TMC THE METALS CO INC. MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

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The following discussion of the financial condition and results of our
operations should be read in conjunction with the financial statements and the
notes to those statements appearing elsewhere in this Annual Report on
Form 10-K. Some of the information contained in this discussion and analysis or
set forth elsewhere in this report, including information with respect to our
plans and strategy for our business, includes forward-looking statements that
involve risks and uncertainties. You should read the Risk Factors set forth in
Item 1A of this Annual Report on Form 10-K for a discussion of important factors
that could cause actual results to differ materially from the results described
in or implied by the forward-looking statements contained in the following
discussion and analysis.

Overview

We are a deep sea mineral exploration company focused on the collection, processing and refining of polymetallic nodules found on the seabed in international waters of the Clarion Clipperton Area (“CCZ”), approximately 1,300 nautical miles southwest of San Diego, California.

The CCZ is a geological submarine fracture zone of abyssal plains and other
formations in the Eastern Pacific Ocean, with a length of around 7,240 km (4,500
miles) that spans approximately 4,500,000 square kilometers (1,700,000 sq mi).
Polymetallic nodules are discrete rocks that sit unattached to the seafloor,
occur in significant quantities in the CCZ and have high concentrations of
nickel, cobalt and copper in a single rock.  These four metals contained in the
polymetallic nodules are critical for the transition to clean energy. Our
resource definition work to date shows that nodules in our contract areas
represent the world's largest estimated undeveloped source of

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critical battery metals. If we are able to collect polymetallic nodules from the
seafloor on a commercial scale, we plan to use such nodules to produce three
types of metal products: (i) feedstock for battery cathode precursors (nickel
and cobalt sulfates) for electric vehicles ("EV") and renewable energy storage
markets, (ii) copper cathode for EV wiring, clean energy transmission and other
applications and (iii) manganese silicate for manganese alloy production
required for steel production. Our mission is to build a carefully managed
shared stock of metal (a "metals common") that can be used, recovered and reused
for generations to come.  Significant quantities of newly mined metal are
required because existing metal stocks are insufficient to meet rapidly rising
demand.

Exploration and exploitation of seabed minerals in international waters is
regulated by the International Seabed Authority ("ISA"), an intergovernmental
organization established pursuant to the 1994 Agreement Relating to the
Implementation of the United Nations Convention on the Law of the Sea
("UNCLOS"). The ISA grants contracts to sovereign states or to private
contractors who are sponsored by a sovereign state. The ISA requires that a
contractor must obtain and maintain sponsorship by a host nation that is a
member of the ISA and signatory to UNCLOS and such nation must maintain
effective supervision and regulatory control over such sponsored contractor. The
ISA has issued a total of 19 polymetallic nodule exploration contracts covering
approximately 1.28 million km2, or 0.4% of the global seafloor, 17 of which are
in the CCZ. We hold exclusive exploration and commercial rights to three of the
17 polymetallic nodule contract areas in the CCZ through our subsidiaries Nauru
Ocean Resources Inc. ("NORI") and Tonga Offshore Mining Limited ("TOML"),
sponsored by the Republic of Nauru ("Nauru") and the Kingdom of Tonga ("Tonga"),
respectively, and exclusive commercial rights through our subsidiary, DeepGreen
Engineering Pte. Ltd.'s ("DGE"), 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 Group S.A. (Allseas), a leading
global offshore contractor, which is developing a pilot collection system, which
is expected to be modified into an initial smaller scale commercial production
system and serve as the basis for the design of a full-scale commercial
production system and (ii) Glencore International AG (Glencore) which holds
offtake rights on 50% of the NORI nickel and copper production. In addition, we
have worked with an engineering firm Hatch Ltd. (Hatch) and consultants Kingston
Process Metallurgy Inc. (KPM) to develop a near-zero solid waste flowsheet. The
pyromet stages of the flowsheet were tested as part of our pilot plant program
at FLSmidth & Co. A/S's and XPS Solutions' (Glencore subsidiary) facilities and
hydrometallurgical refining stages are being carried out at SGS SA. The
near-zero solid waste flowsheet is in the process design that is expected to
serve as the basis for our onshore processing facilities.  In March 2022, we
entered into a non-binding memorandum of understanding with Epsilon Carbon Pvt,
LTD. (Epsilon Carbon) in which Epsilon Carbon expressed its intent to conduct
pre-feasibility work to potentially finance, engineer, permit, construct and
operate a commercial polymetallic nodule processing plant in India.

We are currently focused on applying for our first exploitation contract from
the ISA on the NORI Area D contract area with the goal of potentially starting
commercial production in 2024. To reach our objective and initiate commercial
production in 2024, we are: (i) defining our resource and project economics,
(ii) developing an offshore nodule collection system, (iii) assessing the ESG
impacts of offshore nodule collection, and (iv) developing onshore technology to
process collected polymetallic nodules into a manganese silicate product, and an
intermediate nickel-copper-cobalt matte product and/or end-products like nickel
and cobalt sulfates, and copper cathode.

We are still in the exploration phase and have not yet obtained any exploitation
contracts from the ISA to commence commercial scale polymetallic nodule
collection in the CCZ nor have we obtained the applicable environmental permits
and other permits required to build and operate commercial scale polymetallic
nodule processing and refining plants on land.

2021 Highlights

2021 has been an important year in our potential to exploit our resources and start commercial production. Below are some of the developments that occurred in 2021.

Creation of TMC the metal company Inc. – On September 9, 2021we finished

? the business combination, creating TMC the metals company Inc. and raised

product of $137.6 million in cash before transaction fees.

Resource Estimation – Enabled January 15, 2021AMC, a leader in mining consulting

company, released a revised independent resource estimate for the NORI D Zone and

? for TOML in accordance with Canadian NI 43-101 standards, which showed a

upgrading the quantity and quality of resources from previous estimates we had

has received.

Set Value – Enabled March 17, 2021AMC released an independent SK 1300

? Compliant initial appraisal report for the NORI Area D property which

   indicated life of project net cash flow of $30.6 billion and a project NPV of
   $6.8 billion using a


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9% discount rate and metal price assumption for nickel metal $16,472/t; nickel in

nickel sulphate $18,807/t Ni; copper metal $6,872/t; cobalt metal $46,333/t;

  cobalt in cobalt sulfate $56,920/t Co; manganese in manganese silicate
  $4.50/dmtu Mn.

Expected regulatory schedule – In July 2021the Republic of Nauru exercised

its right under the 1994 UNCLOS Implementation Agreement by requesting the ISA

? complete the adoption of the exploitation regulations within two years. AIS

met in December 2021establishing a schedule of work to be carried out in 2022

with the aim of finalizing the regulations relating to the exploitation of the seabed

minerals in the area by July 2023.

Conversion of nodules into salable metal – We have completed the pyrometallurgical pilot project

polymetallic nodule test producing a matte product containing > 80%

? combined Ni, Cu and Co which is a suitable raw material to produce critical metals

essential for electric vehicle batteries and wiring. We have also produced a manganese silicate

product that can be sold directly on the market and then transformed into manganese

alloy, an essential input to the production of steel.

Continuous development of the Pilot Nodule Collection System – In collaboration with

Allseas ultra-deepwater drillship, the Hidden Gem has been modified and

? ranked first underwater mining vessel in the world. Allseas has advanced the

development and assembly of collection vehicle and vertical transport

system throughout 2021. We expect to complete this work in time for our pilot

   nodule collection tests in 2022.


   Completion of Deep-Sea Environmental Baseline Program and Submission of

Collector Test EIS – We carried out five offshore campaigns in 2021, including

? at-sea sampling and data collection for our environmental reference

program. EIS for pilot test in NORI Zone D was submitted in July

2021 and the test is scheduled for the second half of 2022.

Support for reduced potential impact – Independent plume modeling for EIS

? was undertaken in 2021 which showed a more limited and localized impact than

anticipated.

Improved Transparency – We have partnered with Kongsberg Digital to develop the

? digital twin required to support our adaptive management system which

provide real-time visibility to subsea operations stakeholders, and

will allow us to operate safely, within acceptable limits.

Business combination

On September 9, 2021, we completed the Business Combination with SOAC. The
transaction resulted in the combined company being renamed "TMC the metals
company Inc." and the combined company's common shares and warrants to purchase
common shares commenced trading on the Nasdaq Global Select Market ("Nasdaq") on
September 10, 2021, under the symbols "TMC" and "TMCWW," respectively. As a
result of the Business Combination, we received gross proceeds of approximately
$137.6 million.

The Business Combination was accounted for as a reverse recapitalization and
DeepGreen was deemed the accounting acquirer. Under this method of accounting,
SOAC was treated as the acquired company for financial statement reporting
purposes. The Business Combination was accounted for as a reverse acquisition
with no goodwill or intangible assets being recorded. As SOAC had no operations,
the net assets acquired were recorded at their historical cost. Adjustments
related to the Business Combination including consideration paid to DeepGreen
shareholders and any other adjustments to eliminate the historical equity of
SOAC and recapitalize the equity of DeepGreen were recorded to common shares to
reflect the effective issuance of common shares to SOAC and Private Investment
in Public Equity investors in the Business Combination.

Following the Business Combination, we became the successor to an SEC-registered
company, which resulted in us hiring additional personnel and implement
procedures and processes to address public company regulatory requirements and
customary practices to ensure ongoing compliance with applicable law and Nasdaq
listing requirements. We expect to incur additional annual expenses as a public
company for, among other things, directors' and officers' liability insurance,
director fees, additional internal and external accounting, legal and
administrative resources, including increased personnel costs, audit and other
professional service fees.

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Exploration Contracts

We currently hold exclusive exploration rights to certain polymetallic nodule
areas in the CCZ through our subsidiaries NORI and TOML, sponsored by the
Republic of Nauru and the Kingdom of Tonga, respectively, and exclusive
commercial rights through our subsidiary's (DGE), arrangement with Marawa, a
company owned and sponsored by the Republic of Kiribati.

NORI. NORI our wholly-owned subsidiary, holds exploration rights to four blocks
(NORI Area A, B, C, and D, the "NORI Contract Area") covering 74,830 km2 in the
CCZ that were granted by the ISA in July 2011. NORI is sponsored by Nauru
pursuant to a certificate of sponsorship signed by the Government of Nauru on
April 11, 2011. The D block of the NORI area ("NORI Area D") is the seafloor
parcel where we have performed the most resource definition and environmental
work to date. NORI commissioned AMC Consulting Ltd, a leading mining consulting
firm (AMC), to undertake a preliminary economic assessment ("PEA") of the
mineral resource contained in NORI Area D and to compile a technical report
compliant with Canadian National Instrument (NI 43-101), which was completed in
March 2021. AMC subsequently compiled the NORI Technical Report Summary, dated
March 2021, which included an initial assessment and an economic analysis of
NORI Area D prepared in accordance with the SEC's Modernization of Property
Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K
(the "SEC Mining Rules"). The NORI Technical Report Summary is filed as Exhibit
96.1 to this Annual Report on Form 10-K.

TOML. TOML our wholly-owned subsidiary which we acquired in March 2020, holds
exploration rights to an area covering 74,713 km2 in the CCZ that were granted
by the ISA in January 2012 (the "TOML Contract Area"). On March 8, 2008, Tonga
and TOML entered into a sponsorship agreement formalizing certain obligations of
the parties in relation to TOML's exploration application to the ISA
(subsequently granted) for the TOML Contract Area.  The sponsorship agreement
was updated on September 23, 2021. TOML commissioned a Technical Report Summary
by AMC, dated March 2021, which is filed as Exhibit 96.2 to this Annual Report
on Form 10-K.

Marawa. DGE, our wholly-owned subsidiary, entered into agreements with Marawa
and Kiribati which provide DGE with exclusive exploration rights to an area
covering 74,990 km2 in the CCZ (the "Marawa Contract Area"). The exploration
contract between Marawa and the ISA (the "Marawa Exploration Contract") was
signed on January 19, 2015. To date, very limited offshore marine resource
definition activities in the Marawa Contract Area have occurred and we expect to
commit future resources as contractually agreed with Marawa to evaluate the
future commercial viability of any project in such area. We have not completed
adequate exploration to establish the economic viability of any project in the
Marawa Contract Area. Further work will need to be conducted in order to assess
the viability of any potential project in the Marawa Contract Area and such work
may take several years until such assessment can be made. Marawa has delayed
certain of its efforts in the Marawa Contract Area while it determines how it
will move forward with additional assessment work.

Main trends, opportunities and uncertainties

We are currently a pre-revenue company and we do not anticipate earning revenues
until such time as NORI receives an exploitation contract from the ISA and we
are able to successfully collect polymetallic nodules and process the nodules
into saleable products on a commercial scale. We believe that our performance
and future success pose risks and challenges, including those related to:
finalization of ISA regulations to allow for commercial exploitation, approval
of an application for the ISA exploitation contract, developing environmental
regulations associated with our business and successful development of our
technologies to collect and process polymetallic nodules. These risks, as well
as other risks, are discussed in Item 7A entitled "Quantitative and Qualitative
Disclosures About Market Risk" and Item 1A entitled "Risk Factors" included in
this Annual Report on Form 10-K.

Impact of climate change

TMC is committed to adopting the Task Force on Climate-Related Financial
Disclosures recommendations. In our upcoming inaugural impact report, we will be
providing the same type of climate-related disclosure to the one in this Annual
Report on Form 10-K. We recognize that climate change may have a meaningful
impact on our financial performance over time, and we have begun the process of
consolidating key risks and corresponding action plans to mitigate their
negative impact of climate change and create value.

Our climate-related transition risks and opportunities are likely to be driven by changes in regulation, public policy and technology.

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Regulatory risks
Regulations related to emissions limits, such as cap and trade schemes and
carbon taxes, would likely increase our future cost of operations, energy
purchase, and equipment selection in addition to costs associated with potential
carbon tax and/or purchase of carbon offsets. It is difficult to estimate the
impact of potential future regulations on future operations.

We are working on a plan for continuous reduction of emissions and eventually
developing operations with as close to zero emissions as possible. When
selecting the location of our onshore plant, one of our requirements is access
to renewable energy as our metallurgical process will be the most energy
intensive step in our operations. In addition, we are looking to replace
metallurgical coal used as reductant during calcining of nodules and have tested
potential renewable alternatives. We are also identifying the best approach for
decarbonizing our offshore operations. To date, we have not experienced any
material impact to our business related to potential regulations but will
continue to evaluate and monitor future developments.

Risks for public policies

Awareness of climate change related impacts and commitments made by companies
and governments to achieve net zero emissions, continues to grow. We support the
ambition of the U.S. to achieve net zero greenhouse gas emissions by no later
than 2050 and to reach half of all new vehicles sales to be EVs by 2030. We are
committed to achieving zero emissions and are reviewing and designing
technologies to achieve this goal. The location of our onshore plant will be
key, and we will be working on science-based targets and scenario analysis in
2022.

To support the EV and battery storage value chain, we are looking to close the
emerging supply gap of critical battery metals needed for the transition to
renewable energy and adoption of EVs. We plan to take advantage of this
opportunity to supply lower carbon battery metals, avoid deforestation, and
help
reduce the cost of batteries.

Technology risks

The timing and deployment of technologies to support the transition to a lower
carbon economy can be uncertain. Investments in assets with long lifespans
require the selection of not only the proper technology, but also the proper
timing to retain the ability to adapt to future developments. There are also
risks associated with the additional costs of lower emissions technology and
transition to renewables. To mitigate this risk, we based our flowsheet
development on existing proven technology, while retaining sufficient
flexibility to be able to retrofit processes with new lower carbon technology as
they become available.

Physical risks
Our main activity currently consists of offshore exploration campaigns for
research and testing purposes, and technology development at partner facilities.
However, once a location is selected for our onshore metallurgical plant, we
will assess the risks associated with hurricanes, floods, and extreme weather.

COVID-19[female[feminine

In March 2020, the World Health Organization declared the global outbreak of
COVID-19 a pandemic. Since then, there have been actions, of varying severity,
taken around the world to mitigate and manage the spread of COVID-19. The
disparate actions undertaken by local governments to mitigate or manage the
spread have had and are expected to continue to have an adverse impact on supply
chains and labor markets worldwide. On March 27, 2020, the U.S. enacted the
Coronavirus Aid, Relief, and Economic Security ("CARES") Act to provide
financial stimulus and support as a result of the initial economic fallout from
events related to the COVID-19 pandemic.

As we are a pre-revenue company, the impacts of COVID-19 are relatively smaller
than companies with commercial operations. Depending on the duration and
evolution of the pandemic and our supply chains and future customers' ability to
operate normally, there could be future challenges to our business which we
cannot currently foresee. It is critical for our partners to have access to
supplies and competent human capital for us to collectively meet our business
objectives. As we have seen during the height of the pandemic and continuing
regulations in certain countries, many of our contractors and service providers
have modified their business practices to limit travel and in-person meetings.

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While there are positive signs that the current situation is being managed well
in most parts of the world and country-wide restrictions and lockdowns are
subsiding, there can be no guarantee that any new COVID-19 variant would not
result in reinstating restrictions which may impact our business. If significant
portions of our contractors, service providers and partners are unable to work
effectively, including due to illness, lockdowns, quarantine measures or other
government actions, our current development activities and future operations may
be impacted negatively. For instance, the final exploitation regulations were
expected to be adopted by the ISA during 2020 but were delayed due to COVID-19.

Offshore, in 2021, we have safely and successfully completed five complex
campaigns in our NORI Area D in the CCZ involving crew and scientists departing
from and returning to San Diego from around the world. In close coordination
with our partners, we have implemented rigid quarantining and testing protocols
designed to provide a safe COVID-19 free work environment. Onshore, our pilot
plant program at third-party facilities has proceeded without COVID-19 related
incidents. Our corporate and project development teams have adopted a virtual
working environment without a traditional office setting. This means we have
been minimally impacted by countrywide lockdowns across the globe. We continue
to work and collaborate through virtual channels on an ongoing basis.

We continue to closely monitor the recent developments surrounding the continued
spread and potential resurgence of COVID-19 from variants. The COVID-19 pandemic
may have an adverse impact on our operations, particularly because of preventive
and precautionary measures that our company, other businesses, and governments
are taking. Refer to the section entitled "Risk Factors" included in this Annual
Report on Form 10-K for more information. We are unable to predict the full
impact that the COVID-19 pandemic will have on our future results of operations,
liquidity and financial condition due to numerous uncertainties, including the
duration of the pandemic and the actions that may be taken by government
authorities. However, COVID-19 is not expected to result in any significant
changes to our business or our costs in the near term. We will continue to
monitor the performance of our business and reassess the impacts of COVID-19.

presentation basis

We currently conduct our business through one operating segment. As a
pre-revenue company with no commercial operations, our activities to date have
been limited. Our historical results are reported under U.S. GAAP and in U.S.
dollars. All share and per share amounts have been adjusted to reflect the
impact of the Business Combination.

Acquisition TOML

On March 31, 2020, DeepGreen entered into an acquisition agreement to acquire
the polymetallic nodules business unit of TOML and other entities in the group
(the "TOML Group") from DSMF (the "TOML Acquisition"). Total purchase price of
the TOML Acquisition, before transaction costs, was $32.0 million. TOML holds
the TOML Exploration Contract, and some exploration related equipment. The TOML
Group also holds various patents and an application right with respect to a
prospecting exploration contract in Kiribati.

The purchase price of $32.0 million was settled through initial cash payments in
two tranches of $0.25 million each (paid on March 31, 2020 and May 31, 2020,
respectively), issuance of 9,005,595 common shares, $0.1 million payment to the
ISA on behalf of DSMF and deferred consideration of $3.4 million which was to be
paid on January 31, 2021. The common share consideration paid by DeepGreen was
valued at $3.11 per DeepGreen common share based on the recent private
placements completed by DeepGreen for a total of $28.0 million.

DeepGreen had the option of settling the deferred consideration in either cash
or common shares of DeepGreen at its sole discretion. In January 2021, the
arrangement with DSMF was amended to pay the entire deferred consideration in
cash. The deferred consideration was fully settled on June 30, 2021.

DeepGreen determined that the value of TOML Acquisition was substantially
concentrated in the TOML Exploration Contract and therefore considered this to
be an acquisition of a group of connected assets rather than an acquisition of a
business. Consequently, the total cost of the transaction was primarily
allocated to exploration contracts.

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Components of operating results

We are an exploration-stage company with no revenue to date and a net loss of
$141.3 million for the year ended December 31, 2021, compared to a net loss of
$56.6 million in the prior year. We have an accumulated deficit of approximately
$304.2 million from inception through December 31, 2021.

Our historical results may not be indicative of our future results for reasons that may be difficult to predict. Therefore, the drivers of our future financial results, as well as the components of those results, may not be comparable to our historical or projected results of operations.

Income

To date, we have not generated any revenue. We do not expect to generate revenue
until at least 2024 and only if NORI receives an exploitation contract from the
ISA and we are able to successfully collect polymetallic nodules and process the
nodules into saleable products on a commercial scale. Any revenue from initial
production is difficult to predict.

Exploration and evaluation expenditures

We expense all costs relating to exploration and development of mineral claims.
Such exploration and development costs include, but are not limited to, ISA
contract management, geological, geochemical and geophysical studies,
environmental baseline studies, process development and payments to Allseas for
the PMTS. Our exploration expenses are impacted by the amount of exploration
work conducted during each period. The acquisition cost of ISA polymetallic
nodule exploration contracts will be charged to operations as amortization
expense on a unit-of-production method based on proven and probable reserves
should commercial production commence in the future.

General and administrative expenses

General and administrative ("G&A") expenses consist primarily of compensation
for employees, consultants and directors, including share-based compensation,
consulting fees, investor relations expenses, expenses related to advertising
and marketing functions, insurance costs, office and sundry expenses,
professional fees (including legal, audit and tax fees), travel expenses and
transfer and filing fees.

Share-based compensation cost from the issuance of stock options and restricted
share units ("RSUs") is measured at the grant date based on the fair value of
the award and is recognized over the related service period. Share-based
compensation costs are charged to exploration expenses and general and
administrative expenses depending on the function fulfilled by the holder of the
award. In instances where an award is issued for financing related services, the
costs are included within equity as part of the financing costs. We recognize
forfeiture of any awards as they occur.

Interest income/expense

Interest income consists primarily of interest income earned on our cash and cash equivalents.

Interest expense resulted from our financing transactions, specifically the
convertible debentures issued in February 2021, which accrued interest at 7% per
annum. The convertible debentures were fully converted into DeepGreen common
shares on September 9, 2021.

Foreign Exchange Loss

The foreign exchange income or loss for the periods primarily relates to our
cash held in Canadian dollars and to the settlement of costs incurred in foreign
currencies, depending on either the strengthening or weakening of the U.S.
dollar.

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Change in fair value of warrant liabilities

Change in fair value of warrant liabilities primarily consists of the change in
the fair value of the 9,500,000 warrants issued to Sustainable Opportunities
Holdings LLC concurrently with SOAC's initial public offering (the "Private
Warrants"). For accounting purposes, the Company was considered to have issued
the Private Warrants as part of the Business Combination.

Operating results

DeepGreen has been determined to be the accounting acquirer and, therefore, all information prior to the business combination, including prior period financial information, represents the financial condition and results of operations of DeepGreen.

Comparison of closed periods December 31, 2021 and 2020

                                       For the Three Months Ended               For the Year Ended
(Dollar amounts in thousands,                  December 31,                        December 31,
except as noted)                      2021         2020      % Change      2021         2020      % Change
Exploration and evaluation
expenses                            $  12,825    $ 13,137         (2) %  $  93,006    $ 48,881          90 %
General and administrative
expenses                               15,445       3,905         295 %     56,583       7,723         633 %
Change in fair value of warrants
liability                             (8,497)           -         N/A      (9,375)           -         N/A
Foreign exchange loss                      25          43        (42) %         82          80           3 %
Interest expense (income)                   -           -         N/A      
 1,003        (53)         199 %
Loss for the period                 $  19,798    $ 17,085          16 %  $ 141,299    $ 56,631         150 %

Full year 2021 versus full year 2020

Exploration and evaluation expenditures

Exploration and evaluation expenses for the year ended December 31, 2021 were
$93.0 million, compared to $48.9 million for the year ended December 31, 2020.
The increase of $44 million was primarily due to the recognition of $27.0
million of share-based compensation granted to personnel during the year ended
December 31, 2021 as compared to $0.8 million during the same period in 2020.
The share-based compensation cost for stock options and restricted share units
granted to personnel involved in exploration activities is included within
exploration and evaluation expenses for the periods presented. The increase in
share-based compensation was mainly due to the completion of the Business
Combination and increased project activity resulting in additional personnel and
new incentive plans, as well as an increase in the fair value of DeepGreen
common shares compared to the prior year. In addition, the cost of offshore
campaigns that we undertook during the year ended December 31, 2021 was
$39.0 million as compared to $28.0 million during the same period in 2020,
reflecting increased activity to complete environmental baseline studies. In
2021, we had a strategic partnership with Maersk, as described below, pursuant
to which we settled the costs for marine vessel services provided by Maersk
through the issuance of common shares. Such common shares were recognized at
their fair value and the changes in such fair value had a significant impact on
exploration and evaluation expenditures in 2021. During March 2021, we revised
our previous arrangement with Maersk, to require settlement of marine vessel
services in cash instead of common shares. Cost incurred for the PMTS to Allseas
during the year ended December 31, 2021 was $14.3 million, representing the
first two milestone payments to Allseas under Amendment 3 of our PMTS agreement
with Allseas compared to $11.7 million during the same period in 2020, whereby
we paid $10 million and issued 3.2 million common shares to Allseas under
Amendment 2 of our PMTS agreement with Allseas.

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General and administrative expenses

G&A expenses for the year ended December 31, 2021 were $56.6 million compared to
$7.7 million in 2020. The increase in G&A in 2021 was a result of higher
share-based compensation which increased by $30.1 million, reflecting the impact
of new incentive plans, with higher issuances and vesting, with an increased
workforce, as well as an increase in the fair value of DeepGreen common shares
compared to the prior year. The level of corporate activities and the number of
corporate personnel increased as a result of the Business Combination.  In
addition, an expense of $3.9 million was recognized in the third quarter of
2021, as the board of directors approved amendments to certain stock option
grants to extend their initial terms.  Professional and consulting fees, and
investor relations expenses increased by $8.6 million and $5.3 million,
respectively, as compared to 2020 due to increased corporate activities as we
became a public company.  We expect G&A expenses, excluding those related to the
Business Combination, to continue to increase as we expand our infrastructure to
prepare for commencement of production and due to additional legal, accounting,
insurance and other expenses associated with being a public company.

Interest charges

During the year ended December 31, 2021we recorded interest expense of
$1.0 million following the issuance of convertible debentures at 7% of
$26.0 million during February 2021prior to their conversion into our common shares as part of the business combination.

Change in fair value of warrant liability

Change in fair value of warrant liability primarily consists of the change in
the fair value of the 9,500,000 warrants issued to Sustainable Opportunities
Holdings LLC concurrently with SOAC's initial public offering (the "Private
Warrants"). For accounting purposes, we are considered to have issued the
Private Warrants as part of the Business Combination.

Cash and capital resources

Prior to closing of the Business Combination, our primary sources of capital
have been private placements of DeepGreen common shares and DeepGreen preferred
shares and the issuance of convertible debentures completed in February 2021,
which were automatically converted into DeepGreen common shares immediately
prior to the completion of the Business Combination. In addition, on
September 9, 2021, we completed the Business Combination with SOAC, and as a
result we received gross proceeds of approximately $137.6 million. As of
December 31, 2021, we had cash and cash equivalents of $84.9 million.

We have yet to generate any revenue from our business operations. We are an
exploration-stage company and the recovery of our investment in mineral
exploration contracts and attainment of profitable operations is dependent upon
many factors including, among other things, the development of production system
for collecting polymetallic nodules from the seafloor as well as the development
of our processing technology for the metallurgical treatment of such nodules,
the establishment of mineable reserves, the demonstration of commercial and
technical feasibility of seafloor polymetallic nodule collection and processing
systems, metal prices, and securing ISA exploitation contracts. While we have
obtained financing in the past, there is no assurance that such financing will
continue to be available on favorable terms, if at all.

Financing for the 2020 financial year

During the year ended December 31, 2020, we issued 6.6 million DeepGreen Common
Shares in private placements for total proceeds of $20.4 million. Inclusive in
this was a subscription from Allseas for 3.2 million DeepGreen Common Shares for
total proceeds of $10 million.

We further issued 3.2 million DeepGreen Common Shares for services to Allseas at
a price of $3.11 per share for total value of $10.0 million and 4.7 million
DeepGreen Common Shares for marine vessel services to Maersk to settle invoiced
cost of $5.1 million at an agreed upon contract price of $1.08 per share. Such
shares issued to Maersk were recognized for accounting purposes at $3.11 per
share.

During the year ended December 31, 2020, option holders exercised 2.6 million
stock options for total proceeds of $0.9 million at an average exercise price of
$0.42 per share.

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Fiscal 2021 Financings

During the year ended December 31, 2021, we issued 4.2 million DeepGreen Common
Shares to Maersk for marine vessel services. Such Common Shares were valued at
$6.05 per DeepGreen Common Share. Certain holders of stock options exercised
their rights in exchange for 6.3 million DeepGreen Common Shares. The weighted
average exercise price of these stock options was $0.67 per DeepGreen Common
Share resulting in total proceeds of $4.3 million.

During February 2021, we raised a total of $26 million through convertible
debentures financing. The convertible debentures bear interest at the rate of
7.0% per annum, compounded annually, with a maturity date that is 24 months from
the date of the financing. The debentures were automatically converted into
DeepGreen Common Shares immediately prior to the Business Combination at the
conversion price of $8.64 per share.

On February 18, 2021, debentures totaling $0.5 million were converted into
50,000 DeepGreen Common Shares, and then converted into 57,894 of our common
shares upon closing of the Business Combination. On September 9, 2021, the
Company issued 3,068,673 common shares, after adjustment for the exchange ratio,
in connection with the Business Combination, upon conversion of the outstanding
debentures consisting of $25.5 million and $1.0 million of principal and accrued
interest, respectively.

We expect our capital expenditures and working capital requirements to increase
materially in the near future as NORI and TOML seek to obtain exploitation
contracts, perform the required environmental studies, complete pre-feasibility
and feasibility studies. We believe that our cash on hand will be sufficient to
meet our working capital and capital expenditure requirements into the third
quarter of 2023. With these funds, we expect to be able to complete pilot nodule
system collection trials in 2022, complete our environmental impact studies by
2023, and lodge our application to move from exploration phase to exploitation
phase in the third quarter of 2023. We may, however, need additional cash
resources due to changes in business conditions or other developments,
including, but not limited to, deferral of approvals, capital cost escalation,
currently unrecognized technical and development challenges or changes in
external business environment. To the extent that our current resources are
insufficient to satisfy our cash requirements, we may need to seek additional
equity or debt financing. If the financing is not available, or if the terms of
financing are less desirable than we expect, we may be forced to delay our
exploration and/or exploitation activities or scale back our operations, which
could have a material adverse impact on our business and financial prospects.

Cash flow summary

Comparison of closed periods December 31, 2021 and December 31, 2020

The following table summarizes our sources and uses of cash for the three months and years ended December 31, 2021 and December 31, 2020.

Presented below is a summary of our operating, investing and financing cash
flows:

                                                For the Three Months Ended          For the Year Ended
                                                       December 31,                    December 31,
(thousands)                                       2021              2020            2021          2020
Net cash (used in) operating activities      $     (27,753)     $     (5,182)    $ (56,092)    $ (26,532)
Net cash (used in) investing activities      $            -     $           -    $  (3,842)    $    (607)
Net cash provided by financing activities    $            -     $         944    $  134,701    $   21,292
Increase (decrease) in cash                  $     (27,753)     $     (4,238)    $   74,767    $  (5,847)


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Full year 2021 versus full year 2020

Cash flows used in operating activities

Net cash used in operating activities for the year ended December 31, 2021 was
$56.1 million, attributable to a net loss of $141.3 million, a net change in net
operating assets and liabilities of $18.7 million and non-cash adjustments of
$66.5 million. Non-cash adjustments primarily consisted of $12.8 million for the
value of shares issued to Maersk and $60.3 million of share-based payments
related to the value of the incentive stock options and RSUs recognized during
the year ended December 31, 2021. The change in our net operating assets and
liabilities was primarily due to a $22.0 million increase in accounts payable
and accrued liabilities due to the timing of payments.

Net cash used in operating activities for the year ended December 31, 2020 was
$26.5 million, attributable to a net loss of $56.6 million and a net change in
net operating assets and liabilities of $2.4 million and non-cash adjustments of
$27.7 million. Non-cash adjustments primarily consisted of $10.0 million
expensed for the value of shares issued to Allseas and Maersk as described
above, $12.9 million for the value of shares issued to Maersk at the end of
2020, $4.1 million of share-based payments related to the value of the incentive
stock options recognized during the year ended December 31, 2020, and
$0.6 million for amortization of equipment. The change in our net operating
assets and liabilities was primarily due to a $2.5 million increase in accounts
payable and accrued liabilities due to the timing of payments.

Cash flows used in investing activities

Net cash used in investing activities for the year ended December 31, 2021 was
$3.8 million and related to the payments made to DSMF for the deferred
consideration that became due during the period. As at December 31, 2021 there
was no amount outstanding for the deferred consideration pertaining to TOML
Acquisition. We also spent $0.4 million for the purchase of equipment.

Net cash used in investing activities for the year ended December 31, 2020 was
$0.6 million and related to the initial payments made to DSMF in connection with
the TOML Acquisition.

Cash flows generated by financing activities

Net cash provided by financing activities for the year ended December 31, 2021
has been $134.7 million related to the product of $104.5 million of the Business Combination, the proceeds of $26.0 million the issuance of convertible debentures and $4.2 million exercise of incentive stock options.

Net cash provided by financing activities for the year ended December 31, 2020
was $21.3 million related to proceeds from private placements of $20.3 million
and $0.9 million from the exercise of incentive stock options.

Contractual obligations and commitments

NORI exploration contract

As part of the NORI Exploration Contract with the ISA, NORI submitted a periodic
review report to the ISA in 2021, covering the 2017-2021 period.  NORI had
committed to spend $5 million over the five-year period from 2017 to 2021, which
it has exceeded, spending close to $167 million (including over $77 million
spent in 2021). The periodic review report included a summary of work completed
over the five-year period and a program of activities and estimated budget for
the next five-year period.  The report is being reviewed by the ISA.

Marawa Option Agreement and Services Agreement

As part of DGE's Marawa Option Agreement and Services Agreement with Marawa with
respect to the Marawa Area, Marawa committed to spend a defined amount of funds
on exploration activities on an annual basis. The commitment for fiscal 2021 and
2020 was Australian dollar $2 million and Australian dollar $1 million,
respectively. The spending commitment for both years has been met.  The
commitment for fiscal 2022, 2023 and 2024 is Australian dollar $1 million,
Australian dollar $3 million and Australian dollar $2 million, respectively.
Such commitment is negotiated with the ISA for five-year plans and is subject to
regular periodic reviews. Marawa

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is in the process of preparing to submit its 5-year periodic review report to
the ISA.  Due to uncertainty on the economic potential of the Marawa Contract
Area, Marawa is currently considering conducting another exploration campaign to
increase the geological knowledge or is considering to seek a new area. Marawa
expects to finalize its decision in 2022. Marawa has delayed its 2022 geological
and environmental work programs until it determines how it will move forward. We
expect that the offshore engineering, onshore engineering and training work
programs will continue to be advanced subject to any limitations posed by the
ongoing pandemic.

TOML Exploration Contract
As part of the TOML Exploration Contract, TOML submitted a periodic review
report to the ISA in 2021, covering the 2017-2021 period. The periodic review
report included a summary of work completed over the five-year period just
completed and a program of activities and estimated budget for the next
five-year period of $44 million. TOML had committed to spend $30.0 million over
the five-year period from 2017 to 2021. Such commitment has flexibility where
the amount can be reduced by the ISA and such reduction would be dependent upon
various factors including the success of the exploration programs and the
availability of funding.

For the year 2021, we had spent approximately $12.6 million under the TOML exploration contract, bringing total expenditure over five years to approximately $17.8 million from 2017 to 2021.

TOML has submitted its periodic five-year review which includes the next five-year work program, with both program periods under consideration by the ISA.

Regulatory obligations relating to exploration contracts

Each of TOML and NORI require sponsorship from their host sponsoring nations,
Tonga and Nauru, respectively. 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 nation must maintain effective supervision and
regulation over such sponsored contractor. Each of TOML and NORI is subject to
the registration and incorporation requirements of these nations. In the event
the sponsorship is otherwise terminated, such subsidiary will be required to
obtain new sponsorship from another nation that is a member of the ISA. Failure
to obtain such new sponsorship would have a material impact on the operations of
such subsidiary and us.

Sponsorship Agreements

On July 5, 2017, Nauru, the Nauru Seabed Minerals Authority and NORI entered
into the NORI Sponsorship Agreement formalizing certain obligations of the
parties in relation to NORI's exploration and potential exploitation of the NORI
Area. Upon reaching the minimum recovery level within the exploitation contract
area, NORI will pay Nauru a seabed mineral recovery payment based on the
polymetallic nodules recovered from the exploitation contract area. In addition,
NORI will pay an administration fee each year to Nauru for such administration
and sponsorship, which is subject to review and increase in the event NORI is
granted an ISA exploitation contract.

On March 8, 2008, Tonga and TOML entered into the TOML Sponsorship Agreement
formalizing certain obligations of the parties in relation to TOML's exploration
and potential exploitation of the TOML Area. Upon reaching the minimum recovery
level within the exploitation contract area, TOML has agreed to pay Tonga a
seabed mineral recovery payment based on the polymetallic nodules recovered from
the exploitation contract area. In addition, TOML has agreed to pay the
reasonable direct costs incurred by Tonga to administer the obligations of Tonga
to the ISA. On September 23, 2021, Tonga updated the TOML Sponsorship Agreement
harmonizing the terms of its engagement with TOML with those held by NORI with
Nauru.

Allseas Agreements

On March 29, 2019, we entered into a strategic alliance with Allseas to develop
a system to collect, lift and transport nodules from the seafloor to shore and
agreed to enter into a nodule collection and shipping agreement whereby Allseas
would provide commercial services for the collection of the first 200 million
metric tonnes of polymetallic nodules on a cost plus 50% profit basis. In
furtherance of this agreement, on July 8, 2019, we entered into a Pilot Mining
Test Agreement with Allseas ("PMTA"), which was amended on three occasions in
2020 and 2021, to develop and deploy a PMTS, successful completion of which is a
prerequisite for our application

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for an exploitation contract with the ISA. Under the PMTA, Allseas agreed to
cover the development cost of the project in exchange for a payment from us upon
successful completion of the pilot trial of the PMTS in NORI Area D.

On March 16, 2022, NORI and Allseas entered into a non-binding term sheet for
the development and operation of commercial nodule collection system The pilot
nodule collection system developed and currently being tested by Allseas and is
expected to be upgraded to a commercial system with a targeted production
capacity of 1.3 million tonnes of wet nodules per year with expected production
readiness by the fourth quarter of 2024.  NORI and Allseas intend to equally
finance all costs related to developing and getting the first commercial system.
 Once in production, NORI expects to pay Allseas a nodule collection and
transshipment fee estimated at approximately EUR 150 per wet tonne in the first
year of operations and expected to be reduced as Allseas scales up production to
1.3 million wet tonnes per year. The parties intend to further detail and revise
these cost estimates in the definitive agreement contemplated by the non-binding
term sheet, which the parties expect to enter into no later than December 31,
2022 following the completion of the planned pilot collection tests.  Subject to
the necessary regulatory approvals Allseas and NORI also intend to investigate
acquiring a second production vessel similar to the Hidden Gem, a Samsung 10000,
with the potential for it to be engineered to support a higher production rate
of three million tonnes of wet nodules. There can be no assurances, however,
that we will enter into definitive agreements 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
definitive agreements are 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 December 31, 2021, 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 warrants to purchase 11.6 million common shares at a
nominal exercise price per share in March 2021 and (d) $10 million in cash in
October 2021, following the closing of the Business Combination and meeting
certain progress targets on the PMTS.

As of December 31, 2021, we had the following remaining payment obligations to
Allseas under the PMTA: (a) $10 million on the later of (i) January 1, 2022, and
(ii) confirmation of successful completion of the North Sea drive test; and (b)
$10 million upon successful completion of the pilot trial of the PMTS in NORI
Area D.

Maersk Agreement

Effective March 15, 2017, we entered into a strategic partnership with Maersk to
undertake the exploration, environmental baseline and offshore testing required
to support development of feasibility studies for economic production of
polymetallic nodules from the CCZ. Under the agreement, Maersk provided vessel
services and project management services, which enabled us to undertake the
various offshore campaigns to support required pre-feasibility studies. During
these offshore campaigns, we undertook baseline studies required to complete an
ESIA, collected nodules for metallurgical test work and collected samples and
survey data for resource evaluation. The invoiced cost related to the vessel was
settled through issuance of common shares at an agreed upon price of $1.08 per
common share. Project management services provided by Maersk for managing these
offshore campaigns are paid in cash.

On March 3, 2021, the agreement with Maersk was amended whereby all costs
incurred on or after February 5, 2021, pertaining to the use of the marine
vessel, would be paid in cash rather than through issuance of common shares.
Under this amendment, Maersk also agreed that amounts owed to Maersk for
services rendered through February 5, 2021 in the aggregate amount of
$4.6 million had been satisfied by the issuance of 4.2 million common shares at
a contractual price per share of $1.08.

Our agreement with Maersk ended pursuant to its terms in January 2022. We are
seeking proposals from third parties to provide a survey vessel, and specialized
ROV and AUV services required to support the implementation of the collector
test monitoring survey planned for 2022.

Direct debit agreement

On May 25, 2012, DGE and Glencore International AG ("Glencore") entered into a
copper offtake agreement and a nickel offtake agreement. DGE has agreed to
deliver to Glencore 50% of the annual quantity of copper and nickel produced by
a DGE-owned facility from nodules derived from the NORI Area at London Metal
Exchange referenced market pricing with allowances for product quality and
delivery location. Either party may terminate the agreement upon a material
breach or insolvency of the other party. Glencore may also terminate the
agreement by giving twelve months' notice.

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Off-balance sheet arrangements

We are not party to any off-balance sheet arrangements.

Significant Accounting Policies and Estimates

Our financial statements have been prepared in accordance with U.S. GAAP. In the
preparation of these financial statements, we are required to use judgment in
making estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the financial statements, as well as the reported expenses incurred
during the reporting periods.

We consider an accounting judgment, estimate or assumption to be critical when
(1) the estimate or assumption is complex in nature or requires a high degree of
judgment and (2) the use of different judgments, estimates and assumptions could
have a material impact on the consolidated financial statements. Our significant
accounting policies are described in Note 2 to our audited consolidated
financial statements included in this Annual Report on Form 10-K. We have the
critical accounting policies and estimates which are described below.

Acquisition TOML

On March 31, 2020, we completed the TOML Acquisition and applied guidance from
ASC 805 to understand the accounting treatment regarding this acquisition and
make necessary judgements.

ASC 805 defines a business as inputs and processes, when applied to the inputs,
resulting in the creation of outputs. The key input acquired in connection with
the TOML Acquisition is the TOML Exploration Contract and the related
intellectual property. TOML Exploration Contract is in the exploration stage and
therefore does not produce outputs. ASC 805 requires that where there is no
output, there must be both an input and substantive process which must include
an organized workforce with the necessary skills, experience, and knowledge to
develop and convert the inputs into outputs, for a group of assets to be
considered a business. An organized workforce was not included in the TOML
Acquisition and therefore our management deemed that the TOML Acquisition was
not a business acquisition and only an acquisition of a group of assets.

Our position is supported by ASC 805's guidance that if substantially all of the
fair value of the gross assets acquired is concentrated in a single identifiable
asset or a group of similar identifiable assets, the set is not considered a
business. We determined that the value of TOML Acquisition was substantially
concentrated in the TOML Exploration Contract.

Our management also determined that other assets acquired (which included other
intangible assets, such as patents and trademarks) were connected to the TOML
Exploration Contract and would not hold value by themselves. Consequently, the
total cost of the transaction was primarily allocated to exploration contracts.

Value of common share-based payments

We recognize the cost of share-based awards granted to employees and directors
based on the estimated grant-date fair value of the awards. We determine the
fair value of stock options using the Black-Scholes option pricing model, which
is impacted by the following assumptions:

Fair value of the common shares on the date of grant – We used the price of the

? latest private placements to assess the value of our shares as of the date of

the granting of incentive stock options.

? Expected duration – We have used the duration of the grant when calculating the

term due to insufficient historical exercise data.

Expected volatility – Because our common stock was not actively traded, the

 ? volatility is based on a benchmark of comparable companies within the mining
   industry.


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Expected dividend yield – Dividend rate used is zero because we never paid

? no cash dividends on our common stock and does not expect to do so in

a foreseeable future.

Risk-free interest rate – The interest rates used are based on the implicit rate

? yield available on Canadian Treasury zero-coupon issues with an equivalent

remaining term equal to the expected life of the award.


This valuation approach involves the use of estimates, judgments and assumptions
that are subjective, such as those regarding the probability of future events.
Changes in these estimates and assumptions impact our valuation as of the
valuation date and may have a material impact on the valuation of the Company's
common shares. Changes in these assumptions used to determine the fair value of
incentive stock options, including the vesting timeline of granted stock
options, could have a material impact on our loss and comprehensive loss.

Valuation of Warrant Indebtedness

We re-measure the fair value of the Private Warrants at the end of each
reporting period. The fair value of the Private Warrants is estimated using a
Black-Scholes option pricing model whereby the expected volatility is estimated
using a binomial model based on consideration of the implied volatility from the
Company's Public Warrants adjusted to account for the call feature of the Public
Warrants at prices above $18.00 during 20 trading days within any 30-trading day
period.

Recent accounting pronouncements

See Note 2 to the audited consolidated financial statements included in this
Annual Report on Form 10-K for more information about recent accounting
pronouncements, the timing of their adoption, and our assessment, to the extent
we have made one, of their potential impact on our financial condition and our
results of operations and cash flows.

Emerging Growth Company Status

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.

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. Following
the closing of the Business Combination, we expect to remain an emerging growth
company at least through the end of the 2021 fiscal year and we expect to
continue to take advantage of the benefits of the extended transition period,
although we may decide to early adopt such new or revised accounting standards
to the extent permitted by such standards. This may make it difficult or
impossible to compare our financial results with the financial results of
another public company that is either not an emerging growth company or is an
emerging growth company that has chosen not to take advantage of the extended
transition period exemptions because of the potential differences in accounting
standards used.

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