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Item 1. Business

2021-03-19 compared with 2020-05-14 · 735 added, 629 removed, 340 unchanged (80% of the section changed)

KULR Technology Group,

Inc., through our wholly-owned subsidiary KULR Technology Corporation, develops and commercializes high-performance thermal management

technologies for batteries, electronics, and other components across an array of applications.

Currently, our main focus is a total

solution to battery safety by which we aim to mitigate the effects of thermal runaway propagation.

We also target and provide thermal

solutions for the following applications:

electric vehicles, cloud computing, 5G communication technologies, and energy storage

for commercial markets as well as directed energy weapons and high-power missile programs for aerospace and defense.

Our proprietary,

core technology is a carbon fiber material that provides what we believe to be superior thermal conductivity and heat dissipation

for an ultra-lightweight and pliable material.

By leveraging our proprietary cooling solutions that have been developed through

longstanding partnerships with NASA, the Jet Propulsion Lab and others, our products and services make commercial battery powered

products safer and electronics systems cooler and lighter.

KULR Technology Group, Inc.,

through our wholly-owned subsidiary KULR Technology Corporation, develops and commercializes high-performance thermal management

technologies for batteries, electronics, and other components across an array of battery-powered applications.

For aerospace and

Department of Defense (“DOD”) applications, our solutions target high performance applications in direct energy, hypersonic

vehicles and satellite communications.

For commercial applications, our main focus is a total solution to battery safety and sustainability

by which we aim to mitigate the effects of thermal runaway propagation which has been known to cause random fires in lithium-ion

(“Li-ion”) batteries.

This total battery safety solution can be used for electric vehicles, energy storage, battery

recycling transportation, cloud computing and 5G communication devices.

Our proprietary core technology is a carbon fiber material

that provides what we believe to be superior thermal conductivity and heat dissipation for an ultra-lightweight and pliable material.

By leveraging our proprietary cooling solutions that have been developed through longstanding partnerships with advanced technology

users like NASA, the Jet Propulsion Lab and others, our products and services make commercial battery powered products safer and

electronics systems cooler and lighter.

KULR’s business

model continues to evolve from being a component supplier, to providing more design and testing services to our customers.

next step of evolution is to provide total system solutions to address market needs.

In order to scale up as a systems provider

more quickly and efficiently in (i) the Li-ion battery energy storage and recycling markets, (ii) battery cell design and safety

testing, and (iii) advanced thermal management systems, such as hypersonic vehicles, KULR will actively seek partners for joint

venture, technology licensing and other strategic partnership models.

The goal is to leverage the Company’s thermal design

technology expertise to create market leading products, which KULR will take to market directly to capture more value for KULR

shareholders.

Battery safety technology

is becoming increasingly vital to our world in which battery-operated devices are everywhere.

Lithium ion (“Li-ion”) batteries are

widely used in consumer electronics, aerospace, marine and automotive applications.

In recent months, KULR has developed a total

battery safety solution for its customers that spans a wide array of industries and applications.

KULR has seen great success in

using our patented thermal runaway shield (“TRS”) technology to prevent cell to cell thermal runaway propagation as well as module

to module propagation.

Li-ion batteries are widely used

in consumer electronics, aerospace, marine and automotive applications.

In recent months, KULR has developed a total battery safety

solution for its customers that spans a wide array of industries and applications.

KULR has seen great success in using our patented

thermal runaway shield (“TRS”) technology to prevent cell to cell thermal runaway propagation as well as module to

module propagation.

We have designed a total solution for customers from the design stages incorporating our materials all the

way to testing their passive propagation resistant (“PPR”) battery packs.

We are flexible and can work with different battery pack

configurations across various industries.

way to testing their passive propagation resistant (“PPR”) battery packs.

We are flexible and can work with different

battery pack configurations across various industries.

We developed a PPR reference design for CubeSat battery in December 2019.

Based on this reference design platform, we were awarded a dual-use technology development agreement from NASA’s Marshall

Space Flight Center to build 3D printed battery systems for manned and robotic space applications in August 2020.

and testing, as well as working alongside battery experts at NASA Johnson Space Center, has positioned us for further advancements

at the forefront of battery safety.

Hundreds of millions

of Li-ion cells are produced and transported annually and even those packaged to prevent external short can still experience thermal

runaway (“TR”) due to internal shorts, caused by latent defects, when fully charged.

In these dangerous cases, a torch-like fire

is released as energy escapes from the cell and sends nearby cells into TR resulting in a large fire.

As part of our total battery

safety solution, we have designed a bag out of our TRS material to quench the flames and prevent the TR event.

Suitably placed,

the TRS provides a means of protection not only from adjacent batteries but also outside fires of arbitrary origin.

NASA’s Propulsion & Power Division found our TRS successful at extinguishing the fire generated by cells when they intentionally

triggered the batteries into dangerous failures.

Our TRS bag is currently being used on the International Space Station (“ISS”) through

a project with Leidos, for storing laptop batteries in order to reduce the risk of TR.

Another key element

of our battery safety solution is KULR internal short circuit (“ISC”) device and trigger cells which are used for cell testing and

Our patented ISC device, licensed from NASA/NREL, can be inserted by OEMs or manufacturers into cells to mimic failure

conditions in a cell.

Once the trigger device is placed inside the cell, it can be intentionally triggered on demand causing the

cell to short circuit.

Currently, we provide ISC devices to OEMs and cell manufacturers, as well as ready-made ISC trigger

cells to customers to identify failure modes and safety issues within their systems.

Currently we are creating an ecosystem based

on our technology which can be applied to different battery architectures and chemistries.

Hundreds of millions of

Li-ion cells are produced and transported annually and even those packaged to prevent external shorting can still experience thermal

runaway (“TR”) due to internal shorts, caused by latent defects, when fully charged.

In these dangerous cases, a torch-like

fire is released as energy escapes from the cell and sends nearby cells into TR resulting in a large fire.

As part of our total

battery safety solution, we have designed a bag out of our TRS material to suppress the flames and prevent the TR event.

placed, the TRS provides a means of protection not only from adjacent batteries but also outside fires of arbitrary origin.

at NASA’s Propulsion & Power Division found our TRS successful at extinguishing the fire generated by cells when

they intentionally triggered the batteries into dangerous failures.

Our TRS bag is currently being used on the International Space

Station (“ISS”) through a project with Leidos, for storing laptop batteries in order to reduce the risk of TR.

Another key element of

our battery safety solution is KULR internal short circuit (“ISC”) device and trigger cells which are used for cell

testing and screening.

Our patented ISC device, licensed from NASA/NREL, can be inserted by OEMs or manufacturers into cells to

mimic failure conditions in a cell.

Once the trigger device is placed inside the cell, it can be intentionally triggered on demand

causing the cell to short circuit.

Currently, we provide ISC devices to OEMs and cell manufacturers, as well as ready-made ISC

trigger cells to customers to identify failure modes and safety issues within their systems.

Currently we are creating an ecosystem

based on our technology which can be applied to different battery architectures and chemistries.

Our management believes

that within commercial markets, aerospace and defense, and high-value applications, cell testing and screening has become a topic

Therefore, we plan to expand our capabilities to include full battery screening and testing as outlined by NASA Johnson

Space Center.

We plan to fully incorporate this into our holistic approach to battery safety along with our PPR battery pack design

and testing services, ISC device and trigger cell products and TRS bags.

With increasing regulations and pressure from government

bodies to mitigate the dangers of battery fires and TR, we plan to further develop our capabilities in this arena.

Our management projects high priority and

growth in the aerospace and defense sectors, specifically in regard to directed energy, hypersonic weapon programs, and space missions.

Directed energy is currently in the spotlight as experts predict it will greatly impact the future of warfare.

Our CRUX cathode

generates powerful electron pulses by field emission from the tops of our carbon fiber coating which has the potential to further

develop the current technology.

Thermal management is another critical component of both hypersonic weapons programs and space

missions and is another area in which our products excel.

Our carbon fiber velvets are used for thermal management in missile defense

programs and are particularly effective because of their survivability at very high temperatures.

They are also very effective

at transferring heat, and mitigate the risk of overheating in such high-risk environments.

Historically we have provided value

to this sector and we look forward to further developing our relationships with Airforce Research Lab, Naval Research Lab and prime

contractors to market our solutions.

In addition to evolving demands led by aerospace

and defense, we have observed trending manufacturer-led opportunities in industries such as electric motor vehicles (“EV”) that have

become increasingly more reliant on the Cloud, portability and high-demand processing power.

KULR’s high performance thermal

interface materials can be used to accelerate 5G communications development due to our material’s core properties:

conductivity, light weight, and low contact pressure.

5G is one of the biggest opportunities going forward for transportation technology

and we would like to take part in testing of digital and RF tests for 5G.

Testing is still in early phases for both digital and

RF communication chips, however, we are seeing a big growth opportunity for thermal management for 5G.

Cloud computing is also

an application of interest since high power communications chips and optical communication modules require cooling.

Corporate History

that within commercial markets, aerospace and defense, and high-value applications, cell safety testing and screening has become

a topic of focus.

Therefore, we plan to expand our capabilities to include full battery analysis and testing as outlined by NASA

Johnson Space Center.

We plan to fully incorporate this into our holistic approach to battery safety along with our PPR battery

pack design and testing services, ISC device and trigger cell products and TRS bags.

With increasing regulations and pressure

from government bodies to mitigate the dangers of battery fires and TR, we plan to further develop our capabilities in this arena.

Our management expects

high growth in the aerospace and defense sectors, specifically in regards to hypersonic vehicle programs, space missions and directed

energy programs.

Thermal management is a critical component of both hypersonic weapons programs and space missions.

fiber solutions are used for thermal management in missile defense programs and are particularly effective because of their survivability

at very high temperatures.

They are also very effective at transferring heat and mitigate the risk of overheating in such high-risk

environments.

Historically we have provided value to this sector and we expect to further develop our relationships with the Airforce

Research Lab, the Naval Research Lab and prime contractors to market our solutions.

Directed energy is currently in the spotlight

as experts predict it will greatly impact the future of national security.

Our CRUX cathode generates powerful electron pulses

by field emission from the tops of our carbon fiber coating and has the potential to further develop the current technology.

In addition to evolving

demands led by aerospace and defense, we have observed trending manufacturer-led opportunities in industries such as electric

motor vehicles (“EV”) that have become increasingly more reliant on the Cloud, portability and high-demand processing

KULR’s high performance thermal interface materials can be used to accelerate 5G communications development due to

our material’s core properties:

high thermal conductivity, light weight, and low contact pressure.

5G is one of the biggest

opportunities going forward for transportation technology and we plan to take part in testing of digital and RF tests for 5G.

Testing is still in early phases for both digital and RF communication chips, however, we are seeing a big growth opportunity

for thermal management for 5G.

Cloud computing is also an application of interest since high power communications chips and optical

communication modules require cooling.

We have not yet achieved

profitability and expect to continue to incur cash outflows from operations, as a result, we will eventually need to generate

significant revenues to achieve profitability.

Until that time we shall have to continue to raise cash as and when required through

the sale of stock.

KULR was incorporated

in the State of Delaware in December 2015 and was formerly known as “KT High-Tech Marketing, Inc.” and, prior to that,

as “Grant Hill Acquisition Corporation.” In April 2016, KULR implemented a change of control by issuing shares to new

shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of

its then existing officers and directors.

as “Grant Hill Acquisition Corporation.” In April 2016, KULR implemented a change of control by issuing shares to

new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations

of its then existing officers and directors.

Our wholly-owned subsidiary,

KULR Technology Corp, was formed in 2013 and is based in Santa Clara, California.

Since its inception, KTC primarily focused on

developing and commercializing its thermal management technologies, which it acquired through assignment from and license with

KTC’s co-founder Dr.

KULR Technology Corp, was formed in 2013 and is based in San Diego California.

Since its inception, KTC primarily focused on developing

and commercializing its thermal management technologies, which it acquired through assignment from and license with KTC’s

co-founder Dr.

Timothy Knowles.

Prior to 2013, KTC’s technologies were used in numerous advanced space and industrial

applications for NASA, Boeing, and Raytheon.

A few notable achievements were the use of KTC’s technologies in the X-31 aircraft

(battery heat sink), Mercury Messenger (battery heat sink), and X-51 Scramjet (heat exchanger).

Prior to 2013, KTC’s technologies were used in numerous advanced space and industrial applications

for NASA, Boeing, and Raytheon.

A few notable achievements were the use of KTC’s technologies in the X-31 aircraft (battery

heat sink), Mercury Messenger (battery heat sink), and X-51 Scramjet (heat exchanger).

On June 19, 2017, KULR

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becoming KULR’s main operation.

The Share Exchange

was accounted for as a reverse recapitalization i n accordance with generally accepted accounting

The Share Exchange was

accounted for as a reverse recapitalization i n accordance with generally accepted accounting

principles in the United States of America, with K TC being treated as the acquiring

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(20) days after the mailing date of the December Information Statement, KUTG was deemed authorized by ratifying vote of its majority

shareholders and the authorization granted by its Board of Directors to issue the Voting Preferred Shares, which KULR has not but

expects to do in the near future.

On December 31, 2018, KULR filed a certificate of amendment with the Secretary of State of the

State of Delaware, to increase the number of authorized shares of its common stock from 100,000,000 to 500,000,000.

the aggregate number of the Company’s authorized capital stock became 520,000,000 shares.

In January 2020, an

outbreak of a new strain of coronavirus, COVID-19, was identified in Wuhan, China.

shareholders and the authorization granted by its Board of Directors to issue the Voting Preferred Shares, which KULR has not

but expects to do in the near future.

On December 31, 2018, KULR filed a certificate of amendment with the Secretary of State

of the State of Delaware, to increase the number of authorized shares of its common stock from 100,000,000 to 500,000,000.

a result, the aggregate number of the Company’s authorized capital stock became 520,000,000 shares.

Recent Developments

In January 2020,

an outbreak of a new strain of coronavirus, COVID-19, was identified in Wuhan, China.

Through the first quarter of 2020, the disease

became widespread around the world, and on March 11, 2020, the World Health Organization declared a pandemic.

Our business is dependent

on developing new markets and new products to be used on a global basis, thus restrictions on travel could lead to reduced demand

for our products and interruptions to supply chains.

Also, the local regulations such as “Shelter in Place”

our ability to maintain regular R&D and manufacturing schedules as well as the capability to meet customer demands timely.

Given the uncertainty around the extent and timing of the potential future spread or mitigation of the Coronavirus and around the

imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations,

cash flows, or financial condition.

Decontamination Solutions

In response to the

unprecedented demand for solutions to combat the spread of COVID-19 (and other viruses) and in response to an opportunity that

arose in connection with our ongoing customer engagements and strategic relationships, we recently explored the launch of a suite

of commercial and consumer products that utilize a Hypochlorous-Acid based microbial decontamination liquid.

assurance can be made that we will be able to commercialize these decontamination products or that there will be demand for such

products, we believe that we are capable of producing or acquiring substantial quantities of the decontamination liquid to deploy

in a suite of decontamination delivery products and technology that we are actively developing.

In order to advance these

efforts and to test the efficacy of the decontamination liquid, we engaged an independent lab to test our solution but we do not

yet have any lab results.

PPR Product License and Supply Agreement

- Americase’s Battery Bag

On April 13, 2020,

we announced that it entered into a license and supply agreement with Americase, LLC, granting a license for Americase’s

use of our passive propagation resistant (PPR) technology and agreeing to supply our PPR materials for Americase’s “Battery

is dependent on developing new markets and new products to be used on a global basis, thus restrictions on travel could lead to

reduced demand for our products and interruptions to supply chains.

Also, the local regulations such as “Shelter in Place”

will affect our ability to maintain regular R&D and manufacturing schedules as well as the capability to meet customer demands

in a timely manner.

Given the uncertainty around the extent and timing of the potential future spread or mitigation of the Coronavirus

and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results

of operations, cash flows, or financial condition.

Standby Equity

Distribution Agreement and Notes Payable

On February 27, 2020,

we entered into a Standby Equity Distribution Agreement (“SEDA”) with YAII PN, Ltd., a Cayman Island exempt limited

partnership (“YAII”).

Under the terms of this Agreement, the Company raised an aggregate of $2,292,695 from the facility.

As of December 31, 2020, the Company had approximately $5,707,000 available in connection with the SEDA, however, so long as warrants

issued on December 31, 2020 in an unrelated transaction remain outstanding, the Company may not issue shares in connection with

variable rate transactions.

During the year ended December 31, 2020, the Company issued notes to YAII in the aggregate amount

of $4,000,000, of which the Company repaid principal on the notes in the aggregate amount of $1,550,000 ($791,000 was repaid from

proceeds from the SEDA).

Subsequent to December 31, 2020, the Company repaid principal on the notes in the aggregate amount of

Registered Direct Offering

On December 31, 2020,

we closed a registered direct offering conducted pursuant to a securities purchase agreement (“Purchase Agreement”)

with the purchasers set forth on the signature page thereto (the “Purchasers”) for the purchase and sale of an aggregate

of 6,400,001 shares of our common stock (the “Shares”), and warrants to purchase an aggregate of up to 6,400,001 shares

of common stock (“Warrants”), at a combined purchase price of $1.25 per Share and Warrant.

The aggregate gross proceeds

to us were equal to approximately $8 million.

The Warrants are immediately exercisable and may be exercised at any time until

December 31, 2025, at an exercise price of $1.25 per share.

Lake Street Capital Markets, LLC and Maxim Group LLC acted as co-placement

agents in connection with the registered direct offering.

We paid the co-placement agents a cash fee of 7.0% of the gross proceeds

we received under the Purchase Agreement.

We also reimbursed the co-placement agents for certain out-of-pocket accountable expenses

incurred by them in connection with this offering of $50,000.

We paid total approximate offering expenses, other than the placement

agent fees, of approximately $170,000, which includes the co-placement agents’ reimbursable expenses, legal, financial advisory

fees, accounting, printing costs, listing fees, and various other expenses associated with registering and issuing the shares.

We intend to use the net proceeds from this offering for capital expenditures, as well as for working capital and general corporate

The Shares and Warrants

(and underlying shares) were offered, and will be issued, pursuant to the Prospectus Supplement, dated December 29, 2020, to the

Prospectus included in our Registration Statement on Form S-3 (Registration No.

333- 232614) filed with the Securities and Exchange

Commission on July 11, 2019 and declared effective on August 1, 2019.

Appointment of Keith Cochran

On March 8, 2021, our

Board of Directors (the “Board”) appointed Keith Cochran as President and Chief Operating Officer of the Company,

to hold office until the earlier of the expiration of the term of office, a successor is duly elected and qualified, or the earlier

of such officer’s death, resignation, disqualification, or removal.

As compensation for his

services as President and Chief Operating Officer of the Company, Mr.

Cochran will receive:

(1) a salary of $250,000 per annum

and commensurate benefits;

(2) 2,000,000 restricted shares of the Company’s common stock, which shares shall vest, so long

Cochran remains employed by the Company, in four (4) equal yearly installments, with the first installment amount to vest

on March 1, 2022 and annually thereafter;

and (3) eligibility, also subject to Mr.

Cochran’s continued employment with the

Company, for incentive based grants of up to 1,500,000 shares, which shall be earned upon the Company achieving certain market

capitalization milestones.

Appointment of Independent Directors

On February 20, 2021,

the Board, contingent upon the Company’s common stock being approved for uplisting to a national exchange, approved the

appointment of Morio Kurosaki as an independent member of the Board.

Kurosaki will also serve as chair of the Audit Committee.

As such, the Board has determined that Mr.

Kurosaki is a financial expert within the meaning of SEC regulations.

Additionally,

Kurosaki will serve as a member of both the Compensation Committee and the Nominating and Governance Committee.

In connection with his

appointments, Mr.

Kurosaki will be compensated (1) $10,000 per quarter, beginning on and subject to approval for uplisting, and

(2) 20,000 restricted shares of the Company’s common stock, which shares shall vest equally in 5,000 share increments per

quarter beginning on and subject to approval for uplisting.

On February 20, 2021,

the Board, contingent upon the Company’s common stock being approved for uplisting to a national exchange, approved the

appointment of Stayce D.

Harris as an independent member of the Board.

Harris will also serve as chair of the Compensation

Additionally, Ms.

Harris will serve as a member of both the Audit Committee and the Nominating and Governance Committee.

In connection with her

appointments, Ms.

Harris will be compensated (1) $10,000 per quarter, beginning on and subject to approval for uplisting, and

(2) 20,000 restricted shares of the Company’s common stock, which shares shall vest equally in 5,000 share increments per

quarter beginning on and subject to approval for uplisting.

On February 20, 2021,

the Board, contingent upon the Company’s common stock being approved for uplisting to a national exchange, approved the

appointment of Joanna D.

Massey as an independent member of the Board.

Massey will also serve as chair of the Nominating and

Governance Committee.

Additionally, Ms.

Massey will serve as a member of both the Audit Committee and the Compensation Committee.

In connection with her

appointments, and subject to the receipt of her acknowledgment of the same, Ms.

Massey will be compensated (1) $10,000 per quarter,

beginning on and subject to approval for uplisting, and (2) 20,000 restricted shares of the Company’s common stock, which

shares shall vest equally in 5,000 share increments per quarter beginning on and subject to approval for uplisting.

Conversion of Series C Preferred Stock

During the year ended

December 31, 2020, KULR issued an aggregate of 56,778 shares of our common stock upon voluntary conversions of 5.11 shares of

our Series C Preferred Stock.

Effective as of December

31, 2020, KULR issued an aggregate of 177,885 shares of our common stock and warrants to purchase an aggregate of 177,885 shares

of our common stock at an exercise price of $1.25 per share, upon a deemed automatic conversion of 18.90 shares of our Series

C Preferred Stock, after which there remained no further Series C Preferred Stock outstanding.

Although the conversion shares

were issued subsequent to the deemed automatic conversion, in connection with a registered direct offering that closed on December

31, 2020, the conversions were made effective as of December 31, 2020 pursuant to an automatic conversion feature of the Series

C Preferred Stock under which the stated value of each share was converted into the same securities issued in the registered direct

offering at an effective conversion price of 85% of the aggregate purchase price of such securities.

Conversion of Series B Preferred Stock

During the year ended

December 31, 2020, KULR issued an aggregate of 25,758 shares of our common stock upon conversion of 515 shares of our Series B

Preferred Stock.

Subsequent to the year

ended December 31, 2020, KULR issued an aggregate of 698,600 shares of our common stock upon conversion of 13,972 shares of our

Series B Preferred Stock, after which there remained no further Series B Preferred Stock outstanding.

Market Opportunity and Strategy

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continues to become more and more demanding and performance driven.

The increasing demand for reliability of microelectronics and

lithium-ion batteries has pushed thermal management to the forefront of many industries.

The increasing demand for reliability of microelectronics

and Li-ion batteries has pushed thermal management to the forefront of many industries.

We target our solutions to serve the following

markets and applications:

PPR battery design, Battery Storage and Transportation, Electrical Transportation,

5G Mobile and Cloud Computing Infrastructure, Aerospace and Defense.

PPR battery design, Battery Storage and Transportation, Electrical Transportation, 5G Mobile and Cloud

Computing Infrastructure, Aerospace and Defense.

Lithium-Ion Battery,

Energy Storage and Battery Transportation Market .

According to Prescient & Strategic Intelligence, Lithium-Ion battery

market was valued at $34 billion in 2018, the global lithium-ion battery market is projected

to surpass $106 billion by 2024, witnessing a CAGR of 21.8% between 2019 and 2024.

T he stationary

battery storage market is slated to ramp from $11 billion in

2018 to $170 billion by 2030, according to a 2019 Global Market Insights, Inc.

Favorable regulatory policies pertaining to sustainable energy technologies coupled with upsurge in investments toward

large scale storage units with increased power output will drive the market size.

According to Market

Research Future, the global thermal management market is expected to reach approximately $15 billion by end of 2023 with 7% compound

annual growth rate during the forecast period from 2017 to 2023.

According to the report, in recent years, electronic devices and

systems have undergone tremendous technological growth.

Advancements in the electronics industry have led to an increased need

for innovative thermal management technologies, which serve to improve performance and reliability.

The report states that technological

progress has come on two fronts:

According to Prescient & Strategic Intelligence, Li-ion battery market

was valued at $34 billion in 2018, the global Li-ion battery market is projected to surpass

$106 billion by 2024, witnessing a CAGR of 21.8% between 2019 and 2024.

The stationary battery storage market is forecasted to

ramp from $11 billion in 2018 to $170 billion by

2030, according to a 2019 Global Market Insights, Inc.

Favorable regulatory policies pertaining to sustainable energy

technologies coupled with upsurge in investments toward large scale storage units with increased power output will drive the market

According to Market Research

Future, the global thermal management market is expected to reach approximately $15 billion by end of 2023 with 7% compound annual

growth rate during the forecast period from 2017 to 2023.

According to the report, in recent years, electronic devices and systems

have undergone tremendous technological growth.

Advancements in the electronics industry have led to an increased need for innovative

thermal management technologies, which serve to improve performance and reliability.

The report states that technological progress

has come on two fronts:

increased functionality on a single device unit and miniaturization of each unit.

there has been an increased demand for thermal management technologies.

The report analyzes the thermal market by four segments,

including hardware, software, interfaces, and substrates.

Transportation Market.

According to Frost & Sullivan’s recently released “Global Electric Vehicle Market

Outlook 2018,” global EV sales will climb from 1.2 million units in 2017 to approximately 2 million units in 2019.

industry will need to overcome major challenges related to battery technology and charging infrastructure, both of which have fallen

far short of the pace set by global EV sales.

The charging infrastructure market, which includes batteries and battery technology,

according to an AT Kearney report, will be a $29 billion global market by 2020 within the overall $390 billion global E-Mobility

As a result, there has

been an increased demand for thermal management technologies.

The report analyzes the thermal market by four segments, including

hardware, software, interfaces, and substrates.

Electrical Transportation

According to Frost & Sullivan’s recently released “Global Electric Vehicle Market Outlook EV industry

will need to overcome major challenges related to battery technology and charging infrastructure, both of which have fallen far

short of the pace set by global EV sales.

Computing Market .

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– could produce up to $12.3 trillion worth of goods and services enabled by 5G.

Computing Market .

Market analysts at Gartner, Inc.

project the cloud computing market to be $227 billion in 2019, up

from $146 billion in 2017 with sustained growth at 22% annually.

Forrester also predicts that more than 50% of global enterprises

will rely on at least one public cloud platform.

A key area of cloud computing is optical data transfer and communications connections

Optical data is faster and more efficient and, as cloud computing banks move to acquire and utilize optical data, thermal

management will play a pivotal role in maintaining the peak performance and safety of these expensive and highly sensitive computer

The processing demands of artificial intelligence (“AI”) technology in the cloud requires advanced thermal

management solutions for processors and memory modules.

Exploration and Communications Market .

According to BIS Research, the Space Industry,

is valued at $380 billion in 2019, and is projected grow at a CAGR of 5.6%, to a value of $558 billion by 2026.

Demand for nano-satellites

and re-usable launch vehicle systems is anticipated to be driven by the massive investment made by governments and

private enterprises.

The overall trend in space investment is stable financially but explosive numerically, providing vastly more

opportunity for space technology providers.

Increasingly, investments in space exploration and commercialization are being led

by well-funded private companies with most focused-on satellite development and deployment.

KULR’s heritage in space thermal

management technology positions us well in this market.

Cloud Computing Market .

A key area of cloud computing is optical data transfer and communications connections and lines.

Optical data is faster and more

efficient and, as cloud computing banks move to acquire and utilize optical data, thermal management will play a pivotal role

in maintaining the peak performance and safety of these expensive and highly sensitive computer connections.

The processing demands

of artificial intelligence (“AI”) technology in the cloud requires advanced thermal management solutions for processors

and memory modules.

Space Exploration and

Communications Market .

Demand for nano-satellites and re-usable launch vehicle systems

is anticipated to be driven by the massive investment made by governments and private enterprises.

The overall trend

in space investment is stable financially but explosive numerically, providing vastly more opportunity for space technology providers.

Increasingly, investments in space exploration and commercialization are being led by well-funded private companies with most

focused-on satellite development and deployment.

KULR’s heritage in space thermal management technology positions us well

in this market.

We believe KULR’s

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design flexibility and durability compared to traditional solutions.

As a result, we believe KULR has real potential to offer a

unique value proposition to customers in the multibillion-dollar thermal management industry.

As a result, we believe KULR has real potential to offer

a unique value proposition to customers in the multibillion-dollar thermal management industry.

KULR aims to provide cost-effective,

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Sales and Marketing Strategy

The Company markets

and sells products and solutions directly to customers.

We believe that our direct relationship with end customers allows us to

have more in-depth technical interactions with our customers and faster turnaround time.

We market to our customers through our

website, industry conferences, and industry market research reports.

In 2020, we plan to expand our sales network by working with

sales agents and distributors for more mature and off-the-shelf products such as FTI and Cathode product.

For PPR design service,

we will continue to work with customers directly.

The Company markets and

sells products and solutions directly to customers.

We believe that our direct relationship with end customers allows us to have

more in-depth technical interactions with our customers and faster turnaround time.

We market to our customers through our website,

industry conferences, and industry market research reports.

In 2021, we plan to expand our sales network by working with sales

agents and distributors for more mature and off-the-shelf products such as FTI and Cathode products.

For PPR design service, we

will continue to work with customers directly.

Advertising and Communications Strategy

We plan to utilize

all forms of advertising and communications tools at our disposal.

We plan to utilize all

forms of advertising and communications tools at our disposal.

This includes commissioning unbiased white papers and technical

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acquisition of intellectual property, and licensing of third-party patents and intellectual property.

May 14, 2020, we have eight pending nonprovisional and provisional patent applications and we have four patents

granted and assigned to KULR.

December 31, 2020, we have eight pending nonprovisional and provisional patent applications and we have four

patents granted and assigned to KULR.

We also have an exclusive license to four third party patents.

Product and Services

Our heat management

products and services can be divided into the following categories, subcategories and functionalities:

Ion (“L-ion”) Battery Thermal Runaway Shield (“TRS”) :

KULR has developed a thermal insulation

technology aimed at passive resistance to thermal runaway propagation in L-ion batteries in partnership with National Aeronautics

and Space Administration Johnson Space Center (“NASA JSC”).

HYDRA TRS acts as a heat sink during normal lithium-ion

battery pack operation but also prevents thermal runaway propagation, which is a serious concern for aerospace and defense customers

and electric vehicle manufacturers.

The HYDRA is a vaporizing thermal capacitor that provides passive prevention of thermal runaway

propagation (“TRP”) in lithium-ion battery packs.

Thermal runaway can occur spontaneously in a Li-ion cell due to a short.

trigger an explosive release of electric energy that ruptures the end cap resulting in a flare and combustion of cell materials.

Released heat drives the triggered cell temperatures to > 500°C, causing a dramatic increase in neighboring cell temperatures.

Temperatures above the critical 130°C greatly increases the chance for a short in adjacent cells and result in TRP.

neighboring cell temperatures from rising above 100°C (well below the 130°C threshold) and prevents TRP.

Thermal Interface Material (“FTI”) :

KULR thermal interface materials (“TIMs”) consist of vertically

oriented carbon fiber velvets attached to a film of polymer or metal.

The fiber packing density and orientation are selected to

serve a wide range of applications, including hostile thermal and chemical environments, sliding interfaces, and interfaces with

widely varying gaps.

They can be coated for electrical isolation.

Our heat management products and services

can be divided into the following categories, subcategories and functionalities:

Lithium-Ion Battery Thermal Runaway

Shield (“TRS”) :

KULR has developed a thermal insulation technology aimed at passive resistance to thermal runaway

propagation in Li-ion batteries in partnership with National Aeronautics and Space Administration Johnson Space Center (“NASA

HYDRA TRS acts as a heat sink during normal Li-ion battery pack operation but also prevents thermal runaway propagation,

which is a serious concern for aerospace and defense customers and electric vehicle manufacturers.

The HYDRA is a vaporizing thermal

capacitor that provides passive prevention of thermal runaway propagation (“TRP”) in Li-ion battery packs.

runaway can occur spontaneously in a Li-ion cell due to a short.

This can trigger an explosive release of electric energy that

ruptures the end cap resulting in a flare and combustion of cell materials.

Released heat drives the triggered cell temperatures

to > 500°C, causing a dramatic increase in neighboring cell temperatures.

Temperatures above the critical 130°C greatly

increases the chance for a short in adjacent cells and result in TRP.

TRS keeps neighboring cell temperatures from rising above

100°C (well below the 130°C threshold) and prevents TRP.

Fiber Thermal Interface Material

KULR thermal interface materials (“TIMs”) consist of vertically oriented carbon fiber velvets

attached to a film of polymer or metal.

The fiber packing density and orientation are selected to serve a wide range of applications,

including hostile thermal and chemical environments, sliding interfaces, and interfaces with widely varying gaps.

coated for electrical isolation.

They require low contact pressure and provide high thermal conductivity.

Their light weight and high compliance make them uniquely suited for aerospace, industrial and high-performance commercial devices.

Change Material (“PCM”) Heat Sink :

KULR PCM composite heat sinks consisting of a conductive carbon fiber

velvet embedded with a suitable alkane (“paraffin”) having high latent heat at its melting point.

Such heat sinks offer

passive thermal control for instruments that would otherwise overheat or under-cool during periodic operations.

A typical application

involves lasers that dissipate heat but need tight thermal control where active cooling is unavailable.

TRS Battery Storage Bag :

KULR developed HYDRA TRS Bag to safely store and transport lithium-ion batteries in partnership

with NASA Johnson Space Center for the International Space Stations.

Between January and June 2019 experts with NASA’s Propulsion

& Power Division tested storage and use of rechargeable lithium ion laptop batteries.

The tests intentionally triggered the

batteries into dangerous failures in order to study what storage methods may stop battery fires from spreading battery to battery

in thermal runaway propagation.

As a result, KULR TRS bags are currently in service on the International Space Station for storage

of spare laptop batteries, having flown November 2 , 2019 on the CRS2 NG-12 resupply mission.

KULR is developing a commercial

version for mass market applications.

Short Circuit (“ISC”) Device :

In March 2018, KULR reached an agreement with the National Renewable Energy

Laboratory (“NREL”), a national laboratory of the U.S.

Department of Energy, to be the exclusive manufacturing and

distribution partner for the patented ISC device, which causes predictable battery cell failures in Li-ion batteries, making them

easier to study and, therefore, safer.

Li-ion batteries are the industry and consumer standard for portable power;

billions of individual

battery cells exist and billions more are planned for production.

They provide power for everything from smart phones and laptops

to electric cars and space crafts.

Their light weight and

high compliance make them uniquely suited for aerospace, industrial and high-performance commercial devices.

Phase Change Material (“PCM”)

KULR PCM composite heat sinks consisting of a conductive carbon fiber velvet embedded with a suitable alkane (“paraffin”)

having high latent heat at its melting point.

Such heat sinks offer passive thermal control for instruments that would otherwise

overheat or under-cool during periodic operations.

A typical application involves lasers that dissipate heat but need tight thermal

control where active cooling is unavailable.

HYDRA TRS Battery Storage Bag :

KULR developed the HYDRA TRS Bag to safely store and transport Li-ion batteries in partnership with NASA Johnson Space Center

for the International Space Stations.

Between January and June 2019 experts with NASA’s Propulsion & Power Division

tested storage and use of rechargeable lithium-ion laptop batteries.

The tests intentionally triggered the batteries into dangerous

failures in order to study what storage methods may stop battery fires from spreading battery to battery in thermal runaway propagation.

As a result, KULR TRS bags are currently in service on the International Space Station for storage of spare laptop batteries,

having flown November 2, 2019 on the CRS2 NG-12 resupply mission.

KULR is developing a commercial version for mass market applications.

Internal Short Circuit (“ISC”)

In March 2018, KULR reached an agreement with the National Renewable Energy Laboratory (“NREL”), a national

laboratory of the U.S.

Department of Energy, to be the exclusive manufacturing and distribution partner for the patented ISC device,

which causes predictable battery cell failures in Li-ion batteries, making them easier to study and, therefore, safer.

batteries are the industry and consumer standard for portable power;

billions of individual battery cells exist and billions more

are planned for production.

They provide power for everything from smart phones and laptops to electric cars and space crafts.

But Li-ion batteries fail, sometimes with catastrophic results.

Due to the relative rarity of

cell failures, scientists and researchers had been unable to reliably or accurately replicate latent defect cell failures in lab

settings, impeding research into safer battery technology.

In 2019, KULR has produced and sold both ISC devices and ISC trigger

cells to customers.

Due to the relative rarity of cell failures, scientists and researchers

had been unable to reliably or accurately replicate latent defect cell failures in lab settings, impeding research into safer

battery technology.

In 2020, KULR has produced and sold both ISC devices and ISC trigger cells to customers.

CRUX Cathode :

CRUX Cathode is composed of a carbon fiber velvet, providing a means of generating powerful electron pulses by field emission from

the tops of the carbon fibers.

The CRUX Cathode

is composed of a carbon fiber velvet, providing a means of generating powerful electron pulses by field emission from the tops

of the carbon fibers.

CRUX Cathodes can be customized for different applications including the generation of microwaves,

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Currently, the battery

industry uses a number of solutions to mitigate thermal runaway propagation that are offered by Unifrax, Lydall, LHS,

3M, Engineered Syntactic Systems, Celono, AllCell and others.

Each of their solutions offer unique features and benefits for a

specific application.

industry uses a number of solutions to mitigate thermal runaway propagation that are offered by Unifrax, Lydall, LHS, 3M, Engineered

Syntactic Systems, Celono, AllCell and others.

Each of their solutions offer unique features and benefits for a specific application.

We do not believe, however, that there is a one-size-fits-all solution across all applications.

our PPR design solution offers competitive light-weight and effective solutions for high energy battery cells because it is more

flexible and can fit into different design configurations.

For applications that require passive, light-weight solutions for high

energy density battery cells, TRS offers a competitive solution.

We believe our PPR design solution

offers competitive light-weight and effective solutions for high energy battery cells because it is more flexible and can fit

into different design configurations.

For applications that require passive, light-weight solutions for high energy density battery

cells, TRS offers a competitive solution.

Thermal interface material

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These solutions are typically based on silicone and thermal particles.

KULR’s FTI offers high bulk thermal conductivity and

low contact pressure requirements, which we believe gives us a competitive advantage over other thermal interface solutions.

KULR’s FTI offers high bulk thermal conductivity

and low contact pressure requirements, which we believe gives us a competitive advantage over other thermal interface solutions.

Our licensed ISC device

offers a reliable way to trigger battery cell thermal runaway compared to nail penetration, over-charging or over-heating the cell.

ISC d oes not rely on mechanically damaging the battery exterior to activate

the short, as do most of the other evaluation methodologies.

offers a reliable way to trigger battery cell thermal runaway compared to nail penetration, over-charging or over-heating the

ISC d oes not rely on mechanically damaging the battery exterior to activate the short,

as do most of the other evaluation methodologies.

Instead, the ISC devices trigger true internal shorts.

it possible to accurately pinpoint and fix problems leading to malfunctions, an ability that we believe will give us a competitive

advantage over other testing solutions.

This makes it possible

to accurately pinpoint and fix problems leading to malfunctions, an ability that we believe will give us a competitive advantage

over other testing solutions.

Governmental Regulation and Environmental

substances we use in our manufacturing process are subject to federal governmental regulations (such as Environmental Protect Agency

regulations).

We believe we are in material compliance with all applicable governmental regulations, and that the cost and

effect of compliance with environmental laws is not material.

As a small generator of hazardous

substances, we are subject to local governmental regulations relating to the storage, discharge, handling, emission, generation,

manufacture and disposal of toxic or other hazardous substances, such as acetone that is used in very small quantities to manufacture

our products.

substances we use in our manufacturing process are subject to federal governmental regulations (such as Environmental Protect

Agency regulations).

We believe we are in material compliance with all applicable governmental regulations, and that the

cost and effect of compliance with environmental laws is not material.

As a small generator

of hazardous substances, we are subject to local governmental regulations relating to the storage, discharge, handling, emission,

generation, manufacture and disposal of toxic or other hazardous substances, such as acetone that is used in very small quantities

to manufacture our products.

We are currently in compliance with these regulations.

Most new materials sold in the U.S or in many other

countries require regulation by government authorities.

In most other countries, there are no specific regulations that require

additional regulation, but some countries do have registration requirements with which we comply to the best our ability.

As of May 14, 2020,

Most new materials sold in the U.S

or in many other countries require regulation by government authorities.

In most other countries, there are no specific regulations

that require additional regulation, but some countries do have registration requirements with which we comply to the best our

As of December 31, 2020,

we had 9 employees and 4 consultants.

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Intellectual Property

We seek to establish

and maintain our proprietary rights in our technology and products through the use of patents, copyright, trademarks and trade

We have, and will continue to, file applications for and/or obtain patents, copyrights and trademarks in the United States

and selected foreign countries where we believe filing for such protection is appropriate.

We also seek to maintain our trade

secrets and confidential information by implementing organizational nondisclosure policies and through the use of appropriate

confidentiality agreements.

As of May 14, 2020, we held four U.S.

We seek to establish and

maintain our proprietary rights in our technology and products through the use of patents, copyright, trademarks and trade secrets.

We have, and will continue to, file applications for and/or obtain patents, copyrights and trademarks in the United States and

selected foreign countries where we believe filing for such protection is appropriate.

We also seek to maintain our trade secrets

and confidential information by implementing organizational nondisclosure policies and through the use of appropriate confidentiality

As of December 31, 2020, we held four U.S.

patents and eight non-provisional pending U.S.

patent applications

with expiration dates ranging from 2022 to 2035.

patent applications with

expiration dates ranging from 2022 to 2035.

In addition, KULR has exclusive license on four patents from its partnerships.

There can be no assurance, however, that the rights obtained can be successfully enforced against infringing products in every

jurisdiction.

While our patents, copyrights, trademarks, and trade secrets provide some advantage and protection, we believe our

competitive position and future success is largely determined by such factors as the system and application knowledge, innovative

skills, technological expertise and management ability and experience of our personnel;

the range and success of new products

being developed by us;

can be no assurance, however, that the rights obtained can be successfully enforced against infringing products in every jurisdiction.

While our patents, copyrights, trademarks, and trade secrets provide some advantage and protection, we believe our competitive

position and future success is largely determined by such factors as the system and application knowledge, innovative skills,

technological expertise and management ability and experience of our personnel;

the range and success of new products being developed

our market brand recognition and ongoing marketing efforts;

and customer service and technical support.

We also have trademarks that are used in the conduct of our business to distinguish genuine KULR products;

KULR has been granted

trademarks for Class 9 and Class 17 applications.

On April 15, 2013,

KULR entered into a license and development agreement (the “ESLI License Agreement”) with Energy Science Laboratories,

(“ESLI”) pursuant to which ESLI received a significant ownership stake in KULR, and in exchange ESLI granted to

KULR and its affiliates an irrevocable, exclusive, world-wide license to ESLI’s Thermal Management Technologies and Thermal

Intellectual Property (as such terms are defined in the ESLI License Agreement).

Subsequently, on November 16, 2016, KULR and ESLI

entered into a patent assignment agreement (the “ESLI Patent Assignment”) pursuant to which ESLI assigned to KULR certain

patents and patent applications owned by ESLI.

An investment in the

Company’s common stock involves a high degree of risk.

In determining whether to purchase the Company’s common stock,

an investor should carefully consider all of the material risks described below, together with the other information contained

in this report before deciding to purchase the Company’s securities.

An investor should only purchase the Company’s

securities if he or she can afford to suffer the loss of his or her entire investment.

Risks Related to Our Business and

We are a young

company with a limited operating history, making it difficult for you to evaluate our business and your investment.

We also have trademarks

that are used in the conduct of our business to distinguish genuine KULR products;

KULR has been granted trademarks for Class

9 and Class 17 applications.

An investment in the Company’s

common stock involves a high degree of risk.

In determining whether to purchase the Company’s common stock, an investor

should carefully consider all of the material risks described below, together with the other information contained in this report

before deciding to purchase the Company’s securities.

An investor should only purchase the Company’s securities if

he or she can afford to suffer the loss of his or her entire investment.

Risks Related to Our Business and Our

We are a young company

with a limited operating history, making it difficult for you to evaluate our business and your investment.

KULR was formed in 2015

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The Company, as a whole, has limited operating history.

We have not yet demonstrated sales of

products at a level capable of covering our fixed expenses.

Since inception, we have not demonstrated the capability to produce

sufficient materials to generate the ongoing revenues necessary to sustain our operations in the long-term.

Nor have we demonstrated

the ability to generate sufficient sales to sustain the business.

There can be no assurance that the Company will ever produce

We have not yet demonstrated sales of products

at a level capable of covering our fixed expenses.

Since inception, we have not demonstrated the capability to produce sufficient

materials to generate the ongoing revenues necessary to sustain our operations in the long-term.

Nor have we demonstrated the

ability to generate sufficient sales to sustain the business.

There can be no assurance that the Company will ever produce a profit.

Many of the Company’s

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achieve sufficient revenues for profitable operations, which could cause us to cease operations.

KULR primarily sells

bulk materials or products made with these materials to other companies for incorporation into their products.

KULR primarily sells bulk

materials or products made with these materials to other companies for incorporation into their products.

Although KULR’s

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incorporation of our materials or products into customer products that are released for commercial sale as of the date of this

Because there is no demonstrated history of large-scale commercial success for our products, it is possible that such commercial

success may never happen and that we will never achieve the level of revenues necessary to sustain our business.

There is substantial

doubt about our ability to continue as a going concern.

As of December 31,

2019, we had a working capital deficit and accumulated deficit of $824,481 and $8,396,312, respectively.

During the year ended

December 31, 2019, we had a net loss and used cash in operations of $1,979,753 and $1,188,339, respectively.

We have historically

incurred operating losses and may continue to incur operating losses for the foreseeable future.

We believe that these conditions

raise substantial doubt about our ability to continue as a going concern.

This may hinder our future ability to obtain financing

or may force us to obtain financing on less favorable terms than would otherwise be available.

Although we have generated revenues

from the sale of our products, we have only recently begun to market and sell our products and solutions.

If we are unable

to develop sufficient revenues and additional customers for our products and services, we will not generate enough

revenue to sustain our business, and we may fail.

There can be no assurance that we will be able to continue as a going concern.

to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed

Because there is no demonstrated history of large-scale commercial success for our products, it is possible that such

commercial success may never happen and that we will never achieve the level of revenues necessary to sustain our business.

We will need to

raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed

and on acceptable terms, which could have a materially adverse effect on our business.

We anticipate that

we will incur operating losses for the foreseeable future.

We anticipate that we

will incur operating losses for the foreseeable future.

We may require additional funds for our anticipated operations and if

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production processes and facilities to support sustainable sales levels, the Company may be forced to curtail or cease operations.

We have a long

and complex sales cycle and have not demonstrated the ability to operate successfully in this environment.

We have a long and

complex sales cycle and have not demonstrated the ability to operate successfully in this environment.

It has been our experience

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testing our products until the time that they could be successfully used in a commercial product.

We have only demonstrated a limited

track record of success in completing customer development projects, which makes it difficult for you to evaluate the likelihood

of our future success.

The sales and development cycle for our products is subject to customer budgetary constraints, internal

acceptance procedures, competitive product assessments, scientific and development resource allocations, and other factors beyond

If we are not able to successfully accommodate these factors to enable customer development success, we will be unable

to achieve sufficient sales to reach profitability.

In this case, the Company may not be able to raise additional funds and may

be forced to curtail or cease operations and you could lose all or a significant part of your investment.

We have only demonstrated a

limited track record of success in completing customer development projects, which makes it difficult for you to evaluate the

likelihood of our future success.

The sales and development cycle for our products is subject to customer budgetary constraints,

internal acceptance procedures, competitive product assessments, scientific and development resource allocations, and other factors

beyond our control.

If we are not able to successfully accommodate these factors to enable customer development success, we will

be unable to achieve sufficient sales to reach profitability.

In this case, the Company may not be able to raise additional funds

and may be forced to curtail or cease operations and you could lose all or a significant part of your investment.

We are dependent

on customers and partners to design and test our solution into new applications which may not be brought to market successfully.

The Company targets

its thermal management solution for new applications and devices that require high performance and unique features offered by its

The Company targets its

thermal management solution for new applications and devices that require high performance and unique features offered by its

Developing new applications and devices involves a lengthy and complex process, and they may not be commercialized on

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The Company’s success is directly related to the success of these new products.

Furthermore, because

the Company’s solutions are relatively new to mass market consumer electronics, the design and testing time is longer than

traditional solutions.

because the Company’s solutions are relatively new to mass market consumer electronics, the design and testing time is longer

than traditional solutions.

Moreover, in transitioning to new technologies and products, we may not achieve design wins, our customers

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concentration risk as a result of our reliance on a relatively small number of customers for a significant portion of our revenues.

For 2019, we had 3 customers whose purchases accounted for 69% of total product revenues.

Due to the nature of our business and

the relatively large size of many of the applications our customers are developing, we anticipate that we will be dependent on

a relatively small number of customers for the majority of our revenues for the next several years.

It is possible that only one

or two customers could place orders sufficient to utilize most or all of our existing manufacturing capacity.

In this case, there

would be at risk of significant loss of future revenues if one or more of these customers were to stop ordering our materials,

which could in turn have a material adverse effect on our business and on your investment.

We operate in

an advanced technology arena where hypothesized properties and benefits of our products may not be achieved in practice, or in

which technological change may alter the attractiveness of our products.

Because there is no

sustained history of successful use of our products in commercial applications, there is no assurance that broad successful commercial

applications may be technically feasible.

Some of the scientific and engineering data related to our products has been generated

in our own laboratories or in laboratory environments at our customers or third-parties.

It is well known that laboratory data

is not always representative of commercial applications.

Likewise, we operate

in a market that is subject to rapid technological change.

For 2020, we had 2 customers whose purchases accounted for 50% of total revenues.

Due to the nature of our business and the relatively

large size of many of the applications our customers are developing, we anticipate that we will be dependent on a relatively small

number of customers for the majority of our revenues for the next several years.

It is possible that only one or two customers

could place orders sufficient to utilize most or all of our existing manufacturing capacity.

In this case, there would

be at risk of significant loss of future revenues if one or more of these customers were to stop ordering our materials, which

could in turn have a material adverse effect on our business and on your investment.

We operate in an

advanced technology arena where hypothesized properties and benefits of our products may not be achieved in practice, or in which

technological change may alter the attractiveness of our products.

Because there is no sustained

history of successful use of our products in commercial applications, there is no assurance that broad successful commercial applications

may be technically feasible.

Some of the scientific and engineering data related to our products has been generated in our own

laboratories or in laboratory environments at our customers or third-parties.

It is well known that laboratory data is not always

representative of commercial applications.

Likewise, we operate in

a market that is subject to rapid technological change.

Part of our business strategy is to monitor such change and take steps

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adversely affected.

Such an occurrence may have severe consequences, including the potential for our investors to lose all of their

Such an occurrence may have severe consequences, including the potential for our investors to lose all of

their investment.

Competitors that

are larger and better funded may cause the Company to be unsuccessful in selling its products.

The Company operates

in a market that is expected to have significant competition in the future.

Global research is being conducted by substantially

larger companies who have greater financial, personnel, technical, and marketing resources.

There can be no assurance that the

Company’s strategy of offering better thermal management solutions based on the Company’s proprietary carbon fiber-based

products will be able to compete with other companies, many of whom will have significantly greater resources, on a continuing

In the event that we cannot compete successfully, the Company may be forced to cease operations.

Because of our

small size and limited operating history, we are dependent on key employees.

The Company’s

operations and development are dependent upon the experience and knowledge of Michael Mo, our Chief Executive Officer, Simon Westbrook

our Chief Financial Officer, Dr.

Timothy Knowles, our Chief Technical Officer and Michael Carpenter, our Vice President of Engineering.

If the services of any of these individuals should become unavailable, the Company’s business operations might be adversely

If several of these individuals became unavailable at the same time, the ability of the Company to continue normal business

operations might be adversely affected to the extent that revenue or profits could be diminished, and you could lose all or a significant

amount of your investment.

The Company operates in

a market that is expected to have significant competition in the future.

Global research is being conducted by substantially larger

companies who have greater financial, personnel, technical, and marketing resources.

There can be no assurance that the Company’s

strategy of offering better thermal management solutions based on the Company’s proprietary carbon fiber-based products

will be able to compete with other companies, many of whom will have significantly greater resources, on a continuing basis.

the event that we cannot compete successfully, the Company may be forced to cease operations.

Because of our small

size and limited operating history, we are dependent on key employees.

The Company’s operations

and development are dependent upon the experience and knowledge of Michael Mo, our Chief Executive Officer, Simon Westbrook our

Chief Financial Officer, Dr.

Timothy Knowles, our Chief Technical Officer, Keith Cochran, our President and Chief Operating Officer,

and Michael Carpenter, our Vice President of Engineering.

If the services of any of these individuals should become unavailable,

the Company’s business operations might be adversely affected.

If several of these individuals became unavailable at the

same time, the ability of the Company to continue normal business operations might be adversely affected to the extent that revenue

or profits could be diminished, and you could lose all or a significant amount of your investment.

Our success depends

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property could reduce any competitive advantage we have developed, reduce our market share or otherwise harm our business.

event of unauthorized use of our intellectual property, litigation to protect or enforce our rights could be costly, and we may

the event of unauthorized use of our intellectual property, litigation to protect or enforce our rights could be costly, and we

may not prevail.

Many of our technologies

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patent, trademark, copyright and trade secret protection may be unavailable or limited in some foreign countries.

on unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets to develop and maintain

our competitive position.

Although we generally enter into confidentiality agreements with our employees and third parties to protect

our intellectual property, these confidentiality agreements are limited in duration and could be breached, and may not provide

meaningful protection of our trade secrets or proprietary manufacturing expertise.

Adequate remedies may not be available if there

is an unauthorized use or disclosure of our trade secrets and manufacturing expertise.

In addition, others may obtain knowledge

about our trade secrets through independent development or by legal means.

The failure to protect our processes, apparatus, technology,

trade secrets and proprietary manufacturing expertise, methods and compounds could have a material adverse effect on our business

by jeopardizing critical intellectual property.

on unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets to develop and

maintain our competitive position.

Although we generally enter into confidentiality agreements with our employees and third parties

to protect our intellectual property, these confidentiality agreements are limited in duration and could be breached, and may

not provide meaningful protection of our trade secrets or proprietary manufacturing expertise.

Adequate remedies may not be available

if there is an unauthorized use or disclosure of our trade secrets and manufacturing expertise.

In addition, others may obtain

knowledge about our trade secrets through independent development or by legal means.

The failure to protect our processes, apparatus,

technology, trade secrets and proprietary manufacturing expertise, methods and compounds could have a material adverse effect

on our business by jeopardizing critical intellectual property.

Where a product formulation

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If our technologies

conflict with the proprietary rights of others, we may incur substantial costs as a result of litigation or other proceedings and

we could face substantial monetary damages and be precluded from commercializing our products, which would materially harm our

business and financial condition.

conflict with the proprietary rights of others, we may incur substantial costs as a result of litigation or other proceedings

and we could face substantial monetary damages and be precluded from commercializing our products, which would materially harm

our business and financial condition.

Patents in the thermal

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the scope of coverage afforded by a patent and the courts do not always arrive at uniform conclusions.

A patent owner may

claim that we are making, using, selling or offering for sale an invention covered by the owner’s patents and may go to court

A patent owner may claim

that we are making, using, selling or offering for sale an invention covered by the owner’s patents and may go to court

to stop us from engaging in such activities.

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patents and would order us to stop the activities covered by the patents, including the commercialization of our products.

there is a risk that we would have to pay the other party damages for having violated the other party’s patents (which damages

may be increased, as well as attorneys’ fees ordered paid, if infringement is found to be willful), or that we will be required

to obtain a license from the other party in order to continue to commercialize the affected products, or to design our products

in a manner that does not infringe a valid patent.

We may not prevail in any legal action, and a required license under the patent

may not be available on acceptable terms or at all, requiring cessation of activities that were found to infringe a valid patent.

We also may not be able to develop a non-infringing product design on commercially reasonable terms, or at all.

addition, there is a risk that we would have to pay the other party damages for having violated the other party’s patents

(which damages may be increased, as well as attorneys’ fees ordered paid, if infringement is found to be willful), or that

we will be required to obtain a license from the other party in order to continue to commercialize the affected products, or to

design our products in a manner that does not infringe a valid patent.

We may not prevail in any legal action, and a required

license under the patent may not be available on acceptable terms or at all, requiring cessation of activities that were found

to infringe a valid patent.

We also may not be able to develop a non-infringing product design on commercially reasonable terms,

We may not obtain U.S.

contracts to further develop our technology.

Government contracts

to further develop our technology.

We can give no assurances

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Government contracts utilizing our carbon fiber-based solutions.

general economic conditions could adversely affect our profitability.

Downturns in general

economic conditions can cause fluctuations in demand for our products, product prices, volumes and gross margins.

Future economic

conditions may not be favorable to our industry.

A decline in the demand for our products or a shift to lower-margin products due

to deteriorating economic conditions could adversely affect sales of our products and our profitability and could also result in

impairments of certain of our assets.

economic conditions could adversely affect our profitability.

Downturns in general economic

conditions can cause fluctuations in demand for our products, product prices, volumes and gross margins.

Future economic conditions

may not be favorable to our industry.

A decline in the demand for our products or a shift to lower-margin products due to deteriorating

economic conditions could adversely affect sales of our products and our profitability and could also result in impairments of

certain of our assets.

Furthermore, any uncertainty

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our customers may be able or willing to pay for our products or by reducing the demand for our products.

An increase in

the cost of raw materials or electricity might affect our profits.

Any increase in the

prices of our raw materials or energy might affect the overall cost of our products.

If we are not able to raise our prices to

pass on increased costs to our customers, we would be unable to maintain our existing profit margins.

Our major cost components

include items such as production materials and electricity, which items are normally readily available industrial commodities.

During our history as a business, we have not seen any material impact (as defined by GAAP) on our cost structure from fluctuations

in raw material or energy costs, but this could change in the future.

Our results of

operations could deteriorate if our manufacturing operations were substantially disrupted for an extended period.

An increase in the

cost of raw materials or electricity might affect our profits.

Any increase in the prices

of our raw materials or energy might affect the overall cost of our products.

If we are not able to raise our prices to pass on

increased costs to our customers, we would be unable to maintain our existing profit margins.

Our major cost components include

items such as production materials and electricity, which items are normally readily available industrial commodities.

our history as a business, we have not seen any material impact (as defined by GAAP) on our cost structure from fluctuations in

raw material or energy costs, but this could change in the future.

Our results of operations

could deteriorate if our manufacturing operations were substantially disrupted for an extended period.

Our manufacturing operations

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If such an event occurs, it could have a material adverse effect on us.

We may become

subject to liabilities related to risks inherent in working with hazardous materials.

Our development and

manufacturing processes involve the controlled use of hazardous materials, such as acetone.

We are subject to federal, provincial

and local laws and EPA regulations governing the use, manufacture, storage, handling and disposal of such materials and certain

waste products.

Although we believe that our safety procedures for handling and disposing of such materials comply with the standards

prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely

In the event of such an accident, we could be held liable for any damages that result and any such liability could

exceed our resources.

We may become subject

to liabilities related to risks inherent in working with hazardous materials.

Our development and manufacturing

processes involve the controlled use of hazardous materials, such as acetone.

We are subject to federal, provincial and local

laws and EPA regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products.

Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed

by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated.

In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our

We are not specifically insured with respect to this liability.

Although we believe that we are in compliance

in all material respects with applicable environmental laws and regulations and currently do not expect to make material capital

expenditures for environmental control facilities in the near-term, if we fail to comply with these regulations substantial fines

could be imposed on us and we could be required to suspend production, alter manufacturing processes or cease operations.

Although we believe that we are in compliance in all

material respects with applicable environmental laws and regulations and currently do not expect to make material capital expenditures

for environmental control facilities in the near-term, if we fail to comply with these regulations substantial fines could be

imposed on us and we could be required to suspend production, alter manufacturing processes or cease operations.

there can be no assurance that we will not be required to incur significant costs to comply with environmental laws and regulations

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laws or regulations.

Future adverse

regulations could affect the viability of the business.

Future adverse regulations

could affect the viability of the business.

a small generator of hazardous substances, we are subject to local governmental regulations relating to the storage, discharge,

handling, emission, generation, manufacture and disposal of toxic or other hazardous substances, such as acetone that is used in

very small quantities to manufacture our products.

handling, emission, generation, manufacture and disposal of toxic or other hazardous substances, such as acetone that is used

in very small quantities to manufacture our products.

We are currently in compliance with these regulations.

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case the Company’s financial prospects might be severely limited, causing investors to lose some or all of their investment.

directors and officers may be exposed to liability .

currently maintain a policy for director and officer liability insurance, also known as “D&O Insurance.” However,

the maximum coverage under our D&O Insurance policy may not be sufficient to cover all such liability exposure and, as a result,

it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

Our directors and

officers may be exposed to liability .

We currently maintain

a policy for director and officer liability insurance, also known as “D&O Insurance.” However, the maximum coverage

under our D&O Insurance policy may not be sufficient to cover all such liability exposure and, as a result, it may be more

difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

Compliance with

changing regulation of corporate governance and public disclosure will result in additional expenses and will divert time and attention

away from revenue generating activities.

changing regulation of corporate governance and public disclosure will result in additional expenses and will divert time and

attention away from revenue generating activities.

Changing laws, regulations

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have an adverse effect on our business.

If we fail to

maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

In the past, our management

identified weaknesses in our internal controls and although our management believes such weaknesses have been remediated, our internal

control over financial reporting may still or could in the future have weaknesses and conditions that could require correction

or remediation, the disclosure of which may have an adverse impact on the price of our common stock.

We are required to establish

and maintain appropriate internal controls over financial reporting.

Failure to establish those controls, or any failure of

those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition

we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

Our management identified

weaknesses in our internal controls, as described in Item 9A here within.

Our internal control over financial reporting may still

or could in the future have weaknesses and conditions that could require correction or remediation, the disclosure of which and

continued existence of which may have an adverse impact on the price of our common stock.

We are required to establish and

maintain appropriate internal controls over financial reporting.

Failure to establish those controls, or any failure of those

controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition

or results of operations.

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our business could be harmed and our stock price could decline.

Rules adopted by the

SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial

reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting

The standards that must be met for management to assess the internal controls over financial reporting as effective

are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards.

expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis.

It is difficult

for us to predict how long it will take or how costly it will be to complete the assessment of the effectiveness of our internal

control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting.

As a result, we may not be able to complete the assessment and remediation process on a timely basis.

Rules adopted by the SEC

pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting,

and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm.

standards that must be met for management to assess the internal controls over financial reporting as effective are evolving and

complex, and require significant documentation, testing, and possible remediation to meet the detailed standards.

to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis.

It is difficult for

us to predict how long it will take or how costly it will be to complete the assessment of the effectiveness of our internal control

over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting.

a result, we may not be able to complete the assessment and remediation process on a timely basis.

In addition, although

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In the event that our Chief Executive Officer or Chief Financial Officer

determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how

regulators will react or how the market prices of our shares will be affected;

however, we believe that there is a risk that investor

confidence and share value may be negatively affected.

determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict

how regulators will react or how the market prices of our shares will be affected;

however, we believe that there is a risk that

investor confidence and share value may be negatively affected.

Risks Relating to Our Common Stock

our common stock is volatile and fluctuations in our operating results and announcements and developments concerning our business

The price of our

common stock is volatile and fluctuations in our operating results and announcements and developments concerning our business

affect our stock price, which may cause investment losses for our stockholders.

The market for our

common stock is highly volatile and the trading price of our stock quoted on the OTCQB is subject to wide fluctuations in response

to, among other things, operating results, the number of stockholders desiring to sell their shares, changes in general economic

conditions and the financial markets, the execution of new contracts and the completion of existing agreements and other developments

affecting us.

In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry

analysts relating to our market or relating to us could result in an immediate and adverse effect on the market price of our common

The market for our common

stock is highly volatile and the trading price of our stock quoted on the OTCQB is subject to wide fluctuations in response to,

among other things, operating results, the number of stockholders desiring to sell their shares, changes in general economic conditions

and the financial markets, the execution of new contracts and the completion of existing agreements and other developments affecting

In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts

relating to our market or relating to us could result in an immediate and adverse effect on the market price of our common stock.

The highly volatile nature of our stock price may cause investment losses for our shareholders.

In the past, securities

class action litigation has been brought against companies following periods of volatility in the market price of their securities.

In the past, securities class

action litigation has been brought against companies following periods of volatility in the market price of their securities.

If securities class action litigation is brought against us, such litigation could result in substantial costs while diverting

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in our stock cumbersome and may reduce the value of an investment in our stock.

The Securities and

Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock,"

for the purposes relevant

to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00

per share, subject to certain exceptions.

The Securities and Exchange

Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock,"

for the purposes relevant to

us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per

share, subject to certain exceptions.

For any transaction involving a penny stock, unless exempt, the rules require:

That a broker or dealer approve a person's account for transactions in penny stocks;

The broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions

in penny stocks, the broker or dealer must:

Obtain financial information and investment experience objectives of the person;

Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer

must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the

penny stock market, which, in highlight form:

Sets forth the basis on which the broker or dealer made the suitability determination;

That the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers

may be less willing to execute transactions in securities subject to the "penny stock"

That a broker or dealer approve a person's account for transactions

in penny stocks;

The broker or dealer receives from the investor a written agreement

to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny

stocks, the broker or dealer must:

Obtain financial information and investment experience objectives

of the person;

Make a reasonable determination that the transactions in penny

stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable

of evaluating the risks of transactions in penny stocks.

The broker or dealer must

also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny

stock market, which, in highlight form:

Sets forth the basis on which the broker or dealer made the

suitability determination;

That the broker or dealer received a signed, written agreement

from the investor prior to the transaction.

Generally, brokers may

be less willing to execute transactions in securities subject to the "penny stock"

This may make it more difficult

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sell our common stock.

In addition to the

“penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer,

a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.

Prior to recommending

speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information

In addition to the “penny

stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer

must have reasonable grounds for believing that the investment is suitable for that customer.

Prior to recommending speculative

low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information

about the customer’s financial status, tax status, investment objectives and other information.

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stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

thinly traded, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell a significant number

of your shares.

Our stock is thinly

traded, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell a significant number of

The shares of our common

stock are thinly-traded on the OTCQB, meaning that the number of persons interested in purchasing our common stock at or near bid

prices at any given time may be relatively small or non-existent.

As a consequence, there may be periods of several days or

more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady

volume of trading activity that will generally support continuous sales without an adverse effect on share price.

We cannot give

you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that

current trading levels will be sustained.

Due to these conditions, we can give you no assurance that you will be able to sell your

shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares.

stock are thinly-traded on the OTCQB, meaning that the number of persons interested in purchasing our common stock at or near

bid prices at any given time may be relatively small or non-existent.

As a consequence, there may be periods of several days

or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and

steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.

give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained,

or that current trading levels will be sustained.

Due to these conditions, we can give you no assurance that you will be able

to sell your shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares.

Shares eligible

for future sale may adversely affect the market.

From time to time,

certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage

transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations.

pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information

Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), and current

public information and notice requirements.

Any substantial sales of our common stock pursuant to Rule 144 may have a material

adverse effect on the market price of our common stock.

From time to time, certain

of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions

in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations.

In general, pursuant

to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information

Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), and

current public information and notice requirements.

Any substantial sales of our common stock pursuant to Rule 144 may have a

material adverse effect on the market price of our common stock.

If we sell shares of our common stock

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Equity Distribution Agreement, we may sell up to $8,000,000 of shares of our common stock over a 24-month period at our discretion

and subject to certain limitations, and, as consideration for YA II PN, Ltd’s (“YA”) entering into the Standby

Equity Distribution Agreement, we agreed to issue to YA an aggregate of up to 95,847 commitment shares.

The sale of shares

of our common stock pursuant to the Standby Equity Distribution Agreement will have a dilutive impact on our existing stockholders.

The number of shares ultimately offered for sale by YA under this prospectus supplement is dependent upon the number of shares

we elect to sell to YA under the Standby Equity Distribution Agreement.

YA may ultimately purchase all, some or none of the $8,000,000

of shares of common stock that, together with the commitment shares, are the subject of this statement.

YA may resell all,

some or none of the shares we issue to it under the Standby Equity Distribution Agreement.

and subject to certain limitations, and, as consideration for YA II PN, Ltd’s (“YA”) entering into the Standby

Equity Distribution Agreement, we issued to YA an aggregate of 95,847 commitment shares.

If we submit additional

advance notices to YA, the sale of shares of our common stock pursuant to the Standby Equity Distribution Agreement will have a

dilutive impact on our existing stockholders.

The number of shares ultimately offered for sale by YA is dependent upon the number

of shares we elect to sell to YA under the Standby Equity Distribution Agreement.

YA may ultimately purchase all or some of the

$8,000,000 of shares of common stock that, together with the commitment shares, are issuable in connection with the Standby Equity

Distribution Agreement.

YA may resell all, some

or none of the shares we issue to it under the Standby Equity Distribution Agreement.

Sales by YA of shares acquired pursuant

to the Standby Equity Distribution Agreement could cause the market price of our common stock to decline, which decline could be

The sale of a substantial number of shares of our common stock by YA, or the anticipation of such sales, could make

it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise

We could issue

additional common stock, which might dilute the book value of our common stock.

to the Standby Equity Distribution Agreement could cause the market price of our common stock to decline, which decline could

be significant.

The sale of a substantial number of shares of our common stock by YA, or the anticipation of such sales, could

make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might

otherwise wish.

We could issue additional

common stock, which might dilute the book value of our common stock.

Our Board of Directors

has authority, without action or vote of our shareholders, to issue all or a part of our authorized but unissued shares.

issuances could be made at a price that reflects a discount or a premium from the then-current trading price of our common stock.

In addition, in order to raise capital, we may need to issue securities that are convertible into or exchangeable for a significant

amount of our common stock.

These issuances would dilute the percentage ownership interest, which would have the effect of reducing

your influence on matters on which our shareholders vote and might dilute the book value of our common stock.

You may incur additional

dilution if holders of stock options, whether currently outstanding or subsequently granted, exercise their options, or if we issue

warrants in the future and such warrant holders exercise their warrants to purchase shares of our common stock.

stock issuances could be made at a price that reflects a discount or a premium from the then-current trading price of our common

In addition, in order to raise capital, we have and may need to issue securities that are convertible into or exchangeable

for a significant amount of our common stock.

These issuances would dilute the percentage ownership interest, which would have

the effect of reducing your influence on matters on which our shareholders vote and might dilute the book value of our common

You may incur additional dilution if holders of stock options, whether currently outstanding or subsequently granted, exercise

their options, or if warrant holders exercise their warrants, whether currently outstanding or subsequently granted, to purchase

shares of our common stock.

Our common stock

could be further diluted as a result of the issuance of convertible securities, warrants or options.

the past, we have issued convertible securities (such as convertible debentures and notes), warrants and options in order to raise

money or as compensation for services and incentive compensation for our employees and directors.

We have shares of common stock

reserved for issuance upon the exercise of certain of these securities and may increase the shares reserved for these purposes

in the future.

Our issuance of these convertible securities, options and warrants could affect the rights of our stockholders,

could reduce the market price of our common stock or could result in adjustments to exercise prices of outstanding warrants (resulting

in these securities becoming exercisable for, as the case may be, a greater number of shares of our common stock), or could obligate

us to issue additional shares of common stock to certain of our stockholders.

We may experience volatility in our

stock price, which may adversely affect the trading price of our common stock.

In the past, we have issued

convertible securities (such as convertible debentures and notes), warrants and options in order to raise money or as compensation

for services and incentive compensation for our employees and directors.

We have shares of common stock reserved for issuance

upon the exercise of certain of these securities and may increase the shares reserved for these purposes in the future.

of these convertible securities, options and warrants could affect the rights of our stockholders, could reduce the market price

of our common stock or could result in adjustments to exercise prices of outstanding warrants (resulting in these securities becoming

exercisable for, as the case may be, a greater number of shares of our common stock), or could obligate us to issue additional

shares of common stock to certain of our stockholders.

We may experience volatility in our stock

price, which may adversely affect the trading price of our common stock.

The sale prices of our common stock as reported

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developments in patent or other technology ownership rights;

Other factors which may affect our stock

price include general changes in the economy, the financial markets or the industries in which we target our products and services.

Other factors which may affect our stock price

include general changes in the economy, the financial markets or the industries in which we target our products and services.

Trading on the OTCQB is volatile and

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common stock.

Our common stock is

quoted on the OTCQB tier of the OTC Markets Group, Inc.

Trading in securities quoted on the OTCQB is often thin and characterized

by wide fluctuations in trading prices due to many factors, some of which may have little to do with our operations or business

This volatility could depress the market price of our common stock for reasons unrelated to our business or operating

Moreover, the OTCQB is not a stock exchange, and trading of securities on the OTCQB is often more sporadic than the

trading of securities listed on a stock exchange like The Nasdaq Capital Market or the NYSE American.

These factors may result

in investors having difficulty reselling any shares of our common stock.

Recent outbreak

of Coronavirus has led to restrictions on travel and public meetings and has disrupted markets and shipping schedules.

The recent emergence of the COVID-19 virus pandemic has created global restrictions on travel and meetings, temporary but

unlimited closure of businesses and business activities, major economic uncertainties leading to unemployment, loss of customers

and suppliers, and reluctance of business management to make critical commitments and, instead, conserve cash.

At this stage,

we are unable to quantify the impact of the virus on our current or future business, but it could make it extremely difficult

to contract with new customers, sell our products or services and manage our supply chain.

Our common stock is quoted

on the OTCQB tier of the OTC Markets Group, Inc.

Trading in securities quoted on the OTCQB is often thin and characterized by

wide fluctuations in trading prices due to many factors, some of which may have little to do with our operations or business prospects.

This volatility could depress the market price of our common stock for reasons unrelated to our business or operating performance.

Moreover, the OTCQB is not a stock exchange, and trading of securities on the OTCQB is often more sporadic than the trading of

securities listed on a stock exchange like The Nasdaq Capital Market or the NYSE American.

These factors may result in investors

having difficulty reselling any shares of our common stock.

The outbreak of

Coronavirus has led to restrictions on travel and public meetings and has disrupted markets and shipping schedules.

The COVID-19 virus pandemic

has created global restrictions on travel and meetings, temporary and permanent closures of businesses and business activities,

unemployment, loss of customers and suppliers, and reluctance of business management to make critical commitments and, instead,

conserve cash.

For example, we have experienced delays in customer acceptance of delivered products and shipment delays from our

suppliers or customers’ suppliers, which delays have disrupted ours and our customers’ product development and testing

At this stage, we are unable to quantify the impact of the virus on our current or future business, but it could make

it extremely difficult to contract with new customers, sell our products or services and manage our supply chain.

We do not intend

to pay dividends.

We do not anticipate

paying cash dividends on our common stock in the foreseeable future.

We do not anticipate paying

cash dividends on our common stock in the foreseeable future.

We may not have sufficient funds to legally pay dividends.

Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends.

declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend

upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements,

and other factors our board of directors may consider relevant.

There is no assurance that we will pay any dividends in the future,

and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

Voting power of our shareholders is

highly concentrated by insiders.

if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends.

The declaration,

payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among

other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other

factors our board of directors may consider relevant.

There is no assurance that we will pay any dividends in the future, and,

if dividends are paid, there is no assurance with respect to the amount of any such dividend.

Voting power of our shareholders is highly

concentrated by insiders.

Our officers, directors

and affiliates currently own approximately 46% of our outstanding Common Stock.

Such concentrated control of the Company may adversely

affect the value of our Common Stock.

If you acquire our Common Stock, you may have no effective voice in our management.

by our insiders or affiliates, along with any other market transactions, could affect the value of our Common Stock.

of incorporation allow for our board to create a new series of preferred stock without further approval by our stockholders, which

and affiliates currently own approximately 41.43% of our outstanding Common Stock eligible to vote.

Such concentrated control

of the Company may adversely affect the value of our Common Stock.

If you acquire our Common Stock, you may have no effective

voice in our management.

Sales by our insiders or affiliates, along with any other market transactions, could affect the value

of our Common Stock.

Our articles of

incorporation allow for our board to create a new series of preferred stock without further approval by our stockholders, which

could adversely affect the rights of the holders of our Common Stock.

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to our existing stockholders.

UNRESOLVED STAFF COMMENTS

STAFF COMMENTS

Smaller reporting companies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business