NOTE 7 — 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.

Public Offerings

On August 14, 2020, the Company consummated its IPO 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.

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, 2020, no awards have been issued by the Company under the Founder Program.

Stock-Based Compensation

For the years ended December 31, 2020 and 2019, the Company recognized aggregate stock-based compensation expense of $468,216 and $27,275, respectively, related to stock options and common stock. As of December 31, 2020, there was $49,433 of unrecognized stock-based compensation expense, which will be recognized over approximately 2.8 years.

Common Stock

During the year ended December 31, 2019, the Company issued 2,221 shares of immediately vested common stock with fair value of $6,000 to an executive officer of the Company in connection with an employment agreement.

During the year ended December 31, 2020, the Company issued an aggregate of 38,433 shares of immediately vested common stock under the Company’s 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 year ended December 31, 2020, the Company’s Compensation Committee approved the issuance of an aggregate of 20,040 shares of common stock to the four members of the Company’s Board of Directors. The shares had a grant date fair value of $60,120 which is being recognized ratably through January 15, 2021, the date the shares were issued.

See Note 6 – Notes Payable for additional details related to common stock issuances.

Stock Options

During the year ended December 31, 2019, the Company granted to three executives ten-year options to purchase an aggregate of 4,404 shares of common stock at an exercise price of $33.75 per share under the 2017 Plan. The options vest over four years, with 25% of the shares vesting on the one-year anniversary of the grant date and the remaining vesting monthly thereafter. The options had an aggregate grant date fair value of $6,467, or $0.18 per share, which will be recognized over the vesting period.

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.

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

 

 

A summary of the Company’s stock option activity during the year ended December 31, 2020 is as follows:

 

 

The following table presents information related to stock options as of December 31, 2020:

 

 

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:

 

 

A summary of the warrant activity during the year ended December 31, 2020 is presented below:

 

[1] Effect of down round triggered in connection with closing of IPO. See Note 6 – Notes Payable for additional details.

[2] Excludes five-year warrants to purchase 1,235,977 shares of common stock at an exercise price of $5.50 per share that are issuable upon exercise of certain warrants. See Note 5 – Notes Payable for additional details.

The following table presents information related to stock warrants as of December 31, 2020: