Kubient, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2022

NOTE 11 — FAIR VALUE MEASUREMENT

On November 30, 2021, Kubient entered into and consummated a Purchase Agreement with 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 the Earnout Shares. See Note 3 – Business Combination for details.

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.

As of December 31, 2021, the Earnout Shares had a fair value of $613,000. As of December 31, 2022, the Company recomputed the fair value of its Earnout Shares as $0 using the Monte Carlo simulation. As a result, the Company recorded a gain on the change in fair value of the contingent consideration of $613,000 during the year ended December 31, 2022.

The following table sets forth a summary of the changes in the fair value of Level 3 liabilities that are measured at fair value on a recurring basis:

Contingent Consideration


	2022		2021
Beginning balance as of January 1,	$	613,000	$	—
Issuance of contingent consideration		—		613,000
Change in fair value of contingent consideration		(613,000)		—
Ending balance as of December 31,	$	—	$	613,000

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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