TIDMENET
RNS Number : 8997M
Ethernity Networks Ltd
17 January 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.
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17 January 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 GBP1.55 million (gross) through the issue
of 22,142,858 new ordinary shares of NIS 0.001 each ("Ordinary
Shares") at 7 p 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 GBP1.55 million through the issue of
22,142,858 new Ordinary Shares (the "Placing Shares") at the Issue
Price
-- David Levi, Director and CEO, in support of the Placing has
subscribed for 3,028,571 Placing Shares for an aggregate sum of
GBP212,000
-- Participants in the Placing to receive one warrant for every
Placing Share subscribed for, exercisable at 15p, subject to the
passing of the relevant resolutions at an extraordinary general
meeting of the Company
-- Broker option (the "Broker Option") for a further 2,142,857
new Ordinary Shares which will raise up to a further GBP150,000
enabling existing shareholders to participate in the Placing via
Peterhouse
-- Shavit Baruch, Director and VP R&D, has indicated that he
intends to participate in the Broker Option up to an amount of
GBP46,814
-- Net proceeds of approximately GBP1.46 million will 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
-- In addition to the Placing, various service providers to the
Company have agreed to subscribe for 2,388,771 new Ordinary Shares
in lieu of outstanding fees (the "Fee Shares") totalling GBP167,214
(the Fee Shares and the Placing Shares are, together, the "New
Ordinary Shares")
-- Admission of the New Ordinary Shares is expected to occur on
or around 20 January 2023 ("Admission")
David Levi, CEO, commented: "Ethernity continues to progress its
current strategy, and advance the opportunities being presented by
the components shortages to leverage our data processing SoC
technology and IP, as well as our PON semiconductor technology. The
Placing allows the Company to be financially positioned for the
next stage of its development to service anticipated mass
deployment growth on existing contracts and capitalise on new
opportunities."
Trading Update
The Company has made significant progress during 2022 in the
development and commercialisation of its Data Processing Unit (DPU)
System-on-Chip (SoC) devices, Passive Optical Networks (PON) SoC
devices, and Universal Edge Platform (UEP) offerings and
anticipates further growth from the Company's progress for its FPGA
SmartNIC data plane offload.
2022 trading update
Subject to completion of the audit, the Company anticipates that
revenues for 2022 will be not less than $2.9 million, an increase
of 10% (2021: $2.64 million). Approximately $600,000 of revenue
that was expected to be recorded in 2022 is now expected to be
reported in 2023 as a result of delays in projects resulting from
component shortages, and certain customers informing the Company
that they were not ready to receive milestone deliveries as had
previously been anticipated.
During 2022, the following highlights were achieved that are
expected to support revenue growth in 2023:
-- the Company completed the delivery of all the FPGA SoC orders
planned for 2022 to its U.S. fixed wireless system provider
customer;
-- FPGA SoC sales increased by 200% compared to 2021;
-- the Company signed with its U.S. fixed wireless OEM customer
a contract for a second-generation platform based on a scaled-up
version of the Company's DPU SoC offering;
-- the Company progressed with the delivery of the $3 million
GPON and XGS-PON OLT SoC contract for its Chinese/Indian OEM, and
is currently working with the customer to complete the hardware
integration of the customer platform, to be ready for
deployment;
-- the Company signed a follow-on contract of $4.6 million with
that customer for delivery of a PON device for Fiber-to-the-Room
deployment; and
-- the Company delivered a UEP2025 for testing and integration
with an existing prominent microwave wireless OEM customer and is
working with the customer on joint go-to-market plans for the U.S.
wireless internet service provider (WISP) market.
2023 outlook
The Company will continue to focus its resources towards either
existing or new contracts that produce revenues and cash flows for
the Company in the short and medium term, be that the revenues in
the form of licensing fees or sale of devices and systems. To this
end, development resources will only be added on the basis of
further contracts that contribute towards the generation of such
revenue streams. Given the opportunities that are presenting
themselves to the Company for further expanded or new engagements
on PON, SoC and other system product expansion, the resources will
be best utilised in these areas that will produce revenues and cash
flows in the short and medium term. With this in mind, the Company
is currently re-evaluating whether to continue the work with an
Indian OEM customer, the contract of which was announced on 22
September 2020, as the customer continues to experience repeated
delays from their side, and the Company does not wish to
continually apply resources where no progress is being made with
the customer.
The Company has good revenue visibility for 2023 and, based on
contracted orders and conservative estimates of the potential
orders that are under discussion with prospective customers, the
Directors believe that revenues of $9 million for 2023 are
achievable. The contracted revenues for 2023 include:
-- continued supply of FPGA SoC devices for its U.S. fixed
wireless OEM customer and expected initial revenues for the
deployment of the second-generation product;
-- commencement of shipment of FPGA PON SoC devices under the
$7.6 million of contracts signed with the Chinese/Indian broadband
network OEM customer; and
-- other royalties, maintenance, licensing fees and payments due
under existing contracts for various DPU SoC projects, including
second generation products from a U.S. fixed wireless OEM customer,
a U.S. Tier 1 broadband provider, a U.S. based aviation company,
and various Israeli OEMs for 4G cellular base stations, Ethernet
Access devices and a European OEM bonding SoC project.
On top of the contracted revenues above, the Company anticipates
further modest revenue from:
-- discussions with four new OEMs for the potential deployment
of the Company's PON OLT (optical line termination) SoC for
optimised SFP (small form-factor pluggable), and remote low power
PON OLT complete system solutions that would result in licensing
revenue towards further deployment of SoC or systems during 2024
and beyond;
-- the Company's existing prominent microwave wireless OEM
customer contract for the sale of the Company's wireless link
bonding UEP system offering, with sales targeted for 2023 with
focus on U.S. WISPs; and
-- anticipated sales of the complete OLT product manufactured by
the Company's Chinese/Indian OEM customer that is based on the
Company's PON SoC devices into the WISPs U.S. market in conjunction
with the UEP2025 wireless link bonding, targeting the same
market.
Reasons for the Placing and Use of Proceeds
As Ethernity continues to implement its strategy of becoming a
supplier of customised and differentiated solutions and technology,
the Placing will serve to place the Company in a stronger position
for the next stage of its development and growth towards successful
developments and field deployments.
The net proceeds of the Placing, along with any funds raised via
the Broker Option, will be applied to strengthen the balance sheet,
providing additional working capital to allow the Company to
support the delivery of recently secured contracts and
engagements.
Details of the Placing
The Company has resolved to issue 22,142,858 Placing Shares at
the Issue Price raising gross proceeds of GBP1.55 million. In
addition, conditional on the approval of shareholders of
resolutions granting the necessary share capital authorities under
Israeli law at an Extra General Meeting ("EGM") of the Company,
investors in the Placing will receive one warrant for every Placing
Share subscribed for, exercisable at a price of 15p per share (the
"Warrants"). The Warrants will be exercisable for a period of 24
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 20p 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.
The Company will shortly be convening the EGM to seek
shareholder approval for an increase in the authorised share
capital and disapplication of pre-emption rights, details of which
are set out below.
The Company has entered into a placing 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 placing 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.
Peterhouse may terminate the placing 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 under the Company's existing
share authorities and are not conditional on the passing of the
resolutions at the EGM. Should the resolutions at the EGM not be
passed, the Placing will still proceed but the Company will not be
able to grant the Warrants to participants in the Placing.
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 2,142,857 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 GBP150,000 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 16 January
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 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 4.45
p.m. UK time on 18 January 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.
To subscribe for Broker Option Shares, Existing Shareholders and
other qualified investors should communicate their bid to
Peterhouse via their stockbroker as Peterhouse cannot take direct
orders from individual private investors. Existing Shareholders or
other interested parties who wish to register their interest in
participating in the Broker Option Shares should instruct their
stockbroker to call Peterhouse on STX: 76086 or 020 7469 0938 or
020 7469 0936 or 020 7220 9797. Each bid should state the number of
Broker Option Shares the Existing Shareholder wishes to subscribe
for at the Issue Price.
Director dealings
David Levi, CEO, has subscribed for 3,028,571 Placing Shares. On
Admission, David Levi's interest in the Company's Ordinary Shares
shall comprise 12,615,731 Ordinary Shares representing
approximately 12.29% of the Company issued share capital as
enlarged by issue of the New Ordinary Shares. Further details of
David Levi's share purchase are set out in the table at the end of
this announcement.
Shavit Baruch has notified the Company of his intention to apply
for 668,771 Ordinary Shares pursuant to the Broker Option and a
further update will be provided once the Broker Option has
closed.
Related party transaction
As a Director and substantial shareholder of Ethernity, David
Levi is a related party of the Company pursuant to the AIM Rules
for Companies. The Directors of the Company (excluding David Levi
and Shavit Baruch, who may be participating in the Broker Option),
having consulted with the Company's Nominated Adviser, Allenby
Capital Limited, consider that the terms of David Levi's
participation in the Placing are fair and reasonable in so far as
the Company's shareholders are concerned.
Broker warrant
In connection with the Placing, Peterhouse will be granted
warrants to subscribe for new ordinary shares in the capital of the
Company, exercisable at the Issue Price (the "Broker Warrants").
The number of Broker Warrants granted to Peterhouse will be
determined following the closing of the Broker Option. The Broker
Warrants can be exercised for a period of 24 months from the date
of Admission.
Fee Shares
In addition to the Placing, service providers to the Company
have agreed to receive 2,388,771 Fee Shares at the Issue Price in
satisfaction of GBP167,214 of outstanding fees due to them. The Fee
Shares are subject to a one-year lock-in period. There are no
Warrants attached to the Fee Shares.
Admission to trading
The New Ordinary Shares (comprising the Placing Shares and the
Fee Shares) will rank pari passu with the Company's existing
Ordinary Shares. Application is being made to for the admission of
the 24,531,629 New Ordinary Shares to trading on AIM and Admission
is expected to occur at 8.00 a.m. on or around 20 January 2023.
Total voting rights
Following Admission (and prior to the issue of any new Ordinary
Shares pursuant to the Broker Option) the Company's enlarged issued
share capital will be 102,616,066 Ordinary Shares. The Company
holds no Ordinary Shares in Treasury. This figure of 102,616,066
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.
Notice of EGM
The Company will shortly be posting to shareholders a notice
convening the EGM to seek approval for the dis-application of the
pre-emption rights required to be able to issue the Warrants. The
EGM will be held at 3rd Floor Beit Golan, 1 Golan St. Corner
HaNegev, Airport City 7019900, Israel at 11.00 a.m. Israel time
(9.00 a.m. UK time) on 9 February 2023. A copy of the EGM notice
will be made available on the Company's website,
www.ethernitynet.com .
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 Tel: +44 (0)20 3328
and Joint Broker) 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
Harbor Access Inc (US Investor Relations) Tel: +1 (475) 477
Jonathan Paterson 9401
About Ethernity ( 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 Initial notification
/Amendment
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 ordinary shares of NIS 0.001 nominal value
financial instrument, each
type of instrument ISIN: IL0011410359
Identification code
b) Nature of the transaction Placing for new ordinary shares
c) Price(s) and volume(s)
Price(s) Volume(s)
7p 3,028,571
d) Aggregated information N/A - single transaction
e) Date of the transaction 16 January 2023 to be completed on 20 January
2023
f) Place of the transaction Outside a trading venue
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END
IOEEAPFKFDLDEFA
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January 17, 2023 02:00 ET (07:00 GMT)
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