What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-13 · 130 added, 90 removed, 235 unchanged (48% of the section changed)

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and its consolidated subsidiaries.

The unaudited condensed consolidated interim financial statements for the three months ended March 31, 2024 and 2023, respectively, present the financial position and results of operations of TMC the metals company Inc.

The unaudited condensed consolidated interim financial statements for the three months and six months ended June 30, 2024 and 2023, respectively, present the financial position and results of operations of TMC the metals company Inc.

and its consolidated subsidiaries.

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Polymetallic nodules are discrete rocks that sit unattached to the seafloor, occur in significant quantities in the CCZ and have high concentrations of nickel, manganese, cobalt and copper in a single rock.

These four metals contained in the polymetallic nodules are critical for the transition to low carbon energy.

These four metals contained in the polymetallic nodules are critical for the transition to low carbon energy, as well as for infrastructure and development.

Our resource definition work to date shows that nodules in our contract areas represent the world’s largest estimated undeveloped source of critical battery metals.

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Ltd.’s (“DGE”), and its arrangement with Marawa Research and Exploration Limited (“Marawa”), a company owned and sponsored by the Republic of Kiribati (“Kiribati”).

We have key strategic alliances with (i) Allseas, a leading global offshore contractor, which developed and tested a pilot collection system, which is expected to be modified into the first commercial production system and (ii) Glencore which holds offtake rights to 50% of the NORI nickel and copper production.

We have key strategic alliances with (i) Allseas, a leading global offshore contractor, which developed and tested a pilot collection system, and is now working to modify it into the first commercial production system and (ii) Glencore which holds offtake rights to 50% of the NORI nickel and copper production if produced from a DGE-owned or controlled facility.

In addition, we have worked with an engineering firm Hatch Ltd.

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(KPM) to develop a near-zero solid waste flowsheet.

The primary processing stages of the flowsheet from nodule to NiCuCo matte intermediate were demonstrated as part of our pilot plant program at FLSmidth and XPS’ facilities.

The primary processing stages of the flowsheet from nodule to Ni-Cu-Co matte intermediate were demonstrated as part of our pilot plant program at FLSmidth and XPS’ facilities.

The matte refining stages are being tested at SGS Lakefield.

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In November 2022, we entered into a non-binding Memorandum of Understanding (“MoU”) with Pacific Metals Co Ltd (PAMCO) of Japan pursuant to which PAMCO completed prefeasibility work assessing the prospect of processing nodules using their existing facilities.

In November 2023, we entered into a binding MoU with PAMCO whereby they must complete a feasibility study (expected to be completed during the fourth quarter of 2024) to toll treat 1.3 million tonnes of wet polymetallic nodules per year at its Hachinohe, Japan smelting facility expected to start in the second quarter of 2026, provided we obtain an exploitation contract from the ISA as expected.

In November 2023, we entered into a binding MoU with PAMCO whereby they committed to completing a feasibility study (expected to be completed during the fourth quarter of 2024) to toll treat 1.3 million tonnes of wet polymetallic nodules per year at its Hachinohe, Japan smelting facility expected to start in the second quarter of 2026, provided we obtain an exploitation contract from the ISA as expected.

The toll treatment is intended to take place on a dedicated Rotary Kiln Electric Arc Furnace (RKEF) processing line and produce two products:

nickel-copper-cobalt alloy, an intermediate product used as feedstock to produce Li-ion battery cathodes, and a manganese silicate product used to make silico-manganese alloy, a critical input into steel manufacturing.

nickel-copper-cobalt alloy, an intermediate product used as feedstock to produce lithium-ion battery cathodes, and a manganese silicate product used to make silico-manganese alloy, a critical input into steel manufacturing.

We expect this partnership to progress to a definitive tolling agreement before the end of 2024, subject to successful evaluation study outcomes and agreement to mutually acceptable commercial terms.

There can be no assurance that we will enter into such definitive strategic alliance in a particular time period, or at all, or on terms similar to those set forth in the binding MoU, or that if such definitive tolling agreement is entered into by us or that the existing facility will be able to successfully process nodules in a particular time period, or at all.

We are currently focused on preparing our application to the ISA for our first exploitation contract for the NORI Area D contract area following the July 2024 meetings of the ISA.

We expect to commence production offshore at the end of the first quarter of 2026, assuming an ISA application review and approval process of approximately one year.

We are currently focused on preparing our application for a plan of work to the ISA for our first exploitation contract for the NORI contract area, which we expect to be completed and ready for submission prior to the next meeting of the ISA scheduled for March 2025.

We expect to commence production offshore at the end of the first quarter of 2026, assuming an ISA application review and approval process of approximately one year, based on the current timeline in the consolidated draft regulations issued February 2024.

See “ Project and Regulatory Updates - ISA Developments ” below for a further discussion of our planned application and recent developments at the ISA.

To reach our objective and initiate commercial production, we are:

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In addition, we do not have the applicable environmental and other permits required to build and/or operate commercial scale polymetallic nodule processing and refining plants on land.

Developments in the First Quarter 2024

Below are some of the major developments that occurred in the first quarter of 2024:

Amendment to Credit Facility with Allseas Affiliate

On March 22, 2024, we entered into the Second Amendment to the Unsecured Credit Facility with Argentum Credit Virtuti GCV (the Lender), the parent of Allseas Investments S.A.

and an affiliate of Allseas, to further extend the Credit Facility to August 31, 2025 and to provide that the underutilization fee thereunder shall cease to be payable after the date on which we or the Lender gives notice of termination of the agreement (as amended by this amendment and the July 2023 amendment, the “Credit Facility”).

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

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

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

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

The 2024 Credit Facility also contains customary events of default.

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

As of May 13, 2024, the Company drew $2.9 million from the 2024 Credit Facility

ISA Consolidated Draft Regulations

In February 2024, the ISA published a consolidated set of draft regulations for the first time, harmonizing and cleaning up the text thereof.

The 225-page text is comprehensive and signals the next phase in the negotiations to finalize the regulations.

Part 1 of the ISA’s 29th Session took place between March 18-29, 2024.

During the Session, the ISA Council commenced negotiations on the new consolidated text and identified a number of issues for negotiation inter-sessionally.

Responsible Use of Seafloor Resources Act (RUSRA)

In March 2024, legislation was introduced in the U.S.

House of Representatives calling for the U.S.

to “support international governance of seafloor resource exploration and responsible polymetallic nodule collection by allied partners”, and to “provide financial, diplomatic, or other forms of support for seafloor nodule collection, processing and refining.”

Developments Subsequent to March 31, 2024

World-First Production of Nickel Sulfate from Deep-Seafloor Polymetallic Nodules

In April 2024, we announced that we had successfully produced the world’s first nickel sulfate derived exclusively from seafloor polymetallic nodules during pilot-scale nodule processing.

In partnership with SGS Canada Inc, the testing was undertaken on samples of nickel-cobalt-copper matte produced by TMC in 2021 using the Company’s efficient flowsheet to process high-grade nickel matte directly to nickel sulfate without making nickel metal, while producing fertilizer byproducts instead of solid waste or tailings.

Extensive Submission of Deep-Sea Environmental Data to the ISA

In May 2024, we announced that our subsidiary NORI had made a second submission of key environmental data from all prior environmental baseline campaigns conducted in the NORI-D exploration area up to January 2022 to DeepData, an open database of contractor data managed by the ISA.

The submission of this batch of data includes an extensive set of geochemical and biological samples from across the water column.

Developments in the Second Quarter 2024

Below are some of the major developments that occurred in the second quarter of 2024:

Steve Jurvetson Joins TMC’s Board of Directors as Vice Chairman and Special Advisor to the CEO

In April 2024, renowned Silicon Valley investor Steve Jurvetson joined our board of directors as Vice Chairman and special advisor to the CEO.

On April 10, 2024, renowned Silicon Valley investor Steve Jurvetson joined our board of directors as Vice Chairman and special advisor to the CEO.

Jurvetson is an investor focused on founder-led, mission-driven companies at the cutting edge of disruptive technology and new industry formation.

His investments include pioneering technology companies like Tesla, Planet Labs, SpaceX and Commonwealth Fusion Systems, and represent over $800 billion in aggregate value creation.

House Allocates Defense Department Funding to Assess the Feasibility of Domestic Nodule Refining Capacity

On May 23, 2024, we welcomed the allocation of $2 million under the House version of the fiscal year 2025 National Defense Authorization Act (NDAA) to the Defense Department’s Industrial Base Policy Office to study the feasibility of developing domestic capacity to refine polymetallic nodule-derived intermediates to high-purity nickel, copper and cobalt products.

In addition, TMC’s U.S.

subsidiary has an outstanding application seeking a $9 million grant under the Defense Production Act Title III program for feasibility work on a domestic refinery for nodule-derived intermediate products.

subsidiary may pursue larger grants and/or loans through the Department of Energy’s Loan Programs Office, Export-Import Bank and other departments to fund construction of a refinery.

World-First Cobalt Sulfate Produced from Deep-Seafloor Polymetallic Nodules

On June 12, 2024, we announced that we successfully produced the world’s first cobalt sulfate derived exclusively from seafloor polymetallic nodules.

The cobalt sulfate was generated during bench-scale testing of our hydrometallurgical flowsheet design with SGS Canada Inc.

Based on samples of nickel-cobalt-copper matte first produced by us in 2021, SGS tested our efficient flowsheet to process high-grade nickel-copper-cobalt matte directly to high-purity cobalt sulfate without making cobalt metal, while producing fertilizer byproducts instead of solid waste or tailings.

The milestone followed the news in May of our successful production of nickel sulfate, a key raw material input used in the production of energy-dense electric vehicle batteries.

Prominent Sustainability Strategist Brendan May Joins TMC’s Board of Directors

On June 3, 2024, we announced the appointment of Brendan May to our Board of Directors.

As a former Chief Executive of the Marine Stewardship Council (MSC) and European Chairman of the Rainforest Alliance, Mr.

May has spent over two decades at the forefront of sustainability challenges in globally significant ecosystems.

In 2010, he formed renowned global sustainability consultancy, Robertsbridge, whose counsel has been sought by leading companies and NGOs around the world.

Developments Subsequent to June 30, 2024

Third Annual Impact Report Published

On July 29, 2024, we published our third annual Impact Report to provide an update on key milestones achieved in our assessment of the environmental impacts of nodule collection including, what we believe, is the successful collection of sufficient quantities of environmental baseline and impact data to develop an Environmental Impact Statement and Environmental Mitigation and Management Plan (EMMP) for the world’s first deep-seafloor nodule collection project.

Project and Regulatory Updates

NORI Area D Project Developments

Data processing from the successful Campaign 8 has been completed, and data packages have been distributed to all relevant subcontractors to advance environmental and technical scopes.

On April 6, 2024, 2,000 wet tonnes of polymetallic nodules, collected during the successful 2022 pilot nodule collection system test, were delivered to PAMCO, at their facility in Hachinohe, Japan.

This delivery facilitated the commencement of calcining trials at the PAMCO facility in mid-May, marking a significant milestone in supporting the metallurgical program.

Progress continues on the Environmental Impact Statement (EIS), Pre-Feasibility Study (PFS), and Plan of Work application documentation.

Key activities during the second quarter 2024 included the development of tender documents by Allseas for long lead items and our EIS team conducted an environmental synthesis workshop with all EIS contributors.

ISA Developments

As we previously disclosed, the ISA did not provisionally adopt and approve the final rules, regulations and procedures (“RRPs” or the “Mining Code”) for the exploitation of seafloor resources by the July 9, 2023 deadline.

At its July 2024 session, the ISA agreed to continue the negotiations of the Mining Code with a continued view to its adoption during the 30 th session of the ISA in 2025.

The ISA Council has scheduled two ISA Council meetings in March and July 2025 to progress the Mining Code and has agreed to continue working inter-sessionally to advance the text.

In addition, on August 2, 2024, the ISA Assembly elected Leticia Carvalho of Brazil as the new Secretary-General of the ISA for the period 2025-2028.

Consistent with Nauru’s rights, as the sponsoring state of NORI, under UNCLOS and the 1994 agreement relating to the implementation of Part XI of UNCLOS, NORI reserves its right to submit a plan of work for exploitation, in the absence of the adoption of the final Mining Code pursuant to Section 1, Paragraph 15(c) of the Annex to the 1994 agreement relating to the implementation of Part XI of UNCLOS, the possibility of which was recognized in ISA Council decisions ISBA/28/C/24 and ISBA/28/C/25.

There can be no assurances, however, that the ISA will provisionally approve our plan of work or that such provisional approval would lead to the issuance of an exploitation contract by the ISA.

Assuming submission of an application for a plan of work for exploitation prior to the next meeting of the ISA scheduled for March 2025, assuming the ISA’s timely review and approval thereof, based on the current timeline in the consolidated draft regulations issued February 2024, we expect our first production offshore from NORI Area D to be at the end of the first quarter of 2026.

There can be no assurances, however, that (i) the Mining Code will be adopted within these timelines, or at all, or (ii) the ISA will provisionally approve our plan of work or that such provisional approval would lead to the issuance of an exploitation contract by the ISA before the final Mining Code is adopted, or at all.

Exploration Contracts

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Components of Results of Operations

We are an exploration-stage company with no revenue to date and a net loss of $25.2 million for the three months ended March 31, 2024, compared to a net loss of $13.7 million in the same period of 2023.

We have an accumulated deficit of approximately $574.1 million from inception through March 31, 2024.

We are an exploration-stage company with no revenue to date and a net loss of $20.2 million and $45.4 million for the three and six months ended June 30, 2024, respectively, compared to a net loss of $14.1 million and $27.9 million in the same periods of 2023, respectively.

We have an accumulated deficit of approximately $594.3 million from inception through June 30, 2024.

Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate.

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Results of Operations

The following is a discussion of our results of operations for the three months ended March 31, 2024 and 2023.

The following is a discussion of our results of operations for the three and six months ended June 30, 2024 and 2023.

Our accounting policies are described in Note 3 “Significant Accounting Policies” in our financial statements filed as part of the 2023 Annual Report on Form 10-K.

Additionally, the unaudited condensed consolidated interim financial statement for the three months ended March 31, 2023 have been revised to correct prior period errors as discussed in Note 22 “Quarterly Financial Data (Unaudited) Restatement of Previously Issued Financial Statements” to the consolidated financial statement included in Part II, Item 8 of our 2023 Annual Report on Form 10-K.

Additionally, the unaudited condensed consolidated interim financial statement for the six months ended June 30, 2023 have been revised to correct prior period errors as discussed in Note 22 “Quarterly Financial Data (Unaudited) Restatement of Previously Issued Financial Statements” to the consolidated financial statement included in Part II, Item 8 of our 2023 Annual Report on Form 10-K.

Accordingly, the Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects the effects of the revisions.

Comparison of the Three Months Ended March 31, 2024 and 2023

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

For the Three Months Ended

For the Six Months Ended

(Dollar amounts in thousands, except as noted)

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Change in fair value of warrants liability

Foreign exchange (gain) loss

Foreign exchange loss (gain)

Interest income

Fees and interest on credit facility

Loss for the period

Three Months ended March 31, 2024 compared to Three Months ended March 31, 2023

We reported a net loss of approximately $25.2 million in the first quarter of 2024, compared to a net loss of $13.7 million in the same period of 2023.

The following explains the major reasons for the increase in the net loss in the first quarter of 2024.

Fees and interest on borrowings and credit facilities

Net Loss for the period

Three Months ended June 30, 2024 compared to Three Months ended June 30, 2023

We reported a net loss of approximately $20.2 million in the second quarter of 2024, compared to a net loss of $14.1 million in the same period of 2023.

The following explains the major reasons for the increase in the net loss in the second quarter of 2024.

Exploration and Evaluation Expenses

Exploration and evaluation expenses for the three months ended March 31, 2024 were $18.1 million, compared to $7.2 million for the same period in 2023.

The increase of $10.9 million was primarily due to an increase in mining, technological and process development of $10.5 million due to increased engineering work and expenses incurred on the transportation of nodules to PAMCO’s facility in Japan, and higher personnel costs.

This was partially offset by a decrease in environmental studies as the cost for Campaign 8 which commenced in the fourth quarter of 2023 was completed in the first quarter of 2024 and was lower than the cost of the environmental work in the first quarter of 2023 following the completion of the NORI integrated collector test.

Exploration and evaluation expenses for the three months ended June 30, 2024 were $12.4 million, compared to $8.1 million for the same period in 2023.

The increase of $4.3 million was primarily due to an increase in mining, technological and process development of $1.8 million resulting from increased engineering work by Allseas, increase in share-based compensation of $1.7 million due to amortization of the fair value of RSUs and options granted to the directors and officers in the second quarter of 2024 and higher personnel costs of $1 million.

This was partially offset by a decrease in environmental studies as the costs to complete Campaign 8b in the second quarter of 2024 was lower than the cost of the environmental work spent in the second quarter of 2023 to complete the NORI pilot nodule collection system test.

General and Administrative Expenses

G&A expenses for the three months ended March 31, 2024 were $6.6 million compared to $6.2 million for the same period in 2023.

The increase of $0.4 million is due to higher amortization of share-based compensation and higher consulting fees, offset by lower legal costs.

G&A expenses for the three months ended June 30, 2024 were $7.9 million compared to $5.1 million for the same period in 2023.

The increase of $2.8 million in G&A expenses was mainly due to an increase in share-based compensation of $1.7 million due to amortization of the fair value of RSUs and options granted to the directors and officers in the second quarter of 2024, higher personnel costs and an increase in legal and consulting costs.

Change in F air V alue of W arrants L iability

Six Months ended June 30, 2024 compared to Six Months ended June 30, 2023

We reported a net loss of $45.4 million in the first half of 2024, compared to a net loss of $27.9 million in the same period of 2023.

The following explains the major reasons for the increase in the net loss in the first half of 2024.

Exploration and Evaluation Expenses

Exploration and evaluation expenses for the six months ended June 30, 2024 were $30.5 million, compared to $15.3 million for the same period in 2023.

T he increase of $15.2 million was primarily due to an increase in mining, technological and process development of $12.2 million resulting from increased engineering work by Allseas, as well as expenses incurred on the transportation of nodules to PAMCO’s facility in Japan, higher personnel costs of $2.2 million and an increase in share-based compensation of $1.7 million due to amortization of the fair value of RSUs and options granted to the directors and officers in the second quarter of 2024 .

This was partially offset by a decrease in environmental studies as the cost for Campaign 8 which commenced in the fourth quarter of 2023 was completed in the first quarter of 2024 and was lower than the cost of the environmental work in the first half of 2023 following the completion of the NORI pilot nodule collection system test.

General and Administrative Expenses

G&A expenses for the six months ended June 30, 2024 were $14.5 million, compared to $11.3 million for the same period in 2023.

The increase of $3.2 million in G&A expenses in the first half of 2024 was mainly the result of an increase in share-based compensation of $2.2 million due to amortization of the fair value of RSUs and options granted to the directors and officers in the second quarter of 2024, higher personnel cost of $1.3 million and higher cost incurred on business development, communication, and advisory activities.

This increase was partially offset by decreased legal and insurance costs incurred in the first half of 2024 compared to the same period in 2023.

Change in Fair Value of Warrants Liability

The change in fair value of warrants liability primarily consists of the change in the fair value of the 9,500,000 Private Warrants.

The charge recorded in both years reflects the increase in the market price of our warrants.

The change in fair value of warrants liability consists of the change in the fair value of the 9,500,000 Private Warrants, which is based on the change in the price of our warrants and the price of the Company’s shares and resulted in a small credit in the first half of 2024 and a charge of $1.3 million in the first half of 2023, primarily due to an increase of 150% in the price of our Public Warrants over this period.

Liquidity and Capital Resources

Our primary sources of financing have come from private placements and public offerings of Common Shares and warrants, the issuance of convertible debentures and from credit facilities.

As of March 31, 2024, we had cash on hand of $4.0 million.

In light of the significant deficit in expected funding following the closing of the Business Combination in September 2021, we adopted what we call a “capital-light” strategy whereby we removed any allocation of funds to capital expenditures that were not deemed necessary to support the submission of an application for an exploitation contract for the NORI Area D, and by negotiating the settlement of program expenditures with our equity whenever possible.

As of June 30, 2024, we had cash on hand of $0.5 million.

In light of the significant deficit in expected funding following the closing of the Business Combination in September 2021, we adopted what we call a “capital-light” strategy whereby we removed any allocation of funds to capital expenditures that were not deemed necessary to support the submission of an application for an exploitation contract for the NORI contract area, and by negotiating the settlement of program expenditures with our equity whenever possible.

We have yet to generate any revenue from our business operations.

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We expect to incur significant expenses and operating losses for the foreseeable future, particularly as we advance towards our application to the ISA for an exploitation contract and preparation for potential commercialization.

Based on our cash balance and availability of borrowing under our credit facility with Allseas and credit facility with ERAS Capital LLC and Gerard Barron, when compared with our forecasted cash expenditures, we believe we will have sufficient funds to meet our obligations that become due within the next twelve months.

Based on our cash balance and availability of borrowing under our credit facility with a company related to Allseas, as we expect the credit facility will be amended, and credit facility with ERAS Capital LLC and Gerard Barron, when compared with our forecasted cash expenditures, we believe we will have sufficient funds to meet our obligations that become due within the next twelve months.

Our estimates used in reaching this conclusion are based on information available as at the date of filing this Quarterly Report on Form 10-Q.

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The offer and sales of the shares are made under our effective “shelf” registration statement on Form S-3 filed with the SEC on September 16, 2022, which the SEC declared effective on October 14, 2022.

In April 2024, we sold 1,607,821 Common Shares pursuant to the Sales Agreement for gross proceeds of $2.6 million ($2.5 million net of fees and commissions).

On March 22, 2023, we entered into a Credit Facility with Argentum Credit Virtuti GCV, the parent of Allseas Investments S.A.

In the second quarter of 2024, we sold 1,634,588 Common Shares pursuant to the Sales Agreement for net proceeds of $2.6 million, net of fees and commissions.

On March 22, 2023, we entered into a Credit Facility with Argentum Cedit Virtuti GCV, the parent of Allseas Investments S.A.

and an affiliate of Allseas, which was amended on July 31, 2023 and March 22, 2024, pursuant to which, we may borrow from the Lender up to $25 million in the aggregate, from time to time, subject to certain conditions.

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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

August 31, 2025.

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 August 31, 2025.

The Credit Facility also contains customary events of default.

We believe we have an agreement in principle with the Lender to amend the Credit Facility to increase the borrowing limit of the Credit Facility from $25 million to $27.5 million until certain financing events when the borrowing limit returns to its original amount.

We, however, are awaiting the final amendment from the Lender and believe the amendment to the Credit Facility will be executed in the next few days when the authorized signatory is available to sign the amendment.

As of the date of this Quarterly Report on Form 10-Q, no amounts have been drawn under this Credit Facility.

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The aggregate gross proceeds from the Registered Direct Offering were 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).

On March 22, 2024, we entered into an Unsecured Credit Facility (the “2024 Credit Facility”) with Gerard Barron, our Chief Executive Officer and Chairman, and ERAS Capital LLC, the family fund of our director, Andrei Karkar (collectively, the “2024 Lenders”), pursuant to which, we may borrow from the 2024 Lenders up to $25,000,000 in the aggregate ($12,500,000 from each of the 2024 Lenders), from time to time (was initially $20,000,000 in the aggregate ($10,000,000 from each of the 2024 Lenders), subject to certain conditions.

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The 2024 Credit Facility also contains customary events of default.

As of May 13, 2024, the Company drew $2.9 million from the 2024 Credit Facility.

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

On August 13, 2024, we entered into an amendment to the 2024 Credit Facility to increase the borrowing limit to $25 million in the aggregate ($12.5 million from each of the 2024 Lenders).

Under the terms of the amendment, the borrowing limit will return to the initial $20 million in the aggregate ($10 million from each of the 2024 Lenders) upon certain financing events.

As of the date of this Quarterly Report on Form 10-Q, there was $4.2 million drawn under the 2024 Credit Facility, including a draw of $0.3 million subsequent to June 30, 2024.

On May 27, 2024, the Company entered into a short-term loan agreement with the Lender (Argentum Cedit Virtuti GCV), an affiliate of Allseas.

In accordance with the agreement, the Lender provided a short-term loan amounting to $2 million (the "Loan") on May 30, 2024.

The Loan takes priority over the 2024 Credit Facility.

The Loan and accrued interest are payable to the Lender on or before the earlier of (i) our next financing and (ii) September 10, 2024 (maturity date).

The Loan will accrue interest at a rate of 8% per annum.

As of the date of this Quarterly Report on Form 10-Q, the Loan remains outstanding.

We may receive up to approximately $281.8 million in aggregate gross proceeds from cash exercises of the Public Warrants and the Private Warrants, based on the per share exercise price of such warrants.

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For the Three Months Ended

For the Six Months Ended

Net cash used in operating activities

Net cash used in investing activities

Net provided by financing activities

Net cash provided by financing activities

Decrease in cash

Comparison of the Three Months Ended March 31, 2024 and March 31, 2023

Six Months ended June 30, 2024 compared to Six Months ended June 30, 2023

Cash flows used in Operating Activities

For the three months ended March 31, 2024, major operating activities over this period involved Campaign 8, as well as advanced work on engineering and pre-feasibility studies as we advance towards our application to the ISA for an exploitation contract and prepare for potential future commercial production.

Net cash used in operating activities in the first quarter of 2024, amounted to $11.8 million, and consisted mainly of $6.7 million on various environmental work, $2.1 million on personnel costs, $0.8 million for sponsorship,

training and stakeholder engagement support, $0.6 million spent on engineering and pre-feasibility studies, $0.4 million on legal costs, and additional payments of $1.4 million for various expenses.

For the three months ended March 31, 2023, operating activities focused mainly on the continuation of environmental work following the completion of the NORI integrated collector test, as well as progressing on engineering work and pre-feasibility studies on the project.

Net cash used in operating activities in the first quarter of 2023, amounted to $23.5 million, and consisted mainly of $17.0 million on various environmental work, $2.7 million on personnel costs, $1.4 million on legal costs, $0.8 million for sponsorship, training, and stakeholder engagement support, $0.4 million spent on engineering and pre-feasibility studies, and additional payments of $1.2 million for various expenses.

Cash flows provided by (used in) Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2024 was $0.3 million for the purchase of equipment and software development.

For the six months ended June 30, 2024, major operating activities over this period involved Campaign 8, as well as advanced work on engineering and pre-feasibility studies as we advance towards our application to the ISA for an exploitation contract and prepare for potential future commercial production.

Net cash used in operating activities in the first half of 2024, amounted to $23.9 million, and consisted mainly of $12.1 million on various environmental work, $3.6 million on personnel costs, $2.8 million on legal, advisory and consulting, $1.5 million for sponsorship, training and stakeholder engagement support, $1.8 million spent on engineering and pre-feasibility studies, $1.1 million on communication and business development expenses, and additional payments of $1 million for various expenses.

For the six months ended June 30, 2023, operating activities focused mainly on the continuation of environmental work following the completion of the NORI integrated collector test, as well as progressing on engineering work and pre-feasibility studies on the project.

Net cash used in operating activities in the first half of 2023, amounted to $31.9 million, and consisted mainly of $17.2 million on various environmental work, $4.8 million on personnel costs, $3.3 million on legal costs, $1.8 million for sponsorship, training, and stakeholder engagement support, $2.2 million spent on engineering and pre-feasibility studies, $1 million on communication and business development expenses and additional payments of $1.6 million for various expenses.

Cash flows used in Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2024 was $0.4 million for the purchase of equipment and software development.

Cash flows provided by Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2024 was $9.0 million, representing the net proceeds received from the Registered Direct Offering announced in August 2023, while the 2023 first quarter results represent the cash received of $5 million on closing of our investment in Low Carbon Royalties.

Net cash provided by financing activities for the six months ended June 30, 2024 was $17.7 million, which comprised of net proceeds received from the Registered Direct Offering announced in August 2023 of $9 million, proceeds from short term debt and credit facilities of $5.9 million, proceeds from shares issued from ATM of $2.5 million and proceeds from exercise of stock options and employee stock plans of $0.3 million while the 2023 first half results represent the cash received of $5 million on closing of our investment in Low Carbon Royalties.

Contractual Obligations and Commitments

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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 this five-year plan.

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

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

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

Should the approval of NORI’s exploitation application for the NORI contract area 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 us, agreed with the ISA and may be subject to change depending on our progress to date.

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Each company has been registered and incorporated within the applicable host nation’s jurisdiction.

The ISA requires that a contractor must obtain and

maintain sponsorship by a host nation that is a member of the ISA and such state must maintain effective supervision and regulatory control over such sponsored contractor.

The ISA requires that a contractor must obtain and maintain sponsorship by a host nation that is a member of the ISA and such state must maintain effective supervision and regulatory control over such sponsored contractor.

Each of TOML and NORI is subject to the registration and incorporation requirements of these nations.

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There can be no assurances, however, that we will enter into a definitive agreement with Allseas contemplated by the non-binding term sheet in a particular time period, or at all, or on terms similar to those set forth in the non-binding term sheet, or that if such a definitive agreement is entered into by us that the proposed commercial systems and second production vessel will be successfully developed or operated in a particular time period, or at all.

Through March 31, 2024, we have made the following payments to Allseas under the PMTA:

Through June 30, 2024, we have made the following payments to Allseas under the PMTA:

(a) $10 million in cash in February 2020, (b) $10 million through the issuance of 3.2 million Common Shares valued at $3.11 per share in February 2020, (c) issued Allseas a warrant to purchase 11.6 million Common Shares at a nominal exercise price per share in March 2021, (d) $10 million in cash in October 2021, following the closing of the Business Combination and meeting certain progress targets on the PMTS and (e) on February 23, 2023 issued 10.85 million Common Shares to Allseas.

On August 9, 2023, 11,578,620 common shares were issued to Allseas upon

the exercise of the warrant that was granted to Allseas in March 2021, and receipt of the exercise fee of $115.8 thousand.

On August 9, 2023, 11,578,620 common shares were issued to Allseas upon the exercise of the warrant that was granted to Allseas 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.

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Glencore may also terminate the agreement by giving twelve months’ notice.

Credit Facility with Allseas Affiliate

As described above, on March 22, 2023, we entered into the Credit Facility with Argentum Credit Virtuti GCV, an affiliate of Allseas, under which we may borrow up to $25 million pursuant to the terms and conditions of the Credit Facility, which as amended has a maturity date of August 31, 2025.

Borrowing with Company Related to Allseas

2023 Credit Facility

As described above, on March 22, 2023, the Company entered into the 2023 Credit Facility with Argentum Cedit Virtuti GCV, an affiliate of Allseas, under which we may borrow up to $25.0 million pursuant to the terms and conditions of the Credit Facility, as amended, which has a maturity date of August 31, 2025.

The Company believes it has an agreement in principle with the Lender to amend the Credit Facility to increase the borrowing limit of the Credit Facility from $25 million to $27.5 million until certain financing events when the borrowing limit returns to its original amount.

The Credit Facility remained undrawn as at June 30, 2024.

2024 Short-Term Loan

On May 27, 2024, the Company entered into a short-term loan agreement with Argentum Cedit Virtuti GCV whereby the Company borrowed $2 million (the "Loan") on May 30, 2024.

The Loan takes priority over the 2024 Credit Facility discussed below.

The Loan and accrued interest are payable to the Lender on or before the earlier of (i) our next financing and (ii) September 10, 2024 (maturity date).

The Loan accrues interest at a rate of 8% per annum.

Credit Facility with ERAS Capital LLC and Gerard Barron

As described above, on March 22, 2024, we entered into the 2024 Credit Facility with ERAS Capital LLC and Gerard Barron under which we may borrow up to $20 million pursuant to the terms and conditions of the 2024 Credit Facility through its maturity on September 22, 2025.

As of May 13, 2024, the Company drew $2.9 million from the 2024 Credit Facility.

On March 22, 2024, the Company entered into an Unsecured Credit Facility (as amended, the “2024 Credit Facility”) with Gerard Barron, our Chief Executive Officer and Chairman, and ERAS Capital LLC, the family fund of our director, Andrei Karkar (collectively, the “2024 Lenders”), pursuant to which, we may borrow from the 2024 Lenders up to $25,000,000 in the aggregate ($12,500,000 from each of the 2024 Lenders), from time to time, subject to certain conditions.

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

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

The 2024 Credit Facility also contains customary events of default.

The 2024 Credit Facility will terminate automatically if we or any of our subsidiaries raise at least USD $50,000,000 in the aggregate (i) through the issuance of any

of our or our subsidiaries’ debt or equity securities, or (ii) in prepayments under an off-take agreement or similar commercial agreement.

In the second quarter 2024, the Company drew $3.9 million from the 2024 Credit Facility.

Off-Balance Sheet Arrangements

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Section 102(b)(1) of the Jumpstart Our Business Startups (“JOBS”) Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can choose not to take advantage of the extended transition

period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable.

The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis