ ( 20,168 ) ​ ( 20,168 ) June 30, 2024 ​ 322,241,883 ​ $ 460,573 ​ $ — ​ $ — $ 125,300 $ ( 1,216 ) $ ( 594,264 ) $ ( 9,607 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ ​ ​ ​ ​ Additional Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred ​ Special ​ Paid in ​ Comprehensive ​ ​ ​ ​ ​ ​ Three months ended June 30, 2023 Shares Amount Shares Shares Capital Loss Deficit Total April 1, 2023 ​ 280,618,285 ​ $ 345,090 ​ $ — ​ $ — ​ $ 186,796 ​ $ ( 1,216 ) ​ $ ( 488,869 ) ​ $ 41,801 Conversion of restricted share units, net of shares withheld for taxes ​ 434,558 ​ ​ 591 ​ ​ — ​ ​ — ​ ​ ( 561 ) ​ ​ — ​ ​ — ​ ​ 30 Share purchase under Employee Share Purchase Plan ​ 83,572 ​ ​ 94 ​ ​ — ​ ​ — ​ ​ ( 45 ) ​ ​ — ​ ​ — ​ ​ 49 Share-based compensation and expenses settled with equity — ​ ​ — ​ ​ — ​ — ​ 2,532 ​ — ​ — ​ 2,532 Loss for the period — ​ ​ — ​ ​ — ​ — ​ — ​ — ​ ( 14,107 ) ​ ( 14,107 ) June 30, 2023 281,136,415 ​ $ 345,775 ​ $ — $ — $ 188,722 $ ( 1,216 ) $ ( 502,976 ) $ 30,305 ​ 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 Changes in Equity (in thousands of US Dollars, except share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Preferred ​ Special ​ Paid in ​ Comprehensive ​ ​ ​ ​ ​ ​ Six months ended June 30, 2024 Shares Amount Shares Shares Capital Loss Deficit Total January 1, 2024 ​ 306,558,710 ​ $ 438,239 ​ $ — ​ $ — ​ $ 122,797 ​ $ ( 1,216 ) ​ $ ( 548,902 ) ​ $ 10,918 Issuance of shares and warrants under Registered Direct Offering, net of expenses (Note 9) 4,500,000 ​ 7,447 ​ — ​ ​ — ​ 1,553 ​ — ​ — ​ 9,000 Conversion of restricted share units, net of shares withheld for taxes (Note 11) ​ 8,890,139 ​ ​ 10,485 ​ ​ — ​ ​ — ​ ​ ( 10,485 ) ​ ​ — ​ ​ — ​ ​ — Shares issued as per At-the-Market Equity Distribution Agreement (Note 12) ​ 1,634,588 ​ ​ 2,587 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,587 Exercise of stock options (Note 11) ​ 631,052 ​ ​ 1,761 ​ ​ — ​ ​ — ​ ​ ( 1,352 ) ​ ​ — ​ ​ — ​ ​ 409 Share purchase under Employee Share Purchase Plan (Note 11) 27,394 ​ 54 ​ — ​ ​ — ​ ( 30 ) ​ — ​ — ​ 24 Share-based compensation and expenses settled with equity (Note 11) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 12,817 ​ ​ — ​ ​ — ​ ​ 12,817 Loss for the period — ​ — ​ — ​ ​ — ​ — ​ — ​ ( 45,362 ) ​ ( 45,362 ) June 30, 2024 322,241,883 $ 460,573 $ — ​ $ — ​ 125,300 $ ( 1,216 ) $ ( 594,264 ) $ ( 9,607 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Preferred ​ Special ​ Paid in ​ Comprehensive ​ ​ ​ ​ ​ ​ Six months ended June 30, 2023 Shares Amount Shares Shares Capital Loss Deficit Total January 1, 2023 ​ 266,812,131 ​ $ 332,882 ​ $ — ​ $ — ​ $ 184,960 ​ $ ( 1,216 ) ​ $ ( 475,121 ) ​ $ 41,505 Conversion of restricted share units, net of shares withheld for taxes 3,390,712 ​ 3,405 ​ ​ — ​ — ​ ( 3,375 ) ​ — ​ — ​ 30 Share purchase under Employee Share Purchase Plan 83,572 ​ 94 ​ ​ — ​ — ​ ( 45 ) ​ — ​ — ​ 49 Shares issued to Allseas 10,850,000 ​ 9,394 ​ ​ — ​ — ​ — ​ — ​ — ​ 9,394 Share-based compensation and expenses settled with equity ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 7,182 ​ ​ — ​ ​ — ​ ​ 7,182 Loss for the period — ​ — ​ ​ — ​ — ​ — ​ — ​ ( 27,855 ) ​ ( 27,855 ) June 30, 2023 281,136,415 ​ $ 345,775 ​ $ — ​ $ — ​ ​ 188,722 ​ $ ( 1,216 ) ​ $ ( 502,976 ) ​ $ 30,305 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ ​ ​ 8 Table of Contents TMC the metals company Inc. Condensed Consolidated Statements of Cash Flows (in thousands of US Dollars) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended ​ Six months ended ​ ​ June 30, June 30, ​ Note 2024 2023 Cash provided by (used in) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ ​ ​ ​ ​ ​ Loss for the period ​ ​ $ ( 45,362 ) $ ( 27,855 ) Items not affecting cash: ​ ​ ​ ​ ​ ​ Amortization ​ ​ ​ ​ 197 ​ ​ 175 Lease Expense ​ 6 ​ ​ 954 ​ ​ — Accrued interest on credit facilities ​ 6,14 ​ ​ 25 ​ ​ — Share-based compensation and expenses settled with equity ​ 11 ​ ​ 12,817 ​ ​ 7,182 Equity-accounted investment loss 7 ​ ​ 139 ​ 356 Change in fair value of warrants liability 10 ​ ​ ( 49 ) ​ 1,331 Unrealized foreign exchange ​ ​ ​ ​ ( 301 ) ​ ​ ( 17 ) Changes in working capital: ​ ​ ​ ​ ​ ​ Receivables and prepayments ​ ​ ​ 782 ​ 1,097 Accounts payable and accrued liabilities ​ ​ ​ 6,857 ​ ( 14,152 ) Net cash used in operating activities ​ ​ ​ ​ ( 23,941 ) ​ ( 31,883 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Investing activities ​ ​ ​ ​ ​ ​ Acquisition of equipment and software ​ ​ ​ ​ ( 415 ) ​ ​ ( 75 ) Net cash used in investing activities ​ ​ ​ ​ ( 415 ) ​ ( 75 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Financing activities ​ ​ ​ ​ ​ ​ Proceeds from registered direct offering ​ 9 ​ ​ 9,000 ​ ​ — Expenses paid for registered direct offering ​ 9 ​ ​ ( 142 ) ​ ​ — Proceeds from Shares issued from ATM ​ 12 ​ ​ 2,546 ​ ​ — Proceeds from Drawdown of Credit Facilities ​ 14 ​ ​ 3,875 ​ ​ — Proceeds from Drawdown of Allseas Debt Agreement ​ 6 ​ ​ 2,000 ​ ​ — Interest paid on amounts drawn from credit facilities ​ 14 ​ ​ ( 25 ) ​ ​ — Proceeds from Low Carbon Royalties Investment ​ ​ ​ ​ — ​ ​ 5,000 Proceeds from employee stock plans ​ 11 ​ ​ 24 ​ ​ 49 Proceeds from exercise of stock options ​ 11 ​ ​ 409 ​ ​ — Proceeds from issuance of shares ​ ​ ​ ​ — ​ ​ 30 Net cash provided by financing activities ​ ​ ​ ​ 17,687 ​ ​ 5,079 ​ ​ ​ ​ ​ ​ ​ ​ ​ Decrease in cash ​ ​ $ ( 6,669 ) $ ( 26,879 ) Impact of exchange rate changes on cash ​ ​ ​ 301 ​ 17 Cash - beginning of period ​ ​ ​ 6,842 ​ 46,876 Cash - end of period ​ ​ ​ 474 ​ 20,014 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ ​ 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) 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. The Company’s corporate office, registered address and records office is located at 10th 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, cobalt and manganese sulfates, or intermediate nickel-copper-cobalt matte) for electric vehicles (“EV”) and renewable energy storage markets, (ii) copper cathode for EV wiring, 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 square kilometers 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 square kilometers 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 square kilometers 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 deliver a system to collect, lift and transport nodules from the seafloor to shore that meets the requirements of 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 at commercial scale, 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. 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, 2024 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, 2023. The Company has applied the same accounting policies as in the prior year, except as disclosed below. 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) Comparative figures reported in the Condensed Consolidated Balance Sheet, for software development costs and equipment, and figures reported in the Condensed Consolidated Statements of Cash Flows, for expenses settled with equity and changes in working capital 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 11), valuation of Class A warrants (Note 10) as well as the valuation of private warrants (Note 10), the valuation of the Royalty liability (Note 7) and the valuation of leases (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 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. ● Level 2  - Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. ● Level 3  - Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. There were no transfers between fair value measurement levels during the three and six months ended June 30, 2024, and 2023. As at June 30, 2024, and December 31, 2023, 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 royalty liability, and warrants issued by the Company. These warrants and royalty liability are valued at fair value, which is disclosed in Note 10. 5. Recent Accounting Pronouncements Issued and Adopted There were no recent accounting pronouncements issued and adopted by the Company during the period. 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) 6. Strategic Alliance with Allseas and Affiliates Development of Project Zero Offshore Nodule Collection System On March 16, 2022, NORI and Allseas entered into a non-binding term sheet for the development and operation of a commercial nodule collection system. For the three and six months ended June 30, 2024, Allseas provided the Company with engineering, project management and vessel use services consisting of lay-up and transit costs totaling $ 3.2 million and $ 6.9 million respectively which were recorded as mining, technological and process development within exploration and evaluation expenses (three months and six months ended June 30, 2023 - $ 1.9 million and $ 2.9 million respectively) (Note 8). Exclusive Vessel Use Agreement with Allseas 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 vessel (“ Hidden Gem ”) to the Company in support of the development of the Project Zero Offshore Nodule Collection System. The Company determined that the Exclusive Vessel Use Agreement with Allseas is a lease agreement, classified as an operating lease. For the three and six months ended June 30, 2024, the Company has recognized $ 0.5 million and $ 1 million, respectively as lease expense recorded as mining, technological and process development within exploration and evaluation expenses. As at June 30, 2024, the net amount of the right-of-use asset is as follows: ​ ​ ​ ​ ​ ​ Right-of-use Asset Balance as at December 31, 2023 ​ $ 5,721 Lease expense during the period ​ ( 954 ) Balance as at June 30, 2024 ​ $ 4,767 ​ Credit Facility and Loan Agreement with Company Related to Allseas On March 22, 2023, the Company entered into an Unsecured Credit Facility Agreement, which was amended on July 31, 2023 (“Credit Facility”), with Argentum Cedit 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. The Company has the ability to settle certain charges under this Credit Facility in cash or in equity at the discretion of the Company. The Credit Facility also contains customary events of default. On March 22, 2024, the Company entered into the Second Amendment to the Unsecured Credit Facility with the Lender, 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 the Company or the Lender gives notice of termination of the agreement. Under the amended Credit Facility, the Company may borrow from the Lender up to $ 25,000,000 in the aggregate through August 31, 2025. During the three months and six months ended June 30, 2024, the Company has not drawn any amount from the Credit Facility and has incurred $ 0.3 million and $ 0.5 million, respectively (three months ended and six months ended June 30, 2023: $ 0.3 million) as underutilization fees. 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) On May 27, 2024, the Company entered into a short-term loan agreement with the Lender. In accordance with the agreement, the Lender provided a short-term loan to the Company amounting to $ 2 million (the “Loan”) on May 30, 2024. The Loan has priority over the 2024 Credit Facility with Gerard Barron and ERAS Capital LLC (Note 14). The Loan and accrued interest are payable to the Lender on or before the earlier of (i) the Company’s next financing and (ii) September 10, 2024 (maturity date). The Loan accrues interest at a rate of 8 % per annum. During the three and six months ended June 30, 2024, the Company has incurred $ 14 thousand as interest expense. As at June 30, 2024, the total amount payable to Allseas and its affiliates was $ 22.8 million (December 31, 2023: $ 13.8 million). As at June 30, 2024, Allseas and its affiliates owned 53.8 million TMC common shares (2023: 53.8 million TMC common shares) which constituted 16.7 % (December 31, 2023: 17.6 %) of total common shares outstanding. 7. 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 “Royalty Agreement”) with Low Carbon Royalties. In connection with the Royalty Agreement, NORI contributed a 2 % gross overriding royalty (the “NORI Royalty”) on the Company’s NORI project area in the CCZ to Low Carbon Royalties. 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. On March 21, 2023, Low Carbon Royalties acquired additional gross overriding royalties on natural gas fields in Latin America. 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 % from 35 %. Based on the fair value of the NORI Royalty granted and the cash received, the Company recorded $ 9 million as investment in Low Carbon Royalties on the Closing Date. For the three and six months ended June 30, 2024, the Company’s share of the net loss generated by the Low Carbon Royalties was $ 62 thousand and $ 139 thousand, respectively (share of net loss for three months and six months ended June 30, 2023: $ 0.1 million and $ 0.4 million respectively). ​ ​ ​ ​ ​ ​ Investment Fair value of NORI Royalty ​ $ 14,000 Cash received ​ ​ ( 5,000 ) Cost of Investment on Closing Date ​ ​ 9,000 Equity-accounted investment loss for the year ended 2023 ​ ( 571 ) Investment as at December 31, 2023 ​ $ 8,429 Equity-accounted investment loss for the period ended June 30, 2024 ​ ​ ( 139 ) Investment as at June 30, 2024 ​ $ 8,290 ​ The NORI Royalty was recorded as a royalty liability in the consolidated Balance Sheet in accordance with ASC 470, Debt (“ASC 470”). The Company elected to account for the royalty liability at fair value through profit and loss. The fair value was determined using a market approach which entails examining recent royalty transactions prior to the reporting date, focusing on those transactions that involve similar metals as contained in NORI’s polymetallic nodules. The Company compares the specific characteristics of these transactions to estimate the fair value. The fair value of the royalty liability as at June 30, 2024, remained unchanged at $ 14 million. ​ Financial results of Low Carbon Royalties as at and for the three and six months ended June 30, 2024 and 2023 are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ As at June 30, As at June 30, ​ 2024 2023 Current Assets ​ $ 1,410 1,045 Non-Current Assets ​ 25,726 26,606 Current Liabilities ​ 80 119 ​ 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months Three months Six months Six months ​ ended June 30, ended June 30, ended June 30, ended June 30, ​ 2024 2023 2024 2023 Royalty Income ​ $ 396 99 790 124 Total Revenue ​ 410 113 814 179 Comprehensive Loss for the period ​ $ ( 191 ) ( 426 ) ( 433 ) ( 1,078 ) ​ ​ 8 . Exploration and Evaluation Expenses The detail of exploration and evaluation expenses is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI ​ Marawa ​ TOML ​ ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ Three months endedJune 30, 2024 Contract Agreement Contract Total Environmental Studies $ 1,489 $ — $ — $ 1,489 Exploration Labor ​ 2,248 ​ 21 ​ 154 ​ 2,423 Share-Based Compensation (Note 11) ​ 3,002 ​ 8 ​ 113 ​ 3,123 Mining, Technological and Process Development ​ 3,618 ​ — ​ 318 ​ 3,936 Prefeasibility Studies ​ ​ 295 ​ ​ — ​ ​ — ​ ​ 295 Sponsorship, Training and Stakeholder Engagement ​ 557 ​ 26 ​ 157 ​ 740 Permit Application Activities ​ ​ 203 ​ ​ — ​ ​ — ​ ​ 203 Other ​ 158 ​ — ​ 36 ​ 194 ​ $ 11,570 $ 55 $ 778 $ 12,403 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI ​ Marawa ​ TOML ​ ​ ​ ​ ​ Exploration ​ Option ​ Exploration ​ ​ ​ Three months ended June 30, 2023 Contract Agreement Contract Total Environmental Studies $ 1,909 ​ $ — ​ $ — ​ $ 1,909 Exploration Labor ​ 1,167 ​ ​ 41 ​ ​ 136 ​ ​ 1,344 Share-Based Compensation ​ 1,260 ​ 43 ​ 132 ​ 1,435 Mining, Technological and Process Development ​ 1,969 ​ — ​ 197 ​ 2,166 Prefeasibility Studies ​ 421 ​ — ​ — ​ 421 Sponsorship, Training and Stakeholder Engagement ​ 489 ​ ​ 45 ​ ​ 222 ​ ​ 756 Other ​ ​ 67 ​ — ​ — ​ 67 ​ $ 7,282 ​ $ 129 ​ $ 687 ​ $ 8,098 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI Marawa TOML ​ ​ ​ Exploration Option Exploration ​ ​ ​ Six months ended June 30, 2024 Contract Agreement Contract ​ Total Environmental Studies ​ $ 3,319 ​ $ — ​ $ — ​ $ 3,319 Exploration Labor ​ 4,407 ​ 40 ​ 310 ​ 4,757 Share-Based Compensation (Note 11) ​ 3,919 ​ ( 1 ) ​ 176 ​ 4,094 Mining, Technological and Process Development ​ 14,878 ​ — ​ 656 ​ 15,534 Prefeasibility Studies ​ 585 ​ — ​ — ​ 585 Sponsorship, Training and Stakeholder Engagement ​ 1,244 ​ 61 ​ 308 ​ 1,613 Permit Application Activities ​ 203 ​ — ​ — ​ 203 Other ​ 360 ​ — ​ 61 ​ 421 ​ ​ $ 28,915 ​ $ 100 ​ $ 1,511 ​ $ 30,526 ​ 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NORI Marawa TOML ​ ​ ​ Exploration Option Exploration ​ ​ ​ Six months ended June 30, 2023 Contract Agreement Contract ​ Total Environmental Studies ​ $ 4,527 ​ $ — ​ $ — ​ $ 4,527 Exploration Labor ​ 2,245 ​ 86 ​ 269 ​ 2,600 Share-Based Compensation ​ 2,088 ​ 69 ​ 215 ​ 2,372 Mining, Technological and Process Development ​ 2,987 ​ — ​ 302 ​ 3,289 Prefeasibility Studies ​ 805 ​ — ​ — ​ 805 Sponsorship, Training and Stakeholder Engagement ​ 903 ​ 121 ​ 459 ​ 1,483 Other ​ 191 ​ — ​ — ​ 191 ​ ​ $ 13,746 ​ $ 276 ​ $ 1,245 ​ $ 15,267 ​ ​ 9. Registered Direct Offering On August 14, 2023, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering (the “Registered Direct Offering”) 12,461,540 common shares and issue Class A Warrants to purchase 6,230,770 common shares (“Class A Warrants) (Note 10). Each common share and accompanying Class A Warrant were sold at a price of $ 2.00 per unit. The exercise price to purchase one common share under the Class A warrants is $ 3.00 , subject to adjustment as provided in the warrant agreement. As at June 30, 2024, all common shares and Class A Warrants to purchase common shares under the Registered Direct Offering had been issued and the Company received gross proceeds amounting to $ 24.9 million. The Company incurred $ 1.3 million as offering expenses, resulting in net proceeds received of $ 23.6 million. Out of the total net proceeds received of $ 23.6 million, the net proceeds attributable to common shares were $ 18.9 million and the net proceeds attributable to Class A Warrants were $ 4.7 million. 10 . 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 June 30, 2024, 15,000,000 (June 30, 2023 - 15,000,000 ) Public Warrants were outstanding. Public Warrants may only be exercised for a whole number of shares. As at June 30, 2024, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital. Private Warrants As at June 30, 2024, 9,500,000 (June 30, 2023 - 9,500,000 ) Private Warrants were outstanding. 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 -day trading period and historical volatility of the share price of the common shares. 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 June 30, 2024, the fair value of outstanding Private Warrants of $ 1.9 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, 2023 ​ $ 1,969 Increase in fair value of warrants liability ​ ( 49 ) Warrants liability as at June 30, 2024 ​ $ 1,920 ​ The fair value of the Private Warrants was estimated using the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2024 2023 Exercise price ​ $ 11.50 ​ $ 11.50 Share price ​ $ 1.35 ​ $ 1.10 Volatility ​ ​ 103.97 % ​ 105.34 % Term ​ ​ 2.19 years ​ 2.69 years Risk-free rate ​ ​ 4.56 % ​ 3.98 % Dividend yield ​ ​ 0.0 % ​ 0.0 % ​ Class A Warrants As at June 30, 2024, 6,230,770 (June 30, 2023 – nil ) Class A warrants were outstanding, and the total fair value of the outstanding Class Warrants recorded in additional paid in capital was $ 4.7 million (December 31, 2023 - $ 3.2 million). There were no exercises or redemptions of the Public Warrants, Private Warrants and Class A warrants during the three-month and six-month period ended June 30, 2024. ​ 11 . 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 June 30, 2024, is 56,634,518 common shares, including 12,262,348 shares added to the Plan in January 2024 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 from 2022 to 2031, 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. Share-based awards consisting of Restricted Share Units (STIP and LTIP) and options granted by TMC have been issued under the 2021 Incentive Equity Plan. Stock options On April 9, 2024, the Company entered into a consulting agreement with Mr. Jurvetson, a director of the Company (the “Agreement”). The Agreement provides, among other things, that Mr. Jurvetson would serve as a special advisor to the Company’s Chief Executive Officer for a term of five years . As the sole compensation for his advisory services, Mr. Jurvetson was granted stock options to purchase 3,440,000 of the Company’s common shares, with an exercise price equal to $ 1.71 , under the Company’s 2021 Incentive Plan (“Incentive Plan”). The options vest in thirds on each anniversary of the grant date of the options provided that Mr. Jurvetson is still providing services to the Company at such time and expire on April 9, 2031. On April 9, 2024, the Company also granted stock options to purchase 500,000 shares to a consultant in exchange for advisory services over a 5-year period ending April 9, 2029. 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) The Company determined the fair value of the options to be $ 1.36 per unit using the Black-Scholes valuation method. The fair value was estimated using the following assumptions: ​ ​ ​ ​ ​ ​ April 9, ​ ​ 2024 Exercise price ​ $ 1.71 Share price ​ $ 1.71 Volatility ​ 114.32 % Term (1) ​ 4.5 years Risk-free rate ​ 4.29 % Dividend yield ​ 0.0 % (1) The expected term is estimated using the simplified method which is calculated as the average of the time to vest for each tranche from the grant date and the 7-year contractual term. During the three and six months ended June 30, 2024, the Company recognized $ 0.4 million of share-based compensation expense reported as general and administrative expenses in the statement of loss and comprehensive loss. As at June 30, 2024, there were 14,443,188 stock options outstanding under the Company’s Short-Term Incentive Plan (“STIP”) and 9,644,874 stock options outstanding under the Company’s Long-Term Incentive Plan (“LTIP”). The Company has not granted any options under the STIP and LTIP since September 9, 2021 (date of the Business Combination) and has fully recognized the fair value of the options issued in prior periods under the STIP and LTIP. During the six months ended June 30, 2024, the Company recorded the forfeiture of unvested stock options (issued under LTIP plans) thereby reversing $ 0.6 million previously recorded as share-based compensation expense in the statement of loss and comprehensive loss (six months ended June 30, 2023: $ nil ), evenly apportioned between exploration and evaluation expenses (Note 8) and general and administration expenses. A continuity schedule summarizing the movements in the Company’s stock options under the various plans is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Number of Number of Options ​ ​ Options ​ Options Outstanding ​ ​ Outstanding ​ Outstanding under ​ ​ under STIP under LTIP Incentive Plan Outstanding – December 31, 2022 15,356,340 9,783,922 ​ — Expired ( 162,100 ) — ​ — Exercised ( 120,000 ) — ​ — Outstanding – December 31, 2023 15,074,240 9,783,922 ​ — Granted ​ — ​ — ​ 3,940,000 Forfeited — ( 139,048 ) ​ — Exercised ( 631,052 ) — ​ — Outstanding – June 30, 2024 14,443,188 9,644,874 ​ 3,940,000 ​ Restricted Share Units (“RSU”) The Company may, from time to time, grant RSUs to directors, officers, employees, and consultants of the Company and its subsidiaries under the Plan. On each vesting date, RSU holders are issued common shares equivalent to the number of RSUs held provided the holder is providing service to the Company on such vesting date. 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) A summary of the RSU activity during the six-month period ended June 30, 2024 is presented in the table below: ​ ​ ​ ​ ​ Number of RSUs ​ ​ Outstanding Outstanding – December 31, 2023 12,484,880 Granted 32,414,380 Forfeited ( 247,560 ) Exercised ( 8,890,139 ) Outstanding – June 30, 2024 35,761,561 ​ The details of RSUs granted by the Company during the three months and six months ended June 30, 2024 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ​ Three months Six months ​ Six months ​ ​ ended June 30, ​ ended June 30, ​ ended June 30, ​ ended June 30, Vesting Period 2024 2023 2024 2023 Vesting Immediately (1)(2) ​ 206,260 ​ — ​ 4,006,695 ​ 3,237,710 Vesting fully on the first anniversary of the grant date (3) 476,189 1,014,349 493,430 1,014,349 Vesting in thirds on each anniversary of the grant date (4) 68,027 — 7,212,375 8,683,486 Vesting in fourths on each anniversary of the grant date 701,880 — 701,880 343,750 Vesting based on market conditions (5) ​ 20,000,000 ​ — ​ 20,000,000 ​ — Total Units Granted ​ 21,452,356 ​ 1,014,349 ​ 32,414,380 ​ 13,279,295 1. Of the 4,006,695 RSUs vesting immediately on grant date, 2,812,802 RSUs were issued to settle liabilities with a carrying amount of $ 4.1 million, at a weighted average grant date fair value of $ 1.44 per RSU. 2. Of the 206,260 RSUs vesting immediately on the grant date issued during the three months ended June 30, 2024, the Company granted 140,260 RSUs, to consultants (three months ended June 30, 2023: nil ) resulting in $ 0.2 million, charged as general and administrative expenses for the three months ended June 30, 2024 (three ended June 30, 2023: nil ). Of the 4,006,695 RSUs vesting immediately on the grant date issued during the six months ended June 30, 2024, the Company granted 186,593 RSUs, to consultants (six months ended June 30, 2023: 23,438 RSUs) resulting in $ 0.3 million, charged as general and administrative expenses for the six months ended June 30, 2024 (six months ended June 30, 2023: $ 23 thousand charged as general and administrative expenses). During the three and six months ended June 30, 2024, the Company also granted 39,174 RSUs and 66,497 RSUs, respectively, to consultants as a prepayment for their services (three and six months ended June 30, 2023: nil ). 3. During the three and six months ended June 30, 2024, an aggregate of 476,189 RSUs were granted to the Company’s non-employee directors under the Company’s Non-employee Director Compensation Policy, which will vest at the Company’s 2025 annual shareholders meeting. The total fair value of units granted as annual grants to non-employee directors amounted to $ 700,000 . 4. During the six months ended June 30, 2024, the Company granted 7,144,348 RSUs, as payment for the 2023 LTIP awards (six months ended June 30, 2023: 8,645,465 RSUs were issued as payment for the 2022 LTIP awards). 18 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) 5. On April 16, 2024, the Company entered into a new employment agreement with Gerard Barron, the Company’s Chief Executive Officer and Chairman (the “Employment Agreement”) that replaced and superseded Mr. Barron’s existing employment agreement. Under the Employment Agreement, the Company granted Mr. Barron a one-time signing bonus award of market-based restricted stock units (the “Signing RSUs”) amounting to 20,000,000 of the Company’s common shares. The Signing RSUs will vest upon the common shares achieving the following closing prices per common share, based on the trailing 30 -day average price (the “Closing Price”), on or prior to April 16, 2029 (maturity date), subject to Mr. Barron’s continued service with the Company on the applicable vesting date: one -third of the Signing RSUs vest on achievement of a Closing Price of $ 7.50 ; one -third of the Signing RSUs vest on achievement of a Closing Price of $ 10.00 ; and one -third of the Signing RSUs vest on achievement of a Closing Price of $ 12.50 (each subject to equitable adjustment for any stock splits, combinations, reclassifications, stock dividends and the like). Pursuant to the Employment Agreement, Mr. Barron has agreed not to sell any of the common shares issuable upon vesting of the Signing RSUs until after the fifth anniversary of entering into the Employment Agreement. The Company determined the fair value of the options using the Monte-Carlo valuation method. The fair value of each tranche and the derived service period are as follows: ​ ​ ​ ​ ​ ​ ​ Tranche Fair Value per RSU Derived Service Period Achievement of a Closing Price of $ 7.50 ​ $ 1.07 1.58 years from the grant date Achievement of a Closing Price of $ 10 ​ $ 1.04 1.87 years from the grant date Achievement of a Closing Price of $ 12.50 ​ $ 1.00 2.10 years from the grant date ​ The fair value of the Signing RSUs was estimated using the following assumptions: ​ ​ ​ ​ ​ ​ April 16, 2024 Share price ​ $ 1.72 Performance period ​ April 16, 2024 – April 16, 2029 Volatility ​ 113.83 % Risk-free rate ​ 4.57 % Cost of Equity ​ 19.56 % Dividend yield ​ 0.0 % ​ The grant date fair value of all RSUs, apart from the Signing RSUs, is equivalent to the closing share price of the Company’s common shares on the date of grant. During the three and six months ended June 30, 2024, a total of $ 5.3 million and $ 8.5 million, respectively, was charged to the statement of loss and comprehensive loss as share-based compensation expense for RSUs (three and six months ended June 30, 2023: $ 2.4 million and $ 4 million, respectively). For the three and six months ended June 30, 2024, a total of $ 3.1 million and $ 4.4 million, respectively, was recognized as share-based compensation expense and related to exploration and evaluation activities (three and six months ended June 30, 2023 - $ 1.4 million and $ 2.3 million, respectively). The amount of share-based compensation expense related to general and administration matters for three and six months ended June 30, 2024 was $ 2.2 million and $ 4.1 million, respectively (three and six months ended June 30, 2023 - $ 1 million and $ 1.7 million, respectively). As at June 30, 2024, total unrecognized share-based compensation expense for RSUs was $ 31.7 million (December 31, 2023 - $ 6.9 million). As at June 30, 2024, an aggregate of 72,318 vested RSUs were being processed and due to be converted into common shares. 19 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) Employee Stock Purchase Plan On May 31, 2022, TMC’s 2021 Employee Stock Purchase Plan (“ESPP”) was approved at the Company’s 2022 annual shareholders meeting. As of June 30, 2024, there were 10,998,032 common shares reserved for issuance under the ESPP. This included 3,065,587 shares added to the ESPP in January 2024 pursuant to the ESPP’s automatic annual increase provision. 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 three and six months ended June 30, 2024, a total of $ 13 thousand and $ 31 thousand, respectively, was charged to the condensed consolidated statement of loss and comprehensive loss (for three and six months ended June 30, 2023: $ 28 thousand and $ 47 thousand, respectively) as share-based compensation expense for ESPP issuances. For the three and six months ended June 30, 2024, a total of $ 6 thousand and $ 15 thousand, respectively, of this recognized share-based compensation expense was related to exploration and evaluation activities (three and six months ended June 30, 2023 - $ 19 thousand and $ 26 thousand, respectively). The amount of this share-based compensation expense related to general and administration matters for three and six months ended June 30, 2024 was $ 7 thousand and $ 16 thousand, respectively (three and six months ended June 30, 2023 - $ 9 thousand and $ 21 thousand, respectively). On May 31, 2024, the Company issued 27,394 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, 2023, 83,572 common shares were issued). 12. Shares issued as per At-the-Market Equity Distribution Agreement (“ATM”) In December 2022, the Company filed a prospectus supplement with the Securities and Exchange Commission to sell up to $ 30 million of the Company’s common shares from time to time through an ATM. During the three months and six months ended, the Company issued 1,634,588 common shares at an average share price of $ 1.61 resulting in net proceeds amounting to $ 2.6 million after incurring $ 42 thousand as commission and fees. 13 . Loss per Share Basic loss per share is computed by dividing the loss by the weighted-average number of common shares of the Company outstanding during the period. Diluted loss per share is computed by giving effect to all common share equivalents of the Company, including outstanding stock options, RSUs, warrants, Special Shares and options to purchase Special Shares, to the extent these are dilutive. Basic and diluted loss per share was the same for each period presented as the inclusion of all common share equivalents would have been anti-dilutive. Anti-dilutive equivalent common shares were as follows: ​ ​ ​ ​ ​ ​ ​ ​ Six months ended ​ Six months ended ​ ​ June 30, ​ June 30, ​ 2024 2023 Outstanding options to purchase common shares ​ 28,028,062 25,140,262 Outstanding RSUs ​ 35,761,561 13,661,066 Outstanding shares under ESPP ​ 2,767 ​ 46,011 Outstanding warrants ​ 30,730,770 ​ 36,078,620 Outstanding Special Shares and options to purchase Special Shares ​ 136,239,964 ​ 136,239,964 Total anti-dilutive common equivalent shares ​ 230,763,124 211,165,923 ​ ​ 20 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) 14 . Related Party Transactions The Company’s subsidiary, DeepGreen Engineering Pte. Ltd., 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 and six months ended June 30, 2024 totaled $ 25 thousand and $ 50 thousand, respectively (three and six months ended June 30, 2023 - $ 69 thousand and $ 138 thousand, respectively), out of which for three and six months ended June 30, 2024 a total of $ 18 thousand $ 35 thousand, respectively (three and six months ended June 30, 2023 - $ 55 thousand and $ 110 thousand, respectively), is disclosed as exploration labor within exploration and evaluation expenses (Note 8) and $ 7 thousand and $ 15 thousand, respectively, for three and six months ended June 30, 2024 is disclosed as general and administration expenses (three and six months ended June 30, 2023 - $ 14 thousand and $ 28 thousand, respectively). As at June 30, 2024, the amount payable to SSCS was $ nil (December 31, 2023 - $ 17 thousand). One of the Company’s directors who was appointed in the Company’s annual general meeting held on May 31, 2024 is the Chairman of Stonehaven Campaigns Limited and Robertsbridge Consultants Limited, which provide the Company with consulting services. During the three and six months ended June 30, 2024, Stonehaven Campaigns Limited provided consulting services amounting to nil and $ 12 thousand recorded in general and administrative expenses. During the three and six months ended June 30, 2024, Robertsbridge Consultants Limited provided consulting services amounting to $ 5 thousand and $ 36 thousand recorded in general and administrative expenses. As at June 30, 2024, the amount payable to both Stonehaven Campaigns Limited and Robertsbridge Consultants Limited was nil . On January 30, 2024, as part of the Registered Direct Offering (Note 9), the Company received the remaining committed funding of $ 9 million from ERAS Capital LLC, the investment fund of one of the Company’s directors. On March 22, 2024, the Company entered into an Unsecured Credit Facility (the “2024 Credit Facility”) with Gerard Barron, the Company’s Chief Executive Officer and Chairman, and ERAS Capital LLC, the family fund of one of the Company’s director, (collectively, the “2024 Lenders”), pursuant to which, the Company 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. The Company 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. The Company has 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 the Company or any of its subsidiaries raise at least $ 50,000,000 in the aggregate (i) through the issuance of any of the Company’s or its subsidiaries’ debt or equity securities, or (ii) in prepayments under an off-take agreement or similar commercial agreement. During the three and six months ended June 30, 2024, the Company has drawn $ 3.9 million from the 2024 Credit Facility and incurred $ 50 thousand as interest expense. During the three and six months ended June 30, 2024, the Company incurred $ 0.2 million as underutilization fees, which would be payable only in the event the 2024 Credit Facility is not drawn down upon at the time such fees are payable. In the second quarter of 2024, the Company repaid interest amounting to $ 25 thousand and underutilization fees amounting to $ 0.1 million to the 2024 Lenders. The borrowing limit of the 2024 Credit Facility was increased to $ 25 million ($ 12.5 million from each of the 2024 Lenders) subsequent to June 30, 2024 (Note 17). Apart from the above-mentioned transactions, the Company had transactions with Allseas which are detailed in Note 6 and issued share-based grants to Company’s directors which are detailed in Note 11. ​ 15 . Commitments and Contingent Liabilities Commitments On June 15, 2024, the Company signed a retainership agreement pursuant to which a non-refundable retainer fee of $ 0.4 million is payable. 21 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) Contingent Liability On October 28, 2021, a shareholder filed a putative class action against the Company, one of the Company’s 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 the Company’s operations and prospects during the period from March 4, 2021 and October 5, 2021. On November 15, 2021, a second complaint containing substantially the same allegations was filed, captioned Tran v. TMC the Metals Company, Inc. These cases have been consolidated. On March 6, 2022, a lead plaintiff was selected. An amended complaint was filed on May 12, 2022, reflecting substantially similar allegations, with the Plaintiff seeking to recover compensable damages caused by the alleged wrongdoings. The Company denies any allegations of wrongdoing and filed and served the plaintiff a motion to dismiss on July 12, 2022 and intend to defend against this lawsuit. 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 its 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, certain investors in the 2021 private placement from the Business Combination filed a lawsuit against the Company in the Commercial Division of 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 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 plaintiffs’ private placement Subscription Agreements 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 the amended complaint on July 28, 2023. On December 7, 2023, the Court granted the Company’s motion to dismiss the claim for breach of the covenant of good faith and fair dealing and denied the Company’s motion to dismiss the breach of the Subscription Agreement claim. The Company filed a notice of appeal regarding the Court’s denial of its motion to dismiss the breach of the Subscription Agreement claim. There is no assurance that the Company will be successful in its 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. Such losses or range of possible losses cannot be reliably estimated. 16. 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. ​ 17. Subsequent Event On August 13, 2024, the Company entered into the First Amendment to the 2024 Credit Facility with the 2024 Lenders, Gerard Barron and ERAS Capital LLC, to increase the borrowing limit of the 2024 Credit Facility to $ 25 million in the aggregate ($ 12.5 million from each of the 2024 Lenders). Under the terms of the First Amendment, the borrowing limit will return to $ 20 million in the aggregate ($ 10 million from each of the 2024 Lenders) upon certain financing events. ​ ​ 22 ​ Table of Contents