FREYR(FREY) - 2022 Q4 - Annual Report

PART I Business FREYR is a pre-revenue company developing clean battery cell production facilities in Norway and the U.S - FREYR's mission is to accelerate the decarbonization of global energy and transportation systems by producing clean, cost-competitive batteries[13] - The company is in the final construction stages of its Customer Qualification Plant (CQP) and has started groundwork for its inaugural gigafactory, Giga Arctic, both in Mo i Rana, Norway[14] - FREYR has announced plans for its first U.S. manufacturing project, Giga America, in Coweta County, Georgia, and is exploring a potential gigafactory site in Vaasa, Finland[14] - As of December 31, 2022, FREYR has not yet initiated manufacturing or derived revenue from its principal business activities[15] - The company's employee count increased significantly from 119 at the end of 2021 to 212 at the end of 2022[53] Risk Factors The company faces significant risks in manufacturing scale-up, technology reliance, construction, and financing - FREYR has no prior experience manufacturing battery cells and faces risks that its intended technologies may not result in efficient, low-cost, automated manufacturing at scale[61] - The company's business relies heavily on technology licensed from 24M, which has not yet been commercialized on a gigafactory scale and may not perform as expected[65][67] - Construction of manufacturing facilities is subject to significant risks, including delays, cost overruns, and obtaining necessary permits, which the company has experienced in the past[69] - The business is capital-intensive and will require significant additional financing to complete its planned gigafactories; such financing may not be available on attractive terms, or at all[139][141] - The passage of the U.S. Inflation Reduction Act (IRA) could significantly impact the profitability and competitiveness of its planned operations, influencing capital allocation decisions[151] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[197] Properties FREYR leases global office spaces and owns a 368-acre site in Georgia for its future Giga America plant - The company leases its corporate headquarters in Luxembourg and administrative/R&D facilities in Norway, the U.S., and Japan[198] - FREYR owns an approximately 368-acre parcel of land in Coweta County, Georgia, for the development of its Giga America facility[198] - In Mo i Rana, Norway, FREYR leases the Customer Qualification Plant (CQP) and the land for the Giga Arctic project[198] Legal Proceedings The company is not currently involved in any material legal proceedings - There are no material litigation, claims, or actions currently pending or threatened against FREYR, its officers, or directors[199] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[200] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities FREYR's shares trade on the NYSE, and the company does not anticipate paying dividends in the near future - The Company's ordinary shares and Warrants trade on the NYSE under the symbols 'FREY' and 'FREY WS'[203] - FREYR has not declared or paid any dividends and does not plan to in the foreseeable future[204] Securities Authorized for Issuance Under Equity Compensation Plans (as of Dec 31, 2022) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 5,924,379 | $9.83 | 5,659,565 | | Equity compensation plan not approved by security holders | 566,935 | $3.23 | — | | Equity compensation arrangement not approved by security holders | 850,000 | $10.00 | — | Management's Discussion and Analysis of Financial Condition and Results of Operations The company's 2022 net loss was $99.1 million, with rising G&A costs and major investments in new facilities Consolidated Results of Operations (2022 vs 2021) | (in thousands) | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | General and administrative | $107,357 | $61,755 | 74% | | Research and development | $13,574 | $13,816 | (2%) | | Loss from operations | $(122,488) | $(75,633) | 62% | | Other income (expense) | $23,369 | $(17,745) | 232% | | Net loss | $(99,119) | $(93,378) | 6% | - General and administrative expenses increased by $45.6 million (74%) in 2022, mainly due to higher headcount and costs associated with ramping up activities and operating as a public company[218] - As of December 31, 2022, the company had approximately $563.0 million of cash, cash equivalents, and restricted cash[227] Cash Flow Summary (2022 vs 2021) | (in thousands) | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(90,009) | $(63,136) | 43% | | Net cash used in investing activities | $(175,026) | $(33,787) | 418% | | Net cash provided by financing activities | $250,072 | $649,000 | (61%) | - The significant increase in cash used for investing activities was driven by $180.8 million in purchases of property and equipment, including land for Giga America and construction costs for CQP and Giga Arctic[234] Quantitative and Qualitative Disclosures About Market Risk FREYR is primarily exposed to market risks from currency fluctuations and inflationary pressures on materials - The company is exposed to currency risk, with the most significant exposure related to the Norwegian Krone[252] - Inflation risk is a key concern, as rising raw material prices (e.g., steel, aluminum) may significantly increase costs from suppliers[253] Financial Statements and Supplementary Data Audited statements show a pre-revenue company with rising assets due to financing and capital investments Key Consolidated Balance Sheet Data (as of Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $443,063 | $562,077 | | Property and equipment, net | $210,777 | $21,062 | | Total Assets | $827,698 | $624,548 | | Total current liabilities | $62,578 | $21,365 | | Warrant liability | $33,849 | $49,124 | | Total Liabilities | $107,571 | $78,060 | | Total Equity | $720,127 | $546,488 | Key Consolidated Operations Data (Year Ended Dec 31) | (in thousands, except per share) | 2022 | 2021 | | :--- | :--- | :--- | | Total operating expenses | $122,488 | $75,633 | | Loss from operations | $(122,488) | $(75,633) | | Net Loss | $(99,119) | $(93,378) | | Net loss per share - basic and diluted | $(0.83) | $(1.24) | - Construction in progress increased to $164.4 million in 2022 from $20.0 million in 2021, primarily related to the CQP and Giga Arctic facilities in Norway[337] - The company maintains a full valuation allowance on its net deferred tax assets of $64.7 million due to a history of taxable losses[389] Controls and Procedures Management concluded that the company's disclosure controls and internal financial controls were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[411] - Based on the COSO framework, management concluded that internal control over financial reporting was effective as of December 31, 2022[413] - No changes in internal control over financial reporting occurred during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[415] PART III Directors, Executive Officers, and Corporate Governance The company details its board composition, executive team, and corporate governance committee structure - The Board of Directors consists of eight members, with Torstein Dale Sjøtveit serving as the Founder and Executive Chairman[420][421] - Six of the eight directors have been determined to be 'independent' under NYSE and SEC rules: Daniel Barcelo, Mimi Berdal, Jason Forcier, Daniel Steingart, Olaug Svarva, and Monica Tiúba[439] - The Board has established an Audit and Risk Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each with a written charter and independent members[442][445][448][450] - The company's executive team is led by Co-Founder and CEO Tom Einar Jensen, COO Jan Arve Haugan, and Group CFO Oscar Brown[458] Executive Compensation Executive compensation includes salary, bonuses, and share-based awards, with specific terms for top officers 2022 Summary Compensation Table | Name and Title | Salary ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Tom Einar Jensen, CEO | $653,962 | $350,387 | $1,004,349 | | Jan Arve Haugan, COO | $544,968 | $319,598 | $864,566 | | Oscar Brown, Group CFO | $450,000 | $1,569,025 | $2,469,024 | - The CEO, Tom Einar Jensen, has an employment agreement with an 18-month severance payment and a stock option agreement for 850,000 options tied to nine separate performance criteria[488][489] - The Group CFO, Oscar Brown, has an employment agreement with a 12-month severance payment and received sign-on and annual stock option and RSU grants[492] - Non-employee directors receive an annual cash retainer of $100,000, plus additional retainers for committee chair and member roles[494] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Directors and executives own 11.08% of shares, with several entities holding stakes greater than 5% - As of February 17, 2023, all directors and executive officers as a group beneficially owned 15,920,734 shares, representing 11.08% of outstanding ordinary shares[502][503] Beneficial Owners of More Than 5% | Name of Beneficial Owner | Percentage of Outstanding Shares | | :--- | :--- | | Alussa Energy Sponsor LLC | 7.60% | | Certain entities affiliated with Encompass Capital Advisors | 8.59% | | ATS AS | 5.82% | | Entities affiliated with Teknovekst Invest AS | 6.01% | | Certain entities affiliated with Sylebra Capital Limited | 5.92% | | Certain entities affiliated with Koch Industries, Inc. | 8.23% | Certain Relationships and Related Transactions, and Director Independence FREYR maintains a formal policy for approving related-party transactions and confirms director independence - FREYR has a formal policy requiring Audit and Risk Committee pre-approval for related person transactions[508] - The company disclosed compensation for two employees who are family members of an executive officer and a director, which were approved by the Audit and Risk Committee[510][511] - The Board of Directors has determined that Mimi Berdal, Daniel Barcelo, Jason Forcier, Daniel Steingart, Olaug Svarva, and Monica Tiúba are 'independent directors'[513] Principal Accountant Fees and Services Total fees paid to the principal accountant, PricewaterhouseCoopers AS, increased to $1.39 million in 2022 Accountant Fees (2022 vs 2021) | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $1,349,207 | $820,085 | | Audit Related Fees | $37,380 | $12,219 | | Tax Fees | — | — | | All Other Fees | — | — | | Total | $1,386,587 | $832,304 | - The Audit and Risk Committee pre-approved all audit and permissible non-audit services provided by the independent registered public accounting firm[516] PART IV Exhibits and Financial Statement Schedules This section lists all financial statements and exhibits filed as part of the annual report - This item provides an index of all financial statements, schedules, and exhibits filed with the 10-K[520][522] - Key exhibits include the Business Combination Agreement, Consolidated Articles of Association, various license and services agreements with 24M Technologies, and employment agreements with key executives[525][526]