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Share-Based Compensation

12 Months Ended

Dec. 31, 2024

17.Share-Based Compensation

The Company’s 2021 Incentive Equity Plan (the “ Incentive Plan”) provides that the aggregate number of common shares reserved for future issuance under the Incentive Plan. As of December 31, 2024, there were a total of 56,634,518 common shares reserved for issuance under the Incentive Plan out of which 37,870,371 common shares remained available for future issuances. These amounts include 12,262,348 shares added to the Incentive Plan in January 2024 pursuant to the Incentive 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 from 2022 to 2031, the number of common shares that may be issued pursuant to the Incentive 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.

Share-based awards consisting of Restricted Share Units (“RSU”) and options under the Short-Term Incentives Plan (“STIP”) and Long-Term Incentives Plan (“LTIP”) have been issued under the 2021 Incentive Equity Plan.

Prior to the 2021 Incentive Plan, the Company had granted share-based awards under the 2018 Stock Option Plan (“2018 Plan”).

Stock options

Outstanding under the Incentive Plan.

On April 9, 2024, the Company entered into a consulting agreement with Mr. Jurvetson, a director of the Company. As per the agreement, Mr. Jurvetson would serve as a special advisor to the Company’s Chief Executive Officer for a term of five years. As the sole compensation for his advisory services, Mr. Jurvetson was granted stock options to purchase 3,440,000 of the Company’s common shares, with an exercise price equal to $1.71, under the Incentive Plan. The options vest in thirds on each anniversary of the grant date of the options provided that Mr. Jurvetson is still providing services to the Company at such time and expire on April 9, 2031.

On April 9, 2024, the Company also granted stock options to purchase 500,000 shares to a consultant in exchange for advisory services over a 5-year period ending April 9, 2029.

The Company determined the fair value of the options to be $1.36 per unit using the Black-Scholes valuation method. The fair value was estimated using the following assumptions:


	April 9,
	2024
Exercise price	$	1.71
Share price	$	1.71
Volatility		114.32	%
Term⁽¹⁾		4.5 years
Risk-free rate		4.29	%
Dividend yield		0.0	%

(1)

As these were the first options granted under the Incentive Plan, the expected term was estimated using the simplified method which is calculated as the average of the time to vest for each tranche from the grant date and the 7-year contractual term.

During the year, the Company recognized $1.3 million of share-based compensation expense related to the amortization of stock options, reported under general and administrative expenses in the statement of loss and comprehensive loss.

There were no forfeitures and exercises during the year and as at December 31, 2024, there were 3,940,000 options outstanding under the Company’s 2021 Incentive Plan (2023: Nil). The intrinsic value of the outstanding stock options was $ nil and was calculated by considering the closing market price of the Company’s common shares as the fair value of the Company’s common share.

The total unrecognized share-based compensation expense of $4 million is expected to be recognized over a period of approximately two years.

Outstanding under the Company’s 2018 Plan.

No new stock options were granted by the Company as STIPs or LTIPs under the 2018 Plan during 2024 and 2023.

Outstanding STIPs under the 2018 plan:

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


		Weighted		Aggregate		Weighted
		average		intrinsic		average
	Number of	exercise		value of		contractual
	Options	price per		stock		life
	Outstanding	option		options		(years)
Outstanding – December 31, 2022	15,356,340	$	1.40	$	1,582	5.11
Expired	(162,100)		0.87		—	—
Exercised	(120,000)		0.65		—	—
Outstanding – December 31, 2023	15,074,240	$	1.41	$	5,425	4.18
Exercised	(715,772)		0.65		—	—
Expired	(57,893)		2.60		—	—
Outstanding – December 31, 2024 Vested and exercisable	14,300,575	$	1.45	$	5,321	3.25

A summary of the Company’s stock options granted and outstanding under the Company’s STIP as at December 31, 2024 is as follows:


			Weighted average	Number of Options
			life to expiry	Outstanding and
Expiry Date	Exercise price		(years)	Exercisable
December 31, 2025	$	0.65	1.00	11,578
January 27, 2026	$	0.52 - $2.59	1.07	590,509
February 2, 2026	$	0.65	1.09	57,893
February 17, 2026	$	0.22 - $0.52	1.13	431,493
June 1, 2028	$	0.65 - $8.64	3.42	12,514,385
June 30, 2028	$	2.59	3.50	694,717
				14,300,575

The total grant date fair value of STIP stock options that vested during the year ended December 31, 2024, was $1 million. As at December 31, 2024, all the options are vested and the total unrecognized share-based compensation expense was $nil.

As at December 31, 2024, the closing market price of the Company’s common shares is considered to be the fair value of the Company’s common share to determine the intrinsic value of outstanding stock options.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2024, was $0.7 million.

During the year, the Company recognized $47 thousand of share-based compensation expense for STIP stock options in the statement of loss and comprehensive loss (2023: $0.5 million) out of which share-based compensation expense related to exploration and evaluation activities amounted to $14 thousand (2023 - $0.2 million) and the share-based compensation expense recognized related to general and administrative matters amounted to $33 thousand (2023 - $0.3 million).

Outstanding LTIPs under the 2018 plan:

On March 4, 2021, the Company granted 9,783,922 stock options as 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:

(1)

Tranche 1 - 25% when the Company’s market capitalization equals $3 billion;

(2)

Tranche 2 - 35% when the Company’s market capitalization equals $6 billion;

(3)

Tranche 3 - 20% upon the date that the ISA grants an exploitation contract to the Company; and

(4)

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

Tranche 1 and Tranche 2 vest based on the Company’s market capitalization of $3 billion and $6 billion, respectively. Accordingly, these options are determined to be market-based awards for which the Company has calculated fair value and derived a service period through which to expense the related fair value. The options included in Tranche 1 and Tranche 2 had a grant date fair value of $5.59 per share and $5.42 per share and derived service periods of 0.33 years and 1.41 years, respectively. The Company expensed these awards ratably over the remaining service period.

Tranche 3 and Tranche 4 of the LTIP stock options vest based on the date the ISA grants an exploitation contract and the commencement of commercial production. These options are determined to be performance-based awards. The Company will recognize compensation costs for the performance-based awards if and when the Company concludes that it is probable that the performance conditions will be achieved. As at December 31, 2024, no compensation expense related to the performance-based

awards was recorded as the awarding of an ISA contract is outside the control of the Company. 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 aggregate intrinsic value of LTIP stock options as at December 31, 2024, was $4.5 million. An aggregate 139,048 LTIP stock options were forfeited during 2024 and as at December 31, 2024, none of the LTIP stock options were exercisable. The Company expects LTIP options to vest as and when the market and performance milestones described below are achieved. As at December 31, 2024, an aggregate of 9,644,875 LTIP stock options were outstanding.

As at December 31, 2024, total unrecognized share-based compensation expense for the LTIP stock options was $23 million.

In 2024, the Company reversed $0.6 million of previously recognized share-based compensation expense to record the forfeiture of unvested LTIP stock options in the statement of loss and comprehensive loss (2023: $nil), evenly apportioned between exploration and evaluation expenses (Note 10) and general and administration expenses.

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

A summary of the RSU activity in 2024 is presented in the table below:


		Weighted
	Number of RSUs	average grant-
	Outstanding	date fair value
Outstanding – December 31, 2022	3,815,143	$	2.75
Granted	13,669,185		0.92
Forfeited	(86,700)		0.96
Exercised	(4,912,748)		1.57
Outstanding – December 31, 2023	12,484,880	$	1.23
Granted	33,079,041		1.18
Forfeited	(516,685)		1.45
Exercised	(10,734,581)		1.39
Outstanding – December 31, 2024	34,312,655	$	1.12

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


Vesting Period	2024	2023
Vesting Immediately ⁽¹⁾	4,538,922	3,561,078
Vesting fully on the first anniversary of the grant date ⁽²⁾	493,430	1,014,349
Vesting in thirds on each anniversary of the grant date ⁽³⁾	7,212,374	8,689,481
Vesting in fourths on each anniversary of the grant date	834,315	404,277
Vesting based on market conditions ⁽⁴⁾	20,000,000	—
Total Units Granted	33,079,041	13.669.185

(1)

Of the 4,538,922 RSUs granted during 2024 and vesting immediately, 2,812,802 RSUs were issued to settle liabilities with a carrying amount of $4.1 million, at a weighted average grant date fair value of $1.44 per RSU. In addition, the Company granted 662,399 RSUs, to consultants (2023: 274,912 RSUs) resulting in $1.1 million, charged as general and administrative expenses (2023: $0.3 million charged as general and administrative expenses). In 2024, the Company also granted 57,756 RSUs, to consultants as a prepayment for their services (2023: 43,478 units).

(2)

Of the 493,430 units granted during 2024, an aggregate amount of 476,189 RSUs (2023: 1,014,349 RSUs) were granted to the Company’s non-employee directors under the Company’s Non-employee Director Compensation Policy, which will vest at the Company’s 2025 annual shareholders meeting. The total fair value of units granted as annual grants to non-employee directors amounted to $0.7 million (2023: $0.7 million). The remaining 17,241 units were granted to a director as annual fees for consulting services to be provided, which were fair valued at $25 thousand.

(3)

Of the 7,212,374 units granted during 2024, the Company granted 7,144,347 RSUs, as payment for the 2023 LTIP awards (2023: 8,645,465 RSUs were issued as payment for the 2022 LTIP awards). The remaining 68,027 units were granted to a non-employee director of the Company as an initial grant, as prescribed under the Company’s Non-employee Director Compensation Policy.

(4)

On April 16, 2024, the Company entered into a new employment agreement with Gerard Barron, the Company’s Chief Executive Officer and Chairman (the “Employment Agreement”) that replaced and superseded Mr. Barron’s existing employment agreement. Under the Employment Agreement, the Company granted Mr. Barron a one-time signing bonus award of market-based restricted stock units (the “Signing RSUs”) amounting to 20,000,000 of the Company’s common shares. The Signing RSUs will vest upon the common shares achieving the following closing prices per common share, based on the trailing 30-day average price (the “Closing Price”), on or prior to April 16, 2029 (maturity date), subject to Mr. Barron’s continued service with the Company on the applicable vesting date: one-third of the Signing RSUs vest on achievement of a Closing Price of $7.50, a further one-third vest on achievement of a Closing Price of $10.00 and the final one-third vest on achievement of a Closing Price of $12.50 (each subject to equitable adjustment for any stock splits, combinations, reclassifications, stock dividends and the like). Pursuant to the Employment Agreement, Mr. Barron has agreed not to sell any of the common shares issuable upon vesting of the Signing RSUs until after the fifth anniversary of entering into the Employment Agreement.

The Company determined the fair value of the options using the Monte-Carlo valuation method. The fair value of each tranche and the derived service period are as follows:


Tranche	Fair Value per RSU		Derived Service Period
Achievement of a Closing Price of $7.50	$	1.07	1.58 years from the grant date
Achievement of a Closing Price of $10	$	1.04	1.87 years from the grant date
Achievement of a Closing Price of $12.50	$	1.00	2.10 years from the grant date

The fair value of the Signing RSUs was estimated using the following assumptions:


	April 16, 2024
Share price	$	1.72
Performance period		April 16, 2024 – April 16, 2029
Volatility		113.83	%
Risk-free rate		4.57	%
Cost of Equity		19.56	%
Dividend yield		0.0	%

The grant date fair value of all RSUs, apart from the Signing RSUs, is equivalent to the closing share price of the Company’s common shares on the date of grant. The grant date fair value of the RSUs vesting based on market conditions was determined

using the Monte-Carlo valuation method. During the year, a total of $19.5 million was charged to the statement of loss and comprehensive loss as share-based compensation expense for RSUs (2023: $8.6 million) of which share-based compensation expense related to exploration and evaluation activities amounted to $10.7 million (2023 - $4.8 million) and share-based compensation expense related to general and administration matters amounted to $8.8 million (2023 - $3.8 million). As at December 31, 2024, total unrecognized share-based compensation expense for RSUs was $20.5 million (December 31, 2023 - $6.9 million) which is expected to be recognized over 1.24 years. The fair value of shares vested during the year ended December 31, 2024, amounted to $14.1 million (2023 - $8.3 million).

As at December 31, 2024, an aggregate of 128,642 vested RSUs were being processed and due to be converted into common shares.

Employee Stock Purchase Plan

On May 31, 2022, TMC’s 2021 Employee Stock Purchase Plan (“ESPP”) was approved at the Company’s 2022 annual shareholders meeting. As of December 31, 2024, there were a total of 10,988,032 common shares reserved for issuance under the ESPP out of which 10,648,622 common shares remained available for future issuance under the ESPP. These amounts include 3,065,587 shares added to the ESPP in January 2024 pursuant to the ESPP’s automatic annual increase provision. 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, 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. Each offering period includes four purchase periods of six months each, which begin on approximately every June 1 and December 1, or at such other times designated by the board of directors or its compensation committee. At the exercise date, which is the last business day of each purchase period, the accumulated deductions from participating employees are used to purchase common shares of the Company. Shares are purchased at a price equal to 85% of the lower of either the share price of the Company’s common shares on the first business day of the particular offering period or the last business day of the purchase period. The ESPP also has an automatic reset feature wherein, if the share price of the common share on any exercise date is less than the share price of the common share on the first business day of the applicable offering period, then such offering period shall automatically terminate immediately after the purchase of the common shares. In such case, a new offering period shall commence on the first business day following the exercise date.

The ESPP includes the following limitations:

●

an employee’s contribution is limited to 15% of the employee’s annual gross earnings, not exceeding the $25,000 annual limit set under the Internal Revenue Code (IRC) established by the Internal Revenue Service (IRS).

●

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

●

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

During 2024, the Company issued 47,809 common shares (2023: 173,672 common shares) to its employees as part of its ESPP program. A total of $37 thousand was charged to the statement of loss and comprehensive loss as share-based compensation expense for the year ended December 31, 2024, representing the share price purchase discount offered by the Company (2023: $47 thousand). From the amount charged in 2024, $19 thousand was recorded in exploration and evaluation expenses (2023: $26 thousand) and $18 thousand was recorded in general and administrative expenses (2023: $21 thousand).