FREYR Battery Inc DE

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Business

FREYR Battery, Inc., a Delaware corporation (“FREYR,” the “Company”, “we”, or “us”), is a developer of sustainable next-generation battery solutions. Our mission and vision are to accelerate the decarbonization of global energy and transportation systems by producing sustainable, cost-competitive batteries. Through our strategy of Speed, Scale, and Sustainability, we seek to serve our primary markets of energy storage systems (“ESS”) and commercial mobility, including marine applications and commercial vehicles, and we have future ambitions to serve the electric vehicles market (“EV”).

We are continuing the development of our first battery cell manufacturing project in the U.S. (“Giga America”), which is located on a 368-acre parcel of land in Coweta County, Georgia that was purchased by the Company in 2022. Through the development of Giga America, we will pursue the opportunities and incentives provided by the U.S. Inflation Reduction Act of 2022 (the “IRA”). At our Customer Qualification Plant (“CQP”) in Mo i Rana, Norway, we continue to progress our efforts to fully automate production of customer testable batteries using the SemiSolid TM technology licensed from 24M Technologies, Inc. (“24M”). We are simultaneously pursuing a conventional battery technology partner to diversify and accelerate delivering our products to market.

As of March 31, 2024, we have not yet initiated commercial manufacturing or derived revenue from our principal business activities.

Basis of Presentation

The unaudited condensed consolidated interim financial statements have been prepared in conformity with the accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, these financial statements do not include all of the information required by U.S. GAAP for complete consolidated financial statements.

The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements for the year ended December 31, 2023 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 three months ended March 31, 2024, are not necessarily indicative of the results to be expected for the full year ending December 31, 2024. The condensed consolidated balance sheet as of December 31, 2023, was derived from the audited consolidated financial statements as of December 31, 2023. However, these condensed consolidated interim 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, 2023 filed with the SEC on February 29, 2024.

The condensed consolidated financial statements include the accounts of FREYR, its wholly owned subsidiaries, majority-owned subsidiaries, and variable interest entities (“VIE”) of which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated. Certain prior period balances and amounts have been reclassified to conform with the current year’s presentation.

Use of Estimates

The preparation of the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates and assumptions include, but are not limited to, estimates related to impairment of long-lived assets, the valuation of warrant liability, and share-based compensation. 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, 2023 filed with the SEC on February 29, 2024.

These condensed consolidated financial statements have been prepared by management in accordance with U.S. GAAP and this basis assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of the date of this report, our existing cash resources, which were primarily provided as a result of our business combination with Alussa Energy Acquisition Corporation in 2021 (the "Business Combination") and issuance of equity securities, are sufficient to support our planned operations for at least the next 12 months from the date of issuance of these financial statements. Therefore, our financial statements have been prepared on the basis that we will continue as a going concern.

Restricted Cash

Certain cash balances are restricted as to withdrawal or use. Restricted cash includes funds held in a restricted account for the payment of upfront rental lease deposits and government income tax withholdings, and in 2023, restricted cash included the balance of an account held for the construction of Giga Arctic.

Significant Accounting Policies

The Company’s significant accounting policies were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Supplemental accounting policy disclosures are included above.

2. RESTRUCTURING

In November 2023, FREYR announced a restructuring process (the “Restructuring”), which focused on preserving Company liquidity during scale up of the CQP and development of Giga America, while continuing to fund critical initiatives. We accrued severance and other termination benefits of $6.0 million related to the RIF in 2023, which was recognized in Restructuring charge in the condensed consolidated statements of operation and comprehensive loss.

The changes in accrued severance and other termination benefits were as follows (in thousands):

Accrued and unpaid severance and personnel costs are included within accrued liabilities and other on the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.

3. OTHER CURRENT ASSETS

Other current assets consisted of the following (in thousands):

4. PROPERTY AND EQUIPMENT, NET AND INTANGIBLE ASSETS, NET

Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

Depreciation expense was $2.2 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.

Intangible Assets, net

Intangible assets, net consisted of the following (in thousands):

Amortization expense was $38,000 for both the three months ended March 31, 2024 and 2023. Future annual amortization expense is estimated to be $150,000 for the full year 2024 and each of the next four years.

5. LONG-TERM INVESTMENTS

The Company’s equity investments consisted of the following (in thousands):

Equity Method Investments

In March 2023, the Company contributed $1.7 million to obtain a 33% equity interest in Nidec Energy AS (the “Nidec JV”), a joint venture with Nidec Europe BV (“Nidec”). The Nidec JV was formed to develop, manufacture, and sell battery modules and battery packs for industrial and utility-grade ESS applications. The Company determined that the Nidec JV was a VIE, and that the Company was not the primary beneficiary. Additionally, the Company is able to exercise significant influence but not control over the operating and financial policies of the Nidec JV. Therefore, the Company has recorded its investment in the Nidec JV as an equity method investment.

During the three months ended March 31, 2024 and 2023, the Company recognized $156,000 and $25,000, respectively, as its share of net loss of equity method investee in the condensed consolidated statements of operations and comprehensive loss related to the Company’s equity method investment in the Nidec JV. During the three months ended March 31, 2024, the Company recognized other income of $0.1 million related to general and administrative expenses incurred on behalf of the Nidec JV. There wereno comparable amounts recognized in the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, unpaid amounts of $0.9 million and $0.8 million, respectively, are recorded in other current assets.

Equity Investments Without Readily Determinable Fair Values

On October 8, 2021, we invested in an unsecured convertible note receivable (the “Convertible Note”) from 24M, our battery platform technology licensor for our planned gigafactories. On March 24, 2023, we converted the Convertible Note to preferred stock of 24M. As the 24M preferred stock does not have a readily determinable fair value and does not provide the Company with control or significant influence, we have elected to account for the 24M preferred stock under the measurement alternative. There have been no adjustments to the fair value of the 24M preferred stock since its conversion.

6. ACCRUED LIABILITIES AND OTHER

Accrued liabilities and other consisted of the following (in thousands):

7. COMMITMENTS AND CONTINGENCIES

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 if such loss or a range of losses is estimable, often involves significant judgment, including estimates and assumptions about future events.

To the knowledge of our management, as of March 31, 2024 there is 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.

8. WARRANTS

Public and Private Warrants

As of March 31, 2024 and December 31, 2023, we had 24.6 million warrants outstanding (the “Warrants”), consisting of 14.7 million public warrants (the “Public Warrants”) and 9.9 million private warrants (the “Private Warrants”) as of March 31, 2024 and 14.6 million Public Warrants and 10.0 million Private Warrants as of December 31, 2023. Each Warrant entitles the holder thereof to purchaseone share of our common stock 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.

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 common stock 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 common stock and qualify for classification within stockholders’ 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 a certain holder 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 common stock as the holder of the Private Warrants impacts the settlement amount and therefore, they are liability classified. The Private Warrants are presented as warrant liability on the condensed consolidated balance sheets.

If Private Warrants are sold or transferred to another party that is not the specified holder or any of its permitted transferees, the Private Warrants become Public Warrants and qualify for classification within stockholders’ equity at the fair value on the date of the transfer. See also Note 9 – Fair Value Measurement.

EDGE Warrants

As of both March 31, 2024 and December 31, 2023, we had 2.2 million warrants outstanding and exercisable held by EDGE Global LLC (“EDGE”) or its co-owners, which entitle the holder thereof to purchaseone share of our common stock at the exercise price, subject to adjustments. The EDGE warrants consist of 1.5 million warrants with an exercise price of $0.95, which expire on May 15, 2024, and 0.7 million warrants with an exercise price of $1.22, which expire on September 30, 2025.

9. FAIR VALUE MEASUREMENT

Financial assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, consisted of the following (in thousands):

We measured our warrant liabilities for Private Warrants, 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. These valuations used assumptions and estimates that we believed a market participant would use in making the same valuation. Changes in the fair value of the Private Warrants were recognized as a warrant liability fair value adjustment within the condensed consolidated statements of operations and comprehensive loss.

As of March 31, 2024 and December 31, 2023, the carrying value of all other financial assets and liabilities approximated their respective fair values.

Private Warrants

The Private Warrants were valued using the Black-Scholes-Merton option pricing model. See Note 8 – Warrants above for further details. Our use of the Black-Scholes-Merton option pricing model for the Private Warrants required the use of subjective assumptions, including:

•The risk-free interest rate assumption was based on the U.S. Treasury Rates commensurate with the contractual terms of the Private Warrants.

•The expected term was determined based on the expiration date of the Private Warrants.

•The expected volatility assumption was based on the implied volatility of the publicly traded Public Warrants.

The fair value of the Private warrants was determined using this approach, an exercise price of $11.50 and a share price of $1.68 as of March 31, 2024 and $1.87 as of December 31, 2023. An increase in each of the risk-free interest rate, expected term, or expected volatility, in isolation, would increase the fair value measurement, and a decrease in each of these assumptions would decrease the fair value measurement, of the Private Warrants.

Rollforward of Level 3 Fair Value

The changes in the Level 3 instruments measured at fair value on a recurring basis were as follows (in thousands):

10. STOCKHOLDERS' EQUITY

Common Stock

As of March 31, 2024 and December 31, 2023,355.0 million shares of common stock were authorized with a par value of $0.01 per share and 139.7 million shares of common stock were outstanding. Holders of common stock are entitled toone vote per share and to receive dividends when, as, and if, declared by our Board of Directors. As of March 31, 2024, we have not declared any dividends.

Preferred Shares

As of March 31, 2024 and December 31, 2023,10.0 million preferred shares with a par value of $0.01 per share were authorized andnone were outstanding.

Share-Based Compensation

2021 Plan

In June 2021, we adopted the 2021 Equity Incentive Plan (amended and restated as of May 10, 2023), (the “2021 Plan”), which was amended and restated in June 2023. The 2021 Plan provides for the grant of stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, performance units, and performance shares to our employees, directors, and consultants. Generally, our stock options and RSUs vest annually over three years and our stock options are exercisable over a maximum period offive years from their grant dates. Options are typically forfeited when the employment relationship ends for employees and they do not typically forfeit for directors. Generally, our RSUs are liability-classified awards, as they are cash settled based on the closing price of the shares on the vesting date. All exercised options are expected to be settled in shares, net of shares withheld to satisfy the award exercise price. As of March 31, 2024, a total of 25.0 million shares were authorized for issuance to satisfy share-based compensation awards made under the 2021 Plan.

During the three months ended March 31, 2024,13.6 million options were granted,822,000 options were forfeited, and 12,000 RSUs vested.

2019 Plan

The 2019 Incentive Stock Option Plan (the “2019 Plan”) was issued on September 11, 2019. All stock options and warrants granted under the 2019 Plan are fully vested and no further awards can be issued. Outstanding awards under the 2019 Plan are required to be cash settled. The awards granted under the 2019 Plan are liability-classified awards, and as such, these awards are remeasured to fair value at each reporting date with changes to the fair value recognized as stock compensation expense in general and administrative expense or research and development expense within the condensed consolidated statements of operations and comprehensive loss. Cumulative stock compensation expense cannot be reduced below the grant date fair value of the original award.

During the three months ended March 31, 2024,67,000 awards were exercised and cash settled.

Jensen Option Awards

In June 2021, our then Chief Executive Officer (“CEO”), Tom Einar Jensen, entered into a stock option agreement, as an appendix to an employment agreement. In accordance with the stock option agreement, on July 13, 2021 Mr. Jensen was granted 850,000 performance stock options to acquire our shares at an exercise price of $10.00 (the “Jensen Options”), of which the performance criteria for a total of 661,000 of the stock options were met by December 31, 2023 and the remaining stock options were forfeited.

11. GOVERNMENT GRANTS

For both of the three months ended March 31, 2024 and 2023, we recognized no grant income within the condensed consolidated statements of operations and comprehensive loss and no grant income as a reduction of property and equipment, net on our condensed consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, we had $0.3 million and $0.2 million, respectively, in short-term deferred income from grants recorded in accrued liabilities and other on our condensed consolidated balance sheets. As of both March 31, 2024 and December 31, 2023, we had $27.0 million in long-term deferred income from grants recorded in other long-term liabilities on our condensed consolidated balance sheets.

12. INCOME TAXES

The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company has incurred taxable losses in each year since inception, and maintains a full valuation allowance against its loss carryforwards and other deferred tax assets. The Company’s effective income tax rate was 0% for the three months ended March 31, 2024, and (2)% for the three months ended March 31, 2023.

13. RELATED PARTY TRANSACTIONS

Consulting Agreements

In May 2021, we entered into a consulting agreement with a member of the Board of Directors for a term ofthree years. In August 2023, we entered into a consulting agreement with another member of the Board of Directors for aone-year term. We pay both Board of Director consultants a monthly fee of $30,000 plus related reimbursable costs. The expenses incurred for these consulting services for the three months ended March 31, 2024 and 2023 were $0.2 million and $0.1 million, respectively. These expenses are recognized as general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. As of both March 31, 2024 and December 31, 2023, an unpaid amount of $0.1 million is recorded in accrued liabilities and other related to these agreements.

14. NET LOSS PER SHARE

The computation of basic and diluted net loss per share attributable to stockholders is as follows (in thousands, except per share data):

The outstanding securities that could potentially dilute basic net loss per share attributable to stockholders in the future that were not included in the computation, as the impact would be antidilutive, are as follows (in thousands):

(1) For the three months ended March 31, 2024 the Company excluded 582,000 outstanding share-based compensation liability options and warrants, as these awards are required to be cash-settled. For the three months ended March 31, 2023 the Company excluded 101,000 of the total 668,000 outstanding share-based compensation liability options and warrants, as these awards are required to be cash-settled. See Note 10 – Stockholders' Equity for further details.

(2) For the three months ended March 31, 2023, the Company excluded 756,000 of the total 850,000 Jensen Options, as it was not yet probable that the performance conditions for these options would be achieved. See Note 10 – Stockholders' Equity for further details.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed consolidated financial statements and the accompanying notes thereto contained in Part I, Item 1 “Financial Statements” and the other disclosures in this Quarterly Report on Form 10-Q and with the disclosures in our Annual Report on Form 10-K for the year ended December 31, 2023.

Overview

FREYR Battery, Inc., a Delaware corporation (“FREYR,” the “Company”, “we”, or “us”), is a developer of sustainable next-generation battery solutions. Our mission and vision are to accelerate the decarbonization of global energy and transportation systems by producing sustainable, cost-competitive batteries. Through our strategy of Speed, Scale, and Sustainability, we seek to serve our primary markets of energy storage systems (“ESS”) and commercial mobility, including marine applications and commercial vehicles, and we have future ambitions to serve the electric vehicles market (“EV”).

We are continuing the development of our first battery cell manufacturing project in the U.S. (“Giga America”), which is located on a 368-acre parcel of land in Coweta County, Georgia that was purchased by the Company in 2022. Through the development of Giga America, we will pursue the opportunities and incentives provided by the U.S. Inflation Reduction Act of 2022 (the “IRA”). At our Customer Qualification Plant (“CQP”) in Mo i Rana, Norway, we continue to progress our efforts to fully automate production of customer testable batteries using the SemiSolid TM technology licensed from 24M Technologies, Inc. (“24M”). We are simultaneously pursuing a conventional battery technology partner to diversify and accelerate delivering our products to market.

As of March 31, 2024, we have not yet initiated commercial manufacturing or derived revenue from our principal business activities.

Recent Developments

•In February 2024, we announced the achievement of a significant technical milestone of successfully conducting automated casting trials of both anode and cathode electrodes with active electrolyte slurry at the CQP.

•Also in February 2024, we launched the FREYR 2.0 growth initiative pursuing distinct project opportunities tied to projects using either the 24M SemiSolid TM platform or conventional battery technology. The prospective end markets for these projects include both ESS and commercial mobility applications.

•In April 2024, we appointed Todd Jason Kantor, Tore Ivar Slettemoen, and David J. Manners to our Board of Directors. The appointments filled vacancies created by the departures of Mimi Berdal and Jason Forcier, and are intended to strengthen our Board of Directors as we continue to pursue our key growth and capital formation initiatives.

•On April 18, 2024, in connection with Mr. Slettemoen's appointment, we also entered into a cooperation agreement with him and other parties (collectively, the “Parties”) (the “Cooperation Agreement”). Under the terms of the Cooperation Agreement, the Parties have agreed to a period of customary standstill restrictions, as well as certain voting commitments, which include supporting each director nominated and recommended by the Board of Directors for election at the Company's 2024 annual meeting of stockholders.