Item 1.01. Entry into a Material Definitive Agreement.
On June 23, 2023, Phoenix
Motor Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement (the “SPA”)
with certain investors named therein (the “Investors”), to issue and sell, subject to the satisfaction of certain closing
conditions, up to $5.1 million aggregate principal amount of the Company’s unsecured senior convertible promissory notes (the “Notes”),
with (i) $0.6 million in the aggregate to be funded at the first closing within one business day after satisfaction or waiver of
the applicable closing conditions; (ii) $1.0 million in the aggregate to be funded at the second closing after the Company’s
satisfaction of the Good Standing Condition (as defined below); and (iii) up to $3.5 million to be funded over multiple additional
closings at the discretion of the Investors on any date that is prior to the date that is 36 months following the initial closing, after
the satisfaction or waiver of the applicable closing conditions.
The Notes are subject to an
original issue discount of 8.5%, and are convertible into shares of common stock of the Company, par value $0.0001 per share (“Common
Stock”), at a conversion price equal to the greater of (x) $0.60 (the “Floor Price”) and (y) 87.5%
of the lowest daily VWAP (as defined in the SPA) in the seven (7) trading days prior to the applicable conversion date (the “Variable
Price”), subject to certain adjustments including full ratchet anti-dilution price protection, as set forth in the Notes. Notwithstanding
the foregoing, automatically following an Event of Default (as defined in the Notes and further described below), without the requirement
of the holder to provide notice to the Company, and subject to the provisions relating to the Nasdaq 19.99% Cap (as defined below), the
conversion price is equal to the lesser of the (x) Floor Price and (y) the Variable Price. In respect of any conversion where
the Variable Price is less than the Floor Price (the “Alternative Conversion”), the Company will pay to the holder
either in cash, or subject to the Nasdaq 19.99% Cap, in shares of Common Stock equal to such conversion amount or interests, divided by
the applicable Variable Price.
Each Note matures on the date
that is 18 months after the date of issuance at each applicable closing. The Notes accrue interest at the Prime Rate (as defined in the
Notes) plus 4.75% per annum in cash, or the Prime Rate plus 7.75% per annum if interest is paid in shares of Common Stock. The Company
may, from time to time, prepay the principal amount owing under the Notes, subject to a 30% prepayment premium, so long as the Company
provides at least 30 business days’ prior written notice to the holder of such prepayment.
Under the Notes, Events of
Default mainly include, among others, (i) any default in the payment of principal amount when due or liquidate damages; (ii) the
Company’s failure to observe or perform any material convent, condition or agreement contained in the Notes or other transaction
documents; (iii) the Company’s notice of its inability to comply with proper requests for conversion; (iv) the Company’s
failure to timely deliver the conversion shares; (v) the Company’s failure to reserve the required minimum number of shares
to satisfy a potential conversion; (vi) any breach of a material representation or warranty by the Company or any of its subsidiaries;
(vii) any default of the Company in any payment amount on indebtedness in excess of $250,000; and (i) a proceeding in respect
of the Company or its subsidiaries seeking the liquidation, dissolution or winding up. Certain Events of Default contain cure periods
as set forth in the Notes.
Pursuant to the Notes, the
Company shall not (i) issue to any third party any shares of Common Stock which have been registered under the 1933 Act or any Common
Stock or Common Stock equivalents having registration rights (except for permitted issuances under the SPA and Notes) until the date that
is 30 trading days following such date as the shares of Common Stock issuable upon conversion of the Notes have been registered for resale
under the Securities Act of 1933 (the “1933 Act”) or may be sold without restriction on the number of shares to be
sold or manner of sale; or (ii) enter into any Prohibited Transactions (as defined in the Notes) or incur additional indebtedness
except for Permitted Indebtedness (as defined in the Notes) until the date that is 30 days after such time as 80% of the Notes have been
converted or repaid. Pursuant to the Notes, the Company shall have 30 days from the initial closing to obtain a certificate of good standing
from the State of Delaware and provide the Investors with a certified copy thereof (the “Good Standing Condition”).
Under the Notes, the Investors
and the Company agreed that the total cumulative number of shares of Common Stock issued to such the Investor may not exceed the requirements
of Nasdaq Listing Rule 5635(d) (“Nasdaq 19.99% Cap”). In addition, each Investor will not be entitled to
receive shares of Common Stock upon conversion of the Notes to the extent that such conversion would cause the holder to become a “beneficial
owner” (within the meaning of Section 13(d) of the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder) which ownership exceeds 4.99%.
Pursuant to the SPA, the Company
is required to hold one special meeting of shareholders no later than December 31, 2023 (which may also be at the annual meeting
of shareholders) to obtain shareholder approval, as is required by the Nasdaq listing rules, with respect to the issuance of any shares
of Common Stock in excess of 19.99% of the issued and outstanding shares of Common Stock upon conversion of the Notes being issued to
the Investors pursuant to the SPA (the “Shareholder Approval”). If the Company does not obtain Shareholder Approval
at the first meeting, the Company shall call a meeting every four months thereafter to seek Shareholder Approval until the date the Shareholder
Approval is obtained.
The foregoing description
of the SPA and the Notes is a summary and does not purport to be complete and is qualified in its entirety by reference to the full text
of the SPA and the form of Note filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and incorporated
herein by reference.