UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 2.02. | Results of Operations and Financial Condition. |
On March 25, 2024, TMC the metals company Inc. (the “Company”) issued a press release announcing its results for the fourth quarter and full year ended December 31, 2023 and providing a business update. A copy of the press release is furnished as Exhibit 99.1 hereto. In addition, the Company will hold a conference call on March 25, 2024 at 4:30 p.m. EDT to discuss these results and the business update.
The information in this Current Report on Form 8-K (including Exhibit 99.1) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in the press release attached as an exhibit hereto, the press release contains forward-looking statements which involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary note in the press release regarding these forward-looking statements.
| Item 4.02. | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review |
(a) On March 22, 2024, the Audit Committee (the “Audit Committee”) of the Board of Directors (the “Board”) of the Company and the Board, after discussions with Ernst & Young LLP, the Company’s independent registered public accounting firm, and the Company’s legal advisors, concluded that the Company’s previously issued financial statements (i) for the three months ended March 31, 2023 contained in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 as filed with the Securities and Exchange Commission (the “SEC”) on May 11, 2023, (ii) the six months ended June 30, 2023 contained in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 as filed with SEC on August 14, 2023 and (iii) the nine months ended September 30, 2023 contained in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 as filed with SEC on November 9, 2023 (the “Previous Financial Statements”) should be restated and, accordingly, should no longer be relied upon.
In February 2023, the Company and its wholly-owned subsidiary, Nauru Ocean Resources Inc. (“NORI”), entered into a strategic partnership with Low Carbon Royalties Inc. (“LCR”), 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 Company agreed with LCR to a purchase and sale agreement whereby LCR acquired a 2.0% gross overriding royalty on our NORI project area in the Clarion Clipperton Zone of the Pacific Ocean (“NORI Royalty”). In consideration for the NORI Royalty, the Company received $5,000,000 cash and an initial 35.0% equity interest in LCR.
As will be disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 expected to be filed with the SEC on March 25, 2024 (the “2023 Annual Report”) – see Note 22, Quarterly Financial Data (Unaudited) Restatement of Previously Issued Financial Statements, to the audited consolidated financial statements included in the 2023 Annual Report when available - and as will be discussed on the Company’s conference call for the fourth quarter and full year ended December 31, 2023 to be held on March 25, 2024, the right to royalty payments underlying the NORI asset (sale of future revenue) amounting to $14 million was considered as the transfer (sale) of a non-financial asset in 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 Accounting Standards Codification 470, Debt (“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 LCR should be classified as debt or deferred income. As the transaction with LCR was considered an equity investment rather than a sale transaction, the sale of future revenue will be reclassified as Royalty liability, as per ASC 470, in the Company’s 2023 financial statements for the year ended December 31, 2023 to be included in the 2023 Annual Report. 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 will restate the Previous Financial Statements in the 2023 Annual Report.
| • | This error had no impact on the Company’s annual audited financial statements as of December 31, 2023 to be included in the 2023 Annual Report. |
| • | 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. |
The following tables present a reconciliation of the Company’s 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 the Company’s future filings of its 2024 unaudited condensed consolidated financial statements within the Company’s 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):
Condensed Consolidated Balance Sheet Information
| As at March 31, 2023 | As at June 30, 2023 | As at September 30, 2023 | ||||||||||||||||||||||||||||||||||
| As Previously Reported | Restatement Adjustments | As
Restated | As Previously Reported | Restatement Adjustments | As
Restated | As Previously Reported | Restatement Adjustments | As
Restated | ||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||
| Cash | $ | 28,390 | $ | 28,390 | $ | 20,006 | $ | 20,006 | $ | 22,548 | $ | 22,548 | ||||||||||||||||||||||||
| Receivables and prepayments | 3,230 | 3,230 | 1,637 | 1,637 | 5,325 | 5,325 | ||||||||||||||||||||||||||||||
| 31,620 | - | 31,620 | 21,643 | - | 21,643 | 27,873 | - | 27,873 | ||||||||||||||||||||||||||||
| Non-current | ||||||||||||||||||||||||||||||||||||
| Exploration contracts | 42,900 | 250 | 43,150 | 42,900 | 250 | 43,150 | 42,900 | 250 | 43,150 | |||||||||||||||||||||||||||
| Equipment | 1,997 | 1,997 | 1,970 | 1,970 | 2,078 | 2,078 | ||||||||||||||||||||||||||||||
| Right-of-use asset | - | - | - | 6,198 | 6,198 | |||||||||||||||||||||||||||||||
| Investment | 8,781 | 8,781 | 8,644 | 8,644 | 8,525 | 8,525 | ||||||||||||||||||||||||||||||
| 53,678 | 250 | 53,928 | 53,514 | 250 | 53,764 | 59,701 | 250 | 59,951 | ||||||||||||||||||||||||||||
| TOTAL ASSETS | $ | 85,298 | $ | 250 | $ | 85,548 | $ | 75,157 | $ | 250 | $ | 75,407 | $ | 87,574 | $ | 250 | $ | 87,824 | ||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||
| Accounts payable and accrued liabilities | 17,544 | 17,544 | 18,113 | 18,113 | 19,344 | 19,344 | ||||||||||||||||||||||||||||||
| 17,544 | - | 17,544 | 18,113 | - | 18,113 | 19,344 | - | 19,344 | ||||||||||||||||||||||||||||
| Non-current | ||||||||||||||||||||||||||||||||||||
| Deferred tax liability | 10,675 | 10,675 | 10,675 | 10,675 | 10,675 | 10,675 | ||||||||||||||||||||||||||||||
| Royalty Liability | - | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | |||||||||||||||||||||||||||||
| Warrants liability | 1,528 | 1,528 | 2,314 | 2,314 | 2,197 | 2,197 | ||||||||||||||||||||||||||||||
| TOTAL LIABILITIES | $ | 29,747 | $ | 14,000 | $ | 43,747 | $ | 31,102 | $ | 14,000 | $ | 45,102 | $ | 32,216 | $ | 14,000 | $ | 46,216 | ||||||||||||||||||
| EQUITY | ||||||||||||||||||||||||||||||||||||
| Common shares (unlimited shares, no par value) | 345,090 | 345,090 | 345,775 | 345,775 | 434,099 | 434,099 | ||||||||||||||||||||||||||||||
| Special Shares | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Additional paid in capital | 186,796 | 186,796 | 188,722 | 188,722 | 124,168 | 124,168 | ||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | (1,216 | ) | (1,216 | ) | (1,216 | ) | (1,216 | ) | (1,216 | ) | (1,216 | ) | ||||||||||||||||||||||||
| Deficit | (475,119 | ) | (13,750 | ) | (488,869 | ) | (489,226 | ) | (13,750 | ) | (502,976 | ) | (501,693 | ) | (13,750 | ) | (515,443 | ) | ||||||||||||||||||
| TOTAL EQUITY | $ | 55,551 | (13,750 | ) | $ | 41,801 | $ | 44,055 | (13,750 | ) | $ | 30,305 | $ | 55,358 | (13,750 | ) | $ | 41,608 | ||||||||||||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 85,298 | $ | 250 | $ | 85,548 | $ | 75,157 | $ | 250 | $ | 75,407 | $ | 87,574 | $ | 250 | $ | 87,824 | ||||||||||||||||||
Condensed Consolidated Statements of Loss and Comprehensive Loss
| For
three months period ended March 31, 2023 | For
six months period ended June 30, 2023 | For
nine months period ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | As Previously Reported | Restatement Adjustments | As Restated | As Previously Reported | Restatement Adjustments | As Restated | ||||||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||||||
| Exploration and evaluation expenses | $ | 7,169 | $ | 7,169 | $ | 15,267 | $ | 15,267 | $ | 23,172 | $ | 23,172 | ||||||||||||||||||||||||
| General and administrative expenses | 6,214 | 6,214 | 11,345 | 11,345 | 15,958 | 15,958 | ||||||||||||||||||||||||||||||
| Operating loss | 13,383 | 13,383 | 26,612 | 26,612 | 39,130 | 39,130 | ||||||||||||||||||||||||||||||
| Other items | ||||||||||||||||||||||||||||||||||||
| Equity-accounted investment loss | 219 | 219 | 356 | 356 | 475 | 475 | ||||||||||||||||||||||||||||||
| Gain on disposition of asset | (13,750 | ) | 13,750 | 0 | (13,750 | ) | 13,750 | 0 | (13,750 | ) | 13,750 | 0 | ||||||||||||||||||||||||
| Change in fair value of warrants liability | 544 | 544 | 1,331 | 1,331 | 1,214 | 1,214 | ||||||||||||||||||||||||||||||
| Foreign exchange loss | 29 | 29 | 52 | 52 | 66 | 66 | ||||||||||||||||||||||||||||||
| Interest income | (454 | ) | (454 | ) | (773 | ) | (773 | ) | (1092 | ) | (1092 | ) | ||||||||||||||||||||||||
| Fees and interest on credit facility | 27 | 27 | 277 | 277 | 529 | 529 | ||||||||||||||||||||||||||||||
| Loss and comprehensive loss for the year, before tax | $ | (2 | ) | $ | 13,750 | $ | 13,748 | $ | 14,105 | $ | 13,750 | $ | 27,855 | $ | 26,572 | $ | 13,750 | $ | 40,322 | |||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||||||||||
| Loss (gain) and comprehensive loss (gain) for the period, after tax | $ | (2 | ) | $ | 13,750 | $ | 13,748 | $ | 14,105 | $ | 13,750 | $ | 27,855 | $ | 26,572 | $ | 13,750 | $ | 40,322 | |||||||||||||||||
| Loss per share | ||||||||||||||||||||||||||||||||||||
| - basic and diluted | - | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.09 | $ | 0.05 | $ | 0.14 | |||||||||||||||||||
| Weighted average number of Common Shares outstanding – basic | 272,029,603 | 272,029,603 | 272,029,603 | 276,702,050 | 276,702,050 | 276,702,050 | 282,745,892 | 282,745,892 | 282,745,892 | |||||||||||||||||||||||||||
| Weighted average number of Common Shares outstanding – diluted | 300,376,133 | 272,029,603 | 272,029,603 | 276,702,050 | 276,702,050 | 276,702,050 | 282,745,892 | 282,745,892 | 282,745,892 | |||||||||||||||||||||||||||
Condensed Consolidated Statements of Cash Flows
| For
three months period ended March 31, 2023 | For
six months period ended June 30, 2023 | For
nine months period ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | As Previously Reported | Restatement Adjustments | As Restated | As Previously Reported | Restatement Adjustments | As Restated | ||||||||||||||||||||||||||||
| Operating activities | ||||||||||||||||||||||||||||||||||||
| Gain/(Loss) for the period | 2 | (13,750 | ) | (13,748 | ) | (14,105 | ) | (13,750 | ) | (27,855 | ) | (26,572 | ) | (13,750 | ) | (40,322 | ) | |||||||||||||||||||
| Items not affecting cash: | ||||||||||||||||||||||||||||||||||||
| Amortization | 88 | 88 | 175 | 175 | 262 | 262 | ||||||||||||||||||||||||||||||
| Lease expense | - | - | - | 318 | 318 | |||||||||||||||||||||||||||||||
| Expenses settled with share-based payments | 1,775 | 1,775 | 4,307 | 4,307 | 6,839 | 6,839 | ||||||||||||||||||||||||||||||
| Expenses to be settled with share-based payments | 15 | 15 | 0 | 0 | ||||||||||||||||||||||||||||||||
| Equity-accounted investment loss | 219 | 219 | 356 | 356 | 475 | 475 | ||||||||||||||||||||||||||||||
| Gain on disposition of asset | (13,750 | ) | 13,750 | - | (13,750 | ) | 13,750 | - | (13,750 | ) | 13,750 | - | ||||||||||||||||||||||||
| Change in fair value of warrants liability | 545 | 545 | 1,331 | 1,331 | 1,214 | 1,214 | ||||||||||||||||||||||||||||||
| Vesting of Allseas Warrant | - | - | - | - | ||||||||||||||||||||||||||||||||
| Unrealized foreign exchange movement | (20 | ) | (20 | ) | (17 | ) | (17 | ) | (24 | ) | (24 | ) | ||||||||||||||||||||||||
| Changes in working capital: | ||||||||||||||||||||||||||||||||||||
| Receivables and prepayments | (469 | ) | (469 | ) | 1,123 | 1,123 | (2,364 | ) | (2,364 | ) | ||||||||||||||||||||||||||
| Accounts payable and accrued liabilities | (11,877 | ) | (11,877 | ) | (11,277 | ) | (11,277 | ) | (10,757 | ) | (10,757 | ) | ||||||||||||||||||||||||
| Net cash used in operating activities | (23,472 | ) | - | (23,472 | ) | (31,857 | ) | - | (31,857 | ) | (44,359 | ) | - | (44,359 | ) | |||||||||||||||||||||
| Investing activities | ||||||||||||||||||||||||||||||||||||
| Cash received from investment in Low Carbon Royalties | 5,000 | (5,000 | ) | - | 5,000 | (5,000 | ) | - | 5,000 | (5,000 | ) | - | ||||||||||||||||||||||||
| Acquisition of equipment | - | - | (75 | ) | (75 | ) | (175 | ) | (175 | ) | ||||||||||||||||||||||||||
| Net cash provided by (used in) investing activities | 5,000 | (5,000 | ) | - | 4,925 | (5,000 | ) | -75 | 4,825 | (5,000 | ) | -175 | ||||||||||||||||||||||||
| Financing activities | ||||||||||||||||||||||||||||||||||||
| Proceeds from Low Carbon Royalties investment | - | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | |||||||||||||||||||||||||||||
| Proceeds from Registered Direct Offering | - | - | - | 15,723 | 15,723 | |||||||||||||||||||||||||||||||
| Expenses paid for Registered Direct Offering | - | - | - | (779 | ) | (779 | ) | |||||||||||||||||||||||||||||
| Proceeds from PIPE financing | - | - | - | - | ||||||||||||||||||||||||||||||||
| Expenses paid for PIPE financing | - | - | - | - | ||||||||||||||||||||||||||||||||
| Proceeds from employee stock plan | - | - | 49 | 49 | 49 | 49 | ||||||||||||||||||||||||||||||
| Proceeds from exercise of stock options | - | - | - | 77 | 77 | |||||||||||||||||||||||||||||||
| Proceeds from exercise of warrants by Allseas | - | - | - | 116 | 116 | |||||||||||||||||||||||||||||||
| Proceeds from issuance of shares | - | - | 30 | 30 | 30 | 30 | ||||||||||||||||||||||||||||||
| Taxes withheld and paid on share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net cash provided by financing activities | - | 5,000 | 5,000 | 79 | 5,000 | 5,079 | 15,216 | 5,000 | 20,216 | |||||||||||||||||||||||||||
| Decrease in cash | (18,472 | ) | (18,472 | ) | (26,853 | ) | (26,853 | ) | (24,318 | ) | (24,318 | ) | ||||||||||||||||||||||||
| Impact of exchange rate changes on cash | 20 | 20 | 17 | 17 | 24 | 24 | ||||||||||||||||||||||||||||||
| Cash - beginning of period | 46,842 | 46,842 | 46,842 | 46,842 | 46,842 | 46,842 | ||||||||||||||||||||||||||||||
| Cash - end of period | 28,390 | 28,390 | 20,006 | 20,006 | 22,548 | 22,548 | ||||||||||||||||||||||||||||||
Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in this Current Report on Form 8-K, this Current Report on Form 8-K contains forward-looking statements which involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary note in the 2023 Annual Report, when available, regarding these risks and uncertainties.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit No. | Description |
| 99.1 | Press Release dated March 25, 2024 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TMC THE METALS COMPANY INC. | ||
| Date: March 25, 2024 | By: | /s/ Craig Shesky |
| Name: | Craig Shesky | |
| Title: | Chief Financial Officer | |