REG - Ethernity Networks - Placing to raise £540,500

Ethernity NetworksAnnouncement

09/09/2024 12:00

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RNS Number : 4479D  Ethernity Networks Ltd  09 September 2024

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announcement via a Regulatory Information Service, this inside information is
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9 September 2024

 

ETHERNITY NETWORKS LTD

("Ethernity" or the "Company")

 

Placing to raise £540,500

 

Ethernity Networks (AIM: ENET.L; OTCMKTS: ENETF), a leading supplier of data
processing semiconductor technology for networking appliances announces a
placing (the "Placing") to raise £540,500 (gross) through the issue
of 180,166,666 new ordinary shares of NIS 0.001 each ("Ordinary Shares")
at 0.3p 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 £540,500 through the issue
of 180,166,666 new Ordinary Shares (the "Placing Shares") at the Issue
Price.

 

·      Participants in the Placing will receive one warrant for every
Placing Share subscribed for, exercisable at 0.75p (the "Warrants") for 18
months commencing from the Admission of the Placing Shares to AIM.

 

·      David Levi, CEO, has confirmed his intention to subscribe for
9,008,333 new Ordinary Shares (the "Subscription Shares") at the Issue Price
to raise a further £27,025 (before expenses) for the Company (the "Director
Subscription"). As the Company is currently in a closed period pursuant to MAR
until the publication of its interim results for the six months ended 30 June
2024 (the "Interim Results"), David Levi is not permitted to deal in the
Company's Ordinary Shares until after the publication of the Interim
Results. The Interim Results will be published by 30 September 2024 and David
Levi will subscribe for the Subscription Shares at the first available
opportunity following publication of the Interim Results on substantially
identical terms as those of the Placing (including in respect of the
Warrants).

 

·      Admission of the Placing Shares and Fee Shares (as defined below)
(together, the "New Ordinary Shares") is expected to occur on or around 18
September 2024.

 

David Levi, CEO, commented: "Over the past several months we have been
engaged in discussions with two Tier-1 wireless backhaul equipment vendors.
Both vendors have prior experience with Ethernity's technology, and one has
been successfully testing our UEP solution for the past nine months. They have
indicated that devices from Ethernity's competitors do not meet their need
and, therefore, they have expressed interest in building a next-generation
solution based on Ethernity's offering. These solutions would cover several
use cases in their domain, enabling them to gain market share while also
improving their respective gross margins. Consequently, we believe that
Ethernity is strategically positioned to capitalise on its UEP technology."

 

Business update

In 2024 to date, Ethernity has made positive commercial progress and is
currently executing multiple customer projects, whilst simultaneously engaging
in active discussions with prominent global OEM potential customers.

Over the past several months, the Company has been engaged in discussions with
two Tier-1 wireless backhaul solutions providers. They both have prior
experience with the Company's technology, and one has been successfully
testing Ethernity's solution for the past nine months. Whilst no contracts
have been entered into to date, these vendors have expressed an interest in
Ethernity's technology and solution, as they believe that it would enable them
to gain market share while also improving their gross margins.

To meet this anticipated demand, Ethernity intends to leverage its significant
skill and know-how as a networking technology provider, along with its
existing patented ENET data processing technology, to develop a
higher-performance networking device at groundbreaking lower cost to capture
different Carrier Ethernet uses cases and to support our customers' growth
opportunities. Based on these engagements with wireless and mobile backhaul
OEM vendors, the Directors believe that there is an addressable market that
could enable the Company to achieve significant revenue growth over the coming
years and the Board aspires to reach annual Group revenues of not less than
$35 million in five years. The Directors believe that Ethernity is
strategically positioned to capitalize on a unique transformative business
opportunity within the growing FrontHaul/Backhaul mobile industry, driven by
the ever increasing demand for more bandwidth driven by mass migration to
cloud based solutions.

 

Over the period of the last two months, the Company has signed two contracts
with prominent Tier-1 U.S based customers:

 

·      a $1.05m licensing contract with Tier-1 U.S based aerospace
system solutions provider (announced on 28 June 2024); and

 

·      a $200k product enhancement order with an existing Tier-1 US
based broadband equipment vendor (announced on 13 August 2024).

 

As previously disclosed, the $1.05m licensing contract involves Ethernity
delivering its silicon-tuned software to enable specific networking
functionalities on the customer's unique platform. The project remains
contingent upon the customary U.S. Government approval for such aerospace
initiatives and this is expected to be received imminently. In anticipation of
this approval, Ethernity has delivered the initial project milestones, such
that as soon as U.S Government approval is obtained, it will trigger immediate
payment of 40% of the contract value. Moreover, Ethernity's technical teams
have been diligently collaborating to train and familiarize the customer's
personnel with the Company technology, ensuring their readiness to further
expedite development progress once U.S. Government clearance has been
obtained.

 

The $200k product enhancement order announced in August leverages Ethernity's
data processing technology and will enable the customer to secure additional
orders for its remote 10G PON OLT product, contributing to the Company's
future revenue growth.

 

Use of proceeds

 

The Directors consider that it is appropriate to undertake the Placing at this
time in order to provide additional working capital to support the Company's
anticipated growth as described above.

 

Details of the Placing

 

The Company has resolved to issue 180,166,666 Placing Shares at the Issue
Price raising gross proceeds of £540,500. In addition, investors in the
Placing will receive one Warrant for every Placing Share subscribed for,
exercisable at a price of 0.75p per share. The Warrants will be exercisable
for a period of 18 months from the date of grant. The Warrants are not
transferable and will not be traded on an exchange. The Warrants contain an
accelerator clause such that the Company may serve notice ("Notice") on the
Warrant holders to exercise their Warrants in the event that the closing
mid-market share price of the Company's Ordinary Shares trade at 1.5p or more
over a consecutive five-day trading period from date of Admission. In the
event the Company serves Notice, any Warrants remaining unexercised after
seven calendar days following the issue of the Notice will be cancelled.
Exercise of the Warrants in full would raise an additional £1.35m for the
Company.

 

Director Subscription

 

David Levi, CEO, has confirmed his intention to subscribe for 9,008,333 new
Subscription Shares at the Issue Price to raise a further £27,025 (before
expenses) for the Company. As the Company is currently in a closed period
pursuant to MAR until the publication of its Interim Results, David Levi is
not permitted to deal in the Company's Ordinary Shares until after the
publication of the Interim Results. The Interim Results will be published by
30 September 2024 and David Levi will subscribe for the Subscription Shares at
the first available opportunity following publication of the Interim Results
on substantially identical terms as those of the Placing (including in respect
of the Warrants).

 

Fee Shares

 

In addition to the Placing Shares, 1,666,667 new Ordinary Shares (the "Fee
Shares") are to be issued at the Issue Price, conditional upon Admission, to
an adviser in settlement of amounts owed by the Company. There are no Warrants
attached to the Fee Shares.

 

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
181,833,333 New Ordinary Shares to trading on AIM ("Admission") and Admission
is expected to occur at 8.00 a.m. on or around 18 September 2024.

 

Total voting rights

 

Following Admission, the Company's enlarged issued share capital will be
698,225,576 Ordinary Shares. The Company holds no Ordinary Shares in Treasury.
This figure of 698,225,576 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 3 748 9846
 David Levi, Chief Executive Officer

 Ayala Deutsch, 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 / Stefano Aquilino (Sales and Corporate Broking)

 CMC Markets UK plc (Joint Broker)                              Tel: +44 (0)20 3003 8632
 Douglas Crippen

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

 

About Ethernity (www.ethernitynet.com)

 

Ethernity Networks (AIM: ENET.L) 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
Broadband Networks.

 

 

 

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