SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 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
FREYR Battery
(Exact name of Registrant as specified in its charter)
Luxembourg | Not Applicable | |||||||
(State or other jurisdiction of | (I.R.S. Employer | |||||||
incorporation or organization) | Identification Number) |
412F, route d’Esch, L-2086 Luxembourg
Grand Duchy of Luxembourg
+352 46 61 11 3721
Securities registered pursuant to Section 12(b) of the Act:
Title 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 |
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.
☐ | Large accelerated filer | ☐ | ||||||||||
☒ | Non-accelerated filer | ☒ | ||||||||||
☒ | Emerging growth company |
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 August 4,November 10, 2022, the registrant had 116,703,504116,705,234 ordinary shares, without nominal value, outstanding.
TABLE OF CONTENTS
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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:
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PART I - FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In Thousands, Except per Share Amounts) FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (In Thousands) FREYR BATTERY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) See accompanying Notes to Condensed Consolidated Financial Statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 global energy and transportation systems by producing clean, cost-competitive batteries. We are in the design and testing phase related to our battery production process and we Business Combination On 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. The merger was completed in multiple stages, pursuant to the terms of the BCA, which included among other things, the transfer of FREYR Legacy’s wind farm business to Sjonfjellet Vindpark Holding AS (“SVPH”), resulting in SVPH shares being held by FREYR Legacy’s shareholders. On July 8, 2021, FREYR’s ordinary shares and 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. 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 United States Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, these financial statements do not include all of the information required by GAAP for complete consolidated financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements for the year ended December 31, 2021 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments necessary for the fair presentation of the Company’s condensed consolidated financial statements for the periods presented. The results of operations for the Use of Estimates The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and 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. Risks and Uncertainties We are subject to those risks common to our business and industry and also those risks common to early stage development companies. These risks include those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 9, 2022 and Part 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 sufficient to support our planned operations for at least the next 12 months. Therefore, our financial statements have been prepared on the basis 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. 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. Leases A lease is a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease classification as short-term lease, operating lease or finance lease is made at the lease inception. The Company 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. The Company made an accounting policy election not to recognize a right-of-use asset and lease liability for short-term leases with an initial term of 12 months or 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 statements of operations and comprehensive loss. The Company recognizes lease liabilities and right-of-use assets for all operating and finance leases for which it is a lessee at the lease commencement date. Lease liabilities are initially recognized at the present value of the future lease payments during the expected lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, based on the information available at 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. The right-of-use asset is initially recognized at the amount of the initial measurement of the lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received, and any initial direct costs incurred by the Company. Right-of-use assets are recorded as other long-term assets in the consolidated balance sheets. Subsequent to initial recognition, the right-of-use asset is reflected net of amortization. Costs to get a leased asset to the condition and location necessary for its intended use are capitalized as leasehold improvements. The Company remeasures its lease liabilities with a corresponding adjustment to the right-of-use asset due to an applicable change in lease payments such as those due to a lease modification not accounted for as a separate contract, certain changes in the expected term of the lease, and certain changes in assessments and contingencies. Subsequent to initial recognition, the operating lease liability is increased for the interest component of the lease liability and reduced by the lease payments made. Operating lease expenses are recognized as a single lease cost in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term, which includes the interest component of the measurement of the lease liability and amortization of the right-of-use asset. In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting 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. In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC 842), 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 and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in 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 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, 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 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 50 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 The components of lease liabilities included in our condensed consolidated balance sheet consisted of the following (in thousands): Components of lease expenses were as follows (in thousands): 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. 8. 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 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”). 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 as part of additional paid-in capital on the condensed consolidated balance sheets. The Private Warrants are identical to the Public Warrants, except that so long as they are held by the Sponsor or any of its permitted transferees, the Private Warrants: (i) may be exercised for cash or on a cashless basis and (ii) shall not be redeemable by FREYR. We determined that the Private Warrants are not considered indexed to our ordinary shares as the holder of the Private Warrants impacts the settlement amount and thus, they are liability classified. The Private Warrants are presented as warrant liability on the condensed consolidated balance sheets. See also Note 9 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 changes in the Level 3 instruments measured at fair value were as follows (in thousands): For the six months ended June 30, 2021 10. Ordinary Shares As of Share Repurchase Program In May 2022, the board of directors approved a share repurchase program (the “Share Repurchase Program”). The shares purchased under the program are to be used to settle the exercise of employee options granted under the Company’s equity compensation plans. We were authorized to repurchase up to 150,000 of the Company’s Ordinary Shares, or approximately 0.13% of the current outstanding share capital. 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, excluding fees, during the Employee Awards – 2019 Plan FREYR Legacy had an Incentive Stock Option Plan (the “2019 Plan”) issued on September 11, 2019. According to the 2019 Plan, options or warrants could be granted to eligible employees, and a total of 895,190 ordinary shares could be issued. On December 1, 2020, the board of directors increased the number of ordinary shares available under the 2019 Plan by 895,190 ordinary shares. 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 2019 Plan awards. Effective as of the close of the Business Combination, the 2019 Plan was modified to require During the Employee Awards – 2021 Plan 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 employees and directors. The aggregate number of additional shares authorized under the 2021 LTIP is not to exceed 10% of the current number of issued shares over the subsequent five years, excluding any options or warrants granted prior to the 2021 LTIP. All options and restricted stock units (“RSUs”) granted under 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. During the 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. In accordance with the stock option agreement, on July 13, 2021 our CEO was granted 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 On March 1, 2021, we were awarded a grant of NOK 142.0 million ($16.5 million based on NOK/USD exchange rate at the time of the transaction) for the development and construction of the pilot plant in Mo i Rana, Norway. The grant was awarded to assist with the costs incurred associated with 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. The 2020 EDGE Agreement provided that FREYR Legacy should pay EDGE a monthly retainer fee. 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 The expenses incurred in relation to the consulting services provided for the three and 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 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 Metier 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 Project Execution. The expenses incurred for consulting services for the three and Equity Method Investment We hold a 50% common stock ownership in No dividends were declared or paid for the Diluted net The following table sets forth the computation of our basic and diluted net 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 anti-dilutive (in thousands): This FREYR Battery’s “Management’s Discussion and 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 global energy and transportation systems by producing clean, cost-competitive batteries. We are in the design and testing phase related to our battery production process and we Our initial CQP production line is We expect our capital and operating expenditures to increase significantly Recent 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. Share Repurchase Program In May 2022, the board of directors approved a share repurchase program (the “Share Repurchase Program”). The shares purchased under the program are to be used to settle the exercise of employee options granted under the Company’s equity compensation plans. We were authorized to repurchase up to 150,000 of the Company’s Ordinary Shares, or approximately 0.13% of the current outstanding share capital. 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, excluding fees, during the The following table sets forth FREYR Battery’s condensed consolidated results of operations data for the periods presented (in thousands except percentages): Operating expenses General and administrative General and administrative expenses consist of personnel and personnel-related expenses, including share-based compensation, fees paid for contractors and consultants assisting with growing the business, office space related costs, travel costs, public relations costs, legal, accounting and audit fees, and depreciation expense. General and administrative expenses We expect general and administrative expenses to increase for the foreseeable future as we scale headcount with the growth of our business, and as a result of increased 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. Research and development (“R&D”) R&D expenses R&D (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 June 30, December 31, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 484,204 $ 563,956 Restricted cash 4,160 1,671 Prepaid assets 19,348 15,882 Other current assets 5,728 1,282 Total current assets 513,440 582,791 Property and equipment, net 45,339 21,062 Convertible note 20,722 20,231 Equity method investments 2,475 2,938 Right-of-use asset under operating leases 12,785 — Other long-term assets 11 11 Total assets $ 594,772 $ 627,033 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 9,025 $ 3,813 Accrued liabilities and other 31,853 15,077 Accounts payable and accrued liabilities - related party 620 3,316 Deferred income 1,236 1,380 Share-based compensation liability 985 2,211 Total current liabilities 43,719 25,797 Warrant liability 24,420 49,124 Operating lease liability 11,090 — Long-term share-based compensation liability 2,583 6,627 Total liabilities 81,812 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 June 30, 2022 and December 31, 2021 and 116,704 and 116,854 ordinary shares outstanding as of June 30, 2022 and December 31, 2021, respectively 116,854 116,854 Additional paid-in capital 539,639 533,418 Treasury stock (1,052 ) — Accumulated other comprehensive (loss) income (7,982 ) (524 ) Accumulated deficit (134,499 ) (104,263 ) Total shareholders’ equity 512,960 545,485 Total liabilities and shareholders’ equity $ 594,772 $ 627,033 (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) Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Operating expenses: General and administrative $ 28,150 $ 7,176 $ 52,764 $ 16,188 Research and development 3,082 3,045 5,941 5,952 Equity in losses from investee 296 — 463 — Total operating expenses 31,528 10,221 59,168 22,140 Loss from operations (31,528 ) (10,221 ) (59,168 ) (22,140 ) Other income (expense): Warrant liability fair value adjustment 33,392 — 24,704 — Redeemable preferred shares fair value adjustment — 69 — 75 Convertible notes fair value adjustment 270 — 491 — Interest income 26 2 61 8 Interest expense (12 ) — (32 ) — Foreign currency transaction gain (loss) 1,421 (208 ) 1,090 (188 ) Other income, net 1,102 2,322 2,618 2,322 Total other income (expense) 36,199 2,185 28,932 2,217 Income (loss) before income taxes 4,671 (8,036 ) (30,236 ) (19,923 ) Income tax expense — — — — Net income (loss) $ 4,671 $ (8,036 ) $ (30,236 ) $ (19,923 ) Weighted average ordinary shares outstanding: Basic 116,830 37,452 116,842 37,452 Diluted 119,250 37,452 116,842 37,452 Net income (loss) per share: Basic $ 0.04 $ (0.21 ) $ (0.26 ) $ (0.53 ) Diluted 0.04 (0.21 ) (0.26 ) (0.53 ) Other comprehensive income (loss): �� Net income (loss) $ 4,671 $ (8,036 ) $ (30,236 ) $ (19,923 ) Foreign currency translation adjustments (7,791 ) 177 (7,458 ) 234 Total comprehensive loss $ (3,120 ) $ (7,859 ) $ (37,694 ) $ (19,689 ) (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 Treasury Accumulated Total Shareholders’
Equity Shares Amount Capital Income (Loss) Stock 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 $ - $ 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 $ - $ 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 - - 528 - - - 528 Share-based compensation expense — — 922 — — — 922 Net loss - - - - - (8,036 ) (8,036 ) Net loss — — — — — (93,850) (93,850) Other comprehensive income - - - 177 - - 177 Balance as of June 30, 2021 37,452 $ - $ 20,328 $ 892 $ - $ (30,808 ) $ (9,588 ) 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 Treasury Accumulated Total Shareholders’
Equity Shares Amount Capital Income (Loss) Stock Deficit (Deficit) Balance as of January 1, 2022 116,854 $ 116,854 $ 533,418 $ (524 ) $ - $ (104,263 ) $ 545,485 Share-based compensation expense - - 850 - - - 850 Net loss - - - - - (34,907 ) (34,907 ) Other comprehensive income - - - 333 - - 333 Balance as of March 31, 2022 116,854 $ 116,854 $ 534,268 $ (191 ) $ - $ (139,170 ) $ 511,761 Share-based compensation expense - - 5,371 - - - 5,371 Net income - - - - - 4,671 4,671 Repurchase of shares - - - - (1,052 ) - (1,052 ) Other comprehensive loss - - - (7,791 ) - - (7,791 ) Balance as of June 30, 2022 116,854 $ 116,854 $ 539,639 $ (7,982 ) $ (1,052 ) $ (134,499 ) $ 512,960 (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 Six months ended
June 30, 2022 2021 Cash flows from operating activities: Net loss $ (30,236 ) $ (19,923 ) Adjustments to reconcile net loss to cash used in operating activities: Share-based compensation expense 2,923 4,688 Depreciation 186 24 Reduction in the carrying amount of right-of-use assets 746 — Warrant liability fair value adjustment (24,704 ) — Redeemable preferred shares fair value adjustment — (75 ) Convertible note fair value adjustment (491 ) — Equity in losses from investee 463 — Foreign currency transaction net unrealized gain (2,113 ) — Other — 28 Changes in assets and liabilities: Prepaid assets (5,229 ) (1,049 ) Other current assets (7,434 ) (50 ) Accounts payable and accrued liabilities 15,265 3,659 Accounts payable and accrued liabilities – related party 638 950 Other current liabilities (1 ) — Deferred income — 1,431 Operating lease liability (443 ) — Net cash used in operating activities (50,430 ) (10,317 ) Cash flows from investing activities: Proceeds from property related grants 4,874 — Purchases of property and equipment (26,420 ) (107 ) Investments in equity method investee (3,000 ) — Purchases of other long-term assets — (12 ) Net cash used in investing activities (24,546 ) (119 ) Cash flows from financing activities: Repurchase of treasury shares (1,052 ) — Proceeds from issuance of redeemable preferred shares — 7,500 Net cash (used in) provided by financing activities (1,052 ) 7,500 Effect of changes in foreign exchange rates on cash, cash equivalents, and restricted cash (1,235 ) 73 Net decrease in cash, cash equivalents, and restricted cash (77,263 ) (2,863 ) Cash, cash equivalents, and restricted cash at beginning of period 565,627 14,945 Cash, cash equivalents, and restricted cash at end of period $ 488,364 $ 12,082 Significant non-cash investing and financing activities: Accrued purchases of property and equipment $ 13,026 $ — Settlement of accrued liabilities through the issuance of non-employee warrants — 460 Reconciliation to consolidated balance sheets: Cash and cash equivalents $ 484,204 $ 11,279 Restricted cash 4,160 803 Cash, cash equivalents, and restricted cash $ 488,364 $ 12,082 1. Business and Basis of Presentationhave initiatedare 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 JuneSeptember 30, 2022, we have not yet initiated manufacturing or derived revenue from our principal business activities.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)sixnine months ended JuneSeptember 30, 2022, are not necessarily indicative of the results to be expected for the full year ending December 31, 2022. The condensed consolidated balance sheet as of December 31, 2021, was derived from the audited consolidated financial statements as of December 31, 2021. However, these interim condensed consolidated financial statements do not contain all of the footnote disclosures from the annual consolidated financial statements. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 9, 2022.2. Summary of Significant Accounting PoliciesNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)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 existed before the adoption of the new standard. A description of our accounting policy and accounting methods elected, 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 did not cause a material change in the Company’s operating expenses.3. Business CombinationNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)Property and Equipment, netPROPERTY AND EQUIPMENT, NET June 30, December 31, 2022 2021 Construction in progress $ 43,983 $ 20,017 Office equipment and other 1,651 1,180 45,634 21,197 Less: Accumulated depreciation (295 ) (135 ) Total $ 45,339 $ 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 CQP production equipment in Mo i Rana, Norway. Depreciation expense was $0.2$0.3 million and $24 thousand$0.1 million for the sixnine months ended JuneSeptember 30, 2022 and 2021, respectively, and is included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.5. Accrued Liabilities and other 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 June 30, December 31, 2022 2021 Accrued purchases $ 17,976 $ 8,165 Accrued payroll and payroll related expenses 9,517 6,476 Operating lease liabilities (Note 6) 1,984 — Accrued other operating costs 2,376 436 Total $ 31,853 $ 15,077 LeasesLEASESJuneSeptember 30, 2022, all of our leases are operating leases. June 30,
2022 Accrued liabilities and other (Note 5) 1,984 Operating lease liability 11,090 Total $ 13,074 September 30,
2022Accrued liabilities and other (Note 5) $ 3,061 Operating lease liability 9,933 Total $ 12,994 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Three months ended
June 30,
2022 Six months ended
June 30,
2022 Operating lease cost 543 1,019 Variable lease cost 74 102 Short-term lease cost 15 15 Total lease cost $ 632 $ 1,136 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 June 30,
2022 For the remainder of 2022 $ 1,036 2023 1,910 2024 1,866 2025 1,916 2026 1,916 Thereafter 19,216 Total undiscounted lease payments 27,860 Less: Imputed interest (14,786 ) Present value of lease liabilities $ 13,074 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 June 30,
2022September 30,
2022Weighted-average remaining lease term (in years) 22.424.7 Weighted-average discount rate 6.93 7.15% 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 Six months
ended
June 30,
2022 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows $ 869 Lease liabilities arising from obtaining right of use assets 14,616 Commitments and ContingenciesCOMMITMENTS AND CONTINGENCIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)WarrantsWARRANTS JuneSeptember 30, 2022 and December 31, 2021, we had 24,625,000 warrants outstanding (the “Warrants”), consisting of 14,375,000 public warrants (the “Public Warrants”) and 10,250,000 private warrants (the “Private Warrants”). The Warrants entitle the holder thereof to purchase one of our ordinary shares at a price of $11.50 per share, subject to adjustments. The Warrants will expire on July 9, 2026, or earlier upon redemption or liquidation.-– Fair Value Measurement.9. Fair Value Measurement June 30, 2022 December 31, 2021 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Convertible Note $ — $ — $ 20,722 $ 20,722 $ — $ — $ 20,231 $ 20,231 Liabilities: Warrant Liabilities — — 24,420 24,420 — — 49,124 49,124 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 JuneSeptember 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.JuneSeptember 30, 2022 and December 31, 2021, the carrying value of all other financial assets and liabilities approximated their respective fair values.JuneSeptember 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 JuneSeptember 30, 2022 and December 31, 2021, required the use of subjective assumptions:●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 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.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)●The expected term was determined to be 4.03 and 4.53 years as of June 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.$6.84$14.24 and $11.18 as of JuneSeptember 30, 2022 and December 31, 2021, respectively, we determined that the fair value of the Private Warrants was $24.4$94.7 million and $49.1 million, respectively.JuneSeptember 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 determineda redeemable preferred shares fair value adjustment within the consolidated statements of operations and comprehensive loss.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 $ — For the six months ended
June 30, 2022 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 — — — — 7,500 Fair value measurement adjustments 491 (24,704 ) — — (74 ) Foreign currency exchange effects — — — — — Settlements — — — — — Balance (end of period) $ 20,722 $ 24,420 $ — $ — $ 15,000 Shareholders’ EquitySHAREHOLDERS' EQUITYJuneSeptember 30, 2022 and December 31, 2021, 245,000,000 ordinary shares without par value were authorized and 116,703,504 andand 116,853,504 ordinary shares were outstanding as of JuneSeptember 30, 2022 and December 31, 2021, respectively. Holders of ordinary shares are entitled to one vote per share and are entitled to receive dividends when, as, and if, declared by our Board of Directors. As of JuneSeptember 30, 2022, we have not declared any dividends.three and sixnine months ended JuneSeptember 30, 2022 (no comparative amounts for the three and sixnine months ended JuneSeptember 30, 2021). As of JuneSeptember 30, 2022, the authorized share repurchase was completed and no ordinary shares remain available for repurchase under the program.cash-settlementcash-sixnine months ended JuneSeptember 30, 2022, 223,796300,352 of the 2019 Plan awards were exercised.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)Nonemployee Awards – Related PartyOn March 1, 2019, FREYR Legacy entered into a consulting agreement with EDGE Global LLC (“EDGE”) for FREYR Legacy’s CEO and Chief Commercial Officer to be hired 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.On September 1, 2020, FREYR Legacy amended the 2019 EDGE Agreement, effective as of July 1, 2020 (the “2020 EDGE Agreement”). FREYR Legacy issued an additional 687,219 warrants to EDGE under the 2020 EDGE Agreement with an initial subscription price of $0.99 per share, which was modified to $1.22 per share on September 25, 2020. The warrants vested over an eighteen-month graded vesting period and expire on September 30, 2025.Upon the consummation of the Business Combination on July 9, 2021, all unvested warrants under the 2019 and 2020 Edge Agreements vested immediately. As such, on July 9, 2021, compensation cost was recognized for the remaining unrecognized fair value of these awards.sixnine months ended JuneSeptember 30, 2022, 2.93.8 million options were granted to employees and directors, 81,191 RSUs were granted, and 164,386166,777 options were forfeited. directors’directors during their first quarter 2022 meeting, the corresponding awards will vest in equal thirds on December 31, 2022, September 30, 2023, and June 1, 2024. If achieved and certified during the first quarter 2023 meeting, the awards will vest in equal halves on September 30, 2023 and June 1, 2024. Compensation cost is recognized to the extent that achievement of the performance criteria is deemed probable. During the sixnine months ended JuneSeptember 30, 2022, 94,444 of the CEO Option Awards were deemed probable.11. Government GrantsJuneSeptember 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 recognized $1.2recorded $1.3 million as of JuneSeptember 30, 2022 and $1.3$1.4 million as of December 31, 2021, as deferred income within the condensed consolidated balance sheet. For the sixnine months ended JuneSeptember 30, 2022 and 2021, no other income was recognized within the condensed consolidated statements of operations and comprehensive loss.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)As of JuneFor the nine months ended September 30, 2022, we satisfied the requirements for an initial payment of $6.3payments totaling $11.9 million of which $1.4 million related to costs which were expensed and were recognized as other income and $4.9$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 Taxessixnine months ended JuneSeptember 30, 2022 and 2021 as the Company continues to maintain a full valuation allowance against its deferred tax assets.13. Related Party Transactions- Shareholders’– 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.sixnine months ended JuneSeptember 30, 2021 were $0.1$4.0 million and $0.2$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 JuneSeptember 30, 2022 and December 31, 2021.sixnine months ended JuneSeptember 30, 2022 were $0.2$0.1 million and $0.3$0.4 million, respectively. No expenses were recorded inrespectively, and $0.1 million for both the corresponding periods ofthree 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 JuneSeptember 30, 2022 and December 31, 2021.sixnine months ended JuneSeptember 30, 2022 were $1.5$1.3 million and $2.8$4.1 million, respectively, and $1.2$1.1 million and $2.5$3.5 million for the three and sixnine months ended JuneSeptember 30, 2021, respectively. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. The unpaid amount of $0.6$0.7 million and $0.3 million was recognized in accounts payable and accrued liabilities - related party as of JuneSeptember 30, 2022 and December 31, 2021, respectively.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)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 June 30, 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 $0.9$2.3 million for the sixnine months ended JuneSeptember 30, 2022. For the sixnine months ended JuneSeptember 30, 2022, we incurred $0.5recorded $1.1 million of expenses on behalf of FREYR KSP JV.related to the joint venture. There waswere no unpaid amountamounts due to the joint venture as of JuneSeptember 30, 2022 and December 31, 2021.14. Convertible Note-– Fair Value Measurement for details on the valuation methodology.15. Net Income (Loss) Per Shareincome (loss)loss per share attributable to ordinary shareholders for the three and sixnine months ended JuneSeptember 30, 2022 was computed by dividing net income (loss)loss attributable to ordinary shareholders by the weighted-average ordinary shares outstanding.sixnine months ended JuneSeptember 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 sixnine months ended JuneSeptember 30, 2021, was computed by dividing net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding.sixnine months ended JuneSeptember 30, 2022 and 2021.income (loss)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 sixnine months ended JuneSeptember 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.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)income (loss)loss per share attributable to ordinary shareholders for the three and sixnine months ended JuneSeptember 30, 2022 and 2021(in2021 (in thousands, except per share data): For the three months ended
June 30, For the six months ended
June 30, 2022 2021 2022 2021 Numerator: Net income (loss) attributable to ordinary shareholders – basic and diluted $ 4,671 $ (8,036 ) $ (30,236 ) $ (19,923 ) Denominator: Weighted average ordinary shares outstanding – basic 116,830 37,452 116,842 37,452 Dilutive effect of EDGE Warrants and share-based compensation liability awards 2,420 — — — Weighted average ordinary shares outstanding – dilutive 119,250 37,452 116,842 37,452 Net income (loss) per ordinary share: Basic $ 0.04 $ (0.21 ) $ (0.26 ) $ (0.53 ) Diluted $ 0.04 $ (0.21 ) $ (0.26 ) $ (0.53 ) 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) For the three months ended
June 30, For the six months ended
June 30, 2022 2021 2022 2021 Public Warrants 14,375 — 14,375 — Private Warrants 10,250 — 10,250 — EDGE warrants — 2,176 2,176 2,176 Share-based compensation liability awards — — 784 — Employee awards 4,881 1,012 4,881 1,012 RSUs 81 — 81 — CEO option awards 94 — 94 — Other nonemployee warrants — 413 — 413 Redeemable preferred shares — 15,000 — 15,000 Total 29,681 18,601 32,641 18,601 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 sixnine months ended JuneSeptember 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.Analysis”Analysis of FREYR Battery’s results operationsFinancial Condition and financial conditionResults of Operations” should be read in conjunction with our 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 this Quarterly Report on Form 10-Q for the period ended JuneSeptember 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 and actual results could differ materially from those that are discussed in these forward-looking statements. See 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. 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.Overviewhave initiatedare in the final stages of 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 JuneSeptember 30, 2022, we have not yet initiated manufacturing or derived revenue from our principal business activities.expected to be based on our licensed Semi-SolidSemiSolidTM technology and partnership with 24M Technologies (“24M”) and lithium-ion chemistry. Future development and expansion could incorporate alternative chemistry models and additional advances in battery technology both through our ongoing partnership with 24M, joint ventures, and licensing opportunities. We will initially target market opportunities in energy storage systems (“ESS”), marine applications, commercial vehicles, and electric vehicles (“EV”) with high density and slower charge requirements, with plans to target additional markets, including faster charge battery cells for the broader consumer EV market.infor the second halffull year of 2022 and in 2023 in connection with our ongoing activities and to prepare for growth, as we:●Construct manufacturing facilities and purchase related equipment;●Commercialize products;●Make additional investments in technology;●Maintain and improve operational, financial, and management information systems;●Hire additional personnel; and●Operate as a public company.Developments●In June 2022, FREYR’s Board of Directors sanctioned construction of Giga Arctic, a combination of our previously announced Gigafactory 1 & 2, the Company’s first full scale battery manufacturing facility currently under development in Mo i Rana, Norway. Giga Arctic is expected to have nameplate capacity of 29 Gigawatt hours (“GWh”) and a total estimated capital cost of $1.7 billion.●In June 2022, FREYR announced it had identified $1.6 billion of total potential debt financing support based on visibility from export credit agencies, multilateral development finance institutions, and commercial banking partners.●In June 2022, FREYR secured a conditional offtake agreement with a major European energy technology company for 25 GWh of battery cells from 2024 to 2028.
•On November 11, 2022, FREYR announced the launch of the Giga America clean battery cell manufacturing project in Coweta County, Georgia. Construction of Giga America is expected to take place in multiple phases. The first cell production module is expected to be approximately 34 GWh and will be established with the United States-based 24M production platform, which is intended to produce highly capital efficient and clean battery cells. FREYR made an additional $49.0 million capital contribution to its joint venture in the United States in November 2022, primarily to fund the land acquisition for Giga America and to take a controlling interest in the joint venture.●In June 2022, FREYR announced it had entered into a reservation agreement with Changzhou Senior New Energy Materials Co., Ltd. and Senior Material (Europe) AB (“Changzhou”) to supply battery materials for its CQP and Giga Arctic facilities through 2028, with an optional extension until 2031. Subject to the terms and conditions of the reservation agreement, Changzhou has reserved the supply capacity of separator materials through 2028 to align with FREYR’s estimated demand.●In May 2022, FREYR signed a binding Heads of Terms with Statkraft, Europe’s largest producer of renewable energy, which was finalized as a long-term physical supply agreement in June 2022. The agreement provides a supply of hydropower renewable energy to cover all of FREYR’s currently anticipated electricity needs for the period of 2024 to 2031 and ensures physical delivery of energy from the central grid in Mo i Rana to FREYR’s CQP and Giga Arctic facilities. The agreement will be effective upon our meeting certain requirements related to the status of our construction and financing activities.three and sixnine months ended JuneSeptember 30, 2022 (no comparative amounts for the three and sixnine months ended JuneSeptember 30, 2021). As of JuneSeptember 30, 2022, the authorized share repurchase was completed and no ordinary shares remain available for repurchase under the program. Three months ended June 30, Six months ended June 30, 2022 2021 Change (%) 2022 2021 Change (%) Operating expenses: General and administrative $ 28,150 $ 7,176 292 % $ 52,764 $ 16,188 226 % Research and development 3,082 3,045 1 % 5,941 5,952 0 % Equity in losses from investee 296 — NM 463 — NM Total operating expenses 31,528 10,221 208 % 59,168 22,140 167 % Loss from operations (31,528 ) (10,221 ) 208 % (59,168 ) (22,140 ) 167 % Other income (expense) 36,199 2,185 NM 28,932 2,217 NM Income (loss) before income taxes 4,671 (8,036 ) 158 % (30,236 ) (19,923 ) 52 % Income tax expense — — — — Net income (loss) $ 4,671 $ (8,036 ) 158 % $ (30,236 ) $ (19,923 ) 52 % Three months ended
September 30,Change (%) Nine months ended
September 30,Change (%) 2022 2021 2022 2021 Operating expenses: General and administrative $ 25,124 $ 30,057 (16 %) $ 77,888 $ 46,245 68 % Research and development 3,253 5,257 (38 %) 9,194 11,209 (18 %) Equity in losses from investee 668 — NM 1,131 — NM Total operating expenses 29,045 35,314 (18 %) 88,213 57,454 54 % Loss from operations (29,045) (35,314) (18 %) (88,213) (57,454) 54 % Other income (expense) (64,805) (10,105) 541 % (35,873) (7,888) 355 % Loss before income taxes (93,850) (45,419) 107 % (124,086) (65,342) 90 % Income tax expense — — NM — — NM Net loss $ (93,850) $ (45,419) 107 % $ (124,086) $ (65,342) 90 % NM - Not meaningfulNM - Not meaningful increased decreased by $21.0$4.9 million or 292%16%, to $28.2$25.1 million for the three months ended JuneSeptember 30, 2022, from $7.2$30.1 million for the three months ended JuneSeptember 30, 2021. This is primarily due to a decrease in compensation expense, largely attributable to the Business Combination in 2021. General and administrative expenses increased by $36.6$31.6 million or 226%68%, to $52.8$77.9 million for the sixnine months ended JuneSeptember 30, 2022, from $16.2$46.2 million for the sixnine months ended JuneSeptember 30, 2021. General and administrative expenses increasedThis is primarily due to higher headcount and increased spending associated with the ramp up of activities as we continue to invest in building our business and move closer to start-up of manufacturing operations. Overhead costs also increased due to the professional fees and other costs related to operating as a public company.consistsconsist 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 expenses also include development costs related to our technology license with 24M.expenses increased slightlyexpenses decreased by $2.0 million or 38% to $3.1$3.3 million for the three months ended JuneSeptember 30, 2022, from $3.0$5.3 million for the three months ended JuneSeptember 30, 2021. R&D expenses decreased slightlyby $2.0 million or 18% to $5.9$9.2 million for the sixnine months ended JuneSeptember 30, 2022, from $6.0$11.2 million for the sixnine months ended JuneSeptember 30, 2021.
We expect R&D expenses to increase in future periods as we increase our personnelpersonnel and research activities.
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 FREYR 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.
Other income (expense)
Other income (expense) primarily consists of the fair value adjustments on our warrant liability, convertible note, and redeemable preferred shares, interest income and expense, net foreign currency transaction gains and losses, and grant proceeds received.
Other incomeexpense increased by $34.0$54.7 million to $36.2$64.8 million for the three months ended JuneSeptember 30, 2022 from $2.2$10.1 million for the three months ended JuneSeptember 30, 2021. Other incomeexpense increased by $26.7$28.0 million to $28.9$35.9 million for the sixnine months ended JuneSeptember 30, 2022 from $2.2$7.9 million for the sixnine months ended JuneSeptember 30, 2021. The increase in other incomeexpense is primarily due to the $33.4$70.3 million gainand $45.6 million loss on the revaluation of the warrant liability recorded during the second quarter ofthree and nine months ended September 30, 2022 as a resultresult of a decreasean increase in our stock price.
Financial Condition, Liquidity and Capital Resources
Liquidity and Capital Resources
As of JuneSeptember 30, 2022, we had approximately $488.4approximately $418.6 million of cash,cash, cash equivalents, and restricted cash and current liabilities of approximately $45.7 million.$47.2 million. To date, our principal sources of liquidity have been proceeds received from the Business Combination, issuance of equity securities, and amounts received from government grants. Historically, these funds have been used for constructing and equipping our battery manufacturing facilities, including the CQP and Giga Arctic, technology licensing, R&D activities, and general corporate purposes.
Our future liquidity requirements depend on many factors, including 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 R&D efforts, spending on other growth initiatives or expansion into new geographies, our future revenue generating activities, including market acceptance of our products and services, and overall economic conditions.
Until we can generate sufficient revenue to adequately support our liquidity requirements, we expect to fund short-term cash needs through our existing cash balances. We believe that we have sufficient liquidity to meet our contractual obligations and commitments for at least the 12 months following JuneSeptember 30, 2022.
Our long-term operating needs and planned investments in our business and manufacturing footprint, as currently devised, will require significant financing. Such financing may not be available at terms acceptable to us, or at all. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing. If we are unable to raise substantial additional capital in the near term, our ability to invest in Giga Arctic and other gigafactories or development projects will be significantly delayed or curtailed which would have a material adverse impact on our business prospects and results of operations. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to those of holders of our ordinary shares. The terms of debt securities or other borrowings could impose significant restrictions on our operations. If we raise funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of holders of our ordinary shares.
Cash Flow Summary
The following table summarizes our cash flows (in thousands):
Six months ended June 30, | ||||||||||||
2022 | 2021 | Change (%) | ||||||||||
Net cash (used in) provided by: | ||||||||||||
Operating activities | $ | (50,430 | ) | $ | (10,317 | ) | 389 | % | ||||
Investing activities | (24,546 | ) | (119 | ) | NM | |||||||
Financing activities | (1,052 | ) | 7,500 | (114 | %) |
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 |
Operating Activities
Net cash used in operating activities was $50.1$73.0 million for the sixnine months ended JuneSeptember 30, 2022, compared to $10.3$35.6 million for the sixnine months ended JuneSeptember 30, 2021. During the sixnine months ended JuneSeptember 30, 2022, the increase in cash used in operating activities was driven by a $38.0$31.9 million increase in net loss, adjusted for non-cash items. The increase in net loss, adjusted for non-cash items was primarily due to higher operating expenses from higher headcount
Investing Activities
Net cash used in investing activities was $24.5$70.2 million for the sixnine months ended JuneSeptember 30, 2022, compared to $0.1$4.1 million for the sixnine months ended JuneSeptember 30, 2021. The change in cash used in investing activities was primarily driven by $26.4$77.7 million in purchases of property and equipment compared to $0.1$4.1 million for the sixnine months ended JuneSeptember 30, 2022 and 2021, respectively. In addition, for the sixnine months ended JuneSeptember 30, 2022, we used $3.0 million in cash for an investment in FREYR Battery KSP JV, LLC, our equity method investee in the United States and received proceeds of $4.9$10.5 million from grants funding our property and equipment construction.
Financing Activities
Net cash used in financing activities was $1.1 million for the sixthe nine months ended JuneSeptember 30, 2022, compared to cash provided by financing activities of $7.5$649.0 million for the sixnine months ended JuneSeptember 30, 2021. Net cash used during 2022 was related to the purchase of treasury shares during the second quarter.shares. Net cash provided during 2021, consisted of $7.5net proceeds of $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 the Management’s Discussion and Analysis section of our December 31, 2021 Annual Report on Form 10-K. There have been no material changes to our critical accounting policies during the sixnine months ended JuneSeptember 30, 2022.
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 “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.
Currency Exchange Risk
We are exposed to currency risk from potential changes in currency values of our non-United States dollar denominated expenses, assets, liabilities, and cash flows. Our most significant currency exposure relates to the Norwegian Krone.
Inflation Risk
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 which saw significant price increases in 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. Increased costs of building supply costs may adversely impact the cost of construction of our buildings, equipment, and infrastructure for our CQP and Giga Arctic.
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 JuneSeptember 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
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the three months ended JuneSeptember 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
From time to time, we may be involved in litigation relating to claims arising in the ordinary course of our business. To the knowledge of our management, there are no material litigation, claims, or actions currently pending or threatened against us, any of our officers, or directors in their capacity as such, or against any of our property.
As of the 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.
As announced in the Company’s Current Report on Form 8-K filed with the SEC on June 13, 2022, in May 2022, the board of directors approved a share repurchase program (the “Share Repurchase Program”). The following table presents information relatedshares purchased under the program are to our repurchasesbe used to settle the exercise of employee options granted under the Company’s equity compensation plans. We were authorized to repurchase up to 150,000 of the Company’s Ordinary Shares, or approximately 0.13% of the current outstanding share capital. As of September 30, 2022, the authorized share repurchase was completed and no ordinary shares duringremain available for repurchase under the three months ended June 30, 2022:
Period | Total number of shares purchased (1) | Weighted average price paid per share | Total number of shares purchased as part of publicly announced plans or programs (1) | Maximum number of shares that may yet be purchased under the plans or programs (1) | ||||||||||||
Ordinary shares: | ||||||||||||||||
April 1 – 30, 2022 | - | $ | - | - | - | |||||||||||
May 1 – 31, 2022 | - | - | - | 150,000 | ||||||||||||
June 1 – 30, 2022 | 150,000 | 6.97 | 150,000 | - | ||||||||||||
Total | 150,000 | $ | 6.97 | 150,000 | - |
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.ExhibitNumberExhibitExhibit Description3.1NumberExhibit Description 31.1*31.1*31.2*31.2*32.1‡32.1‡,*32.2‡32.2‡,*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 JuneSeptember 30, 2022 is formatted in Inline XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of JuneSeptember 30, 2022 and December 31, 2021; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and sixnine months ended JuneSeptember 30, 2022 and 2021; (iii) Condensed Consolidated Statements of Shareholders’ Equity for the sixnine months ended JuneSeptember 30, 2022 and 2021; (iv) Condensed Consolidated Statements of Cash Flows for the sixnine months ended JuneSeptember 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: August 8,November 14, 2022By: /s/ Tom Einar Jensen Name: Tom Einar Jensen Title:Title: Date: November 14, 2022 (Principal Executive Officer)Date: August 8, 2022By: /s/ Oscar K. Brown Name: Oscar K. Brown Title:
(Principal Financial Officer &
Principal Accounting Officer)2500-0000000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 false --12-31 Q2 0001844224 iso4217:NOK xbrli:shares