| Item 1.01. | Entry into a Material Definitive Agreement. |
On February 11, 2022 (the “Closing Date”), IronNet, Inc. (the “Company”) entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Tumim Stone Capital LLC (“Tumim Stone”), pursuant to which Tumim Stone has committed to purchase, subject to certain limitations, up to $175 million (the “Total Commitment”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). Concurrently with the execution of the Purchase Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Tumin Stone pursuant to which the Company agreed to file one or more registration statements (the “Registration Statement”), as permissible and necessary to register under the Securities Act of 1933, as amended (the “Securities Act”), the sale of the shares of Common Stock that may be issued to Tumin Stone under the Purchase Agreement.
Under the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Tumim Stone, and Tumim Stone is obligated to purchase, up to the Total Commitment. Such sales of Common Stock by the Company, if any, will be subject to certain limitations, and may occur from time to time in the Company’s sole discretion, over the period commencing once certain conditions specified in the Purchase Agreement are satisfied, including the filing and securing effectiveness of the Registration Statement, and ending on the first day of the month following the 36-month anniversary of the Closing Date (the “Termination Date”).
Under the terms and subject to the conditions of the Purchase Agreement, Tumim Stone has no right to require the Company to sell any shares of Common Stock to Tumim Stone, but Tumim Stone is obligated to make purchases as the Company directs, subject to certain conditions. Shares of Common Stock will be issued from the Company to Tumim Stone at either a (i) 3% discount to the average daily volume weighted average price (the “VWAP”) of the Common Stock during the three consecutive trading days from the date that a purchase notice with respect to a particular purchase (a “VWAP Purchase Notice”) is delivered from the Company to Tumim Stone (a “Forward VWAP Purchase”), or (ii) 5% discount to the lowest daily VWAP during the three consecutive trading days from the date that a VWAP Purchase Notice with respect to a particular purchase is delivered from the Company to Tumim Stone (an “Alternative VWAP Purchase”). Each VWAP Purchase Notice from the Company to Tumim Stone will specify whether the applicable purchase is a Forward VWAP Purchase or an Alternative VWAP Purchase, and will direct that Tumim Stone purchase the applicable number of shares of Common Stock at the applicable purchase price. There are no upper limits on the price per share that Tumim Stone must pay for shares of Common Stock. Actual sales of shares of Common Stock to Tumim Stone will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, the trading price of the Common Stock, and determinations by the Company as to the appropriate sources of funding for the Company and its operations.
Under the applicable New York Stock Exchange (“NYSE”) rules, the Company may not issue to Tumim Stone under the Purchase Agreement more than 17,743,727 shares of its Common Stock, which number of shares is equal to 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”), unless (i) the Company obtains stockholder approval to issue shares of its Common Stock in excess of the Exchange Cap in accordance with applicable NYSE rules, or (ii) the average purchase price per share paid by Tumim Stone for all shares of Common Stock, if any, that the Company elects to sell to Tumim Stone under the Purchase Agreement equals or exceeds $3.608, which was the arithmetic average of the five NYSE official closing prices for the Common Stock during the five-trading day period immediately preceding the execution of the Purchase Agreement, as adjusted so that the Exchange Cap will not apply to issuances of Common Stock under the Purchase Agreement under applicable NYSE rules.
Moreover, the Company may not issue or sell any shares of its Common Stock to Tumim Stone under the Purchase Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by Tumim Stone and its affiliates (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated thereunder), would result in Tumim Stone beneficially owning more than 9.99% of the outstanding shares of the Common Stock.
The net proceeds from sales, if any, under the Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its Common Stock to Tumim Stone. The Company expects that any proceeds received by the Company from such sales to Tumim Stone will be used for working capital and general corporate purposes.
