NOTE 8 — STOCKHOLDERS’ EQUITY

Authorized Capital

The authorized capital of Kubient consists of 95,000,000 shares of common stock, par value $0.00001 per share, and 5,000,000 shares of preferred stock, par value $0.00001 per share. The holders of the Company’s common stock are entitled to one vote per share.

Reverse Stock Split

A 1:9 reverse stock split of the Company’s common stock was affected on August 6, 2020 (the “Reverse Stock Split”). All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.

Public Offerings

On August 14, 2020, the Company consummated its initial public offering of 2,500,000 units (the “Units”) at a price of $5.00 per Unit, which resulted in aggregate gross and net proceeds of approximately $12.5 million and $10.6 million, respectively. Each Unit consisted of one share of common stock, par value $0.00001 per share and one warrant to purchase one share of common stock (the “Warrants”). The Warrants are exercisable immediately upon issuance and at any time up to the date that is five years from the date of issuance and will have an exercise price of $5.50 per share.

On August 14, 2020, the Company consummated the closing of a partial exercise of the over-allotment option granted to the underwriters in connection with its IPO to purchase 375,000 additional common stock purchase warrants at a price of $0.01 per warrant for aggregate proceeds of $3,750.

On August 14, 2020, in connection with its IPO, the Company issued to the underwriters warrants to purchase 125,000 shares of common stock at $6.25 per share. The warrants are exercisable at any time for cash or on a cashless basis during the four- and one-half year period commencing 180 days from the effective date of the Company’s registration statement. The warrants had an issuance date fair value of $225,850 that was recorded as a debit and credit to additional paid-in capital.

On December 28, 2020, the Company consummated a Follow-On Offering of 4,058,822 shares of common stock at a price of $5.10 per share for aggregate gross and net proceeds of approximately $20.7 million and $18.9 million, respectively, which such amounts include the full exercise by the underwriters of the over-allotment option to purchase an additional 529,411 shares of common stock at $5.10 per share. The Company issued to the representatives of the underwriters warrants to purchase 176,470 shares of common stock at an exercise price of $6.38 per share. The warrants are exercisable at any time for cash or on a cashless basis during the four- and one-half year period commencing 180 days from the effective date of the Company’s registration statement. The warrants had an issuance date fair value of $447,987 that was recorded as a debit and credit to additional paid-in capital.

See Note 6 – Notes Payable for additional details.

Equity Incentive Plans

The 2017 Equity Incentive Plan (the “2017 Plan”) was originally adopted by the Company’s board of directors and approved by its stockholders on September 12, 2017 and was subsequently amended and restated on June 5, 2019. The purposes of the 2017 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our service providers and to promote the success of the Company’s business. The Company has reserved 333,334 shares of common stock to issue awards under the 2017 Plan. as of December 31, 2021, 11,889 shares of common stock remained available for future issuance under the 2017 Plan.

The 2021 Equity Incentive Plan was originally adopted by the Company’s board of directors and approved by its stockholders on June 30, 2021 (the “2021 Plan”). The purposes of the 2021 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our service providers and to promote the success of the Company’s business. The Company has reserved 1,500,000 shares of common stock to issue awards under the 2021 Plan. As of December 31, 2021, 1,400,000 shares of common stock remained available for future issuance under the 2021 Plan.

Founder Employee Incentive Program

On July 2, 2020, the Company’s board of directors adopted the Founder Employee Incentive Program (the “Founder Program”) under the 2017 Plan. The purposes of the Founder Program are to offer near-term and long-term incentives to founder employees of the Company that are intended to keep such employees in the employ of the Company, and that are based on individual performance, the achievement of financial goals of the Company and the total return to the Company’s stockholders. Through December 31, 2021, no awards have been issued by the Company under the Founder Program.

Stock-Based Compensation

For the years ended December 31, 2021 and 2020, the Company recognized stock-based compensation expense related to stock options and common stock as follows:

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As of December 31, 2021, there was approximately $875,000 of unrecognized stock-based compensation expense related to awards that were determined to be probable to vest, which will be recognized over approximately 2.3 years.

Common Stock

During the year ended December 31, 2020, the Company issued an aggregate of 38,433 shares of immediately vested common stock under the 2017 Plan to three employees and two non-employee service providers. The shares had an issuance date fair value of an aggregate of $107,503, which was recognized immediately.

During the three months ended March 31, 2021, the Company issued an aggregate of 20,040 shares of common stock under the 2017 Plan to the four members of the Company’s Board of Directors. The shares had a grant date fair value of $60,120, which was recognized ratably from the grant date of November 5, 2020 through January 15, 2021, the date the shares were issued.

During the three months ended March 31, 2021, the Company issued an aggregate of 50,000 shares of immediately vested common stock (10,000 shares were issued under the Company’s 2017 Plan) to an employee and a consultant for services provided. The common stock had an aggregate issuance date fair value of $500,400 which was recognized immediately.

During the three months ended June 30, 2021, the Company issued an aggregate of 167,600 restricted shares of its common stock under the 2017 Plan to six employees. The restricted stock had an aggregate issuance date fair value of $963,701, of which, awards with an aggregate fair value of $957,313 vest over a period of one year and an award with an aggregate fair value of $6,388 vests immediately. The fair value of the awards is being recognized over the vesting term.

During the three months ended December 31, 2021, the Company issued 1,062 shares of immediately vested common stock to a former member of the Company’s Board of Directors that had an issuance date fair value of $3,282 that was recognized immediately.

See Note 4 – Intangible Assets for details regarding the issuance of common stock as partial consideration for the acquisition of intangible assets. See Note 7 – Notes Payable for additional details related to common stock issuances. See Note 9 – Commitments and Contingencies – Employment Agreements for details regarding the grant of a bonus that is payable in common stock of the Company.

Stock Options

On November 9, 2020, the Company granted a ten-year option to purchase 20,000 shares of common stock at an exercise price of $2.81 per share to an employee under the 2017 Equity Incentive Plan. The shares vest over a four-year period, with 5,000 shares vesting on November 9, 2021 and the remaining 15,000 shares vesting ratably on a monthly basis over the remaining three-year period. The options had an aggregate grant date fair value of $32,981, or $1.31 per share, which will be recognized over the vesting period.

During the year ended December 31, 2021, the holder of an option under the 2017 Plan to purchase 2,815 shares of the Company’s common stock at an exercise price of $2.97 per share exercised such option resulting in cash proceeds of $8,361 to the Company.

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following approximate assumptions:

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A summary of the Company’s stock option activity during the year ended December 31, 2021 is as follows:

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The following table presents information related to stock options as of December 31, 2021:

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Stock Warrants

See Note 6 – Notes Payable – Convertible Notes Payable and Note 7 – Stockholder’s Equity – Public Offerings for details regarding the issuance of warrants during the year ended December 31, 2020.

The Company used the following approximate assumptions in connection with its estimation of fair value of warrants:

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A summary of the warrant activity during the year ended December 31, 2021 is presented below:

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[1] Excludes five-year warrants to purchase 368,711 shares of common stock at an exercise price of $5.50 per share that are issuable upon exercise of certain warrants.

The following table presents information related to stock warrants as of December 31, 2021:

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