Item
1.01 Entry into a Material Definitive Agreement.
On
March 1, 2022, American Virtual Cloud Technologies, Inc. (the “Company”) consummated the initial closing (the “Initial
Closing”) of the transactions contemplated by the securities purchase agreement, dated as of February 28, 2022 (the “Purchase
Agreement”), between the Company and the buyer set forth on the signature page thereto (the “Buyer”), as described
in the Current Report on Form 8-K filed by the company on February 28, 2022 (the “Prior 8-K”).
At
the Initial Closing, the Company issued to the Buyer (i) 16,125 shares (the “Preferred Shares”) of the Company’s Series
B convertible preferred stock (the “Series B Preferred”) with a stated value of $1,000 per share, initially convertible into
up to 16,125,000 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) a warrant (the “Warrant”) initially exercisable to purchase up to 16,125,000 shares of
Common Stock, in a registered direct offering. The aggregate purchase price paid for the Preferred Shares and the Warrant at the Initial
Closing was $15,000,000.
Pursuant
to the Purchase Agreement, an additional 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, as described in the Prior 8-K.
Pursuant
to the Certificate of Designations of the Series B Preferred (the “Certificate of Designation”), the Series B Preferred is
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 are 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
Warrant has 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 Warrant 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 Warrant will be exercisable commencing on the date of issuance, and will expire five years
from the date of the receipt of Stockholder Approval (as defined below).
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”).
In connection with such agreement, the Company entered into voting agreements (the “Voting Agreements”) with each of Navigation
Capital Partners SOF I, LLC (and an affiliated entity), Pensare Sponsor Group, LLC and Ribbon Communications Inc., each of which is a
significant stockholder of the Company (each, a “Stockholder”). Pursuant to the Voting Agreements, each Stockholder
has agreed, 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.
The
foregoing summaries provide only a brief description of the Series B Preferred, the Warrant and the Voting Agreements. The summaries
do not purport to be complete and are qualified in their entireties by the full text of such documents, copies of which are attached
as Exhibits 4.1, 4.2 and 10.1, respectively, and incorporated herein by reference.