Item 1.01. Entry into a Material
Definitive Agreement.
On February 28, 2022, American
Virtual Cloud Technologies, Inc. (the “Company”) entered into a securities purchase agreement (“Purchase Agreement”)
with the buyer set forth on the signature page thereto (the “Buyer”) for the purchase and sale of (i) an aggregate of up to
21,500 shares (the “Preferred Shares”) of the Company’s newly-designated Series B convertible preferred stock (the “Series
B Preferred”) with a stated value of $1,000 per share, initially convertible into up to 21,500,000 shares of the Company’s
common stock, par value $0.0001 per share (the “Common Stock”) at a conversion price of $1.00 per share, and (ii) warrants
(the “Warrants”) to purchase up to that number of shares of Common Stock equal to the number of shares of Common Stock into
which the shares of Series B Preferred actually sold pursuant to the Purchase Agreement are initially convertible, in a registered direct
offering.
Pursuant to the Purchase Agreement,
an aggregate of 16,125 shares of Series B Preferred, initially convertible into 16,125,000 shares of Common Stock, together with the Warrants,
initially exercisable for 16,125,000 shares of Common Stock, are to be issued and sold at an initial closing (the “Initial Closing”),
and the remaining 5,375 Preferred Shares may be issued and sold in one or more subsequent closings (each, an “Additional Closing”),
in each case subject to certain closing conditions. The Company can require the Buyer to purchase the remaining 5,375 Preferred Shares
at an Additional Closing if the Company’s stockholders approve the issuance of all securities issuable pursuant to the Purchase
Agreement in compliance with the rules and regulations of the Nasdaq Capital Market within a specified period of time after the Initial
Closing, subject to certain other closing conditions (including certain equity conditions), and the Buyer can require the Company to sell
the remaining 5,375 Preferred Shares at one or more Additional Closings, subject to certain conditions. The aggregate purchase price for
the Preferred Shares and the Warrants to be sold in the Initial Closing is $15,000,000. The purchase price for any Preferred Shares sold
at an Additional Closing would be approximately $930 per share.
As a result of the issuance
of the Preferred Shares and Warrants, the exercise price of the Series A Warrant, Series B Warrant and Series D Warrant previously issued
by the Company to an affiliate of the Buyer will automatically adjust to $1.00 (with a proportional increase to the number of shares of
Common Stock issuable upon exercise of such warrants). Pursuant to the Purchase Agreement, such affiliate of the Buyer will agree to waive
any further anti-dilution adjustment of such existing warrants below $1.00 as a result of the transactions contemplated by the Purchase
Agreement. A copy of the Purchase Agreement is attached to this Form 8-K as Exhibit 10.1.
The terms of the Series B
Preferred shall be as set forth in the form of Certificate of Designations of the Series B Preferred attached as Exhibit 4.1 to this Current
Report on Form 8-K (the “Certificate of Designations”). The Series B Preferred will be convertible into Common Stock at the
election of the holder at any time at an initial conversion price of $1.00 (the “Conversion Price”). The Conversion Price
is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment,
on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable
for, Common Stock at a price below the then-applicable Conversion Price (subject to certain exceptions). The Company will be required
to redeem the Preferred Shares in 12 equal monthly installments, commencing on April 1, 2022. Subject to certain conditions, including
certain equity conditions, the Company may redeem the applicable number of Preferred Shares on each monthly redemption date either in
cash, shares of Common Stock or a combination. The number of shares used to redeem any Preferred Shares in such event would be calculated
as 88% of the lowest daily volume weighted average price of the Common Stock during the eight trading days immediately prior to the payment
date. No dividends will be payable on the Series B Preferred, except that holders of Preferred Shares would be entitled to receive any
dividends paid on account of the Common Stock, on an as-converted basis, and if a “Triggering Event” (as defined in the Certificate
of Designations) occurs and is continuing, dividends will accrue on each Preferred Share at a rate of 15% per annum. The holders of Preferred
Shares have no voting rights on account of the Series B Preferred, other than with respect to certain matters affecting the rights of
the Series B Preferred.
The terms of the Warrants to
be issued pursuant to the Purchase Agreement shall be as set forth in the form of Warrant attached as Exhibit 4.2 to this Current
Report on Form 8-K. The Warrants have an exercise price of $1.00 per share, subject to customary adjustments for stock dividends, stock
splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of
any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable
exercise price (subject to certain exceptions). If additional Preferred Shares are sold at one or more Additional Closings, the Warrants
will automatically adjust such that they are exercisable for, in the aggregate, the total number of shares of Common Stock into which
all Preferred Shares sold pursuant to the Agreement are convertible. The Warrants will be exercisable commencing on the date of issuance,
and will expire five years from the date of issuance.
Pursuant to the Purchase Agreement,
the Company agreed to seek the approval of its stockholders for the issuance of all securities to be issued pursuant to the Purchase Agreement,
in compliance with the rules of the Nasdaq Capital Market (the “Stockholder Approval”). It is a condition to the Initial Closing
that the Company enter into voting agreements (the “Voting Agreements”) with certain significant stockholders of the Company
(each, a “Stockholder”), pursuant to which each Stockholder will agree, with respect to all of the voting securities of the
Company that such Stockholder beneficially owns as of the date thereof or thereafter, to vote in favor of the Stockholder Approval. A
copy of the form of Voting Agreement is attached to this Form 8-K as Exhibit 10.2.
The Preferred Shares and Warrants
(and underlying shares of Common Stock) were offered, and will be issued, pursuant to a Prospectus Supplement, dated February 28, 2022,
to the Prospectus included in the Company’s Registration Statement on Form S-3 (Registration No. 333- 258136), originally filed
with the Securities and Exchange Commission on July 23, 2021, as amended, which became effective on August 27, 2021. This Current Report
on Form 8-K shall not constitute an offer to sell or the solicitation to buy nor shall there be any sale of the shares in any state or
jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws
of any such state or jurisdiction.
Pursuant to an engagement
letter dated October 16, 2021 between the Company and Northland Securities, Inc. (the “Placement Agent”), the Company engaged
the Placement Agent to act as the Company’s placement agent in connection with the offering and agreed to pay the Placement Agent’s
fees of 7% of the aggregate gross proceeds the Company receives in the Private Placement and the Public Offering.
Greenberg Traurig, LLP, counsel
to the Company, has issued an opinion to the Company regarding the validity of the securities to be issued in the offering. A copy of
the opinion is filed as Exhibit 5.1 to this Current Report on Form 8-K.
The foregoing summaries
of the terms of the Purchase Agreement, the Series B Preferred, the Warrants and the form of Voting Agreement are subject to, and
qualified in their entirety by, such documents, which are incorporated herein by reference.