OSLO: Element ASA has entered into a Letter of Intent to acquire Harmonychain for the commercialization of the Scrypt microchip mining system, designed to increase blockchain mining microchip efficiency more than 300 percent, a news release said.
“Harmonychain has recently acquired Lokotech AS, which has developed a disruptive and commercialization-ready microchip that is setting a new standard in the scrypt mining market, “says Thomas Christensen, Chairman of the Board of Directors of Element.
“The microchip is theoretically proven to be up to three times more efficient than current chips, and reducing computer energy consumption by up 70 percent. The company has secured strong pre-production interest for the initial complete blockchain mining systems., which will be manufactured by Samsung and Keytouch, providing operational leverage and short runway to profitability and expansion”.
Lokotech, a company 100% owned by Harmonychain, is headed by CEO Ola Stene-Johansen and the technology team is led by Chief Technology Officer Christian Rustad. The Board of Directors of Harmonychain consists of Bjørn Zachrisson, professor Thore Johnsen, Tore Sviland, Christian Rustad and Ben Miklozek
”Blockchain mining consumes a lot of energy and our Scrypt system is designed to outperform all current products on the market. The Scrypt microchip is poised to be the most profitable blockchain hardware with an addressable market of over nine million units. We expect to reach profitability within twelve-months after product launch in 2021, based on our current pre-commitments from customers,” says Bjørn Zachrisson, Chairman of the Board of Directors of Harmonychain.
The market for cryptocurrency mining hardware is estimated to USD 6.8 billion in 2020 with a compounded annual growth of 7.4 percent until 2024, following Technavia’s market analysis.
Harmonychain subsidiary Lokotech has secured pre-production LOIs for 40.000 mining units for the scrypt market, representing potential revenues of USD 80 to 100 million. The Scrypt ASIC is planned to enter production in the first half of 2021 with partners Samsung and Keytouch, in addition to the core technology being verified by Inventas.
“Based on a successful market breakthrough of the Scrypt microchip, we will leverage our market position to address the significantly larger bitcoin mining market with the SHA-256 microchip after complete design, efficiency analysis and simulation completion,” Zachrisson concludes.
Assuming all shares in Harmonychain is acquired by Element pursuant to the terms of the LoI, such shares will be acquired in exchange for (i) 51 million new consideration shares and (ii) 10 million warrants both to be issued by Element to the sellers of Harmonychain. Upon completion of the Acquisition, the Harmonychain Group will not have any external interest bearing debt.
The Warrants will have a strike price of NOK 10 per Warrant and are subject to fulfilment of the following milestones: (i) 5 million Warrants may be exercised when manufacturing has commenced by Harmonychain, (ii) 5 million Warrants may be exercised when Harmonychain has received payment from the first customer, but not in any event after 31.12.2022.
Procorp AS is acting as financial advisor to the Company in connection with the transaction. Advokatfirmaet CLP DA is acting as legal advisor to the Company in connection with the transaction.
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