REG - Ethernity Networks - Issue of Equity

Ethernity NetworksAnnouncement

19/12/2023 07:00

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RNS Number : 2213X  Ethernity Networks Ltd  19 December 2023

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK version of the Market
Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE
OR IN PART, IN, INTO OR FROM, AUSTRALIA, NEW ZEALAND, CANADA, JAPAN OR THE
REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE
UNLAWFUL.

 

THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO BUY, ACQUIRE OR SUBSCRIBE
FOR (OR THE SOLICITATION OF AN OFFER TO BUY, ACQUIRE OR SUBSCRIBE FOR)
ORDINARY SHARES TO ANY PERSON WITH A REGISTERED ADDRESS IN, LOCATED IN, OR
WHO IS A RESIDENT OF, THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, JAPAN
OR THE REPUBLIC OF SOUTH AFRICA OR IN ANY OTHER JURISDICTION IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL OR CONTRAVENE ANY REGISTRATION
OR QUALIFICATION REQUIREMENTS UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.

 

19 December 2023

 

ETHERNITY NETWORKS LTD

("Ethernity" or the "Company")

 

Issue of equity

 

Ethernity Networks (AIM: ENET.L, OTCMKTS: ENETF), a leading supplier of
networking processing semiconductor technology ported on field programmable
gate arrays for virtualised networking appliances, announces a fundraise to
raise £700,000 (US$ 882,000) through the issue of new ordinary shares of NIS
0.001 each ("Ordinary Shares") at 1p per share (the "Issue Price"), as well as
the conversion of £75,000 of loans into new Ordinary Shares at the Issue
Price by a Director of the Company.

 

Highlights

 

·    Placing to raise £650,000 through the issue of 65,000,000 new
Ordinary Shares (the "Placing Shares") at the Issue Price (the "Placing"). CMC
Markets UK plc ("CMC") is acting as placing agent to the Placing.

 

·    Subscription by an existing shareholder of the Company for 5,000,000
new Ordinary Shares (the "Subscription Shares") at the Issue Price to raise an
additional £50,000 (the "Subscription")

 

·    In total, £700,000 has been raised pursuant to the Placing and
Subscription (together, the "Fundraise")

 

·    In addition, David Levi, Director and CEO, has agreed to subscribe
for a further 7,500,000 new Ordinary Shares (the "Conversion Shares") at the
Issue Price in satisfaction of NIS 347,350 (£75,000, US$ 94,500) of
short-term loans to the Company (details of which were announced on 26 October
2023) to further strengthen the Company's working capital position

 

·    Following completion of the Fundraise, the Company's cash balances at
the end of December 2023 are expected to be approximately US$2.1 million

 

·    Subject to the Company finalising a settlement with creditors under
the TSP (as defined below), the net Fundraise proceeds will be used to
strengthen the Company's balance sheet to allow the Company to service
existing contracts, capitalise on new opportunities and support its growth
plan

 

·    Admission of the Placing Shares, the Subscription Shares and the
Conversion Shares (together, the "New Ordinary Shares") is expected to occur
on or around 27 December 2023

 

 

David Levi, CEO, commented: "Ethernity continues to progress its current
strategy, cantered around its semiconductor technology for Ethernet Access and
fibre access technology to deliver a broad offering to OEMs from IP licensing,
conversion to eASIC or ASIC, through to delivery of a complete customised
system. The Fundraise, together with the collection of cash during Q4 2023,
allows the Company to be financially positioned for the next stage of its
development to service existing contracts and capitalise on new
opportunities."

 

 

Background to and reasons for the Fundraise

 

As highlighted in the Company's full year trading update, announced on 5
December 2023 (the "FY Trading Update"), the Directors consider that because
of the positive cash collection and new contracts won during the fourth
quarter of 2023, the Company may have been able to exit the ongoing temporary
suspension of proceedings ("TSP") without the requirement to raise any
additional funds.  In order to exit the TSP, the Company will be required to
agree a settlement payment schedule with its creditors at a meeting of
creditors, which will be convened in due course.

 

Notwithstanding this progress, the Company flagged in the FY Trading Update
that it was considering options to raise additional funding to strengthen its
balance sheet, as the Directors believe that it will best position the Company
to service its existing contracts and capitalise on new opportunities to
support its growth plan. The Board considers that it is appropriate to
undertake the Fundraise in accordance with its terms to provide the Company
with the additional funding in the most cost effective and time efficient
manner. Whilst the Board was keen to ensure that existing shareholders in
Ethernity were able to participate in any fundraise on equivalent terms, it
was not possible to do so in the permitted timeframe and the Board considers
that the relatively small discount of the Issue Price compared to the closing
bid price of an Ordinary Share on 18 December 2023 (the day prior to this
announcement) ensures that dilution to existing shareholders in the Company
has been minimised.

 

Following receipt of the net Fundraise proceeds (totalling approximately
£660,000), the Board anticipates that the Company's cash position at the end
of 2023 will be approximately $2.1 million. The Company will be able to
utilise its available cash balances for the ongoing operations of the Company
as well as towards any payment schedule agreed with the creditors.

 

Details of the Placing and Subscription

 

The Company has resolved to issue 65,000,000 Placing Shares at the Issue Price
raising gross proceeds of £650,000.

 

The Company has entered into an agreement pursuant to which CMC, as agent for
the Company, has agreed to use its reasonable endeavours to procure placees
for the Placing at the Issue Price. The Placing has not been underwritten.

 

In addition, an existing shareholder of the Company has subscribed for a total
of 5,000,000 Subscription Shares at the Issue Price, raising a further
£50,000 pursuant to the Subscription.

 

Director loan conversion

 

David Levi, CEO, has subscribed for 7,500,000 Conversion Shares at the Issue
Price in repayment of 347,350 NIS (£75,000, US$ 94,500) of his 1,000,000 NIS
short-term loan to the Company, details of which were announced on 26 October
2023.  As previously announced, David Levi will be repaid the outstanding
balance of the loan as a priority creditor on exiting the TSP.

 

On Admission, David Levi's interest in the Company's Ordinary Shares shall
comprise 20,949,065 Ordinary Shares representing approximately 5.56% of the
Company issued share capital as enlarged by issue of the New Ordinary Shares.
Further details of David Levi's share conversion is set out in the table at
the end of this announcement.

 

Admission to trading

 

The New Ordinary Shares are being issued pursuant to the Company's existing
authorities to issue and allot new Ordinary Shares free of pre-emption rights.
The New Ordinary Shares will rank pari passu with the Company's existing
Ordinary Shares. Application is being made for the admission of the 77,500,000
New Ordinary Shares to trading on AIM ("Admission") and Admission is expected
to occur at 8.00 a.m. on or around 27 December 2023.

 

Total voting rights

 

Following Admission, the Company's enlarged issued share capital will be
376,721,091 Ordinary Shares. The Company holds no Ordinary Shares in Treasury.
This figure of 376,721,091 Ordinary Shares may be used by shareholders in the
Company as the denominator for the calculations by which they will determine
if they are required to notify their interest in, or a change in their
interest in, the share capital of the Company under the FCA's Disclosure
Guidance and Transparency Rules.

 

For further information, please contact:

 

 Ethernity Networks Ltd                                        Tel: +972 8 915 0392
 David Levi, Chief Executive Officer

 Allenby Capital Limited (Nominated Adviser and Joint Broker)  Tel: +44 (0)20 3328 5656
 James Reeve / Piers Shimwell (Corporate Finance)

 Amrit Nahal (Sales and Corporate Broking)

 Peterhouse Capital Limited (Joint Broker)                     Tel: +44 (0)20 7562 0930
 Lucy Williams / Duncan Vasey / Eran Zucker

 

About Ethernity (www.ethernitynet.com (http://www.ethernitynet.com) )

Ethernity Networks (AIM: ENET.L, OTCMKTS: ENETF) provides innovative,
comprehensive networking and security solutions on programmable hardware for
accelerating telco/cloud networks. Ethernity's semiconductor logic offers
complete Carrier Ethernet Switch Router data plane processing and control
software with a rich set of networking features, robust security, and a wide
range of virtual function accelerations to optimize telecommunications
networks. Ethernity's complete solutions quickly adapt to customers' changing
needs, improving time-to-market, and facilitating the deployment of 5G, edge
computing, and NFV.

 

Notification and public disclosure of transactions by persons discharging
managerial responsibilities and persons closely associated with them

 

 1    Details of the person discharging managerial responsibilities / person closely
      associated
 a)   Name                                                         David Levi
 2    Reason for the notification
 a)   Position/status                                              CEO
 b)   Initial notification /Amendment                              Initial notification
 3    Details of the issuer, emission allowance market participant, auction
      platform, auctioneer

      or auction monitor
 a)   Name                                                         Ethernity Networks Ltd.
 b)   LEI                                                          213800LZJO33QBNXU496
 4    Details of the transaction(s): section to be repeated for (i) each type of
      instrument;

      (ii) each type of transaction; (iii) each date; and (iv) each place where
      transactions have been conducted
 a)   Description of the financial instrument, type of instrument   ordinary shares of NIS 0.001 nominal value each

      Identification code                                          ISIN: IL0011410359
 b)   Nature of the transaction                                    Conversion of loan
 c)   Price(s) and volume(s)

                                                                                     Price(s)          Volume(s)
                                                                                     1p                7,500,000
 d)   Aggregated information                                       N/a - single transactions
 e)   Date of the transaction                                      27 December 2023
 f)   Place of the transaction                                     Outside a trading venue

 

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