Item: Acquire Harmonychain AS for commercialization of blockchain microchip mining system

Highlights<br />
o	Element ASA (Element) enters into a Letter of Intent (LOI) to acquire ("the
Acquisition") Harmonychain AS (Harmonychain), the developer of a disruptive and
commercialization ready Scrypt microchip for blockchain mining computers<br />
o	Subsidiaries of Harmonoychain has secured pre-production LOIs for over 40.000
mining units, representing potential revenues of USD 80 to 100 million.<br />
o	Consideration to be paid  for 100% of Harmonychain is 51 million Element
shares and 10 million warrants<br />
<br />
<br />
(Oslo, 3 November 2020) Element ASA (OSE: ELE) 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.<br />
<br />
"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. 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, " says Thomas Christensen, Chairman of
the Board of Directors of Element. <br />
<br />
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 <br />
<br />
"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.<br />
<br />
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. <br />
<br />
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.<br />
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) 51,000,000 new
consideration shares and (ii) 10,000,000 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.<br />
<br />
The Warrants will have a strike price of NOK 10,0 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. <br />
<br />
Signing of a legal binding share exchange agreement ("SEA") is conditional upon,
among other things, (i) completion of a due diligence of Harmonychain with
outcome to the satisfaction of Element, (ii) successful negotiation and signing
of the SEA, and (iii) approval of the SEA by the Harmonychain Shareholders
representing at least 95% of the Harmonychain shares and the Board of Directors
of Element. <br />
<br />
Completion of the SEA will be subject to certain terms and conditions,
including, but not limited to, (i) approval of the Acquisition, including the
issuance of  the consideration shares and warrants to be issued to the sellers
by an extraordinary general meeting in Element, (ii) and Element receiving 
applications for minimum 8,750,000 new shares in Element, raising gross proceeds
of minimum NOK 35 million ("Offering").<br />
<br />
The LoI further states that Element shall carry out a dividend in kind to its
shareholders following the Acquisition and the Offering of all or some of its
securities and/or rights related to its investments in the digital and
block-chain sector.<br />
<br />
The LoI further provides certain other customary terms and conditions including,
exclusivity undertaking on Element and Harmonychain until 31 December, the SEA
shall include customary terms and conditions, including conditions to closing,
pre- and post-closing covenants and representations and warranties, and that 95%
of the Consideration Shares held by the executives of Harmonychain and
Økonomringen AS shall be subject to lock up undertaking (1/3 of such shares will
be released after 6 months, 1/3 will released after 9 months and the last 1/3
after 12 months after closing.<br />
<br />
Procorp AS is acting as financial  advisor to the Company in connection with the
transaction.<br />
Advokatfirmaet CLP DA is acting as legal advisor to the Company in connection
with the transaction.<br />
The parties expect to enter into the SEA in December 2020.<br />
<br />
<br />
For additional information, please contact:<br />
Thomas Christensen, Chairman of the Board of Directors of Element, +47 9225
5444<br />
Geir Johansen, CEO Element, +47 4771 0451<br />
Bjørn Zachrisson, Chairman of the Board of Directors of Harmonychain, +47 462 90
000<br />
<br />
*Technavio Cryptocurrency Mining Hardware Market by Product and Geography -
Forecast and Analysis 2020-2024

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