NOTE 3 – BUSINESS COMBINATION

On November 30, 2021, Kubient entered into and consummated an Asset Purchase Agreement (the “Purchase Agreement”) between the Company and MediaCrossing Inc., a Delaware corporation (“MediaCrossing”), pursuant to which the Company acquired certain assets and liabilities that were critical to continue to operate the business of MediaCrossing for (i) $500,000 in cash and (ii) if the acquired business achieves certain milestones in 2022, up to 822,369 shares of the Company’s common stock, par value $0.00001 per share (the “Earnout Shares”) (the “Transaction”). In accordance with ASC 805, the Company determined that the Transaction should be accounted for as a business combination after determining that the acquired set of assets of MediaCrossing, the fair value of which was not concentrated in a single asset or group of similar assets and included (a) cash, (b) prepaid expenses and other current assets, (c) intangible assets as detailed further below and (d) an assembled workforce, met the definition of a business. As a result, Kubient has recorded the business combination in its consolidated financial statements and has applied the acquisition method to account for MediaCrossing’s assets acquired and liabilities assumed upon completion of the Transaction. The acquisition method requires recording the identifiable assets acquired and liabilities assumed at their fair values on the acquisition date and recording goodwill for the excess of the purchase price over the aggregate fair value of the identifiable assets acquired and liabilities assumed.

The Earnout Shares consist of up to 822,369 shares of the Company’s common stock, depending on the amount of revenue generated by the acquisition in 2022. Each share had a fair value of $2.55 as of the acquisition date. The Earnout Shares were measured using a Monte Carlo simulation. Key assumptions used in the fair value assessment consisted of revenue projections (which were used to estimate the number of Earnout Shares issuable), discount rate and standard deviation. The fair value measurement of the contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect Kubient’s own assumptions in measuring fair value.

MediaCrossing is engaged in the business of providing managed media services to agencies and direct brand advertisers, including media planning, strategy, contracting for media, developing, executing and managing campaigns, reporting and services ancillary to the foregoing.

In connection with the Acquisition and pursuant to the terms of the Purchase Agreement, the Company has offered employment to ten employees of MediaCrossing, including Michael Kalman as President – Agency & Brand Partnerships. In addition, the Purchase Agreement contains customary representations, warranties, post-closing covenants and indemnification provisions.

The aggregate preliminary purchase price was allocated to the assets acquired and liabilities assumed as follows:

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The components of debt free net working capital deficit are as follows:

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Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and the amount is attributable to the reputation of the business acquired, the workforce in place and the synergies to be achieved from this acquisition. Goodwill is deductible for tax purposes.

The consolidated financial statements of the Company include the results of operations of MediaCrossing from November 30, 2021 to December 31, 2021 and do not include results of operations for the year ended December 31, 2020. The results of operations of MediaCrossing from November 30, 2021 to December 31, 2021 included revenues of $154,954 and a net loss of $18,447.

The following table presents the unaudited pro forma consolidated results of operations for the year ended December 31, 2021 as if the Transaction had occurred on January 1, 2020. The pro forma information provided below is compiled from the pre-acquisition financial information of MediaCrossing and includes certain pro forma adjustments for the amortization of intangible assets and transaction costs. The pro forma results are not necessarily indicative of (i) the results of operations that would have occurred had the operations of this acquisition actually been acquired at the beginning of fiscal year 2020 or (ii) future results of operations:

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