01 September 2022

ETHERNITY NETWORKS LIMITED

("Ethernity" or the "Company")

Contract cancellation

Ethernity Networks (AIM: ENET.L), a leading supplier of data processing offload solutions on programmable FPGA (field programmable gate array) for accelerating telco/cloud networks, announces that it received notice on 31 August 2022 that its contract for the provision of the Company's UEP module (Universal Edge Platform), details of which were first announced on 30 July 2021, (the "Contract") has been cancelled.

The Contract was signed with an Israeli international wireless connectivity vendor and the Company has been informed that it has been cancelled due to customer claims of delays in the product delivery. Ethernity strongly rejects the allegations by the customer, which has itself caused continual delays due to subsequent pricing issues, amendments to technical requirements and designs, faulty hardware definitions, as well as faults in the customer product on which the Company needed to integrate its solution. These factors drove the delays experienced by the Ethernity development teams.

The Contract was for an initial total of $930,000 with various scheduled deliveries and billings. To date, the Company has invoiced the customer for a total of $107,000 which included deliveries as required for prototypes in accordance with the Contract terms. The Company had budgeted for a further c.$240,000 to be delivered and invoiced in 2022, with the balance being delivered and invoiced in 2023. These amounts had been factored into the Company's contracted revenue figures for 2022 and 2023 provided in the 2021 full year results, announced on 8 April 2022, and these figures are now expected to reduce commensurately as a result of the Contract cancellation.

On 13 June 2022, the Company announced it has been continuing with development of a higher end UEP product for the market and that it had delivered the UEP module adapted for use in conjunction with a leading OEM wireless backhaul transmission product to the customer, in line with the Contract, following the successful conclusion of the development and prototype testing stages. It further announced that the completed UEP module is a similar design to the Company's forthcoming UEP2025. The Ethernity development team that has focussed on the customer development will continue to focus on the UEP2025 as, per customer interactions and discussions, the management remain of the view that the UEP2025 has the potential to generate additional revenues for the Company.

The Company is in discussions with potential customers for supply of the UEP2025, which is equipped with the Company's patented wireless link bonding and is targeted to serve as an ideal disaggregated, all-in-one, wireless backhaul Indoor Unit, facilitating 5G infrastructure deployment by offering higher bandwidth transport, faster time to market, and lower cost to deploy.

Ethernity CEO, David Levi, said: "We are extremely disappointed with the customer's stance and believe that their decision has been driven by other internal factors at the customer, which is resulting in them not being able to deliver to their anticipated plans. We consider that these factors are unrelated to the Ethernity developments. We are however highly encouraged by the progress and developments of our UEP2025 and will continue to focus our resources on this development."

About Ethernity Networks

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 NFV.

For more information on Ethernity's products and solutions, please see The Company's website at www.ethernitynet.com.

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MARKET ABUSE REGULATION

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse (amendment) (EU Exit) Regulations 2019/310 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.