FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-40581 (Exact name of Registrant as specified in its charter) Grand Duchy of Luxembourg (Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices) Warrants, each whole warrant exercisablefor one Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No☒ As of We make forward-looking statements in this Quarterly Report on Form 10-Q (this “Report”) and in documents incorporated herein by reference. All statements, other than statements of present or historical fact included in or incorporated by reference in this Report, regarding FREYR Battery’s future financial performance, as well as our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, and objectives of management are forward-looking statements. When used in this Report, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would”, the negative of such terms, and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations, assumptions, hopes, beliefs, intentions, and strategies regarding future events and are based on currently available information as to the outcome and timing of future events. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to our business. These forward-looking statements are based on information available as of the date of this Report, and current expectations, forecasts, and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements in this Report and in any document incorporated herein by reference should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include: CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In Thousands, Except FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In See accompanying FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) See accompanying NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FREYR Battery New York Stock Exchange. On July 9, 2021, FREYR The Business Combination was accounted for as a reverse As a result, the condensed consolidated financial statements included herein reflect (i) the historical operating results of FREYR Legacy prior to the Business Combination, (ii) the combined results of In accordance with These unaudited SEC on March 9, 2022. Restricted cash consists of funds held in a restricted account for payment of upfront rental lease deposits and income tax withholdings to the Norwegian government, payable every other month. A lease is a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease classification as short-term lease, operating lease or finance lease is made at the lease inception. The Company As discussed in Note 1 Upon the closing of the Business Combination, In connection with the Business Combination, on January 29, 2021, Alussa and The Business Combination was accounted for as a reverse recapitalization in accordance with 4. PROPERTY AND EQUIPMENT, NET 8. WARRANTS The Private Warrants are identical to the Public Warrants, except that so long as they are held by the Sponsor or any of its permitted transferees, the Private Warrants: (i) may be exercised for cash or on a cashless basis and (ii) shall not be redeemable by The following table sets forth, by level within the fair value hierarchy, the accounting of The Private Warrants outstanding on September 30, 2022 and December 31, 2021, were valued using the The Employee Awards – 2019 Plan FREYR Legacy had an Incentive Stock Option Plan (the “2019 Plan”) issued on September 11, 2019. According to the 2019 Plan, options or warrants could be granted to eligible employees, and a total of 895,190 ordinary shares could be Employee Awards – 2021 Plan CEO Option Awards On June 16, 2021, On February 12, 2021, On March 1, 2021, The The expenses incurred in relation to the consulting services provided for the three and nine months ended September 30, 2021 were $4.0 million and $4.3 million, Consulting Agreement Concurrent with the consummation of the Business Combination, In 2020, The following table discloses the outstanding securities that could potentially dilute basic net loss per share in the future that were not included in the computation of diluted net loss per share as the impact would be 2,176,081 2,176,081 FREYR Battery (“FREYR,” the “Company”, “we”, or “us”) is a developer of clean, next-generation battery cell production capacity. Our mission and vision are to accelerate the decarbonization of Operating General and administrative General and administrative Research and development (“R&D”) t of an increase in our stock price. Financial Condition, Liquidity and Capital Resources Our Cash Flow Summary The following table summarizes our cash flows Net cash used in operating activities was $73.0 million for the nine months ended September 30, 2022, compared to $35.6 million for the nine months ended September 30, Emerging Growth Company Status Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We qualify as an emerging growth company, as defined in the JOBS Act, and therefore intend to take advantage of certain exemptions from various public company reporting requirements, including delaying the adoption of new or revised accounting standards until those standards apply to private companies. This may make a comparison of our condensed consolidated financial statements with another public company that is either not an emerging growth company or is an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used. Limitations on Effectiveness of Controls and Procedures We maintain disclosure controls and procedures Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Evaluation of Disclosure Controls and Procedures As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the three months ended September 30, From time to time, we may be involved in litigation relating to claims arising in the ordinary course of our business. Not applicable. The documents listed below are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K). 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 thereunto duly authorized.FREYR BatteryLuxembourg Not Applicable (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 412F, route d’Esch, L-2086 Luxembourg00 +352 46 61 11 3721Title of each class Trading Symbol(s) Name of each exchange on which registered Ordinary Shares, without nominal value FREY The New York Stock Exchange
Ordinary Share at an exercise price of $11.50FREY WS FREY WS The New York Stock Exchange ☐ No ☒Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☒ Non-accelerated filer☒ Smaller reporting company☒ ☒ Emerging growth company October 22, 2021,November 10, 2022, the registrant had 116,440,191116,705,234 ordinary shares, without nominal value, outstanding.TABLE OF CONTENTSPAGE 20163120312132213232323333333423i●Changes adversely affecting the battery industry and the development of existing or new technologies;●The effect of the COVID-19 pandemic on our business;●Our ability to recognize the benefits of the Business Combination (as defined herein), which may be affected by, among other things, competition and our ability to grow and manage growth profitably;●The failure of 24M Technologies, Inc. (“24M”) technology or our batteries to perform as expected;●24M or other future counterparties will provide similar licenses to other manufacturers which will increase our competition;●Our ability to manufacture battery cells and to develop and increase our production capacity in a cost-effective manner;●The electrification of energy sources does not develop as expected, or develops more slowly than expected;●Technological developments in existing technologies or new developments in competitive technologies that could adversely affect the demand for our battery cells;●General economic conditions;●Increases in the cost of electricity or raw materials and components;●Our ability to protect our intellectual property;●Changes in applicable laws or regulations, including environmental and export control laws;●Our ability to retain key employees;ii•●Our business strategy and plans;●Our ability to target and retain customers and suppliers;●The failure to build our finance infrastructure and improve our accounting systems and controls;●Our ability to assert, enforce and otherwise protect against unauthorized use of intellectual property rights licensed from 24M, which could result in our competitors using the intellectual property to offer products;●The outcome of any legal proceedings relating to our products and services, including intellectual property or product liability claims;●Whether and when we might pay dividends;●Our ability to source materials from an ethically- and sustainably-sourced supply chain;●The result of future financing efforts;●The cost-competitiveness, carbon footprint, energy density and charge-rates of our batteries;●The timing, capacity, configurations and locations of our battery factories and production lines;●The planned construction and production dates for the customer qualification plant and the planned construction period for each of our Gigafactories;●The cost to build the customer qualification plant and the Gigafactories;●Our expectations for our general and administrative expenses;●Our expectations about market supply, demand and other dynamics, including the number of industrial-scale battery manufacturing facilities in Norway, supply costs, regulatory developments, increased globalization, consolidation in the automotive and energy industries; The use and mix of lithium-nickel-manganese-oxide and lithium-iron-phosphate battery chemistries, including shifts in the battery chemistry mix due to conversations with potential customers;●The market segments that we will initially target;●Whether we will successfully enter into or obtain, and the impact of failing to sign or obtain, customer offtake agreements, necessary consents, other commercial agreements, permits or licenses in a timely manner or at all;●Our ability to enter successful joint venture partnerships and licensing arrangements; and●Our ability to commercialize 24M and other technology.ItemFinancial Statements.FINANCIAL STATEMENTS.(Unaudited) September 30,
2022 December 31,
2021 ASSETS Current assets: Cash and cash equivalents $ 416,431 $ 563,956 Restricted cash 2,160 1,671 Prepaid assets 9,397 15,882 Other current assets 9,317 1,282 Total current assets 437,305 582,791 Property and equipment, net 90,392 21,062 Convertible note 20,498 20,231 Equity method investments 1,807 2,938 Right-of-use asset under operating leases 12,730 — Other long-term assets 9 11 Total assets $ 562,741 $ 627,033 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 2,795 $ 3,813 Accrued liabilities and other 34,026 15,077 Accounts payable and accrued liabilities - related party 799 3,316 Deferred income 1,306 1,380 Share-based compensation liability 8,227 2,211 Total current liabilities 47,153 25,797 Warrant liability 94,712 49,124 Operating lease liability 9,933 — Long-term share-based compensation liability — 6,627 Total liabilities 151,798 81,548 Commitments and contingencies Shareholders’ equity: Ordinary share capital, no par value, 245,000 ordinary shares authorized and 116,854 issued as of both September 30, 2022 and December 31, 2021 and 116,704 and 116,854 ordinary shares outstanding as of September 30, 2022 and December 31, 2021, respectively 116,854 116,854 Additional paid-in capital 540,561 533,418 Treasury stock (1,052) — Accumulated other comprehensive (loss) income (17,071) (524) Accumulated deficit (228,349) (104,263) Total shareholders' equity 410,943 545,485 Total liabilities and shareholders' equity $ 562,741 $ 627,033 As of
September 30, As of
December 31, 2021 2020 Assets Current assets Cash and cash equivalents $ 622,582 $ 14,749 Restricted cash 879 196 Prepaid assets 6,486 464 Other current assets 709 442 Total current assets 630,656 15,851 Property and equipment, net 5,606 80 Other long-term assets 11 - Total assets $ 636,273 $ 15,931 Liabilities and shareholders’ equity Current liabilities Accounts payable $ 3,147 $ 888 Accrued liabilities 9,286 2,153 Accounts payable and accrued liabilities - related party 1,040 322 Redeemable preferred shares - 7,574 Deferred income 1,387 - Total current liabilities 14,860 10,937 Warrant liability 38,438 - Other long-term liabilities - 38 Total liabilities 53,298 10,975 Commitments and contingencies (Note 6) Shareholders’ equity Additional paid-in capital 658,868 15,183 Accumulated other comprehensive income 334 658 Accumulated deficit (76,227 ) (10,885 ) Total shareholders’ equity 582,975 4,956 Total liabilities and shareholders’ equity $ 636,273 $ 15,931 notesNotes to condensed consolidated financial statementsShare and per Share Amounts)Three months ended
September 30,Nine months ended
September 30,2022 2021 2022 2021 Operating expenses: General and administrative $ 25,124 $ 30,057 $ 77,888 $ 46,245 Research and development 3,253 5,257 9,194 11,209 Equity in losses from investee 668 — 1,131 — Total operating expenses 29,045 35,314 88,213 57,454 Loss from operations (29,045) (35,314) (88,213) (57,454) Other income (expense): Warrant liability fair value adjustment (70,292) (11,173) (45,588) (11,173) Redeemable preferred shares fair value adjustment — — — 75 Convertible note fair value adjustment (224) — 267 — Interest income 71 51 132 59 Interest expense (11) (1) (43) (1) Foreign currency transaction gain 4,325 1,015 5,415 827 Other income, net 1,326 3 3,944 2,325 Total other income (expense) (64,805) (10,105) (35,873) (7,888) Loss before income taxes (93,850) (45,419) (124,086) (65,342) Income tax expense — — — — Net loss $ (93,850) $ (45,419) $ (124,086) $ (65,342) Weighted average ordinary shares outstanding - basic and diluted 116,704 108,713 116,795 61,467 Net loss per share - basic and diluted $ (0.80) $ (0.42) $ (1.06) $ (1.06) Other comprehensive loss: Net loss $ (93,850) $ (45,419) $ (124,086) $ (65,342) Foreign currency translation adjustments (9,089) (558) (16,547) (324) Total comprehensive loss $ (102,939) $ (45,977) $ (140,633) $ (65,666) (Unaudited) For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Operating expenses: General and administrative $ 30,027 $ 1,666 $ 46,191 $ 3,453 Research and development 5,257 283 11,209 371 Depreciation 30 4 54 10 Total operating expenses 35,314 1,953 57,454 3,834 Loss from operations (35,314 ) (1,953 ) (57,454 ) (3,834 ) Other income (expense): Redeemable preferred shares fair value adjustment - - 75 - Interest income 51 - 59 - Warrant liability fair value adjustment (11,173 ) (350 ) (11,173 ) (575 ) Convertible notes fair value adjustment - (165 ) - (199 ) Interest expense (1 ) (11 ) (1 ) (53 ) Foreign currency transaction (loss) gain 1,015 4 827 - Other income 3 6 2,325 277 Loss before income taxes (45,419 ) (2,469 ) (65,342 ) (4,384 ) Income tax expense - - - - Net loss (45,419 ) (2,469 ) (65,342 ) (4,384 ) Other comprehensive income (loss): Foreign currency translation adjustments (558 ) (23 ) (324 ) 106 Total comprehensive loss $ (45,977 ) $ (2,492 ) $ (65,666 ) $ (4,278 ) Basic and diluted weighted-average ordinary shares outstanding 108,713,120 32,975,533 61,466,975 25,321,078 Basic and diluted net loss attributable to ordinary shareholders (Note 14) $ (0.42 ) $ (0.07 ) $ (1.06 ) $ (0.17 ) notesNotes to condensed consolidated financial statementsThousands, Except Share Amounts)Thousands)Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Treasury Stock Accumulated Deficit Total Shareholders’ Equity (Deficit) Ordinary Shares Shares Amount Balance as of January 1, 2021 37,452 $ — $ 15,183 $ 658 $ — $ (10,885) $ 4,956 Share-based compensation expense — — 4,617 — — — 4,617 Net loss — — — — — (11,887) (11,887) Other comprehensive income — — — 57 — — 57 Balance as of March 31, 2021 37,452 — $ 19,800 $ 715 $ — $ (22,772) $ (2,257) Share-based compensation expense — — 528 — — — 528 Net loss — — — — — (8,036) (8,036) Other comprehensive income — — — 177 — — 177 Balance as of June 30, 2021 37,452 — $ 20,328 $ 892 $ — $ (30,808) $ (9,588) Share-based compensation expense — — 8,349 — — — 8,349 Norway Demerger — — (2,897) — — — (2,897) Issuance of ordinary shares in settlement of FREYR Legacy preferred shares 1,490 — 14,895 — — — 14,895 PIPE Investment, net of transaction costs 60,000 — 579,000 — — — 579,000 Business Combination, net of redemptions and transaction costs 17,498 — 39,192 39,192 Net loss — — — — — (45,419) (45,419) Other comprehensive loss — — — (558) — — (558) Balance as of September 30, 2021 116,440 — $ 658,868 $ 334 $ — $ (76,227) $ 582,975 Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Treasury Stock Accumulated Deficit Total Shareholders’ Equity (Deficit) Ordinary Shares Shares Amount Balance as of January 1, 2022 116,854 $ 116,854 $ 533,418 $ (524) $ — $ (104,263) $ 545,485 Share-based compensation expense — — 850 — — — 850 Net loss — — — — — (34,907) (34,907) Other comprehensive income — — — 333 — — 333 Balance as of March 31, 2022 116,854 116,854 $ 534,268 $ (191) $ — $ (139,170) $ 511,761 Share-based compensation expense — — 5,371 — — — 5,371 Net income — — — — — 4,671 4,671 Repurchase of shares — — — — (1,052) — (1,052) Other comprehensive loss — — — (7,791) — — (7,791) Balance as of June 30, 2022 116,854 116,854 $ 539,639 $ (7,982) $ (1,052) $ (134,499) $ 512,960 Share-based compensation expense — — 922 — — — 922 Net loss — — — — — (93,850) (93,850) Other comprehensive loss — — — (9,089) — — (9,089) Balance as of September 30, 2022 116,854 116,854 $ 540,561 $ (17,071) $ (1,052) $ (228,349) $ 410,943 (Unaudited) Ordinary Shares Additional Paid-in Accumulated Other Comprehensive Accumulated Total Shareholders’ Shares Amount Capital Income Deficit Equity Balance as of January 1, 2020 21,250,776 $ - $ 335 $ (4 ) $ (1,280 ) $ (949 ) Net loss - - - - (895 ) (895 ) Other comprehensive income - - - 246 - 246 Balance as of March 31, 2020 21,250,776 $ - $ 335 $ 242 $ (2,175 ) $ (1,598 ) Capital contributions from Rana municipality, net of issuance costs 938,074 - 995 - - 995 Net loss - - - - (1,020 ) (1,020 ) Other comprehensive income - - - (117 ) - (117 ) Balance as of June 30, 2020 22,188,850 $ - $ 1,330 $ 125 $ (3,195 ) $ (1,740 ) Capital Contributions, net of issuance costs 14,868,057 - 12,259 - - 12,259 Share-based compensation expense - - 447 - - 447 Net loss - - - - (2,469 ) (2,469 ) Other comprehensive income - - - (23 ) - (23 ) Balance as of September 30, 2020 37,056,907 $ - $ 14,036 $ 102 $ (5,664 ) $ 8,474 Ordinary Shares Additional Paid-in Accumulated Other Comprehensive Accumulated Total Shareholders’ Shares Amount Capital Income Deficit Equity Balance as of January 1, 2021 37,452,359 $ - $ 15,183 $ 658 $ (10,885 ) $ 4,956 Share-based compensation expense - - 4,617 - - 4,617 Net loss - - - - (11,887 ) (11,887 ) Other comprehensive income - - - 57 - 57 Balance as of March 31, 2021 37,452,359 $ - $ 19,800 $ 715 $ (22,772 ) $ (2,257 ) Share-based compensation expense - - 528 - - 528 Net loss - - - - (8,036 ) (8,036 ) Other comprehensive income - - - 177 - 177 Balance as of June 30, 2021 37,452,359 $ - $ 20,328 $ 892 $ (30,808 ) $ (9,588 ) Share-based compensation expense - - 8,349 - - 8,349 Norway Demerger - - (2,897 ) - - (2,897 ) Issuance of ordinary shares in settlement of FREYR Legacy preferred shares 1,489,500 - 14,895 - - 14,895 PIPE Investment, net of transaction costs 60,000,000 - 579,000 - - 579,000 Business Combination, net of redemptions and transaction costs 17,498,332 - 39,192 - - 39,192 Net loss - - - - (45,419 ) (45,419 ) Other comprehensive income - - - (558 ) - (558 ) Balance as of September 30, 2021 116,440,191 $ - $ 658,868 $ 334 $ (76,227 ) $ 582,975 notesNotes to condensed consolidated financial statements(Unaudited) Nine months ended September 30, 2022 2021 Cash flows from operating activities: Net loss $ (124,086) $ (65,342) Adjustments to reconcile net loss to cash used in operating activities: Share-based compensation expense 9,280 14,367 Depreciation 298 54 Reduction in the carrying amount of right-of-use assets 1,096 — Warrant liability fair value adjustment 45,588 11,173 Redeemable preferred shares fair value adjustment — (74) Convertible note fair value adjustment (267) — Equity in losses from investee 1,131 — Foreign currency transaction net unrealized gain (4,864) — Other — (54) Changes in assets and liabilities: Prepaid assets 4,054 (6,065) Other current assets (11,113) (236) Accounts payable and accrued liabilities 5,692 8,365 Accounts payable and accrued liabilities - related party 820 738 Other current liabilities (2) — Deferred income 182 1,431 Operating lease liability (802) — Net cash used in operating activities (72,993) (35,643) Cash flows from investing activities: Proceeds from property related grants 10,461 — Purchases of property and equipment (77,687) (4,099) Investments in equity method investee (3,000) — Purchases of other long-term assets — (12) Net cash used in investing activities (70,226) (4,111) Cash flows from financing activities: Repurchase of treasury shares (1,052) — Proceeds from Business Combination — 70,836 Proceeds from PIPE Investment — 600,000 Issuance cost — (26,334) Payments for the Norway Demerger — (3,002) Proceeds from issuance of redeemable preferred shares — 7,500 Net cash (used in) provided by financing activities (1,052) 649,000 Effect of changes in foreign exchange rates on cash, cash equivalents, and restricted cash (2,765) (730) Net (decrease) increase in cash, cash equivalents, and restricted cash (147,036) 608,516 Cash, cash equivalents, and restricted cash at beginning of period 565,627 14,945 Cash, cash equivalents, and restricted cash at end of period $ 418,591 $ 623,461 Significant non-cash investing and financing activities: Accrued purchases of property and equipment $ 18,514 $ — Settlement of accrued liabilities through issuance of non-employee warrants — 460 Reconciliation to consolidated balance sheets: Cash and cash equivalents $ 416,431 $ 622,582 Restricted cash 2,160 879 Cash, cash equivalents, and restricted cash $ 418,591 $ 623,461 For the nine months ended September 30, 2021 2020 Cash flows from operating activities Net loss $ (65,342 ) $ (4,384 ) Adjustments to reconcile net loss to cash used in operating activities: Share-based compensation expense 14,367 447 Depreciation 54 10 Redeemable preferred shares fair value adjustment (74 ) - Foreign currency transaction loss on redeemable preferred shares 28 - Warrant liability fair value adjustment 11,173 575 Convertible notes fair value adjustment - 199 Other (82 ) 81 Changes in assets and liabilities: Prepaid assets (6,065 ) (66 ) Other current assets (236 ) 129 Accounts payable and accrued liabilities 8,365 (385 ) Accounts payable and accrued liabilities - related party 738 11 Deferred income 1,431 - Other long-term liabilities - 7 Net cash used in operating activities (35,643 ) (3,376 ) Cash flows from investing activities Purchases of property and equipment (4,099 ) (35 ) Purchases of other long-term assets (12 ) - Net cash used in investing activities (4,111 ) (35 ) Cash flows from financing activities Proceeds from Business Combination 70,836 - Proceeds from PIPE Investment 600,000 - Capital contributions - ordinary shares - 12,349 Issuance cost (26,334 ) (799 ) Proceeds from issuance of redeemable preferred shares 7,500 - Payments for the Norway Demerger (3,002 ) - Proceeds from issuance of convertible debt - 1,104 Proceeds from issuance of convertible debt - related party - 427 Payments related to convertible debt - (125 ) Net cash provided by financing activities 649,000 12,956 Effect of changes in foreign exchange rates on cash, cash equivalents, and restricted cash (730 ) 3 Net increase in cash, cash equivalents, and restricted cash 608,516 9,548 Cash, cash equivalents, and restricted cash at beginning of period 14,945 257 Cash, cash equivalents, and restricted cash at end of period $ 623,461 $ 9,805 Reconciliation to consolidated balance sheets Cash and cash equivalents $ 622,582 $ 9,740 Restricted cash 879 65 Cash, cash equivalents, and restricted cash $ 623,461 $ 9,805 notesNotes to condensed consolidated financial statements.FREYR Battery(Unaudited)1. Business and Basis of Presentation(the(“FREYR,” the “Company”, “FREYR”“we”, or “we”“us”) was incorporated asis a public limited liability companydeveloper of clean, next-generation battery cell production capacity. Our mission and vision are to accelerate the decarbonization of global energy and transportation systems by producing clean, cost-competitive batteries. We are in the design and testing phase related to our battery production process and we are in the final stages of the construction of our Customer Qualification Plant (“société anonyme”) under the laws of Grand Duchy of Luxembourg on January 20, 2021. Pursuant to the business combination agreement (the “BCA”) entered into to effect a merger between Alussa Energy Acquisition Corp., a Cayman Islands exempted company (“Alussa”CQP”) and groundworks and foundation structures for our inaugural gigafactory (“Giga Arctic”), both located in Mo i Rana, Norway. As of September 30, 2022, we have not yet initiated manufacturing or derived revenue from our principal business activities., the Company. FREYR, a Luxembourg public limited liability company was formed to complete the Business Combination and related transactions and carry on the business of FREYR Legacy. FREYR serves as the successor entity to FREYR Legacy, the predecessor entity.FREYR’s mission and vision areThe merger was completed in multiple stages, pursuant to accelerate the decarbonizationterms of the transportation sectorBCA, which included among other things, the transfer of FREYR Legacy’s wind farm business to Sjonfjellet Vindpark Holding AS (“SVPH”), resulting in SVPH shares being held by FREYR Legacy’s shareholders. On July 8, 2021, FREYR’s ordinary shares and energy systems by delivering some ofwarrants began trading on the world’s cleanest and most cost-effective batteries. FREYR aims to produce some of the most cost-competitive batteries with the lowest carbon footprints, which could further support the acceleration of the energy transition. FREYR is currently working to develop an application of its in-licensed technology and planning the building of the battery factories in Mo i Rana, Norway. Following the investment decision of the Customer Qualification Plant (“CQP”), preparatory work is on-going in Mo i Rana, Norway. The CQP production line will be based on our in-licensed technology from 24M. As of September 30, 2021, FREYR has not derived revenue from its principal business activities. FREYR will initially target energy storage systems (“ESS”), marine applications, commercial vehicles and electric vehicles (“EV”) with slower charge requirements, and then plans to target additional markets, including consumer EVs, through both licensing and joint venture models. FREYR plans to produce faster charge battery cells for the broader consumer EV segment through the 24M platforms, as well as through the joint venture business model and potentially additional licensing partnerships.consummatedcompleted the Business Combination with FREYR Legacy and Alussa pursuant to the terms of the BCA dated January 29, 2021, by and between the Company, FREYR Legacy, Alussa, Alussa Energy Sponsor LLC (“Sponsor”), ATS AS (“Shareholder Representative”), Norway Sub 1 AS, a private limited liability company organized under the laws of Norway (“Norway Merger Sub 1”), Norway Sub 2 AS, a private limited liability company organized under the laws of Norway (“Norway Merger Sub 2”), Adama Charlie Sub, a Cayman Islands exempted company (“Cayman Merger Sub”) and the shareholders of FREYR Legacy named therein (the “Major Shareholders”).Pursuant to the terms of the BCA, among other things (a) FREYR Legacy’s wind farm business was transferred to Sjonfjellet Vindpark Holding AS (“SVPH”), a private limited liability company incorporated by way of a Norwegian demerger (the “Norway Demerger”), resulting in such business becoming held by FREYR Legacy’s shareholders through SVPH, (b) Alussa merged with and into Cayman Merger Sub, with Alussa continuing as the surviving entity and a wholly owned subsidiary of FREYR (the “Cayman Merger” and the “First Closing”), (c) following the First Closing, Alussa distributed all of its interests in Norway Merger Sub 1 to FREYR, (d) FREYR Legacy merged with and into Norway Merger Sub 2, with Norway Sub 2 continuing as the surviving entity (the “Norway Merger”), (e) FREYR acquired all preferred shares of Norway Merger Sub 1 (which were issued in exchange for the FREYR Legacy redeemable preferred shares as a part of the Norway Merger) from certain former holders of FREYR Legacy redeemable preferred shares in exchange for a number of newly issued shares of FREYR and (f) Norway Merger Sub 1 merged with and into FREYR, with FREYR continuing as the surviving entity (the “Cross-Border Merger”) (the events in (d), (e) and (f), the “Second Closing”).Alussa. In connection with the consummation of the transactions contemplated by the BCA, FREYR Legacy and Alussa became wholly-ownedwholly owned subsidiaries of FREYR. Following the First Closing on July 7, 2021, the Company’s ordinary shares and warrants began trading on the New York Stock Exchange.Basis of Presentation and Principles of ConsolidationThe Company’s condensed consolidated financial statements have been prepared in conformity with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).recapitalization in accordance with U.S. GAAP.recapitalization. Under this method of accounting, Alussa was treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the following factors: (i) FREYR Legacy’s existing operations comprisecomprised the ongoing operations of the combined company, (ii) FREYR Legacy’s senior management comprisescomprised the senior management of the combined company and (iii) no shareholder hashad control of the board of directors or a majority voting interest in the combined company. In accordance with guidance applicable to these circumstances, the Business Combination was treated as the equivalent of FREYR issuing shares for the net assets of Alussa, accompanied by a recapitalization. The net assets of Alussa were stated at historical cost, with no goodwill or other intangible assets recorded.the Company,FREYR, FREYR Legacy and Alussa following the closing of the Business Combination, (iii) the assets and liabilities of FREYR Legacy at their historical cost, (iv) the assets and liabilities of the CompanyFREYR and Alussa at their historical cost, which approximates fair value, and (v) the Company’sFREYR’s equity structure for all periods presented.ASCAccounting Standards Codification (“ASC”) 805,Business Combinations, guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the closing date, to reflect the number of shares of the Company’sFREYR’s ordinary shares issued to FREYR Legacy’s shareholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to FREYR Legacy’s ordinary shares prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination.the accountsall of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the condensedinformation required by GAAP for complete consolidated financial statements herein.Certain prior period balances and amounts have been reclassified to conform with the current period presentation in the condensed consolidated financial statements and the accompanying notes.2. Summary of Significant Accounting PoliciesUse of EstimatesThe preparation of the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, including those related to the valuation of its warrant liability, among others. The Company bases these estimates on historical experiences and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.Unaudited Condensed Consolidated Financial StatementsThe accompanying interim condensed consolidated balance sheet as of September 30, 2021, the interim condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021 and 2020, the interim condensed consolidated statements of shareholders’ equity for the nine months ended September 30, 2021 and 2020, and the interim condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020, are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements for the year ended December 31, 2021 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments necessary for the fair statementpresentation of the Company’s condensed consolidated financial statements for the periods presented. The financial data and other financial information disclosed in the notes to these condensed consolidated financial statements related to the three-month and nine-month periods are also unaudited. The results of operations for the three and nine months ended September 30, 20212022, are not necessarily indicative of the results to be expected for the full fiscal year or any other period. Although theending December 31, 2022. The condensed consolidated balance sheet as of December 31, 20202021, was derived from the audited annual consolidated financial statements as of December 31, 2020,2021. However, these interim condensed consolidated financial statements do not contain all of the footnote disclosures from the annual consolidated financial statements.interim condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s annual financial statementsAnnual Report on Form 10-K for the fiscal year ended December 31, 2020.2021 filed with the Private WarrantsLeasesevaluatedconsiders all relevant contractual provisions, including renewal and termination options, to determine the Private Warrants, whichterm of the lease. Renewal or termination options that are discussedreasonably certain of exercise by the lessee and those controlled by the lessor are included in Note 7 - Warrants, in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”.determining the lease term. The Company concluded thathas made an accounting policy election to present the Private Warrants should belease and associated non-lease operations as a single component based upon the predominant component. as derivative liabilities on the condensed consolidated balance sheetssheets. Expenses for short-term leases are recognized on a straight-line basis over the lease term in the consolidated statements of operations and measured at fair valuecomprehensive loss.closelease commencement date. Lease liabilities are initially recognized at the present value of the Business Combination andfuture lease payments during the expected lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, based on the information available at each reportingthe lease commencement date, in accordancedetermining the present value of lease payments. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with ASC 820,similar terms and payments, and in economic environments where the leased asset is located. The right-of-use asset is initially recognized at the amount of the initial measurement of the lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received, and any initial direct costs incurred by the Company. Right-of-use assets are recorded as other long-term assets in the consolidated balance sheets. Subsequent to initial recognition, the right-of-use asset is reflected net of amortization. Costs to get a leased asset to the condition and location necessary for its intended use are capitalized as leasehold improvements.fair valuethe expected term of the lease, and certain changes in assessments and contingencies. Subsequent to initial recognition, the operating lease liability is increased for the interest component of the lease liability and reduced by the lease payments made. Operating lease expenses are recognized as a single lease cost in the condensed consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term, which includes the interest component of the measurement of the lease liability and amortization of the right-of-use asset. period of change.Company’s operating expenses.Public Warrants3. BUSINESS COMBINATIONThe Company evaluated the Public Warrants, which are discussed in Note 7 - Warrants, in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”. The Company concluded that the Public Warrants would be equity classified at the close of the Business Combination.3. Business Combination–- Business and Basis of Presentation, we completed the Business Combination on July 9, 2021, the Company completed the Business Combination.2021. Immediately prior tobefore the closing of the Business Combination, all outstanding redeemable preferred shares of FREYR Legacy were converted into ordinary shares of the Company.FREYR. Upon the consummation of the Business Combination, each share of FREYR Legacy issued and outstanding was canceled and converted into the right to receive 0.179038 ordinary shares in the CompanyFREYR (the “Exchange Ratio”).the Company’sour articles of association were amended and restated to, among other things, increase the total number of authorized shares to 245,000,000 shares without par value.the CompanyFREYR entered into separate subscription agreements with a number of investors (each a “Subscriber”), pursuant to which the Subscribers agreed to purchase, and the CompanyFREYR agreed to sell to the Subscribers, an aggregate of 60,000,000 ordinary shares (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $600.0 million, in a private placement pursuant to the subscription agreements (the “PIPE Investment”). The PIPE Investment closed simultaneously with the consummation of the Business Combination. U.S. GAAP. Under this method of accounting, Alussa was treated as the “acquired” company for financial reporting purposes. See Note 1 –- Business and Basis of Presentation for further details. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of the CompanyFREYR issuing shares for the net assets of Alussa, accompanied by a recapitalization. The net assets of Alussa were stated at historical cost, with no goodwill or other intangible assets recorded.The following table reconciles the elementsProperty and equipment, net consisted of the Business Combination and PIPE Investmentfollowing (in thousands): September 30,
2022December 31,
2021 Construction in progress $ 88,879 $ 20,017 Office equipment and other 1,889 1,180 90,768 21,197 Less: Accumulated depreciation (376) (135) Total $ 90,392 $ 21,062 condensed consolidated statementconstruction of cash flowsthe CQP and Giga Arctic facilities and the condensed consolidated statement of shareholders’ equityrelated production equipment in Mo i Rana, Norway. Depreciation expense was $0.3 million and $0.1 million for the nine months ended September 30, 2022 and 2021, (in thousands): Recapitalization Cash - Alussa trust and cash, net of redemptions $ 104,535 Cash - PIPE Investment 600,000 Less: Non-cash net liabilities assumed from Alussa (25,957 ) Less: Transaction costs (60,386 ) Net Business Combination and PIPE Investment 618,192 Add back: Non-cash net liabilities assumed from Alussa 25,957 Add: Accrued transaction costs 353 Net cash contribution from Business Combination and PIPE $ 644,502 The number of ordinary shares issued immediately following the consummation of the Business Combination:Number of SharesAlussa Class A ordinary shares, outstanding prior to Business Combination28,750,000Less: Redemption of Alussa Class A ordinary shares(18,439,168)Alussa Class A ordinary shares10,310,832Alussa Class B founder ordinary shares7,187,500Ordinary shares issuedrespectively, and is included in general and administrative expenses in PIPE Investment60,000,000Ordinary shares issued to FREYR Legacy preferred shareholders1,489,500Business Combination and PIPE Investment ordinary shares78,987,832FREYR Legacy ordinary shares (1)37,452,359Total ordinary shares immediately after Business Combination and PIPE Investment116,440,191(1)The number of FREYR Legacy ordinary shares was determined from the 209,196,827 of FREYR Legacy ordinary shares outstanding prior to the closing of the Business Combination converted at the exchange ratio of 0.179038. All fractional shares were rounded down.4. Property and EquipmentProperty and equipment consisted of the following (in thousands): As of
September 30, As of
December 31, 2021 2020 Construction in progress $ 4,903 $ - Office equipment 773 98 Less: Accumulated depreciation and amortization (69 ) (15 ) Less: Foreign currency translation effects (1 ) (3 ) Property and equipment, net $ 5,606 $ 80 5. Accrued LiabilitiesAccrued liabilities consisted of the following (in thousands): As of
September 30, As of
December 31, 2021 2020 Accrued purchases $ 4,817 $ 690 Accrued payroll and payroll related expenses 4,191 518 Accrued share-based compensation expense - 460 Accrued other operating costs 278 485 Total accrued liabilities $ 9,286 $ 2,153 6. Commitments and ContingenciesCommitmentsOn December 1, 2020, the Company entered into a definitive licensing and services agreement effective December 15, 2020 with 24M to use its SemiSolidTM lithium-ion battery platform technology in FREYR’s planned facilities in Mo i Rana, Norway. In accordance with this agreement and a letter agreement dated December 18, 2020, the Company has committed to pay $20.0 million for the rights to the production of battery cells based on 24M’s current and future technology, as well as the provision of services to the Company, including technical training of engineers, the provision of information relevant to construct and operate the factory and on-site support. $0.7 million was paid and expensed in 2020 at the signing of the memorandum of understanding prior to entering into a definitive agreement. The Company determined that the remaining $19.3 million payable would be recognized straight-line over the service period through December 31, 2022, which was extended to December 31, 2023 through the first amendment to the definitive agreement dated January 18, 2021. As of December 31, 2020, $0.4 million was accrued related to the agreement. The Company paid $2.5 million on both January 12, 2021 and July 27, 2021, as prescribed by the definitive agreement. As of September 30, 2021, $0.3 million was accrued related to the agreement and the Company’s remaining commitment was $14.3 million, payable upon the financial close of the Company’s commercial facility, but no later than December 31, 2021. In accordance with the definitive agreement, the Company will also pay an ongoing royalty fee based on sales volumes with minimum annual payments of $3.0 million beginning on the three-year anniversary of the effective date. All expenses related to this definitive agreement are recognized as research and development costs within the condensed consolidated statements of operations and comprehensive loss. September 30,
2022December 31,
2021 Accrued purchases $ 20,528 $ 8,165 Accrued payroll and payroll related expenses 10,437 6,476 Operating lease liabilities (Note 6) 3,061 — Accrued other operating costs — 436 Total $ 34,026 $ 15,077 The Company entered into agreements with a public Norwegian universityWe currently lease our corporate headquarters, the building for the CQP, the land for the Giga Arctic facilities, as well as other facilities and properties. Our leases have remaining lease terms of up to fund professorships50 years, some of which include options to extend the leases and research withinsome of which include options to terminate the fieldleases at our sole discretion. We do not assume renewals in our determination of energy-efficient battery plants. Under the agreements,lease term unless the Company has committedrenewals are deemed to pay NOK 0.7 million annually for four years for a total of NOK 2.8 million to fund the professorships and NOK 1.0 million annually for eight years for a total of NOK 8.0 million to fund the research.be reasonably assured. As of September 30, 2021,2022, all of our leases are operating leases. Company’sfollowing (in thousands): September 30,
2022Accrued liabilities and other (Note 5) $ 3,061 Operating lease liability 9,933 Total $ 12,994 Three months ended
September 30, 2022Nine months ended
September 30, 2022Operating lease cost $ 558 $ 1,577 Variable lease cost 65 167 Short-term lease cost 45 60 Total lease cost $ 668 $ 1,804 commitments were NOK 1.2 million ($0.1 million)minimum lease payments due on our long-term leases are as follows (in thousands): September 30,
2022 For the remainder of 2022 $ 900 2023 2,664 2024 1,740 2025 1,783 2026 1,778 Thereafter 18,173 Total undiscounted lease payments 27,038 Less: imputed interest (14,044) Present value of lease liabilities $ 12,994 NOK 6.0 million ($0.7 million) to fund the professorships and research, respectively. All expensesdiscount rate are as follows: September 30,
2022Weighted-average remaining lease term (in years) 24.7 Weighted-average discount rate 6.93 % these agreements are recognizedleases were as research and development costs within the condensed consolidated statements of operations and comprehensive loss.follows (in thousands): Nine months ended
September 30, 2022Cash paid for amounts included in the measurement of lease liabilities Operating cash flows $ 1,308 Lease liabilities arising from obtaining right-of-use assets 13,578 On January 23, 2020, the Company entered into an agreement with the Nordland county municipality relatedthe mobilization of the battery factory in Mo i Rana. Under the agreement, the Company has committed to pay NOK 0.5 million per year over three years beginning in 2020. As of September 30, 2021, the Company’s remaining commitment was NOK 0.5 million (less than $0.1 million). All expenses related to this agreement are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss.Contingent Liabilities - LitigationThe Company istime, we may be subject to legal and regulatory actions that arise from time to time in the ordinary course of business. The assessment as to whether a loss is probable or reasonably possible, and as to whether such loss or a range of such loss is estimable, often involves significant judgment about future events. In the opinionManagement believes that any liability of management, asours that may arise out of September 30, 2021, there was not at least a reasonable possibility the Company may have incurred a material lossor with respect to loss contingencies for asserted legal and other claims. However, the outcomethese matters will not materially, adversely affect our condensed consolidated financial position, results of litigation is inherently uncertain.7. Warrantsthe Company haswe had 24,625,000 warrants outstanding. Asoutstanding (the “Warrants”), consisting of 14,375,000 public warrants (the “Public Warrants”) and 10,250,000 private warrants (the “Private Warrants”). The Warrants entitle the holder thereof to purchase one of our ordinary shares at a price of $11.50 per share, subject to adjustments. The Warrants will expire on July 9, 2026, or earlier upon redemption orliquidation. Combination, the 14,375,000 public warrants of Alussa were each exchanged for one public warrant in the Company (the “Public Warrants”) and the 10,250,000 private warrants of Alussa were each exchanged for one private warrant in the Company (the “Private Warrants”).Combination. The Public and Private Warrants (collectively, “Warrants”) are subject to the terms and conditions of the warrant agreement entered into between Alussa, Continental Stock Transfer & Trust Company, and the CompanyFREYR (the “Amended and Restated Warrant Agreement”).TheWe may call the Public Warrants entitle the holder thereof to purchase one ordinary share of the Companyfor redemption once they become exercisable, in whole and not in part, at a price of $11.50$0.01 per Public Warrant, so long as we provide at least 30 days prior written notice of redemption to each Public Warrant holder, and if, and only if, the reported last sales price of our ordinary shares equals or exceeds $18.00 per share subjectfor each of 20 trading days within the 30 trading-day period ending on the third trading day before the date on which we send the notice of redemption to adjustments. Thethe Public Warrant holders. We determined that the Public Warrants may be exercised for a whole number ofare equity classified as they are indexed to our ordinary shares and qualify for classification within shareholders’ equity. As such, the Public Warrants are presented as part of additional paid-in capital on the Company. No fractional shares will be issued upon exercise of the Warrants. The Warrants will expire on July 9, 2026, or earlier upon redemption or liquidation.the Company.The Company may call the Public Warrants for redemption once they become exercisable, in whole and not in part, at a price of $0.01 per Public Warrant, so long as the Company provides not less than 30 days’ prior written notice of redemption to each Public Warrant holder, and if, and only if, the reported last sales price of the Company’s ordinary shares equals or exceeds $18.00 per share for each of 20 trading days within the 30 trading-day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Public Warrant holders.The Company determined that the Public Warrants are equity classified as they are indexed to the Company’s ordinary shares and qualify for classification within shareholders’ equity. As such, the Public Warrants are presented within additional paid-in capital on the condensed consolidated balance sheets herein. However, the CompanyFREYR. We determined that the Private Warrants are not considered indexed to the Company’sour ordinary shares as the holder of the Private Warrants impacts the settlement amount and thus, they are liability classified. The Private Warrants are presented withinas warrant liability on the condensed consolidated balance sheets herein.sheets. See also Note 89 – Fair Value MeasurementMeasurement. further details.FREYR Legacy’s CEO and Chief Commercial Officer to be hired to perform certain services related to leadership, technology selection, and operational services (the “2019 EDGE Agreement”). FREYR Legacy issued 1,488,862 warrants to EDGE under the 2019 EDGE Agreement with a subscription price of $0.95 per share and an expiration date of May 15, 2024.8. Fair Value Measurementthe Company’sour financial assets and liabilities at fair value on a recurring basis according to the valuation techniques the Company useswe use to determine their fair value (in thousands): As of September 30, 2021 Level 1 Level 2 Level 3 Total Liabilities Warrant Liabilities $ - $ - $ 38,438 $ 38,438 Total fair value $ - $ - $ 38,438 $ 38,438 As of December 31, 2020 Level 1 Level 2 Level 3 Total Liabilities Redeemable Preferred Shares $ - $ - $ 7,574 $ 7,574 Total fair value $ - $ - $ 7,574 $ 7,574 September 30, 2022 December 31, 2021 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Convertible Note $ — $ — $ 20,498 $ 20,498 $ — $ — $ 20,231 $ 20,231 Liabilities: Warrant Liabilities $ — $ — $ 94,712 $ 94,712 $ — $ — $ 49,124 $ 49,124 AsWe measured our Private Warrants and the Convertible Note as of September 30, 20212022 and December 31, 2020, the carrying value of all other financial assets and liabilities approximated their respective fair values.As of September 30, 2021 and December 31, 2020, the Company measured its Private Warrants and redeemable preferred shares, respectively, at fair value based on significant inputs not observable in the market, which caused them to be classified as Level 3 measurements within the fair value hierarchy. The valuation of the Private Warrants and preferred sharesthe Convertible Note used assumptions and estimates that the Companywe believed would be made by a market participant in making the same valuation. Changes in the fair value of the preferred shares related to updated assumptions and estimates were recognized as a redeemable preferred shares fair value adjustment within the condensed consolidated statements of operations and comprehensive loss. Changes in the fair value of the Private Warrants related to updated assumptions and estimates were recognized as a warrant liability fair value adjustment within the condensed consolidated statements of operations and comprehensive loss.Black-ScholesBlack-Scholes-Merton option pricing model. No Private Warrants were outstanding on December 31, 2020 as they were issued by the Company as part of the Business Combination. See Note 78 – Warrants above for further detail. The Company’sOur use of the Black-ScholesBlack-Scholes-Merton option pricing model for the Private Warrants as of September 30, 2022 and December 31, 2021, required the use of subjective assumptions:●The risk-free interest rate assumption was based on the U.S. Constant Maturity Treasury yield,•The risk-free interest rate assumption was based on the United States Treasury Rates, which was commensurate with the contractual terms of the Private Warrants, which expire on the earlier of (i) five years after the completion of the Business Combination or July 9, 2026 and (ii) redemption or liquidation. An increase in the risk-free interest rate in isolation, would result in an increase in the risk-free interest rate, in isolation, would increase the fair value measurement of the Private Warrants and vice versa.●The expected term was determined to be 4.78 years as of September 30, 2021, given the expiration of the Private Warrants as noted above. An increase in the expected term, in isolation, would result in an increase in the fair value measurement of the Private Warrants and vice versa.●The expected volatility assumption was based on the implied volatility from a set of comparable publicly traded companies as determined based on the size and industry. An increase in expected volatility, in isolation, would result in an increase in the fair value measurement of the Private Warrants and vice versa.$9.87, the Company$14.24 and $11.18 as of September 30, 2022 and December 31, 2021, respectively, we determined that the fair value of the Private Warrants was $38.4$94.7 million asand $49.1 million, respectively.2021.TheOn November 11, 2020, 7,500,000 redeemable preferred shares outstanding on December 31, 2020were issued, each with a nominal value of NOK 0.01 per share for an aggregate subscription amount of NOK 71.5 million ($7.5 million) to two affiliates of Alussa in exchange for a cash contribution of $7.5 million (the “Preferred Share Preference Amount”). Concurrently, FREYR Legacy issued 92,500,000 warrants that were subscribed together with the redeemable preferred shares and considered an embedded feature as they were not separately exercisable. On February 16, 2021, an additional 7,500,000 redeemable preferred shares were issued, each with a nominal value of NOK 0.01 per share for an aggregate subscription amount of NOK 64.1 million ($7.5 million) to three affiliates of Alussa in exchange for a Preferred Share Preference Amount of $7.5 million. As part of the Business Combination and after the Norway demerger, the FREYR Legacy preferred shares were repurchased by FREYR at an adjusted Preferred Share Preference Amount of $14.9 million and the holders received 1,489,500 ordinary shares of FREYR. Before settlement, the preferred shares were valued using a scenario-based framework. No preferred shares were outstanding on September 30, 2021 as they were settled as part of the Business Combination. See Note 1 – Business and Basis of Presentation and Note 3 – Business Combination for further detail. Within each scenario, an income approach, specifically the discounted cash flow approach, was utilized based on the expected payoffs upon the conversion or redemption event, the estimated yield, and the expected probability of occurrence, which managementwe determined was a significant assumption. Using this approach, FREYR Legacy determined thatPrior to settlement, changes in the fair value of the redeemable preferred shares was $7.6 millionrelated to updated assumptions and estimates were recognized as of December 31, 2020. FREYR Legacy noted that a change in the weighting of the expected forms of settlement would result in a change to theredeemable preferred shares fair value ascribed to the redeemable preferred shares. See Note 9 – Redeemable Preferred Shares for further discussion.2020 Convertible NotesDuring 2020, FREYR Legacy issued the 2020 Convertible Notes, of which 7 were issued to third-party investors and two were issued to related parties. FREYR Legacy elected to apply the fair value option to the 2020 Convertible Notes at the time they were first recognized. On July 2, 2020 and July 8, 2020, the 2020 Convertible Notes were settled. Prior to settlement, the 2020 Convertible Notes were valued using a scenario-based framework. This analysis assumed two scenarios that were weighted based on the likelihood of occurrence, one in which a qualified financing event occurred and the other in which no qualified financing event occurred and the 2020 Convertible Notes were redeemed at maturity.Warrant Liability (Settled in 2020)On June 10, 2019, FREYR Legacy entered into an agreement with a third-party investor (the “Investment Agreement”) to issue warrants in exchange for the investor funding cash investments in tranches to support FREYR Legacy’s 2 battery projects for the period from the effective date of the agreement through September 30, 2021. The warrant liability was initially valued using a scenario-based framework that assumed varying levels of tranches of investments and the related equity valuation, which caused it to be classified as a Level 3 measurementadjustment within the fair value hierarchy. Asconsolidated statements of June 30, 2020, FREYR Legacy measured its warrant liability using the indicated transaction price for the private placement that was finalized shortly after period end. This change in the valuation methodology was a result of the availability of inputs corroborated by an observable market transaction, which caused it to be classified as a Level 2 measurement within the fair value hierarchy. As of September 30, 2020,operations and through settlement on November 23, 2020, FREYR Legacy measured the fair value of the warrant liability based on inputs corroborated by observable market transactions using the over-the-counter (“OTC”) trading price. The warrant liability was settled on November 23, 2020. following table presents changes in the Level 3 instruments measured at fair value for the nine months ended September 30, 2021 and 2020, respectivelywere as follows (in thousands): For the nine months ended
September 30, 2021 Private Warrants Redeemable preferred shares 2020 Convertible Notes Warrant liability Balance (beginning of period) $ - $ 7,574 $ - $ - Additions 27,265 7,500 - - Fair value measurement adjustments 11,173 (74 ) - - Settlements - (15,000 ) - - Balance (end of period) $ 38,438 $ - $ - $ - For the nine months ended
September 30, 2020 Private Warrants Redeemable preferred shares 2020 Convertible Notes Warrant liability Balance (beginning of period) $ - $ - $ - $ 93 Additions - - 1,531 76 Accrued interest - - 33 - Fair value measurement adjustments - - 199 233 Foreign currency exchange effects - - 2 (6 ) Transfer to Level 2 - - - (396 ) Settlements - - (1,765 ) - Balance (end of period) $ - $ - $ - $ - 9. Redeemable Preferred SharesOn November 11, 2020, 7,500,000 redeemable preferred shares were issued, each with a nominal value of NOK 0.01 per share for an aggregate subscription amount of NOK 71.5 million ($7.5 million) to 2 affiliates of Alussa in exchange for a cash contribution of $7.5 million (the “Preferred Share Preference Amount”). Concurrently, FREYR Legacy issued 92,500,000 warrants that were subscribed together with the preferred shares and considered an embedded feature as they were not separately exercisable. FREYR Legacy determined that the preferred shares and warrants should be considered a single financial instrument and recognized as a liability within the condensed consolidated balance sheets. As such, the liability was measured at fair value and was subsequently remeasured at each reporting date with changes being recorded as a redeemable preferred shares fair value adjustment within the condensed consolidated statements of operations and comprehensive loss. As of December 31, 2020, the fair value of the preferred shares and warrants was $7.6 million. See Note 8 – Fair Value Measurement for further information on the preferred shares and warrants. For the nine months ended
September 30, 2022For the nine months ended
September 30, 2021 Asset Liability Asset Liability Convertible Note Private Warrants Convertible Note Private Warrants Redeemable Preferred Shares Balance (beginning of period) $ 20,231 $ 49,124 $ — $ — $ 7,574 Additions — — — 27,265 7,500 Fair value measurement adjustments 267 45,588 — 11,173 (74) Foreign currency exchange effects — — — — — Settlements — — — — (15,000) Balance (end of period) $ 20,498 $ 94,712 $ — $ 38,438 $ — On February 16, 2021, an additional 7,500,000 redeemable preferred shares were issued, each with a nominal value of NOK 0.01 per share for an aggregate subscription amount of NOK 64.1 million ($7.5 million) to 3 affiliates of Alussa in exchange for a Preferred Share Preference Amount of $7.5 million. part of the Business Combination and subsequent to the Norway Demerger, the FREYR Legacy preferred shares were repurchased by the Company at an adjusted Preferred Share Preference Amount of $14.9 million and the holders received 1,489,500 ordinary shares of the Company. No preferred shares exist as of September 30, 2021.10. Shareholders’ EquityOrdinary SharesAs of September 30,2022 and December 31, 2021, 245,000,000 ordinary shares without par value are authorized.were authorized the Company’sour Board of Directors. As of September 30, 2021, the Company has2022, we have not declared any dividends.holdershares purchased under the program are to be used to settle the exercise of eachemployee options granted under the Company’s equity compensation plans. We were authorized to repurchase up to 150,000 of the Company’s Ordinary Shares, or approximately 0.13% of the current outstanding share capital. The Share Repurchase Program had no time limit and was able to be suspended or discontinued at any time. We purchased 150,000 ordinary shares at an average price of $6.97 per share, is entitled to one vote per share.excluding fees, during the nine months ended September 30, 2022 (no comparative amounts for the nine months ended September 30, 2021). As of September 30, 2021, there are 116,440,1912022, the authorized share repurchase was completed and no ordinary shares outstanding.issued pursuant to the exercise of options and warrants granted.issued. On December 1, 2020, the board of directors approved to increaseincreased the amountnumber of ordinary shares to be issuedavailable under the 2019 Plan by 895,190 ordinary shares.Under the 2019 Plan, FREYR Legacy issued offer letters to 33 employees. Each offer letter providedAs a grant schedule including the number of options or warrants (“awards”) to be granted on each grant date, the vesting date and the exercise period. For 29result of the employees, the options or warrants were determined to be granted on a quarterly basis over a two-year period and could be exercised at the earliest three years and at the latest five years after the dateconsummation of the first legal grant date. The options granted to three of FREYR Legacy’s executives were determined to vest basedBusiness Combination on service-based conditions for a portion of the awards and upon service-based conditions and the achievement of a liquidity-event-driven performance condition for the remainder of the awards. In the event of a change of control, defined as a corporate transaction involving 50% or more of the combined voting power of the equity interests in FREYR Legacy,July 9, 2021, the stock options and warrants and performance stock options and warrants already granted or earmarked for an employee’s first year of employment would vest immediately, given that the employee’s employment contract had not been terminated.In accordance with ASC 718, Stock-Based Compensation, the grant date should be the date at which an employer and an employee reach a mutual understanding of the key terms and conditions of a share-based payment award. In addition, individual awards that are subject to approval by the board of directors, management, or both are not deemed to be granted until all such approvals are obtained.On January 29, 2021, FREYR Legacy entered into the BCA, which was simultaneously approved by the board of directors. See Note 1 – Business and Basis of Presentation and Note 3 – Business Combination for further information on the BCA and related Business Combination. Pursuant to the BCA, the exercise prices for certain employee awards that were not previously known were established.vested immediately. As such, a grant date for accounting purposes was achieved for these employee awards as there was a mutual understanding of the terms and conditions. However, the board of directors did not have the requisite authorization to settle the equity awards in ordinary shares. As such, the employee awards were initially treated as cash-settled liability awards as of January 29, 2021. On February 16, 2021, the share settlement of the employee awards was approved by FREYR Legacy’s shareholders at an extraordinary general meeting, and as a result, the awards were reclassified from liability to equity. Furthermore, on February 16, 2021, FREYR Legacy’s share-based compensation liability of less than $0.1 million recognized in other long-term liabilities as of December 31, 2020 related to these employee awards was reclassified to equity. In addition to establishing a mutual understanding of the key terms and conditions for certain employee awards, the BCA also established a performance condition that would adjust the exercise price of certain options and warrants upon the close of the Business Combination. As such, prior to the Business Combination, the total cumulative share-based compensation expense recognized for the employee awards was based on the fair value of the awards estimated at the grant date for the condition or outcome that was actually satisfied, that is, the service-based condition or the liquidity-event-driven performance condition, which was previously determined to be improbable. As a result of the consummation of the Business Combination on July 9, 2021, the performance condition was met. As such, the employee awards vested immediately on July 9, 2021 in accordance with the BCA and share-based compensation was recognized by the Company for the remaining unrecognized fair value of the employee2019 Plan awards. Effective as of the close of the Business Combination, the 2019 Plan was modified to require cash-subjectgranted under the 2019 Plan are liability-classified awards, and as such, these awards are remeasured to fair value at each reporting date with changes to the performance condition. Share-basedfair value recognized as stock compensation expense is recognized separately in general and administrative expense andor research and development expense within the condensed consolidated statements of operations and comprehensive loss.The Company hasWe have a Long-Term Incentive Plan (the “2021 LTIP”) that was issued on July 9, 2021. According to the 2021 LTIP, at the discretion of theour board of directors, but at least on an annual basis, stock options may be granted to eligible employees.Asemployees and directors. The aggregate number of September 30, 2021, the Company has issued offer letters to 65 employeesadditional shares authorized under the 2021 LTIP. Each offer letter outlinesLTIP is not to exceed 10% of the current number of issued shares over the subsequent five years, excluding any options or warrants granted on each grant date,prior to the exercise price, and the vesting date. 2021 LTIP. were determined tounder the 2021 LTIP vest annually in equal thirds and options can be exercised up to five years after the grant date. There are no performance requirementsor market conditions for vesting except that the share price must exceed the exercise price and the individual must remain employed. Under the 2021 LTIP, all unvested options will be accelerated and vest immediately upon occurrence of a change of control where more than 50% of the ownership of FREYR Battery comes under control of a shareholder group or group of shareholders acting together.The following table sets forth the activity relating to the employee options and warrants outstanding under the 2019 Plan and 2021 LTIP forvesting. 2021 (aggregate intrinsic value in thousands):Nine Months Ended September 30, 2021 Number Weighted average exercise price Weighted average remaining contractual life (years) Aggregate intrinsic value Awards outstanding at beginning of period 179,037 $ 0.99 4.75 $ 973 Awards granted 2,328,450 $ 7.32 4.72 $ 5,946 Awards outstanding at end of period 2,507,487 $ 6.79 4.38 $ 7,713 Awards exercisable at end of period 1,011,464 $ 2.81 3.96 $ 7,138 Assumptions used to determine the fair value of employee awards under the 2019 Plan using the Black-Scholes-Merton option pricing model are as follows: Nine Months Ended
September 30, 2021 Range of Assumptions Grant date fair value per warrant or option $ 3.67 - $ 11.08 Valuation assumptions: - Expected term (years) 4.12 - 4.88 Expected volatility 45.50 % - 46.93 % Expected dividend yield 0.00 % - 0.00 % Risk-free interest rate -0.66 % - -0.58 % The expected option and warrant terms were calculated using the remaining contractual term as the employee awards were deeply in-the-money as of the valuation date. The expected volatilities were derived from the average historical daily stock volatilities of a peer group of public companies that the Company considers to be comparable to its business over a period equivalent to the expected terms of the share-based awards. The expected dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. Consequently, the expected dividend yield used is zero. The risk-free interest rates were based on the AAA-Rated Euro Area Central Government Bond Yields.Assumptions used to determine the fair value of employee options under the 2021 LTIP using a lattice option pricing model are as follows: Nine Months Ended
September 30, 2021 Range of Assumptions Grant date fair value per option $ 3.26 - $ 3.41 Valuation assumptions: - Expected volatility 49.70 % - 50.80 % Expected dividend yield 0.00 % - 0.00 % Risk-free interest rate 0.78 % - 0.82 % As the awards were issued out-of-the-money, an assumption was made that the holders would choose to exercise when a certain exercise ratio was achieved of share price over exercise price, upon which the expected life was calculated. The expected volatilities were derived from the average historical daily stock volatilities of a peer group of public companies that the Company considers to be comparable to its business over a period equivalent to the expected terms of the share-based awards. The expected dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. Consequently, the expected dividend yield used is zero. The risk-free interest rates were based on the US Treasury Rates.The fair value of employee awards which vested during the three and nine months ended September 30, 2021 was $8.9 million. No options vested during the three and nine months ended September 30, 2020. Compensation expense recorded for the employee awards in general and administrative for the three and nine months ended September 30, 2021 was $6.6 million and $7.4 million, respectively. Compensation expense recorded for the employee awards in research and development for the three and nine months ended September 30, 2021 was $1.7 million. For the three and nine months ended September 30, 2020, compensation expense was $0.5 million. As of September 30, 2021, unrecognized compensation expense related to non-vested share-based compensation arrangements was $4.9 million. The expense is expected to be fully recognized over a period of 2.8 years.theour Chief Executive Officer (“CEO”) of FREYR Battery entered into a stock option agreement, as an appendix to an employment agreement, effective upon the consummation of the Business Combination. UnderIn accordance with the stock option agreement, theon July 13, 2021 our CEO was awardedgranted 850,000 options to acquire our shares in FREYR Battery at an exercise price of $10.00 (the “CEO Option Awards”). The CEO Option Awards are subject to nine separate performance criteria, each of which is related to 1/9th of the total award amount. If any of the performance criteria are achieved and certified by the board of directors’ assessment ofdirectors during their first quarter 2022 meeting, the CEO’s performance pursuant to nine KPIs, which will occur during Q1 2022 and Q1 2023. The performance of each KPI will award the CEO with 1/9 of the maximum options. For each KPI, options that are confirmed in Q1 2022corresponding awards will vest in equal thirds on December 31, 2022, September 30, 2023, and June 1, 2024. Options that are confirmed in Q1If achieved and certified during the first quarter 2023 meeting, the awards will vest in equal halves on September 30, 2023 and June 1, 2024. FailureCompensation cost is recognized to perform a KPI will reduce the maximum conditionally awarded options pro rata and preclude the KPI from subsequently being earned by the CEO.The CEO Option Awards were determined to be granted on July 13, 2021 and compensation cost will be recognized if and when the Company concludesextent that it is probable thatachievement of the performance condition will be achieved. As of September 30, 2021, no compensation expense has been recognized for the three or nine months ended September 30, 2021.Nonemployee Awards – Related PartyOn March 1, 2019, FREYR Legacy entered into a consulting agreement with EDGE Global LLC (“EDGE”) for FREYR Legacy’s CEO and Chief Commercial Officer to be hired in to perform certain services related to leadership, technology selection and operational services (the “2019 EDGE Agreement”). Per the 2019 EDGE Agreement, FREYR Legacy agreed to issue 1,488,801 warrants to EDGE equaling 6.5% of the total outstanding shares of FREYR Legacy as of the effective date of the 2019 EDGE Agreement. On July 8, 2020, FREYR Legacy resolved to issue 1,488,801 warrants to EDGE under the 2019 EDGE Agreement upon the consummation of a New Capital Raise as defined in the 2019 EDGE Agreement. The warrants may be exercised at the latest of May 15, 2024. Each warrant shall give the right to subscribe for one new ordinary share of FREYR Legacy with a subscription price of $0.95 per share.On September 1, 2020, FREYR Legacy amended the 2019 EDGE Agreement, effective as of July 1, 2020 (the “2020 EDGE Agreement”). This amendment extended the term of the 2019 EDGE Agreement to December 31, 2021, and also set forth the new terms and conditions governing EDGE’s engagement with FREYR Legacy. Under the 2020 EDGE Agreement, FREYR Legacy agreed to issue 687,191 warrants to EDGE. The warrants will vest over an eighteen-month graded vesting period and expire on September 30, 2025. Each warrant provided the right to subscribe for one new ordinary share of FREYR Legacy with a subscription price of $0.99 per share. On September 25, 2020, the board approved the modification of the subscription price to be $1.22 per share. On October 6, 2020, the issuance of warrants was approved by FREYR Legacy’s shareholders at the extraordinary general meeting reclassifying the award from a liability to equity after which the fair value of the award was no longer remeasured. Upon the consummation of the Business Combination, all unvested awards vested immediately. The following table sets forth the activity relating to warrants outstanding forcriteria is deemed probable. 2021 (aggregate intrinsic value in thousands):Nine Months Ended September 30, 2021 Number Weighted average exercise price Weighted average remaining contractual life (years) Aggregate intrinsic value Warrants outstanding at beginning of period 2,176,081 $ 1.04 3.81 $ 11,724 Warrants granted - $ - - $ - Warrants outstanding at end of period 2,176,081 $ 1.04 3.06 $ 19,224 Warrants exercisable at end of period 2,176,081 $ 1.04 3.06 $ 19,224 Assumptions used to determine the fair value of warrants under the EDGE Agreements using the Black-Scholes-Merton option pricing model are as follows: July 8,
2020 October 6,
2020 Grant date fair value per warrant $ 0.28 $ 0.39 Valuation assumptions: Expected term (years) 4.00 2.80 Expected volatility 43.29 % 43.10 % Expected dividend yield 0.00 % 0.00 % Risk-free interest rate -0.65 % -0.71 % The expected term was calculated using the simplified method based on the warrants vesting term and contractual terms as there was not sufficient relevant historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The expected volatility was derived from the average historical daily stock volatilities of a peer group of public companies that the Company considers to be comparable to its business over a period equivalent to the expected term2022, 94,444 of the share-based grants. The expected dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. Consequently, the expected dividend yield used is zero. The risk-free interest rate was based on the AAA-Rated Euro Area Central Government Bond Yields.The fair value of warrants related to the EDGE Agreement which vested during the three and nine months ended September 30, 2021 was $0.1 million and $0.2 million, respectively. For the three and nine months ended September 30, 2020, the fair value of warrants which vested was less than $0.1 million. Compensation expense recorded for the three and nine months ended September 30, 2021 for the warrants was $0.1 million and $0.2 million, respectively. For the three and nine months ended September 30, 2020, compensation expense was less than $0.1 million. As of September 30, 2021, all compensation expense for the warrants was recognized.NonemployeeCEO Option AwardsOn December 4, 2020, FREYR Legacy entered into an agreement with a third-party service provider for its support in initiating and enabling high-level discussions with Japanese technology providers with the purpose of entering into license agreements. In accordance with the agreement, FREYR Legacy planned to issue 413,313 warrants as payment-in-kind. Per the agreement, the warrants vest immediately and may be exercised at any time with the latest being September 30, 2023. As of December 31, 2020, as the warrants had yet to be approved by the shareholders, they were treated as cash-settled liability awards. Until the share issuance is approved by the shareholders, the third-party service provider retains a put option to demand cash payment in the amount of EUR 0.4 million ($0.4 million), which was recognized as accrued share-based compensation expense within accrued liabilities in FREYR Legacy’s condensed consolidated balance sheet as of December 31, 2020. On February 16, 2021, FREYR Legacy’s shareholders resolved to issue the 413,313 warrants with an exercise price of NOK 0.01. On March 8, 2021, the warrants were subscribed for by the third-party service provider, and as the put option was no longer in the control of the third-party service provider, the warrants were reclassified from liability to equity and remeasured to the fair value on the date of subscription. As part of this reclassification, the share-based compensation liability of $0.5 million recognized in accrued liabilities as of December 31, 2020 was reclassified to equity. There was no warrant activity for the nine months ended September 30, 2021.Assumptions used to determine the fair value of warrants using the Black-Scholes-Merton option pricing model are as follows: March 8,
2021 Grant date fair value per warrant $ 10.17 Valuation assumptions: Expected term (years) 3.00 Expected volatility 49.80 % Expected dividend yield 0.00 % Risk-free interest rate -0.66 % The expected term is the contractual term per the agreement between the Company and the third-party service provider. The expected volatility was derived from the average historical daily stock volatilities of a peer group of public companies that the Company considers to be comparable to its business over a period equivalent to the expected term of the options. The expected dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. Consequently, the expected dividend yield used is zero. The risk-free interest rate was based on the AAA-Rated Euro Area Central Government Bond Yields, as well as the US Treasury Rates.The fair value of the warrants issued to the third-party service provider which vested during the nine months ended September 30, 2021 was $4.2 million. No warrants vested during the three months ended September 30, 2021 nor the three or nine months ended September 30, 2020. Compensation expense recorded for the three and nine months ended September 30, 2021 for the warrants was nil and $3.7 million, respectively. As of September 30, 2021, all compensation expense was recognized related to the share-based compensation arrangement. There was no compensation expense recorded for the three and nine months ended September 30, 2020.11. Government GrantsOn February 10, 2021, the Company was awarded a grant for research, development and innovation in battery cell technology. The grant was awarded to assist with the costs incurred associated with employees and staff, contract research and consultants, overhead and operating expenses and purchased research and development. The grant will be paid out over a period of two years. During the three months ended June 30, 2021, an initial grant was made for 50% of the expected grant for 2021. The Company will be required to submit annual expense reports with supporting documentation of costs incurred that must be approved before payment. The grant will cover up to 70% of total expected project costs with 75% being granted upon receipt of the annual expense report and the remaining 25% being paid upon the approval of the final project report and third-party attestation. Although a payment of the initial grant has been received, support for the related expenses will not be approved until the submission of the first annual expense report. As such, as of September 30, 2021, the Company recognized less than $0.1 million as deferred income in the condensed consolidated balance sheet.the Company waswe were awarded a grant of NOK 39.0 million ($4.6 million based on NOK/USD exchange rate at the time of the transaction) for research, development, and innovation in environmental technology. The grant was awarded to assist with the costs incurred associated with employees and staff, contract research and consultants, overhead and operating expenses and intellectual property, patents, and licenses. The grant is paid out in three installments based on meeting certain milestones in the agreement, in which the last milestone is payable after the final project report is approved. The grant is subject to meeting certain business size thresholds and conditions, such as documenting and supporting costs incurred, obtaining a third-party attestation of the Company’sour related records, and implementing policies that demonstrate good corporate governance. For the portion of any grant received for which costs have not yet been either incurred or supported through the appropriate documentation, the Company recognizeswe recognize deferred income in the condensed consolidated balance sheets. The first milestone of 30% and the second milestone of 50% were met during the three months ended March 31, 2021 and three months ended June 30, 2021, respectively, and payment was received. However, as of September 30, 2021,2022, the appropriate documentation of the financing of project costs and third-party attestation had only occurred for the second milestone. As such, we recorded $1.3 million as of September 30, 2022 and $1.4 million as of December 31, 2021, the Company recognized $1.3 million as deferred income within the condensed consolidated balance sheet. For the three and nine months ended September 30, 2022 and 2021, nil and $2.3 millionno other income was recognized as other income within the condensed consolidated statements of operations and comprehensive loss.the Company waswe were awarded a grant of NOK 142.0 million ($16.5 million based on NOK/USD exchange rate at the time of the transaction) for the development and construction of the pilot plant in Mo i Rana, Norway. The grant was awarded to assist with the costs incurred associated with payroll, rent and depreciation,the pilot plant including research and development, costs, costs directly related to the production of the pilot plantgeneral and other operating expenses.administrative, and construction in progress. The grant is paid in arrears upon request based on progress and accounting reports with the last milestone becoming payable after the final project report is approved. The grant is subject to achieving successful financing of the pilot plant and other conditions, such as documenting and supporting costs incurred and obtaining a third-party attestation of the Company’sour related records. As ofFor the nine months ended September 30, 2021, the Company had not yet2022, we satisfied the requirements for payments totaling $11.9 million of which $1.4 million related to costs which were expensed and thus has not reducedwere recognized as other income and $10.5 million related to costs which were capitalized and were recognized as a reduction of the carrying amount of the pilot plant by any grant amount.12. Income Taxes20212022 and 20202021 as the Company continues to maintain a full valuation allowance against its deferred tax assets.13. Related Party Transactions20192020 EDGE Agreement provided that FREYR Legacy shallshould pay EDGE a monthly retainer fee. See Note 10 – Shareholders’ Equity for further discussion on the warrants agreements between FREYR Legacy and EDGE. Furthermore, theAdditionally, FREYR Legacy agreed to make certain milestone payments to EDGE based on the closing of certain additional financing rounds as defined within the 20192020 EDGE Agreement. The 2019 EDGE Agreement was supersededSee Note 10 – Shareholders' Equity for further discussion on September 1, 2020 by the 2020 EDGE Agreement which extended the term of the 2019 EDGE agreement to December 31, 2021warrant agreements between FREYR Legacy and set forth the new terms and conditions governing EDGE’s engagement with FREYR Legacy.EDGE. On January 18, 2021, the board resolved to terminate the 2020 EDGE Agreement and enter into an employment contract with the continuing CEO and a consulting contract with the prior Chief Commercial Officer, subject to the closing of the Business Combination. See below for further detail on the consulting agreement with the prior Chief Commercial Officer. Pursuant to the termination, EDGE will no longer be eligible to participate in the Company’s targeted management bonus pool.respectively, and $0.2 million and $0.4 million forrespectively. No expenses were recorded in the three and nine months ended September 30, 2020, respectively.corresponding periods of 2022. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. TheThere was no unpaid amount of nil and less than $0.1 million was recognized in accounts payable and accrued liabilities – related party as of September 30, 20212022 and December 31, 2020, respectively.the Company entered into anwe agreed to a consulting agreement with the prior Chief Commercial Officer and current member of the board of directors to provide consulting services to the Company.directors. Per the consulting agreement, the consultant will provide services related to scaling sustainable energy storage, as well as any other services requested by the Company,us, for a term of three years. During this term, the Companywe will pay the consultant an annual fee of $0.4 million.million plus expenses. Per the agreement, the consultant is also entitled to participate in the Company’sour benefit plans made available to our senior executives of the Company.executives. The expenses incurred in relation to thefor consulting services provided for the three and nine months ended September 30, 20212022 were $0.1 million.million and $0.4 million, respectively, and $0.1 million for both the three and nine months ended September 30, 2021. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. The unpaid amount of less than $0.1 million and nilwas recognized in accounts payable and accrued liabilities - related party as of September 30, 20212022 and December 31, 2020, respectively.MetierFREYR Legacywe entered into a framework agreement with Metier OEC, which provides forprimarily project management and administrative consulting services. The CEO of Metier OEC is the brother of theour current Executive Vice President Projects of the Company.Project Execution. The expenses incurred in relation to thefor consulting services provided for the three and nine months ended September 30, 20212022 were $1.3 million and $4.1 million, respectively, and $1.1 million and $3.5 million, respectively, and $0.1 million and $0.2 million for the three and nine months ended September 30, 2020,2021, respectively. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. The unpaid amount of $0.9$0.7 million and $0.3 million was recognized in accounts payable and accrued liabilities —- related party as of September 30, 20212022 and December 31, 2020,2021, respectively.Convertible DebtDuringWe hold a 50% common stock ownership in a joint venture with Koch Strategic Platforms (“Koch”) that is accounted for under the equity method. The joint venture was formed in October 2021 to advance the development of clean battery cell manufacturing in the United States. As part of this agreement, both parties agreed to contribute $3.0 million for the initial costs related to developing the first gigafactory to project concept selection, and these contributions were made in January 2022. Project concept selection remained under development as of September 30, 2022. The joint venture reported a net loss of $2.3 million for the nine months ended September 30, 2020,2022. For the Company issued 2020nine months ended September 30, 2022, we recorded $1.1 million of expenses related to the joint venture. There were no unpaid amounts due to the joint venture as of September 30, 2022 and December 31, 2021. NotesNote matures on October 8, 2024, carries an annual interest rate of 5%, and is convertible into common stock or preferred stock at our option beginning on October 8, 2023 or automatically upon a qualified initial public offering or direct listing in excess of our conversion price. Additionally, the Convertible Note contains a change of control provision that would result in repayment of 1.75x the note’s original investment value plus any accrued interest. We have elected to two related parties.account for the Convertible Note using the fair value option. See Note 89 – Fair Value Measurement for further discussion.14. Net Loss Per Sharethe Company’sour basic and diluted net loss per share attributable to ordinary shareholders for the three and nine months ended September 30, 2022 and 2021 and 2020 (amounts in(in thousands, except share and per share amounts)data): For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Numerator: Net loss attributable to ordinary shareholders - basic and diluted $ (45,419 ) $ (2,469 ) $ (65,342 ) $ (4,384 ) Denominator: Weighted average ordinary shares outstanding - basic and diluted 108,713,120 32,975,533 61,466,975 25,321,078 Net loss per ordinary share: Basic and diluted $ (0.42 ) $ (0.07 ) $ (1.06 ) $ (0.17 ) Three months ended
September 30,Nine months ended
September 30, 2022 2021 2022 2021 Numerator: Net loss attributable to ordinary shareholders – basic and diluted $ (93,850) $ (45,419) $ (124,086) $ (65,342) Denominator: Weighted average ordinary shares outstanding – basic and diluted 116,704 108,713 116,795 61,467 Net loss per ordinary share: Basic and diluted $ (0.80) $ (0.42) $ (1.06) $ (1.06) anti-dilutive: As of September 30, 2021 2020 EDGE warrants Other nonemployee warrants 413,313 - Employee options 3,196,391 179,037 Employee warrants 161,096 - Warrant liability - 3,992,792 Private Warrants 10,250,000 - Public Warrants 14,375,000 - Total 30,571,881 6,347,910 15. Subsequent Events Three months ended
September 30,Nine months ended
September 30, 2022 2021 2022 2021 Public Warrants 14,375 14,375 14,375 14,375 Private Warrants 10,250 10,250 10,250 10,250 EDGE warrants 2,176 2,176 2,176 2,176 567 — 567 — Employee awards 5,697 3,358 5,697 3,358 RSUs 81 — 81 — 94 — 94 — Other nonemployee warrants — 413 — 413 Total 33,240 30,572 33,240 30,572 On October 8, 2021,formed a joint venture with Koch Strategic Platforms (“KSP”)excluded 755,556 of the total 850,000 CEO Option Awards, as it is not yet probable that the performance conditions for these options will be achieved.50%/50% ownership structure. The joint venture has been formed to advancecontractor for the developmentGiga Arctic construction.States. TheStates in November 2022, primarily to fund the land acquisition for Giga America and to take a controlling interest in the joint venture has secured a license from 24M to deploy 24M’s SemiSolidTM platform technology. In conjunction, KSP and the Company has invested $70 million in convertible promissory notes with 24M, under which KSP and the Company will invest $50 million and $20 million, respectively.venture.ItemManagement’sMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOperationsThis “FREYR Battery’s Management’s Discussion and Analysis” of FREYR Battery’s results operations and financial conditionOperations” should be read in conjunction with the historical audited annual consolidated financial statements as of andour Annual Report on Form 10-K for the year ended December 31, 20202021 and the unaudited interim condensed consolidated financial statements and the accompanying notes included as part of September 30, 2021 andthis Quarterly Report on Form 10-Q for the nine monthsperiod ended September 30, 2021 and 2020, and the related respective notes, which are included elsewhere in this Report.2022. The financial information contained herein is taken or derived from such audited annual consolidated financial statements and unaudited interim condensed consolidated financial statements, unless otherwise indicated. The following discussion contains forward-looking statements. FREYR Battery’sstatements and actual results could differ materially from those that are discussed in these forward-looking statements. FactorsSee also “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Form 10-Q and our December 31, 2021 Annual Report on Form 10-K for more information on factors that could cause or contribute to such differences include those discussed below and elsewhere in this Report, particularly under “Risk Factors.”differences. Unless the context otherwise requires, all references in this section to “FREYR” refer to FREYR Legacy prior to the Closingclosing of the Business Combination and to FREYR Battery following the Closingclosing of the Business Combination.Overviewtheglobal energy and transportation sector and energy systems by delivering some of the world’s cleanest and most cost-effectiveproducing clean, cost-competitive batteries. We aimare in the design and testing phase related to produce someour battery production process and we are in the final stages of the most cost-competitive batteries with the lowest carbon footprints, which could further support the accelerationconstruction of the energy transition. Following the investment decision of the CQP, preparatory work is on-goingour Customer Qualification Plant (“CQP”) and groundworks and foundation structures for our inaugural gigafactory (“Giga Arctic”), both located in Mo i Rana, Norway. The CQP production line will be based on our in-licensed technology from 24M. As of September 30, 2021,2022, we have not yet initiated manufacturing or derived revenue from our principal business activities.electronicmarket opportunities in energy storage systems (“ESS”), marine applications, commercial vehicles, and electric vehicles (“EVs”EV”) with high density and slower charge requirements, and then planwith plans to target additional markets, including consumer EVs, through both the joint venture model and through the licensing model. We plan to produce faster charge battery cells for the broader consumer EV segment throughmarket. 24M platforms,full year of 2022 and in 2023 in connection with our ongoing activities and to prepare for growth, as wellwe: througha public company.joint venture business model and potentially additional licensing partnerships.FREYR was founded on February 1, 2018 and is incorporated and domiciled in Norway. FREYR Battery’s principal executive offices are located in the Grand Duchy of Luxembourg. As of July 8, 2021, our ordinary shares and warrants now trade publicly on the New York Stock Exchange.GrantsInnovation NorwayOn September 4, 2018, we were awarded a grant of approximately NOK 1.9 million for research, development and innovation by Innovation Norway, an instrumentlaunch of the Norwegian Government for supporting innovation and developing Norwegian enterprises and industries.Giga America clean battery cell manufacturing project in Coweta County, Georgia. Construction of Giga America is expected to take place in multiple phases. The grant was awardedfirst cell production module is expected to assist with the costs incurred associated with employees and staff, contract research and overhead and operating expenses. The grant was paid out in three installments based on meeting certain milestones in the agreement, in which the last milestone was payable after the final project report was approved. As of December 31, 2020, all milestones for this grant had been achieved.On March 5, 2020, we were awarded an additional grant ofbe approximately NOK 7.0 million for research, development and innovation by Innovation Norway. Similar to the grant awarded in 2018, the 2020 grant was paid out in three installments based on meeting certain milestones in the agreement, in which the last payment milestone was payable after the final project report was approved. As of December 31, 2020, all milestones for this grant had been achieved.On February 12, 2021, we were awarded a grant of NOK 39.0 million for research, development and innovation in the environmental technology category by Innovation Norway. This grant has been34 GWh and will be paid during 2021established with the United States-based 24M production platform, which is intended to produce highly capital efficient and 2022 and followsclean battery cells. FREYR made an evaluation process that startedadditional $49.0 million capital contribution to its joint venture in the fall of 2020.United States in November 2022, primarily to fund the land acquisition for Giga America and to take a controlling interest in the joint venture.grant will be paid out in three installmentsagreement, which includes ongoing services and support from Aleees, provides FREYR with a worldwide license to produce and sell lithium-iron phosphate (“LFP”) cathode battery material based on meeting certain milestones inAleees’ technology and to build production facilities leveraging Aleees’ industrial experience. Aleees is an approved supplier of LFP cathode material to 24M and an established LFP cathode producer outside of mainland China. LFP cathode materials represent a significant component of the agreement, in which the last payment milestone is payable after the final project report is approved. The grant is subject to certain conditions and will be earned only upon successful completioncost of these conditions. As of September 30, 2021, the first and second payment milestones had been met and NOK 11.7 million and NOK 19.5 million, respectively, were received. However, as conditions had only been met for income recognition for the second payment, the first payment of NOK 11.7 million ($1.3 million) has been recorded as deferred income.Nordland FylkeskommuneOn February 10, 2021, we were awarded a grant of NOK 2.5 million from the Regional Nordland Research Fund for research, development and innovation in battery cell technology. The grant was awardedand the projected full-cycle supply chain carbon footprint of cells. Through this agreement and in cooperation with Aleees, FREYR is positioned to assist with the costs incurred associated with employeesbecome a low cost and staff, contract researchlow carbon producer of LFP cathode material.consultants, overhead and operating expenses and purchased research and development. The grant will be paid out over a period of two years. As of September 30, 2021, an upfront payment of NOK 0.5 million was received. However, as conditions had not been met for income recognition, NOK 0.5 million (less than $0.1 million) was recorded as deferred income.ENOVAOn March 1, 2021, we were awarded a grant of NOK 142.0 million from the Norwegian Ministry of Climate and Environment through ENOVA SF (“ENOVA”) as part of financing for the development and construction of the CQPequipping its Giga Arctic manufacturing facility in Mo i Rana, Norway. ENOVAFREYR signed an agreement with HENT AS (“HENT”) for the planning, project management, and construction of FREYR’s 120,000 square-meter Giga Arctic battery factory. HENT is one of Norway’s largest general contractors and project developers. FREYR also entered into an enterprise owned byagreement with Italy based NTE Process (“NTE”) to supply a complete and integrated drying and powder handling system to Giga Arctic. FREYR also awarded an agreement to UK based Mpac Group (“Mpac”) to provide production line equipment for automated casting and unit cell assembly to the MinistryGiga Arctic project. Both of Climatethese equipment suppliers are pre-qualified vendors of 24M and Environment. This grant will be paid as reimbursements of 25% of the costs incurredare currently supplying equipment for the CQP project.December 1, 20202025 to December 1, 2024,2030, with options to increase the volume to 50 GWh and to extend the contract beyond 2030. The joint venture will combine FREYR’s clean, next-generation battery cells with Nidec’s expertise as a global leader in responsethe ESS business and will produce modules and packs and generate integrated downstream ESS solutions for industrial and utility grade customers. The battery cell sales agreement will be executed with the joint venture when it is incorporated.requests made by usjointly develop formation and aging, pouch assembly, and inspection and packaging equipment and automation solutions for such reimbursement,FREYR’s planned gigafactories. This strategic alliance frame agreement will enable FREYR and Hana Technology to customize and co-develop solutions for the Giga Arctic.must be made at a minimumwill continue to enhance the Company’s global footprint. The technology resources campus and business unit in Fukuoka, Japan will focus on the facilitation and scale-up of twice per year. We can begin to make requests for reimbursements when we can document that financing for such CQP has been secured, meaning that requests can be made following the closingFREYR’s testing and development of the Business Combination. ENOVA24M battery platform. The technology center in Boston, Massachusetts will withhold 20%support the Company’s expansion strategy to accelerate the development of the grant untilCompany’s first United States gigafactory, Giga America, and to enhance technological development and strategic coordination with 24M.CQP is completed, whichInflation Reduction Act of 2022 (the “IRA”) was signed into law in accordance with the termsUnited States. The IRA includes $369 billion in climate and energy-related provisions, including those to incentivize and accelerate the build out of renewable energy and accelerate the adoption of EV technologies. The IRA creates specific tax credit incentives for the manufacturing and production of battery cells, modules, and electrode materials in the United States, and extends the Investment Tax Credit to standalone battery storage technology projects for the first time without co-location requirements to solar or wind developments. The IRA will likely drive significantly lower battery costs and prices in the United States, potentially leading to a surge in domestic ESS activity. The benefits of the grant must happen before December 1, 2024. The grant is subject to certain conditionsIRA support the Company’s acceleration of a potential investment in Giga America.be earned only upon successful completion of these conditions. As of September 30, 2021, the Company had not yet satisfied the requirements and thus has not reduced the carrying amount of the pilot plant by any grant amount.Business Combination and Public Company CostsOn July 9, 2021, the Business Combination described under Note 3 – Business Combination was consummated. The Business Combination was accounted forserve as a reverse recapitalization, with no goodwill or other intangibledirect materials supplier for FREYR’s procurement and supply chain operations to secure the raw materials required for FREYR’s planned battery production at giga scale. Additionally, ITOCHU is an investor in 24M.recorded, in accordance with U.S. GAAP. Under this method of accounting, Alussa was treatedand liabilities may not be comparable between periods as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the transactions were treated as the equivalent of our issuing ordinary shares for the net assets of Alussa, accompanied by a recapitalization.Following the consummationresult of the Business Combination our ordinary shares were listed onand becoming a public company. As a result of the Business Combination, we became a New York Stock Exchange (“NYSE”) listed company, which has required and will continue to require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, directors’director fees, internal control over financial reporting compliance, and additional internal and external accounting, legal and administrative resources, including increased audit, compliance, and legal fees.Key Factors Affecting Operating ResultsWe believe our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and inIn May 2022, the sectionboard of this Report titled “Risk Factors.”Licensing StrategyOur licensing business model is based on technology licensed from 24M, which has been commercialized only todirectors approved a limited extent and may not perform as expected. Our business plansshare repurchase program (the “Share Repurchase Program”). The shares purchased under the program are dependent on the technology from 24M performing as expected. If the cost, performance characteristics, simplified manufacturing process or other specifications of the technology licensed from 24M fall short of our targets, our ability to achieve projected sales, time to market, competitive advantage, product pricing and margins would likely be adversely affected.Facility Development PlanFor us to be successful in growing the business, we will need to develop production capacity and increase it. We expect to assemble and produce our battery cells in Mo i Rana, Norway, with production at the CQP to begin in 2022, at the earliest. We have made the final investment decision to proceed with construction of our CQP, which will be used to provide samplessettle the exercise of employee options granted under the Company’s equity compensation plans. We were authorized to enable early customer engagementrepurchase up to 150,000 of the Company’s Ordinary Shares, or approximately 0.13% of the current outstanding share capital. The Share Repurchase Program had no time limit and was able to test new material suppliers and solutions overbe suspended or discontinued at any time. The planned construction periodWe purchased 150,000 ordinary shares at an average price of $6.97 per share, excluding fees, during the CQP is estimated at 12nine months fromended September 30, 2021). As of September 30, 2022, the final investment decision. We do not currently have any production capacity and have not made a final investment decision or begun any construction activities for our Gigafactories. The planned construction period for each of our Gigafactories is estimated at 24 months. If we build our first Fast-Track Gigafactories as planned, we expect it will be Norway’s first lithium-ion battery cell manufacturing facility at such industrial scale.Our facility development plan assumes lithium-nickel-manganese-oxide (“NMC”) battery chemistry is used through 2025 and a combination of NMC and lithium-iron-phosphate (“LFP”) battery chemistry-based products are used in combination thereafter. Recent and ongoing discussions with potential customers may result in a larger volume of LFP-based batteries being put into production earlier, potentially already in the first Gigafactories. A stronger and earlier shift from NMC to LFP chemistry could, in isolation, reduce actual output, due to LFP-based products having a lower energy density (as measured by Wh/kg per KWh) for otherwise comparable product configurations compared to NMC-based products. A major part of the increased demand for LFP-based products in the market is driven in part by the lower metal costs for LFP-based products relative to NMC-based products (as measured by USD/kg per KWh). While we are still evaluating whether the initial timing regarding LFP use should be accelerated, we believe it is possible that the reduction in output could be offset by higher LFP volumes.Costs for the construction of our CQP will be significantly higher than those originally forecasted. As part of making the final investment decision for the CQP, we considered potential customer feedback and the value of future flexibility, including flexibility related to NMC and LFP manufacturing, size of electrodes, and increased automation, which led to our decision to acquire certain upgraded equipment and implement a more complex equipment installation design. On July 23, 2021, we entered into a contract with Mpac for the supply of critical production line machinery in our CQP, the casting and unit cell assembly. Another factor in increased construction costs is the inflationary pressure on prices of equipment and building materials experienced in the first half of 2021 and continuing today. We have also received preliminary input on plans relating to Gigafactory 1, which reflects similar trends in costs.Our ability to plan, construct and equip manufacturing facilities, including our CQP and our Gigafactories, is subject to significant risks and uncertainties. On July 19, 2021, we entered into two lease agreements with Mo Industripark with respect to the area to be used for the CQP. Pursuant to an earlier letter of intent, we also have an exclusive right to lease and develop a second area and a first right of refusal for a third area, which expires June 30, 2022. We have also obtained a non-binding memorandum of understanding with the City of Vaasa, Finland, which provides us with the exclusive right, until July 22, 2022, to a 90-hectare site for a potential Gigafactory. Mo Industripark AS has certain permits related to our status as a regulated industrial zone and we have the consents, agreements, permits and licenses needed for our planned construction activities with respect to the CQP; however, we do not have all consents, agreements, permits or licenses needed for the operation of the CQP or our planned construction and operation activities for the Gigafactories. In addition, the failure to reach a sufficient amount of customer offtake agreements in a timely manner will delay or possibly prohibit the initiation of the construction of any Gigafactories. Failure to obtain, delay in obtaining or the loss of necessary consents, commercial agreements, permits and licenses could result in delay or termination of development activities.Market and CompetitionWe expect competition in battery technology and EVs to intensify due to a regulatory push for EVs, increased decarbonization of energy systems (requiring additional storage/battery capacity), continuing globalization, and potential consolidation in the worldwide automotive and energy industry. Developments in alternative technologies or improvements in battery technology made by competitors may materially adversely affect the sales, pricing and gross margins of our battery cells. If a competing process or technology is developed that has superior operational or price performance, our business could be harmed. In addition, battery cells may be or become subject to tariffs and/or technical barriers to trade, which we may not be able to overcome by sourcing and supply arrangements, and which therefore could harm our business. On the other hand, the increased demand for batteries from various customer segments that is being observed may result in accelerated and higher volumes, higher prices and better margins. Our ongoing customer acquisition dialogues indicate potential for higher prices than previously estimated, but further negotiations are ongoingauthorized share repurchase was completed and no firm offtake agreements have yet been entered into.ImpactResults of COVID-19In December 2019, COVID-19 was first reported to the World Health Organization (“WHO”), and in January 2020, the WHO declared the outbreak to be a public health emergency. In March 2020, the WHO characterized COVID-19 as a pandemic. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity.As a result of the COVID-19 pandemic, we modified our business practices (including employee travel, recommending that personnel work from home and cancellation or reduction of physical participation in sales activities, meetings, events and conferences), applied additional safety protocols for essential workers, and implemented cost cutting measures in order to reduce operating costs. Management continues to monitor public health and regulatory developments and may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, suppliers, vendors and business partners. While the ultimate duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted, such as the extent and effectiveness of containment actions, it has already had an adverse effect on the global economy and the ultimate societal and economic impact of the COVID-19 pandemic remains unknown. In particular, the conditions caused by this pandemic are likely to affect the rate of consumer and business spending and could adversely affect our business,following table sets forth FREYR Battery’s condensed consolidated results of operations and financial condition during current and future periods.Supplier Agreement with Glencore International AG (“Glencore”)On November 15, 2021, we entered into a contract with Glencoredata for the supply of up to 1,500 metric tons of high grade, sustainably sourced cobalt metal cut cathodes made from at least 50% recycled cobalt produced at Glencore’s Nikkelverk facility in Norway. The supply contract follows the Letter of Intent between us and Glencore announced on February 9, 2021. Cobalt is a core component in our lithium-ion battery cells. We and Glencore plan on collaborating closely to minimize our carbon footprint and define actions and milestones to meet the common ambition of developing carbon neutral material, including the potential use of carbon offsets schemes. We will also collaborate to develop a scheme to introduce recycling certificates to document the delivery of recycled material as well as on the collection and processing of battery scrap generated during the production of battery material and cells.Three months ended
September 30,Change (%) Nine months ended
September 30,Change (%) 2022 2021 2022 2021 Operating expenses: General and administrative $ 25,124 $ 30,057 (16 %) $ 77,888 $ 46,245 68 % Research and development 3,253 5,257 (38 %) 9,194 11,209 (18 %) Equity in losses from investee 668 — NM 1,131 — NM Total operating expenses 29,045 35,314 (18 %) 88,213 57,454 54 % Loss from operations (29,045) (35,314) (18 %) (88,213) (57,454) 54 % Other income (expense) (64,805) (10,105) 541 % (35,873) (7,888) 355 % Loss before income taxes (93,850) (45,419) 107 % (124,086) (65,342) 90 % Income tax expense — — NM — — NM Net loss $ (93,850) $ (45,419) 107 % $ (124,086) $ (65,342) 90 % NM - Not meaningful We and Glencore will also explore potential collaboration for battery material and battery scrap recycling and work together to assure responsible sourcing and recycling through third-party audits.Components of Results of OperationsExpensesexpense consistsexpenses consist of personnel and personnel-related expenses, including share-based compensation, of our executives and employees, fees paid for contractors and consultants assisting with growing the business, and developing the battery factories, office space related costs, travel costs, public relations costs, legal, accounting and audit fees, and depreciation expense.wellwe continue to invest in building our business and move closer to start-up of manufacturing operations. Overhead costs also increased due to the professional fees and other costs related to operating as legal and accounting fees for professional and contract services. a public company, partially offset by a decrease in compensation expense as described above. operatingincreased expenses to operate as a public company, including compliance with the rules and regulations of the SEC,United States Securities and Exchange Commission, additional legal, audit, and insurance expenses, investor relations activities, and other administrative and professional services.Research and development expense consistsexpenseexpenses also includes theinclude development costs related to the 24M License.DepreciationDepreciation expense relates to the depreciation of the Company’s property and equipment and is calculated using the straight-line method over the useful lives of the related assets.Other income (expense)Redeemable preferred shares fair value adjustmentThe redeemable preferred shares fair value adjustment consists of unrealized gains and losses as a result of adjustments to FREYR Legacy’s redeemable preferred shares to reflect fair market value at the end of each reporting period. FREYR Legacy’s redeemable preferred shares were initially measured at fair value and subsequently remeasured at each reporting dateour technology license with changes being recorded as a redeemable preferred shares fair value adjustment. As part of the Business Combination and subsequent to the Norway Demerger, the FREYR Legacy preferred shares were repurchased24M.the Company at an adjusted Preferred Share Preference Amount.Interest incomeInterest income consists primarily of interest income earned on our cash and cash equivalents.Warrant liability fair value adjustmentThe warrant liability fair value adjustment consists of unrealized gains and losses as a result of marking our warrant liability to fair market value at the end of each reporting period. Our warrant liability is initially measured at fair value and subsequently remeasured at each reporting date with changes being recorded as a warrant liability fair value adjustment.Convertible notes fair value adjustmentThe convertible notes fair value adjustment consists of unrealized gains and losses as a result of adjustments to FREYR’s convertible notes issued in 2020 (“2020 Convertible Notes”) to reflect fair market value at the end of each reporting period. The 2020 Convertible Notes are initially measured at fair value and subsequently remeasured at each reporting date with changes being recorded as a convertible notes fair value adjustment.Interest expenseInterest expense consists primarily of interest expense incurred on our convertible notes.Foreign currency transaction (loss) gainForeign currency transaction (loss) gain consists of the gains and losses recognized from transactions and balances denominated in a currency other than the functional currency of the different group entities.Other incomeOther income consists of grants received for research, development and innovation. The grants were awarded to assist with the costs incurred associated with employees and staff, contract research and overhead, and operating expensesResults of OperationsComparison of the Three Months Ended September 30, 2021 and 2020The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Report. The following table sets forth FREYR Battery’s condensed consolidated results of operations data for the periods presented (in thousands, except percentages): For the three months ended September 30, Change Change 2021 2020 ($) (%) Operating expenses: General and administrative $ 30,027 $ 1,666 $ 28,361 1,702 % Research and development 5,257 283 4,974 1,758 % Depreciation 30 4 26 650 % Total operating expenses 35,314 1,953 33,361 1,708 % Loss from operations (35,314 ) (1,953 ) (33,361 ) 1,708 % Other income (expense): Interest income 51 — 51 NM (1) Warrant liability fair value adjustment (11,173 ) (350 ) (10,823 ) 3,092 % Convertible notes fair value adjustment — (165 ) 165 NM (1) Interest expense (1 ) (11 ) 10 -91 %(1) Foreign currency transaction (loss) gain 1,015 4 1,011 25,275 % Other income 3 6 (3 ) -45 %(1) Loss before income taxes (45,419 ) (2,469 ) (42,950 ) 1,740 % Income tax expense — — — 0 % Net loss $ (45,419 ) $ (2,469 ) $ (42,950 ) 1,740 % (1)NM = Not meaningfulOperating expensesGeneral and administrativeGeneral and administrative expenses increased by $28.4$2.0 million or 1,702%,38% to $30.0$3.3 million for the three months ended September 30, 2021,2022, from $1.7 million for the three months ended September 30, 2020. General and administrative expenses increased primarily due to an increase of compensation costs of $21.6 million resulting from a higher headcount and share-based compensation costs. Furthermore, there was an increase of $6.8 million related to growth in general corporate expenses, professional services, and travel.Research and development (“R&D”)R&D expenses increased by $5.0 million or 1,758%, to $5.3 million for the three months ended September 30, 2021, from $0.3 million for the three months ended September 30, 2020.2021. R&D expenses increased primarily due to an increase in compensation costs of $3.3 million resulting from higher headcount and share-based compensation costs incurred in accordance with the 24M license of $1.6 million.DepreciationDepreciation was de minimis for the three months ended September 30, 2021 and 2020.Other income (expense)Interest incomeInterest income was de minimis for the three months ended September 30, 2021 and 2020.Warrant liability fair value adjustmentThe warrant liability fair value adjustment increaseddecreased by $10.8$2.0 million or 3,092%,18% to $11.2 million for the three months ended September 30, 2021, from $0.4 million for the three months ended September 30, 2020. The warrant liability fair value adjustment represented the change in the fair value of the warrant liability during the three months ended September 30, 2021.Convertible notes fair value adjustmentAs a result of the settlement of the 2020 Convertible Notes in 2020, there was no convertible notes fair value adjustment for the three months ended September 30, 2021. The convertible notes fair value adjustment resulted in a loss of $0.2 million for the three months ended September 30, 2020. The convertible notes fair value adjustment represented the change in the fair value of the 2020 Convertible Notes during the three months ended September 30, 2020.Interest expenseInterest expense was de minimis for the three months ended September 30, 2021 and 2020.Foreign currency transaction (loss) gainThe foreign currency transaction (loss) gain increased by $1.0 million or 25,275%, to a gain of $1.0 million for the three months ended September 30, 2021, from a gain of less than $0.1 million for the three months ended September 30, 2020. The foreign currency transaction (loss) gain change reflects the closing of the Business Combination in early July with significant new equity and cash received. The gain reflects favorable movement on foreign currency transactions and balances that were denominated in currencies other than the functional currencies of the group companies.Other incomeOther income was de minimis for the three months ended September 30, 2021 and 2020.Comparison of the Nine Months Ended September 30, 2021 and 2020The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Report. The following table sets forth FREYR Battery’s condensed consolidated results of operations data for the periods presented (in thousands, except percentages): For the nine months ended September 30, Change Change 2021 2020 ($) (%) Operating expenses: General and administrative $ 46,191 $ 3,453 $ 42,738 1,238 % Research and development 11,209 371 10,838 2,921 % Depreciation 54 10 44 440 % Total operating expenses 57,454 3,834 53,620 1,399 % Loss from operations (57,454 ) (3,834 ) (53,620 ) 1,399 % Other income (expense): Redeemable preferred shares fair value adjustment 75 — 75 NM (1) Interest income 59 — 59 NM (1) Warrant liability fair value adjustment (11,173 ) (575 ) (10,598 ) 1,843 % Convertible notes fair value adjustment — (199 ) 199 NM (1) Interest expense (1 ) (53 ) 52 -98 %(1) Foreign currency transaction (loss) gain 827 — 827 NM (1) Other income 2,325 277 2,048 739 % Loss before income taxes (65,342 ) (4,384 ) (60,958 ) 1,390 % Income tax expense — — — — Net loss $ (65,342 ) $ (4,384 ) $ (60,958 ) 1,390 % (1)NM = Not meaningfulOperating expensesGeneral and administrativeGeneral and administrative expenses increased by $42.7 million or 1,238%, to $46.2$9.2 million for the nine months ended September 30, 2021,2022, from $3.5 million for the nine months ended September 30, 2020. General and administrative expenses increased primarily due to an increase of compensation costs of $33.6 million resulting from a higher headcount and share-based compensation costs. Furthermore, there was an increase of $9.1 million related to growth in general corporate expenses, professional services, and travel.Research and development (“R&D”)R&D expenses increased by $10.8 million or 2,921%, to $11.2 million for the nine months ended September 30, 2021. This is primarily due to a decrease of $1.5 million in share-based compensation costs, largely attributable to employee options and warrants which vested immediately following the Business Combination in 2021$0.4investee 2020. R&D expenses increased primarily due to an increase in costs incurred in accordance with the 24M license of $4.8 million, an increase in compensation costs of $4.6 million resulting2022 from a higher headcount and share-based compensation costs and an increase in other technology and professional fees of $1.4 million.DepreciationDepreciation was de minimis for the nine months ended September 30, 2021 and 2020.Other income (expense)Redeemable preferred shares fair value adjustmentThe redeemable preferred shares fair value adjustment resulted in a gain of $0.1$7.9 million for the nine months ended September 30, 2021. There was no redeemable preferred shares fair value adjustment forThe increase in other expense is primarily due to the $70.3 million and $45.6 million loss on the revaluation of the warrant liability recorded during the three and nine months ended September 30, 2020.2022 as a resulInterest incomeInterest income was de minimis for the nine months ended September 30, 2021 and 2020.Warrant liability fair value adjustmentThe warrant liability fair value adjustment increased by $10.6 million or 1,843% to a loss of $11.2 million for the nine months ended September 30, 2021, from a loss of $0.6 million for the nine months ended September 30, 2020. The warrant liability fair value adjustment represented the change in the fair value of the warrant liability during the nine months ended September 30, 2021.Convertible notes fair value adjustmentAs a result of the settlement of the 2020 Convertible Notes during fiscal year 2020, there was no convertible notes fair value adjustment for the nine months ended September 30, 2021. The convertible notes fair value adjustment resulted in a loss of $0.2 million for the nine months ended September 30, 2020. The convertible notes fair value adjustment represented the change in the fair value of the 2020 Convertible Notes during the nine months ended September 30, 2020.Interest expenseInterest expense was de minimis for the nine months ended September 30, 2021 and 2020.Foreign currency transaction (loss) gainThe foreign currency transaction (loss) gain changed by $0.8 million to a gain of $0.8 million for the nine months ended September 30, 2021, from a loss of less than $0.1 million for the nine months ended September 30, 2020. The foreign currency transaction (loss) gain changed due to the recognition of net gains during the nine months ended September 30, 2021 on foreign currency transactions and balances that were denominated in currencies other than the functional currency of the different group entities.Other incomeOther income increased by $2.0 million or 739% to $2.3 million for the nine months ended September 30, 2021, from $0.3 million for the nine months ended September 30, 2020. Other income increased due to grant proceeds received during 2021.SourcesAs of LiquiditySeptember 30, 2022, we had approxicapitalfuture liquidity requirements depend on many factors, including capital expenditures required to support the development of the battery factories, the timing and extent of the following: capital expenditures for construction of our battery manufacturing facilities and purchase of related equipment, spending to support technology licensing and researchR&D efforts, spending on other growth initiatives or expansion into new geographies, our future revenue generating activities, including market acceptance of our products and development efforts,services, and market adoption of future products. overall economic conditions.the Companywe can generate sufficient revenue to cover operating expenses, working capital and capital expenditures,adequately support our liquidity requirements, we expect to fund short-term cash needs through our existing cash balances. We believe that we have sufficient liquidity to meet our contractual obligations and commitments for at least the funds raised12 months following September 30, 2022.Business Combination to fund our cash needs for our battery projects, technology licensingpast, and researchmay in the future, experience periods of uncertainty that could impact the availability and development efforts,cost of equity and general corporate purposes.debt financing. If we are requiredunable to raise substantial additional funds by issuing equity securities, dilutioncapital in the near term, our ability to shareholdersinvest in Giga Arctic and other gigafactories or development projects will be significantly delayed or curtailed which would result. Any equity securities issued may also provide for rights, preferences or privileges senior to thosehave a material adverse impact on our business prospects and results of holders of the Company’s ordinary shares.operations. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to those of holders of our ordinary shares. The terms of debt securities or other borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing.We have incurred losses since our inception. As of December 31, 2020,If we had an accumulated deficit of $10.9 million and cash, cash equivalents and restricted cash of $14.9 million. As of September 30, 2021, we had an accumulated deficit of $76.2 million and cash, cash equivalents and restricted cash of $623.5 million. To date, our principal sources of liquidity have been proceeds received from the issuance of debt andraise funds by issuing equity securities, and amounts received from government grants.for the periods presented (in thousands):Nine months ended
September 30,Change (%) 2022 2021 Net cash (used in) provided by: Operating activities $ (72,993) $ (35,643) 105 % Investing activities (70,226) (4,111) NM Financing activities (1,052) 649,000 (100 %) NM - Not meaningful For the nine months ended
September 30, 2021 2020 Net cash provided by (used in): Operating activities $ (35,643 ) $ (3,376 ) Investing activities (4,111 ) (35 ) Financing activities 649,000 12,956 Operating Activities2021, while net2021. During the nine months ended September 30, 2022, the increase in cash used in operating activities was $3.4driven by a $31.9 million increase in net loss, adjusted for non-cash items. The increase in net loss, adjusted for non-cash items was primarily due to higher operating expenses from higher headcount2020. For the nine months ended September 30, 2021, the primary factor affecting our operating cash flows was our operating expenses of $57.5 million driven by payroll and other related costs, fees2022, compared to EDGE Global LLC, accounting and legal fees, research and development, and other operating expenses. These operating expenses were partially offset by the impact of the increase in accounts payable and accrued liabilities of $9.1 million due to the timing of payments, non-cash share-based compensation of $14.4 million, as well as the fair value adjustment from the warrant liabilities of $11.2 million. For the nine months ended September 30, 2020, the primary factor affecting our operating cash flows was our operating expenses of $3.8 million driven by general and administrative, research and development, and other operating expenses. These operating expenses were offset by the fair value adjustment from the warrant liabilities of $0.6 million and 2020 Convertible Notes of $0.2 million, as well as non-cash share-based compensation of $0.4 million, net of the decrease in accounts payables and accrued liabilities of less than $0.4 million due to payments.Investing ActivitiesNet cash used in investing activities was $4.1 million for the nine months ended September 30, 2021, while net2021. The change in cash used in investing activities was less than $0.1primarily driven by $77.7 million in purchases of property and equipment compared to $4.1 million for the nine months ended September 30, 2020. For the nine months ended September 30,2022 and 2021, and 2020, our investing cash flows primarily reflect the purchases of equipment.Financing ActivitiesNet cash provided by financing activities was $649.0 millionrespectively. In addition, for the nine months ended September 30, 2021, while net2022, we used $3.0 million in cash for an investment in our equity method investee in the United States and received proceeds of $10.5 million from grants funding our property and equipment construction. was $13.0of $649.0 million for the nine months ended September 30, 2020. For2021. Net cash used during 2022 was related to the nine months ended September 30,purchase of treasury shares. Net cash provided during 2021, our financing cash flows primarily relate toconsisted of net proceeds of $641.5 million from the Business Combination and $7.5$7.5 million in proceeds from the issuance of redeemable preferred shares. For2020, our financing cash flows primarily relate to $12.3 million from capital contributions of ordinary shares net of issuance costs, proceeds of $1.1 million from the issuance of convertible debt and proceeds of $0.4 million from the issuance of convertible debt to related parties.2022. Contractual Obligations and CommitmentsThere were no material changes in our contractual obligations and commitments during the period.Off-Balance Sheet ArrangementsSince the date of our incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.Critical Accounting Policies and EstimatesWe prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that can significantly impact the amounts we report as assets, liabilities, revenues, and expenses and the related disclosures. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions.Our significant accounting policies are described in more detail inSee Note 2 to the Company’scondensed consolidated financial statements included elsewhere in this Report. We believe that thefor information concerning new accounting policies discussed below are critical to understanding our historical and future performance as these policies involved a greater degree of judgment and complexity.Share-Based CompensationThe share-based compensation expense for options is typically determined based on the grant-date fair value of those options. The grant date fair value is derived from the use of valuation models which are commonly used. These valuation models use inputs which require estimates that are reflective of future expectations including the forward expected risk-free interest rate, volatility of our shares,standards and the expected exercise behavior of employees. We employed a lattice option pricing model for the 2021 LTIP options granted with a strike price above the grant date price and the Black-Scholes-Merton option pricing model for all other stock options granted. Significant judgment must be employed to derive reasonable estimates in determining the grant-date fair value.Warrant LiabilityPrior to the consummationimpact of the Business Combination, the Company measured its warrant liability at fair value based on significant inputs not observable in the market, which caused it to be classified as a Level 3 measurement within the fair value hierarchy. The Company used a scenario-based framework that considered varying levelsimplementation of tranches of investments and the related equity valuation. The Company assessed the assumptions and estimates used in the analysis on an ongoing basis as additional data impacting the assumptions and estimates was obtained. Once available, the over-the-counter trading price was used to measure the warrant liability, which caused it to be transferred from a Level 3 measurement to a Level 2 measurement. All subsequent changes in the fair value of the warrant liability related to updated assumptions and estimates were recognized as a warrant liability fair value adjustment within the consolidated statement of operations and comprehensive loss.Subsequent to the consummation of the Business Combination, with the acquisition of the Private Warrants, the Company measures its warrant liability at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The Company uses the Black-Scholes option pricing model to value the Private Warrants, which includes subjective assumptions relating to the risk-free interest rate, expected term, and expected volatility. All subsequent changes in the fair value of the warrant liability related to updated assumptions and estimates are recognized as a warrant liability fair value adjustment within the consolidated statement of operations and comprehensive loss.Redeemable preferred sharesThe Company measured its redeemable preferred shares at fair value based on significant inputs not observable in the market, which caused it to be classified as a Level 3 measurement within the fair value hierarchy. The Company used a scenario-based framework that utilized the discounted cash flow approach based on the expected payoffs upon the conversion or redemption event, expected probability of occurrence and estimated yield. The Company assessed the assumptions and estimates used in the analysis on an ongoing basis as additional data impacting the assumptions and estimates was obtained. Subsequent changes in the fair value of the redeemable preferred shares related to updated assumptions and estimates were recognized as a redeemable preferred shares fair value adjustment within the consolidated statement of operations and comprehensive loss.2020 Convertible NotesThe Company elected the fair value option for the 2020 Convertible Notes. Such election is irrevocable and is applied on an instrument-by-instrument basis at initial recognition. The Company measured its 2020 Convertible Notes at fair value based on significant inputs not observable in the market, which caused them to be classified as a Level 3 measurement within the fair value hierarchy. The Company used a scenario-based framework that assumed two scenarios that were weighted based on the likelihood of occurrence, one in which a Qualified Financing Event occurred and the other in which no Qualified Financing Event occurred and the 2020 Convertible Notes were redeemed at maturity. The Company assessed the assumptions and estimates used in the analysis on an ongoing basis as additional data impacting the assumptions and estimates was obtained. All subsequent changes in the fair value of the 2020 Convertible Notes related to updated assumptions and estimates were recognized as a convertible notes fair value adjustment within the consolidated statement of operations and comprehensive loss.Recent Accounting PronouncementsManagement does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effectthese standards on our financial statements.ItemITEM 3. QualitativeQUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative Disclosures About Marketchanging prices. This market risk is described further below. In addition, refer to the section entitled “Risk Factors” in the prospectus filed by us pursuant to Rule 424(b)(3) on March 16, 2022 (the “Prospectus”), in the section entitled “Risk Factors” beginning on page 14, for additional discussion of these and other risks, including the potential risks associated with the supply chain and the COVID-19 pandemic.ItemControls and ProceduresCONTROLS AND PROCEDURES (Disclosure Controls)(“Disclosure Controls”) within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our Disclosure Controls are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.2021.2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.20212022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.PartPART II - Other InformationItemITEM 1. Legal ProceedingsLEGAL PROCEEDINGSTo the knowledge of our management, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.ThereTo the knowledge of our management, there are currently no material litigation, claims, or actions currently pending or threatened against us.us, any of our officers, or directors in their capacity as such, or against any of our property.ItemITEM 1A. Risk FactorsRISK FACTORSThere are a numberAs of the date of this filing, there have been no material changes in our risk factors that may adversely affectfrom those disclosed in Part I, Item 1A, of our business, financial results or stock price. These risks are described elsewhere in this report or our other filingsAnnual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission includingon March 9, 2022, except as discussed in Part II, Item IA, of our Quarterly Report on Form 10-Q for the section entitled “Risk Factors” in the prospectus filed byperiod ended March 31, 2022. Additional risks not currently known to us pursuant to Rule 424(b)(3) on September 20, 2021 (the “Prospectus”), in the section entitled “Risk Factors” beginning on page 50, which is incorporated herein by reference. Additional risksor that we currently do not know about or currently view asdeem to be immaterial may also impair our business or adversely impact our financial results or stock price.We are providing an update to the Risk Factors contained in the Prospectus referenced above under the heading “Risks Relating to FREYR’s Limited Operating History”. These Risk Factors should be considered together with the other Risk Factors contained in the Prospectus.Risks Relating to FREYR’s Limited Operating HistoryFREYR Battery’s recently announced joint venture to advance the development of clean battery cell manufacturing in the United States is subject to various risks, including the fact that the joint venture may not occur on the expected timeline or at all and that the joint venture may not be successful (or less successful than expected), which could adverselymaterially affect our business and future prospects.We have entered into a definitive joint venture agreement on October 8, 2021, which formed a joint venture to advance the development of clean battery cell manufacturing in the United States (the “JV Agreement”). The joint venture has secured a license from 24M to deploy 24M’s SemiSolidTM platform technology. In conjunction, we and our joint venture partner have invested $70 million in convertible promissory notes with 24M, under which we and our joint venture partner will invest $20 million and $50 million, respectively.However, if our joint venture partner is unable or unwilling to meet its economic or other obligations under the joint venture arrangements, we may be required to either fulfill those obligations alone to ensure the ongoing success of the joint venture or to dissolve and liquidate the joint venture. Even after the entry into the JV Agreement, there can be no assurance that the joint venture will be able to complete the development of a battery cell manufacturing facility and successfully manufacture and commercialize batteries in the United States.Additionally, the JV Agreement only applies up to the time period prior to a decision by the joint venture to develop and finalize preparations for the final decision to provide funding for the construction of the battery cell manufacturing facility in the United States. As such, the joint venture may be dissolved or liquidated unilaterally by either us or our joint venture partner prior to construction if there is no decision to move forward with plans to develop and finalize preparations for the final investment within 18 months after the signing of the JV Agreement. These factors could harm our business,consolidated financial position, results of operations, and financial results.or cash flows. ItemITEM 2. Unregistered SalesUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSEquity Securitiesdirectors approved a share repurchase program (the “Share Repurchase Program”). The shares purchased under the program are to be used to settle the exercise of employee options granted under the Company’s equity compensation plans. We were authorized to repurchase up to 150,000 of the Company’s Ordinary Shares, or approximately 0.13% of the current outstanding share capital. As of September 30, 2022, the authorized share repurchase was completed and Use of Proceedsno ordinary shares remain available for repurchase under the program.None.ItemITEM 3. Defaults Upon Senior SecuritiesDEFAULTS UPON SENIOR SECURITIESNone.ItemITEM 4. Mine Safety DisclosuresMINE SAFETY DISCLOSURESNone.ItemOther InformationOTHER INFORMATIONItemITEM 6. ExhibitsEXHIBITS#ExhibitIndicates management contract or compensatory plan or arrangement.Number Exhibit Description 101* Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2022 is formatted in Inline XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021; (iii) Condensed Consolidated Statements of Shareholders’ Equity for the nine months ended September 30, 2022 and 2021; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021; and (v) Notes to Condensed Consolidated Financial Statements. 104* Cover Page Interactive Data File formatted as Inline XBRL and contained in Exhibit 101 * Filed herewith ‡ The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. SignaturesFREYR BATTERY Date: November 15, 202114, 2022By: /s/ Tom Einar Jensen Name: Tom Einar Jensen Title: Date: November 14, 2022 By: /s/ Oscar K. Brown Name: (Principal Executive Officer)Oscar K. Brown Date: November 15, 2021Title:By:/s/ Steffen Føreid Name:Steffen FøreidTitle:Group Chief Financial Officer
(Principal Financial Officer &
Principal Accounting Officer)34iso4217:NOK xbrli:shares