What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-25 compared with 2023-03-27 · 531 added, 420 removed, 642 unchanged (60% 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, 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.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for each of the two years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for the two years then in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

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Exploration contracts

Right-of-use asset

Accounts payable and accrued liabilities

Deferred tax liability

Royalty liability

Warrants liability

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Operating loss

Change in fair value of private warrants liability

Equity-accounted investment loss

Change in fair value of warrants liability

Foreign exchange loss

Interest expense (income)

Interest income

Fees and interest on credit facility

Loss and comprehensive loss for the year, before tax

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December 31, 2022

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

Shares issued to Allseas (Note 8)

Exercise of warrant by Allseas (Note 8 and 13)

Issuance of shares and warrants under Registered Direct Offering, net of expenses (Note 12)

Conversion of restricted share units, net of shares withheld for taxes (Note 15)

Shares purchased under Employee Share Purchase Plan (Note 15)

Exercise of stock options (Note 15)

Conversion of restricted share units (Note 15)

Share purchase under Employee Share Purchase Plan

Vesting of Allseas Warrant (Note 10, 13)

Share-based compensation (Note 15)

Share-based compensation and Expenses settled with equity (Note 15)

Loss for the year

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December 31, 2021

Exercise of stock options (Note 15)

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

Vesting of Allseas Warrant

Issuance of shares under PIPE financing - net of expenses (Note 12)

Conversion of restricted share units, net of shares withheld for taxes

Exercise of stock options

Shares purchased under Employee Share Purchase Plan

Share-based compensation and Expenses settled with equity

Loss for the year

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For the year ended

Cash resources provided by (used in)

Cash provided by (used in)

Operating activities

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Items not affecting cash:

Expenses settled with share-based payments

Interest on convertible debentures

Lease expense

Share-based compensation and Expenses settled with equity

Equity-accounted investment loss

Change in fair value of warrants liability

Vesting of Allseas Warrant

Unrealized foreign exchange

Unrealized foreign exchange movement

Changes in working capital:

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Investing activities

Settlement of deferred acquisition costs

Acquisition of equipment

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Financing activities

Proceeds from Registered Direct Offering

Expenses paid for Registered Direct Offering

Proceeds from PIPE financing

Expenses paid for PIPE financing

Proceeds from exercise of stock options

Proceeds from issuance of convertible debentures

Proceeds from employee share purchase plan

Proceeds from exercise of stock options

Proceeds from exercise of warrants by Allseas

Proceeds from issuance of shares

Proceeds from Low Carbon Royalties investment

Taxes withheld and paid on share-based compensation

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

Net cash provided by financing activities

Increase (decrease) in cash

Decrease in cash

Impact of exchange rate changes on cash

1 unchanged sentence

Cash - end of year

Supplemental cash flow information (Note 21)

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

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TMC the metals company Inc.

(“TMC” or the “Company”), formerly known as Sustainable Opportunities Acquisition Corporation (“SOAC”), was incorporated as a Cayman Islands exempted company limited by shares on December 18, 2019 and continued as a corporation under the laws of the province of British Columbia, Canada on September 9, 2021.

(“TMC” or the “Company”) was incorporated as a Cayman Islands exempted company limited by shares on December 18, 2019 and continued as a corporation under the laws of the province of British Columbia, Canada on September 9, 2021.

On September 9, 2021, the Company completed its business combination (the “Business Combination”) with DeepGreen Metals Inc.

(“DeepGreen”) (Note 6).

(“DeepGreen”).

The Company’s corporate office, registered address and records office is located at 10th floor, 595 Howe Street, Vancouver, British Columbia, Canada, V6C 2T5.

The Company’s common shares and warrants to purchase common shares are listed for trading on the Nasdaq Global Select Market (“Nasdaq”) under tickers “TMC” and “TMCWW”, respectively.

In connection with closing of the Business Combination, DeepGreen merged with a wholly-owned subsidiary of SOAC and became a wholly-owned subsidiary of the Company.

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 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.

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

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

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

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

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

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

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

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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).

(“Allseas”), to deliver a system to collect, lift and transport nodules from the seafloor to shore that meets the requirements of an early commercial production system (Note 8).

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

financing being arranged by the Company to continue operations, development of a nodule collection system for the recovery of polymetallic nodules from the seafloor as well as development of processing technology for the treatment of polymetallic nodules, the establishment of mineable reserves, the commercial and technical feasibility of seafloor polymetallic nodule collection and processing, metal prices, and regulatory approvals and environmental permitting for commercial operations.

financing being arranged by the Company to continue operations, development of a nodule collection system for the recovery of polymetallic nodules from the seafloor as well as development of processing technology for the treatment of polymetallic nodules at commercial scale, the establishment of mineable reserves, the commercial and technical feasibility of seafloor polymetallic nodule collection and processing, metal prices, and regulatory approvals and environmental permitting for commercial operations.

The outcome of these matters cannot presently be determined because they are contingent on future events and may not be fully under the Company’s control.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Basis of Presentation

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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.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Comparative figures reported in the Consolidated Balance Sheet, for cash, receivables and prepayments, and figures reported in the Consolidated Statements of Cash Flows, for Expenses settled with equity and changes in working capital have been reclassified to conform to the current year’s presentation.

Basis of Measurement

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by the Company

DeepGreen Metals ULC

Mineral exploration

DeepGreen Engineering Pte.

Mineral exploration

DeepGreen Metals ULC

Mineral exploration

DeepGreen Resources, LLC

Holding Company

Nauru Ocean Resources Inc.

DeepGreen TOML Holding 1 Ltd.

Holding Company

British Virgin Islands

DeepGreen TOML Holding 2 Ltd.

Holding Company

British Virgin Islands

DeepGreen TOML Singapore Pte.

Mineral exploration

Republic of Nauru

Koloa Moana Resources Ltd.

Holding Company

Nauru Education and Training Foundation Inc.

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Republic of Nauru

Tonga Offshore Mining Ltd.

Nauru Ocean Resources Inc.

Mineral exploration

Kingdom of Tonga

Koloa Moana Resources Ltd.

Holding Company

Republic of Nauru

Offshore Minerals Pty.

Mineral exploration

DeepGreen TOML Singapore Pte.

Mineral exploration

DeepGreen TOML Holding 1 Ltd.

Holding Company

British Virgin Islands

DeepGreen TOML Holding 2 Ltd.

Holding Company

British Virgin Islands

The Metals Company Australia Pty Ltd

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United Kingdom

All inter-group balances have been eliminated on consolidation.

Tonga Offshore Mining Ltd.

Mineral exploration

Kingdom of Tonga

All intra-group balances have been eliminated on consolidation.

Significant Accounting Policies

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

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

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.

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

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 consolidation purposes, the assets and liabilities of entities with functional currencies other than the US Dollar are translated at the period end rates of exchange, and the results of their operations are translated at average rates of exchange for the period.

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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, the valuation of share-based payments, including valuation of incentive stock options (Note 15), as well as the valuation of warrants liability (Note 13).

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

(“Low Carbon Royalties”) (Note 9).

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 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.

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 3 - Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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

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

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

The financial instruments also include warrants which are valued at fair value as disclosed in Note 13.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and term deposits with a remaining term to maturity at acquisition of three months or less.

Cash include cash on hand and term deposits with a remaining term to maturity at acquisition of three months or less.

As at December 31, 2023 and 2022, the Company had no 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.

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 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.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

The operating lease ROU asset also includes any lease payments made and excludes lease incentives.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Differences between the calculated lease payment and actual payment are expensed as incurred.

Amortization of finance lease assets is recognized over the lease term.

Interest expense on finance lease liabilities is recognized over the lease term in interest expense.

The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The Company elected to apply the short-term lease recognition exemption to all of its lease arrangements and recorded an expense of $ 132 (2021:

$ 132 ) for lease payments during the year ended December 31, 2022 relating to office premises and employee accommodations.

Such lease expense is disclosed under general and administrative expenses within the statement of loss and comprehensive loss and forms part of cash flow from operating activities.

Exploration Contracts

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The cost of exploration contracts will be charged to operations using a unit-of-production method based on proven and probable reserves once commercial production commences in the future.

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

The Company expenses all costs related to exploration and development of exploration contracts.

While in the exploration phase, the Company expenses all costs related to exploration and development of exploration contracts.

Such exploration and development costs include, but are not limited to, exploration contract management, geological, geochemical and geophysical studies, environmental studies and process development.

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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 evaluates all of its financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to U.S.

GAAP Accounting Standard Coding (“ASC”) 480, Distinguishing Liability from Equity, and ASC 815, Derivatives and Hedging.

GAAP Accounting Standard Coding (“ASC”) 480, Distinguishing Liability from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”).

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

The Company accounts for the Public Warrants and Private Warrants (as defined below) in accordance with the guidance contained in ASC 815 (Subtopic 40), Derivative and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”), and the U.S.

Securities and Exchange Commission (“SEC”) Division of Corporation Finance’s April 12, 2021 Public Statement, Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SEC Statement”), under which, subsequent to the Business Combination, the 15,000,000 common share warrants issued by SOAC as part of the units offered in its initial public offering (“Public Warrants”) were determined to meet the criteria for equity classification, while the 9,500,000 private placement common share warrants issued by SOAC in a private placement simultaneously with the closing of the initial public offering (“Private Warrants”) did not meet the criteria for equity classification and must be recorded as liabilities.

Securities and Exchange Commission (“SEC”) Division of Corporation Finance’s April 12, 2021 Public Statement, Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SEC Statement”), under which the 15,000,000 common share warrants issued by SOAC as part of the units offered in its initial public offering (“Public Warrants”) were determined to meet the criteria for equity classification, while the 9,500,000 private placement common share warrants issued by SOAC in a private placement simultaneously with the closing of the initial public offering (“Private Warrants”) did not meet the criteria for equity classification and were recorded as liabilities.

Specifically, the terms of the Private Warrants provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and, because the holder of a Private Warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude the Private Warrants from being classified in equity and should be classified as a liability.

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 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.

Fair value changes in the Private Warrants are recognized in the Company’s statement 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)

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.

The Allseas Warrant vested and became exercisable upon successful completion of the PMTS in the fourth quarter of 2022, and had 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.

The Company issued Class A Warrants under the Registered Direct Offering (Note 12) in the third quarter of 2023.

The Class A Warrants issued met the criteria for equity classification and were recorded under additional paid in capital (Note 13).

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.

Deferred income tax assets and liabilities are based on temporary differences, which are differences between the accounting basis and tax basis of assets and liabilities, non-capital loss, capital loss, and tax credits carryforwards and are measured using the enacted tax rates and laws expected to apply when these differences reverse.

Deferred tax benefits, including non-capital loss, capital loss, and tax credits carryforwards are recognized to the extent that realization of such benefits is considered more likely than not.

Deferred tax benefits, including non-capital loss, capital loss, and tax credit carryforwards are recognized to the extent that realization of such benefits is considered more likely than not.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated income statement in the period that enactment occurs.

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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.

The Company records leases in accordance with ASC 842, Leases , and determines if an arrangement contains a lease at inception.

Specifically, a contract is or contains a lease when (1) the contract contains an explicitly or implicitly identified asset and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract in exchange for consideration.

If an arrangement contains a lease, the Company performs a lease classification test to determine if the lease is an operating lease or a finance lease.

Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Lease liabilities are recognized on the commencement date of the lease based on the present value of the future lease payments over the lease term.

The discount rate used to calculate the present value of lease payments is the rate implicit in the lease.

Lease liabilities due within the subsequent 12 months of the reporting date are classified as current lease liabilities and are included in accounts payable and accrued liabilities on the Company’s condensed consolidated balance sheet.

Lease liabilities payable after the subsequent 12 months of the reporting date are classified as non-current lease liabilities and are presented as non-current lease liability in the condensed consolidated balance sheet.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

ROU assets are valued at the initial measurement of the lease liability, plus any indirect costs or rent prepayments, and reduced by any lease incentives and any deferred lease payments.

ROU assets are recorded as Right-of-use assets, net of any amortization on the condensed consolidated balance sheet.

Operating ROU assets are amortized on a straight-line basis over the lease term, whereas Finance ROU assets are amortized on a front-loaded basis.

Depending on the nature of the ROU asset, the amortization expense is either included in exploration and evaluation expenses or in general and administrative expenses.

The Company subsequently measures the ROU assets for an operating lease at the amount of the remeasured lease liability (i.e.

the present value of the remaining lease payments), adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term and any unamortized initial direct costs.

The ROU assets for a finance lease are subsequently measured by amortizing them on a straight-line basis over the shorter of the lease term or useful life and also adjustment for any impairments.

In the third quarter of 2023, the Company entered into an Exclusive Vessel Use Agreement with Allseas (Note 8) which was recognized as a lease agreement in accordance with accounting standards.

The Company consolidates investments over which it has control in accordance with ASC 810, Consolidation (“ASC 810”).

Where the Company does not have control over the investment, but has significant influence, the Company records the investment in accordance with ASC 323, Investments-Equity Method and Joint Ventures (“ASC 323”) whereby, after recording the initial investment, the Company recognizes its proportional share of results of operations of the affiliate in its consolidated financial statements.

The value of the equity method investments is impaired if it is determined that there is an other-than-temporary decline in value.

Investments over which the Company does not have control nor significant influence are recorded at cost.

The Company and its wholly-owned subsidiary, NORI, entered into an investment with Low Carbon Royalties on February 21, 2023 (Note 9).

Significant Accounting Estimates and Judgements

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

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.

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.

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.

● Expected Volatility—As TMC’s shares were not actively traded prior to closing of the Business Combination, the volatility is based on a benchmark of comparable companies within the mining industry.

● Expected Dividend Yield—The dividend rate used is zero as TMC has never paid any cash dividends on common shares and does not anticipate doing so during the expected life of the stock options.

● Risk-Free Interest Rate—The interest rates used are based on the implied yield available on Canadian Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

The fair market value of share-based awards granted to employees, non-employees and directors is based on the closing market price of the Company’s shares, on the date these were granted (Note 15).

TMC the metals company Inc.

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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 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.

Valuation of Warrants Liability

The Company re-measures the fair value of the Private Warrants at the end of each reporting period.

The Company re-measures the fair value of the Private Warrants at the end of each reporting period (Note 13).

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.

During the year the Company issued Class A warrants as a part of the Registered Direct Offering (Note 12 & Note 13).

The warrants were valued using a Monte Carlo simulation by running 250,000 trials.

The model assumed that the Company’s share price follows geometric Brownian motion which is a standard assumption used in Monte Carlo univariate pricing models.

The valuation was calculated under a risk-neutral framework using a zero-coupon risk-free interest rate derived from the Treasury Constant Maturities yield curve for a term until the expiry of the Warrants.

The Company’s share price was simulated up to the expiration date using a blended volatility, calculated by assigning equal weights to both implied volatility of the Company’s Public Warrants and the historical volatility of the Company’s share price.

Valuation of Royalty Liability

The Company re-measures the fair value of its royalty liability at each reporting date.

As NORI is in an advanced exploration stage and pre-production, the fair value of the royalty liability is measured by using a market approach which entails examining recent royalty transactions prior to the reporting date, focusing on those transactions that involve similar metals as contained in NORI’s polymetallic nodules.

The Company compares the specific characteristics of these transactions to estimate the fair value of its royalty liability at the reporting date.

Recent Accounting Pronouncements Issued and Adopted

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

On March 4, 2021, SOAC and DeepGreen entered into a business combination agreement (“BCA”) in which SOAC would combine with DeepGreen, relist on the Nasdaq and SOAC would be renamed to TMC.

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”).

Each class of Special Shares automatically convert to TMC common shares if TMC common shares trade at a price on any 20 trading days within any 30 - trading day period that is greater than or equal to the specific trigger price for the respective class of Special Share.

The trigger prices range from $ 15 per share to $ 200 per share.

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.

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.

These Rollover Options did not change in value as a result of the Business Combination.

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 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:

Special Share Class

Share Trigger price ($)

Special Shares (million)

The following table reconciles the cash proceeds from the Business Combination:

Cash proceeds from SOAC

Cash proceeds from sale of equity securities

Gross cash received by TMC from Business Combination

Transaction costs settled in cash

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 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.

On September 9, 2021, each remaining issued and outstanding share of SOAC Class A Shares automatically converted, on a one-for- one basis, into TMC common shares and 6.8 million outstanding shares of SOAC Class B Shares automatically converted, on a one-for- one basis, into TMC common shares and 0.7 million outstanding shares of SOAC Class B Shares converted into Class J Special Shares.

The TMC common shares also changed from having a par value of $ 0.0001 per share to no par 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 number of TMC common shares issued immediately following the consummation of the Business Combination is summarized as follows:

Shares by type

SOAC Class A shares outstanding prior to the Business Combination

Redemption of SOAC Class A shares

( 27,278,657 )

SOAC Class A shares outstanding and converted to TMC common shares

Shares issued in the Private Investment in Public Equity (“PIPE”)

Conversion of SOAC Class B shares to TMC common shares

Shares issued to SOAC and PIPE investors

Shares issued to the DeepGreen shareholders

Total TMC common shares outstanding at close of Business Combination

The Company incurred transaction costs related to the Business Combination of approximately $ 42.1 million, of which $ 5.4 million, incurred prior to the closing of the Business Combination becoming probable, are included in general and administrative expenses on the consolidated statements of loss and other comprehensive loss.

The remaining $ 36.7 million of transaction costs were capitalized to common shares on the consolidated balance sheet.

The Business Combination was accounted for as a reverse acquisition with no goodwill or intangible assets being recorded.

As SOAC had no operations, the net assets acquired were recorded at their historical cost.

Adjustments related to the Business Combination including consideration paid to DeepGreen shareholders and any other adjustments to eliminate the historical equity of SOAC and recapitalize the equity of DeepGreen were recorded to common shares to reflect the effective issuance of common shares to SOAC and PIPE investors in the Business Combination.

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

Net assets acquired

Total acquisition cost

Allocated to:

Exploration contracts (Note 10)

Deferred tax liability 1

Net assets acquired

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.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

There were no recent accounting pronouncements applicable to the Company during the year.

Receivables and Prepayments

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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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As at December 31, 2023

Strategic Alliance with Allseas and Affiliates

Pilot Mining Test Project

On March 29, 2019, the Company and Allseas entered into a Strategic Alliance Agreement (“SAA”) with the objective to develop and operate commercial nodule collection systems in the Company’s contract areas.

The SAA included the intent to develop and deploy a Pilot Mining Test System (“PMTS”), the successful completion of which would support the Company’s application for an exploitation contract with the ISA.

Allseas committed to a fixed price development contract and would own all intellectual property used and generated in the development of the PMTS.

Under the terms of the SAA, Allseas subscribed for and ultimately received 6.7 million common shares for a total of $ 20.0 million paid in cash to the Company.

On July 8, 2019, as contemplated by the SAA, the Company and Allseas entered into the Pilot Mining Test Agreement (“PMTA”) which governs the terms, design specifications, procedures, and timetable under which Allseas agreed to complete a pilot trial of the PMTS in NORI Area D.

Under the PMTA, in exchange for Allseas’ development efforts, upon successful delivery of the pilot trial of the PMTS in NORI Area D by Allseas, the Company agreed to pay Allseas:

● First milestone payment:

$ 10 million within 10 business days of the closing of the Business Combination and Allseas providing confirmation of placing an order for certain equipment and demonstrating certain progress on construction of the PMTS;

● Second milestone payment:

$ 10 million on the later of (i) January 1, 2022, and (ii) confirmation of successful completion of the North Sea drive test;

● Third milestone payment:

$ 10 million upon successful completion of the pilot trial of the PMTS in NORI Area D;

● 11.6 million warrants which would vest and become exercisable upon successful completion of the PMTS.

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 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 as agreed with Allseas.

Accordingly 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.

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

The Amendments relate to the Company’s settlement of the third and final payment of $ 10 million due to Allseas upon successful completion of the trial of the 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 10.85 million of its common shares to Allseas.

On August 9, 2023, 11,578,620 common shares were issued to Allseas upon the exercise of the Allseas Warrant granted in March 2021, and receipt of the exercise fee of $ 115.8 thousand.

The warrant vested and became exercisable on successful completion of the PMTS in November 2022 (refer Allseas Warrant, Note 13).

Development of Project Zero Offshore Nodule Collection System

On March 16, 2022, NORI and Allseas entered into a non-binding term sheet for the development and operation of a commercial nodule collection system.

During the year ended December 31, 2023, in relation to the development of the commercial nodule collection system, Allseas provided the Company with engineering, project management and vessel use services consisting of lay-up and transit costs totaling $ 12.1 million, recorded as mining, technological and process development within exploration and evaluation expenses (Note 10).

For the year ended December 31, 2022, Allseas managed and delivered the PMTS project, with services totaling $ 15.7 million, recorded as PMTS within exploration and evaluation expenses (Note 10).

Exclusive Vessel Use Agreement with Allseas

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

In consideration of the exclusivity term, the Company, on August 14, 2023, issued 4.15 million common shares to Allseas.

Allseas can terminate the agreement if the Company ceases normal operations, assigns assets to creditors, initiates bankruptcy proceedings, or faces unresolved bankruptcy-related actions.

The Company concluded that the agreement was a lease, as the Hidden Gem was considered an identified asset and the Company had the right to direct the use of the Hidden Gem for the development of the Project Zero System and obtain substantially all of the economic benefits from its use.

The lease was determined to be an operating lease given that ownership of the vessel remained with Allseas, the duration of the lease is considerably shorter than the vessel’s economic life and the present value of lease payments is significantly lower than the fair value of the vessel.

The Company recorded a lease liability and right-of-use asset of $ 6.5 million, which represents the fair value of 4.15 million common shares issued to Allseas on August 14, 2023, as consideration, and equal to the present value of the lease payments.

As the entire lease liability was settled within 14 days of the commencement of the lease, the discount rate for calculating the present value of lease payments was determined to be insignificant.

For the year ended December 31, 2023, the Company has recognized $ 0.8 million as lease expense recorded as exploration and evaluation expense.

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, 2023, the net amount of the lease liability and right-of-use asset is as follows:

Lease Liability

Balance as at August 1, 2023

Payments made during the year by issuing 4.15 million common shares

Balance as at December 31, 2023

Right-of-use Asset

Balance as on August 1, 2023

Lease expense during the year

Balance as at December 31, 2023

Credit Facility with Allseas Affiliate

On March 22, 2023, the Company entered into an Unsecured Credit Facility Agreement, which was amended on July 31, 2023 (“Credit Facility”), with Argentum Credit Virtuti GCV (the “Lender”), the parent of Allseas Investments S.A.

and an affiliate of Allseas, pursuant to which, the Company may borrow from the Lender up to $ 25 million in the aggregate, from time to time, subject to certain conditions.

All amounts drawn under the Credit Facility will bear interest based on the 6-month Secured Overnight Financing Rate, 180 -day average plus a margin of 4.0 % per annum payable in cash semi-annually (or plus 5 % if paid-in-kind at maturity, at the Company’s election) on the first business day of each of June and January.

The Company will pay an underutilization fee equal to 4.0 % per annum payable semi-annually for any amounts that remain undrawn under the Credit Facility.

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

The Company has the ability to settle the drawn credit facility, the interest on the drawn credit facility and underutilitzation fee in cash or in equity at discretion of the Company.

On March 22, 2024, the maturity date of this Credit Facility was extended to August 31, 2025.

The Credit Facility also contains customary events of default.

During the year ended December 31, 2023, the Company had not drawn any amount from the Credit Facility and had incurred $ 0.8 million as underutilization fees, which would be payable only in the event the Credit Facility is not drawn down upon at the time such fees are payable.

As at December 31, 2023, the amount payable to Allseas and its affiliates was $ 13.8 million (December 31, 2022:

$ 10.2 million).

Other Activity

As a part of the Registered Direct Offering in August 2023 (Note 12), Allseas purchased 3,500,000 common shares and accompanying Class A Warrants to purchase 1,750,000 Common Shares (Note 13) for a total purchase price of $ 7 million.

As at December 31, 2023, Allseas and its affiliates owned 53.8 million TMC common shares (2022:

23.7 million TMC common shares) which constituted 17.6 % (December 31, 2022:

8.9 %) of total common shares outstanding.

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Investment in Low Carbon Royalties

On February 21, 2023 (the “Closing Date”), the Company and its wholly-owned subsidiary, NORI, entered into an investment agreement (the “Royalty Agreement”) with Low Carbon Royalties, 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 Royalty Agreement, NORI contributed a 2 % gross overriding royalty (the “NORI Royalty”) on the Company’s NORI project area in the CCZ in which NORI currently holds exclusive exploration rights for polymetallic nodules from the ISA to Low Carbon Royalties.

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

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

At the Closing Date, Low Carbon Royalties also owned a 1.56 % gross overriding royalty on a producing natural gas field in Latin America (the “LCR-owned Royalty”).

In consideration of the NORI Royalty, TMC received 35.0 % of the common shares issued by Low Carbon Royalties and $ 5 million in cash, as of the Closing Date.

In connection with the Royalty Agreement the Company entered into an Investor Rights Agreement with Low Carbon Royalties and a shareholder of Low Carbon Royalties, pursuant to which the Company and this shareholder each have a right, subject to certain percentage maintenance, to nominate a director to Low Carbon Royalties’ board of directors, along with registration and information rights.

As a condition of closing the Royalty Agreement, the parties entered into an agreement with Low Carbon Royalties to mitigate risks associated with the potential termination of the exploitation license granted for one of the royalty-producing natural gas fields in Latin America (the “Exploitation License”).

As per the agreement, 5 million contingent value rights (“CVR”) were issued to NORI.

The CVR would convert into 5 million additional shares of Low Carbon Royalties being issued to NORI, in the event the Exploitation License is found, in a final decision, to be invalid by the Colombian National Agency of Hydrocarbons prior to the earlier of (1) five years from the issuance of the CVR and (2) the date Low Carbon Royalties becomes a publicly listed entity.

Although the Company does not control Low Carbon Royalties (as per ASC 810), it does however exercise significant influence and therefore the equity method of accounting is applied (as per ASC 323).

On March 21, 2023, Low Carbon Royalties acquired additional gross overriding royalties on natural gas fields in Latin America, increasing its total gross overriding royalty on the existing first license block from 1.56 % to 3.13 % and acquiring a new gross overriding royalty of 1.44 % on a second license block.

The royalty acquisitions were financed through the issuance of Low Carbon Royalties common shares to the third-party vendor of such royalties, thereby reducing the Company’s ownership in the Partnership to 32 % from 35 %.

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

For the year ended December 31, 2023, the Company’s share of the net loss generated by the Low Carbon Royalties was $ 0.6 million.

Fair value of NORI Royalty

Cash received

Cost of Investment on Closing Date

Equity-accounted investment loss for the year

Investment as at December 31, 2023

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 NORI Royalty was recorded as a royalty liability in the consolidated Balance Sheet as this represented a sale of future revenues which falls within the scope of ASC 470, Debt ("ASC 470").

The Company elected to account for the royalty liability at fair value through profit and loss.

The fair value was determined using a market approach which entails examining recent royalty transactions prior to the reporting date, focusing on those transactions that involve similar metals as contained in NORI’s polymetallic nodules.

The Company compares the specific characteristics of these transactions to estimate the fair value.

The fair value of the royalty liability as at December 31, 2023, remained unchanged at $ 14 million.

Financial results of Low Carbon Royalties are summarized below:

For the year ended

Current Assets

Non-Current Assets

Current Liabilities

Royalty Income

Total Revenue

Comprehensive Income (Loss) for the year

Exploration Contracts

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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 19).

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Marawa Agreements:

3 unchanged sentences

(“DGE”), entered into an Option Agreement (“Marawa Option Agreement”) with Marawa and Kiribati.

Under the amended Marawa Option Agreement dated October 1, 2013, DGE paid an option fee of $ 0.3 million to acquire the right to purchase tenements, as may be granted to Marawa by the ISA or any other regulatory body, for the greater of $ 0.3 million or the value of any amounts owing to DGE by Marawa.

The exercise period for the option is a maximum of 40 years after the date of the execution of the amended Marawa Option Agreement.

On October 1, 2013, DGE also entered into a services agreement (“Marawa Services Agreement”) with Marawa and Kiribati, which grants DGE the exclusive right to carry out all exploration and collection in the Marawa Area.

Under the Marawa Services Agreement, DGE will pay to the ISA, on behalf of Marawa, the following:

$ 47 thousand annual exploration fees, ISA royalties and taxes, and the ISA exploitation application fee of $ 0.3 million.

In addition, DGE will ensure that the activities carried out in the Marawa Area by DGE and any other service contractor complies with the ISA regulations and any other required regulations.

The Marawa Services Agreement grants DGE the right to recover any and all polymetallic nodules from the Marawa Area by paying Kiribati a royalty per wet tonne of polymetallic nodules collected (adjusted for inflation from October 1, 2013 onwards).

DGE has the right to terminate the Marawa Services Agreement at its sole discretion by giving written notice to Marawa and Kiribati, and such termination shall take effect two months following the date of the termination notice, provided that DGE shall pay to the ISA on behalf of Marawa the fees or payments legally owed to the ISA by Marawa (including the annual ISA exploration fee and ISA royalties and taxes) that are outstanding at the date of termination or that are incurred within 12 months after the date of such termination.

There are no other longer-term commitments with respect to the Marawa Option Agreement and the Marawa Services Agreement.

As at December 31, 2022, Marawa had no amounts owing to DGE under the Marawa Services Agreement and no purchase tenements had been granted to Marawa.

TOML Exploration Contract:

TOML was granted the TOML Exploration Contract on January 11, 2012 under the sponsorship of Tonga.

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.

TMC the metals company Inc.

1 unchanged sentence

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

Strategic Partnerships

Strategic Alliance with Allseas Pilot Mining Test Project

Allseas committed to a fixed price development contract and would own all intellectual property used and generated in the development of the PMTS.

Upon successful completion of the pilot trial of the PMTS in NORI Area D, the Company and Allseas agreed to enter into a nodule collection and shipping agreement whereby Allseas would provide commercial services for the collection of the first 200 million metric tonnes of polymetallic nodules on a cost plus 50 % profit basis.

Under the terms of the SAA, Allseas subscribed for and ultimately received 7.7 million common shares for a total of $ 20.0 million paid in cash to the Company.

Under the PMTA, in exchange for Allseas’ development efforts, upon successful delivery of the pilot trial of the PMTS in NORI Area D by Allseas, the Company agreed to pay Allseas:

(a) $ 30.0 million in cash and (b) issue 11.6 million common shares.

Contract Amendments

On February 20, 2020, the PMTA was amended to recognize the acquisition by Allseas of the Hidden Gem , a former drillship to be converted into a surface production vessel that would first be used as part of the PMTS, and later as part of the commercial production system.

The Company paid an additional:

(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 Warrant (Note 13).

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

● $ 10 million within 10 business days of the closing of the Business Combination and Allseas providing confirmation of placing an order for certain equipment and demonstrating certain progress on construction of the PMTS;

● $ 10 million on the later of (i) January 1, 2022, and (ii) confirmation of successful completion of the North Sea drive test;

● $ 10 million upon successful completion of the pilot trial of the PMTS in NORI Area D.

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.

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 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:

16.2 million TMC common shares) which constituted 8.9 % (2021:

7.2 %) of total common shares outstanding.

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).

TOML Exploration Contract:

TOML was granted the TOML Exploration Contract on January 11, 2012 under the sponsorship of Tonga.

On March 31, 2020, the Company entered into an acquisition agreement with Deep Sea Mining Finance Ltd.

to acquire TOML and other related entities in the group (the “TOML Acquisition”).

Total purchase price of the TOML Acquisition, before transaction costs, was $ 32.0 million comprising of $ 42.7 million for exploration contracts offset by $ 10.7 million for deferred tax liability.

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

Reconciliation – Exploration Contracts

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Mining, Technological and Process Development

Allseas Warrant (Note 13)

Prefeasibility Studies

Sponsorship, Training and Stakeholder Engagement (1)

(1) Sponsorship, Training and Stakeholder Engagement include $ 80 thousand of equity (RSU) settled expenses in 2023 (2022:

TMC the metals company Inc.

6 unchanged sentences

Mining, Technological and Process Development

Allseas Warrant (Note 13)

Sponsorship, Training and Stakeholder Engagement

13 unchanged sentences

(1) Professional and consulting fees include $ 0.4 million of equity (RSU) settled expenses in 2023 (2022:

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

$ 1 million).

Convertible Debentures

In February 2021, the Company issued a total of $ 26 million in convertible debentures.

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).

(2) Investor relations include $ nil million of equity (RSU) settled expenses in 2023 (2022:

$ 0.3 million).

Financing Activity

Registered Direct Offering

On August 14, 2023, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering (the “Registered Direct Offering”) 12,461,540 common shares and issue Class A Warrants to purchase 6,230,770 common shares (Note 13).

Each common share and accompanying Class A Warrant were sold at a price of $ 2.00 per unit.

The exercise price to purchase one common share under the Class A warrants is $ 3.00 , subject to adjustment as provided in the warrant agreement.

The aggregate gross proceeds to the Company from the Registered Direct Offering were expected to be approximately $ 24.9 million, before deducting fees payable to financial advisors and other estimated offering expenses payable by the Company ($ 23.6 million net of fees).

As at December 31, 2023, 7,961,540 common shares and Class A Warrants to purchase 3,980,770 common shares had been issued and the Company received gross proceeds amounting to $ 15.9 million.

The Company incurred $ 1.3 million as offering expenses, resulting in net proceeds received of $ 14.6 million.

Out of the total net proceeds received of $ 14.6 million, the net proceeds attributable to common shares were $ 11.4 million and the net proceeds attributable to Class A Warrants were $ 3.2 million.

TMC the metals company Inc.

1 unchanged sentence

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

On January 30, 2024, the Company received the remaining committed funding of $ 9 million (representing 4,500,000 common shares and 2,250,000 warrants) from an investor affiliated with the Company.

The common shares and warrants were issued on January 31, 2024.

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.

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 an issue price of $ 0.80 per share.

Public Warrants

10 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 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:

3 unchanged sentences

● if, and only if, the closing price of the common shares equals or exceeds $ 18.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 - day trading period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If the Company calls the Public Warrants for redemption in certain circumstances, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a cashless basis, by surrendering the Public Warrants for a number of common shares per warrant equal to the lesser of:

● the quotient obtained by dividing (x) the product of the number of common shares underlying such warrant, multiplied by the excess of the average reported closing price of common shares for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders (“Fair Market Value”) over the warrant price by (y) the Fair Market Value, and

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.

1 unchanged sentence

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

Private Warrants

8 unchanged sentences

If the Private Warrants are held by a holder other than the Sponsor or any of its permitted transferees, the Private Warrants are redeemable by the Company in all redemption scenarios applicable to the Public Warrants and exercisable by such holders on the same basis as the Public Warrants.

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

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.

2 unchanged sentences

The primary unobservable input utilized in determining the fair value of the Private Warrants was the expected volatility of the Company’s common shares.

The expected volatility was estimated using a binomial model based on consideration of the implied volatility from the Company’s Public Warrants adjusted to account for the call feature of the Public Warrants at prices above $ 18.00 during 20 trading days within any 30 -trading day period.

As at December 31, 2022, the fair value of outstanding Private Warrants of $ 1 million is recorded as warrants liability.

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

Warrants liability as at December 31, 2021

Reduction in fair value of warrants liability

Warrants liability as at December 31, 2022

As the Company’s shares reached their two-year trading anniversary on September 9, 2023, the Company changed its approach in calculating volatility from solely the implied volatility of the Company’s Public Warrants to now include an equal weight blend of the Public Warrants volatility and the historical volatility of the Company’s share price.

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, 2023, the fair value of outstanding Private Warrants of approximately $ 2 million is recorded as warrants liability.

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

Warrants liability as at December 31, 2022

Increase in fair value of warrants liability

Warrants liability as at December 31, 2023

As at December 31, 2023, the fair value of the Private Warrants was estimated using the following assumptions:

2 unchanged sentences

Exercise price

Volatility (1)

Risk-free rate

Dividend yield

The Company used a blended volatility approach to calculate the fair value of the warrants on December 31, 2023 by assigning equal weights to both implied volatility of the Company’s Public Warrants and the historical volatility of the share price.

The volatility used in calculating the fair value of the warrants as at December 31, 2022 comprised only of the implied volatility of the Company’s Public Warrants.

There were no exercises or redemptions of the Public Warrants or Private Warrants during the year ended December 31, 2023.

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.

The Allseas Warrant that 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.

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

On July 26, 2023, the Allseas Warrant was exercised resulting in the issuance of 11,578,620 common shares of the Company on August 9, 2023, once the exercise amount of $ 115.8 thousand was received from Allseas (Note 8).

Class A Warrants

As a part of the Registered Direct Offering (Note 12), the Company issued 3,980,770 Class A Warrants for the purchase of common shares at an exercise price of $ 3.00 per share.

The Class A Warrants expire on December 31, 2027.

The valuation of these Class A Warrants was determined using a Monte Carlo simulation.

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 Class A Warrants were valued on August 14, 2023, at a fair value of $ 0.80 per warrant.

The fair value of the Class A Warrants was estimated using the following assumptions:

Exercise price

Call price threshold

Risk-free rate

Dividend yield

The Class A Warrants contain a call provision under which if the Volume Weighted Average Price “VWAP” for 30 consecutive trading days exceeds $ 6.50 , and the warrant holder does not possess material non-public information provided by the Company, the Company may call for cancellation of the unexercised warrants, offering $ 0.0001 per Warrant Share.

If conditions for the call are met, the unexercised portion of these warrants will be cancelled ten Trading Days after the call notice is received.

The Class A Warrants were not determined to be liabilities under ASC 480 as they were not required to be redeemed.

The Company classified the Class A Warrants as equity (per ASC 815), as the warrants entailed physical settlement and were also considered to be indexed to the Company’s share, wherein, upon exercise, a fixed number of common shares would be issued on payment of a fixed exercise price.

As at December 31, 2023, the Company recorded $ 3.2 million as additional paid in capital.

On January 31, 2024, the Company issued the remaining 2,250,000 Class A Warrants, after receiving the remaining committed funding from the Registered Direct Offering of $ 9 million (Notes 12 and 22).

Common Shares

24 unchanged sentences

The holders of the Company’s common shares are entitled to one vote for each common share held.

Each class of Special Shares do not have voting rights and do not participate in earnings.

The Special Shares automatically convert to TMC common shares if TMC common shares trade at a price on any 20 trading days within any 30 -trading day period that is greater than or equal to the specific trigger price for the respective class of Special Share.

The trigger prices range from $ 15 per share to $ 200 per share (refer to Note 6 for details).

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

TMC the metals company Inc.

1 unchanged sentence

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

Each class of Special Shares do not have voting rights and do not participate in earnings.

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:

Special Share Class

Share Trigger price ($)

Special Shares (million)

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.

Common Share Continuity

In accordance with ASC 805, under a reverse recapitalization, the equity structure reflects the equity structure of SOAC, as the legal acquirer, including the equity interests SOAC issued to affect the Business Combination.

Accordingly, the Company has restated its equity structure using the Exchange Ratio of the Business Combination to reflect the number of shares of SOAC issued in the reverse acquisition.

The share amounts stated below have been recast from the historical share totals of DeepGreen to reflect the Exchange Ratio.

Common shares

December 31, 2021

Issued for services (Note 10& 11)

Exercise of stock options

Conversion of restricted share units (Note 15)

Conversion of preferred shares to common shares

Issued in Business Combination (Note 6)

Conversion of debentures (Note 12)

December 31, 2021

Issuance of shares under PIPE financing (Note 12)

Exercise of stock options

Exercise of stock options (Note 15)

Conversion of restricted share units

Share purchase under Employee Stock Purchase Plan (Note 15)

December 31, 2022

Issuance of shares under Registered Direct Offering (Note 12)

Exercise of warrant by Allseas (Note 13)

Shares issued to Allseas (Notes 8)

Exercise of stock options (Note 15)

Conversion of restricted share units (Note 15)

2 unchanged sentences

Share-Based Compensation

The Company’s 2021 Incentive Equity Plan (the “Plan”) provides that the aggregate number of common shares reserved for future issuance under the Plan as of 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.

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, 2023, is 44,372,170 common shares, including 10,672,485 shares added to the Plan in January 2023 pursuant to the Plan’s automatic annual increase provision, provided that 2,243,853 of the outstanding common shares shall only be available for awards made to non-employee directors of the Company.

On the first day of each fiscal year beginning in 2022 to the tenth anniversary of the closing of the Business Combination, the number of common shares that may be issued pursuant to the Plan is automatically increased by an amount equal to the lesser of 4 % of the number of outstanding common shares or an amount determined by the board of directors.

2 unchanged sentences

The board of directors grants such options with vesting periods and exercise prices determined at its sole discretion.

As described in Note 6, existing DeepGreen options were automatically adopted by TMC after application of the Exchange Ratio to both the underlying number of common shares and the exercise price and provided for additional Special Shares to be issued to option holders on a pro-rata basis, if exercised.

The Rollover Options did not change in value as a result of the Business Combination.

Comparative information below has been restated by adjusting for the number of options and exercise prices for the Exchange Ratio.

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 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)

As at December 31, 2023, there were 15,074,240 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 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 2023 and 2022.

Outstanding under STIP plan :

2 unchanged sentences

Cancelled/Forfeited

( 6,310,593 )

Outstanding – December 31, 2022

1 unchanged sentence

Outstanding – December 31, 2023

Vested and expected to vest – December 31, 2022

Vested and exercisable – December 31, 2023

3 unchanged sentences

Exercise price

June 30, 2023

March 31, 2024

1 unchanged sentence

January 27, 2026

0.52 - $ 2.59

February 2, 2026

February 17, 2026

0.22 - $ 0.52

0.65 - $ 8.64

June 30, 2028

The total grant date fair value of STIP stock options that vested during the year ended December 31, 2023, was $ 1.5 million.

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 .

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.

The aggregate intrinsic value of LTIP stock options as at December 31, 2022 was $ 1.2 million.

None of the LTIP stock options were exercisable on December 31, 2022.

The Company expects LTIP options to vest as and when the market and performance milestones described below are achieved.

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.

As at December 31, 2023, total unrecognized share-based compensation expense of $ 47 thousand is expected to be recognized over a weighted-average recognition period of approximately one year .

As at December 31, 2023, the closing market price of the Company’s common shares was $ 1.10 per share which was considered to be the fair value of the Company’s common share used to determine the intrinsic value of outstanding stock options.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2023 was $ 188 thousand.

TMC the metals company Inc.

1 unchanged sentence

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

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

Activity and Valuation

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.

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.

The LTIP awards vest as follows:

12 unchanged sentences

The Company will reassess the probability of the vesting of the performance-based awards at each reporting period and adjust the compensation cost when determined to be probable.

The fair value of awards granted under the LTIP was estimated on the date of grant using the following weighted average assumptions:

Tranche 1 and

Expected stock price volatility

Expected life of options (years)

Risk-free interest rate

Expected dividend yield

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

The fair value of the market-based awards granted under the LTIP was estimated on the date of grant using a Monte-Carlo model to simulate a distribution of future share prices.

The fair value of the performance-based awards granted under the LTIP was estimated on the date of grant using the Black-Scholes option pricing model.

Changes in these assumptions could have a material impact on the Company’s 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)

The aggregate intrinsic value of LTIP stock options as at December 31, 2023 was $ 4.4 million.

None of the LTIP stock options were exercisable on December 31, 2023.

The Company expects LTIP options to vest as and when the market and performance milestones described below are achieved.

As at December 31, 2023, total unrecognized share-based compensation expense for the LTIP stock options was $ 23 million.

During the year ended December 31, 2023, the Company recognized $ 0.5 million of share-based compensation expense for stock options (originally issued under STIP and LTIP plans) in the statement of loss and comprehensive loss (2022:

5 unchanged sentences

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, 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.

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

On each vesting date, RSU holders are 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.

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

2 unchanged sentences

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

Vesting in halves on each anniversary of the grant date

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

2 unchanged sentences

Of the 3,561,078 units vesting immediately on grant date, 3,198,648 units were issued to settle liabilities with a carrying amount of $ 2.8 million, at a weighted average grant date fair value of $ 0.89 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).

During the year ended December 31, 2023, the Company granted 274,912 units to consultants (2022:

649,157 units) resulting in $ 0.3 million, charged to professional and consulting fees under general and administrative expenses and $ 11 thousand charged to exploration and evaluation activities for the year ended December 31, 2023 (2022:

$ 1.2 million of general and administrative expenses).

During the year ended December 31, 2023, the Company also granted 43,478 units to consultants as a prepayment for their services (2022:

During the year ended December 31, 2023, the Company granted 1,014,349 RSUs (2022:

476,189 ) to its non-employee directors under the Company’s Non-employee Director Compensation Policy, which vest upon the Company’s 2024 annual shareholders meeting.

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

During the year ended December 31, 2023, the Company granted 8,645,465 units, as payment for the 2022 LTIP awards and 44,016 units as a sign-on grant.

The 2021 LTIP awards were granted in the fourth quarter of 2021 and totaled 3,500,000 units.

A summary of the RSU activity in 2023 is presented in the table below:

4 unchanged sentences

Outstanding – December 31, 2023

(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.

6 unchanged sentences

As at December 31, 2023, total unrecognized share-based compensation expense for RSUs was $ 6.9 million (December 31, 2022 - $ 6.1 million).

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

The fair value of shares vested during the year ended December 31, 2023, amounted to $ 8.3 million (December 31, 2022 - $ 7.2 million).

As at December 31, 2023, an aggregate of 746,445 vested units were being processed and due to be converted into common 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)

Employee Stock Purchase Plan

3 unchanged sentences

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.

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

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

8 unchanged sentences

● 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.

During 2023, the Company issued 173,672 common shares (2022:

117,929 common shares) to its employees as part of its ESPP program.

A total of $ 47 thousand was charged to the statement of loss and comprehensive loss as share-based compensation expense for the year ended December 31, 2023, representing the share price purchase discount offered by the Company (2022:

$ 0.1 million).

From the amount charged in 2023, $ 26 thousand was recorded in exploration and evaluation expenses (2022:

$ 35 thousand) and $ 21 thousand was recorded in general and administrative expenses (2022:

$ 67 thousand).

Loss per Share

24 unchanged sentences

Accounts payable and accrued liabilities

Fair value through profit or loss Warrants liability

Fair value through profit or loss

Royalty liability

Warrants liability

Related Party Transactions

The Company’s subsidiary, DGE, is engaged in a consulting agreement with SSCS Pte.

The Company’s subsidiary, DeepGreen Engineering Pte.

Ltd., is engaged in a consulting agreement with SSCS Pte.

(“SSCS”) to manage offshore engineering studies.

1 unchanged sentence

Consulting services during the year ended December 31, 2023 totaled $ 212 thousand, (2022:

$ 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:

$ 275 thousand), out of which a total $ 170 thousand (2022:

$ 220 thousand), is disclosed as exploration labor within exploration and evaluation expenses (Note 10) and $ 42 thousand is disclosed as general and administrative expenses (2022:

$ 55 thousand).

As at December 31, 2023, the amount payable to SSCS was $ 17 thousand (December 31, 2022 - $ 17 thousand).

The Company’s Chief Ocean Scientist provides consulting services to the Company through Ocean Renaissance LLC (“Ocean Renaissance”) where he is a principal.

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

$ 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:

Consulting services during year ended December 31, 2023 amounted to $ 331 thousand (2022:

$ 375 thousand), out of which $ 149 thousand (2022 $ 188 thousand:), is disclosed as exploration labor within exploration and evaluation expenses (Note 10) and $ 182 thousand is disclosed as general and administrative expenses (2022:

$ 187 thousand).

As at December 31, 2023, the amount payable to Ocean Renaissance was $ 25 thousand (December 31, 2022- $ nil ).

The Registered Direct Offering announced on August 14, 2023, included approximately $ 0.3 million from the participation of several of the Company’s Directors and Officers.

In addition, the committed funding included $ 10 million from ERAS Capital LLC, the investment fund of one of the Company’s Directors, $ 1 million of which was received on August 16, 2024 and the remaining $ 9 million was received on January 30, 2024 (Note 12).

Apart from the above-mentioned transactions, the Company had transactions with Allseas which are detailed in Note 8.

TMC the metals company Inc.

1 unchanged sentence

(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

1 unchanged sentence

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.

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 the Company is implementing the five-year plan.

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

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

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

Marawa Exploration Contract

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.

Marawa Option Agreement and Services Agreement

Through DGE’s Marawa Option Agreement and separate Services Agreement with Marawa with respect to the Marawa Area, Marawa and DGE submitted a periodic review report to the ISA in 2019, covering 2015-2019.

The periodic review report includes a proposed work plan and estimated budget for the 2020-2024 five-year period.

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

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.

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

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

TOML Exploration Contract

1 unchanged sentence

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.

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.

Notes to Consolidated Financial Statements

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

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

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

Offtake Agreements

9 unchanged sentences

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.

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 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”).

4 unchanged sentences

Contingent Liability

On October 28, 2021, a shareholder filed a putative class action against the Company and certain executives in federal district court for the Eastern District of New York, styled Caper v.

On October 28, 2021, a shareholder filed a putative class action against the Company, one of the Company’s executives and a former director in federal district court for the Eastern District of New York, captioned Caper v.

TMC The Metals Company Inc.

F/K/A Sustainable Opportunities Acquisition Corp., Gerard Barron and Scott Leonard.

The complaint alleges that all defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and Messrs.

The complaint alleges that all defendants violated Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Messrs.

Barron and Leonard violated Section 20(a) of the Exchange Act, by making false and/or misleading statements and/or failing to disclose information about the Company’s operations and prospects during the period from March 4, 2021 and October 5, 2021.

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On March 6, 2022, a lead plaintiff was selected.

The Company denies any allegations of wrongdoing and the Company has filed a motion to dismiss and intends to defend against this lawsuit.

There is no assurance, however, that the Company or the other defendants will be successful in their 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.

An amended complaint was filed on May 12, 2022, reflecting substantially similar allegations, with the Plaintiff seeking to recover compensable damages caused by the alleged wrongdoings.

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

On July 12, 2023, an oral hearing on the motion to dismiss was held.

The parties are currently awaiting a ruling.

There is no assurance, however, that the Company or the other defendants will be successful in the Company’s defense of this lawsuit or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of this action.

If the motion to dismiss is unsuccessful, there is a possibility that the Company may incur a loss in this matter.

Such losses or range of possible losses either cannot be reliably estimated.

Such losses or range of possible losses cannot be reliably estimated.

A resolution of this lawsuit adverse to the Company or the other defendants, however, could have a material effect on the Company’s financial position and results of operations in the period in which the lawsuit is resolved.

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 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.

On January 23, 2023, investors in the 2021 private placement from the Business Combination filed a lawsuit against us in the Commercial Division of New York Supreme Court, New York County, captioned Atalaya Special Purpose Investment Fund II LP et al.

Sustainable Opportunities Acquisition Corp.

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

The amended complaint alleges that the Company breached the representations and warranties in the plaintiffs’ private placement Subscription Agreements and breached the covenant of good faith and fair dealing.

The Plaintiffs are seeking to recover compensable damages caused by the alleged wrongdoings.

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.

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

On December 7, 2023, the Court granted our motion to dismiss the claim for breach of the covenant of good faith and fair dealing and denied our motion to dismiss the breach of the Subscription Agreement claim.

The Company filed a notice of appeal regarding the Court’s denial of our motion to dismiss the breach of the Subscription Agreement claim.

There is no assurance that the Company will be successful in our defense of this lawsuit or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of this action.

Such losses or range of possible losses cannot be reliably estimated.

Supplemental Cash Flow Information

For the year ended

Non-Cash Investing and Financing Activities

Common shares issued to settle previous services

Conversion of debentures (Note 12)

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Segmented Information

The Company’s business consists of only one operating segment, namely exploration of seafloor polymetallic nodules, which includes the development of a metallurgical process to treat such seafloor polymetallic nodules.

Details on the geographical basis of the Company’s long-lived assets based on where each legal entity is domiciled are as follows:

Details on the geographical segmentation of the Company’s long-lived assets based on where each legal entity is domiciled are as follows:

December 31, 2023

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Reconciliation of Effective Tax Rate

The Company is subject to Canadian federal and provincial tax for the estimated assessable profit for the years ended December 31, 2022 and 2021 at a rate of 27 %.

The Company is subject to Canadian federal and provincial tax for the estimated assessable profit at a rate of 26.68 % for the year ended December 31, 2023 (2022:

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 2023 and 2022 per the statement of loss and comprehensive loss as follows:

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For the year ended

Net loss for the year, before taxes

Loss for the year, before taxes

Canadian Federal and Provincial income tax rates

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Effect of differences in future and foreign tax rates

Foreign exchange and other

Expiry of losses as a result of the Business Combination (Note 6)

Valuation allowance changes affecting the provision of income taxes

Total income taxes

(1) Comparative amounts for the year ended December 31, 2022 are restated based on actual tax returns filed.

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:

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Non-capital losses

Capital losses and other

Share issuance costs

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Deferred tax liability recognized

(1) Comparative amounts for the year ended December 31, 2022 are restated based on actual tax returns filed.

Deductible temporary differences, unused tax losses and unused tax credits are as follows:

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Non-capital losses

Capital losses

Not applicable

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As at December 31, 2023, the Company had non-capital loss carry-forwards of $ 89.3 million that may be used to offset future taxable income.

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:

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As at December 31, 2023, the 2023 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.

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.

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

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.

Quarterly Financial Data (Unaudited) Restatement of Previously Issued Financial Statements

The right to royalty payments underlying the NORI asset (sale of future revenue) amounting to $ 14 million (Note 9) was considered as the transfer (sale) of a non-financial asset in the Company’s previously issued financial statements for the three months ended March 31, 2023, the six months ended June 30, 2023 and the nine months ended September 30, 2023 contained in its Quarterly Reports on Form 10-Q for the quarter ended March 31, 2023, June 30, 2023 and September 30, 2023, respectively, filed with the SEC (the “Previous Financial Statements”).

In preparing the Previous Financial Statements, the Company derecognized the capitalized exploration contract related to the NORI project amounting to $ 0.25 million and recorded the remaining value of the non-financial asset received amounting to $ 13.75 million as a gain on disposition.

In connection with the preparation of the financial statements for the year ended December 31, 2023 and a re-evaluation of ASC 470 by the Company, the Company concluded that the sale of future revenue falls within the scope of ASC 470 and, as a result, the Company re-evaluated whether the offsetting entry to the proceeds it received from Low Carbon Royalties should be classified as debt or deferred income.

As the transaction with Low Carbon Royalties was considered an equity investment rather than a sale transaction, the sale of future revenue was reclassified as Royalty Liability, as per ASC 470, in the Company’s 2023 financial statements for the year ended December 31, 2023.

Factors that also influenced this reclassification included the Company’s continued significant involvement in generating future cash flows from operations and the fact that the earnings process implied in this transaction had not been completed.

As a result, the Company has restated the Previous Financial Statements.

- This error had no impact on our annual audited financial statements as of December 31, 2023.

- This error had no impact on the consolidated statements of loss and comprehensive loss for the three-month period ended June 30, 2023 and the three month period ended September 30, 2023

- The error and restatement of the 2023 quarterly financial statements does not impact the Company's reported cash position in any of the previously reported periods or as of December 31, 2023.

In the following tables, we have presented a reconciliation of our unaudited condensed consolidated financial information as originally reported in the Previous Financial Statements to the as restated amounts as of and for the three months ended March 31, 2023, six months ended June 30, 2023, and nine months ended September 30, 2023.

The restatements will be reflected in the comparative financial statements included in our future filings of our 2024 unaudited condensed consolidated financial statements within our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024, June 30, 2024 and September 30, 2024, respectively.

The tables below set forth the unaudited condensed consolidated balance sheet information, the unaudited condensed statements of loss and comprehensive loss and the unaudited condensed consolidated statements of cash flows including the amounts as reported, adjustments and the amounts as restated (in thousands, except per share amounts):

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Condensed Consolidated Balance Sheet Information

As at March 31, 2023

As at June 30, 2023

As at September 30, 2023

As Previously

Receivables and prepayments

Exploration contracts

Right-of-use asset

Accounts payable and accrued liabilities

Deferred tax liability

Royalty Liability

Warrants liability

TOTAL LIABILITIES

Common shares (unlimited shares, no par value)

Special Shares

Additional paid in capital

Accumulated other comprehensive loss

TOTAL LIABILITIES AND EQUITY

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Condensed Consolidated Statements of Loss and Comprehensive Loss

For three months period ended

For six months period ended

For nine months period ended

March 31, 2023

June 30, 2023

September 30, 2023

As Previously

Operating expenses

Exploration and evaluation expenses

General and administrative expenses

Operating loss

Equity-accounted investment loss

Gain on disposition of asset

Change in fair value of warrants liability

Foreign exchange loss

Interest income

Fees and interest on credit facility

Loss and comprehensive loss for the year, before tax

Loss (gain) and comprehensive loss (gain) for the period, after tax

Loss per share

- basic and diluted

Weighted average number of Common Shares outstanding – basic

Weighted average number of Common Shares outstanding – diluted

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Condensed Consolidated Statements of Cash Flows

For three months period ended

For six months period ended

For nine months period ended

March 31, 2023

June 30, 2023

September 30, 2023

As Previously

Operating activities

Gain/(Loss) for the period

Items not affecting cash:

Lease expense

Expenses settled with share-based payments

Expenses to be settled with share-based payments

Equity-accounted investment loss

Gain on disposition of asset

Change in fair value of warrants liability

Vesting of Allseas Warrant

Unrealized foreign exchange movement

Changes in working capital:

Receivables and prepayments

Accounts payable and accrued liabilities

Net cash used in operating activities

Investing activities

Cash received from investment in Low Carbon Royalties

Acquisition of equipment

Net cash provided by (used in) investing activities

Financing activities

Proceeds from Low Carbon Royalties investment

Proceeds from Registered Direct Offering

Expenses paid for Registered Direct Offering

Proceeds from PIPE financing

Expenses paid for PIPE financing

Proceeds from employee stock plan

Proceeds from exercise of stock options

Proceeds from exercise of warrants by Allseas

Proceeds from issuance of shares

Taxes withheld and paid on share-based compensation

Net cash provided by financing activities

Decrease in cash

Impact of exchange rate changes on cash

Cash - beginning of period

Cash - end of period

TMC the metals company Inc.

Notes to Consolidated Financial Statements

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

Subsequent Events

Amendment to Credit Facility with Allseas Affiliate

On March 22, 2024, the Company entered into the Second Amendment to the Unsecured Credit Facility with the Lender, the parent of Allseas Investments S.A.

and an affiliate of Allseas, to extend the Credit Facility to August 31, 2025 and to provide that the underutilization fee thereunder shall cease to be payable after the date on which the Company or the Lender gives notice of termination of the agreement.

Under the amended Credit Facility, the Company may borrow from the Lender up to $ 25,000,000 in the aggregate through August 31, 2025.

Credit Facility with ERAS Capital LLC and Gerard Barron

On March 22, 2024, the Company entered into an Unsecured Credit Facility (the “2024 Credit Facility”) with Gerard Barron, our Chief Executive Officer and Chairman, and ERAS Capital LLC, the family fund of our director, Andrei Karkar (collectively, the “2024 Lenders”), pursuant to which, the Company may borrow from the 2024 Lenders up to $ 20,000,000 in the aggregate ($ 10,000,000 from each of the 2024 Lenders), from time to time, subject to certain conditions.

All amounts drawn under the 2024 Credit Facility will bear interest at the 6-month Secured Overnight Funding Rate (SOFR), 180 -day average plus 4.0 % per annum payable in cash semi-annually (or plus 5 % if paid-in-kind at maturity, at our election) on the first business day of each of June and January.

The Company will pay an underutilization fee equal to 4.0 % per annum payable semi-annually for any amounts that remain undrawn under the 2024 Credit Facility.

The Company has the right to pre-pay the entire amount outstanding under the 2024 Credit Facility at any time, before the 2024 Credit Facility’s maturity of September 22, 2025.

The 2024 Credit Facility also contains customary events of default.

The 2024 Credit Facility will terminate automatically if the Company or any of its subsidiaries raise at least $ 50,000,000 in the aggregate (i) through the issuance of any of the Company’s or its subsidiaries’ debt or equity securities, or (ii) in prepayments under an off-take agreement or similar commercial agreement.

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