UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
10-Q
For the quarterly period ended ☒ 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 1934March 31,September 30, 2022
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 +352 46 61 11 3721 (Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices) Securities registered pursuant to Section 12(b) of the Act: 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☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐ 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 TABLE OF CONTENTS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 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) See accompanying FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In Thousands, Except FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (In See accompanying FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) See accompanying 1. Description of the Business FREYR Battery (“FREYR,” the “Company”, “we”, or “us”) is a developer of clean, next-generation battery Business Combination The Business Combination was accounted for as a reverse 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 comprised the ongoing operations of the combined company, (ii) FREYR Legacy’s senior management comprised the senior management of the combined company and (iii) no shareholder had 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. 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 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 FREYR and Alussa at their historical cost, which approximates fair value, and (v) FREYR’s equity structure for all periods presented. In accordance with Accounting 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 FREYR’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. Basis of Presentation The unaudited condensed consolidated interim financial statements have been prepared in conformity with the accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of 2. The Restricted Cash 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. term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, based on the information available at the lease commencement date, in determining the present value of lease payments. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. 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 In December 2019, the In February 2016, the FASB issued is included under “Leases” above. Our right-of-use assets and corresponding lease liabilities for operating lease liabilities at adoption were $9.9 million. There was no change to accumulated deficit as a result of adoption, and the implementation of this standard Upon the closing of the Business Combination, our 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. In connection with the Business Combination, on January 29, 2021, Alussa and FREYR entered into separate subscription agreements with a number of investors (each a “Subscriber”), pursuant to which the Subscribers agreed to purchase, and FREYR 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. The Business Combination was accounted for as a reverse recapitalization in accordance with Property and equipment, net consisted of the following (in thousands): Construction in progress primarily includes costs related to the construction of the CQP and Giga Arctic facilities and the related production equipment in Mo i Rana, 6. We 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 The components of lease liabilities included in our condensed consolidated balance sheet consisted of the following (in thousands): Components of lease The remaining minimum lease payments due on our long-term leases are as follows (in thousands): Supplemental cash flow information related to leases were as follows (in thousands): 7. Legal Proceedings From time to time, we may be subject to legal and regulatory actions that arise 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. Management believes that any liability of ours that may arise out of or with respect to these matters will not materially, adversely affect our condensed consolidated financial position, results of operations, or liquidity. 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 or The Public and Private Warrants were exchanged for public and private warrants of Alussa as part of the Business Combination, as described in Note 3 – Business Combination. The Warrants are We 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 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 for 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 the Public Warrant holders. We determined that the Public Warrants are equity classified as they are indexed to our ordinary shares and qualify for classification within shareholders’ equity. As such, the Public Warrants are presented In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. We measured our Private Warrants and the Convertible Note as of As of Private Warrants The Private Warrants outstanding on Using this approach, an exercise price of $11.50 and a share price of Convertible Note As of Redeemable Preferred Shares On 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 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. 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 we determined was a significant assumption. Prior to settlement, changes in the fair value of the redeemable preferred shares related to updated assumptions and estimates were recognized as The Employee Awards 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 issued. On December 1, 2020, the board of directors As a result of the consummation of the Business Combination on 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 vested immediately. As such, on July 9, 2021, share-based compensation was recognized for the remaining unrecognized fair value of the Employee Awards We 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 our board of directors, but at least on an annual basis, stock options may be granted to eligible All options and restricted stock units (“RSUs”) granted CEO Option Awards On June 16, 2021, our Chief Executive Officer (“CEO”) entered into a stock option agreement, as an appendix to an employment agreement, effective upon the consummation of the Business Combination. On February 12, 2021, we 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 our 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, we recognize deferred income in the condensed consolidated balance sheets. The first milestone of 30% and the second milestone of 50% were met during 2021 and payment was received. However, as of On March 1, 2021, we were awarded a grant of NOK The 2020 EDGE Agreement provided that FREYR Legacy should pay EDGE a monthly retainer fee. The expenses incurred in relation to the consulting services provided for the three and nine months ended Consulting Agreement Concurrent with the consummation of the Business Combination, we agreed to a consulting agreement with the prior Chief Commercial Officer and current member of the board of directors. Per the consulting agreement, the consultant will provide services related to scaling sustainable energy storage, as well as any other services requested by us, for a term of three years. During this term, we will pay the consultant an annual fee of $0.4 In 2020, we entered into a framework agreement with Metier OEC, which provides primarily project management and administrative consulting services. The CEO of Metier OEC is the brother of our current Executive Vice President Equity Method Investment We hold a 50% common stock ownership in On October 8, 2021, we invested $20.0 million in an unsecured convertible note receivable from 24M, our battery platform technology licensor for our current planned manufacturing facilities in Norway. The Convertible Note matures on October 8, Diluted net loss per share attributable to ordinary shareholders adjusts basic net loss per share attributable to ordinary shareholders to give effect to all potential ordinary shares that were dilutive and outstanding during the period. For the The following table sets forth the computation of our basic and diluted net loss per share attributable to ordinary shareholders for the three and nine months ended 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 This 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 We expect our capital and operating expenditures to increase significantly for the full year of 2022 and in 2023 in connection with our ongoing activities and to prepare for growth, as we: Recent Comparability of Financial Information Our results of operations and reported assets and liabilities may not be comparable between periods as a result of the Business Combination and 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, director fees, internal and external accounting, legal and administrative resources, including increased audit, compliance, and legal fees. General and administrative General and administrative Research and development (“R&D”) R&D Equity in losses from investee Equity in losses from investee consists of our proportionate share of the net earnings or losses and other comprehensive income from Other income (expense) primarily consists of the fair value adjustments on our warrant liability, convertible note, Financial Condition, Liquidity and Capital ResourcesFREYR BatteryLuxembourg Not Applicable (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 412F, route d’Esch, L-2086 LuxembourgTitle of each class Trading Symbol(s) Name of each exchange on which registered Ordinary Shares, without nominal value FREY The New York Stock Exchange Warrants, each whole warrant exercisable for one
Ordinary Share at an exercise price of $11.50 FREY WS The New York Stock Exchange Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☒ Non-accelerated filer☒ Smaller reporting company☒ ☒ Emerging growth company May 4,November 10, 2022, the registrant had 116,853,504116,705,234 ordinary shares, without nominal value, outstanding.PAGE 191623202421252125212521252125212521252126222723i●Changes adversely affecting the battery industry and the development of existing or new technologies;●The effect of the COVID-19 pandemic on our business;●The failure of 24M Technologies, Inc. (“24M”) technology or our batteries to perform as expected;●Our ability to commercialize 24M and other technology for our licensing business model and business plans;●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 and geopolitical 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 attract and retain key employees;●Our ability to execute and realize our business strategy and plans;ii●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 and 24M-qualified suppliers in sufficient quantities;●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 (“CQP”) and the planned construction period for each of our Gigafactories;●The cost to build the CQP 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, and 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; and●Our ability to enter successful joint venture partnerships and licensing arrangements.(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
March 31, As of
December 31, 2022 2021 Assets Current assets Cash and cash equivalents $ 523,208 $ 563,956 Restricted cash 1,366 1,671 Prepaid assets 16,191 15,882 Other current assets 11,327 1,282 Total current assets 552,092 582,791 Property and equipment, net 35,265 21,062 Convertible note 20,452 20,231 Equity method investments 2,771 2,938 Operating lease asset 9,447 - Other long-term assets 11 11 Total assets $ 620,038 $ 627,033 Liabilities and shareholders’ equity Current liabilities Accounts payable $ 4,245 $ 3,813 Accrued liabilities 26,378 15,065 Accounts payable and accrued liabilities - related party 552 3,316 Deferred income 1,392 1,380 Share-based compensation liability 2,552 2,211 Other current liabilities 2 12 Total current liabilities 35,121 25,797 Warrant liability 57,812 49,124 Operating lease liability 7,860 - Long-term share-based compensation liability 7,484 6,627 Total liabilities 108,277 81,548 Commitments and contingencies Shareholders’ equity Ordinary share capital, no par value, 245,000,000 ordinary shares authorized and 116,853,504 ordinary shares issued and outstanding as of March 31, 2022 and December 31, 2021 116,854 116,854 Additional paid-in capital 534,268 533,418 Accumulated other comprehensive (loss) income (191 ) (524 ) Accumulated deficit (139,170 ) (104,263 ) Total shareholders’ equity 511,761 545,485 Total liabilities and shareholders’ equity $ 620,038 $ 627,033 notesNotes to condensed consolidated financial statementsShare and per Share Amounts)(Unaudited)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) For the three months ended
March 31, 2022 2021 Operating expenses: General and administrative $ 24,614 $ 9,012 Research and development 2,859 2,907 Equity in losses from investee 167 - Total operating expenses 27,640 11,919 Loss from operations (27,640 ) (11,919 ) Other income (expense): Warrant liability fair value adjustment (8,688 ) - Redeemable preferred shares fair value adjustment - 6 Convertible note fair value adjustment 221 - Interest income 35 6 Interest expense (20 ) - Foreign currency transaction (loss) gain (331 ) 20 Other income, net 1,516 - Total other income (expense) (7,267 ) 32 Loss before income taxes (34,907 ) (11,887 ) Income tax expense - - Net loss (34,907 ) (11,887 ) Other comprehensive income (loss): Foreign currency translation adjustments 333 57 Total comprehensive loss $ (34,574 ) $ (11,830 ) Basic and diluted weighted-average ordinary shares outstanding 116,853,504 37,452,359 Basic and diluted net loss attributable to ordinary shareholders $ (0.30 ) $ (0.32 ) notesNotes to condensed consolidated financial statementsThousands, Except Share Amounts)(Unaudited)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 Ordinary Shares Additional
Paid-in Accumulated
Other
Comprehensive Accumulated Total Shareholders’ Shares Amount Capital Income (Loss) Deficit Deficit Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Treasury Stock Accumulated Deficit Total Shareholders’ Equity (Deficit) Balance as of January 1, 2021 37,452,359 $ - $ 15,183 $ 658 $ (10,885 ) $ 4,956 Ordinary Shares Shares Amount Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Treasury Stock Accumulated Deficit Total Shareholders’ Equity (Deficit) Balance as of January 1, 2022 Balance as of January 1, 2022 116,854 $ 116,854 Share-based compensation expense - - 4,617 - - 4,617 Share-based compensation expense — — Net loss - - - - (11,887 ) (11,887 ) Net loss — — — — — (34,907) (34,907) Other comprehensive income - - - 57 - 57 Other comprehensive income — — — 333 — — 333 Balance as of March 31, 2021 37,452,359 $ - $ 19,800 $ 715 $ (22,772 ) $ (2,257 ) Balance as of March 31, 2022 Balance as of March 31, 2022 116,854 116,854 $ 534,268 $ (191) $ — $ (139,170) $ 511,761 Share-based compensation expense Share-based compensation expense — — 5,371 — — — 5,371 Net income Net income — — — — — 4,671 4,671 Repurchase of shares Repurchase of shares — — — — (1,052) — (1,052) Other comprehensive loss Other comprehensive loss — — — (7,791) — — (7,791) Balance as of June 30, 2022 Balance as of June 30, 2022 116,854 116,854 $ 539,639 $ (7,982) $ (1,052) $ (134,499) $ 512,960 Share-based compensation expense Share-based compensation expense — — 922 — — — 922 Net loss Net loss — — — — — (93,850) (93,850) Other comprehensive loss Other comprehensive loss — — — (9,089) — — (9,089) Balance as of September 30, 2022 Balance as of September 30, 2022 116,854 116,854 $ 540,561 $ (17,071) $ (1,052) $ (228,349) $ 410,943 Ordinary Shares Additional
Paid-in Accumulated
Other
Comprehensive Accumulated Total
Shareholders’ Shares Amount Capital Income (Loss) Deficit Equity Balance as of January 1, 2022 116,853,504 $ 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 116,853,504 116,854 534,268 (191 ) (139,170 ) 511,761 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 three months ended
March 31, 2022 2021 Cash flows from operating activities Net loss $ (34,907 ) $ (11,887 ) Adjustments to reconcile net loss to cash used in operating activities: Share-based compensation expense 2,047 4,161 Depreciation 92 10 Redeemable preferred shares fair value adjustment - (6 ) Reduction in the carrying amount of lease assets 285 - Warrant liability fair value adjustment 8,688 - Convertible note fair value adjustment (221 ) Equity in losses from investee 167 - Other - (33 ) Changes in assets and liabilities: Prepaid assets (181 ) (1,545 ) Other current assets (4,667 ) 247 Accounts payable and accrued liabilities (1,435 ) 1,128 Accounts payable and accrued liabilities - related party 217 159 Other current liabilities (10 ) - Deferred income - 1,374 Operating lease liability (210 ) - Net cash used in operating activities (30,135 ) (6,392 ) Cash flows from investing activities Purchases of property and equipment (7,932 ) (42 ) Investments in equity method investee (3,000 ) - Purchases of other long-term assets - (12 ) Net cash used in investing activities (10,932 ) (54 ) Cash flows from financing activities Proceeds from issuance of redeemable preferred shares - 7,500 Net cash provided by financing activities - 7,500 Effect of changes in foreign exchange rates on cash, cash equivalents, and restricted cash 14 49 Net increase (decrease) in cash, cash equivalents, and restricted cash (41,053 ) 1,103 Cash, cash equivalents, and restricted cash at beginning of period 565,627 14,945 Cash, cash equivalents, and restricted cash at end of period $ 524,574 $ 16,048 Significant noncash investing and financing activities Accrued purchases of property and equipment $ 11,289 $ - Reconciliation to consolidated balance sheets Cash and cash equivalents $ 523,208 $ 15,768 Restricted cash 1,366 280 Cash, cash equivalents, and restricted cash $ 524,574 $ 16,048 notesNotes to condensed consolidated financial statementsBusiness and Basis of Presentationmanufacturing company.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 initial 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 (“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 to bring a completed product to market.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”) andOn January 29, 2021, FREYR AS, a private limited liability company organized under the laws of Norway (“FREYR Legacy”) and Alussa Energy Acquisition Corp., a Cayman Islands exempted company (“Alussa”), among others, entered into the Business Combination Agreement (the “BCA”) to effect a merger between the companies (the “Business Combination”),. 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.On July 9, 2021, FREYR consummated the Business Combination with FREYR Legacy and AlussaThe merger was completed in multiple stages, pursuant to the terms of the BCA, dated January 29, 2021. Pursuant to the terms of the BCA,which included among other things, the transfer of FREYR Legacy’s wind farm business was transferred 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 warrants began trading on the New York Stock Exchange. On July 9, 2021, FREYR completed the Business Combination with FREYR Legacy and Alussa. In connection with the consummation of the transactions contemplated by the BCA, FREYR Legacy and Alussa became wholly owned subsidiaries of FREYR. Following the First Closing on July 7, 2021, FREYR’s ordinary shares and warrants began trading on the New York Stock Exchange.AmericaUnited States Securities and Exchange Commission (“U.S. GAAP”SEC”). Regulation S-X. Accordingly, these financial statements do not include all of the information required by GAAP for complete consolidated financial statements.year’s presentationyear presentation.the accompanying notes. Estimates and assumptions include, but are not limited to, estimates related to the valuation of share-based compensation, warrant liability, and convertible note. We base these estimates on historical experiences and on various other assumptions that we believe are reasonable under the circumstances, however, actual results may differ materially from these estimates. consolidated financial statements should be readrisks include those disclosed in conjunction with the audited consolidated financial statements and notes thereto included in the Company'sPart I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2021.Risks2021 filed with the UncertaintiesWePart II, Item 1A, of our Quarterly Report on Form 10-Q for the period ended March 31, 2022. As of the date of this report, our existing cash resources, which were primarily provided as a result of the business combination, are subject to those risks common in the renewable energy and manufacturing industries and also those risks common to early stage development companies, including, but not limited to, the possibility of not being able to successfully develop or market our products, the ability to obtain or maintain licenses and permitssufficient to support future business, competition, dependence on key personnel and key external alliances, loss of our grant contributor,planned operations for at least the ability to maintain and establish relationships with current and future vendors and suppliers, the successful protection ofnext 12 months. Therefore, our proprietary technologies, the possibility of the factory development being disrupted, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.These financial statements have been prepared by management in accordance with U.S. GAAP and thison the basis assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.As of the date of this report, our existing cash resources, which were primarily provided as a result of the business combination, are sufficient to support planned operations for the next 12 months. As a result, management believes that our existing financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements.Summary of Significant Accounting PoliciesUse of Estimatespreparation 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, we evaluate our estimates, including those criticalCompany’s significant accounting estimates related to the valuation of share-based compensation, our valuation of warrant liability and our valuation of the convertible note (the “Convertible Note”). We base these estimates on historical experiences and on various other assumptions that we believe 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 March 31, 2022, the interim condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021, the interim condensed consolidated statements of shareholders’ equity (deficit) for the three months ended March 31, 2022 and 2021, and the interim condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments necessary for the fair statement 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 period are also unaudited. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or any other period. Although the consolidated balance sheet as of December 31, 2021 was derived from the audited annual consolidated financial statements as of December 31, 2021, these interim condensed consolidated financial statements do not contain all of the footnote disclosures from the annual consolidated financial statements.These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notespolicies were included in the Company’s annual financial statementsAnnual Report on Form 10-K for the fiscal year ended December 31, 2021.LeasesWe determine if an arrangementA 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. ForThe Company considers all relevant contractual provisions, including renewal and termination options, to determine the term of the lease. Renewal or termination options that are reasonably certain of exercise by the lessee and those controlled by the lessor are included in determining the lease term. The Company has made an accounting policy election to present the lease and associated non-lease operations as a single component based upon the predominant component.a leasean initial term greater thanof 12 months right of use assets and lease liabilitiesor less, therefore these leases are not recorded on the condensed consolidated balance sheets. Expenses for short-term leases are recognized on a straight-line basis over the lease term in the consolidated balance sheetsstatements of operations and comprehensive loss.date based ondate. Lease liabilities are initially recognized at the present value of the remaining fixedfuture lease payments and includes only payments that are fixed and determinable atduring the time of commencement. Ourexpected lease agreements may also contain variable payments such as common area maintenance, insurance, payments affected by a price index or other costs. Such variable lease payments are expensed as incurred.Our lease terms may include options to extend or terminate The right-of-use asset is initially recognized at the amount of the initial measurement of the lease when itliability, 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 reasonablyreflected net of amortization. Costs to get a leased asset to the condition and location necessary for its intended use are capitalized as leasehold improvements.that we will exercise such options. When determiningchanges in the probabilityexpected term of exercising such options, we consider contract-based, asset-based, entity-based,the lease, and market-based factors.expense (excluding variableexpenses are recognized as a single lease costs) is recognizedcost in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve the consistent application. We adopted this guidance as of January 1, 2022. Adoption of the standard did not have a material impact on the condensed consolidated financial statements.Accounting Standards UpdateASU No. 2016-02, Leases (ASC 842) (ASU 2016-02), as amended, which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted this guidance as of January 1, 2022, on a modified retrospective basis and thus did not restate comparative periods. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effectiveeffect for those periods. We elected the package of practical expedients permitted under the transition guidance, which allows us to carry forward our historical lease classification, our assessment onof whether a contract is or contains a lease, and our initial direct costs for any leases that existexisted before the adoption of the new standard. We alsoA description of our accounting policy and accounting methods elected, to combine lease and non-lease components for all classes of assets and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the condensed consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.hasdid not causedcause a material change in the Company’s operating expenses.3. 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 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.4. Property and Equipment As of
March 31, As of
December 31, 2022 2021 Office equipment $ 1,639 $ 1,180 Less: Accumulated depreciation (230 ) (135 ) Construction in progress 33,856 20,017 Property and equipment, net $ 35,265 $ 21,062 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 NorwayNorway. Depreciation expense was $0.3 million and $0.1 million for the related production equipment.5. Accrued Liabilities 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 As of
March 31, As of
December 31, 2022 2021 Accrued purchases $ 15,219 $ 8,165 Accrued payroll and payroll related expenses 7,173 6,476 Operating lease liabilities (Note 6) 1,784 - Accrued other operating costs 2,202 424 Total accrued liabilities $ 26,378 $ 15,065 Leases1050 years, some of which include options to extend the leases and some of which include options to terminate the leases at our sole discretion. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured. As of March 31,September 30, 2022, all of our leases are operating leases. As of
March 31,
2022 Liabilities: Accrued liabilities (Note 5) 1,784 Operating lease liability 7,860 Total lease liabilities $ 9,644 September 30,
2022Accrued liabilities and other (Note 5) $ 3,061 Operating lease liability 9,933 Total $ 12,994 expenseexpenses were as follows (in thousands): For the
three months
ended
March 31,
2022 Operating lease cost 476 Variable lease cost 28 Short-term lease cost - Total lease cost $ 504 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 As of
March 31,
2022 For the remainder of 2022 $ 1,365 2023 1,708 2024 1,699 2025 1,755 2026 1,755 Thereafter 3,852 Total undiscounted lease payments 12,135 Less: Imputed interest 2,491 Present value of lease liabilities $ 9,644 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 As of March 31, 2022, we have entered into one new lease for the land of Gigafactory 1&2 in Mo i Rana, Norway that has not yet commenced with future lease payments of $0.3 million annually that are not reflected in the table above. The lease is expected to commence in 2022 with a term of 50 years plus optional extension periods at the Company’s discretion. Before the Company reaches its final investment decision for Gigafactory 1&2, the lease is cancellable at the Company’s option.As of
March 31,
2022September 30,
2022Weighted-average remaining lease term (in years) 7.124.7 Weighted-average discount rate 6.93 6.6% For the
three months
ended
March 31,
2022 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows $ 402 Lease liabilities arising from obtaining right of use assets $ 9,855 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 Commitments and Contingencies8. WarrantsMarchSeptember 30, 2022 and December 31, 2022,2021, we havehad 24,625,000 warrants outstanding. As partoutstanding (the “Warrants”), consisting of the Business Combination, as described in Note 3 - Business Combination, the 14,375,000 public warrants of Alussa were each exchanged for one public warrant in FREYR (the “Public Warrants”) and the 10,250,000 private warrants of Alussa were each exchanged for one private warrant in FREYR (the “Private Warrants”). 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 FREYR (the “Amended and Restated Warrant Agreement”). liquidation.identicalsubject to the Public Warrants, except that so long as they are held byterms and conditions of the Sponsor or any of its permitted transferees, the Private Warrants: (i) may be exercised for cash or on a cashless basiswarrant agreement entered into between Alussa, Continental Stock Transfer & Trust Company, and (ii) shall not be redeemable by FREYR.withinas part of additional paid-in capital on the condensed consolidated balance sheets herein. However, wesheets.withinas warrant liability on the condensed consolidated balance sheets herein.sheets. See also Note 9 -– 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, 2024.9. Fair Value Measurement As of March 31, 2022 Level 1 Level 2 Level 3 Total Assets Convertible Note $ - $ - $ 20,452 $ 20,452 Total $ - $ - $ 20,452 $ 20,452 Liabilities Warrant Liabilities $ - $ - $ 57,812 $ 57,812 Total $ - $ - $ 57,812 $ 57,812 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 As of December 31, 2021 Level 1 Level 2 Level 3 Total Assets Convertible Note $ - $ - $ 20,231 $ 20,231 Total $ - $ - $ 20,231 $ 20,231 Liabilities Warrant Liabilities $ - $ - $ 49,124 $ 49,124 Total $ - $ - $ 49,124 $ 49,124 March 31,September 30, 2022 and December 31, 2021 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 the Convertible Note used assumptions and estimates that we believed would be made by a market participant in making the same valuation. 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. Changes in the fair value of the Convertible Note related to updated assumptions and estimates were recognized as a convertible note fair value adjustment within the condensed consolidated statement of operations and comprehensive loss.March 31,September 30, 2022 and December 31, 2021, the carrying value of all other financial assets and liabilities approximated their respective fair values.March 31,September 30, 2022 and December 31, 2021, were valued using the Black-Scholes-Merton option pricing model. See Note 8 -– Warrants above for further detail. Our use of the Black-Scholes-Merton option pricing model for the Private Warrants as of March 31,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.•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 increase the fair value measurement of the Private Warrants and vice versa.●The expected term was determined to be 4.28 and 4.53 years as of March 31,•The expected term was determined to be 3.78 and 4.53 years as of September 30, 2022 and December 31, 2021, respectively, given the expiration of the Private Warrants as noted above. An increase in the expected term, in isolation, would increase 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 increase the fair value measurement of the Private Warrants and vice versa. $12.26$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 $57.8$94.7 million and $49.1 million, as of March 31, 2022 and December 31, 2021, respectively.March 31,September 30, 2022 and December 31, 2021, we had an investment in a convertible note from 24M that was fair valued pursuant to the election of the fair value option under ASC 825, Financial Instruments. See Note 14 -– Convertible Note for further detail. The Company considers this to provide a more accurate reflection of the current economic environment of the instrument. The Convertible Note was valued using a scenario-based framework. This analysis assumed various scenarios that were weighted based on the likelihood of occurrence. Within each scenario, an income approach, specifically the discounted cash flow approach, was utilized based on the expected payoffs upon the event, the discount rate, and the expected timing and then the expected probability of occurrence was applied, all of which management determined Using this approach, we determined that the fair value of the Convertible Note as of March 31, 2022 and December 31, 2021 was $20.4 million and $20.2 million, respectively. We noted that a change in the expected payoffs, discount rate, timing, or expected probability would result in a change to the fair value ascribed to the Convertible Note. For the three months ended March 31, 2022 and 2021, the total change in fair value of the Convertible Note, including interest income, of $0.2 million and nil, respectively was recognized as a convertible note fair value adjustment within the condensed consolidated statement of operations and comprehensive loss.a redeemable preferred shares fair value adjustment within the consolidated statements of operations and comprehensive loss. following table presents changes in the Level 3 instruments measured at fair value for the three months ended March 31,were as follows (in thousands): 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 $ — 2021, respectively (in thousands): For the three months ended
March 31, 2022 Asset Liability Convertible
Note Private
Warrants Redeemable
preferred
shares Balance (beginning of period) $ 20,231 $ 49,124 $ - Additions - - - Fair value measurement adjustments 221 8,688 - Foreign currency exchange effects - - - Settlements - - - Balance (end of period) $ 20,452 $ 57,812 $ - For the three months ended
March 31, 2021 Asset Liability Convertible
Note Private
Warrants Redeemable
preferred
shares Balance (beginning of period) $ - $ - $ 7,574 Additions - - 7,500 Fair value measurement adjustments - - (6 ) Foreign currency exchange effects - - 1 Balance (end of period) $ - $ - $ 15,069 10. Shareholders’ Equity (Deficit)Ordinary SharesAs of MarchDecember 31, 2022,2021, 245,000,000 ordinary shares without par value were authorized.authorized March 31,September 30, 2022, 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 March 31,September 30, 2022, there were 116,853,504the authorized share repurchase was completed and no ordinary shares outstanding.-– 2019 Planapproved to increaseincreased the number of ordinary shares to be issuedavailable under the 2019 Plan by 895,190 ordinary shares.employee2019 Plan awards. Effective as of the close of the Business Combination, the 2019 Plan was modified to require cash-settlementcash-Share-based compensation expense, inclusive ofThe awards granted 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 fair value of the share-basedrecognized as stock compensation liability, is recognized separatelyexpense in general and administrative expense andor research and development expense within the consolidated statements of operations and comprehensive loss.The following table sets forthDuring the activity relating to the employee options and warrants outstanding undernine months ended September 30, 2022, 300,352 of the 2019 Plan for the three months ended March 31, 2022 (aggregate intrinsic value in thousands):For the Three Months Ended March 31, 2022 Number Weighted
average
exercise
price Weighted
average
remaining
contractual
life (years) Aggregate
intrinsic
value Awards outstanding at beginning of period 1,007,884 $ 2.81 Awards granted - - Awards forfeited - - Awards outstanding at end of period 1,007,884 $ 2.81 3.46 $ 9,523 Awards exercisable at end of period 1,007,884 $ 2.81 3.46 $ 9,523 Compensation expense recorded for the employee awards in general and administrative for the three months ended March 31, 2022 and 2021 was $1.1 million and $0.4 million, respectively. Compensation expense recorded for the employee awards in research and development for the three months ended March 31, 2022 and 2021 was $0.1 million and nil, respectively. As of March 31, 2022, all employee awards were vested.-– 2021 Planemployees.employees and directors. The aggregate number of additional shares authorized under the 2021 LTIP plan willis not to exceed 10% of the current number of issued shares in issue over the nextsubsequent five years, excluding any options or warrants granted beforeprior to the 2021 LTIP Plan.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 or market conditions for vesting.The following table sets forthactivity relating to the employee options outstanding under the 2021 LTIP for the threenine months ended March 31,September 30, 2022, (aggregate intrinsic value in thousands):For the Three Months Ended March 31, 2022 Number Weighted
average
exercise
price Weighted
average
remaining
contractual
life (years) Aggregate
intrinsic
value Awards outstanding at beginning of period 2,101,972 $ 10.05 Awards granted - $ - Awards forfeited 20,725 $ 10.05 Awards outstanding at end of period 2,081,247 $ 10.05 4.49 $ 4,600 Awards exercisable at end of period - $ - - $ - Compensation expense recorded for the employee awards in general and administrative for the three months ended March 31, 2022 and 2021 was $0.7 million and nil, respectively. Compensation expense recorded for the employee awards in research and development for the three months ended March 31, 2022 and 2021 was less than $0.1 million and nil, respectively. As of March 31, 2022, unrecognized compensation expense related to non-vested share-based compensation arrangements was $6.1 million. The expense is expected to be fully recognized over 2.7 years.UnderIn accordance with the stock option agreement, on July 13, 2021 our CEO was awardedgranted 850,000 options to acquire our shares 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 precludeextent that achievement of the KPI from subsequently being earned byperformance criteria is deemed probable. During the CEO.Thenine months ended September 30, 2022, 94,444 of the CEO Option Awards were determined to be granted on July 13, 2021. Compensation cost is recognized if we conclude that it is probable that the performance condition will be achieved. Compensation expense recorded for the CEO option awards in general and administrative for the three months ended March 31, 2022 and 2021 was $0.1 million and nildeemed probable. , respectivelyNonemployee 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 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 1,488,862 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 1,488,862 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”). Under the 2020 EDGE Agreement, FREYR Legacy agreed to issue an additional 687,219 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. Upon the consummation of the Business Combination, all unvested awards vested immediately.Compensation expense recorded for the three months ended March 31, 2022 and 2021 for the warrants was nil and $0.1 million, respectively. As of March 31, 2022, all compensation expense for the warrants was recognized. No warrants were exercised for the period ended for the three months ended March 31, 2022 and 2021.11. Government GrantsMarch 31,September 30, 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 March 31,September 30, 2022 and $1.4 million as of December 31, 2021, we recognized $1.3 million as deferred income within the condensed consolidated balance sheet. For the threenine months ended March 31,September 30, 2022 and 2021, no other income was recognized within the condensed consolidated statements of operations and comprehensive loss.142142.0 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 the pilot plant including research and development, general and 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 our related records. As of March 31,For the nine months ended September 30, 2022, we satisfied the requirements for an initial payment of $6.7payments totaling $11.9 million of which $1.4 million related to costs which were expensed and were recognized as other income and $5.3$10.5 million related to costs which were capitalized and were recognized as a reduction of the carrying amount of the CQP’s construction in progress.12. Income TaxesMarch 31,September 30, 2022 and 2021 as the Company continues to maintain a full valuation allowance against its deferred tax assets.13. Related Party TransactionsSee Note 10 - Shareholders’ Equity (Deficit) for further discussion on the warrant agreements between FREYR Legacy and EDGE. Furthermore,Additionally, FREYR Legacy agreed to make certain milestone payments to EDGE based on the closing of certain additional financing rounds as defined within the 2020 EDGE Agreement. See Note 10 – Shareholders' Equity for further discussion on the warrant agreements between FREYR Legacy and 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.March 31, 2022 andSeptember 30, 2021 were nil$4.0 million and $0.1$4.3 million, respectively. No expenses were recorded in the corresponding periods of 2022. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. There was no unpaid amount in accounts payable and accrued liabilities -– related party as of March 31,September 30, 2022 and December 31, 2021.million.million plus expenses. Per the agreement, the consultant is also entitled to participate in our benefit plans made available to our senior executives. The expenses incurred for consulting services for the three and nine months ended March 31,September 30, 2022 and 2021 were $0.2$0.1 million and nil, respectively.$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 was recognized in accounts payable and accrued liabilities - related party as of March 31,September 30, 2022 and December 31, 2021.MetierProjects.Project Execution. The expenses incurred for consulting services for the three and nine months ended March 31,September 30, 2022 were $1.3 million and $4.1 million, respectively, and $1.1 million and $3.5 million for the three and nine months ended September 30, 2021, were $1.2 million.respectively. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. The unpaid amount of $0.5$0.7 million and $0.3 million was recognized in accounts payable and accrued liabilities - related party as of March 31,September 30, 2022 and December 3 1,31, 2021, respectively.FREYR Battery KSP JV, LLCa joint venture with Koch Strategic Platforms (“FREYR KSP JV”Koch”) that is accounted for under the equity method. FREYR along with Koch Strategic Platforms, who also holds 50% common stock ownership,The joint venture was formed FREYR KSP JV 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. Project concept selection, remains under development as of March 31, 2022. The initial capitaland these contributions by both parties were made in January 2022. FREYR KSP JVProject concept selection remained under development as of September 30, 2022. The joint venture reported a net loss of $0.3$2.3 million for the threenine months ended March 31,September 30, 2022. For the threenine months ended March 31,September 30, 2022, we incurred $0.1recorded $1.1 million of expenses on behalf of FREYR KSP JV andrelated to the joint venture. There were no unpaid amount of less than $0.1 million was recognized as other receivablesamounts due to the joint venture as of MarchSeptember 30, 2022 and December 31, 2022.14. Convertible Note2024. The Convertible Note2024, 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 account for the Convertible Note using the fair value option. See Note 9 -– Fair Value Measurement for details on the valuation methodology.15. Net Loss Per ShareMarch 31,September 30, 2022 was computed by dividing net loss attributable to ordinary shareholders by the weighted-average ordinary shares outstanding.March 31,September 30, 2021, we computed net loss per share using the two-class method required for participating securities. Under the two-class method, undistributed earnings for the period are allocated to participating securities, including the redeemable preferred shares that were settled as part of the Business Combination, based on the contractual participation rights of the security to share in the current earnings as if all current period earnings had been distributed. As there was no contractual obligation for the redeemable preferred shares to share in losses, our basic net loss per share attributable to ordinary shareholders for the three and nine months ended March 31,September 30, 2021, was computed by dividing net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding.threenine months ended March 31,September 30, 2022 and 2021.threenine months ended March 31,September 30, 2022 and 2021, the treasury stock method was used to assess our warrants and share-based payment awards while the if-converted method was used to assess our redeemable preferred shares; however, no instrument was determined to have a dilutive effect.March 31,September 30, 2022 and 2021 (amounts in(in thousands, except share and per share amounts)data): For the three months ended
March 31, 2022 2021 Numerator: Net loss attributable to ordinary shareholders - basic and diluted $ (34,907 ) $ (11,887 ) Denominator: Weighted average ordinary shares outstanding - basic and diluted 116,853,504 37,452,359 Net loss per ordinary share: Basic and diluted $ (0.30 ) $ (0.32 ) 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 March 31, 2022 2021 EDGE warrants 2,176,081 2,176,081 Other nonemployee warrants - 413,313 Employee awards 2,081,247 950,667 CEO awards 94,444 - Share-based compensation liability 1,007,884 - Private Warrants 10,250,000 - Public Warrants 14,375,000 - Redeemable preferred shares - 15,000,000 Total 29,984,656 18,540,061 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 March 31,September 30, 2022, the Company 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.“FREYRFREYR Battery’s Management’s“Management’s Discussion and Analysis”Analysis of FREYR Battery’s results operationsFinancial Condition and financial conditionResults of Operations” 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, 2021 and the unaudited interim condensed consolidated financial statements and the accompanying notes included as part of March 31, 2022 andthis Quarterly Report on Form 10-Q for the three monthsperiod ended March 31, 2022 and 2021, and the related respective notes, which are included elsewhere in this Report.September 30, 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 closing of the Business Combination and to FREYR Battery following the closing 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, construction work is ongoingour 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 March 31,September 30, 2022, we have not yet initiated manufacturing or derived revenue from our principal business activities.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 through the 24M platforms, as well as through the joint venture business model and potentially additional licensing partnerships. market. ●construct manufacturing facilities and purchase related equipment;●commercialize products;●continue to invest in technology;●maintain and improve operational, financial, and management information systems;●hire additional personnel;●operate as a public company.Developments●Signed a Head of Terms agreement to pursue a Joint Venture (“JV”) with Aleees to establish an LFP cathode plant in the Nordic region. The joint venture partners will seek to commence production in 2024, coinciding with the anticipated ramp-up of operations from FREYR’s first Gigafactory in Mo i Rana, Norway.●Announced our signing of UN Global Compact principles of human rights, labor, environment, and anti-corruption.●Appointed Oscar K. Brown as FREYR’s Group Chief Financial Officer, effective on April 4, 2022. Mr. Brown comes with more than 30 years of energy industry experience, having most recently been Senior Vice President of Strategy, Business Development and Supply Chain for Occidental Petroleum Corporation.●Entered into a conditional power purchase agreement (“PPA”) to secure access to clean and renewable electricity through hydropower following the commencement of production in Gigafactory 1&2. The PPA is conditional upon FREYR taking a final investment decision on Gigafactory 1&2.
Share Repurchase ProgramKey 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 in the section of this Report titled “Risk Factors.”Components of Results of OperationsThree 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 Expensesexpensesexpense 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 accountingaudit fees, for professional and contract services, as well as depreciation expense.operatingincreased expenses to operate as a public company, including compliance with the rules and regulations of the United States Securities and Exchange Commission, additional legal, audit, and insurance expenses, investor relations activities, and other administrative and professional services.expense consistsexpenses consist primarily of compensation to employees engaged in research and development activities, including share-based compensation, internal and external engineering, supplies and services, and contributions to research institutions. R&D expenseexpenses also includes theinclude development costs related to our technology license with 24M.24M License.three months ended September 30, 2022, from $5.3 million for the three months ended September 30, 2021. R&D expenses decreased by $2.0 million or 18% to $9.2 million for the nine months ended September 30, 2022, from $11.2 million for the nine months ended September 30, 2021. This is primarily due to a decrease of $1.5 million in share-based compensation costs, largely attributable to employee options and warrants which vested immediately following the Business Combination in 2021FREYR Battery KSP JV LLC,our United States joint venture, which is accounted for under the equity method, as we exercise significant influence but not control, over its operating and financial policies. and redeemable preferred shares, interest income and expense, net foreign currency transaction gains and losses, and grant proceeds received. Results of OperationsComparison of the Three Months Ended March 31, 2022 and 2021The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Report. The following table sets forth FREYR Battery’s condensed consolidated results of operations data for the periods presented (in thousands, except percentages): For the three months ended March 31, Change Change 2022 2021 ($) (%) Operating expenses: General and administrative $ 24,614 $ 9,012 $ 15,602 173 % Research and development 2,859 2,907 (48 ) -2 % Equity in losses from investee 167 - 167 NM (1) Total operating expenses 27,640 11,919 15,721 132 % Loss from operations (27,640 ) (11,919 ) (15,721 ) 132 % Other income (expense) (7,267 ) 32 (7,299 ) NM (1) Loss before income taxes (34,907 ) (11,887 ) (23,020 ) 194 % Income tax expense - - - 0 % Net loss $ (34,907 ) $ (11,887 ) $ (23,020 ) 194 % (1)NM = Not meaningfulOperating expensesGeneral and administrativeGeneral and administrative expensesOther expense increased by $15.6$54.7 million or 173%, to $24.6$64.8 million for the three months ended March 31,September 30, 2022 from $9.0$10.1 million for the three months ended March 31,September 30, 2021. General and administrative expensesOther expense increased primarily due to an increase of $12.4 million related to growth in professional services, general corporate expenses, and travel. Additionally, there was an increase of compensation costs of $6.5 million resulting from a higher headcount and share based compensation costs. These increases were partially offset by a decrease in non-employee share-based compensation costs of $3.7 million recognized in the prior year.Equity in losses from investeeEquity in losses from investee of $0.2 million were recognized for the three months ended March 31, 2022. There was no equity in losses from investee for the three months ended March 31, 2021.Other income (expense)Other income (expense) changed by $7.3$28.0 million to a loss of $7.3$35.9 million for the threenine months ended March 31,September 30, 2022 from a gain of less than $0.1$7.9 million for the threenine months ended March 31,September 30, 2021. The changeincrease in other income (expense)expense is primarily due to the increase in$70.3 million and $45.6 million loss on the revaluation of the warrant liability fair value adjustment of $8.7 million, offset by the increase in other income of $1.5 million, which predominantly consists of the grant proceeds recognizedrecorded during the three and nine months ended March 31, 2022.
Liquidity and Capital Resources
As of March 31,September 30, 2022, we had approximately $524.6approximately $418.6 million of cash,cash, cash equivalents, and restricted cash and current liabilities of approximately $35.1 million.$47.2 million. To date, our principal sources of liquidity have been proceeds received from the Business Combination, issuance of debt and equity securities, and amounts received from government grants. TheseHistorically, these funds will behave been used for constructing and equipping our battery projects, technology licensing and research and development efforts,manufacturing facilities, including the CQP and Giga Arctic, technology licensing, R&D activities, and general corporate purposes. Additionally, we expect that the various government grants we have received but not earned to date will also help fund our operational needs and general corporate purposes and cover certain operating expenses.
Our capitalfuture 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 research and developmentR&D efforts, andspending on other growth initiatives or expansion into new geographies, our future revenue generating activities, including market adoptionacceptance of our future products. products and services, and overall economic conditions.
While we will need to raise additional capital in the future, if adequate funds are not available, we will need to curb our expansion plans or limit our research and development activities, which would have a material adverse impact on our business prospects and results of operations.
We believe that we have the ability to meet all of our contractual obligations and commitments for at least the next 12 months.
Cash Flow Summary
The following table summarizes our cash flows 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 three months ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (30,135 | ) | $ | (6,392 | ) | ||
| Investing activities | (10,932 | ) | (54 | ) | ||||
| Financing activities | - | 7,500 | ||||||
Operating Activities
Net cash used in operating activities was $30.1$73.0 million for the threenine months ended March 31,September 30, 2022, while netcompared to $35.6 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, the increase in cash used in operating activities was $6.4driven by a $31.9 million increase in net loss, adjusted for the three months ended March 31, 2021. For the three months ended March 31, 2022, the primary factor affecting our operating cash flowsnon-cash items. The increase in net loss, adjusted for non-cash items was ourprimarily due to higher operating expenses from higher headcount
Investing Activities
Net cash used in investing activities was $10.9$70.2 million for the threenine months ended March 31,September 30, 2022, while netcompared to $4.1 million for the nine months ended September 30, 2021. The change in cash used in investing activities was $0.1primarily driven by $77.7 million for the three months ended March 31, 2021. For the three months ended March 31, 2022, our investing cash flows primarily reflect $7.9 million ofin purchases of property and equipment compared to $4.1 million for the nine months ended September 30, 2022 and a2021, respectively. In addition, for the nine months ended September 30, 2022, we used $3.0 million in cash for an investment in FREYR Battery KSP JV, LLC, our equity method investee. Forinvestee in the three months ended March 31, 2021,United States and received proceeds of $10.5 million from grants funding our investing cash flows primarily reflect the purchases of equipment.
Financing Activities
There was no netNet cash provided by or used in financing activities was $1.1 million for the threethe nine months ended March 31,September 30, 2022, while netcompared to cash provided by financing activities was $7.5of $649.0 million for the threenine months ended March 31,September 30, 2021. ForNet cash used during 2022 was related to the three months ended March 31,purchase of treasury shares. Net cash provided during 2021, our financing cash flows relate toconsisted of net proceeds of $7.5$641.5 million from the Business Combination and $7.5 million in proceeds from the issuance of redeemable preferred shares.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are consistent with those described in Item 7 of Part II, “Management’sthe Management’s Discussion and Analysis of Financial Condition and Results of Operations”section of our December 31, 2021 Annual Report on Form 10-K.
Recent Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements for information concerning new accounting standards and the impact of the implementation of these standards on our financial statements.
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.
FREYR is exposed to market risks arising from adverse changes in inflation and changing 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 Inflation Risk“Prospectus”“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.
Increases in raw material and building supply prices and increases in freight and logistics costs, including those from inflationary pressures or from supply chain constraints, may adversely impact FREYR’s costs and results of operations. Rising raw material costs, including steel and aluminum raw material inflationwhich saw significant price increases in fiscal year 2021, may result in significant increases in costs from our suppliers and increased lead-times associated with our raw materials, particularly since we have not established fixed prices and volumes with a majority of our prospective suppliers.
Limitations on Effectiveness of Controls and Procedures
We maintain disclosure controls and procedures (“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.
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 March 31,September 30, 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.
Changes in Internal Control Over Financial Reporting
As part of our preparation towards production, we implemented a new cloud enterprise resource planning (“ERP”) system as of January 1, 2022. The ERP system, which is an integral component of our internal controls over financial reporting, will provide us with more efficient transactional processing, increased scalability and enhanced management tools for our business growth.
There werehas been no other changeschange in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the first quarter of fiscalthree months ended September 30, 2022 that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
To 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.
From time to time, we may be involved in litigation relating to claims arising in the ordinary course of our business. ThereTo the knowledge of our management, there are currently no material litigation, claims, or actions currently pending or threatened against us.
Other thanAs of the update to the risk factor set forth below,date of this filing, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 9, 2022, except as discussed in Part II, Item IA, of our Quarterly Report on Form 10-Q for the period ended March 31, 2022. Additional risks not currently known to us or that we currently deem to be immaterial may also materially affect our consolidated financial position, results of operations, or cash flows.
Doing business internationally creates operational, financial and tax risks for FREYR’s business.
FREYR’s business plan includes operations in international markets, including initial manufacturing and supply activities in Norway, initial sales in North America and Europe, and eventual expansion into other international markets. Conducting and launching operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes significant management resources. If FREYR fails to coordinate and manage these activities effectively, its business, financial condition, prospects or results of operations could be adversely affected. International sales entail a variety of risks, including currency exchange fluctuations, challenges in staffing and managing foreign operations, tariffs and other trade barriers, unexpected changes in legislative or regulatory requirements of foreign countries into which FREYR sells its products and services, difficulties in obtaining export licenses or in overcoming other trade barriers, laws and business practices favoring local companies, political and economic instability, difficulties protecting or procuring intellectual property rights, and restrictions resulting in delivery delays and significant taxes or other burdens of complying with a variety of foreign laws.
In particular, in February 2022, armed conflict escalated between Russia and Ukraine. The EU and other governments in jurisdictions in which we plan to operate in have imposed severe financial and economic sanctions and export controls against Russia and Russian interests, and have threatened additional sanctions and controls. It is not possible to predict the broader consequences of this military conflict. Further escalation of geopolitical tensions related to the military conflict, could include, among other things, further sanctions, embargoes, greater regional instability, geopolitical shifts, heightened risk of cyberattacks, and other adverse effects on macroeconomic conditions, currency exchange rates, supply chains and financial markets, any of which may adversely affect our business and supply chain. In addition, the effects of the ongoing conflict could heighten many of our known risks described in the section entitled “Risk Factors" in our Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 9, 2022.
In addition, the corporate structure of FREYR and its subsidiaries with entities in several jurisdictions such as Norway, Luxembourg, the U.S., Finland and the Cayman Islands, is, together with its conducting of operations in international markets as described above, subject to tax risk. The expected tax treatment of FREYR and its subsidiaries relies on current tax laws and regulations, as well as certain tax treaties between the aforementioned different jurisdictions. As such, unexpected changes, interpretation, application or enforcement practice in respect of legislative or regulatory requirements of such tax laws in foreign countries into which FREYR or any of its subsidiaries is incorporated and/or conducting operations and sales in, including but not limited to, changes in treatment of sales and results of operations earned in foreign and offshore jurisdictions, value added tax, cessation of tax treaties and recognition of tax law principles in other jurisdictions, as well as other changes in corporate tax law, may adversely FREYR’s business, financial conditions, prospects or result of operations.
None.
None.
None.
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.#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: May 11,November 14, 2022By: /s/ Tom Einar Jensen Name: Tom Einar Jensen Title:Title: Date: November 14, 2022 (Principal Executive Officer)Date: May 11, 2022By: /s/ Oscar K. Brown Name: Oscar K. Brown Title:
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