UNITED STATES
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

For the quarterly period ended ~~March 31,~~June 30, 2022

☐ 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

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares, without nominal value	FREY	~~FREY~~		The New York Stock Exchange
Warrants, each whole warrant exercisable for one Ordinary Share at an exercise price of $11.50	FREY WS	~~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	☐Accelerated filer
	☒Non-accelerated filer	☒Smaller reporting company
	☒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 ~~May~~August 4, 2022, the registrant had ~~116,853,504~~116,703,504 ordinary shares, without nominal value, outstanding.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this Quarterly Report on Form 10-Q (this “Report”) and in documents incorporated herein by reference. All statements, other than statements of present or historical fact included in or incorporated by reference in this Report, regarding FREYR Battery’s future financial performance, as well as our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, and objectives of management are forward-looking statements. When used in this Report, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would”, the negative of such terms, and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations, assumptions, hopes, beliefs, intentions, and strategies regarding future events and are based on currently available information as to the outcome and timing of future events. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to our business.

These forward-looking statements are based on information available as of the date of this Report, and current expectations, forecasts, and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements in this Report and in any document incorporated herein by reference should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

●

Changes adversely affecting the battery industry and the development of existing or new technologies;

●

The effect of the COVID-19 pandemic on our business;

	●
	●	The failure of 24M Technologies, Inc. (“24M”) technology or our batteries to perform as expected;

●

Our ability to commercialize 24M and other technology for our licensing business model and business plans;

	●
	●	Our ability to manufacture battery cells and to develop and increase our production capacity in a cost-effective manner;

	●
	●	The electrification of energy sources does not develop as expected, or develops more slowly than expected;

	●
	●	Technological developments in existing technologies or new developments in competitive technologies that could adversely affect the demand for our battery cells;

	●
	●	General economic and geopolitical conditions;

	●
	●	Increases in the cost of electricity or raw materials and components;

	●
	●	Our ability to protect our intellectual property;

	●
	●	Changes in applicable laws or regulations, including environmental and export control laws;

	●
	●	Our ability to attract and retain key employees;

●

Our ability to execute and realize our business strategy and plans;

●

Our ability to target and retain customers and suppliers;

	●
	●	The failure to build our finance infrastructure and improve our accounting systems and controls;

	●
	●	Our ability to assert, enforce and otherwise protect against unauthorized use of intellectual property rights licensed from 24M, which could result in our competitors using the intellectual property to offer products;

	●
	●	The outcome of any legal proceedings relating to our products and services, including intellectual property or product liability claims;

	●
	●	Whether and when we might pay dividends;

	●
	●	Our ability to source materials from an ~~ethically-~~ethically and ~~sustainably-sourced~~sustainably sourced supply chain and 24M-qualified suppliers in sufficient quantities;

	●
	●	The result of future financing efforts;

	●
	●	The cost-competitiveness, carbon footprint, energy density and charge-rates of our batteries;

	●
	●	The timing, capacity, configurations and locations of our battery factories and production lines;


	●	The planned construction and production dates for the customer qualification plant (“CQP”) and the planned construction period for each of our Gigafactories;


	●	The cost to build the CQP and the Gigafactories;

	●
	●	Our expectations for our general and administrative expenses;


	●	Our expectations about market supply, demand, and other dynamics, including the number of industrial-scale battery manufacturing facilities in Norway, supply costs, regulatory developments, increased globalization, and consolidation in the automotive and energy industries;


	●	The use and mix of lithium-nickel-manganese-oxide and lithium-iron-phosphate battery chemistries, including shifts in the battery chemistry mix due to conversations with potential customers;

	●
	●	The market segments that we will initially target;

	●
	●	Whether we will successfully enter into or obtain, and the impact of failing to sign or obtain, customer offtake agreements, necessary consents, other commercial agreements, permits or licenses in a timely manner or at all; and

	●
	●	Our ability to enter successful joint venture partnerships and licensing arrangements.

Other risks and uncertainties set forth in this Report, including risk factors discussed in Item 1A under the heading, “Risk Factors”.

iii

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

FREYR BATTERY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

	As of March 31,			As of December 31,			June 30,			December 31,
	2022			2021			2022			2021
Assets
Current assets
ASSETS
Current assets:
Cash and cash equivalents	$	523,208		$	563,956		$	484,204		$	563,956
Restricted cash		1,366			1,671			4,160			1,671
Prepaid assets		16,191			15,882			19,348			15,882
Other current assets		11,327			1,282			5,728			1,282
Total current assets		552,092			582,791			513,440			582,791

Property and equipment, net		35,265			21,062			45,339			21,062
Convertible note		20,452			20,231			20,722			20,231
Equity method investments		2,771			2,938			2,475			2,938
Operating lease asset		9,447			-
Right-of-use asset under operating leases								12,785			—
Other long-term assets		11			11			11			11
Total assets	$	620,038		$	627,033		$	594,772		$	627,033
Liabilities and shareholders’ equity
Current liabilities

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,245		$	3,813		$	9,025		$	3,813
Accrued liabilities		26,378			15,065
Accrued liabilities and other								31,853			15,077
Accounts payable and accrued liabilities - related party		552			3,316			620			3,316
Deferred income		1,392			1,380			1,236			1,380
Share-based compensation liability		2,552			2,211			985			2,211
Other current liabilities		2			12
Total current liabilities		35,121			25,797			43,719			25,797

Warrant liability		57,812			49,124			24,420			49,124
Operating lease liability		7,860			-			11,090			—
Long-term share-based compensation liability		7,484			6,627			2,583			6,627
Total liabilities		108,277			81,548			81,812			81,548

Commitments and contingencies
Shareholders’ equity
Ordinary share capital, no par value, 245,000,000 ordinary shares authorized and 116,853,504 ordinary shares issued and outstanding as of March 31, 2022 and December 31, 2021		116,854			116,854

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		534,268			533,418			539,639			533,418
Treasury stock								(1,052	)		—
Accumulated other comprehensive (loss) income		(191	)		(524	)		(7,982	)		(524	)
Accumulated deficit		(139,170	)		(104,263	)		(134,499	)		(104,263	)
Total shareholders’ equity		511,761			545,485			512,960			545,485

Total liabilities and shareholders’ equity	$	620,038		$	627,033		$	594,772		$	627,033

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements.

FREYR BATTERY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In Thousands, Except ~~Share and~~ per Share Amounts)

(Unaudited)

	For the three months ended March 31,						Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021			2022			2021
Operating expenses:
General and administrative	$	24,614		$	9,012		$	28,150		$	7,176		$	52,764		$	16,188
Research and development		2,859			2,907			3,082			3,045			5,941			5,952
Equity in losses from investee		167			-			296			—			463			—
Total operating expenses		27,640			11,919			31,528			10,221			59,168			22,140
Loss from operations		(27,640	)		(11,919	)		(31,528	)		(10,221	)		(59,168	)		(22,140	)

Other income (expense):
Warrant liability fair value adjustment		(8,688	)		-			33,392			—			24,704			—
Redeemable preferred shares fair value adjustment		-			6			—			69			—			75
Convertible note fair value adjustment		221			-
Convertible notes fair value adjustment								270			—			491			—
Interest income		35			6			26			2			61			8
Interest expense		(20	)		-			(12	)		—			(32	)		—
Foreign currency transaction (loss) gain		(331	)		20
Foreign currency transaction gain (loss)								1,421			(208	)		1,090			(188	)
Other income, net		1,516			-			1,102			2,322			2,618			2,322
Total other income (expense)		(7,267	)		32			36,199			2,185			28,932			2,217
Loss before income taxes		(34,907	)		(11,887	)
Income (loss) before income taxes								4,671			(8,036	)		(30,236	)		(19,923	)
Income tax expense		-			-			—			—			—			—
Net loss		(34,907	)		(11,887	)
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		333			57			(7,791	)		177			(7,458	)		234
Total comprehensive loss	$	(34,574	)	$	(11,830	)	$	(3,120	)	$	(7,859	)	$	(37,694	)	$	(19,689	)

Basic and diluted weighted-average ordinary shares outstanding		116,853,504			37,452,359
Basic and diluted net loss attributable to ordinary shareholders	$	(0.30	)	$	(0.32	)

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements.

FREYR BATTERY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(In ~~Thousands, Except Share Amounts)~~Thousands)

(Unaudited)

	Ordinary Shares				Additional Paid-in		Accumulated Other Comprehensive		Accumulated			Total Shareholders’			Ordinary Shares				Additional Paid-in		Accumulated Other Comprehensive		Treasury		Accumulated			Total Shareholders’ Equity
	Shares		Amount		Capital		Income (Loss)		Deficit			Deficit			Shares		Amount		Capital		Income (Loss)		Stock		Deficit			(Deficit)
Balance as of January 1, 2021		37,452,359	$	-	$	15,183	$	658	$	(10,885	)	$	4,956			37,452	$	-	$	15,183	$	658	$	-	$	(10,885	)	$	4,956
Share-based compensation expense		-		-		4,617		-		-			4,617			-		-		4,617		-		-		-			4,617
Net loss		-		-		-		-		(11,887	)		(11,887	)		-		-		-		-		-		(11,887	)		(11,887	)
Other comprehensive income		-		-		-		57		-			57			-		-		-		57		-		-			57
Balance as of March 31, 2021		37,452,359	$	-	$	19,800	$	715	$	(22,772	)	$	(2,257	)		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	)

	Ordinary Shares				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Shareholders’			Ordinary Shares				Additional Paid-in		Accumulated Other Comprehensive			Treasury			Accumulated			Total Shareholders’ Equity
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity			Shares		Amount		Capital		Income (Loss)			Stock			Deficit			(Deficit)
Balance as of January 1, 2022		116,853,504	$	116,854	$	533,418	$	(524	)	$	(104,263	)	$	545,485			116,854	$	116,854	$	533,418	$	(524	)	$	-		$	(104,263	)	$	545,485
Share-based compensation expense		-		-		850		-			-			850			-		-		850		-			-			-			850
Net loss		-		-		-		-			(34,907	)		(34,907	)		-		-		-		-			-			(34,907	)		(34,907	)
Other comprehensive income		-		-		-		333						333			-		-		-		333			-			-			333
Balance as of March 31, 2022		116,853,504		116,854		534,268		(191	)		(139,170	)		511,761			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

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements.

FREYR BATTERY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	For the three months ended March 31,						Six months ended June 30,
	2022			2021			2022			2021
Cash flows from operating activities
Cash flows from operating activities:
Net loss	$	(34,907	)	$	(11,887	)	$	(30,236	)	$	(19,923	)
Adjustments to reconcile net loss to cash used in operating activities:
Share-based compensation expense		2,047			4,161			2,923			4,688
Depreciation		92			10			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		-			(6	)		—			(75	)
Reduction in the carrying amount of lease assets		285			-
Warrant liability fair value adjustment		8,688			-
Convertible note fair value adjustment		(221	)					(491	)		—
Equity in losses from investee		167			-			463			—
Foreign currency transaction net unrealized gain								(2,113	)		—
Other		-			(33	)		—			28
Changes in assets and liabilities:
Prepaid assets		(181	)		(1,545	)		(5,229	)		(1,049	)
Other current assets		(4,667	)		247			(7,434	)		(50	)
Accounts payable and accrued liabilities		(1,435	)		1,128			15,265			3,659
Accounts payable and accrued liabilities - related party		217			159
Accounts payable and accrued liabilities – related party								638			950
Other current liabilities		(10	)		-			(1	)		—
Deferred income		-			1,374			—			1,431
Operating lease liability		(210	)		-			(443	)		—
Net cash used in operating activities		(30,135	)		(6,392	)		(50,430	)		(10,317	)
Cash flows from investing activities

Cash flows from investing activities:
Proceeds from property related grants								4,874			—
Purchases of property and equipment		(7,932	)		(42	)		(26,420	)		(107	)
Investments in equity method investee		(3,000	)		-			(3,000	)		—
Purchases of other long-term assets		-			(12	)		—			(12	)
Net cash used in investing activities		(10,932	)		(54	)		(24,546	)		(119	)
Cash flows from financing activities

Cash flows from financing activities:
Repurchase of treasury shares								(1,052	)		—
Proceeds from issuance of redeemable preferred shares		-			7,500			—			7,500
Net cash provided by financing activities		-			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		14			49			(1,235	)		73
Net increase (decrease) in cash, cash equivalents, and restricted cash		(41,053	)		1,103
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			565,627			14,945
Cash, cash equivalents, and restricted cash at end of period	$	524,574		$	16,048		$	488,364		$	12,082

Significant noncash investing and financing activities
Significant non-cash investing and financing activities:
Accrued purchases of property and equipment	$	11,289		$	-		$	13,026		$	—
Settlement of accrued liabilities through the issuance of non-employee warrants								—			460

Reconciliation to consolidated balance sheets
Reconciliation to consolidated balance sheets:
Cash and cash equivalents	$	523,208		$	15,768		$	484,204		$	11,279
Restricted cash		1,366			280			4,160			803
Cash, cash equivalents, and restricted cash	$	524,574		$	16,048		$	488,364		$	12,082

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Basis of Presentation

Description of the Business

FREYR Battery (“FREYR,” the “Company”, “we”, or “us”) is a developer of clean, next-generation battery ~~manufacturing company.~~cell production capacity. Our mission and vision are to accelerate the decarbonization of global energy and transportation systems by producing clean, cost-competitive batteries. We are in the ~~initial~~ design and testing phase related to our battery production process and we have initiated 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 June 30, 2022, we have not yet ~~to bring a completed product to market.~~initiated manufacturing or derived revenue from our principal business activities.

Business Combination

~~Pursuant to the Business Combination Agreement (the “BCA”) entered into to effect a merger between Alussa Energy Acquisition Corp., a Cayman Islands exempted company (“Alussa”) and~~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.

~~On July 9, 2021, FREYR consummated the Business Combination with FREYR Legacy and Alussa~~The merger was completed in multiple stages, pursuant to the terms of the BCA, ~~dated January 29, 2021. Pursuant to the terms of the BCA,~~which included among other things, the transfer of FREYR Legacy’s wind farm business ~~was transferred~~ to Sjonfjellet Vindpark Holding AS (“SVPH”), resulting in SVPH shares being held by FREYR Legacy’s shareholders. On July 8, 2021, FREYR’s ordinary shares and warrants began trading on the New York Stock Exchange. On July 9, 2021, FREYR completed the Business Combination with FREYR Legacy and Alussa. In connection with the consummation of the transactions contemplated by the BCA, FREYR Legacy and Alussa became wholly owned subsidiaries of FREYR. ~~Following the First Closing on July 7, 2021, FREYR’s ordinary shares and warrants began trading on the New York Stock Exchange.~~

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 ~~America~~United States Securities and Exchange Commission (“~~U.S. GAAP”~~SEC”). Regulation S-X. Accordingly, these financial statements do not include all of the information required by GAAP for complete consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 six months ended June 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.

The condensed consolidated financial statements include the accounts of FREYR and its wholly owned subsidiaries. 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~~year presentation.

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 ~~the~~ accompanying notes. Estimates and assumptions include, but are not limited to, estimates related to the valuation of share-based compensation, warrant liability, and convertible note. We base these estimates on historical experiences and on various other assumptions that we believe are reasonable under the circumstances, however, actual results may differ materially from these estimates.

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 ~~consolidated financial statements should be read~~risks include those disclosed in ~~conjunction with the audited consolidated financial statements and notes thereto included in the Company's~~Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~

~~Risks~~2021 filed with the SEC on March 9, 2022 and ~~Uncertainties~~

WePart II, Item 1A, of our Quarterly Report on Form 10-Q for the period ended March 31, 2022. As of the date of this report, our existing cash resources, which were primarily provided as a result of the business combination, are subject to those risks common in the renewable energy and manufacturing industries and also those risks common to early stage development companies, including, but not limited to, the possibility of not being able to successfully develop or market our products, the ability to obtain or maintain licenses and permitssufficient to support ~~future business, competition, dependence on key personnel and key external alliances, loss of~~ our ~~grant contributor,~~planned operations for at least the ~~ability to maintain and establish relationships with current and future vendors and suppliers, the successful protection of~~next 12 months. Therefore, our proprietary technologies, the possibility of the factory development being disrupted, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.

~~These~~ financial statements have been prepared ~~by management in accordance with U.S. GAAP and this~~on the basis ~~assumes~~ that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

As of the date of this report, our existing cash resources, which were primarily provided as a result of the business combination, are sufficient to support planned operations for the next 12 months. As a result, management believes that our existing financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements.

2. Summary of Significant Accounting Policies

~~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~~Company’s significant accounting policies were included in the ~~condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those critical~~Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Supplemental accounting estimates related to the valuation of share-based compensation, our valuation of warrant liability and our valuation of the convertible note (the “Convertible Note”). We base these estimates on historical experiences and on various other assumptions that we believepolicy disclosures are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.included below.

~~Unaudited Condensed Consolidated~~ ~~Financial Statements~~

The accompanying interim condensed consolidated balance sheet as of March 31, 2022, the interim condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021, the interim condensed consolidated statements of shareholders’ equity (deficit) for the three months ended March 31, 2022 and 2021, and the interim condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments necessary for the fair statement of the Company’s condensed consolidated financial statements for the periods presented. The financial data and other financial information disclosed in the notes to these condensed consolidated financial statements related to the three-month period are also unaudited. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or any other period. Although the consolidated balance sheet as of December 31, 2021 was derived from the audited annual consolidated financial statements as of December 31, 2021, these interim condensed consolidated financial statements do not contain all of the footnote disclosures from the annual consolidated financial statements.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s annual financial statements for the fiscal year ended December 31, 2021.

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.

~~Leases~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~We determine if an arrangement~~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 ~~at inception. For leases with a lease term greater than 12 months, right of use assets and lease~~commencement date. Lease liabilities are initially recognized ~~on the consolidated balance sheets~~ at ~~the commencement date based on~~ the present value of the ~~remaining fixed~~future lease payments ~~and includes only payments that are fixed and determinable at~~during the ~~time of commencement. Our~~expected lease ~~agreements may also contain variable payments such as common area maintenance, insurance, payments affected by a price index or other costs. Such variable lease payments are expensed as incurred.~~

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.

~~Our~~The Company remeasures its lease ~~terms may include options~~liabilities with a corresponding adjustment to ~~extend or terminate~~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, ~~when it~~and certain changes in assessments and contingencies. Subsequent to initial recognition, the operating lease liability is ~~reasonably certain that we will exercise such options. When determining~~increased for the ~~probability~~interest component of ~~exercising such options, we consider contract-based, asset-based, entity-based,~~the lease liability and ~~market-based factors.~~

reduced by the lease payments made. Operating lease ~~expense (excluding variable~~expenses are recognized as a single lease ~~costs) is recognized~~cost in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease ~~term.~~term, which includes the interest component of the measurement of the lease liability and amortization of the right-of-use asset.

Adoption of Accounting Pronouncements

In December 2019, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~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 ~~Accounting Standards Update~~ASU No. 2016-02, Leases (ASC 842) ~~(ASU 2016-02)~~, as amended, which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted this guidance as of January 1, 2022, on a modified retrospective basis and thus did not restate comparative periods. As a result, the comparative financial information ~~has not been updated~~ and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effective 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 on whether a contract is or contains a lease, and our initial direct costs for any leases that ~~exist~~existed before the adoption of the new standard. ~~We also~~A description of our accounting policy and accounting methods elected, to combine lease and non-lease components for all classes of assets and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the condensed consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

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 ~~has~~did not ~~caused~~cause a material change in the Company’s operating expenses.

3. Business Combination

As discussed in Note 1 - Business and Basis of Presentation, we completed the Business Combination on July 9, 2021. Immediately before the closing of the Business Combination, all outstanding redeemable preferred shares of FREYR Legacy were converted into ordinary shares of FREYR. Upon the consummation of the Business Combination, each share of FREYR Legacy issued and outstanding was canceled and converted into the right to receive 0.179038 ordinary shares in FREYR (the “Exchange Ratio”).

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 ~~U.S.~~ GAAP. Under this method of accounting, Alussa was treated as the “acquired” company for financial reporting purposes. See Note 1 - Business and Basis of Presentation for further details. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of FREYR issuing shares for the net assets of Alussa, accompanied by a recapitalization. The net assets of Alussa were stated at historical cost, with no goodwill or other intangible assets recorded.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. Property and Equipment, net

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

	As of March 31,			As of December 31,			June 30,			December 31,
	2022			2021			2022			2021
Office equipment	$	1,639		$	1,180

Construction in progress							$	43,983		$	20,017
Office equipment and other								1,651			1,180
								45,634			21,197
Less: Accumulated depreciation		(230	)		(135	)		(295	)		(135	)
Construction in progress		33,856			20,017
Property and equipment, net	$	35,265		$	21,062
Total							$	45,339		$	21,062

Construction in progress primarily includes costs related to the construction of the CQP and Giga Arctic facilities and the related CQP production equipment in Mo i Rana, ~~Norway~~Norway. Depreciation expense was $0.2 million and $24 thousand for the ~~related production equipment.~~six months ended June 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

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

					June 30,		December 31,
	As of March 31,		As of December 31,		2022		2021
	2022		2021
Accrued purchases	$	15,219	$	8,165	$	17,976	$	8,165
Accrued payroll and payroll related expenses		7,173		6,476		9,517		6,476
Operating lease liabilities (Note 6)		1,784		-		1,984		—
Accrued other operating costs		2,202		424		2,376		436
Total accrued liabilities	$	26,378	$	15,065
Total					$	31,853	$	15,077

6. Leases

We currently lease our corporate headquarters, CQP, the land for the Giga Arctic facilities, as well as other properties. Our leases have remaining lease terms up to 1050 years, some of which include options to extend the leases and some of which include options to terminate the leases at our sole discretion. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured. As of ~~March 31,~~June 30, 2022, all of our leases are operating leases.

The components of lease liabilities included in our condensed consolidated balance sheet consisted of the following (in thousands):

As of
March 31,
2022
Liabilities:
Accrued liabilities (Note 5) 1,784
Operating lease liability 7,860
Total lease liabilities $ 9,644

	June 30, 2022

Accrued liabilities and other (Note 5)		1,984
Operating lease liability		11,090
Total	$	13,074

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Components of lease ~~expense~~expenses were as follows (in thousands):

			Three months ended June 30, 2022		Six months ended June 30, 2022
	For the three months ended March 31, 2022
Operating lease cost		476		543		1,019
Variable lease cost		28		74		102
Short-term lease cost		-		15		15
Total lease cost	$	504	$	632	$	1,136

The remaining minimum lease payments due on our long-term leases are as follows (in thousands):

	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

As of
March 31,
2022
For the remainder of 2022 $ 1,365
2023 1,708
2024 1,699
2025 1,755
2026 1,755
Thereafter 3,852
Total undiscounted lease payments 12,135
Less: Imputed interest 2,491
Present value of lease liabilities $ 9,644

As of March 31, 2022, we have entered into one new lease for the land of Gigafactory 1&2 in Mo i Rana, Norway that has not yet commenced with future lease payments of $0.3 million annually that are not reflected in the table above. The lease is expected to commence in 2022 with a term of 50 years plus optional extension periods at the Company’s discretion. Before the Company reaches its final investment decision for Gigafactory 1&2, the lease is cancellable at the Company’s option.

Weighted average remaining lease term and discount rate are as follows:

	As of March 31,June 30, 2022

Weighted-average remaining lease term (in years)		~~7.1~~22.4
Weighted-average discount rate		~~6.6~~7.15	%

Supplemental cash flow information related to leases were as follows (in thousands):

			Six months ended June 30, 2022
	For the three months ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows	$	402	$	869
Lease liabilities arising from obtaining right of use assets	$	9,855		14,616

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 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. Warrants

As of ~~March~~June 30, 2022 and December 31, ~~2022,~~2021, we ~~have~~had 24,625,000 warrants ~~outstanding. As part~~outstanding (the “Warrants”), consisting of ~~the Business Combination, as described in Note 3 - Business Combination, the~~ 14,375,000 public warrants ~~of Alussa were each exchanged for one public warrant in FREYR~~ (the “Public Warrants”) and ~~the~~ 10,250,000 private warrants ~~of Alussa were each exchanged for one private warrant in FREYR~~ (the “Private Warrants”). The Public and Private Warrants (collectively, “Warrants”) are subject to the terms and conditions of the warrant agreement entered into between Alussa, Continental Stock Transfer & Trust Company and FREYR (the “Amended and Restated Warrant Agreement”).

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.

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 ~~identical~~subject to the ~~Public Warrants, except that so long as they are held by~~terms and conditions of the ~~Sponsor or any of its permitted transferees, the Private Warrants: (i) may be exercised for cash or on a cashless basis~~warrant agreement entered into between Alussa, Continental Stock Transfer & Trust Company, and ~~(ii) shall not be redeemable by FREYR.~~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 ~~within~~as part of additional paid-in capital on the condensed consolidated balance ~~sheets herein. However, we~~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 ~~within~~as warrant liability on the condensed consolidated balance ~~sheets herein.~~sheets. See also Note 9 - Fair Value ~~Measurement for further details.~~Measurement.

9. Fair Value Measurement

The following table sets forth, by level within the fair value hierarchy, the accounting of our financial assets and liabilities at fair value on a recurring basis according to the valuation techniques we use to determine their fair value (in thousands):

As of March 31, 2022
Level 1 Level 2 Level 3 Total
Assets
Convertible Note $ - $ - $ 20,452 $ 20,452
Total $ - $ - $ 20,452 $ 20,452
Liabilities
Warrant Liabilities $ - $ - $ 57,812 $ 57,812
Total $ - $ - $ 57,812 $ 57,812

	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

As of December 31, 2021
Level 1 Level 2 Level 3 Total
Assets
Convertible Note $ - $ - $ 20,231 $ 20,231
Total $ - $ - $ 20,231 $ 20,231
Liabilities
Warrant Liabilities $ - $ - $ 49,124 $ 49,124
Total $ - $ - $ 49,124 $ 49,124

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 ~~March 31,~~June 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.

As of ~~March 31,~~June 30, 2022 and December 31, 2021, the carrying value of all other financial assets and liabilities approximated their respective fair values.

Private Warrants

The Private Warrants outstanding on ~~March 31,~~June 30, 2022 and December 31, 2021, were valued using the Black-Scholes-Merton option pricing model. See Note 8 - Warrants above for further detail. Our use of the Black-Scholes-Merton option pricing model for the Private Warrants as of ~~March 31,~~June 30, 2022 and December 31, 2021, required the use of subjective assumptions:

●

The risk-free interest rate assumption was based on the ~~U.S.~~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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

●

The expected term was determined to be ~~4.28~~4.03 and 4.53 years as of ~~March 31,~~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.

Using this approach, an exercise price of $11.50 and a share price of ~~$12.26~~$6.84 and $11.18 as of June 30, 2022 and December 31, 2021, respectively, we determined that the fair value of the Private Warrants was ~~$57.8~~$24.4 million and $49.1 million, ~~as of March 31, 2022 and December 31, 2021,~~ respectively.

Convertible Note

As of ~~March 31,~~June 30, 2022 and December 31, 2021, we had an investment in a convertible note from 24M that was fair valued pursuant to the election of the fair value option under ASC 825, Financial Instruments. See Note 14 - Convertible Note for further detail. The Company considers this to provide a more accurate reflection of the current economic environment of the instrument. The Convertible Note was valued using a scenario-based framework. This analysis assumed various scenarios that were weighted based on the likelihood of occurrence. Within each scenario, an income approach, specifically the discounted cash flow approach, was utilized based on the expected payoffs upon the event, the discount rate, and the expected timing and then the expected probability of occurrence was applied, all of which management determined were significant assumptions. ~~Using this approach, we determined that the fair value of the Convertible Note as of March 31, 2022 and December 31, 2021 was $20.4 million and $20.2 million, respectively.~~ We noted that a change in the expected payoffs, discount rate, timing, or expected probability would result in a change to the fair value ascribed to the Convertible Note. ~~For the three months ended March 31, 2022 and 2021, the total change in fair value of the Convertible Note, including interest income, of $0.2 million and~~ ~~nil, respectively was recognized as a convertible note fair value adjustment within the condensed consolidated statement of operations and comprehensive loss.~~

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 a redeemable preferred shares fair value adjustment within the consolidated statements of operations and comprehensive loss.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The ~~following table presents~~ changes in the Level 3 instruments measured at fair value ~~for the three months ended March 31, 2022 and 2021, respectively~~were as follows (in thousands):

For the three months ended
March 31, 2022
Asset Liability
Convertible
Note Private
Warrants Redeemable
preferred
shares
Balance (beginning of period) $ 20,231 $ 49,124 $ -
Additions - - -
Fair value measurement adjustments 221 8,688 -
Foreign currency exchange effects - - -
Settlements - - -
Balance (end of period) $ 20,452 $ 57,812 $ -

								For the six months ended June 30, 2022					For the six months ended June 30, 2021
	For the three months ended March 31, 2021							Asset		Liability			Asset		Liability
	Asset		Liability					Convertible Note		Private Warrants			Convertible Note		Private Warrants		Redeemable Preferred Shares
	Convertible Note		Private Warrants		Redeemable preferred shares
Balance (beginning of period)	$	-	$	-	$	7,574		$	20,231	$	49,124		$	—	$	—	$	7,574
Additions		-		-		7,500			—		—			—		—		7,500
Fair value measurement adjustments		-		-		(6	)		491		(24,704	)		—		—		(74	)
Foreign currency exchange effects		-		-		1			—		—			—		—		—
Settlements									—		—			—		—		—
Balance (end of period)	$	-	$	-	$	15,069		$	20,722	$	24,420		$	—	$	—	$	15,000

10. Shareholders’ Equity ~~(Deficit)~~

Ordinary Shares

As of ~~March~~June 30, 2022 and December 31, ~~2022,~~2021, 245,000,000 ordinary shares without par value were ~~authorized.~~authorized and 116,703,504 and 116,853,504 ordinary shares were outstanding as of June 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 ~~March 31,~~June 30, 2022, we have not declared any dividends. ~~The holder of each ordinary share is entitled to one vote per share. As of March 31, 2022, there were 116,853,504 ordinary shares outstanding.~~

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 three and six months ended June 30, 2022 (no comparative amounts for the three and six months ended June 30, 2021). As of June 30, 2022, the authorized share repurchase was completed and no ordinary shares remain available for repurchase under the program.

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 ~~approved to increase~~increased the number of ordinary shares ~~to be issued~~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 ~~employee~~2019 Plan awards. Effective as of the close of the Business Combination, the 2019 Plan was modified to require cash-settlement after a lock-up period of either (i) one year for all non-executive employees or (ii) two years for all executive employees. ~~Share-based compensation expense, inclusive of~~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 ~~of the share-based~~recognized as stock compensation ~~liability, is recognized separately~~expense in general and administrative expense ~~and~~or research and development expense within the consolidated statements of operations and comprehensive loss. Cumulative stock compensation expense cannot be reduced below the grant date fair value of the original award.

~~The following table sets forth~~During the ~~activity relating to the employee options and warrants outstanding under~~six months ended June 30, 2022, 223,796 of the 2019 Plan ~~for the three months ended March 31, 2022 (aggregate intrinsic value in thousands):~~

For the Three Months Ended March 31, 2022 Number Weighted
average
exercise
price Weighted
average
remaining
contractual
life (years) Aggregate
intrinsic
value
Awards outstanding at beginning of period 1,007,884 $ 2.81
Awards granted - -
Awards forfeited - -
Awards outstanding at end of period 1,007,884 $ 2.81 3.46 $ 9,523
Awards exercisable at end of period 1,007,884 $ 2.81 3.46 $ 9,523

Compensation expense recorded for the employee awards in general and administrative for the three months ended March 31, 2022 and 2021 was $1.1 million and $0.4 million, respectively. Compensation expense recorded for the employee awards in research and development for the three months ended March 31, 2022 and 2021 was $0.1 million and ~~nil, respectively. As of March 31, 2022, all employee~~ awards were ~~vested.~~

~~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. The aggregate number of additional shares authorized under the 2021 LTIP plan will not exceed 10% of the current number of shares in issue over the next five years, excluding any options or warrants granted before the 2021 LTIP Plan.

~~All options granted were determined to vest annually in equal thirds and can be exercised up to five years after the grant date. There are no performance or market conditions for vesting.~~

~~The following table sets forth the activity relating to the employee options outstanding under the 2021 LTIP for the three months ended March 31, 2022 (aggregate intrinsic value in thousands):~~

For the Three Months Ended March 31, 2022 Number Weighted
average
exercise
price Weighted
average
remaining
contractual
life (years) Aggregate
intrinsic
value
Awards outstanding at beginning of period 2,101,972 $ 10.05
Awards granted - $ -
Awards forfeited 20,725 $ 10.05
Awards outstanding at end of period 2,081,247 $ 10.05 4.49 $ 4,600
Awards exercisable at end of period - $ - - $ -

~~Compensation expense recorded for the employee awards in general and administrative for the three months ended March 31, 2022 and 2021 was $0.7 million and~~ ~~nil, respectively. Compensation expense recorded for the employee awards in research and development for the three months ended March 31, 2022 and 2021 was less than $0.1 million and~~ ~~nil~~, respectively. As of March 31, 2022, unrecognized compensation expense related to non-vested share-based compensation arrangements was $6.1 million. The expense is expected to be fully recognized over 2.7 years.

~~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. Under the stock option agreement, our CEO was awarded 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 the board of directors’ assessment of the CEO’s performance pursuant to nine KPIs, which will occur during Q1 2022 and Q1 2023. The performance of each KPI will award the CEO with 1/9 of the maximum options. For each KPI, options that are confirmed in Q1 2022 will vest in equal thirds on December 31, 2022, September 30, 2023 and June 1, 2024. Options that are confirmed in Q1 2023 will vest in equal halves on September 30, 2023 and June 1, 2024. Failure to perform a KPI will reduce the maximum conditionally awarded options pro-rata and preclude the KPI from subsequently being earned by the CEO.exercised.

The CEO Option Awards were determined to be granted on July 13, 2021. Compensation cost is recognized if we conclude that it is probable that the performance condition will be achieved. Compensation expense recorded for the CEO option awards in general and administrative for the three months ended March 31, 2022 and 2021 was $0.1 million and ~~nil, respectively~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Nonemployee Awards —– Related Party

On March 1, 2019, FREYR Legacy entered into a consulting agreement with EDGE Global LLC (“EDGE”) for FREYR Legacy’s CEO and Chief Commercial Officer to be hired to perform certain services related to leadership, technology selection, and operational services (the “2019 EDGE Agreement”). ~~Per the 2019 EDGE Agreement,~~ FREYR Legacy agreed to issue 1,488,862 warrants to EDGE equaling 6.5% of the total outstanding shares of FREYR Legacy as of the effective date of the 2019 EDGE Agreement. On July 8, 2020, FREYR Legacy resolved to issueissued 1,488,862 warrants to EDGE under the 2019 EDGE Agreement upon the consummation of a New Capital Raise as defined in the 2019 EDGE Agreement. The warrants may be exercised at the latest of May 15, 2024. Each warrant shall give the right to subscribe for one new ordinary share of FREYR Legacy with a subscription price of $0.95 per ~~share.~~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”). ~~Under the 2020 EDGE Agreement,~~ FREYR Legacy ~~agreed to issue~~issued an additional 687,219 warrants to ~~EDGE.~~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 ~~will vest~~vested over an eighteen-month graded vesting period and expire on September 30, 2025. Each warrant provided the right to subscribe for one new ordinary share of FREYR Legacy with a subscription price of $0.99 per share. On September 25, 2020, the board approved the modification of the subscription price to be $1.22 per share.

Upon the consummation of the Business Combination on July 9, 2021, all unvested ~~awards~~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.

~~Compensation expense recorded~~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 ~~three~~six months ended ~~March~~June 30, 2022, 2.9 million options were granted to employees and directors, 81,191 RSUs were granted, and 164,386 options were forfeited.

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 1/9^th of the total award amount. If any of the performance criteria are achieved and certified by the board of directors’ during their first quarter 2022 meeting, the corresponding awards will vest in equal thirds on December 31, 2022, September 30, 2023, and ~~2021 for~~June 1, 2024. If achieved and certified during the ~~warrants was~~ ~~nil~~first quarter 2023 meeting, the awards will vest in equal halves on September 30, 2023 and ~~$0.1 million, respectively. As~~June 1, 2024. Compensation cost is recognized to the extent that achievement of ~~March 31, 2022, all compensation expense for~~ the ~~warrants was recognized. No warrants were exercised for~~performance criteria is deemed probable. During the ~~period ended for the three~~six months ended ~~March 31,~~June 30, 2022, ~~and 2021.~~94,444 of the CEO Option Awards were deemed probable.

11. Government Grants

On February 12, 2021, we were awarded a grant of NOK 39.0 million ($4.6 million based on NOK/USD exchange rate at the time of the transaction) for research, development, and innovation in environmental technology. The grant was awarded to assist with the costs incurred associated with employees and staff, contract research and consultants, overhead and operating expenses and intellectual property, patents, and licenses. The grant is paid out in three installments based on meeting certain milestones in the agreement, in which the last milestone is payable after the final project report is approved. The grant is subject to meeting certain business size thresholds and conditions, such as documenting and supporting costs incurred, obtaining a third-party attestation of our related records, and implementing policies that demonstrate good corporate governance. For the portion of any grant received for which costs have not yet been either incurred or supported through the appropriate documentation, we recognize deferred income in the condensed consolidated balance sheets. The first milestone of 30% and the second milestone of 50% were met during 2021 and payment was received. However, as of ~~March 31,~~June 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 $1.2 million as of ~~March 31,~~June 30, 2022 and $1.3 million as of December 31, 2021, ~~we recognized $1.3 million~~ as deferred income within the condensed consolidated balance sheet. For the ~~three~~six months ended ~~March 31,~~June 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)

On March 1, 2021, we were awarded a grant of NOK ~~142~~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. As of ~~March 31,~~June 30, 2022, we satisfied the requirements for an initial payment of ~~$6.7~~$6.3 million of which $1.4 million related to costs which were expensed and were recognized as other income and ~~$5.3~~$4.9 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 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. There is no provision for income taxes because the Company has incurred operating losses in each year since inception. The Company’s effective income tax rate was 0% for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 as the Company continues to maintain a full valuation allowance against its deferred tax assets.

13. Related Party Transactions

EDGE Agreements

The 2020 EDGE Agreement provided that FREYR Legacy should pay EDGE a monthly retainer fee. ~~See Note 10 - Shareholders’ Equity (Deficit) for further discussion on the warrant agreements between FREYR Legacy and EDGE. Furthermore,~~Additionally, FREYR Legacy agreed to make certain milestone payments to EDGE based on the closing of certain additional financing rounds as defined within the 2020 EDGE Agreement. See Note 10 - Shareholders’ Equity for further discussion on the warrant agreements between FREYR Legacy and EDGE. On January 18, 2021, the board resolved to terminate the 2020 EDGE Agreement and enter into an employment contract with the continuing CEO and a consulting contract with the prior Chief Commercial Officer, subject to the closing of the Business Combination. See below for further detail on the consulting agreement with the prior Chief Commercial Officer.

The expenses incurred in relation to the consulting services provided for the three and six months ended ~~March 31, 2022 and~~June 30, 2021 were ~~nil~~ ~~and~~ $0.1 million and $0.2 million, respectively. No expenses were recorded in the corresponding periods of 2022. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. There was no unpaid amount in accounts payable and accrued liabilities -– related party as of ~~March 31,~~June 30, 2022 and December 31, 2021.

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.~~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 six months ended ~~March 31,~~June 30, 2022 ~~and 2021~~ were $0.2 million and ~~nil~~,$0.3 million, respectively. No expenses were recorded in the corresponding periods of 2021. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. The unpaid amount of less than $0.1 million was recognized in accounts payable and accrued liabilities - related party as of ~~March 31,~~June 30, 2022 and December 31, 2021.

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 ~~Projects.~~Project Execution. The expenses incurred for consulting services for the three and six months ended ~~March 31,~~June 30, 2022 were $1.5 million and $2.8 million, respectively, and $1.2 million and $2.5 million for the three and six months ended June 30, 2021, ~~were $1.2 million.~~respectively. These expenses are recognized as general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. The unpaid amount of ~~$0.5~~$0.6 million and $0.3 million was recognized in accounts payable and accrued liabilities - related party as of ~~March 31,~~June 30, 2022 and December ~~3 1,~~31, 2021, respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Equity Method Investment

We hold a 50% common stock ownership in FREYR Battery KSP JV, LLC (“FREYR KSP JV”) that is accounted for under the equity method. FREYR along with Koch Strategic Platforms, who also holds 50% common stock ownership, formed FREYR KSP JV in October 2021 to advance the development of clean battery cell manufacturing in the United States. As part of this agreement, both parties agreed to contribute $3.0 million for the initial costs related to developing the first gigafactory to project concept selection. Project concept selection remains under development as of ~~March 31,~~June 30, 2022. The initial capital contributions by both parties were made in January 2022. FREYR KSP JV reported a net loss of ~~$0.3~~$0.9 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022. For the ~~three~~six months ended ~~March 31,~~June 30, 2022, we incurred ~~$0.1~~$0.5 million of expenses on behalf of FREYR KSP ~~JV and the~~JV. There was no unpaid amount ~~of less than $0.1 million was recognized as other receivables~~ as of ~~March~~June 30, 2022 and December 31, ~~2022.~~2021.

14. Convertible Note

On October 8, 2021, we invested $20.0 million in an unsecured convertible note receivable from 24M, our battery platform technology licensor for our current planned manufacturing facilities in Norway. The Convertible Note matures on October 8, ~~2024. The Convertible Note~~2024, carries an annual interest rate of 5%, and is convertible into common stock or preferred stock at our option beginning on October 8, 2023 or automatically upon a qualified initial public offering or direct listing in excess of our conversion price. Additionally, the Convertible Note contains a change of control provision that would result in repayment of 1.75x the note’s original investment value plus any accrued interest. We have elected to account for the Convertible Note using the fair value option. See Note 9 - Fair Value Measurement for details on the valuation methodology.

15. Net ~~Loss~~Income (Loss) Per Share

The Company’s basic net ~~loss~~income (loss) per share attributable to ordinary shareholders for the three and six months ended ~~March 31,~~June 30, 2022 was computed by dividing net ~~loss~~income (loss) attributable to ordinary shareholders by the weighted-average ordinary shares outstanding.

For the three and six months ended ~~March 31,~~June 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 six months ended ~~March 31,~~June 30, 2021, was computed by dividing net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding.

No dividends were declared or paid for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021.

Diluted net ~~loss~~income (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 ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, the treasury stock method was used to assess our warrants and share-based payment awards while the if-converted method was used to assess our redeemable preferred ~~shares; however, no instrument was determined to have a dilutive effect.~~shares.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table sets forth the computation of our basic and diluted net ~~loss~~income (loss) per share attributable to ordinary shareholders for the three and six months ended ~~March 31,~~June 30, 2022 and ~~2021 (amounts~~ 2021(in thousands, except ~~share and~~ per share ~~amounts)~~data):

For the three months ended
March 31,
2022 2021
Numerator:
Net loss attributable to ordinary shareholders - basic and diluted $ (34,907 ) $ (11,887 )
Denominator:
Weighted average ordinary shares outstanding - basic and diluted 116,853,504 37,452,359
Net loss per ordinary share:
Basic and diluted $ (0.30 ) $ (0.32 )

	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	)

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:~~anti-dilutive (in thousands):

	As of March 31,				For the three months ended June 30,				For the six months ended June 30,
	2022		2021		2022		2021		2022		2021

Public Warrants						14,375		—		14,375		—
Private Warrants						10,250		—		10,250		—
EDGE warrants		2,176,081		2,176,081		—		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		-		413,313		—		413		—		413
Employee awards		2,081,247		950,667
CEO awards		94,444		-
Share-based compensation liability		1,007,884		-
Private Warrants		10,250,000		-
Public Warrants		14,375,000		-
Redeemable preferred shares		-		15,000,000		—		15,000		—		15,000
Total		29,984,656		18,540,061		29,681		18,601		32,641		18,601

For the three and six months ended ~~March 31,~~June 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.

ITEM 2. FREYR BATTERY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This ~~“FREYR~~FREYR Battery’s ~~Management’s~~“Management’s Discussion and Analysis” of FREYR Battery’s results operations and financial condition should be read in conjunction with ~~the historical audited annual consolidated financial statements as of and~~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 ~~March 31, 2022 and~~this Quarterly Report on Form 10-Q for the ~~three months~~period ended ~~March 31, 2022 and 2021, and the related respective notes, which are included elsewhere in this Report.~~June 30, 2022. The financial information contained herein is taken or derived from such audited annual consolidated financial statements and unaudited interim condensed consolidated financial statements, unless otherwise indicated. The following discussion contains forward-looking ~~statements. FREYR Battery’s~~statements and actual results could differ materially from those that are discussed in these forward-looking statements. ~~Factors~~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 include those discussed below and elsewhere in this Report, particularly under “Risk Factors.”~~differences. Unless the context otherwise requires, all references in this section to “FREYR” refer to FREYR Legacy prior to the closing of the Business Combination and to FREYR Battery following the closing of the Business Combination.

Overview

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 ~~the~~global energy and transportation ~~sector and energy~~ systems by ~~delivering some of the world’s cleanest and most cost-effective~~producing clean, cost-competitive batteries. We ~~aim~~are in the design and testing phase related to ~~produce some~~our battery production process and we have initiated construction of the most cost-competitive batteries with the lowest carbon footprints, which could further support the acceleration of the energy transition. Following the investment decision of the CQP, construction work is ongoingour Customer Qualification Plant (“CQP”) and groundworks and foundation structures for our inaugural gigafactory (“Giga Arctic”), both located in Mo i Rana, Norway. ~~The CQP production line will be based on our in-licensed technology from 24M.~~ As of ~~March 31,~~June 30, 2022, we have not yet initiated manufacturing or derived revenue from our principal business activities.

Our initial CQP production line is expected to be based on our licensed Semi-Solid^TM technology and partnership with 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 slower charge requirements, ~~and then plan~~with plans to target additional markets, including ~~consumer EVs, through both the joint venture model and through the licensing model. We plan to produce~~ faster charge battery cells for the broader consumer EV ~~segment through the 24M platforms, as well as through the joint venture business model and potentially additional licensing partnerships.~~ market.

We expect our capital and operating expenditures to increase significantly in the second half of 2022 and 2023 in connection with our ongoing activities and to prepare for growth, as we:

●

~~construct~~Construct manufacturing facilities and purchase related equipment;

●

~~commercialize~~Commercialize products;

●

~~continue to invest~~Make additional investments in technology;

●

~~maintain~~Maintain and improve operational, financial, and management information systems;

●

~~hire~~Hire additional personnel; and

●

~~operate~~Operate as a public company.

Recent Developments

●

~~Signed~~In June 2022, FREYR’s Board of Directors sanctioned construction of Giga Arctic, a ~~Head~~combination of ~~Terms agreement to pursue a Joint Venture (“JV”) with Aleees to establish an LFP cathode plant in~~our previously announced Gigafactory 1 & 2, the ~~Nordic region. The joint venture partners will seek to commence production in 2024, coinciding with the anticipated ramp-up of operations from FREYR’s~~Company’s first ~~Gigafactory~~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.

●

~~Announced our signing~~In June 2022, FREYR announced it had identified $1.6 billion of ~~UN Global Compact principles of human rights, labor, environment,~~total potential debt financing support based on visibility from export credit agencies, multilateral development finance institutions, and ~~anti-corruption.~~

commercial banking partners.

●

Appointed Oscar K. Brown as FREYR’s Group Chief Financial Officer, effective on April 4, 2022. Mr. Brown comes with more than 30 years of energy industry experience, having most recently been Senior Vice President of Strategy, Business Development and Supply Chain for Occidental Petroleum Corporation.

●

~~Entered into~~In June 2022, FREYR secured a conditional ~~power purchase~~offtake agreement ~~(“PPA”)~~with a major European energy technology company for 25 GWh of battery cells from 2024 to secure access to clean and renewable electricity through hydropower following the commencement of production in Gigafactory 1&2. The PPA is conditional upon FREYR taking a final investment decision on Gigafactory 1&2.2028.

●

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.

Comparability of Financial Information

Our results of operations and reported assets and liabilities may not be comparable between periods as a result of the Business Combination and becoming a public company. As a result of the Business Combination, we became a New York Stock Exchange (“NYSE”) listed company, which has required and will continue to require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, internal and external accounting, legal and administrative resources, including increased audit, compliance, and legal fees.

Share Repurchase Program

Results of Operations

The following table sets forth FREYR Battery’s condensed consolidated results of operations data for the periods presented (in thousands except percentages):

	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	%

NM - Not meaningful

~~Key Factors Affecting~~ Operating ~~Results~~

We believe our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Report titled “~~Risk Factors~~.”

~~Components of Results of Operations~~

expenses

~~Operating Expenses~~

General and administrative

General and administrative ~~expense consists~~expenses consist of personnel and personnel-related expenses, including share-based compensation, ~~of our executives and employees,~~ fees paid for contractors and consultants assisting with growing the business, ~~and developing the battery factories,~~ office space related costs, travel costs, public relations costs, legal, accounting, and ~~accounting~~audit fees, ~~for professional~~ and ~~contract services, as well as~~ depreciation expense.

General and administrative expenses increased by $21.0 million or 292%, to $28.2 million for the three months ended June 30, 2022, from $7.2 million for the three months ended June 30, 2021. General and administrative expenses increased by $36.6 million or 226%, to $52.8 million for the six months ended June 30, 2022, from $16.2 million for the six months ended June 30, 2021. General and administrative expenses increased 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.

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 ~~operating~~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 ~~expense~~expenses consists 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 ~~expense~~expenses also ~~includes the~~include development costs related to our technology license with 24M.

R&D expenses increased slightly to $3.1 million for the ~~24M License.~~three months ended June 30, 2022, from $3.0 million for the three months ended June 30, 2021. R&D expenses decreased slightly to $5.9 million for the six months ended June 30, 2022, from $6.0 million for the six months ended June 30, 2021.

We expect R&D expenses to increase in future periods as we increase our personnel 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, which is accounted for under the equity method, as we exercise significant influence but not control, over its operating and financial policies.

Equity in losses from investee of $0.3 million and $0.5 million were recognized for the three and six months ended June 30, 2022, respectively. There was no equity in losses from investee for the corresponding periods in 2021.

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.

~~Results of Operations~~

~~Comparison of the Three Months Ended March 31, 2022 and 2021~~

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Report. The following table sets forth FREYR Battery’s condensed consolidated results of operations data for the periods presented (in thousands, except percentages):

For the three months ended
March 31, Change Change
2022 2021 ($) (%)
Operating expenses:
General and administrative $ 24,614 $ 9,012 $ 15,602 173 %
Research and development 2,859 2,907 (48 ) -2 ^%
Equity in losses from investee 167 - 167 NM ⁽¹⁾
Total operating expenses 27,640 11,919 15,721 132 %
Loss from operations (27,640 ) (11,919 ) (15,721 ) 132 %
Other income (expense) (7,267 ) 32 (7,299 ) NM ⁽¹⁾
Loss before income taxes (34,907 ) (11,887 ) (23,020 ) 194 %
Income tax expense - - - 0 %
Net loss $ (34,907 ) $ (11,887 ) $ (23,020 ) 194 %
⁽¹⁾ ~~NM = Not meaningful~~
~~Operating expenses~~
~~General and administrative~~
~~General and administrative expenses~~Other income increased by ~~$15.6~~$34.0 million ~~or 173%,~~ to ~~$24.6~~$36.2 million for the three months ended ~~March 31,~~June 30, 2022 from ~~$9.0~~$2.2 million for the three months ended ~~March 31,~~June 30, 2021. General and administrative expenses increased primarily due to an increase of $12.4 million related to growth in professional services, general corporate expenses, and travel. Additionally, there was an increase of compensation costs of $6.5 million resulting from a higher headcount and share based compensation costs. These increases were partially offset by a decrease in non-employee share-based compensation costs of $3.7 million recognized in the prior year.
~~Equity in losses from investee~~
~~Equity in losses from investee of $0.2 million were recognized for the three months ended March 31, 2022. There was no equity in losses from investee for the three months ended March 31, 2021.~~
Other income ~~(expense)~~
~~Other income (expense) changed~~increased by ~~$7.3~~$26.7 million to ~~a loss of $7.3~~$28.9 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 from ~~a gain of less than $0.1~~$2.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. The ~~change~~increase in other income ~~(expense)~~ is primarily due to the ~~increase in~~$33.4 million gain on the revaluation of the warrant liability ~~fair value adjustment of $8.7 million, offset by the increase in other income of $1.5 million, which predominantly consists of the grant proceeds recognized~~recorded during the ~~three months ended March 31, 2022.~~ second quarter of 2022 as a result of a decrease in our stock price.

Financial Condition, Liquidity and Capital Resources

Liquidity and Capital Resources

As of ~~March 31,~~June 30, 2022, we had approximately ~~$524.6~~$488.4 million of cash, cash equivalents, and restricted cash and current liabilities of approximately ~~$35.1~~$45.7 million. To date, our principal sources of liquidity have been proceeds received from the Business Combination, issuance ~~of debt and~~ equity securities, and amounts received from government grants. ~~These~~Historically, these funds ~~will be~~have been used for constructing and equipping our battery ~~projects, technology licensing and research and development efforts,~~manufacturing facilities, including the CQP and ~~general corporate purposes. Additionally, we expect that the various government grants we have received but not earned to date will also help fund our operational needs~~Giga Arctic, technology licensing, R&D activities, and general corporate ~~purposes and cover certain operating expenses.~~purposes.

Our ~~capital~~future liquidity requirements depend on many factors, including ~~capital expenditures required to support the development of the battery factories,~~ the timing and extent of the following: capital expenditures for construction of our battery manufacturing facilities and purchase of related equipment, spending to support technology licensing and ~~research and development~~R&D efforts, ~~and~~spending on other growth initiatives or expansion into new geographies, our future revenue generating activities, including market ~~adoption~~acceptance of our ~~future products.~~ products and services, and overall economic conditions.
Until we can generate sufficient revenue to ~~cover operating expenses, working capital and capital expenditures,~~adequately support our liquidity requirements, we expect to fund short-term cash needs through ~~a combination~~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 June 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. 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 borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing.

While we will need to raise additional capital in the future, if adequate funds are not available, we will need to curb our expansion plans or limit our research and development activities, which would have a material adverse impact on our business prospects and results of operations.
~~We believe that we have the ability to meet all of our contractual obligations and commitments for at least the next 12 months.~~

Cash Flow Summary

The following table summarizes our cash flows ~~for the periods presented~~ (in thousands):

For the three months ended Six months ended June 30,
March 31, 2022 2021 Change (%)
2022 2021
Net cash (used in) provided by:
Operating activities $ (30,135 ) $ (6,392 ) $ (50,430 ) $ (10,317 ) 389 %
Investing activities (10,932 ) (54 ) (24,546 ) (119 ) NM
Financing activities - 7,500 (1,052 ) 7,500 (114 %)
NM - Not meaningful

Operating Activities

Net cash used in operating activities was ~~$30.1~~$50.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022, ~~while net~~compared to $10.3 million for the six months ended June 30, 2021. During the six months ended June 30, 2022, the increase in cash used in operating activities was ~~$6.4~~driven by a $38.0 million increase in net loss, adjusted for ~~the three months ended March 31, 2021. For the three months ended March 31, 2022, the primary factor affecting our operating cash flows~~non-cash items. The increase in net loss, adjusted for non-cash items was ~~our~~primarily due to higher operating expenses from higher headcount and increased spending associated with the ramp up of ~~$27.3 million driven by payroll~~activities as we continue to invest in building our business and ~~other related costs, accounting and legal fees, research and development, and other operating expenses.~~ For the three months ended March 31, 2021, the primary factor affecting our operating cash flows was our operating expenses of $11.9 million driven by payroll and other related costs, fees to EDGE Global, accounting and legal fees, research and development, and other operating expenses. These operating expenses were partially offset by the impact of the increase in accounts payable and accrued liabilities of $1.3 million duemove closer to the ~~timing~~start-up of ~~payments and non-cash share-based compensation of $4.2 million.~~manufacturing operations.

Investing Activities

Net cash used in investing activities was ~~$10.9~~$24.5 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022, ~~while net~~compared to $0.1 million for the six months ended June 30, 2021. The change in cash used in investing activities was ~~$0.1~~primarily driven by $26.4 million ~~for the three months ended March 31, 2021. For the three months ended March 31, 2022, our investing cash flows primarily reflect $7.9 million of~~in purchases of property and equipment compared to $0.1 million for the six months ended June 30, 2022 and a2021, respectively. In addition, for the six months ended June 30, 2022, we used $3.0 million in cash for an investment in FREYR Battery KSP JV, LLC, our equity method ~~investee. For the three months ended March 31, 2021,~~investee and received proceeds of $4.9 million from grants funding our ~~investing cash flows primarily reflect the purchases of equipment.~~property and equipment construction.

Financing Activities

~~There was no net~~Net cash ~~provided by or~~ used in financing activities was $1.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022, ~~while net~~compared to cash provided by financing activities ~~was~~of $7.5 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. ~~For~~Net cash used during 2022 was related to the ~~three months ended March 31,~~purchase of treasury shares during the second quarter. Net cash provided during 2021, ~~our financing cash flows relate to net proceeds~~consisted of $7.5 million in proceeds from the issuance of redeemable preferred shares.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are consistent with those described in ~~Item 7 of Part II, “Management’s~~the Management’s Discussion and Analysis ~~of Financial Condition and Results of Operations”~~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 six months ended June 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 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.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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~~”“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 ~~raw material inflation~~which saw significant price increases in ~~fiscal year~~ 2021, may result in significant increases in costs from our suppliers and increased lead-times associated with our raw materials, particularly since we have not established fixed prices and volumes with a majority of our prospective suppliers. 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.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

We maintain disclosure controls and procedures (“Disclosure Controls”) within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our Disclosure Controls are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~March 31,~~June 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes in Internal Control Over Financial Reporting

As part of our preparation towards production, we implemented a new cloud enterprise resource planning (“ERP”) system as of January 1, 2022. The ERP system, which is an integral component of our internal controls over financial reporting, will provide us with more efficient transactional processing, increased scalability and enhanced management tools for our business growth.
There ~~were~~has been no ~~other changes~~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 ~~first quarter of fiscal~~three months ended June 30, 2022 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
~~To the knowledge of our management, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.~~

From time to time, we may be involved in litigation relating to claims arising in the ordinary course of our business. ~~There~~To the knowledge of our management, there are ~~currently~~ no material litigation, claims, or actions currently pending or threatened against ~~us.~~us, any of our officers, or directors in their capacity as such, or against any of our property.

ITEM 1A. RISK FACTORS

~~Other than~~As of the ~~update to the risk factor set forth below,~~date of this filing, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 9, 2022, except as discussed in Part II, Item IA, of our Quarterly Report on Form 10-Q for the period ended March 31, 2022. Additional risks not currently known to us or that we currently deem to be immaterial may also materially affect our consolidated financial position, results of operations, or cash flows.
~~Doing business internationally creates operational, financial and tax risks for FREYR’s business.~~
FREYR’s business plan includes operations in international markets, including initial manufacturing and supply activities in Norway, initial sales in North America and Europe, and eventual expansion into other international markets. Conducting and launching operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes significant management resources. If FREYR fails to coordinate and manage these activities effectively, its business, financial condition, prospects or results of operations could be adversely affected. International sales entail a variety of risks, including currency exchange fluctuations, challenges in staffing and managing foreign operations, tariffs and other trade barriers, unexpected changes in legislative or regulatory requirements of foreign countries into which FREYR sells its products and services, difficulties in obtaining export licenses or in overcoming other trade barriers, laws and business practices favoring local companies, political and economic instability, difficulties protecting or procuring intellectual property rights, and restrictions resulting in delivery delays and significant taxes or other burdens of complying with a variety of foreign laws.
In particular, in February 2022, armed conflict escalated between Russia and Ukraine. The EU and other governments in jurisdictions in which we plan to operate in have imposed severe financial and economic sanctions and export controls against Russia and Russian interests, and have threatened additional sanctions and controls. It is not possible to predict the broader consequences of this military conflict. Further escalation of geopolitical tensions related to the military conflict, could include, among other things, further sanctions, embargoes, greater regional instability, geopolitical shifts, heightened risk of cyberattacks, and other adverse effects on macroeconomic conditions, currency exchange rates, supply chains and financial markets, any of which may adversely affect our business and supply chain. In addition, the effects of the ongoing conflict could heighten many of our known risks described in the section entitled “Risk Factors" in our Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 9, 2022.
In addition, the corporate structure of FREYR and its subsidiaries with entities in several jurisdictions such as Norway, Luxembourg, the U.S., Finland and the Cayman Islands, is, together with its conducting of operations in international markets as described above, subject to tax risk. The expected tax treatment of FREYR and its subsidiaries relies on current tax laws and regulations, as well as certain tax treaties between the aforementioned different jurisdictions. As such, unexpected changes, interpretation, application or enforcement practice in respect of legislative or regulatory requirements of such tax laws in foreign countries into which FREYR or any of its subsidiaries is incorporated and/or conducting operations and sales in, including but not limited to, changes in treatment of sales and results of operations earned in foreign and offshore jurisdictions, value added tax, cessation of tax treaties and recognition of tax law principles in other jurisdictions, as well as other changes in corporate tax law, may adversely FREYR’s business, financial conditions, prospects or result of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~The following table presents information related to our repurchases of ordinary shares during 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 -
(1) 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 shares purchased under the program are to be used to settle the exercise of employee options granted under the Company’s equity compensation plans. We were authorized to repurchase up to 150,000 of the Company’s Ordinary Shares, or approximately 0.13% of the current outstanding share capital. As of June 30, 2022, the authorized share repurchase was completed and no ordinary shares remain available for repurchase under the program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

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).

Exhibit Incorporated by Reference
Number Exhibit Description Form File No. Exhibit Filing Date
3.1 Consolidated Articles of Association of FREYR as of November 26, 2021. 8-K 001-40581 3.1 12/16/2021
10.1# Engagement Agreement, dated March 1, 2019, by and between FREYR AS and EDGE Global LLC. S-4 333-254743 10.1 3/26/2021
10.2# Amendment to the March 2019 Engagement Agreement, dated July 1, 2020, by and between FREYR AS and EDGE Global LLC. S-4 333-254743 10.2 3/26/2021
10.3# Consultancy Agreement entered into on May 14, 2021 between FREYR Battery and Peter Matrai. S-4/A 333-254743 10.14 5/27/2021
10.4# Employment Agreement, dated May 9, 2022, by and between FREYR Battery US Holding, Inc. and Oscar K. Brown Filed herewith
31.1 Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith
31.2 Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith
32.1‡ Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith
32.2‡ Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith
101.INS Inline XBRL Instance Document Filed herewith
101.SCH Inline XBRL Taxonomy Extension Schema Document Filed herewith
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed herewith
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed herewith
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith
104 The cover page for FREYR Battery’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101
Exhibit
Number #Exhibit Description
3.1 ~~Indicates management contract or compensatory plan or arrangement.~~Consolidated Articles of Association of FREYR as of November 26, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 16, 2021).
31.1* Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1‡,* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2‡,* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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 June 30, 2022 is formatted in Inline XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021; (iii) Condensed Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2022 and 2021; (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FREYR BATTERY

Date: ~~May 11,~~August 8, 2022 By: /s/ Tom Einar Jensen
Name: Tom Einar Jensen
Title: Chief Executive Officer
(Principal Executive Officer)

Date: ~~May 11,~~August 8, 2022 By: /s/ Oscar K. Brown
Name: Oscar K. Brown
Title: Group Chief Financial Officer
(Principal Financial Officer &
Principal Accounting Officer)

2725

00-0000000 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 Q1Q2 0001844224 iso4217:NOK xbrli:shares

				PAGE

Part I - Financial Information			1
	~~Item 1.~~	~~Financial Statements.~~	1
	Item 1.	Financial Statements		1
	Item 2.	FREYR Battery’s Management’s Discussion and Analysis of Financial Condition and Results of Operations		1917
	Item 3.	Qualitative and Quantitative Disclosures About Market Risk		21
	Item 4.	Controls and Procedures		22
Part II - Other Information				23
	Item 1.	Legal Proceedings		~~Item 4.~~	~~Controls and Procedures~~	2423
	Item 1A.	~~Part II - Other Information~~Risk Factors		2523
	~~Item 1.~~	~~Legal Proceedings~~	25
	~~Item 1A.~~	~~Risk Factors~~	25
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23
	Item 3.	Defaults Upon Senior Securities		23
	Item 4.	Mine Safety Disclosures		23
	Item 5.	Other Information		23
	Item 6.	Exhibits		24
Signatures				25
	~~Item 3.~~	~~Defaults Upon Senior Securities~~	25
	~~Item 4.~~	~~Mine Safety Disclosures~~	25
	~~Item 5.~~	~~Other Information~~	25
	~~Item 6.~~	~~Exhibits~~	26
~~Signatures~~			27

	As of March 31, 2022
Liabilities:
Accrued liabilities (Note 5)		1,784
Operating lease liability		7,860
Total lease liabilities	$	9,644

	As of March 31, 2022
For the remainder of 2022	$	1,365
2023		1,708
2024		1,699
2025		1,755
2026		1,755
Thereafter		3,852
Total undiscounted lease payments		12,135
Less: Imputed interest		2,491
Present value of lease liabilities	$	9,644

	As of March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Convertible Note	$	-	$	-	$	20,452	$	20,452
Total	$	-	$	-	$	20,452	$	20,452
Liabilities
Warrant Liabilities	$	-	$	-	$	57,812	$	57,812
Total	$	-	$	-	$	57,812	$	57,812

	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Convertible Note	$	-	$	-	$	20,231	$	20,231
Total	$	-	$	-	$	20,231	$	20,231
Liabilities
Warrant Liabilities	$	-	$	-	$	49,124	$	49,124
Total	$	-	$	-	$	49,124	$	49,124

For the Three Months Ended March 31, 2022	Number		Weighted average exercise price		Weighted average remaining contractual life (years)		Aggregate intrinsic value
Awards outstanding at beginning of period		1,007,884	$	2.81
Awards granted		-		-
Awards forfeited		-		-
Awards outstanding at end of period		1,007,884	$	2.81		3.46	$	9,523
Awards exercisable at end of period		1,007,884	$	2.81		3.46	$	9,523

	For the three months ended
	March 31,						Change			Change
	2022			2021			($)			(%)
Operating expenses:
General and administrative	$	24,614		$	9,012		$	15,602			173	%
Research and development		2,859			2,907			(48	)		-2	^%
Equity in losses from investee		167			-			167			NM	⁽¹⁾
Total operating expenses		27,640			11,919			15,721			132	%
Loss from operations		(27,640	)		(11,919	)		(15,721	)		132	%
Other income (expense)		(7,267	)		32			(7,299	)		NM	⁽¹⁾
Loss before income taxes		(34,907	)		(11,887	)		(23,020	)		194	%
Income tax expense		-			-			-			0	%
Net loss	$	(34,907	)	$	(11,887	)	$	(23,020	)		194	%

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		-

Exhibit		Incorporated by Reference
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
3.1	Consolidated Articles of Association of FREYR as of November 26, 2021.	8-K	001-40581	3.1	12/16/2021
10.1#	Engagement Agreement, dated March 1, 2019, by and between FREYR AS and EDGE Global LLC.	S-4	333-254743	10.1	3/26/2021
10.2#	Amendment to the March 2019 Engagement Agreement, dated July 1, 2020, by and between FREYR AS and EDGE Global LLC.	S-4	333-254743	10.2	3/26/2021
10.3#	Consultancy Agreement entered into on May 14, 2021 between FREYR Battery and Peter Matrai.	S-4/A	333-254743	10.14	5/27/2021
10.4#	Employment Agreement, dated May 9, 2022, by and between FREYR Battery US Holding, Inc. and Oscar K. Brown	Filed herewith
31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.1‡	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith
32.2‡	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith
101.INS	Inline XBRL Instance Document	Filed herewith
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith
104	The cover page for FREYR Battery’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101

Exhibit
Number		#Exhibit Description
3.1		~~Indicates management contract or compensatory plan or arrangement.~~Consolidated Articles of Association of FREYR as of November 26, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 16, 2021).
31.1*		Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1‡,*		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2‡,*		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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 June 30, 2022 is formatted in Inline XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021; (iii) Condensed Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2022 and 2021; (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 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.

	FREYR BATTERY

Date: ~~May 11,~~August 8, 2022	By:	/s/ Tom Einar Jensen
	Name:	Tom Einar Jensen
	Title:	Chief Executive Officer
		(Principal Executive Officer)

Date: ~~May 11,~~August 8, 2022	By:	/s/ Oscar K. Brown
	Name:	Oscar K. Brown
	Title:	Group Chief Financial Officer (Principal Financial Officer & Principal Accounting Officer)