What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-27 compared with 2022-03-25 · 306 added, 285 removed, 756 unchanged (44% of the section changed)

13 unchanged sentences

We have audited the accompanying consolidated balance sheets of TMC the metals company Inc.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

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Accounts payable and accrued liabilities

Deferred acquisition costs

Deferred tax liability

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266,812,131 (December 31, 2021 – 225,432,493 ))

Preferred shares (unlimited shares, no par value – issued:

nil (December 31, 2020 – 509,459 ))

Class A - J Special Shares

Special Shares

Additional paid in capital

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Operating loss

Change in fair value of warrants liability

Change in fair value of private warrants liability

Foreign exchange loss

Interest expense (income)

Loss and comprehensive loss for the year

Loss per share

- Basic and diluted

Loss and comprehensive loss for the year, before tax

Loss and comprehensive loss for the year, after tax

Loss per share - Basic and diluted

Weighted average number of common shares outstanding – basic and diluted

9 unchanged sentences

December 31, 2021

Issuance of shares under PIPE Financing (Net Proceeds) (Note 19)

Exercise of stock options (Note 15)

Conversion of restricted share units (Note 15)

Common shares issued for exploration and evaluation expenses (Note 11)

Conversion of debentures (Note 13)

Share purchase under Employee Share Purchase Plan

Vesting of Allseas Warrant (Note 10, 13)

Share-based compensation (Note 15)

Common shares issued for services

Net equity from Business Combination (Note 6)

Conversion of preferred shares to common shares

Loss for the year

2 unchanged sentences

Accumulated Other

For the year ended December 31, 2020 (Note 1)

For the year ended December 31, 2021

Paid in Capital

1 unchanged sentence

December 31, 2020

Private placement (net of financing costs)

Exercise of stock options (Note 15)

Financing cost

Common shares issued for acquisition of Tonga Offshore Minerals Limited (Note 7)

Common shares to be issued for exploration and evaluation expenses (Note 11)

Conversion of restricted share units (Note 15)

Common shares issued for exploration and evaluation expenses (Note 10)

Conversion of debentures (Note 12)

Share-based compensation (Note 15)

Common shares issued for services

Net equity from Business Combination (Note 6)

Conversion of preferred shares to common shares

Loss for the year

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Change in fair value of warrants liability

Vesting of Allseas Warrant

Unrealized foreign exchange

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Settlement of deferred acquisition costs

Acquisition of exploration contract

Acquisition of equipment

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Financing activities

Proceeds from PIPE financing

Expenses paid for PIPE financing

Proceeds from exercise of stock options

Proceeds from issuance of convertible debentures

Proceeds from issuance of common shares (net of fees and other costs)

Proceeds from employee share purchase plan

Taxes withheld and paid on share-based compensation

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

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

The Company is a deep-sea minerals exploration company focused on the collection, processing and refining 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) critical for the transition to clean energy and infrastructure buildout.

Exploration and exploitation of seabed minerals in international waters is regulated by the International Seabed Authority (the “ISA”), an intergovernmental organization established in 1994 pursuant to the United Nations Convention on the Law of the Sea (“UNCLOS”).

ISA contracts are granted to sovereign states or have to be sponsored by a sovereign state.

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

These nodules contain high grades of four metals (nickel, copper, cobalt, manganese) which can be used as (i) feedstock for battery cathode precursors (nickel and cobalt sulfates, or intermediate nickel-copper-cobalt matte) for electric vehicles (“EV”) and renewable energy storage markets, (ii) copper cathode for EV wiring, clean energy transmission and other applications and (iii) manganese silicate for manganese alloy production required for steel production.

Exploration and exploitation of seabed minerals in international waters is regulated by the International Seabed Authority (“ISA”), an intergovernmental organization established pursuant to the 1994 Agreement Relating to the Implementation of the United Nations Convention on the Law of the Sea.

The ISA grants contracts to sovereign states or to private contractors who are sponsored by a sovereign state.

The Company’s wholly-owned subsidiary, Nauru Ocean Resources Inc.

(“NORI”), was granted an exploration contract by the ISA in July 2011 under the sponsorship of the Republic of Nauru (“Nauru”) giving NORI exclusive rights to explore for polymetallic nodules in an area covering 74,830 km 2 in the CCZ (“NORI Area”).

On March 31, 2020, the Company acquired Tonga Offshore Mining Limited (“TOML”), which was granted an exploration contract by the ISA in January 2012 and has exclusive rights to explore for polymetallic nodules covering an area of 74,713 km 2 in the CCZ (“TOML Area”) under the sponsorship of the Kingdom of Tonga (“Tonga”).

(“NORI”), was granted an exploration contract (the “NORI Exploration Contract”) by the ISA in July 2011 under the sponsorship of the Republic of Nauru (“Nauru”) giving NORI exclusive rights to explore for polymetallic nodules in an area covering 74,830 km 2 in the CCZ (“NORI Area”).

On March 31, 2020, the Company acquired Tonga Offshore Mining Limited (“TOML”), which was granted an exploration contract (the “TOML Exploration Contract”) by the ISA in January 2012 under the sponsorship of the Kingdom of Tonga (“Tonga”) and has exclusive rights to explore for polymetallic nodules covering an area of 74,713 km 2 in the CCZ (“TOML Area”).

Marawa Research and Exploration Limited (“Marawa”), an entity owned and sponsored by the Republic of Kiribati (“Kiribati”), was granted rights by the ISA to polymetallic nodules exploration in an area of 74,990 km 2 in the CCZ (“Marawa Area”).

The Company entered into an option agreement with Marawa to purchase such tenements granted to exclusively collect nodules from the Marawa Area in return for a royalty payable to Marawa.

The Company is working with its strategic partner, Allseas Group S.A.

(“Allseas”), to develop a system to collect, lift and transport nodules from the seafloor to shore and to subsequently convert that system into an early commercial production system.

Maersk Supply Service A/S (“Maersk”) previously provided marine vessel operations and project management services for resource definition and environmental offshore campaigns.

The agreement with Maersk ended in January 2022, following the completion of the NORI Area D baseline campaigns.

In 2013, the Company through its subsidiary DeepGreen Engineering Pte.

(“DGE”) entered into an option agreement (the “Marawa Option Agreement”) with Marawa which granted DGE exclusive rights to manage and carry out all exploration and exploitation in the Marawa Area in return for a royalty payable to Marawa.

The Company is working with its strategic partner and investor, Allseas Group S.A.

(“Allseas”), to develop a system to collect, lift and transport nodules from the seafloor to shore and to subsequently convert that system into an early commercial production system (Note 10).

The realization of the Company’s assets and attainment of profitable operations is dependent upon many factors including, among other things:

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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.

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

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

TMC the metals company Inc.

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GAAP”) and include the accounts of TMC and its wholly-owned subsidiaries.

The Company has applied the same accounting policies as in the prior year, except as disclosed below.

All share and per share amounts have been adjusted to reflect the impact of the Business Combination (Note 6).

Certain comparative figures in Note 10 have been reclassified to conform to the current period’s presentation.

Basis of Measurement

These consolidated financial statements have been prepared under the historical cost convention, except for warrants liability that has been measured at fair value, and are presented in US dollars.

These consolidated financial statements have been prepared under the historical cost convention, except for warrants liability that has been measured at fair value and are presented in United States (“US”) dollars.

Consolidation

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The Metals Company Australia Pty Ltd

Holding Company

TMC The Metals Company UK Limited

Holding Company

United Kingdom

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Dollar, except for NEAT and NHEF, whose functional currency is the Australian Dollar.

At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated into the functional currency at the rates prevailing at that date.

Non-monetary assets and liabilities carried at fair value that are denominated in currencies other than the U.S.

Dollar are translated at rates prevailing at the date when the fair value was determined.

TMC the metals company Inc.

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

and losses on translation of these foreign currency transactions are included in the statements of loss and comprehensive loss.

At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated into the functional currency at the rates prevailing at that date.

Non-monetary assets and liabilities carried at fair value that are denominated in currencies other than the U.S.

Dollar are translated at rates prevailing at the date when the fair value was determined.

All gains and losses on translation of these foreign currency transactions are included in the statements of loss and comprehensive loss.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

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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 consolidated financial statements include, but are not limited to, accounting for the acquisition of TOML, the valuation of common share-based payments, including valuation of the incentive stock options (Note 16) and the common shares issued to Maersk (Notes 11 and 15), as well as the valuation of warrants liability (Note 14).

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the valuation of share-based payments, including valuation of incentive stock options (Note 15), as well as the valuation of warrants liability (Note 13).

Actual results could differ materially from those estimates.

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Changes in assumptions can significantly affect estimated fair value.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

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.

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

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

● 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.

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There were no transfers between fair value measurement levels during the years ended December 31, 2022 and 2021.

As at December 31, 2021 and 2020, the carrying values of cash and cash equivalents, receivables, accounts payable and accrued expenses and deferred acquisition costs approximate their fair values due to the short-term nature of these instruments.

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

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

The warrants are valued at fair value which is disclosed in Note 13.

Cash and Cash Equivalents

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Gains and losses on disposals of equipment are determined by comparing the proceeds with the carrying amount of the asset and are included in the statement of loss and comprehensive loss.

The Company determines if an arrangement is or contains a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheet.

The Company does not have any finance leases.

TMC the metals company Inc.

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

The Company determines if an arrangement is or contains a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheet.

The Company does not have any finance leases.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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The Company records share-based compensation from the issuance of stock options and restricted share units (“RSUs”) to employees with service-based conditions using the accelerated attribution method.

For stock options issued with performance conditions (Note 16), the Company recognizes share-based compensation cost when the specific performance targets become probable of being achieved using the accelerated attribution method.

For stock options and restricted share units issued with performance conditions (Note 15), the Company recognizes share-based compensation cost when the specific performance targets become probable of being achieved using the accelerated attribution method.

When these costs relate to equity financing, they are netted against share capital as a share issuance cost.

The fair value of stock option awards with only service and/or performance conditions is estimated on the grant date using a Black-Scholes option-pricing model.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

For stock options issued with market conditions (Note 15), the Company recognizes share-based compensation cost over the expected achievement period for the related market capitalization milestone determined on the grant date.

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The Company recognizes the associated cost in the same period and manner as if the Company paid cash for the services provided.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Warrants Liability

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Accordingly, the Company classified the Private Warrants as liabilities measured at fair value and adjusts the Private Warrants to their fair value at the end of each reporting period.

The warrant liability is subject to re-measurement at each balance sheet date until exercised with any changes in fair value being recognized in the Company’s statement of loss and comprehensive loss.

The warrants liability is subject to re-measurement at each balance sheet date until exercised with any changes in fair value being recognized in the Company’s statement of loss and comprehensive loss.

The Company granted warrants to Allseas on March 4, 2021 to acquire 11.6 million TMC common shares at a nominal value (the “Allseas Warrant”).

The Allseas Warrant vested and became exercisable upon successful completion of the PMTS in the fourth quarter of 2022, and have been accounted for as equity, since the warrants do not meet the criteria to be classified as liability as defined in ASC Topic 480, Distinguishing Liabilities from Equity.

Income tax expense represents the sum of current tax expense and deferred tax expense.

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The Company’s policy is to account for income tax related interest and penalties in income tax expense in the accompanying statements of loss and comprehensive loss.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Deferred tax income taxes are accounted for using the asset and liability method.

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When realization of deferred income tax assets does not meet the more likely than not criterion for recognition, a valuation allowance is provided.

Significant Accounting Policies Adopted during the year

Share-Based Compensation under the Employee Stock Purchase Plan

During the second quarter of 2022, the Company adopted an employee stock purchase plan (the “ESPP”) whereby employees can purchase common shares of the Company at a 15 % discount to its share price at the time of purchase, through payroll deductions (Note 15).

Employee contributions are converted into common shares at a discount to the lower of the share price at the beginning of the offering period and the share price at the end of the purchase period.

The fair value of the shares purchased under the ESPP is estimated on the grant date using a Black-Scholes option-pricing model and is reported as share-based compensation over the offering period, using the accelerated attribution method.

Share-based compensation costs are charged to exploration and evaluation expenses or general and administrative expenses in the statement of loss and comprehensive loss.

Significant Accounting Estimates and Judgements

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GAAP requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates.

Significant management judgments and estimates were applied to the following areas:

TOML Acquisition

In March 2020, the Company completed the TOML Acquisition (Note 7) and applied guidance from ASC 805, Business Combinations , to understand the accounting treatment regarding this acquisition and make necessary judgements.

ASC 805 defines a business as consisting of inputs and processes, which when the processes are applied to those inputs, have the ability to contribute to the creation of outputs.

The key input acquired in connection with the TOML Acquisition is the TOML Exploration Contract (Note 7) and the related intellectual property.

The TOML Exploration Contract is in the development stage and therefore does not produce outputs.

ASC 805 requires that where there is no output, there must be both an input and substantive process which must include an organized workforce with the necessary skills, experience, and knowledge to develop and convert the inputs into outputs, for a group of assets to be considered a business.

An organized workforce was not included in the TOML Acquisition and therefore the Company’s management deemed that the TOML Acquisition was not a business acquisition and only an acquisition of a group of assets.

The Company’s position is supported by ASC 805’s guidance that if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not considered a business.

The value of the TOML Acquisition is considered to be primarily in the TOML Exploration Contract.

Management also determined that other assets acquired (which included other intangible assets such as patents and trademarks) were connected to the TOML Exploration Contract and would not hold value by themselves.

The value of the total cost was therefore capitalized and reported as “Exploration contracts” on the Company’s balance sheet.

Valuation of Share-Based Payments

TMC recognized the cost of share-based awards granted to employees, non-employees and directors based on the estimated grant-date fair value of the awards.

Prior to closing of the Business Combination, TMC determined the fair value of stock options using the Black-Scholes option pricing model, which was impacted by the following assumptions:

● Fair Value of Common Shares on the Date of the Grant — The Company estimated the value of its common shares using the Probability Weighted Expected Return Method (“PWERM”).

The Company applied the PWERM by first defining the range of potential future liquidity outcomes, including the share price used for its most recent private placements and the share price used for the Business Combination, then allocating its value based on the probability of that event occurring.

TMC determined the fair value of stock options and Restricted Share Units using the Black-Scholes option pricing model, which was impacted by the following assumptions:

● Fair Value of Common Shares on the Date of the Grant — The Company valued its common shares at the closing market price of the share as quoted on NASDAQ.

● Expected Term—TMC used the term of the award when calculating the expected term due to insufficient historical exercise data.

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Changes in these assumptions used to determine the fair value of incentive stock options, including the vesting timeline of granted stock options, could have a material impact on the Company’s loss and comprehensive loss.

Prior to closing of the Business Combination, TMC estimated the fair value of common shares issued for services using the PWERM described above.

Prior to closing of the Business Combination, TMC estimated the fair value of common shares issued for services using the Probability Weighted Expected Return Method (“PWERM”).

Valuation of Warrants Liability

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The fair value of the Private Warrants was estimated using a Black-Scholes option pricing model whereby 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.

Evaluation of Going Concern

The Company evaluates its ability to operate as a going concern at each reporting period.

This evaluation requires the Company to estimate its cash flow commitments over a forecast period of twelve months and whether it has the financial ability to pay for such commitments.

Changes in these estimates and assumptions may have a material impact on this assessment.

Recent Accounting Pronouncements Issued and Adopted

Accounting for Debt with Conversion and Other Options

In August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivative and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” , which simplifies the accounting for convertible instruments by reducing the number of accounting models and requiring that a convertible instrument be accounted for as a single liability measured at amortized cost.

Further, ASU 2020-08 amended the earnings per share guidance by requiring the diluted earnings per share calculation for convertible instruments to follow the if-converted method, with the use of the treasury stock method no longer permitted.

The ASU 2020-08 is effective for fiscal periods ending on or after December 15, 2021, with early adoption permitted, but no earlier than fiscal years and interim periods within those fiscal years, beginning after December 15, 2020.

The ASU 2020-08 allows either a modified retrospective method of transition or a fully retrospective method of transition, with any adjustments recognized as an adjustment to the opening balance of deficit.

The Company adopted this standard on January 1, 2021.

The standard did not have any impact on the Company’s historical financial statements but was applied to recognize the impact of the convertible debentures issued during February 2021 (Note 13).

Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

In May 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”, which clarified and reduced diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.

Specifically, an issuer should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument.

Modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument should be measured as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged.

The effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction should be recognized in the same manner as if cash had been paid as consideration.

ASU 2021-04 is effective for fiscal periods ending on or after December 15, 2021, with early adoption permitted.

ASU 2021-04 is applied prospectively to modifications or exchanges occurring on or after the effective date.

The adoption of ASU 2021-04 on January 1, 2022 did not have a material impact on the Company’s consolidated financial statements.

Business Combination

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The Business Combination was consummated on September 9, 2021, whereby SOAC acquired all of the outstanding common shares of DeepGreen.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Pursuant to the BCA, shareholders of DeepGreen exchanged their DeepGreen common shares at a ratio of 1.157862 TMC common shares per DeepGreen common share (“Exchange Ratio”) and received approximately 203.9 million TMC common shares and a total of 120.1 million Class A to H special shares (“Special Shares”).

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In connection with the Business Combination, the SOAC sponsors were entitled to an additional 0.5 million Class I Special Shares and 0.7 million Class J Special Shares which are convertible to TMC common shares if TMC common shares trade for a price on any 20 trading days within any 30 -trading day period that is greater than or equal to $ 50.00 per share and $ 12.00 per share, respectively.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Additionally, existing DeepGreen options were automatically adopted by TMC (the “Rollover Options”) after application of the Exchange Ratio to both the underlying number of common shares and the exercise price.

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The Rollover Options also entitle holders thereof to a pro-rata portion of up to an aggregate of 14.9 million Special Shares if exercised.

Lastly, the warrants granted to Allseas to acquire 10 million DeepGreen common shares at a nominal value (the “Allseas Warrants”) have been assumed by TMC and have become warrants to purchase 11.6 million TMC common shares, in accordance with its terms.

Lastly, the warrants granted to Allseas to acquire 10 million DeepGreen common shares at a nominal value (the “Allseas Warrant”) have been assumed by TMC and have become warrants to purchase 11.6 million TMC common shares, in accordance with its terms.

Below is a summary of the Special Shares and their respective vesting thresholds, assuming the full amount of Special Shares from Rollover Options are issued:

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Net contributions from Business Combination

In addition to the transaction costs settled in cash above, the Company incurred $ 3.5 million of transaction costs which were settled by issuance of 873,953 common shares on October 7, 2021.

Prior to the Business Combination, SOAC had 30.0 million shares of Class A common shares with a par value of $ 0.0001 per share (“SOAC Class A Shares”) outstanding and 7.5 million shares of Class B common shares with a par value of $ 0.0001 per share (“SOAC Class B Shares”) held by Sustainable Opportunities Holdings LLC (the “Sponsor”).

In addition to the transaction costs settled in cash above, the Company incurred $ 3.5 million of transaction costs which were settled by the issuance of 873,953 common shares on October 7, 2021.

Prior to the Business Combination, SOAC had 30.0 million Class A common shares with a par value of $ 0.0001 per share (“SOAC Class A Shares”) outstanding and 7.5 million Class B common shares with a par value of $ 0.0001 per share (“SOAC Class B Shares”) held by Sustainable Opportunities Holdings LLC (the “Sponsor”).

In connection with the Business Combination, 27.3 million SOAC Class A Shares were redeemed by public shareholders.

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TOML Acquisition

On March 31, 2020, the Company entered into an acquisition agreement to wholly acquire TOML and other entities in the group (the “TOML Group”) from Deep Sea Mining Finance Ltd.

(“DSMF”) (the “TOML Acquisition”).

On March 31, 2020, the Company entered into an acquisition agreement to wholly acquire TOML and other entities in the group from Deep Sea Mining Finance Ltd.

(the “TOML Acquisition”).

Total purchase price of the TOML Acquisition, before transaction costs, was $ 32.0 million.

TOML holds an ISA exploration contract in the CCZ (“TOML Exploration Contract”) and some exploration related equipment.

The TOML Group also holds various patents and an application right with respect to a prospecting exploration contract in Kiribati.

The purchase price of $ 32.0 million was settled through initial cash payments in two tranches of $ 0.25 million each (paid on March 31, 2020 and May 31, 2020, respectively), issuance of 9,005,595 common shares, $ 0.1 million payment to the ISA on behalf of DSMF and deferred consideration of $ 3.4 million which was originally to be paid on January 31, 2021.

The common share consideration paid by the Company was valued at $ 3.11 per common share, based on the private placements completed by DeepGreen around the time of the TOML Acquisition, for a total of $ 28.0 million.

The Company had the option of settling the deferred consideration in either cash or common shares of the Company at its sole discretion.

In January 2021, the arrangement with DSMF was amended to pay the entire deferred consideration with cash.

The deferred consideration was fully settled on June 30, 2021.

The Company determined that the value of the TOML Acquisition was substantially concentrated in the TOML Exploration Contract and therefore considered this to be an acquisition of a group of connected assets rather than an acquisition of a business.

Consequently, the total cost of the transaction was primarily allocated to exploration contracts.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

The net assets acquired as part of the TOML Acquisition were as follows:

Net assets acquired

Cash payments

Common shares issued ( 9,005,595 common shares @ $ 3.11 )

Transaction costs paid

Deferred acquisition costs

Total acquisition cost

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A deferred tax liability was recognized by the Company on the acquisition which related to differences between the book value and the tax basis of the TOML exploration contract.

Financial Instruments

Categories of Financial Instruments

December 31 2021

December 31 2020

Financial assets

Amortized cost

Financial liabilities

Amortized cost

Accounts payable and accrued liabilities

Deferred acquisition costs

Fair value through profit or loss Warrants liability

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Receivables and Prepayments

The amounts of outstanding receivables and prepayments at December 31, 2022 and 2021 are as follows:

December 31 2022

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Taxes and other receivables

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

The movements in the Company’s capital equipment are as follows:

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December 31, 2020

TOML Acquisition (Note 7)

December 31, 2021

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NORI has a right to renounce, without penalty, in whole or part of its rights in the NORI Area at any time and therefore does not have a fixed commitment with relation to the NORI Exploration Contract (Note 20).

Marawa Agreements:

Marawa executed the Marawa Exploration Contract with the ISA on January 19, 2015.

The Marawa Exploration Contract provides Marawa with exclusive rights to explore for polymetallic nodules in the Marawa Area for an initial term of 15 years (subject to renewal for successive five-year periods) subject to complying with the exploration contract terms and the priority right to apply for an exploitation contract to collect polymetallic nodules in the same area.

TMC the metals company Inc.

1 unchanged sentence

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

Marawa Agreements:

Marawa executed the Marawa Exploration Contract with the ISA on January 19, 2015.

On March 17, 2012, the Company’s wholly-owned subsidiary, DeepGreen Engineering Pte.

13 unchanged sentences

The TOML Exploration Contract provides TOML with exclusive rights to explore for polymetallic nodules in the TOML Area for an initial term of 15 years (renewable for successive five-year periods) subject to complying with the exploration contract terms and a priority right to apply for an exploitation contract to collect polymetallic nodules in the same area.

Strategic Partnerships

Marine Vessel Services:

Effective March 15, 2017, the Company entered into a strategic partnership with Maersk to undertake the exploration, environmental baseline and offshore testing required to support development of pre-feasibility studies for economic production of polymetallic nodules from the CCZ (the “Participation Agreement”).

Under the Participation Agreement, Maersk provided marine vessel services and project management services, which enabled TMC to undertake the various offshore campaigns to support required pre-feasibility studies.

During these offshore campaigns, TMC undertook baseline studies required to complete an Environmental and Social Impact Assessment (“ESIA”), collected nodules for metallurgical test work and collected samples and survey data for resource evaluation.

Prior to February 5, 2021, the costs related to the marine vessel use were settled through the issuance of DeepGreen common shares, the number of which was based on a contractual price of $ 1.08 per common share.

Project management services provided by Maersk for managing these offshore campaigns are paid in cash.

TMC the metals company Inc.

1 unchanged sentence

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

On March 3, 2021, the Participation Agreement with Maersk was amended whereby all costs incurred on or after February 5, 2021 pertaining to the use of the marine vessel would be paid in cash rather than through issuance of common shares.

By this amendment, Maersk irrevocably waived certain pro rata participation rights that it may have had under the Participation Agreement in connection with the Business Combination and acknowledged that all amounts owing to Maersk for services rendered through February 5, 2021 in the aggregate amount of $ 4.6 million had been satisfied by the issuance of 4.2 million common shares.

During the year ended December 31, 2021, the Company incurred costs to Maersk for offshore campaigns of $ 33.9 million (2020:

$ 25.6 million).

These costs were settled with the issuance of 4.2 million TMC common shares to Maersk at $ 6.05 per common share (2020:

4.7 million TMC common shares at $ 3.11 per common share), with the balance of $ 21.3 million (2020:

$ 4.4 million) settled or to be settled in cash.

As at December 31, 2021, TMC had outstanding payables to Maersk of $ 11.3 million (2020:

$ 1.8 million) included in accounts payable and accrued liabilities.

Subsequent to December 31, 2021, $ 3.5 million of the $ 11.3 million was settled in cash.

The agreement with Maersk ended in January 2022, following the completion of the NORI Area D baseline campaigns.

As at December 31, 2021, Maersk owned 20.8 million TMC common shares (2020:

16.6 million TMC common shares) which constituted 9.2 % (2020:

8.8 %) of the total common shares outstanding of the Company.

Strategic Partnerships

Strategic Alliance with Allseas Pilot Mining Test Project

11 unchanged sentences

(a) $ 10.0 million in cash and (b) $ 10.0 million by issuing 3.2 million common shares valued at $ 3.11 per share.

On March 4, 2021 and June 30, 2021, the Company and Allseas further amended the PMTA whereby, instead of issuing 11.6 million common shares upon successful delivery of the pilot trial of the PMTS in NORI Area D, the Company issued the Allseas Warrants (Note 14).

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

The amendment on March 4, 2021 stipulated that if the market price of the Company’s common shares on June 1, 2022 is higher than $ 12.95 per common share, the aggregate value of the common shares underlying the Allseas Warrants above $ 150 million as at June 1, 2022 will automatically become a commercial credit from Allseas to the Company equal to the excess value.

This commercial credit will be effective on the vesting date of the Allseas Warrants and the Company will be able to exchange this excess value for any future goods and services from Allseas under the nodule collection and shipping contract for one year after commercial production.

There can be no assurance that such future goods and services from Allseas will occur.

The 2021 contract amendments also restructured the original $ 30.0 million lump sum cash payment upon successful delivery of the PMTS to:

3 unchanged sentences

On October 5, 2021, the first $ 10 million payment was paid to Allseas for successfully reaching the first progress milestone, with the completion of the Business Combination and by confirming the order of certain equipment and demonstrating certain progress on construction of the PMTS.

The Company made the second $ 10 million payment of the amended PMTA on April 25, 2022, upon successful completion of the North Sea drive test on March 25, 2022.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

The Company accounts for the first two milestone payments in accordance with ASC 730, Research and Development, as these payments represented progress payments.

Accordingly, the Company expenses the payments according to when the services are performed.

The research and development related services commenced in July 2019 and are expected to be performed through January 2023.

Therefore, the Company records the expense on a straight-line basis over the life of the contract which resulted in total expenses of $ 14.3 million recorded as exploration and evaluation expenses for the year ended December 31, 2021.

The Company will record the expense and liability for the third milestone payment upon successful completion of the pilot trial of the PMTS in the NORI Area D.

The Company has not recorded a liability for the third payment as at December 31, 2021.

Therefore, the Company records the expense on a straight-line basis over the life of the contract which resulted in total expenses of $ 5.8 million (2021:

$ 14.3 million) recorded as exploration and evaluation expenses for the year ended December 31, 2022.

On November 11, 2022, the Board approved the successful completion of the PMTS in NORI Area D and payment of the third milestone amounting to $ 10 million by issuing 10 million common shares to Allseas.

On February 13, 2023, the contract was further amended to allow TMC to pay the third milestone payment to Allseas in shares and these shares were issued to Allseas on February 23, 2023.

In relation to the third milestone payment, the Company has recorded an expense equal to $ 8.7 million based on the fair market value of the Company's shares on November 11, 2022.

As at December 31, 2022, Allseas owned 23.7 million TMC common shares (2021:

2 unchanged sentences

The Allseas total share ownership includes 3.2 million shares issued in a private placement in June 2020.

On February 23, 2023 the Company settled the third milestone payment of $ 10 million and additional PMTS overage charges equal to $ 0.9 million by issuing 10.9 million common shares to Allseas (Note 24).

Reconciliation – Exploration Contracts

A reconciliation of the Company’s exploration contracts is as follows:

December 31, 2019

TOML Acquisition ( Note 7 )

A reconciliation of the Company’s capitalized exploration contracts is as follows:

December 31, 2021

December 31, 2022

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Exploration and Evaluation Expenses

1 unchanged sentence

For the year ended December 31, 2022

Environmental Studies

Exploration Labor

Offshore campaigns

Share-Based Compensation (Note 15)

External consulting

Travel, workshop and other

Mining, Technological and Process Development

Allseas Warrant (Note 13)

Sponsorship, Training and Stakeholder Engagement

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

For the year ended December 31, 2021

Environmental Studies

Exploration Labor

Offshore campaigns

Share-Based Compensation (Note 15)

External consulting

Travel, workshop and other

Mining, Technological and Process Development

Sponsorship, Training and Stakeholder Engagement

General and Administrative Expenses

10 unchanged sentences

Other expenses

General and Administration Expenses

General and Administrative Expenses

(1) Professional and consulting fees include $ 1 million of equity (RSU) settled expenses in 2022 (2021:

(2) Investor relations include $ 0.3 million of equity (RSU) settled expenses in 2022 (2021:

$ 0.2 million).

Convertible Debentures

1 unchanged sentence

The convertible debentures had an interest rate of 7.0 % per annum, compounded annually, and had a maturity date of 24 months from the date of issuance.

On September 9, 2021, the outstanding debentures were converted and as a result, the Company issued 3,068,673 common shares consisting of $ 25.5 million and $ 1.0 million of principal and accrued interest, respectively.

For accounting purposes, the Company was considered to have issued the Public Warrants and Private Warrants as part of the Business Combination (Note 6).

TMC the metals company Inc.

1 unchanged sentence

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

The debentures were convertible into shares of the Company at anytime at the conversion price of $ 8.64 per common share.

Unless any accrued interest was converted prior to the maturity date, all accrued and unpaid interest was payable at the maturity date in TMC common shares at a conversion price of $ 8.64 per common share.

The terms of the convertible debentures provided that in the event that the Company completed the Business Combination (Note 6) or another change of control transaction at any time prior to the maturity date, the debenture value would be automatically converted into common shares at the conversion price immediately prior to the Business Combination or the change of control transaction.

If the debentures, or any portion thereof, were not converted by the holder upon the earlier of the maturity date or the completion of the Business Combination or the change of control transaction, the outstanding debenture value would automatically convert into common shares at the conversion price of $ 8.64 per common share.

On February 18, 2021, convertible debentures with a principal amount of $ 0.5 million were converted into 57,894 common shares of the Company.

On September 9, 2021, the Company issued 3,068,673 common shares upon conversion of the outstanding debentures consisting of $ 25.5 million and $ 1.0 million of principal and accrued interest, respectively.

For accounting purposes, the Company was considered to have issued the Public Warrants and Private Warrants as part of the Business Combination (Note 6).

Public Warrants

Each whole Public Warrant entitles the holder to purchase one TMC common share at a price of $ 11.50 per share beginning on October 9, 2021.

Each whole Public Warrant entitles the holder to purchase one TMC common share at a price of $ 11.50 per share beginning on October 9, 2021, subject to restrictions described below.

As at December 31, 2022, 15,000,000 Public Warrants were outstanding.

8 unchanged sentences

In the event that a registration statement is not effective for the exercised Public Warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the common share underlying such unit.

On October 7, 2021, the Company filed a Registration Statement on Form S-1 with respect to the common shares underlying the Public Warrants, as well as the Private Warrants, which was declared effective by the SEC on October 22, 2021.

The Company is required to file a post-effective amendment to this Registration Statement on Form S-1, which will need to be declared effective by the SEC, following the Company’s filing of its Annual Report on Form 10-K for the year ended December 31, 2021 in which these Notes to the Consolidated Financial Statements are included to update the information and financial statements included therein.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

On July 1, 2022, the Company filed a post-effective amendment to the Registration Statement on Form S-1 with respect to the common shares underlying the Public Warrants and Private Warrants, which was declared effective by the SEC on July 12, 2022.

The Company may call the Public Warrants for redemption:

6 unchanged sentences

As at December 31, 2022, the value of outstanding Public Warrants of $ 19.5 million was recorded in additional paid in capital.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Private Warrants

9 unchanged sentences

In December 2021, the Private Warrants were transferred to permitted transferees.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

The Company evaluated the Private Warrants under ASC 815-40, in conjunction with the SEC Statement , and concluded that they do not meet the criteria to be classified in shareholders’ equity.

5 unchanged sentences

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

Warrants liability as at September 9, 2021

Warrants liability as at December 31, 2021

Reduction in fair value of warrants liability

Warrants liability as at December 31, 2022

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

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

December 31, 2022

September 9, 2021

December 31, 2021

Exercise price

2 unchanged sentences

There were no exercises or redemptions of the Public Warrants or Private Warrants during the year ended December 31, 2022.

Allseas Warrants

The Allseas Warrants will vest and become exercisable upon successful completion of the PMTS and will expire on September 30, 2026.

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

Since the Allseas Warrants vest upon the achievement of a performance condition, being the completion of the PMTS, under U.S.

GAAP, the vesting of the Allseas Warrants was not determined to be probable as at December 31, 2021.

No expense or liability has been recorded as at and for the year ended December 31, 2021.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Allseas Warrant

The Allseas Warrant was granted on March 4, 2021, vested and became exercisable for 11.6 million common shares upon successful completion of the PMTS in November 2022, and will expire on September 30, 2026.

The Company recognized a charge of $ 69.9 million in the fourth quarter of 2022 ( nil in 2021), representing the fair market value of the Allseas Warrant on the date it was granted.

Fair market value was determined using the DeepGreen’s share price on the date the Allseas Warrant was granted to Allseas ($ 7.00 per share), reduced by the exercise price of $ 0.01 per share.

Common Shares

28 unchanged sentences

As the Special Shares meet the indexation and equity classification criteria under ASC 815-40, the Special Shares have been classified as equity instruments at issuance.

As at December 31, 2020, the Company had 509,459 DeepGreen Class B Preferred Shares outstanding.

Class B Preferred Shares were non-dividend earning and include voting rights similar to common shares.

However, if any dividend was declared on common shares, the Company was required to concurrently declare and pay dividend on Class B Preferred Shares in the amount per share equal to the dividend per share paid on the common shares.

These Class B Preferred Shares rank ahead of common shares in the event of liquidation.

As at December 31, 2021, all Class B Preferred Shares have been converted to common shares.

As at December 31, 2021, all 509,459 DeepGreen Class B Preferred Shares were converted to common shares.

TMC the metals company Inc.

7 unchanged sentences

December 31, 2020

Private placement

Financing cost incurred – Cash

Financing cost incurred - Stock option-based payments

Issued for TOML Acquisition ( Note 7 )

Issued for services (Note 10& 11)

Exercise of stock options

December 31, 2020

Issued for services (Note 11)

Exercise of stock options

Conversion of restricted share units (Note 15)

3 unchanged sentences

December 31, 2021

Issuance of shares under PIPE financing (Note 19)

Exercise of stock options

Conversion of restricted share units (Note 15)

Share purchase under Employee Stock Purchase Plan (Note 15)

December 31, 2022

Share-Based Compensation

The Company’s 2021 Incentive Equity Plan (the “Plan”) provides that the aggregate number of common shares reserved for future issuance under the Plan is 24,682,386 common shares, 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 December 31, 2022 is 33,699,685 common shares, 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.

6 unchanged sentences

As at December 31, 2022, there were 15,356,340 stock options outstanding under the Company’s Short-Term Incentive Plan (“STIP”) and 9,783,922 stock options outstanding under the Company’s Long-Term Incentive Plan (“LTIP”).

The Company grants awards under the STIP and LTIP under its equity incentive plans in effect at the time of the award.

The stock options currently outstanding were granted under DeepGreen’s equity incentive plan.

No new stock options have been granted under the Company’s Plan.

The Company makes awards under the STIP and LTIP under its equity incentive plans in effect at the time of the award, which is currently the Plan.

No new stock options were granted by the Company under the STIP or LTIP plans during 2022.

TMC the metals company Inc.

1 unchanged sentence

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

A continuity schedule of the Company’s stock options in the Company’s STIP is as follows:

Outstanding under STIP plan :

A continuity schedule summarizing the movements in the Company’s stock options under the STIP plan is as follows:

Outstanding – December 31, 2020

1 unchanged sentence

( 6,310,593 )

( 2,605,190 )

Outstanding – December 31, 2021

Cancelled/Forfeited

( 6,310,593 )

Outstanding – December 31, 2022

5 unchanged sentences

Exercise price

March 5, 2022

March 5, 2023

March 31, 2024

June 30, 2023

March 31, 2024

December 31, 2025

January 27, 2026

0.52 - $ 2.59

February 2, 2026

February 17, 2026

0.22 - $ 0.52

0.65 - $ 8.64

June 30, 2028

1 unchanged sentence

As at December 31, 2022, total unrecognized share-based compensation expense of $ 0.6 million is expected to be recognized over a weighted-average recognition period of approximately one year .

During the year ended December 31, 2021, the Company granted 9,783,922 stock options under its LTIP.

On March 4, 2021, the Company granted 9,783,922 stock options under its LTIP.

These stock options have an exercise price of $ 0.65 per option and expire on June 1, 2028.

3 unchanged sentences

As at December 31, 2022, total unrecognized share-based compensation expense for the LTIP stock options was $ 23 million.

As at December 31, 2022, the fair value of the Company’s common shares was $ 0.77 per share.

As at December 31, 2022, the Company used the closing market price of its common shares to determine the intrinsic value of outstanding stock options.

TMC the metals company Inc.

1 unchanged sentence

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

As at December 31, 2021, the fair value of the Company’s common shares was $ 2.08 per share.

As at December 31, 2021, the Company used the closing market price of its common shares to determine the intrinsic value of outstanding stock options.

Prior to closing of the Business Combination on September 9, 2021, there was no quoted market price for the Company’s common shares.

Accordingly, the Company estimated the fair value of common shares based on the PWERM by first defining the range of potential future liquidity outcomes, including the share price used for its most recent private placements and the share price used for the Business Combination, then allocating its value based on the probability of that event occurring.

The approach involves estimates, judgments and assumptions that are highly complex and subjective.

Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact the Company’s valuation of its common shares as of each valuation date which may have a material impact on the valuation of the Company’s common shares and equity awards for accounting purposes.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2021 was $ 39.4 million.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2022 was $ 62 thousand.

Activity and Valuation

On February 17, 2021, the Company granted a total of 568,120 incentive stock options to certain directors and non-employees.

These options have an exercise price of between $ 0.22 per share and $ 0.65 per share, vested immediately upon grant, and expire between February 17, 2026 and February 26, 2026 .

On February 26, 2021, the Company granted a total of 46,777 incentive stock options to a consultant.

These options have an exercise price of $ 0.22 per share, vested immediately upon grant, and expire on February 26, 2026.

On March 4, 2021, the Company granted 5,758,306 incentive stock options to certain employees, directors and consultants under the Company’s STIP, as well as 9,783,922 incentive stock options to the same individuals under its LTIP.

The stock options granted under the STIP expire on June 1, 2028 or earlier, have exercise prices ranging between $ 0.65 per share and $ 8.64 per share, and have vesting periods with a maximum of three years .

The fair value of the options granted under the Company’s STIP was estimated on the date of grant using the Black-Scholes option pricing model, with the following weighted average assumptions:

Expected share price volatility

Expected life of options

Risk-free interest rate

Expected dividend yield

Estimated per share fair value of the Company’s common shares

The stock options granted under the LTIP have an exercise price of $ 0.65 per share and expire on June 1, 2028.

During 2022, the board of directors approved the extension of the expiry dates of certain stock option grants to reflect the extension of various consulting contracts, resulting in share-based compensation expense of $ 0.4 million.

The fair value of these modifications was calculated using Black-Scholes option pricing models.

Outstanding under LTIP plan:

The stock options granted under the Company’s LTIP plan have an exercise price of $ 0.65 per share and expire on June 1, 2028.

The LTIP awards vest as follows:

3 unchanged sentences

(4) Tranche 4 - 20 % upon the commencement of the first commercial production following the grant of the exploitation contract.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Tranche 1 and Tranche 2 vest based on the Company’s market capitalization of $ 3 billion and $ 6 billion, respectively.

17 unchanged sentences

Changes in these assumptions could have a material impact on the Company’s loss and comprehensive loss.

In September 2021, the Board of Directors approved amendments for certain stock option grants to extend their term beyond the retirement provisions in the Plan, resulting in an expense of $ 3.9 million.

During the year ended December 31, 2021, the Company recognized $ 59.3 million of share-based compensation expense for stock options in the statement of loss and comprehensive loss (2020:

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

During the year ended December 31, 2022, the Company recognized $ 9.5 million of share-based compensation expense for stock options (originally issued under STIP and LTIP plans) in the statement of loss and comprehensive loss (2021:

$ 59.3 million).

3 unchanged sentences

$ 26.6 million).

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Restricted Share Units

The Company may, from time to time, grant RSUs to directors, officers, employees, and consultants of the Company and its subsidiaries under the Plan, whether to the STIP, the LTIP or otherwise.

During the year ended December 31, 2021, the Company granted 3,556,224 RSUs vesting in thirds on each anniversary of the grant date, 398,438 RSUs vesting in fourths on each anniversary of the grant date and 173,216 RSUs vesting immediately on grant date.

During the year ended December 31, 2022, the Company granted 464,632 RSUs vesting in thirds on each anniversary of the grant date, 527,800 RSUs vesting in fourths on each anniversary of the grant date, 476,189 RSUs vesting in full one year from grant date and 1,721,729 RSUs vesting immediately on grant date.

On each vesting date, RSU holders are entitled to receive common shares equivalent to the number of RSUs held provided the holder is providing service to the Company on such vesting date.

A total of $ 1.0 million was charged to the statement of loss and comprehensive loss as share-based compensation expense for the year ended December 31, 2021, of which $ 0.4 million was recorded in exploration and evaluation expenses and $ 0.6 million was recorded in general and administrative expenses.

As at December 31, 2021, total unrecognized share-based compensation expense for RSUs was $ 12.3 million.

A summary of the RSU activity is presented in the table below:

The details of RSUs granted by the Company during the year are as follows:

Vesting Period

Vesting Immediately

Vesting fully on the anniversary of the grant date

Vesting in halves on each anniversary of the grant date

Vesting in thirds on each anniversary of the grant date

Vesting in fourths on each anniversary of the grant date

Total Units Granted

Of the 1,721,729 units vesting immediately on grant date, 1,072,572 units were issued to settle liabilities with a carrying amount of $ 1.8 million, at a weighted average grant date fair value of $ 1.64 per RSU.

During 2022 476,189 units (2021:

nil ) were granted to the Company’s non-employee directors under the Company’s Non-employee Director Compensation Policy, which vest upon the Company’s 2023 annual shareholders meeting.

The total fair value of units granted as annual grants to the non-employee directors in 2022 amounted to $ 700,000 ($ nil in 2021).

A summary of the RSU activity in 2022 is presented in the table below:

average grant-

1 unchanged sentence

Outstanding – December 31, 2021

( 2,925,146 )

Outstanding – December 31, 2022

(1) Granted units issued to consultants and which vest immediately include 477,740 and 171,417 units (2021:

Nil and 118,528 units), resulting with $ 1 million and $ 0.3 million (2021:

Nil and $ 0.2 million) charged to professional and consulting fees expense and to investor relations expense, respectively.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

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.

As at December 31, 2021, there were no RSUs vested and exercisable.

During the year, a total of $ 7.5 million was charged to the statement of loss and comprehensive loss as share-based compensation expense for RSUs (2021:

$ 1.0 million).

Share-based compensation expense for RSUs totaling $ 3.8 million related to general and administration matters was charged to the statement of loss and comprehensive loss for the year ended December 31, 2022 (2021:

$ 0.6 million).

The Company recorded a total of $ 3.7 million of share-based compensation expense for RSUs related to exploration and evaluation activities for the year ended December 31, 2022 (2021:

$ 0.4 million).

As at December 31, 2022, total unrecognized share-based compensation expense for RSUs was $ 6.1 million (December 31, 2021 - $ 12.3 million).

As at December 31, 2022, an aggregate of 5,354 vested units were outstanding and due to be converted into common shares.

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 December 31, 2022, there were 5,254,324 common shares reserved for issuance under the ESPP.

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

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.

Participation in the ESPP is available to all full-time and certain part-time employees.

The ESPP comprises offering periods that are twenty-four (24) months in length, which begin on approximately every June 1 and December 1.

Each offering period includes four purchase periods of six months each, which begin on approximately every June 1 and December 1, or at such other times designated by the board of directors or its compensation committee.

At the exercise date, which is the last business day of each purchase period, the accumulated deductions from participating employees are used to purchase common shares of the Company.

Shares are purchased at a price equal to 85 % of the lower of either the share price of the Company’s common shares on the first business day of the particular offering period or the last business day of the purchase period.

The ESPP also has an automatic reset feature wherein, if the share price of the common share on any exercise date is less than the share price of the common share on the first business day of the applicable offering period, then such offering period shall automatically terminate immediately after the purchase of the common shares.

In such case, a new offering period shall commence on the first business day following the exercise date.

The ESPP includes the following limitations:

● an employee’s contribution is limited to 15 % of the employee’s annual gross earnings, not to exceed $ 25,000 per year,

● an employee’s purchases in any offering period cannot exceed 15,000 common shares, and

● an employee’s purchases are capped, not to exceed 5 % of the Company’s total outstanding common shares.

During 2022, the Company issued 117,929 common shares to its employees as part of its ESPP program.

A total of $ 0.1 million was charged to the statement of loss and comprehensive loss as share-based compensation expense for the year ended December 31, 2022, representing the share price purchase discount offered by the Company.

From the amount charged in 2022, $ 35 thousand was recorded in exploration and evaluation expenses and $ 67 thousand was recorded in general and administrative expenses.

Loss per Share

2 unchanged sentences

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.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Anti-dilutive equivalent common shares were as follows:

3 unchanged sentences

Outstanding RSUs

Outstanding shares under ESPP

Outstanding warrants

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Total anti-dilutive common equivalent shares

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Financial Instruments

Categories of Financial Instruments

December 31 2022

December 31 2021

Financial assets

Amortized cost

Receivables and Prepayments

Financial liabilities

Amortized cost

Accounts payable and accrued liabilities

Fair value through profit or loss Warrants liability

Related Party Transactions

3 unchanged sentences

Consulting services during the year ended December 31, 2022 totaled $ 275 thousand (2021:

$ 275 thousand), and are disclosed as external consulting and exploration labor within exploration and evaluation expenses (Note 11).

$ 275 thousand), out of which $ 220 thousand (2021:

$ 275 thousand) is disclosed as exploration labor within exploration and evaluation expenses (Note 10) and $ 55 thousand (2021:

Nil ) is disclosed as salaries and wages within general and administrative expenses (Note 11).

As at December 31, 2022, the amount payable to SSCS was $ 46 thousand (2021:

2 unchanged sentences

Consulting services during the year ended December 31, 2022 amounted to $ 375 thousand (2021:

$ 367 thousand), and are disclosed as exploration labor within exploration and evaluation expenses (Note 11).

As at December 31, 2021, the amount payable to Ocean Renaissance was $nil (2020 - $nil ).

$ 375 thousand) out of which $ 188 thousand (2021:

$ 375 thousand) is disclosed as exploration labor within exploration and evaluation expenses (Note 10) and $ 188 thousand (2021:

Nil ) is disclosed as salaries and wages within general and administrative expenses (Note 11).

As at December 31, 2022, the amount payable to Ocean Renaissance was $ Nil (2021:

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

PIPE Financing

On August 12, 2022, the Company entered into three securities purchase agreements for the private placement of an aggregate of 37,978,680 of the Company’s common shares.

The Company entered into a securities purchase agreement with the purchasers named therein for the issuance and sale of an aggregate of 31,625,000 common shares at a purchase price of $ 0.80 per share, a separate securities purchase agreement with Gerard Barron, the Company’s Chief Executive Officer and Chairman, for the issuance and sale of 103,680 Common Shares at $ 0.9645 per share, the consolidated closing bid price per Common Share on August 11, 2022, and a separate securities purchase agreement with ERAS Capital LLC, the family fund of the Company’s director, Andrei Karkar, for the issuance and sale of 6,250,000 common shares at a purchase price of $ 0.80 per share (.

As at December 31, 2022, all of the 37,978,680 shares were issued and the Company received gross proceeds amounting to $ 30.4 million.

The Company incurred $ 1.0 million as placement agent fees and offering expenses out of which expenses amounting to $ 0.2 million were settled by issuing 287,500 shares at issue price of $ 0.80 per share.

Commitments and Contingent Liabilities

NORI Exploration Contract

As part of the NORI Exploration Contract with the ISA (Note 11), NORI submitted a periodic review report to the ISA in 2021, covering the 2017-2021 period.

NORI had committed to spend $ 5 million over the five-year period from 2017 to 2021, which it has exceeded.

The periodic review report included a summary of work completed over the 5-year period and a program of activities and estimated budget for the next five-year period.

The report is being reviewed by the ISA.

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.

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

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

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

Marawa Exploration Contract

As part of DGE’s Marawa Option Agreement and Services Agreement with Marawa with respect to the Marawa Area (Note 11), Marawa committed to spend a defined amount of funds on exploration activities on an annual basis.

The commitment for fiscal 2021 and 2020 was Australian dollar $ 2 million and Australian dollar $ 1 million, respectively.

The spending commitment for both years has been exceeded.

The commitment for fiscal 2022, 2023 and 2024 is Australian dollar $ 1 million, Australian dollar $ 3 million and Australian dollar $ 2 million, respectively.

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

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

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

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

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

DGE expects to collaborate with Marawa to assess the viability of any potential project in the Marawa Contract Area, the timing of such assessment is uncertain.

TOML Exploration Contract

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

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

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

For the 2021 year, the Company has spent approximately $ 8.1 million in connection with the TOML Exploration Contract, bringing the five-year total spend to approximately $ 13.3 million, from 2017 to 2021.

Discussions with the ISA are underway to review the progress achieved to date and agree on program activities for the next 5-years.

The five-year period ending in 2021 included activities of both TOML (from its acquisition in 2020) and its predecessor.

On December 23, 2022, the ISA accepted TOML’s proposed program of activities for the 2022-2026 five-year period.

TMC the metals company Inc.

11 unchanged sentences

In addition, NORI will pay an administration fee each year to Nauru for such administration and sponsorship, which is subject to review and increase in the event NORI is granted an ISA exploitation contract.

NORI has begun discussions with the Government of Nauru to renegotiate the existing sponsorship agreement and has also committed to ensuring NORI pays corporate income tax within Nauru.

On March 8, 2008, Tonga and TOML entered into a sponsorship agreement formalizing certain obligations of the parties in relation to TOML’s exploration and potential exploitation of the TOML Area (“TOML Sponsorship Agreement”).

2 unchanged sentences

On September 23, 2021, the Company and Tonga updated the TOML Sponsorship Agreement harmonizing the terms of its engagement with TOML with those held by NORI with Nauru.

TOML expects to renegotiate the existing sponsorship agreement with Tonga prior to entering into operations in the TOML area and has committed to paying corporate income tax within Tonga.

Contingent Liability

16 unchanged sentences

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

On January 23, 2023, an investor in the 2021 PIPE from the Business Combination filed a lawsuit against us in New York Supreme Court, New York County, captioned Atalaya Special Purpose Investment Fund II LP et al.

Sustainable Opportunities Acquisition Corp.

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

650449/2023 (N.Y.

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

There have been no substantive developments in this case.

The Company denies any allegations of wrongdoing and are preparing to file a motion to dismiss.

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 range of possible losses cannot be reliably estimated.

Supplemental Cash Flow Information

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Non-Cash Investing and Financing Activities

Common shares issued to settle previous services (Note 11)

Common shares issued for TOML Acquisition (Note 7)

Additional contribution from Allseas (Note 11)

Common shares issued to settle previous services

Conversion of debentures (Note 12)

Financing stock options issued (Note 16)

Segmented Information

7 unchanged sentences

The Company had no assessable profit in Canada for all periods disclosed.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

The income tax expense at statutory rates for the Company can be reconciled to the reported loss for the years 2022 and 2021 per the statement of loss and comprehensive loss as follows:

1 unchanged sentence

For the year ended

Net loss for the year

Net loss for the year, before taxes

Canadian Federal and Provincial income tax rates

7 unchanged sentences

The Company currently has no uncertain tax positions and is therefore not reflecting any adjustments.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Components of the Company’s deferred income tax assets (liabilities) are as follows:

23 unchanged sentences

Non-capital losses incurred in Canada prior to closing of the Business Combination (Note 6) have been restricted upon the acquisition of control event and may no longer be available to offset future taxable income.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

These losses, if not utilized, will expire as follows:

1 unchanged sentence

Loss carry-forwards

As at December 31, 2020, the non-capital loss carry-forwards of $ 45 million pertained to the following:

United States

Loss carry-forwards

The Company files income tax returns in Canada, the United States, Singapore and Tonga, and is subject to examination in these jurisdictions for all years since the Company’s inception in 2011.

1 unchanged sentence

Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized.

The timing of the resolution, settlement and closure of any income tax audits is highly uncertain, and the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax

It is possible that the balance of gross unrecognized tax benefits could significantly change in the next twelve months.

As at December 31, 2022, the 2022 tax year filings for the Company and its subsidiaries (where applicable) remain unfiled and have not been assessed by the relative tax authorities.

Subsequent Events

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

The Fifth Amendment relates to the Company’s intent to settle the third and final payment of $ 10 million due to Allseas upon successful completion of the pilot trial of 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 common shares to Allseas (Note 10).

On February 21, 2023, the Company and its wholly-owned subsidiary, NORI, entered into a strategic partnership with Low Carbon Royalties Inc.

(“Low Carbon Royalties”), a private corporation formed under the laws of British Columbia, Canada to finance low carbon emitting energy production and technologies (natural gas, nuclear, renewables), transition metals and minerals required for energy storage and electrification (Cu, Li, Ni, Co, Mn), and the evolving environmental markets (the “Partnership”).

In connection with the Partnership, NORI contributed a 2 % gross overriding royalty (the “NORI Royalty”) on the Company’s NORI project area in the Clarion Clipperton Zone of the Pacific Ocean in which NORI currently holds exclusive exploration rights for polymetallic nodules from the ISA, to Low Carbon Royalties.

The Company retained the right to repurchase up to 75 % of the NORI Royalty at an agreed capped return, exercisable in two transactions, between the second and the tenth anniversary of the Partnership.

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

Low Carbon Royalties also owns a 1.6 % gross overriding royalty on a producing natural gas field in Latin America.

In consideration of the NORI Royalty, TMC received a 35.0 % common ownership interest in Low Carbon Royalties on a fully-diluted basis as of closing and $ 5 million in cash.

In connection with the Partnership, (a) the Company and NORI entered into a Royalty Agreement with Low Carbon Royalties which governs the terms of the NORI Royalty and (b) the Company entered into an Investor Rights Agreement with Brian Paes-Braga (a shareholder of Low Carbon Royalties as well as the Company and Managing Partner of SAF Group, one of Canada’s largest alternative asset managers) and Low Carbon Royalties, pursuant to which the Company and Mr.

Paes-Braga 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.

Pursuant to the Investor Rights Agreement, the Company designated its Chairman and Chief Executive Officer, Gerard Barron, to be its designee on Low Carbon Royalties’ board of directors.

Paes-Braga and Brian O’Neill, Vice President of SAF Group, are the other members of Low Carbon Royalties’ board of directors.

TMC the metals company Inc.

1 unchanged sentence

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

It is possible that the balance of gross unrecognized tax benefits could significantly change in the next twelve months.

As at December 31, 2021, the 2021 tax year filings for the Company and its subsidiaries (where applicable) remain unfiled and have not been assessed by the relative tax authorities.

Subsequent Event

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

The terms are subject to negotiation between NORI and Allseas and if successful, may result in amendments to the existing Strategic Alliance Agreement (Note 11).

On March 22, 2023, we entered into an Unsecured Credit Facility Agreement (“Credit Facility”) with Argentum Credit Virtuti GCV (the “Lender”), the parent of Allseas Investments S.A.

and an affiliate of Allseas, pursuant to which, we may borrow from the Lender up to $ 25,000,000 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 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 Credit Facility.

We have the right to pre-pay the entire amount outstanding under the Credit Facility at any time, before the Credit Facility’s maturity of May 21, 2024.

The Credit Facility also contains customary events of default.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data