Ethernity Networks Ltd (AIM:ENET, OTCQB:ENETF) has updated investors about its share subscription agreement with 5G Innovation Leaders Fund LLC, initially announced on 25 February 2022.
The company previously told investors in October that it was engaging with the subscriber to seek an agreed position and it has now reached an agreement to enter into a settlement deed.
This agreement will see Ethernity issue a fixed number of shares to the subscriber and in turn terminate the subscription agreement and extinguish the company's liability to the subscriber.
It proposes to issue a total of 150 million shares to the subscriber in tranches, whilst capping the size of the subscriber’s holding to no more than 24.99% of the company.
Ethernity has issued an initial 44.9 million of new shares to the subscriber and a further 43.6 million allotment of shares on receipt of a notice from the subscriber.
The initial issue of shares result in the subscriber holding 23.13% of the company.
A further 61.5 million shares would be issued in future tranches upon receipt of subsequent notices – of those shares 50 million can only be issued so long as the Ethernity share price is above 0.3p at the time of issue.
A general meeting of shareholders will be held on 14 December in Israel for a shareholder vote to approve an increase in the company’s authorities to allot shares on a non-preemptive basis.
The company noted that if the GM resolutions are not approved by shareholders it would result in an outstanding US$600,000 debt to the subscriber.
“The directors of Ethernity believe that this debt could seriously adversely impact the company's ability to exit the TSP process and therefore strongly recommends that shareholders vote in favour of the resolutions at the general meeting,” Ethernity said in today’s statement.
Details of the temporary suspension process were provided by the company on 16 October.
Calling the GM, the company also today noted that: “As previously announced, in order to exit the TSP, it is expected that the company will be required to raise additional funds.
“Whilst the structure of this is not yet known, the board believes it is prudent to put in place sufficient authorities to permit an equity fundraising, should that be the required route.
“The resolutions at the general meeting are therefore seeking sufficient headroom over and above those required to issue the conditional subscription shares. Should any fundraise take place, the company will prioritise structures that would enable existing shareholders to participate on the same terms as any incoming investors.”