LOKOTECH GROUP AS ANNOUNCES PARTIALLY UNDERWRITTEN RIGHTS ISSUE TO FULLY FINANCE ITS TRANSFORMATIONAL STEP TO MASS PRODUCTION OF THE SCRYPT ASIC
NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, THE HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE'S REPUBLIC OF CHINA OR JAPAN, OR ANY OTHER JURISDICTION IN WHICH THE PUBLICATION, DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. Oslo, 3 March 2025: Reference is made to Lokotech Group AS' (the "Company") stock exchange announcement published on 4 February 2025, where it was announced that the Company had retained Pareto Securities AS and SpareBank 1 Markets AS (together, the “Managers”) to act as joint financial advisors in connection with the exploration of a potential capital raise. Following this announcement and in response to feedback from investors, the Company’s board of directors (the “Board”) has resolved to propose that the Company carries out a share capital raise, by way of a partially underwritten rights issue of new shares in the Company (the “Offer Shares”), to raise gross proceeds of up to NOK 200 million, of which subscriptions for NOK 125 million will be underwritten (the “Rights Issue”). The Rights Issue will be directed towards the existing shareholders in the Company and such investors will receive listed and tradable subscription rights during the Rights Issue. The Company was admitted to trading on Euronext Growth Oslo on 12 May 2021, following a successful NOK 110 million private placement of new shares, with the mission of developing an industry-leading Scrypt Application Specific Integrated Circuit (ASIC), also known as a microchip, system design. After a series of rigorous design iterations, including 19 updates to the IP library by the Company’s IP vendors, comprehensive simulations, testing and validation, the successful redesign and final power simulation announced on 5 September 2024, represented a key step towards fulfilling the Company’s mission. With the proceeds from the Rights Issue, the Company will be fully positioned to execute the final tape-out and move into mass production of our ASIC microchip. This milestone is a defining step in bringing our technology to market and unlocking significant growth opportunities. Testing and simulations indicate that the ASIC significantly outperforms the competing microchips currently on the market, and the Company has already received strong interest with several framework agreements for delivery of the microchip to private operators in the USA. Based on this, the Company remains confident that it is well positioned for the market anticipated to represent more than a USD 1.4 billion opportunity. "I want to extend my deepest gratitude to our design team for their unwavering commitment, which has positioned the Company to now fulfill its vision of bringing a disruptive Scrypt ASIC to the blockchain mining industry. This contemplated capital raise marks a significant and defining milestone for the Company, and structured as a rights issue, we invite all existing shareholders to participate in the next phase of our exciting journey. We have already made the first down payment and officially entered the manufacturing phase with GlobalFoundries, with the first ASICs anticipated to be available in Q3 2025. Following the initial production, we will rapidly scale up to mass production to capitalize on the pre-orders already secured and the substantial inbound interest in our Scrypt ASICs." said Yngve Bolstad Johansen, Chair of the Board of Directors of the Company. In addition to its Scrypt ASIC business unit, the Company is engaged in other business areas through its majority interest in Powerpool Mining SL (PowerPool.io), a six-algorithm mining pool and blockchain services business, and its wholly-owned subsidiary Arctic Core AS which owns four data center projects. The proposed Rights Issue is among other things subject to approval by the Company's shareholders at an extraordinary general meeting in the Company (the "EGM"). The EGM is expected to be held on or about 30 April 2025. The Partially Underwritten Rights Issue The Rights Issue will be underwritten in part by a consortium comprising of certain primary insiders in the Company, existing shareholders in the Company as well as new investors (the “Underwriters”). The Underwriters that are primary insiders have also pre-committed to subscribe for Offer Shares in the Rights Issue, in an amount equal to their respective underwriting commitment, totaling NOK 4.125 million (the “Pre-Commitment”). The terms and conditions of the underwriting arrangement are set out in underwriting agreements dated 28 February 2025 (the “Underwriting Agreement”). The Underwriters are entitled to an underwriting commission of 12% of their respective underwriting obligations, which shall be settled by an equal split between (i) cash payment and (ii) delivery of newly issued shares in the Company, each issued at the Subscription Price (the “Fee Shares”). It is expected that the Fee Shares will be issued based on an authorization granted by the EGM to the Board to increase the share capital of the Company, subject to approval by the EGM. The Underwriters comprise of the following: - Prozium AS (a company closely associated with CTO of the Company, Christian Rustad) has underwritten and pre-committed to subscribe for Offer Shares in an amount of NOK 100,000 - Infingent AS (a company associated with CEO Ola Stene Johansen) has underwritten and pre-committed to subscribe for Offer Shares in an amount of NOK 3,000,000. - Black Monday Holding AS, a company owned and controlled by the chairman of the Board Yngve Bolstad Johansen, has underwritten and pre-committed to subscribe for Offer Shares in an amount of NOK 500,000. - Ruben Gómez Morales, CEO of PowerPool SL, has underwritten and pre-committed to subscribe for Offer Shares in an amount of NOK 100,000. - Susheel Raj Nuguru, member of the Board, has underwritten and pre-committed to subscribe for Offer Shares in an amount of NOK 50,000. - Sator AS, a company owned and controlled by board member Henrik Danielsen, has underwritten and pre-committed to subscribe for Offer Shares in an amount of NOK 300,000. - Wiktor Boguchwal Miesok, board member, has underwritten and pre-committed to subscribe for Offer Shares in NOK 50,000. - Kjetil Westeng, board member, has underwritten and pre-committed to subscribe for Offer Shares in NOK 25,000. - Bluefin Access Capital LLC, Fredrik Lundgren, Wilhelm Risberg, Anavio Capital Partners LLP, Norda ASA, Selandia Alpha Invest A/S, Songa Capital AS, Paul Zeino, Exelity AB, Nowo Global Fund, Delta Invest AS, Philip Ohlsson, Opulens Invest AS, AD94 Holding Aktiebolag, Consentia AB and Rickard Rönblom have in aggregate underwritten a total amount of NOK 120,875,000. Pursuant to the Underwriting Agreement for the Rights Issue, the subscription price in the Rights Issue (the "Subscription Price") is proposed by the Board to equal the theoretical ex rights price for the Company’s shares ("TERP") based on the volume-weighted average price (VWAP) of the Company's shares on Euronext Growth Oslo over the last three trading days prior to the EGM (i.e. the three trading days ending on 16.30 CEST at the date of the EGM), less a discount of 35% rounded down to 4 decimal places. The subscription price for the new shares to be issued in the Rights Issue, and thus the exact maximum number of new shares and the exact maximum amount of the share capital increase, will be announced through a stock exchange announcement prior to the EGM and then be reflected in the final proposed resolution to the EGM, and ultimately be determined by the EGM. Additionally, warrants (Nw.: Frittstående tegningsrett) will be issued to the investors who are allocated shares in the Rights Issue on a pro-rata basis based on their respective allocations. The number of warrants issued in the Rights Issue is intended to equal 10% of the post-Rights Issue number of shares outstanding in the Company. The strike price of the warrants is proposed to be calculated as the greater of (i) a 35% discount to the volume-weighted average price of the Company’s shares on the last three trading days prior to the first date on which the warrant holders can exercise the warrants, and (ii) the TERP in the Rights Issue. The warrants may only be exercised from 1 April 2026 to 15 April 2026 (post-annual report 2025). The Company intends to apply for the warrants to become tradable on Euronext Growth Oslo in connection with settlement of the Rights Issue. In connection with the Rights Issue, an EEA prospectus (the "Prospectus") will be prepared by the Company, which is subject to approval by the Financial Supervisory Authority in Norway (the "NFSA"). The Prospectus will be published prior to the commencement of the subscription period and will form the basis for subscriptions in the Right Issue. Pursuant to Section 10-4 (1) of the Norwegian Private Limited Companies Act, the shareholders of the Company on the last day of trading in the share inclusive of the rights, which is expected on or about 2 May 2025 and which will be the trading day following the EGM, will, subject to applicable law, be granted preferential rights to subscribe for and be allocated the new shares in the Company. The shareholders will, according to the Board's proposal, receive subscription rights proportionate to their existing shareholding as registered at the record date expected on or about 6 May 2025 in the Company's shareholder register in Euronext Securities Oslo ("VPS"). The Underwriters will thereafter have a preferential right to subscribe for shares not subscribed based on exercised subscription rights, limited upwards to their respective underwriting obligations. Oversubscription with subscription rights will be allowed, but such oversubscription will be given allocation (to the extent any shares remain available for allocation) only after allocating shares to Underwriters who have subscribed for shares (limited upwards to such Underwriter’s Underwriting Obligation). Remaining shares not allocated pursuant to the above is allocated firstly to Underwriters who have subscribed for shares in excess of their respective underwriting obligations, and secondly, to Underwriters pursuant to their underwriting obligation on a pro rata basis. If an Underwriter subscribes directly in the Rights Issue and gets allocated shares based on this subscription, this allocation will be subtracted from the respective Underwriter’s underlying underwriting obligation. Other than subscriptions by the Underwriters, subscription without subscription rights will not be allowed. The Company will apply for admission to trading of the subscription rights on Euronext Growth Oslo. Primary insiders of the Company and their close associates (collectively owning approximately 40.1% of the Company) have agreed to not sell their subscription rights in the Rights Issue. However, the Managers may facilitate a sale of a portion of their subscription rights that they do not exercise in a structured off-market transaction at or above the current market price for the subscription rights. If such sale occurs the proceeds from the sale must be used to subscribe in the Rights Issue. The Company, as well as primary insiders and their close associates (collectively owning approximately 40.1% of the Company), have provided lock-up undertakings to the Managers on customary terms and conditions. Subject to the lock-up undertaking provided by the Company, the Company has, amongst other things, agreed to not issue or sell shares for a period ending 6 months after the completion of the Rights Issue. Subject to the terms and conditions of the lock-up undertakings provided by primary insiders and their close associates, such persons have agreed to, amongst other things (1) for a period commencing on successful underwriting of the Rights Issue and ending on completion of the Rights Issue, will undertake not to sell, pledge or otherwise dispose of, or purchase or otherwise acquire any shares in the Company, and (2) for a period commencing on completion of the Rights Issue and ending on the date falling 6 months thereafter, not to sell, pledge or otherwise dispose of any shares in the Company. Use of proceeds The net proceeds to the Company from the NOK 125 million underwritten portion of the Rights Issue will be used to secure the tape-out and enable mass production of the Company's proprietary Scrypt ASIC Miner. This includes the NOK equivalent of (i) approx. USD 7.2 million for the mask set and associated non-recurring engineering for production equipment, (ii) approx. USD 2.2 million for engineering and production wafers, and (iii) approx. USD 1.8 million for general corporate purposes and transaction costs (final amounts and allocation depending on the final results in the Rights Issue). If the Company receives valid subscriptions for more than the underwritten portion of the Rights Issue, the additional net proceeds will be used to increase the production batch of the Company’s proprietary Scrypt ASIC Miner. Timeline According to the current tentative timetable, and subject to among other things the relevant approvals by the EGM and publication of the Prospectus, the Company's shares are expected to trade exclusive of subscription rights from on or around 5 May 2025, the record date for the subscription rights is expected to be on or around 6 May 2025 and the subscription period for the Rights Issue is expected to commence on or around 7 May 2025 at 09.00 CEST and end on or around 21 May 2025 at 16.30 CEST. The period during which the Subscription Rights are to be tradable is expected to commence on or around 7 May 2025 at 09.00 CEST and end on or around 15 May 2025 at 16.30 CEST. Investors receiving allocation in the Rights Issue will get delivery of tradable shares in the Company shortly after the end of the Subscription Period, expected on or about 3 June 2025. Settlement is also subject to timely payment, expected on or about 26 May 2025 and subsequent registration of the new share capital in the Norwegian Register of Business Enterprises. The Subscription Period may not be shortened, but the Company's board of directors may extend the subscription period in its sole discretion. Any changes will be announced through stock exchange announcements. For more information, please contact: CEO Ola-Stene Johansen, email osj@lokotech.no This information is considered to include inside information pursuant to the EU Market Abuse Regulation article 7 and is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. This stock exchange announcement was published by Ola Stene-Johansen, CEO in Lokotech Group AS, on 3 March 2025 at 08:00 CET. IMPORTANT NOTICE These materials are not and do not form a part of any offer of securities for sale, or a solicitation of an offer to purchase, any securities of the Company in the United States or any other jurisdiction. Copies of these materials are not being made and may not be distributed or sent into any jurisdiction in which such distribution would be unlawful or would require registration or other measures. The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and accordingly may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and in accordance with applicable U.S. state securities laws. Any sale in the United States of the securities mentioned herein will be made solely to "qualified institutional buyers" (QIBs) as defined in Rule 144A under the Securities Act, pursuant to an exemption from the registration requirements under the Securities Act, as well as to major U.S. institutional investors under SEC Rule 15a-6 to the United States Exchange Act of 1934, as amended. This communication contains certain forward-looking statements concerning future events, including possible issuance of equity securities of the Company. Forward-looking statements are statements that are not historical facts and may be identified by words such as "believe", "expect", "anticipate", "strategy", "intends", "estimate", "will", "may", "continue", "should" and similar expressions. The forward-looking statements in this communication are based upon various assumptions, many of which are based, in turn, upon further assumptions. The Company believes that these assumptions were reasonable when made. However, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. Such risks, uncertainties, contingencies and other important factors include the possibility that the Company will determine not to, or be unable to, issue any debt, hybrid or equity securities, and could cause actual events to differ materially from the expectations expressed or implied in this release by such forward-looking statements. The Company does not make any guarantee that the assumptions underlying the forward-looking statements in this announcement are free from errors. The information, opinions and forward-looking statements contained in this communication speak only as at its date and are subject to change without notice. Each of the Company, the Managers and their respective affiliates disclaims any obligation or undertaking to update, review or revise any statement contained in this communication whether as a result of new information, future developments or otherwise. Neither the Managers nor any of its affiliates makes any representation as to the accuracy or completeness of this announcement and none of them accepts any liability arising from the use of this announcement or responsibility for the contents of this announcement or any matters referred to herein. This announcement is for information purposes only and is not to be relied upon in substitution for the exercise of independent judgment. It is not intended as investment advice and under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buy any securities or a recommendation to buy or sell any securities of the Company. Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given. The distribution of this announcement and other information may be restricted by law in certain jurisdictions. Persons into whose possession this announcement or such other information should come are required to inform themselves about and to observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Specifically, neither this announcement nor the information contained herein is for publication, distribution or release, in whole or in part, directly or indirectly, in or into or from the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, Hong Kong, Japan or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.