Item 1.01 Entry
into a Material Definitive Agreement.
Securities Purchase
Agreement
On April 10, 2023, AiAdvertising,
Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with Hexagon Partners,
Ltd., (the “Purchaser”), pursuant to which the Company agreed to issue and sell to the Purchaser up to 2,918,560 shares of
its Series I Preferred Stock (the “Series I Preferred Stock”) for an aggregate purchase price of up to $9,250,000 (the “Purchase
Price”), in three tranches. Tranche A comprises 2,272,727 shares of Series I Preferred Stock
at a purchase price of $2.20 per share of Series I Preferred Stock purchased at an initial closing on April 11, 2023. The Company also
granted the Purchaser a six-month option from the date of the initial closing, which the Purchaser has the right to assign subject to
certain restrictions, to purchase (i) up to 333,333 additional shares of Series I Preferred Stock at a purchase price of $6.00 per share
of Series I Preferred Stock, and (ii) up to 312,500 shares of Series I Preferred Stock at a purchase price of $7.20 per share of Series
I Preferred Stock.
For so long as at least 50% of the Series I Preferred
Stock purchased pursuant to the Purchase Agreement have not been redeemed by the Company or converted into common stock of the Company,
par value $0.001 per share (the “Common Stock”), Hexagon will have the right to designate two directors to the Company’s
Board of Directors (the “Board”), and the Company may not increase the size of the Board above six directors without Hexagon’s
prior written consent. During the same period Hexagon has the right to designate two directors to the Board, Hexagon will have the right
to appoint an observer to attend meetings of the Board.
The foregoing summary of the Purchase Agreement
is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K,
and is incorporated herein by reference.
Series I Certificate of Designation
Pursuant to the Purchase Agreement, on April 10,
2023, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series I Preferred Stock (the “Series
I Certificate”) with the Nevada Secretary of State designating the rights, preferences and limitations of the Series I Preferred
Stock. Each share of Series I Preferred Stock is convertible at the option of the holder at any time and from time to time into four hundred
(400) fully-paid and non-assessable shares of Common Stock, subject to customary adjustments for stock splits, stock dividends, stock
combination recapitalizations or other similar transactions (the “Conversion Ratio”). The holders of outstanding shares of
the Series I Preferred Stock shall be entitled to receive dividends pari passu with the holders of Common Stock (except for stock dividends
for which adjustments are made pursuant to the Series I Certificate or upon a liquidation, dissolution and winding up of the Company where
the holders of Series I Preferred Stock have received payment to the Series I Certificate). The holders of Series I Preferred Stock
are entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series I Preferred
Stock held by such holder are then convertible based on the Conversion Ratio as of the record date for determining stockholders entitled
to vote (i) on all matters presented to the holders of Common Stock for approval, voting together with the holders of Common Stock as
one class, or (ii) whenever the approval or other action of the holders of Series I Preferred Stock is required by applicable law or by
the Company’s articles of incorporation, bylaws, or other organizational documents; provided, however that the holders of Series
I Preferred Stock shall not be entitled to vote together with the Common Stock with respect to any matter at a meeting of the stockholders
of the Company, which under applicable law or the Company’s articles of incorporation, bylaws or other organizational documents
requires a separate class vote.
Without the prior written consent of holders of
not less than 50% of the then total outstanding share of Series I Preferred Stock voting as a single class, the Company and its subsidiaries
may not (a) effect or agree to effect a change of control; (b) sell, transfer, license, lease, or otherwise dispose of, in any transaction
or series of related transactions, any significant assets of the Company or any subsidiary; (c) alter, modify, or repeal the Series I
Certificate; (d) in any manner authorize, create, amend or issue any class or series of capital stock ranking prior to or on parity with
the Series I Preferred Stock; (e)(i) issue or authorize the issuance of any equity securities of the Company’s subsidiaries, other
than to the Company or another of the Company’s wholly owned subsidiaries, or (ii) form or create a subsidiary of the Company that
is not wholly-owned (directly or indirectly) by the Company; or (f) enter into any agreement with respect to any of the foregoing.
Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary, the holders of shares of Series I Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Company available for distribution to its stockholders, before any payment may be made or any assets
distributed to the holders of the Common Stock, such consideration per share as would have been payable had all the shares of Series I
Preferred Stock been converted into Common Stock, immediately prior to such liquidation, dissolution or winding up.
The foregoing summary of the Series I Certificate
of Designations is qualified in its entirety by reference to the Certificate of Designation for the Series I Preferred Stock, which is
filed as Exhibit 3.1 to this Current Report on Form 8-K.
Registration Rights and Lock-up Agreement
In connection with the entry into the Purchase
Agreement and the issuance of the Series I Preferred Stock, the Company and the Purchaser entered into a registration rights and lock-up
agreement (the “Registration Rights Agreement”), pursuant to which the Company granted to the Purchaser certain demand and
piggyback registration rights with respect to the shares of Common Stock issuable to the Purchaser upon conversion of the Series I Preferred
Stock.
The Purchaser agreed to a lock-up that restricts
the offer, pledge or sale of the Series I Preferred Stock and the shares of Common Stock issuable upon conversion of the Series I Preferred
Stock for a period of one year from the date of the Registration Rights Agreement, subject to certain exceptions as provided in the Registration
Rights Agreement.
The foregoing summary of the Registration Rights
Agreement is qualified in its entirety by reference to the Registration Rights Agreement, which is filed as Exhibit 10.2 to this Current
Report on Form 8-K, and is incorporated herein by reference.
Rights Agreement
On April 10, 2023, the Board approved the Company’s
entry into a Rights Agreement, by and between the Company and Worldwide Stock Transfer, LLC, as Rights Agent, in the form attached as
an exhibit to the Purchase Agreement (the “Rights Agreement”). The Company has agreed to execute the Rights Agreement promptly
upon FINRA’s completion of its review of the Company’s notification related to the Rights Agreement and the subsequent distribution
described below. Concurrently with executing the Rights Agreement, the Company expects to set the record date for determining the holders
of the Company’s securities entitled to receive the Rights dividend.
The Rights Agreement will provide for a dividend
distribution of one preferred share purchase right (a “Right”) for each outstanding share of Common Stock and for each share
of Common Stock that the holders of the Company’s warrants and certain of its existing preferred stock (including the Series I Preferred
stock issued pursuant to the Purchase Agreement) would be entitled to receive upon full exercise or conversion thereof. Each Right will
entitle the holder to purchase one ten-thousandth of a share of Series J Junior Participating Preferred Stock, par value $0.001
per share, of the Company (the “Series J Preferred Shares”) at the purchase price set forth in the Rights Agreement.
Generally, the Rights Agreement will work by imposing
a significant penalty upon any person or group that acquires beneficial ownership of 10% or more of the Common Stock without the approval
of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or
discourage a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. The
Rights Agreement is not intended to interfere with any merger, tender or exchange offer or other business combination approved by the
Board. Nor does the Rights Agreement prevent the Board from considering whether an offer is in the best interest of its stockholders.
The Rights Agreement will exempt certain persons as specified therein, including but not limited to the Purchaser and certain of its affiliates.
The
foregoing summary of the Rights Agreement is qualified in its entirety by the form of the Rights
Agreement, which is filed as an exhibit to the Purchase Agreement filed as Exhibit 10.1 to this Current Report on Form 8-K, and is incorporated
herein by reference.