AIAD Aiadvertising Inc (CE)

Item 1. Security and Issuer

This statement on Schedule 13D (this “Schedule 13D”) relates to the common stock, par value $0.001 per share (the “Common Stock”), of AiAdvertising, Inc., a Nevada corporation (the “Issuer”). The principal executive offices of the Issuer are located at 321 Sixth Street, San Antonio, TX 78215.

Item 2. Identity and Background

(a) This Schedule 13D is filed by Timothy Dunn, Texas Star Management Company, LLC (“TSMC”), Hexagon Partners, Ltd. (“Hexagon”) and Bradley Parscale (together with Mr. Dunn, TSMC and Hexagon, the “Reporting Persons”). Mr. Dunn is the managing member of TSMC, which is the general partner of Hexagon. Mr. Parscale has discussed the strategic direction of the Issuer with the other Reporting Persons but is not formally affiliated with them.

(b) The address of the principal business office of Hexagon, TSMC, and Mr. Dunn is 18 Desta Dr., Midland, Texas 79705. The address of the principal business office of Mr. Parscale is 1512 E Broward Blvd., Fort Lauderdale, Florida 33301.

(c) The principal business of Hexagon is making various investments, including in securities of the Issuer. The principal business of TSMC is serving as the general partner of Hexagon. The principal occupation of Mr. Dunn is serving as the chief executive officer of Crownquest Operating, LLC. The principal occupation of Mr. Parscale is digital marketing, software engineering and entrepreneurship.

(d) During the last five years, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e) During the last five years, none of the Reporting Persons has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) Hexagon is a Texas limited partnership. TSMC is a Texas limited liability company. Mr. Dunn and Mr. Parscale are United States citizens.

Item 3. Source and Amount of Funds or Other Consideration

The information provided in Items 4 and 6 is hereby incorporated by reference.

On April 11, 2023, pursuant to a securities purchase agreement between Hexagon and the Issuer (the “SPA”), Hexagon purchased 2,272,727 shares of Series I Preferred Stock (the “Preferred Stock”) at a price equal to $2.20 per share for a total aggregate consideration of $4,999,999.40.

Each share of Preferred Stock may be converted into Common Stock on a 1:400 basis at the election of its holder, at any time upon ninety (90) days’ written notice, and votes with the Common Stock on all matters as to which a vote of the Issuer’s stockholders is required on an as-converted basis. The securities reported in this Schedule 13D as beneficially owned by the Reporting Persons reflect only the 2,272,727 shares of Preferred Stock above with a voting power of 400 votes per share.

The source of funds for such purchase was personal funds of Hexagon.

Item 4. Purpose of Transaction

The information provided in Items 3 and 6 is hereby incorporated by reference.

Hexagon, TSMC, and Mr. Dunn have acquired beneficial ownership of the securities reported herein for investment purposes, subject to the below, and will evaluate the investment in the securities on a continual basis. Mr. Parscale is not a party to the SPA but has consulted with Hexagon, TSMC, and Mr. Dunn with respect to the transactions contemplated by the SPA. Mr. Parscale has beneficial ownership of 5,000,000 shares of Common Stock he received from the conversion of Series D Preferred Stock. Mr. Parscale is compensated by the Issuer for providing consulting services, as further described in Item 6.

The Reporting Persons intend to review their investment in the Issuer on a continuing basis. The Reporting Persons may communicate with the Issuer’s board of directors (the “Board”), members of management or other securityholders of the Issuer, or other third parties from time to time, with respect to operational, strategic, financial or governance matters, including engaging legal, financial, regulatory, technical or industry advisors to assist in any review. Such discussions and actions may be preliminary and exploratory in nature, and may or may not rise to the level of a plan or proposal. Such discussions and other actions may relate to, subject to the terms and conditions of the documents described herein to which the Reporting Persons are a party, various alternative courses of action, including, without limitation, those related to an extraordinary corporate transaction; business combinations; material asset purchases or sales; the formation of joint ventures’ material projects or capital expenditures; changes in the present business, operations, strategy, future plans or prospects of the Issuer, financial or governance matters; changes to the Board (including board composition) or management of the Issuer; changes to the capitalization, ownership structure, dividend policy, business or corporate structure or governance documents of the Issuer securities; or any action similar to those enumerated above.

Subject to the terms and conditions of the documents described herein to which the Reporting Persons are party, the Reporting Persons may seek to acquire securities of the Issuer, including Common Stock or other equity, debt or other financial instruments related to the Issuer, or sell or otherwise dispose of some or all of such Issuer securities or financial instruments from time to time. Any transaction that any of the Reporting Persons may pursue may be made at any time and from time to time without prior notice and will depend on a variety of factors, including, without limitation, the price and availability of the Issuer’s securities or other financial instruments, the Reporting Persons’ investment strategies, subsequent developments affecting the Issuer, the Issuer’s business and the Issuer’s prospects, other investment and business opportunities available to such Reporting Persons and their affiliates, general industry and economic conditions, tax considerations and other factors deemed relevant by such Reporting Persons and such affiliates.

Securities Purchase Agreement

Pursuant to the SPA, the Issuer also granted Hexagon a six (6) month option to purchase (i) a second tranche consisting of up to 333,333 additional shares of Preferred Stock, at a price equal to $6.00 per share, and (ii) a third tranche consisting of up to 312,500 additional shares of Preferred Stock, at a price equal to $7.20 per share. The second and third tranche options have not been exercised at this time, and will expire on October 11, 2023. The SPA gives Hexagon the right to transfer and assign the options to purchase shares of Preferred Stock in the second and third tranche to any of its affiliates or any accredited investor.

For so long as at least 50% of the shares purchased thereunder have not been redeemed by the Issuer or converted into Common Stock (the “Governance Period”), Hexagon will have the right to designate two directors to the Issuer’s Board (the “Hexagon Designees”), and the Issuer may not increase the size of the Board above 6 directors without Hexagon’s prior written consent. The initial Hexagon Designees are James B. Renacci and Thomas O. Hicks, Jr. 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.

As required by the SPA, the Issuer amended its bylaws on April 10, 2023 (the “Amended and Restated Bylaws”) to, among other things, increase the number of seats on the Board to six and provide that the size of the Board may not be increased without the vote of the holders of the Issuer’s voting securities holding 80% of the vote. The Amended and Restated Bylaws also revised the provisions relating to the indemnification of the Issuer’s officers and directors.

Hexagon agreed, without the prior unanimous consent of the Board, to not enter into any Rule 13e-3 Transaction (as defined in Rule 13e-3 under the Exchange Act of 1934, as amended (the “Exchange Act”)), with respect to the Issuer for a period of five years from the date it first purchased Preferred Stock pursuant to the SPA.

The description of the SPA contained in this Item 4 does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the SPA, which is filed as Exhibit B and is also incorporated herein by reference.

Shareholder Rights Plan

On April 10, 2023, the Board approved the Issuer’s entry into a Shareholder Rights Plan, by and between the Issuer and Worldwide Stock Transfer, LLC, as Rights Agent, in the form attached as an exhibit to the SPA (the “Shareholder Rights Plan”), as described in the Issuer’s current report on Form 8-K filed with the SEC on April 11, 2023. Pursuant to the SPA, the Issuer agreed to execute the Shareholder Rights Plan and establish the Record Date (as defined therein) promptly upon FINRA’s completion of its review of the Issuer’s notification related to the Shareholder Rights Plan and the subsequent distribution described below.

The Shareholder Rights Plan 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 Issuer’s warrants and certain of its existing preferred stock (including the Preferred stock issued pursuant to the SPA) 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 Issuer (the “Series J Preferred Shares”) at the purchase price set forth in the Shareholder Rights Plan. The Shareholder Rights Plan will establish a special committee of the board (the “Special Committee”) with full authority to act on behalf of the Board and take all actions deemed advisable by the Special Committee relating to the Shareholder Rights Plan.

Pursuant to the SPA, the Issuer has agreed that during the Governance Period, without the prior written consent of Hexagon, the Special Committee will include each of the Hexagon Designees and the size of the Special Committee will not exceed 4 directors.

Except as disclosed in this Schedule 13D, the Reporting Persons have no other plans or proposals that would relate to or would result in any of the actions required to be described in subsections (a) through (j) of Item 4 of Schedule 13D. The Reporting Persons may, at any time, review or reconsider their position with respect to the Issuer and formulate plans or proposals with respect to any of such matters, but have no present intention of doing so.

The description of the Shareholder Rights Plan contained in this Item 4 does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Shareholder Rights Plan, which is filed as an exhibit to the SPA and is also incorporated herein by reference.

Item 5. Interest in Securities of the Issuer

(a) and (b) Calculations of the percentage of the shares of Common Stock beneficially owned are calculated in accordance with Rule 13d-3 and assume that there are 1,330,477,660 shares of Common Stock outstanding, as represented by the Issuer in the SPA, plus (ii) 909,090,800 shares of Common Stock issuable upon conversion of the 2,272,727 shares of Preferred Stock reported herein.

The aggregate number and percentage of Common Stock beneficially owned by each Reporting Person and, for each Reporting Person, the number of shares as to which there is sole power to vote or to direct the vote, shared power to vote or to direct the vote, sole power to dispose or to direct the disposition, or shared power to dispose or to direct the disposition are set forth on rows 7 through 11 and row 13 of the cover pages of this Schedule 13D and are incorporated herein by reference.

Hexagon directly holds 2,272,727 shares of Preferred Stock, which have the voting power of and are convertible into 909,090,800 shares of Common Stock. TSMC is the general partner of Hexagon. Mr. Dunn is the managing member of TSMC.

Mr. Parscale directly holds 5,000,000 shares of Common Stock from converting shares of Series D Preferred Stock to Common Stock and also directly holds 86,021 shares of Series D Preferred Stock. A Description of the Series D Preferred Stock is included in Item 6.

(c) Except for the transaction which is the subject of this Schedule 13D, none of the Reporting Persons has effected any transaction in Common Stock in the past sixty (60) days.

(d) No person other than the Reporting Persons is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, the securities reported in Item 5(a).

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

The information provided in Items 3 and 4 is hereby incorporated by reference.

Series I Certificate of Designation

On April 10, 2023, the Issuer filed with the secretary of state of the state of Nevada a Certificate of Designation of Preferences, Rights and Limitations of Series I Preferred Stock (the “Certificate of Designation”). Pursuant to the Certificate of Designation, each share of Preferred Stock may be converted into Common Stock on a 1:400 basis at the election of its holder, at any time upon ninety (90) days’ written notice, and votes with the Common Stock on all matters as to which a vote of the Issuer’s stockholders is required on an as-converted basis.

Without the prior written consent of holders of not less than 50% of the then total outstanding share of Preferred Stock voting as a single class, the Issuer 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 Issuer or any subsidiary; (c) alter, modify, or repeal the Certificate of Designation; (d) in any manner authorize, create, amend or issue any class or series of capital stock ranking prior to or on parity with the Preferred Stock; (e)(i) issue or authorize the issuance of any equity securities of the Issuer’s subsidiaries, other than to the Issuer or another of the Issuer’s wholly owned subsidiaries, or (ii) form or create a subsidiary of the Issuer that is not wholly-owned (directly or indirectly) by the Issuer; or (f) enter into any agreement with respect to any of the foregoing.

The description of the Certificate of Designation contained in this Item 6 does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Certificate of Designation, which is filed as Exhibit D and is also incorporated herein by reference.

Registration Rights Agreement

Pursuant to the SPA, the Issuer has entered into a registration rights and lock-up agreement with Hexagon, dated April 11, 2023 (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Issuer granted Hexagon certain demand and piggyback registration rights with respect to the shares of Common Stock issued or issuable upon conversion of shares of Series I Preferred Stock.

Hexagon also agreed to a one-year lock-up period commencing on April 11, 2023 for any Common Stock issued or issuable upon conversion of the Series I Preferred Stock, with customary transfer exceptions described in the Registration Rights Agreement.

The description of the Registration Rights Agreement contained in this Item 6 does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Registration Rights Agreement, which is filed as Exhibit C and is also incorporated herein by reference.

Series D Certificate of Designation

On August 1, 2017, the Issuer filed a Certificate of Designation of Preferences Rights and Limitations of Series D Preferred Stock “the “Series D Certificate of Designation”). Pursuant to the Series D Certificate of Designation, each share of Series D Preferred Stock is convertible at the option of the holder into 2,500 shares of Common Stock upon 90 days’ written notice and pays a quarterly dividend, calculated as (1/90,000) x (5% of the Adjusted Gross Revenue) of the Company’s subsidiary Parscale Digital. Adjusted Gross Revenue means the top line gross revenue of Parscale Digital, as calculated under GAAP (generally accepted accounting principles) less any reselling revenue attributed to third party advertising products or services, such as, but not limited to, search engine keyword campaign fees, social media campaign fees, radio or television advertising fees, and the like. The holders of the Series D Preferred Stock do not have voting rights except as required by law and with respect to certain protective provisions set forth in the Series D Certificate of Designation.

The description of the Series D Certificate of Designation contained in this Item 6 does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Series D Certificate of Designation, which was filed as Exhibit 3.1 to the Issuer’s Current Report on Form 8-K filed on August 2, 2017 and is incorporated by reference.

Independent Consultant Agreement

Mr. Parscale is party to an Independent Consultant Agreement (“Consulting Agreement”) with the Issuer, dated as of August 4, 2022, pursuant to which Mr. Parscale provides business development services, lead generation services, and sales services. Mr. Parscale’s compensation for such services includes $120,000 per year in Common Stock under the Issuer’s 2022 Qualified Incentive Stock Plan.

The description of the Consulting Agreement contained in this Item 6 does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Consulting Agreement, which is filed as Exhibit G hereto and is incorporated by reference.

Item 7. Material to be Filed as Exhibits

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: April 20, 2023

[AiAdvertising, Inc. – Schedule 13D]

Exhibit A

JOINT FILING AGREEMENT

Pursuant to and in accordance with the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the “Exchange Act”) the undersigned hereby agree to the joint filing on behalf of each of them of any filing required by such party under Section 13 of the Exchange Act or any rule or regulation thereunder (including any amendment, restatement, supplement, and/or exhibit thereto) with respect to securities of AiAdvertising, Inc., a Nevada corporation, and further agree to the filing, furnishing, and/or incorporation by reference of this Agreement as an exhibit thereto. Each of them is responsible for the timely filing of such filings and any amendments thereto, and for the completeness and accuracy of the information concerning such person contained therein; but none of them is responsible for the completeness or accuracy of the information concerning the other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate. This Agreement shall remain in full force and effect until revoked by any party hereto in a signed writing provided to each other party hereto, and then only with respect to such revoking party. This Agreement may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument.

Dated: April 20, 2023

Exhibit G

INDEPENDENT CONSULTANT AGREEMENT

This Independent Consultant Agreement is made and entered into as of the date it is fully executed (“Effective Date”), by and between AiAdvertising, Inc., a Nevada corporation (“AIAD”) and the signatory party other than AIAD (“Consultant”).

For good and valuable consideration, receipt of which is hereby acknowledged, AIAD shall employ Consultant subject to the following terms and conditions.

The parties authorize each other to detach and combine original signature pages and consolidate them into a single identical original. Any of such completely executed counterparts shall be sufficient proof of this Agreement. Signatures transmitted by fax, email or e-signature shall be deemed original signatures.

[Signature page follows]

IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day and year first written above.

EXHIBIT A

DUTIES, TERM, AND COMPENSATION

DUTIES: The Consultant will provide the following services: Business development activities, lead generation activities, sales activities.

Consultant will report directly to the CEO or to any other party designated by him in connection with the performance of the duties under this Agreement and shall fulfill any other duties reasonably requested by AIAD and agreed to by the Consultant.

TERM: This Independent Consultant relationship shall commence upon execution of this Agreement and shall continue for twelve (12) months, or until terminated by either party. Consultant’s agreement with AIAD may be terminated, with or without cause, at any time without prior notice, at the option of either AIAD or the Consultant. Upon mutual agreement of AIAD and Consultant, the term of this Agreement may be extended.

Consultant acknowledges and understands that AIAD is under no obligation whatsoever to extend the term of this Agreement beyond the initial term.

COMPENSATION: As full compensation for the services rendered pursuant to this Agreement, AIAD shall compensate the Consultant as follows:

Monthly Compensation: AIAD shall pay Consultant $10,000.00 per month in cash and $120,000 per year in stock, under the Company’s 2022 Qualified Incentive Stock Plan.

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