REG - Ethernity Networks - Placing, Broker Option and Trading Update

Ethernity NetworksAnnouncement

11/05/2023 13:45

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RNS Number : 1470Z  Ethernity Networks Ltd  11 May 2023

The information contained within this announcement is deemed by the Company to
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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.

 

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FOR (OR THE SOLICITATION OF AN OFFER TO BUY, ACQUIRE OR SUBSCRIBE FOR)
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11 May 2023

 

ETHERNITY NETWORKS LTD

("Ethernity" or the "Company")

 

Placing, Broker Option and Trading Update

 

Ethernity Networks (AIM: ENET.L; OTCQB: ENETF), a leading supplier of data
processing semiconductor technology for virtualized networking appliances, is
pleased to announce a placing (the "Placing") to raise £750,000 (gross)
through the issue of 25,000,000 new ordinary shares of NIS 0.001 each
("Ordinary Shares") at 3p per share (the "Issue Price"). Peterhouse Capital
Limited ("Peterhouse") is acting as placing agent to the Placing. The Placing
has not been underwritten.

 

Highlights

 

·    Placing to raise £750,000 through the issue of 25,000,000 new
Ordinary Shares (the "Placing Shares") at the Issue Price

 

·    David Levi, Director and CEO, in support of the Placing has
subscribed for 833,334 Placing Shares for an aggregate sum of £25,000

 

·    Yosi Albagli, Non-Executive Chairman, in support of the Placing has
subscribed for 83,334 Placing Shares for an aggregate sum of £2,500

 

·    Broker option (the "Broker Option") for a further up to 3,333,333 new
Ordinary Shares which will raise up to a further £100,000 enabling existing
shareholders to participate in the Placing via Peterhouse

 

·    Net proceeds of approximately £713,000 will fund capital equipment
purchases to improve testing and integration facilities, to accelerate product
shipment and delivery to customers, strengthen the balance sheet, to allow the
Company to support the growing number of engagements for its offerings towards
successful developments, field deployments, and for general working capital
purposes

 

·    Admission of the Placing Shares and the new Ordinary Shares issued
pursuant to the Broker Option is expected to occur on or around 18 May 2023

 

David Levi, CEO, commented: "Ethernity continues to progress its current
strategy. At the time of the Company's previous fund raise in January of this
year, we were still developing the technology for the new products, being the
UEP with support for wireless link bonding, the XGSPON fiber controller
technology subject to our $3 million contract signed at the end of 2021 and
were at the initial stages of design of the Fiber-To-The-Room ("FTTR") PON
devices for our $4.6 million contract as announced in September 2022.
Subsequently, we have completed the release of the UEP link bonding system
product, XGSPON FPGA code development, and the FTTR FPGA code development,
therefore, I believe we have significantly de-risked the investment case as
there is a clear line to the target revenues for this year as well as
significant further growth potential for 2024 as customer deployments in the
latter half of the year move to annualised deployments in 2024. The Placing
contributes to the Company being financially positioned for the current
requirements and contributes towards the anticipated mass deployment growth on
existing contracts, as well as to capitalise on new opportunities."

 

Trading Update

 

On 17 January 2023, the Company announced that it was developing the
technology for its new products, being: the UEP system product with support
for wireless link bonding; the XGSPON FPGA code; and the FTTR FPGA code, as
well as being engaged in discussions with prospective customers for the new
products.

 

Since then, the following has been achieved:

 

·    UEP - the Company has completed a release of the first version of the
UEP link bonding product as announced on 20 March 2023;

·    XGSPON - as announced on 6 March 2023, the XGSPON is complete and the
Company has commenced shipment of its ENET5200 Quad XGS-PON System-on-chip
(SoC) controller device to the customer in line with the contract terms.
Further to this, the Company is in engagement and testing with potential
substantial new customers; and

·    FTTR controller technology development has been completed and is
going out for testing with our customer and their customer in the coming
weeks.

 

The Company has now completed the majority of the required technology
development for the first version of the UEP link bonding system product,
being the first system product of the Company, as well as the PON (XGSPON and
FTTR), and the Company is now moving to monetise the technology from both
existing contracts and new contracts from its current discussions and
engagements.

 

2023 outlook

 

The Company has received an increasing amount of interest in its new products
offerings. Therefore, the Directors remain confident of the revenue visibility
for 2023 and, based on contracted orders and estimates of the potential orders
that are under discussion with prospective customers, the Directors remain of
the view that revenues of $9 million for 2023 are achievable, subject to the
availability of components and customer production timelines. In line with
previous financial years, revenues are expected to remain significantly
weighted towards the second half of the year.

 

Reasons for the Placing and Use of Proceeds

 

Subsequent to the placing announced in January, the Company has incurred
certain previously unanticipated cash outflows in the first quarter of 2023.
These have included the Company taking advantage of the opportunity to acquire
sophisticated test equipment that would accelerate the time to completion of
product testing with customers, as well as an early component delivery that
the Company had to take to ensure that it did not lose the components, and
various other unanticipated short term working capital requirements.

 

As Ethernity continues to implement its strategy of becoming a supplier of
customised and differentiated solutions and technology, the Placing will
contribute towards putting the Company in a stronger position for the next
stages of growth from the current contracts towards further successful
developments and field deployments.

 

The net proceeds of the Placing will be applied towards the purchase of
quality testing equipment, to order components in advance for the customers'
planned system UEP product and other customer orders, as well as to strengthen
the balance sheet, and providing additional working capital to allow the
Company to support the delivery of recently secured contracts.

 

Details of the Placing

 

The Company has resolved to issue 25,000,000 Placing Shares at the Issue Price
raising gross proceeds of £750,000.

 

The Company has entered into an agreement pursuant to which Peterhouse, as
agent for the Company, has agreed to use its reasonable endeavours to procure
placees for the Placing at the Issue Price. The agreement contains warranties
from the Company in favour of Peterhouse in relation to, inter alia, the
accuracy of the information contained in the documents relating to the Placing
and also certain other matters relating to the Company and its affairs. In
addition, the Company has agreed to indemnify Peterhouse in relation to
certain liabilities that they may incur in respect of the Placing. The
warranties and indemnities are identical to the ones given by the Company as
part of the Placing Agreement signed in relation to the 17 January 2023
fundraise.

 

Peterhouse may terminate the agreement in certain circumstances, including for
breach of warranty at any time prior to Admission, if such breach is
reasonably considered by Peterhouse to be material in the context of the
Placing, and in the event of a force majeure event or material adverse change
occurring at any time prior to Admission.

 

The Placing Shares are being issued pursuant to the Company's existing
authorities to issue and allot new Ordinary Shares free of pre-emption rights.

 

Broker Option

 

In order to provide qualified Ethernity shareholders ("Existing Shareholders")
and other qualified investors with an opportunity to participate on the same
basis as the investors in the Placing, the Company has granted Peterhouse a
Broker Option over 3,333,333 new Ordinary Shares (or such other number of
Ordinary Shares as agreed between the Company and Peterhouse) ("Broker Option
Shares"). Full take up of this number of new Ordinary Shares under the Broker
Option would raise a further £100,000 for the Company, before expenses.

 

Existing Shareholders who hold shares in the Company and are on the register
of members as at the close of business on 10 May 2023, will be given a
priority right to participate in the Broker Option and all orders from such
Existing Shareholders will be accepted and processed by Peterhouse, subject to
scale-back in the event of over-subscription under the Broker Option. The
Company and Peterhouse at their discretion may decide to increase the amount
of the Broker Option to meet demand. The Broker Option has not been
underwritten. Peterhouse is entitled to participate in the Broker Option as
principal.

 

The Broker Option is exercisable by Peterhouse on more than one occasion, at
any time from the time of this announcement to 4.30 p.m. UK time on 12 May
2023, at its absolute discretion, following consultation with the Company.
There is no obligation on Peterhouse to exercise the Broker Option or to seek
to procure subscribers for the Broker Option. Peterhouse may also, subject to
prior consent of the Company, allocate new shares after the time of any
initial allocation to any person submitting a bid after that time.

 

The Broker Option Shares are not being made available to the public and none
of the Broker Option Shares are being offered or sold in any jurisdiction
where it would be unlawful to do so. No Prospectus will be issued in
connection with the Broker Option.

 

Director dealings

 

David Levi, CEO, and Yosi Albagli, Non-Executive Chairman have subscribed for
833,334 and 83,334 Placing Shares respectively. On Admission, David Levi's
interest in the Company's share capital shall comprise 13,449,065 Ordinary
Shares representing approximately 10.42%* of the Company issued share capital
as enlarged by issue of the Placing Shares and Yosi Albagli's interest in the
Company's share capital shall comprise 130,440 Ordinary Shares, representing
approximately 0.10%* of the Company issued share capital as enlarged by issue
of the Placing Shares. Further details of David Levi and Yosi Albagli's share
purchases are set out in the table at the end of this announcement.

 

*Percentage calculation excludes the issue of any Ordinary Shares pursuant to
the Broker Option

 

Broker warrant

 

In connection with the Placing, Peterhouse will be granted warrants to
subscribe for 722,500 new Ordinary Shares, exercisable at the Issue Price (the
"Broker Warrants"). The Broker Warrants can be exercised for a period of 24
months from the date of Admission.

 

Admission to trading

 

The Placing Shares and Broker Option Shares (together, the "New Ordinary
Shares") will rank pari passu with the Company's existing Ordinary Shares.
Application will be made for the New Ordinary Shares to be admitted to trading
on AIM ("Admission") following the closing of the Broker Option and Admission
is expected to occur at 8.00 a.m. on or around 18 May 2023.

 

For further information, please contact:

 

 Ethernity Networks Ltd                                        Tel: +972 8 915 0392
 David Levi, Chief Executive Officer
 Mark Reichenberg, Chief Financial 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 OTCQB: 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                                    Placing for new ordinary shares
 c)   Price(s) and volume(s)

                                                                                     Price(s)          Volume(s)
                                                                                     3p                833,334
 d)   Aggregated information                                       N/A - single transaction
 e)   Date of the transaction                                      11 May 2023 to be completed on 18 May 2023
 f)   Place of the transaction                                     Outside a trading venue

 

 

 1    Details of the person discharging managerial responsibilities / person closely
      associated
 a)   Name                                                         Joseph Albagli
 2    Reason for the notification
 a)   Position/status                                              Non-Executive Chairman
 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                                    Placing for new ordinary shares
 c)   Price(s) and volume(s)

                                                                                     Price(s)          Volume(s)
                                                                                     3p                83,334
 d)   Aggregated information                                       N/A - single transaction
 e)   Date of the transaction                                      11 May 2023 to be completed on 18 May 2023
 f)   Place of the transaction                                     Outside a trading venue

 

 

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