TMC the metal company (US:TMC)2023-11-09 21:19Part I Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of loss, changes in equity, and cash flows, for the periods ended September 30, 2023 Condensed Consolidated Balance Sheets (Unaudited) | (in thousands of US Dollars) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $27,873 | $49,602 | | Total Assets | $87,574 | $94,777 | | Total Current Liabilities | $19,344 | $41,614 | | Total Liabilities | $32,216 | $53,272 | | Total Equity | $55,358 | $41,505 | Condensed Consolidated Statements of Loss and Comprehensive Loss (Unaudited) | (in thousands of US Dollars) | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Exploration and evaluation expenses | $7,905 | $22,663 | $23,172 | $40,340 | | General and administrative expenses | $4,613 | $5,944 | $15,958 | $22,502 | | Operating loss | $12,518 | $28,607 | $39,130 | $62,842 | | Net loss and comprehensive loss | $12,467 | $27,894 | $26,572 | $61,395 | | Net loss per share - basic and diluted | $0.04 | $0.12 | $0.09 | $0.27 | Condensed Consolidated Statements of Cash Flows (Unaudited) | (in thousands of US Dollars) | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(44,359) | $(46,760) | | Net cash provided by (used in) investing activities | $4,825 | $(959) | | Net cash provided by financing activities | $15,216 | $29,774 | | Decrease in cash | $(24,318) | $(17,945) | | Cash - end of period | $22,548 | $66,872 | Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operational results, liquidity, and capital resources, noting the company remains in the exploration phase - The company is focused on preparing an application for its first exploitation contract for the NORI Area D, to be submitted to the International Seabed Authority (ISA) after the July 2024 meetings Production is anticipated in Q4 2025, assuming a one-year review and approval process99 - In August 2023, the company initiated a Registered Direct Offering to sell 12,461,540 common shares and accompanying warrants, expecting gross proceeds of $24.9 million100 - The company reported a net loss of $12.5 million for Q3 2023, a significant reduction from the $27.9 million net loss in Q3 2022 For the nine months ended September 30, 2023, the net loss was $26.6 million, down from $61.4 million in the prior year period122134138 - As of September 30, 2023, the company had $22.5 million in cash Management believes this, along with proceeds from the Registered Direct Offering and available credit, is sufficient for the next twelve months However, an additional $35 to $45 million is needed to submit the exploitation contract application144148150 Results of Operations The company's net loss decreased significantly in the third quarter and first nine months of 2023 compared to the same periods in 2022 Comparison of Financial Results (in thousands) | | For the Three Months Ended Sep 30, | For the Nine Months Ended Sep 30, | | :--- | :--- | :--- | | | 2023 | 2022 | 2023 | 2022 | | Exploration and evaluation expenses | $7,905 | $22,663 | $23,172 | $40,340 | | General and administrative expenses | $4,613 | $5,944 | $15,958 | $22,502 | | Net Loss for the period | $12,467 | $27,894 | $26,572 | $61,395 | - Exploration and evaluation expenses for Q3 2023 decreased by $14.8 million year-over-year, mainly due to a $14.4 million reduction in environmental studies and a $3.7 million reduction in PMTS costs, as the collector test was completed in November 2022135 - General and administrative expenses for Q3 2023 decreased by $1.3 million year-over-year, primarily due to lower share-based compensation as certain long-term incentive plan options were fully amortized in 2022136 - A gain of $13.75 million was reported in the first nine months of 2023 from NORI's contribution of a 2% gross overriding royalty on its project area to Low Carbon Royalties142 Liquidity and Capital Resources The company's liquidity is primarily from private placements and a Registered Direct Offering, with $22.5 million cash on hand as of September 30, 2023, and an estimated $35-45 million needed for the exploitation contract application - As of September 30, 2023, the company had cash on hand of $22.5 million144 - The company estimates it will require an additional $35 to $45 million to fund the submission of a high-quality application for an exploitation contract for NORI Area D following the July 2024 ISA meeting150 - The company has a $25 million unsecured credit facility with an affiliate of Allseas, which was undrawn as of the report date The maturity was extended to November 30, 2024154177 - In August 2023, a Registered Direct Offering was initiated To date, it has provided gross proceeds of $15.9 million, with an additional $9 million in committed funding expected by January 31, 2024155 Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, including interest rate, credit, and foreign currency fluctuations, with future commodity price risk anticipated upon commercial production - The company is exposed to interest rate risk on its cash investments, which are currently held in investment-grade short-term deposits188189 - Foreign currency risk exists due to transactions in Canadian dollars, Australian dollars, Euros, and British Pounds, though cash is primarily held in U.S. dollars to minimize exposure191 - Upon commencing commercial production, the company will be exposed to commodity price risk for nickel, copper, manganese, and cobalt, which will be the principal source of future revenue193 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during Q3 2023 - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2023196 - No changes occurred in the company's internal control over financial reporting during the three months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls197 Part II Other Information Legal Proceedings The company is involved in several material legal proceedings, including lawsuits against investors, a shareholder class action, and an SEC investigation - The company is pursuing litigation against two investors who failed to fund their investment commitments related to the 2021 Business Combination202 - A putative class action lawsuit was filed against the company, an executive, and a former director, alleging false and misleading statements The company has filed a motion to dismiss and is awaiting a ruling203 - The company is cooperating with an SEC investigation concerning its 2020 acquisition of Tonga Offshore Mining Limited (TOML) and the Business Combination204 - An investor from the 2021 private placement has filed a lawsuit alleging breach of representations and warranties The company has filed a motion to dismiss this complaint205 Risk Factors This section updates the company's risk factors, adding a new risk concerning the Post-Collector Environmental Assessment and its sufficiency for the NORI Area D exploitation application - A new risk factor was added regarding the Post-Collector Environmental Assessment, stating there can be no assurance of its success or that the data gathered will be sufficient for the NORI Area D exploitation application207 Unregistered Sales of Equity Securities and Use of Proceeds This section details unregistered equity transactions, including the issuance of 11.58 million common shares to Allseas and 4.15 million common shares for a vessel use agreement - On August 9, 2023, 11,578,620 common shares were issued to Allseas following the exercise of the Allseas Warrant for a cash price of $115.8 thousand208 - On August 1, 2023, 4.15 million common shares were issued to Allseas as consideration for an Exclusive Vessel Use Agreement for the 'Hidden Gem' vessel209 - The company did not repurchase any of its equity securities during the three and nine months ended September 30, 2023210 Defaults Upon Senior Securities This item is not applicable, indicating no defaults upon the company's senior securities during the reporting period - Not applicable211 Mine Safety Disclosures This item is not applicable, as the company is not subject to mine safety disclosure requirements - Not applicable212 Other Information No other information is disclosed for the period covered by this report - None213 Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including key agreements and officer certifications - The report includes several key agreements as exhibits, such as the Exclusive Vessel Use Agreement with Allseas Group S.A. and an amendment to the Unsecured Credit Facility215 - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed with the report215