Ethernity Net Regulatory News (ENET)

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.

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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.

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About Ethernity (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.

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