What changed in this filing

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Item 1. Financial Statements

2021-05-21 compared with 2020-11-13 · 721 added, 1004 removed, 157 unchanged (92% of the section changed)

1 unchanged sentence

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Accounts receivable

Subscription receivable

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net

Liabilities and Stockholders' Deficiency

Liabilities and Stockholders' Equity

Current Liabilities:

2 unchanged sentences

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities - related party

Accrued issuable equity, current portion

Notes payable, net of debt discount of $312,687 and $0 at September 30, 2020 and December 31, 2019, respectively

Loans payable, current portion

Accrued issuable equity

Notes payable, net of debt discount of $20,074 and $128,198 at March 31, 2021 and December 31, 2020, respectively

Loan payable, current portion

Deferred revenue

Total Current Liabilities

Accrued issuable equity, non-current portion

Loans payable, non-current portion

Loan payable, non-current portion

Total Liabilities

Commitments and contingencies (Note 9)

Stockholders' Deficiency:

Stockholders' Equity:

Preferred stock, $0.0001 par value, 20,000,000 shares authorized;

Series A Preferred Stock, 1,000,000 shares designated;

none issued and outstanding at September 30, 2020 and December 31, 2019

none issued and outstanding at March 31, 2021 and December 31, 2020

Series B Convertible Preferred Stock, 31,000 shares designated;

13,972 and 14,487 shares issued and outstanding and liquidation preference

of $13,972 and $14,487 at September 30, 2020 and December 31, 2019

0 and 13,972 shares issued and outstanding and liquidation preference of $0 and $13,972 at March 31, 2021 and December 31, 2020 , respectively

Series C Preferred Stock, 400 shares designated;

18.90 and 24.01 shares issued and outstanding and liquidation preference of

$189,000 and $240,100 at September 30, 2020 and December 31, 2019

none issued and outstanding at March 31, 2021 and December 31, 2020

Series D Convertible

Preferred Stock, 650 shares designated,

none issued and outstanding at March 31, 2021 and December 31, 2020 (see Note 10)

Common stock, $0.0001 par value, 500,000,000 shares authorized;

83,036,226 and 81,071,831 shares issued and outstanding

at September 30, 2020 and December 31, 2019, respectively

Shares to be issued, common stock;

31,250 and 0 shares at September 30, 2020 and

December 31, 2020, respectively

92,627,200 and 89,908,600 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

Total Stockholders' Deficiency

Total Liabilities and Stockholders' Deficiency

The accompanying notes are an integral part of these condensed consolidated financial statements.

(12,961,131 )

(11,246,408 )

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

KULR TECHNOLOGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

For the Three Month s Ended

For the Nine Month s Ended

September 30,

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

Cost of revenue

10 unchanged sentences

$ (1,714,723 )

$ (1,991,497 )

$ (1,454,643 )

Net Loss Per Share

4 unchanged sentences

KULR TECHNOLOGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS’

THE NINE MONTHS ENDED SEPTEMBER 30, 2020

B Convertible

C Convertible

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIENCY)

THE THREE MONTHS ENDED MARCH 31, 2021

Series B Convertible

Series C Convertible

Stockholders'

- January 1, 2020

Balance - January 1, 2021

$ (11,246,408 )

Common stock issued upon conversion

of Series B Convertible Preferred Stock

compensation:

stock issued for the commitment

fee pursuant to the SEDA agreement

stock issued for services

common stock issued

Amortization of

of stock options

of market-based award

- March 31, 2021

$ (12,961,131 )

$ (1,273,431 )

compensation:

stock issued pursuant to the

SEDA agreement [1]

- June 30, 2020

$ (9,375,550 )

compensation:

stock issued pursuant to

the SEDA agreement

stock to be issued pursuant to

the SEDA agreement

stock issued upon conversion of

B Convertible Preferred Stock

stock issued upon conversion of

C Convertible Preferred Stock

- September 30, 2020

$ (10,387,809 )

[1] Amount represents gross

proceeds of $757,695 less $78,258 of deferred offering costs.

The accompanying notes are an integral part of these condensed consolidated financial statements.

KULR TECHNOLOGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS’

DEFICIENCY, CONTINUED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

THE THREE MONTHS ENDED MARCH 31, 2020

Series B Convertible

Series C Convertible

Preferred Stock

Stockholders'

Balance - January 1, 2019

$ (6,416,559 )

Stock-based compensation

Common stock issued for cash

Balance - March 31, 2019

January 1, 2020

$ (8,396,312 )

Stock-based compensation

Common stock issued for cash

Balance - June 30, 2019

Common stock issued as a commitment

fee for the Standby Equity Distribution Agreement

compensation:

of stock options

- March 31, 2020

$ (8,946,565 )

Stock-based compensation

Common stock issued upon conversion of Series B Convertible Preferred Stock

Series C Convertible Preferred Stock and warrants

issued for cash, net of issuance costs [1]

Forgiveness of accrued expenses by

related party

Balance - September 30, 2019

$ (1,273,431 )

gross proceeds of $186,000, less cash issuance costs of $47,000.

The accompanying notes are an integral part of these condensed consolidated financial statements.

KULR TECHNOLOGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

For the Nine Months Ended

September 30,

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

Cash Flows From Operating Activities:

$ (1,714,723 )

$ (1,454,643 )

Adjustments to reconcile net loss to net cash used in operating activities:

2 unchanged sentences

Bad debt expense

Write-down of inventory

Change in fair value of accrued issuable equity

4 unchanged sentences

Accounts payable

Accounts payable - related party

Accrued expenses and other current liabilities

3 unchanged sentences

Net Cash Used In Operating Activities

Cash Flows From Investing Activities:

Purchase of property and equipment

Net Cash Used In Investing Activities

Cash Flows from Financing Activities:

Proceeds from note payable

Repayments of note payable

Payment of debt issuance costs

Proceeds from Paycheck Protection Program loan

Proceeds from sale of Series C Convertible Preferred Stock and warrants

Proceeds from sale of common stock [1]

Payment of offering costs

Net Cash Provided By Financing Activities

Net Increase (Decrease) In Cash

Repayments of notes payable

Proceeds from line of credit, net

Payment of financing costs

Net Cash (Used In) Provided By Financing Activities

Net (Decrease) Increase In Cash

Cash - Beginning of Period

Cash - End of Period

[1] For the nine months ended September 30, 2020, the amount represents

gross proceeds of $2,152,695 less $691,000 withheld by the investor to pay down a portion of the note payable held by the same

The accompanying notes are an integral part of these condensed consolidated financial statements.

KULR TECHNOLOGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

CASH FLOWS, CONTINUED

For the Nine Months Ended

September 30,

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for interest

Cash paid during the period for:

Non-cash investing and financing activities:

Accrual of offering costs

Common stock issued for repayment of note payable

Value of common stock issued as a commitment fee for the SEDA agreement

Common stock issued upon conversion of Series B Convertible Preferred Stock

Common stock issued upon conversion of Series C Convertible Preferred Stock

Deferred offering costs reclassified to equity

Forgiveness of accrued expenses by related party

Original issuance discount on note payable

Subscriptions

receivable for shares to be issued

Value of common stock issued as a commitment fee for the SEDA agreement

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying

notes are an integral part of these condensed consolidated financial statements.

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 1 BUSINESS ORGANIZATION AND NATURE OF OPERATIONS

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Organization and Operations

KULR Technology Group, Inc., through

its wholly-owned subsidiary, KULR Technology Corporation (collectively referred to as “KULR”

or the “Company”),

develops and commercializes high-performance thermal management technologies for electronics, batteries, and other components across

a range of applications.

Currently, the Company is focused on targeting both, high performance aerospace and Department of Defense

(“DOD”) applications, such as satellite communications, directed energy system and hypersonic vehicle, and applying

them to mass market commercial applications, such as lithium-ion battery energy storage, electrical vehicle, 5G communications,

cloud computer infrastructure, consumer and industrial devices.

KULR Technology Group, Inc., through its wholly-owned

subsidiary, KULR Technology Corporation (collectively referred to as “KULR”

or the “Company”), develops and commercializes

high-performance thermal management technologies for electronics, batteries, and other components across a range of applications.

the Company is focused on targeting both, high performance aerospace and Department of Defense (“DOD”) applications, such

as satellite communications, directed energy system and hypersonic vehicle, and applying them to mass market commercial applications,

such as lithium-ion battery energy storage, electrical vehicle, 5G communication, cloud computer infrastructure, consumer and industrial

Basis of Presentation

The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America

GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation

Accordingly, they do not include all of the information and disclosures required by U.S.

financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

they do not include all of the information and disclosures required by U.S.

GAAP for annual financial statements.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered

necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30,

2020 and for the three and nine months ended September 30, 2020 and 2019.

The results of operations for the three and nine months

ended September 30, 2020 are not necessarily indicative of the operating results for the full year ending December 31, 2020

or any other period.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s

audited financial statements and related disclosures as of December 31, 2019 and for the year then ended, which were filed

with the Securities and Exchange Commission (“SEC”) on Form 10-K on May 14, 2020.

NOTE 2 GOING CONCERN AND MANAGEMENT’S PLANS

The Company has not yet achieved profitability

and expects to continue to incur cash outflows from operations.

As of September 30, 2020, the Company had cash of $2,809,656 and

a working capital deficit of $404,561.

For the nine months ended September 30, 2020 and 2019, the Company incurred net losses of

$1,991,497 and $1,454,643, respectively, and used cash in operations of $2,076,035 and $1,206,135, respectively.

It is expected

that research and development and general and administrative expenses will continue to increase and, as a result, the Company will

eventually need to generate significant revenues to achieve profitability.

Further, as of September 30, 2020, the Company has debt

principal outstanding on notes payable in the amount of $3,150,000 which mature between May 31 and July 20, 2021 and $155,226 of

principal outstanding pursuant to the PPP loan agreement that matures in April 2022.

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”

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.

In the opinion of management,

such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation

of the unaudited condensed consolidated financial statements of the Company as of March 31, 2021 and for the three months ended March

31, 2021 and 2020.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating

results for the full year ending December 31, 2021 or any other period.

These unaudited condensed consolidated financial statements

should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2020

and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March

Risks and Uncertainties

In March 2020, the World Health Organization declared

COVID-19, a novel strain coronavirus, a pandemic.

During 2020 and continuing into 2021, the global economy has been, and continues to

be, affected by COVID-19.

While the Company continues to see signs of economic recovery as certain governments began to gradually ease

restrictions, provide economic stimulus and vaccine distribution accelerated, the rate of recovery on a global basis has been affected

by resurgence of the virus or its variants in certain jurisdictions.

The Company continues to monitor the impact of COVID-19 on its business

and operational assumptions and estimates, and determined there were no material adverse impacts on the Company’s results of operations

and financial position at March 31, 2021.

The full extent of the future impact of COVID-19

on the Company’s operations and financial condition is uncertain.

Accordingly, COVID-19 could have a material adverse effect

on the Company’s business, results of operations, financial condition and prospects during 2021 and beyond, including the demand

for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules as

well as the capability to meet customer demands in a timely manner.

The financial statements do not include any adjustments that might

result from the outcome of this uncertainty.

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 2 GOING CONCERN AND MANAGEMENT’S PLANS

Effective February 27, 2020, the Company

entered into a twenty-four month Standby Equity Distribution Agreement (“SEDA”) with an Investor, pursuant to which

the Company may, at its discretion, sell up to an aggregate of $8,000,000 (subject to the Investor’s approval for amounts

over $100,000) of shares of the Company’s common stock at a price equal to 80% of the lowest daily volume weighted average

price for the five days immediately following the date the Company delivers notice requiring the Investor to purchase the shares

under the SEDA.

For each advance, the Company shall have delivered all shares relating to all prior advances, and, unless waived

by the Investor, at least 5 trading days shall have elapsed from the immediately preceding advance date (see Note 11 –

Stockholders’

Additionally, the Company applied for, and in April 2020, received, a loan of $155,226 under the government Small

Business Administration (“SBA”) sponsored Payroll Protection Program (“PPP”) to support continuing employment

during the COVID-19 pandemic.

As of September 30, 2020, the Company had

approximately $5,847,300 available in connection with the SEDA, subject to certain conditions, in order to fund its ongoing operations;

however, there can be no assurance that the Company will be able to continue to sell common shares pursuant to the SEDA at an acceptable

price, or without causing undue dilution to existing investors.

Further, there is also no assurance that the Company will be able

to continue to obtain additional funds on commercially acceptable terms, if at all.

If the Company is unable to obtain adequate

funds on reasonable terms, it may be required to significantly curtail or discontinue operations or obtain funds by entering into

financing agreements on unattractive terms.

The Company’s operating needs include the planned costs to operate its business,

including amounts required to fund working capital and capital expenditures.

The aforementioned conditions indicate

that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the financial

statement issuance date.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity

with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), which contemplate continuation

of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.

The unaudited condensed consolidated financial statements do not include any adjustment that might become necessary should the

Company be unable to continue as a going concern.

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Since the date of the Annual Report on

Form 10-K for the year ended December 31, 2019, there have been no material changes to the Company’s significant

accounting policies, except as disclosed in this note.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Since the date of the Annual Report on Form 10-K

for the year ended December 31, 2020, there have been no material changes to the Company’s significant accounting policies,

except as disclosed in this note.

As of March 31, 2021, the Company had cash and

working capital of approximately $6.2 million and $4.7 million, respectively.

For the three months ended March 31, 2021, the Company incurred

a net loss of approximately $1.7 million and used cash in operations of approximately $1.7 million.

On May 20, 2021, the Company raised

approximately $6.5 million in connection with a convertible preferred financing agreement.

In connection with the closing of the financing,

the Company repaid in full its aggregate notes payable obligation of $1,540,000.

See Note 10 –

Subsequent Events for additional

While the Company anticipates it will continue to incur operating losses and use cash in operating activities for the foreseeable

future, the Company believes that its current working capital is sufficient in comparison to its anticipated cash usage for a period of

at least twelve months subsequent to the filing date of these condensed consolidated financial statements.

Concentrations of Credit Risk

Financial instruments that potentially

subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable.

A significant

portion of the Company’s cash is held at one major financial institution.

The Company has not experienced any losses in such

Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”)

up to $250,000 at each institution.

There was an uninsured balance of $2,559,656 as of September 30, 2020 and no uninsured cash

balances as of December 31, 2019.

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Financial instruments that potentially subject the Company to significant

concentrations of credit risk consisted primarily of cash, accounts receivable, revenue and accounts payable.

Cash Concentrations

A significant portion of the Company’s cash

is held at one major financial institution.

The Company has not experienced any losses in such accounts.

Cash held in US bank institutions

is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution.

uninsured balance of $5,659,918 and $8,513,010 as of March 31, 2021 and December 31, 2020, respectively.

Customer and Revenue Concentrations

The Company had certain customers whose

revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually

represented 10% or more of the Company’s total accounts receivable, as follows:

The Company had certain customers whose revenue

individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented

10% or more of the Company’s total accounts receivable, as follows:

Accounts Receivable

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30, 2020

March 31, 2021

December 31, 2020

All other customers

* Less than 10%

There is no assurance the Company will

continue to receive significant revenues from any of these customers.

Any reduction or delay in operating activity from any of

the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements

with significant customers, could materially harm the Company’s business and prospects.

As a result of the Company’s

significant customer concentrations, its gross profit and results from operations could fluctuate significantly due to changes

in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any

of the Company’s significant customers.

There is no assurance the Company will continue

to receive significant revenues from any of these customers.

Any reduction or delay in operating activity from any of the Company’s

significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers,

could materially harm the Company’s business and prospects.

As a result of the Company’s significant customer concentrations,

its gross profit and results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions,

or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Vendor Concentrations

As of September 30, 2020 and December 31,

2019, certain vendors represented 10% or more of the Company’s total accounts payable, as follows:

Accounts Payable

September 30, 2020

December 31, 2019

All other vendors

During the three months ended March 31, 2021,

three vendors represented more than 10% of the Company’s purchases and during the three months ended March 31, 2020, four different

vendors represented more than 10% of the Company’s purchases, as follows:

For the Three Months Ended

Less than 10%

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Inventory is comprised of carbon fiber velvet

(“CFV”) thermal interface solutions and internal short circuit batteries, which are available for sale.

Inventories are stated

at the lower of cost or net realizable value.

Cost is determined by the first-in, first-out method.

The cost of inventory that is sold

to third parties is included within cost of sales and the cost of inventory that is given as samples is included within operating expenses.

The Company periodically reviews for slow-moving, excess or obsolete inventories.

Products that are determined to be obsolete, if any,

are written down to net realizable value.

As of March 31, 2021 and December 31, 2020, the Company’s inventory was comprised solely

of finished goods.

Revenue Recognition

The Company recognizes

revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with

Customers”

The Company recognizes revenue in accordance with

Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”

(“ASC 606”).

The core principle of ASC 606 requires that an entity recognize revenue to depict

the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects

to be entitled in exchange for those goods or services.

ASC 606 defines a five-step process to achieve this core principle and,

in doing so, it is possible more judgment and estimates may be required within the revenue recognition process, including identifying

performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and

allocating the transaction price to each separate performance obligation.

The following five steps are applied to

achieve that core principle:

The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers

in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required

within the revenue recognition process, including identifying performance obligations in the contract, estimating the amount of variable

consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following five steps are applied to achieve

that core principle:

Identify the contract with the customer;

Identify the performance obligations in the contract;

Identify the performance obligations

in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract;

Recognize revenue when the company satisfies a performance obligation.

The Company recognizes

revenue primarily from the following different types of contracts:

sales –

Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies

its performance obligation, which is generally at the time it ships the product to the customer.

services –

Revenue is recognized at the point in time that the Company

satisfies its performance obligation under the contract, which is generally at the time the services are fulfilled and/or accepted

by the customer.

The following table summarizes the revenue

recognized in the unaudited condensed consolidated statements of operations:

Allocate the transaction price to the

performance obligations in the contract;

Recognize revenue when the company satisfies

a performance obligation.

The Company recognizes revenue primarily

from the following different types of contracts:

Product sales –

Revenue is recognized at

the point in time the customer obtains control of the goods and the Company satisfies its performance obligation, which is generally at

the time it ships the product to the customer.

Contract services –

Revenue is recognized at the point in time that the Company satisfies its performance obligation under the contract, which is generally

at the time the services are fulfilled and/or accepted by the customer.

The following table summarizes the Company’s

revenue recognized during the three months ended March 31, 2021 and 2020:

For the Three Months Ended

For the Nine Months Ended

September 30,

Product sales

1 unchanged sentence

Total revenue

As of September 30, 2020, and December 31,

2019, the Company had $36,600 and $15,000, respectively, of deferred revenue, from contracts with customers.

The contract liabilities

represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract,

or the customers have not officially accepted the goods or services provided under the contract.

During the nine months ended September

30, 2020, the Company recognized $15,000 of revenues that were included in deferred revenue as of December 31, 2019.

As of March 31, 2021 and December 31, 2020, the

Company had $20,000 and $20,000 of deferred revenue, respectively, from contracts with customers.

The contract liabilities represent payments

received from customers for which the Company had not yet satisfied its performance obligation under the contract., or the customers have

not officially accepted the goods or services provided under the contract.

During the three months ended March 31, 2021 and 2020, there

was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of March 31, 2021 and December 2020, the Company

recorded $63,612 and $31,212, respectively, of deferred labor costs, which is included in prepaid expenses and other current assets in

the Company’s condensed consolidated balance sheets.

Deferred labor costs represent costs to fulfill the Company's contract service

The Company will recognize the deferred labor costs as cost of revenues at the point in time that the Company satisfies its performance

obligation under the respective contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

Shipping and Handling Costs

Amounts billed to a customer

in a sales transaction related to shipping and handling are recorded as revenue.

Costs incurred for shipping and handling are

included as cost of sales on the accompanying condensed consolidated statements of operations.

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES - CONTINUED

Sequencing Policy

Under ASC 815-40-35 (“ASC 815”),

the Company has adopted a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or

liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares

as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of

the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares.

Pursuant to ASC 815, issuances of securities as compensation in a share-based payment arrangement are not subject to the sequencing

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Net Loss Per Common Share

Basic net loss per common share is computed

by dividing net loss by the weighted average number of vested common shares outstanding during the period.

Diluted net loss

per common share is computed by dividing net loss by the weighted average number of common shares outstanding, plus the impact

of common shares, if dilutive, resulting from the exercise of outstanding stock options and warrants and the conversion of convertible

The following shares were excluded from

the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

September 30,

Basic net loss per common share is computed by

dividing net loss by the weighted average number of vested common shares outstanding during the period.

Diluted net loss per common share

is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each

Dilutive common-equivalent shares consist of shares of non-vested restricted stock, if not anti-dilutive.

The following shares were excluded from the calculation

of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

For the Three Months Ended

Series B Convertible Preferred Stock

Series C Convertible Preferred Stock

Unvested Restricted Stock

Market-based equity award

Reclassifications

Certain prior period balances have been

reclassified in order to conform to the current period presentation.

These reclassifications have no effect on previously reported

results of operations or loss per share.

NOTE 4 PREPAID EXPENSES

As of September 30, 2020, and December 31,

2019, prepaid expenses consisted of the following:

September 30,

Certain amounts in the prior period financial

statements have been reclassified to conform to the current period presentation.

These reclassifications had no effect on reported consolidated

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12,

“Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes,”

which is intended to simplify various aspects related

to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends

existing guidance to improve consistent application.

The Company adopted ASU 2019-12 effective January 1, 2021 and its adoption did not

have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 PREPAID

EXPENSES AND OTHER CURRENT ASSETS

As of March 31, 2021 and December 31, 2020, prepaid

expenses and other current assets consisted of the following:

Deferred labor costs

Deferred inventory costs

Security deposit

Total prepaid expenses

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 5 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of September 30, 2020 and December 31, 2019, accrued

expenses and other current liabilities consisted of the following:

September 30,

NOTE 4 ACCRUED

EXPENSES AND OTHER CURRENT LIABILITIES

As of March 31, 2021 and December 31, 2020,

accrued expenses and other current liabilities consisted of the following:

Payroll and vacation

1 unchanged sentence

Total accrued expenses and other current liabilities

See Note 10 –

Related Party Transactions

for additional information on accrued expenses –

related party.

NOTE 6 ACCRUED ISSUABLE EQUITY

As of September 30, 2020, accrued issuable

equity consists of the following:

September 30,

Accrued issuable equity for services, current portion

Accrued issuable equity for services, non-current portion

Accrued Issuable Equity for Services

During the three and nine months ended

September 30, 2020, the Company agreed to issue an aggregate of 113,453 and 136,786 shares of common stock to certain consultants

in exchange for services valued at $147,977 and $164,577, respectively.

The shares have not been issued as of September 30, 2020.

The fair value of the accrued but unissued shares as of September 30, 2020 was $183,530.

During the three and nine months ended

September 30, 2020 the Company recorded $9,947 and ($15,853), respectively, of gains (losses) related to the change in fair value

of accrued issuable equity (see Note 11 –

Stockholders’

Deficiency, Stock-Based Compensation ).

NOTE 7 LINE OF CREDIT

On February 18, 2020, the Company entered into a financing agreement

(the “Line of Credit”) wherein it may borrow up to $10,000.

The repayment terms (interest rate, repayment amount and

number of consecutive weekly periodic installments) are determined at the time the Company borrows proceeds under the Line of Credit.

On February 19, 2020, the Company borrowed and received gross

proceeds of $10,000 under the Line of Credit for its working capital needs, which is being repaid weekly for the next 26 weeks

at a weekly interest rate of 1.7%.

As of September 30, 2020, the outstanding aggregate principal amount on the Line of Credit was

$0 During the three and nine months ended September 30, 2020, the Company recorded interest expense of $114 and $2,292, respectively,

related to the Line of Credit.

There was no accrued interest related to the Line of Credit as of September 30, 2020.

The outstanding

balance of the line of credit was paid off in July 2020.

NOTE 8 NOTES PAYABLE

On February 27, 2020, the Company

entered into a note purchase agreement with the YAII PN, Ltd., a Cayman Island exempt limited partnership (the “Investor”),

pursuant to which the Investor purchased a full recourse promissory note (the “Note”) in the original principal amount

of $1,500,000 (“Principal Amount”) for cash proceeds of $1,410,000.

The Note included an original issue discount of

$90,000, which represents the difference between the principal and proceeds received.

The original issue discount, along with the

$130,000 advisory fee were recorded as a debt discount which is being amortized over the term of the Note using the effective interest

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 8 NOTES PAYABLE

The Note bears no coupon interest (original

issue discount only) and will become immediately due and payable on May 31, 2021 or upon acceleration, redemption or otherwise

upon the occurrence of an event of default, as set forth in the Note and which includes the early termination of a standby equity

distribution agreement with the Investor (see Note 11 –

Stockholders’

Deficiency, Standby Equity Distribution Agreement ).

The Company is required to repay the Principal Amount in monthly installments as set forth in the agreement.

The Company may, at

its discretion, prepay any installment amount or the principal amount, subject to a payment premium equal to the 10% of the amount

being prepaid.

During the three and nine months ended

September 30, 2020, the Company repaid principal on the Note of $250,000 and $475,000, respectively (of which $250,000 and

$391,000, respectively, was repaid from proceeds from the SEDA).

As of September 30, 2020, the outstanding aggregate principal

balance of the Note was $1,025,000.

During the three and nine months ended September 30, 2020, the Company recognized amortization

of debt discount of $53,709 and $150,620, respectively, related to the Note.

Please see Note 13 –

Subsequent Events

for additional information regarding further repayments of the Note.

New Note Purchase Agreement and Promissory

The Company also entered into a Note Purchase

Agreement, dated July 20, 2020, with the Investor, pursuant to which the Investor purchased a full recourse promissory note

(the “July 2020 Note”) in the original principal amount of $2,500,000 (“July 2020 Principal Amount”)

for cash proceeds of $2,300,000.

The July 2020 Note included an original issue discount of $200,000, which represents the difference

between the principal and proceeds received.

The original issue discount, along with the $200,000 advisory fee were recorded as

a debt discount, which is being amortized over the term of the July 2020 Note using the effective interest rate method.

The July 2020 Note bears no interest

(original issuance discount only) and will become immediately due and payable on July 20, 2021 or upon acceleration, redemption

or otherwise upon the occurrence of an event of default, as set forth in the July 2020 Note.

The Company will repay the July 2020

Principal Amount in monthly installments as set forth in the July 2020 Note.

The Company may, at its discretion, prepay any

installment amount or the principal amount, subject to a payment premium equal to the 10% of the amount being prepaid.

pursuant to the terms of the July 2020 Note, the Company may decrease any installment payment by up to 50%, of which the decreased

amount is added to the final installment due on the maturity date.

The Company elected to decrease the monthly

installment payments due during May and August 2020 by an aggregate of $225,000.

The decrease of $225,000 will be added to the

final monthly installment on July 20, 2021.

During the three and nine months ended

September 30, 2020, the Company repaid principal on the July 2020 Note of $375,000 (of which $300,000 was repaid from proceeds

from the SEDA).

As of September 30, 2020, the outstanding aggregate principal balance of the July 2020 Note was $2,125,000.

During the three and nine months ended September 30, 2020, the Company recognized amortization of debt discount of $156,693

related to the July 2020 Note.

See Note 13 –

Subsequent Events for additional information regarding further repayments

5 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity

during the three months ended March 31, 2021 is presented below.

There was no accrued issuable equity during the three months ended March

Balance, January 1, 2021

Reclassifications to equity

Mark-to market

Balance, March 31, 2021

During the three months ended March 31, 2021,

the Company entered into certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the

Company, having an aggregate grant date value of $121,989.

The Company settled certain of its accrued issuable equity obligations through

the issuance of an aggregate of 20,000 shares with an aggregate fair value of $49,800.

During the three months ended March 31, 2021,

the Company recorded $132,577 of losses related to the change in fair value of accrued issuable equity.

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 9 LOAN PAYABLE

On April 27, 2020, the Company received

$155,226 of cash proceeds pursuant to an unsecured loan (the “PPP”

Loan) provided in connection with the Paycheck Protection

Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (“CARES

Under the terms of the CARES Act, as amended

by the Paycheck Protection Program Flexibility Act of 2020, the Company is eligible to apply for and receive forgiveness for all

or a portion of the PPP Loan.

Such forgiveness will be determined, subject to limitations, based on the use of the loan proceeds

for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs (as defined under the PPP)

and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”) incurred during the 24 weeks subsequent

to funding, and on the maintenance of employee and compensation levels, as defined, following the funding of the PPP Loan.

Company intends to use the proceeds of the PPP Loan for Qualifying Expenses.

However, no assurance is provided that KULR will be

able to obtain forgiveness of the PPP Loan in whole or in part.

Any amounts not forgiven incur interest at 1.0% per annum and monthly

repayments of principal and interest are deferred until the Small Business Administration decides on forgiveness.

While the Company’s

PPP Loan currently has a two-year maturity, the amended law will permit the Company to request a five-year maturity, subject to

the approval of the counterparty.

During the three and nine months ended September 30, 2020, the Company recognized interest

expense of $387 and $659 respectively in connection with the PPP Loan.

As of September 30, 2020, and December 31, 2019, the

Company’s accrued interest related to the PPP Loan was $659 and $0, respectively.

NOTE 10 RELATED

PARTY TRANSACTIONS

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of notes payable activity during the

three months ended March 31, 2021 and 2020, is presented below:

Balance, January 1, 2021

Repayments in cash

Amortization of debt discount

Outstanding, March 31, 2021

During the year ended December 31, 2020, the Company

entered into note purchase agreements in the original aggregate principal amount of $4,000,000 (“Principal Amount”) for cash

proceeds of $3,710,000.

The Notes included an original issue discount of $290,000, which represents the difference between the principal

and proceeds received.

The original issue discount, along with the $340,000 advisory fees were recorded as a debt discount which are being

amortized over the term of the respective Notes using the effective interest rate method.

The Notes bears no coupon interest (original issue

discount only).

The Company repaid principal $1,550,000 during the year ended December 31, 2020 and repaid additional principal in the

amount of $1,050,000 during the three months ended March 31, 2021.

Of the $1,400,000 principal balance remaining at March 31, 2021, $525,000

matures on May 31, 2021 and $875,000 matures on June 30, 2021.

During the three months ended March 31, 2021

and 2020, the Company recorded amortization of debt discount in the amount of $108,124 and $19,220, respectively.

Subsequent to March

31, 2021, the Company repaid principal on the Notes in the aggregate amount of $350,000.

RELATED PARTY TRANSACTIONS

Accounts Payable –

1 unchanged sentence

Accounts payable –

related party

consists of a liability of $3,454 and $4,253 as of September 30, 2020 and December 31, 2019, respectively, to Energy Science

Laboratories, Inc.

(“ESLI”), a company controlled by the Company’s Chief Technology Officer (“CTO”),

in connection with consulting services provided to the Company associated with the development of the Company’s carbon fiber

velvet (“CFV”) thermal management solutions in prior periods.

During the three and nine months ended September 30,

2020, the Company paid $168 and $799, respectively, of certain bills on behalf of ESLI, which reduced the liability owed to ESLI.

Accrued Expenses and Other Current Liabilities

Related Party

Accrued expenses and other current liabilities

related party consist of a liability of $0 and $10,419 as of September 30, 2020 and December 31, 2019, respectively,

to Energy Science Laboratories, Inc.

(“ESLI”), a company controlled by the Company’s Chief Technology Officer

(“CTO”), in connection with consulting services provided by ESLI to the Company associated with the development of

the Company’s CFV thermal management solutions.

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 11 STOCKHOLDERS’

Standby Equity Distribution Agreement

On February 27, 2020, KULR Technology

entered into a SEDA with the Investor, pursuant to which the Company may, at its discretion, sell to the Investor

up to $8,000,000 of shares of the Company’s common stock (the “Offering”), par value $0.0001 per share (the “Common

Stock”).

For each share of Common Stock purchased under the SEDA (the “Shares”), the Investor will pay the Company

80% of the lowest daily volume weighted average price of the Common Stock on the OTC Markets OTCQB or other principal market on

which the Common Stock is traded for the five days immediately following the date the Company delivers notice requiring the Investor

to purchase the Shares under the SEDA.

The Investor’s obligation to purchase

the Shares under the SEDA is subject to certain conditions, including the Company maintaining the effectiveness of a registration

statement for the securities sold under the SEDA, and is subject to the Investor’s approval for amounts over $100,000.

addition, the Company may not request advances if the Shares to be issued would result in the Investor owning more than 4.99% of

the Company’s outstanding Common Stock, with any such request being automatically modified to reduce the advance amount.

The Company shall not be able to request advances under the SEDA if the Registration Statement is not effective or if any issuances

of Common Stock pursuant to any Advances would violate any rules.

The commitment period under the SEDA commenced

on February 27, 2020 (the “Effective Date”) and expires on the earliest to occur of (i) first day of the

month following the twenty-four months after the Effective Date, (ii) the date on which the Investor has purchased an aggregate

amount of $8,000,000 of Shares under the SEDA, or (iii) the date the SEDA is earlier terminated.

The SEDA contains customary representations,

warranties and agreements of the Company and the Investor, indemnification rights and other obligations of the parties.

has the right to terminate the SEDA at any time upon prior written notice, at no cost to the Company, provided that (i) there

are no outstanding advances which have yet to be issued and (ii) the Company has paid all amounts owed to the Investor, including

amounts borrowed under the Note (see Note 8 –

Notes Payable).

The Investor has covenanted not to cause or engage in any manner

whatsoever, any direct or indirect short selling or hedging of the Company’s shares of Common Stock.

The Company paid cash of $15,000 and issued

95,847 shares of Common Stock to the Investor as consideration for entering into the SEDA.

The shares of common stock issued to

the Investor had an issuance date fair value of $63,259.

The aggregate consideration of $78,259 was recorded as deferred offering

costs and additional paid in capital on the condensed consolidated balance sheet.

During the three and nine months ended September

30, 2020, the Company recorded $0 and $78,259, respectively, of expense related to the amortization of deferred offering costs.

During the three and nine months ended

September 30, 2020 the Company issued an aggregate of 1,159,449 and 1,721,013 shares of common stock, at prices between $0.73 -

$1.62 and $0.72 - $1.65 per share, for aggregate proceeds of $1,395,000 and $2,152,696, respectively, in connection with notices

submitted to the Investor under the SEDA, of which $550,000 and $691,000 of the proceeds, respectively, were applied directly against

the Notes (see Note 8 –

Notes Payable).

See Note 11 –

Stockholders’

Deficiency - Shares To Be Issued for additional information.

See Note 13 –

Subsequent Events for

additional information regarding the sale of SEDA shares subsequent to September 30, 2020.

related party consists

of a liability of $2,628 and $2,628, as of March 31, 2021 and December 31, 2020, respectively, to Energy Science Laboratories, Inc.

(“ESLI”), a company controlled by the Company’s Chief Technology Officer (“CTO”), in connection with consulting

services provided to the Company associated with the development of the Company’s CFV thermal management solutions in prior periods.

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 11 STOCKHOLDERS’

DEFICIENCY - CONTINUED

Series B Convertible Preferred Stock

During the three and nine months ended

September 30, 2020, a holder of 515 shares of Series B Convertible Preferred Stock elected to convert their shares into 25,758

shares of restricted common stock.

Series C Convertible Preferred Stock

During the three and nine months ended

September 30, 2020, certain holders of 5.11 shares of Series C Convertible Preferred stock elected to convert their shares into

an aggregate of 56,777 shares of restricted common stock.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STOCKHOLDERS' EQUITY (DEFICIENCY)

Common Stock Issued upon Conversion of Series

B Preferred Stock

During the three months ended March 31, 2021,

the Company issued an aggregate of 698,600 shares of common stock upon the conversion of 13,972 shares of Series B Preferred stock, after

which there remained no further Series B Preferred Stock outstanding.

Stock-Based Compensation

During the three and nine months ended

September 30, 2020, the Company issued an aggregate of 35,000 and 65,000 shares of immediately vested common stock with a grant

date value of $25,000 and $55,000, respectively, for legal and consulting services provided.

During the three and nine months

ended September 30, 2019, the Company issued 160,966 and 185,966 shares of immediately vested common stock with a grant date value

of $117,160 and $133,660, respectively, for legal and consulting services provided.

Stock Options

On January 1, 2020, the Company granted

five-year options to purchase a total of 10,000 shares of common stock at an exercise price of $0.66 per share to an employee pursuant

to the 2018 Plan.

One-fourth of the options will vest on the first-year anniversary of the grant date and the remaining options

vest monthly over three years.

The options had an aggregate grant date value of $3,609 which is recognized over the vesting period.

The Company estimated the fair value of the options using the Black-Scholes Option Pricing Model with the following assumptions:

(a) stock price of $0.66 per share;

(b) volatility of 93%;

(d) risk-free interest rate of 1.58%;

and (e) a dividend rate of 0.0%.

Stock-Based Compensation Expense

During the three and nine months ended

September 30, 2020, the Company recognized stock-based compensation expense of $158,014 and $252,831, respectively, related to

restricted common stock and stock options, of which $7,424 and $22,961, respectively, was charged to research and development expense

and $150,590 and $229,870, respectively, was charged to general and administrative expense.

As of September 30, 2020, there was

$66,290 of unrecognized stock-based compensation expense that will be recognized over the weighted average remaining vesting period

of 1.77 years.

During the three and nine months ended

September 30, 2019, the Company recognized stock-based compensation expense of $138,640 and $231,751 (which includes the issuance

of 185,966 shares common stock for $133,660 of services provided as described above), respectively, related to restricted common

stock, stock options and warrants, which are included within general and administrative expenses on the condensed consolidated

During the three months ended March 31, 2021 and

2020, the Company recognized stock-based compensation expense of $387,972 and $12,728, respectively, related to common stock and restricted

common stock, warrants and stock options, of which $7,405 and $8,112, respectively, is included in research and development expenses and

$250,322 and $4,616, respectively, is included in selling, general and administrative expenses in the accompanying condensed consolidated

statements of operations.

KULR TECHNOLOGY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 11 STOCKHOLDERS’

DEFICIENCY - CONTINUED

Stock-Based Compensation - Continued

Stock-Based Compensation Expense, Continued

The following table presents information

related to stock-based compensation for the three and nine months ended September 30, 2020 and 2019:

The following table presents information related

to stock-based compensation expense for the three months ended March 31, 2021 and 2020:

For the Three Months Ended

For the Nine Months Ended

September 30,

Common stock (issued)

Common stock issued for services

Amortization of restricted common stock

Amortization of market-based award

Stock options

Accrued issuable equity (common stock)

Shares To Be Issued

On September 28, 2020, the Company delivered

a notice requiring the Investor to purchase 31,250 of shares under the SEDA, at $1.28 price per share, which was equal to 80% of

the lowest daily volume weighted average price at which the shares are traded for the five days immediately following the date

the Company delivered such notice.

The shares were subsequently settled on October 1, 2020 for $40,000 of gross proceeds (see Note

Subsequent Events).

Consulting Agreement

On September 30, 2020, the Company entered

into a 2-year consulting agreement with a contractor to provide services as an Advisory Board Member related to government and

defense acquisitions in exchange for 60,000 shares of restricted common stock.

Pursuant to the consulting agreement, the shares

are subject to the Company’s claw back, based upon the achievement of certain performance obligations.

As of September 30,

2020, the required performance obligations have not been identified, and the restricted common shares were issued on or about November

NOTE 12 COMMITMENTS AND CONTINGENCIES

(1) See Note 5 –

Accrued Issuable Equity, for additional details.

Common Stock Issued for Services

On February 26, 2021, the Company issued 20,000

shares of immediately vested common stock with an aggregate grant date value of $49,800 for consulting services provided during January

and February 2021.

Restricted Common Stock

During the three months ended March 31, 2021,

the Company recorded stock-based compensation of $17,875 in connection with the amortization of restricted stock issued pursuant to consulting

agreements during the fourth quarter of 2020.

On March 1, 2021, the Company issued 2,000,000

shares of its common stock (the “COO Shares”) with an aggregate grant date value of $5,220,000 in connection with the appointment

of the Company’s Chief Operating Officer (see Note 9 –

Commitments and Contingencies).

The shares vest in four equal annual

installments beginning on March 1, 2022.

During March 2021, the Company recorded stock-based compensation of $108,750 related to the amortization

of the grant date value of the COO Shares.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2021, there is $5,178,744 of unrecognized

stock-based compensation related to restricted stock awards which will be amortized over the remaining vesting period of 3.89 years.

Stock Options

On January 1, 2020, the Company granted five-year

options to purchase a total of 10,000 shares of common stock at an exercise price of $0.66 per share to an employee pursuant to the 2018

One-fourth of the options will vest on the first-year anniversary of the grant date and the remaining options vest monthly over

The options had an aggregate grant date value of $3,609 which is recognized over the vesting period.

On March 12, 2021, in connection with the hire

of its Senior Director of Product Development, the Company granted a five-year option to purchase 100,000 shares of common stock to its

Senior Director of Product Development.

pursuant to the 2018 Plan.

The option is exercisable at an exercise price of $2.44 per share.

One-fourth of the options will vest on the first-year anniversary of the grant date and the remaining options vest monthly over three

The options had an aggregate grant date value of $57,819 which is recognized over the vesting period.

The Company has computed the fair value of stock

options granted using the Black-Scholes option pricing model.

In applying the Black-Scholes option pricing model, the Company used the

following assumptions:

For the Three Months Ended

Risk free interest rate

Expected term (years)

Expected volatility

Expected dividends

Option forfeitures are accounted for at the time

of occurrence.

The expected term used is the estimated period of time that options granted are expected to be outstanding.

utilizes the “simplified”

method to develop an estimate of the expected term of “plain vanilla”

employee option

The Company does not yet have a trading history to support its historical volatility calculations.

Accordingly, the Company is

utilizing an expected volatility figure based on a review of the historical volatility of comparable entities over a period of time equivalent

to the expected life of the instrument being valued.

The risk-free interest rate was determined from the implied yields from U.S.

zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

The weighted average grant date fair value

per share of options granted during the three months ended March 31, 2021 and 2020 was $0.58 and $0.36, respectively.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of options activity during the

three months ended March 31, 2021 is presented below:

Outstanding, January 1, 2021

Outstanding, March 31, 2021

Exercisable, March, 2021

The following table presents information related

to stock options as of March 31, 2021:

Options Outstanding

Options Exercisable

Remaining Life

Market-Based Award

On March 1, 2021, in connection with the appointment

of the Company’s COO (see Note 9 –

Commitments and Contingencies), the COO is eligible to receive of up to 1,500,000 shares

of the Company’s common stock which will be earned based upon achieving certain market capitalization milestones up to $4 billion.

The grant date value of this award of $2,911,420 was determined using a Monte Carlo valuation model for market-based vesting awards, and

will be amortized over each of the tranches’

prospective derived service period.

The following assumptions were used:

Risk free interest rate

Expected volatility

Expected dividend yield

Weighted average derived service period

Fair value of common stock on date of grant

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 COMMITMENTS

AND CONTINGENCIES

Operating Lease

On June 15, 2020, the Company entered

into an agreement to extend the term of its original office space lease from September 30, 2020 to December 31, 2020.

rental payments under the renewed lease total $5,107, which are comprised of $4,552 of base rent plus $555 of association fees.

For the three and nine months ended September 30, 2020, operating lease expense was $15,616 and $56,414, respectively.

three and nine months ended September 30, 2019, operating lease expense was $41,281 and $121,769, respectively.

The Company evaluated

their operating lease and determined that the short-term exemption available under ASC 842 applies since the lease term is less

than 12 months and the lease does not include a purchase option whose exercise is reasonably certain.

Since the short-term exemption

applies, lease payments are recognized as expense and no right of use asset or lease liability is recorded.

KULR TECHNOLOGY

Effective December 22, 2020, the Company entered

into a lease addendum to extend the term of its original lease, for space located in San Diego, California used for research and development

activities, from December 31, 2020 to June 30, 2021.

Monthly rental payments under the renewed lease total $5,127, which is comprised

of $4,572 of base rent plus $555 of association fees.

During the three months ended March 31,

2021 and 2020, operating lease expense was $15,402 and $10,016, respectively.

As of March 31, 2021, the Company does not have any financing

Appointment of President and Chief Operating

On January 4, 2021, the Company entered into a

consulting agreement with a new Executive Vice President.

The consultant provided management and business development services to the

In consideration for services provided in January and February 2021, the Company compensated the consultant with $10,000 per

month and 10,000 shares of its common stock per month.

Effective March 1, 2021, the Company appointed the consultant as President and

Chief Operating Officer (“COO”) 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.

connection with his appointment to COO, the COO received an aggregate of 2,000,000 shares of common stock, which shares will vest in four

equal annual installments beginning on March 1, 2022.

Additionally, the COO is eligible for incentive-based share grants totaling up to

1,500,000 shares of the Company’s common stock, which will be earned based on achieving certain market capitalization milestones

up to $4 billion (see Note 8 –

Stockholders Equity (Deficiency).

Director Compensation

On February 2, 2021, the Board of the Company

appointed three new directors on the Board, to hold office until the earlier of the expiration of the term of office of the director whom

they have replaced, a successor is duly elected and qualified, or the earlier of such director’s death, resignation, disqualification,

The three directors appointment is contingent upon the Company’s common stock being approved for uplisting to a national

Furthermore, once appointed, each director will receive quarterly cash compensation equal to $10,000 and each director will

be granted 20,000 shares of common stock, which shares shall vest quarterly in 5,000 share installments with the first installment vesting

immediately upon their appointment.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 SUBSEQUENT EVENTS

Standby Equity Distribution Agreement and Repayments of the

Notes Payable

Subsequent to September 30, 2020, the Company

received cash of $40,000 in satisfaction of subscriptions receivable as of September 30, 2020 and the Company issued 31,250 shares

of common stock pursuant to the SEDA (see Note 6 –

Accrued Issuable Equity, Accrued Issuable Equity for Subscriptions

Receivable and Note 10 –

Stockholders’

Subsequent to September 30, 2020, the Company

issued an aggregate of 89,285 shares of additional common stock at a price of $1.12 per share pursuant to new advance notices submitted

to the Investor under the SEDA.

The entire proceeds of $100,000 were withheld by YAII to pay down a portion of the Notes (see Note

Stockholders’

Deficiency, Standby Equity Distribution Agreement and Note 8 –

Notes Payable).

Subsequent to September 30, 2020, the Company

made cash payments totaling $250,000 to pay down a portion of the Notes.

Subsequent to September 30, 2020, the Company

issued 76,453 shares of restricted common stock in satisfaction of $100,000 of accrued issuable equity, pursuant to a services

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 SUBSEQUENT

Technology Development and Sponsorship Agreement

On March 31, 2021, the Company entered into a

multi-year technology development and sponsorship agreement, pursuant to which the Company has committed to spend an aggregate of $1,650,000

in three installments which are due April 1, 2021, January 1, 2022, and January 1, 2023.

Operating Lease

On April 5, 2021, the Company entered into an

agreement to lease office space for a thirty-six-month period, commencing June 1, 2021.

Monthly rental payments under the new lease total

$23,787, which are comprised of $18,518 of base rent plus $5,269 for common area costs.

On April 6, 2021, the Company issued 20,000 shares

of immediately vested common stock with an aggregate grant date value of $51,000 for legal services.

The shares were issued pursuant to

the Company’s 2018 Incentive Plan.

During April 2021, the Company issued an aggregate

of 300,000 shares of common stock upon the exercise of outstanding warrants pursuant to which the Company received an aggregate of $375,000

of gross proceeds.

Securities Purchase Agreement

On May 19, 2021, the Company entered into a Securities

Purchase Agreement (“SPA”) with an investor, pursuant to which the Company agreed to issue to the investor an aggregate of

650 shares of Series D convertible preferred stock (the “Series D Preferred”) pursuant to a new designation of preferred stock,

and one-year warrants to purchase 2,600,000 shares of common stock (the “Warrants”) at a price of $2.50 per share, for aggregate

gross proceeds of $6,500,000 (the “Offering”).

The Company will also pay the investor a commitment fee of 1,300,000 shares

of common stock at the closing of the Offering.

The closing of the Offering occurred on May 20, 2021.

In connection with the closing of

the financing, the Company repaid in full its aggregate notes payable obligation of $1,540,000.

The Series D Preferred will have a fixed conversion

price of $2.05, will be convertible into an aggregate of 3,170,732 shares of common stock and will have the right to vote on an as-converted

Holders of the Series D Preferred shall be entitled to receive cumulative dividends annually at an annual rate equal to ten

percent (10%).

Dividends shall be payable in cash or, at the option of the holder of the Series D Preferred, converted into shares of

common stock as provided in the certificate of designation for the Series D Preferred.

Provided that the shares of common stock issuable

upon conversion of the Series D Preferred is registered pursuant to an effective registration statement, the Company shall have the option,

but not the obligation, to redeem, in cash, all or part of the Series D Preferred.

As a condition to entering into the SPA, the investor

agreed that, commencing on the closing date and until the earliest of (i) listing of the Company’s common stock on a national exchange

or (ii) June 4, 2021, the Series D Preferred and the Warrants will be subject to a standard lock-up provision.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion

and analysis of the results of operations and financial condition of KULR Technology Group, Inc.

(the “Company”)

as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 should be read in conjunction with

our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q.

This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures

as of December 31, 2019 and for the year then ended, which are included in the Form 10-K filed with the Securities and

Exchange Commission (“SEC”) on May 14, 2020.

References in this Management’s Discussion and Analysis of

Financial Condition and Results of Operations to “us”, “we”, “our”

and similar terms refer

to the Company.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements

that are forward-looking.

These statements are based on current expectations and assumptions that are subject to risk, uncertainties

and other factors.

These statements are often identified by the use of words such as “may,”

(the “Company”) as of

March 31, 2021 and for the three months ended March 31, 2021 and 2020 should be read in conjunction with our financial statements and

the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q.

This discussion and analysis

should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2020

and for the year then ended, which are included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”)

on March 19, 2021.

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations

to “us”, “we”, “our”

and similar terms refer to the Company.

This Management’s Discussion and

Analysis of Financial Condition and Results of Operations contains statements that are forward-looking.

These statements are based on

current expectations and assumptions that are subject to risk, uncertainties and other factors.

These statements are often identified

by the use of words such as “may,”

“will,”

7 unchanged sentences

and similar expressions or variations.

Actual results could differ materially because of the factors discussed in “Risk Factors”

elsewhere in this Quarterly Report, in our other reports filed with the SEC, and other factors that we may not know.

results could differ materially because of the factors discussed in “Risk Factors”

elsewhere in this Quarterly Report, in

our other reports filed with the SEC, and other factors that we may not know.

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

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 by which we aim to mitigate the effects of thermal

runaway propagation.

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 NASA, the Jet Propulsion Lab and

others, our products and services make commercial battery powered products safer and electronics systems cooler and lighter.

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

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 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 supply, to providing more design and testing services to our customers.

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

To scale up as a systems provider more quickly and

efficiently in the directed energy, hypersonic vehicle thermal systems, energy storage and lithium-ion battery recycling markets,

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.

Our management expects 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

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 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 Airforce Research Lab, Naval Research Lab and prime contractors to market our

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.

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.

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

Based on this reference

design platform, we were awarded a dual-used 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.

Our research 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 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 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.

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:

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.

These conditions indicate that there is substantial doubt about our ability to continue as a

going concern within one year after the financial statement issuance date.

Historically, we have been able to raise funds to support

our business operations, although there can be no assurance, even with the support of borrowing under the SEDA, that we will be

successful in raising additional funds in the future.

Furthermore, we remain focused on growing our operations and eventually achieving

profitability, although no assurances can be made that we will achieve such goals.

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

The 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.

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.

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

On February 27,

2020, we entered into a Standby Equity Distribution Agreement (“SEDA”) with YAII PN, Ltd., a Cayman Island exempt

limited partnership (“YAII”), pursuant to which the Company may, at its discretion, subject to certain conditions,

sell to YAII up to $8,000,000 of shares common stock.

For each share of common stock purchased under the SEDA (the “Shares”),

YAII will pay the Company 80% of the lowest daily volume weighted average price of the common stock on the OTC Markets OTCQB or

other principal market on which the common stock is traded for the five days immediately following the date the Company delivers

notice requiring YAII to purchase the Shares under the SEDA.

For each advance, the Company shall have delivered all shares relating

to all prior advances, and, unless waived by YAII, at least 5 trading days shall have elapsed from the immediately preceding advance

The Company agreed to issue, without receiving additional consideration, to YAII 95,847 shares of common stock as commitment

shares in consideration for entering into the SEDA.

Through September 30, 2020, the Company issued an aggregate of 1,721,013 shares

of common stock at prices between $0.72 - $1.65 per share for aggregate proceeds of $2,152,696 received against advance notices

submitted to YAII under the SEDA, of which $691,000 of the proceeds were applied directly against principal owed under a promissory

note agreement with YAII (see Promissory Note Agreements, below).

Please also refer to Note 7 –

Notes Payable, in the accompanying

financial statements, for more information.

Promissory Note Agreements

We entered into a Note

Purchase Agreement, dated February 27, 2020, with YAII, pursuant to which YAII purchased a full recourse promissory note (the

“Note”) in the original principal amount of $1,500,000 (“Principal Amount”).

In consideration for the issuance

of the Note by the Company, the purchase price of the Note paid by YAII was equal to the Principal Amount minus an original issue

discount equal to 6%.

The Note bears no interest and will become immediately due and payable on May 31, 2021 or upon acceleration,

redemption or otherwise upon the occurrence of an event of default, as set forth in the Note.

The Company will repay the Principal

Amount in monthly installments as set forth in the Note.

The Company may, at its discretion, prepay any installment amount or the

principal amount, subject to a payment premium equal to the 10% of the amount being prepaid.

We also entered into

a Note Purchase Agreement, dated July 20, 2020, with YAII, to which YAII purchased a full recourse promissory note (the “July

2020 Note”) in the original principal amount of $2,500,000.

In consideration for the issuance of the July 2020 Note, the

purchase price of the July 2020 Note paid by YAII was equal to the Principal Amount minus an original issue discount equal to 8%.

The July 2020 Note was issued under substantially the same terms as the Note.

Through September 30, 2020, we repaid principal on the Note

and July 2020 Note (together, the “Notes) of $850,000 (of which $691,000 was repaid from proceeds from the SEDA).

Subsequent to September 30, 2020, we received

cash of $40,000 in satisfaction of subscriptions receivable as of September 30, 2020 and we issued 31,250 shares of common stock

pursuant to the SEDA.

Subsequent to September

30, 2020, we issued an aggregate of 89,285 shares of additional common stock at a price of $1.12 per share pursuant to new advance

notices submitted to YAII under the SEDA.

The entire proceeds of $100,000 were withheld by YAII to pay down a portion of the Notes.

Subsequent to September

30, 2020, we made cash payments totaling $250,000 to pay down a portion of the Notes.

Common Stock Issuances

Subsequent to September

30, 2020, we issued 76,453 shares of restricted common stock in satisfaction of $100,000 of accrued issuable equity, pursuant to

a services agreement.

Subsequent to September

30, 2020, the Company issued 60,000 shares of common stock to a consultant, which are subject to clawback, at the sole discretion

of our Board of Directors, in the event certain milestones are not achieved.

On July 28, 2020, the

Patent and Trademark Office has issued patent No.

10727462 covering the Company’s thermal runaway shield technology.

On August 4, 2020,

Patent and Trademark Office has issued patent No.

10734302 covering the Company’s fiber thermal interface technology.

In March 2020, the World Health

Organization declared COVID-19, a novel strain coronavirus, a pandemic.

During 2020 and continuing into 2021, the global economy has been,

and continues to be, affected by COVID-19.

While the Company continues to see signs of economic recovery as certain governments began

to gradually ease restrictions, provide economic stimulus and vaccine distribution accelerated, the rate of recovery on a global basis

has been affected by resurgence of the virus or its variants in certain jurisdictions.

The Company continues to monitor the impact of

COVID-19 on its business and operational assumptions and estimates, and determined there were no material adverse impacts on the Company’s

results of operations and financial position at March 31, 2021.

The full extent of the future

impact of COVID-19 on the Company’s operations and financial condition is uncertain.

Accordingly, COVID-19 could have a material

adverse effect on the Company’s business, results of operations, financial condition and prospects during 2021 and beyond, including

the demand for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules

as well as the capability to meet customer demands in a timely manner.

The financial statements do not include any adjustments that might

result from the outcome of this uncertainty.

Appointment of Keith Cochran

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

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

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

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.

Technology Development and Sponsorship Agreement

On March 31, 2021, the Company

entered into a multi-year technology development and sponsorship agreement where the Company has committed to spend an aggregate of $1,650,000

payable in three installments, which are due April 1, 2021, January 1, 2022, and January 1, 2023.

Operating Lease

On April 5, 2021, the Company

entered into an agreement to lease office space for a thirty-six-month period, commencing June 1, 2021.

Monthly rental payments under

the new lease total $23,787, which are comprised of $18,518 of base rent plus $5,269 for common area costs.

Conversion of Series B Preferred Stock

March 2021, 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.

Securities Purchase Agreement

On May 19, 2021, the Company

entered into a SPA with an investor, pursuant to which the Company agreed to issue to the investor an aggregate of 650 shares of Series

D Preferred pursuant to a new designation of preferred stock, and one-year warrants to purchase 2,600,000 shares of common stock at a

price of $2.50 per share, for aggregate gross proceeds of $6,500,000.

The Company will also pay the investor a commitment fee of 1,300,000

shares of common stock at the closing of the Offering.

The Series D Preferred will have a fixed conversion price of $2.05, will be convertible

into an aggregate of 3,170,732 shares of common stock and will have the right to vote on an as-converted basis.

The closing of the Offering

occurred on May 20, 2021.

In connection with the closing of the financing, the Company repaid in full its aggregate notes payable obligation

of $1,540,000.

On April 6, 2021, we issued 20,000 shares of immediately

vested common stock with a grant date value of approximately $51,000 for legal services.

On April 19, 2021, in connection

with the appointment of a new Vice President of Operations (the “VPO”) the Board of Directors granted 80,000 restricted shares

of our common stock to the VPO.

The shares vest in four equal yearly installments on each anniversary of the grant date.

During April, we issued an aggregate of 300,000

shares of common stock in connection with exercises of outstanding warrant pursuant to which we received an aggregate of $375,000 of gross

Results of Operations

Three and Nine Months Ended September

30, 2020 Compared With Three and Nine Months Ended September 30, 2019

Our revenues consisted

of the following types:

Three Months Ended March 31, 2021 Compared

With the Three Months Ended March 31, 2020

Our revenues consisted of

the following during the three months ended March 31, 2021 and 2020:

For the Three Months Ended

For the Nine Months Ended

September 30,

Product sales

1 unchanged sentence

Total revenue

For the three months ended September 30, 2020 and 2019, we generated

$136,849 and $526,722 of revenues, respectively, representing a decrease of $389,873, or 74%.

Revenue from product sales during

the three months ended September 30, 2020 decreased by 71% compared to the three months ended September 30, 2019, mainly due to

a large contract received during the three months ended September 30, 2019.

For the three months ended

March 31, 2021 and 2020, we generated $417,905 and $77,550 of revenues, respectively, representing an increase of $340,405, or 439%.

from product sales during the three months ended March 31, 2021 increased by 537% compared to the three months ended March 31, 2020, mainly

due to four large contracts received during the three months ended March 31, 2021.

Product sales during these periods included sales of

our component products, carbon fiber velvet (“CFV”) thermal management solutions, ISC battery cells and devices, patented

TRS technology, and thermal fiber thermal interface (“FTI”) materials.

Contract services during the comparable period

consisted of certain research and development contracts and onsite engineering services.

For the nine months

ended September 30, 2020 and 2019, we generated $415,477 and $777,984 of revenues from 20 and 21 customers, respectively, representing

a decrease of $362,507, or 47%.

Revenue from product sales during the nine months ended September 30, 2019 decreased by 66% compared

to the nine months ended September 30, 2019, mainly due to a large DOD contract of about $355,000 received during the three months

ended September 30, 2019.

The customer has pushed the next shipment of product to 2021.

Product sales during these periods included

sales of our component products, CFV thermal management solutions, ISC battery cells and devices, patented technology, and thermal

FTI materials.

Revenue from services increased by 96% for the nine months ended September 30, 2020 as compared to the nine months

ended September 30, 2019, due to increased project requirements from some of our new and existing customers.

Our service revenues,

which include certain research and development contracts and onsite engineering services, were not hampered by restrictions arising

from working under COVID-19 shelter-in-place regulations.

our component product, carbon fiber velvet (“CFV”) thermal management solution, ISC battery cells and devices, patented TRS

technology, and thermal fiber thermal interface (“FTI”) materials.

Our service revenues, which include certain research and

development contracts and onsite engineering services, have not been hampered by restrictions arising from working under COVID-19 shelter-in-place

Our customers and prospective

customers are large organizations with multiple levels of management, controls/procedures, and contract evaluation/authorization.

Furthermore, our solutions are new and do not necessarily fit into pre-existing patterns of purchase commitment.

Accordingly, the

business activity cycle between expression of initial customer interest to shipping, acceptance and billing can be lengthy, unpredictable,

and lumpy, which can influence the timing, consistency and reporting of sales growth.

our solutions are new and do not necessarily fit into pre-existing patterns of purchase commitment.

Accordingly, the business activity

cycle between expression of initial customer interest to shipping, acceptance and billing can be lengthy, unpredictable, and lumpy, which

can influence the timing, consistency and reporting of sales growth.

Cost of Revenues

1 unchanged sentence

of the cost of our products as well as labor expenses directly related to product sales or research contract services.

Generally, we earn

greater margins on revenue from products compared to revenue from services, so product mix plays an important role in our reported

average margins for any period.

Also, we are introducing new products at an early stage in our development cycle and the margins

earned can vary significantly between period, customers and products, due to the learning process, customer negotiating strengths,

and product mix.

For the three

months ended September 30, 2020 and 2019, cost of revenues was $60,967 and $109,051, respectively, a decrease of $48,084 or 44%.

The decrease was primarily due to higher salaries paid and purchase of materials related to higher product sales during the three

months ended September 30, 2019.

The gross margin percentage was 55% and 79% for the three months ended September 30, 2020 and

2019, respectively.

The decrease in margins during 2020 reflects our ongoing efforts to build upon existing customer relationships

over a growing pool of referrals and business development leads.

We are pivoting solutions to cater to the specific needs of existing

customers, which requires a higher up-front cost as compared to the preceding period.

For the nine months

ended September 30, 2020 and 2019, cost of revenues was $128,306 and $199,118, respectively, a decrease of $70,812, or 36%.

decrease was primarily due to reduced costs as a result of reduced revenues.

The gross margin percentage was 69% and 74% for the

nine months ended September 30, 2020 and 2019, respectively.

The decrease in margins during 2020 was primarily the result of an

unfavorable change in product mix and higher up-front costs related to existing customer service contracts.

Research and Development

Generally, we earn greater

margins on revenue from products compared to revenue from services, so product mix plays an important role in our reported average margins

for any period.

Also, we are introducing new products at an early stage in our development cycle and the margins earned can vary significantly

between period, customers and products, due to the learning process, customer negotiating strengths, and product mix.

For the three months ended

March 31, 2021 and 2020, cost of revenues was $275,268 and $30,043, respectively, an increase of $245,225 or 816%.

The increase was primarily

due to higher product sales and service revenues earned during the three months ended March 31, 2021.

The gross margin percentage was

34% and 61% for the three months ended March 31, 2021 and 2020, respectively.

The decrease in margins during the first quarter of 2021

is primarily the result of a low 15% margin earned on a single large contract during the first quarter of 2021.

Research and Development

(“R&D”) includes expenses incurred in connection with the R&D of our CFV thermal management solution.

expenses are expensed as they are incurred.

For the three months

ended September 30, 2020 and 2019, R&D expenses were $51,820 and $137,970, respectively, representing a decrease of $86,150

The decrease is primarily due to reductions in salaries and other salary related costs, such as payroll taxes and other

benefits, implemented during the end of the first quarter of 2020 due to COVID-19, as well as a reduction in head count between

the comparable periods.

For the nine months

ended September 30, 2020 and 2019, R&D expenses were $221,524 and $365,709, respectively, representing a decrease of $144,185

The decrease is attributable to reductions in salaries and other salary related costs, such as payroll taxes and other

benefits, implemented during the end of the first quarter of 2020 due to COVID-19, as well as a reduction in head count between

the comparable periods.

We expect that our

R&D expenses will increase as we expand our future operations.

Research and development expenses

(“R&D”) include expenses incurred in connection with the R&D of our CFV thermal management solution.

are expensed as they are incurred.

For the three months ended

March 31, 2021 and 2020, R&D expenses were $122,983 and $111,713, respectively, representing an increase of $11,270 or 10%.

is primarily due to new energy storage development services provided during the period, partially offset by a reduction in R&D salaries

and other salary related costs, such as payroll taxes and other benefits, due to salary reductions implemented at the end of the first

quarter of 2020 as a result of COVID-19.

We expect that our R&D expenses will increase as we expand our future operations.

Selling, General and Administrative

Selling, general and

administrative expenses consist primarily of travel, salaries, payroll taxes and other benefits, and rent expense.

For the three months

ended September 30, 2020 and 2019, selling, general and administrative expenses were $834,582 and $546,982, respectively, an increase

of $287,600 or 53%.

The increase is primarily attributable to an increase of approximately $215,000 of marketing and advertising

expense, $104,000 of stock-based compensation related to consultants and employees, partially offset by a decrease of $26,000 of

rent expense due to the termination of an operating lease during the end of the fourth quarter of 2019 and a $17,000 decrease in

professional and legal fees.

For the nine months

ended September 30, 2020 and 2019, selling, general and administrative expenses were $1,728,974 and $1,666,735, respectively, an

increase of $62,239, or 4%.

The increase is primarily due to an increase of approximately $260,000 of marketing and advertising

expense, $139,000 of stock-based compensation related to consultants and employees, partially offset by a decrease of $103,000

of travel, meals, and entertainment expense due to COVID-19 restrictions, $78,000 of rent expense due to the termination of an

operating lease during the end of the fourth quarter of 2019, $75,000 of professional fees, $71,000 of payroll and benefits due

to salary reductions implemented during the end of the first quarter of 2020 as a result of COVID-19, and $13,000 of conference

and seminar expenses due to the travel restrictions and stay-at-home orders as a result of COVID-19.

Selling, general and administrative

expenses consist primarily of travel, salaries, payroll taxes and other benefits, and rent expense.

For the three months ended

March 31, 2021 and 2020, selling, general and administrative expenses were $1,492,811 and $465,410, respectively, an increase of $1,027,401

The increase is primarily attributable to an increase of approximately $486,000 of marketing and advertising expense, an increase

of approximately $376,000 of stock-based compensation resulting primarily from the issuance of restricted stock upon the appointment of

the Company’s Chief Operating Officer (“COO”) and stock granted to consultants during the period, as well as an increase

of approximately $87,000 in labor costs as the result of four new hires, including the appointment of the COO.

Other Expenses

For the three months ended September

30, 2020 and 2019, other expense was $201,739 and $253, respectively, an increase of $201,486.

The increase in other expense is

primarily due to the amortization of debt discount related to the issuance of notes payable.

For the nine months ended September 30,

2020 and 2019, other expense was $328,170 and $1,065, respectively, an increase of $327,105.

The increase in other expense is primarily

due to the amortization of debt discount related to the issuance of notes payable and the change in fair value of accrued issuable

equity during the period.

For the three months

ended March 31, 2021 and 2020, other expenses were $241,566 and $20,587, respectively, representing an increase of $220,979.

in other expense is primarily due to amortization of debt discount of $108,124 related to the issuance of notes payable and $132,577 of

change in fair value of accrued issuable equity during the three months ended March 31, 2021.

Liquidity and Capital Resources

As of September 30,

2020 and December 31, 2019, we had cash balances of $2,809,656 and $108,857, respectively, and working capital deficits $404,561

and $824,481, respectively.

For the nine months

ended September 30, 2020 and 2019, cash used in operating activities was $2,076,035 and $1,206,135, respectively.

Our cash used

in operations for the nine months ended September 30, 2020 was primarily attributable to our net loss of $1,991,497, adjusted for

non-cash expenses in the aggregate amount of $587,503, and $672,041 of net cash used to fund changes in the levels of operating

assets and liabilities.

Our cash used in operations for the nine months ended September 30, 2019 was primarily attributable to

our net loss of $1,454,643, adjusted for non-cash expenses in the aggregate amount of $241,285, partially offset by $7,223 of net

cash provided by changes in the levels of operating assets and liabilities.

For the nine months

ended September 30, 2020 and 2019, cash used in investing activities was $46,087 and $0, respectively.

Cash used in investing activities

during the nine months ended September 30, 2020 was related to the purchases of equipment.

For the nine months

ended September 30, 2020 and 2019, cash provided by financing activities was $4,822,921 and $1,052,300, respectively.

provided by financing activities for the nine months ended September 30, 2020 was due to $3,710,000 of net proceeds from the issuance

of notes payable, $155,226 of proceeds from the Paycheck Protection Program loan, and $1,461,695 of net proceeds from the sale

of common stock.

These amounts were partially offset by $330,000 for the payment of debt issuance costs, $159,000 for the repayments

on notes and $15,000 of cash paid in offering costs.

Cash provided by financing activities during the nine months ended September

30, 2019 consisted of $898,300 of proceeds from the sale of common stock and $169,000 of proceeds from the sale of Series C Convertible

Preferred Stock and warrants, offset by $15,000 cash paid for offering costs.

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.

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 .

During the nine months ended September 30,

2020, we received net proceeds of $3,710,000 pursuant to a two Note Purchase Agreements with YAII (the “Notes”).

Notes bear no interest and mature between May 31 through July 20, 2020 and will be paid in monthly installments through the maturity

Additionally, in April

2020, the Company received a loan of $155,226 under the government Small Business Administration (“SBA”) sponsored

Payroll Protection Program (“PPP”) to support continuing employment during the COVID-19 pandemic.

As of March 31, 2021 and December 31,

2020, we had cash balances of $6,166,755 and $8,880,140, respectively, and working capital of $4,699,452 and $6,060,695, respectively.

For the three months ended

March 31, 2021 and 2020, cash used in operating activities was $1,663,385 and $698,110, respectively.

Our cash used in operations for

the three months ended March 31, 2021 was primarily attributable to our net loss of $1,714,723, adjusted for non-cash expenses in the

aggregate amount of $633,444, and $582,106 of net cash used to fund changes in the levels of operating assets and liabilities.

used in operations for the three months ended March 31, 2020 was primarily attributable to our net loss of $550,253, adjusted for non-cash

expenses in the aggregate amount of $32,826, and $180,683 of net cash used to fund changes in the levels of operating assets and liabilities.

There were no cash flows from

investing activities for the three months ended March 31, 2021 and 2020.

For the three months ended

March 31, 2021 and 2020, cash (used in) provided by financing activities was ($1,050,000) and $1,223,401, respectively.

Cash used in financing

activities during the three months ended March 31, 2021 represents principal payments on notes payable.

The cash provided by financing

activities during the three months ended March 31, 2020 primarily represents $1,410,000 of net proceeds from the issuance of a note payable,

offset by the payment of $130,000 of debt issuance costs and repayment of notes payable of $50,000.

In March 2020, the World Health

Organization declared COVID-19, a novel strain coronavirus, a pandemic.

During 2020 and continuing into 2021, the global economy has been,

and continues to be, affected by COVID-19.

While the Company continues to see signs of economic recovery as certain governments began

to gradually ease restrictions, provide economic stimulus and vaccine distribution accelerated, the rate of recovery on a global basis

has been affected by resurgence of the virus or its variants in certain jurisdictions.

The Company continues to monitor the impact of

COVID-19 on its business and operational assumptions and estimates, and determined there were no material adverse impacts on the Company’s

results of operations and financial position at March 31, 2021.

The full extent of the future

impact of COVID-19 on the Company’s operations and financial condition is uncertain.

Accordingly, COVID-19 could have a material

adverse effect on the Company’s business, results of operations, financial condition and prospects during 2021 and beyond, including

the demand for its products, interruptions to supply chains, ability to maintain regular R&D and manufacturing schedules as well as

the capability to meet customer demands in a timely manner.

The condensed consolidated financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

During the year ended December

31, 2020, we entered into note purchase agreements in the original aggregate principal amount of $4,000,000 for cash proceeds of $3,710,000.

Principal in the amount of $1,550,000 was repaid during the year ended December 31, 2020 and principal in the amount of $1,050,000 was

repaid during the three months ended March 31, 2021.

Of the $1,400,000 principal balance remaining at March 31, 2021, $525,000 matures

on May 31, 2021 and $875,000 matures on June 30, 2021.

In April 2020, the Company

received a loan of $155,226 under the government Small Business Administration (“SBA”) sponsored Payroll Protection Program

(“PPP”) to support continuing employment during the COVID-19 pandemic.

The PPP Loan (“Note”) and accrued

interest may be forgiven as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent

and utilities and maintains its payroll levels.

The amount of forgiveness will be reduced if the borrower terminates employees or reduces

salaries during the eight-week period.

If the PPP Loan is not forgiven, the Company will begin repaying this loan beginning in November

Any unforgiven balance must be repaid in full by its maturity date, February 28, 2022.

Effective February 27,

2020, the Company entered into a twenty-four month Standby Equity Distribution Agreement (“SEDA”) with YAII, pursuant

to which the Company may, at its discretion, sell to up to an aggregate of $8,000,000 (subject to YAII’s approval for amounts

over $100,000) of shares of the Company’s common stock at a price equal to Company 80% of the lowest daily volume weighted

average price for the five days immediately following the date the Company delivers notice requiring YAII to purchase the shares

under the SEDA.

For each advance, the Company shall have delivered all shares relating to all prior advances, and, unless waived

by YAII, at least 5 trading days shall have elapsed from the immediately preceding advance date.

Through September 30, 2020, the

Company issued an aggregate of 1,721,013 shares of common stock at prices between $0.72 - $1.65 per share for aggregate proceeds

of $2,152,696 in connection with advance notices submitted to YAII under the SEDA, of which $691,000 of the proceeds were applied

directly against the principal due under the Notes.

As of September 30,

2020, we had approximately $5,847,300 available in connection with the SEDA, in order to fund our ongoing operations;

there can be no assurance that we will be able to continue sell common shares pursuant to the SEDA at an acceptable price, or without

causing undue dilution to our existing investors.

Subsequent to September

30, 2020, we issued an aggregate of 89,285 shares of common stock at a price of $1.12 per share pursuant to advance notices submitted

to the Investor under the SEDA.

The entire proceeds of $100,000 were withheld by the Investor to pay down a portion of the principal

due under the Notes.

Subsequent to September

30, 2020, we made cash payments totaling $250,000 to pay down a portion of the principal due under the Notes.

We have not yet achieved

profitability and expect to continue to incur cash outflows from operations.

It is expected that our research and development and

general and administrative expenses will continue to increase and, as a result, we will eventually need to generate significant

revenues and/or raise additional capital to fund our operations.

Although our management believes that we have access to capital

resources through the SEDA or other sources, there is no assurance that we will be able to obtain funds on commercially acceptable

terms, if at all.

If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or

discontinue operations or obtain funds by entering into financing agreements on unattractive terms.

Our operating needs include

the planned costs to operate our business, including amounts required to fund working capital and capital expenditures.

The conditions

outlined above indicate that there is substantial doubt about our ability to continue as a going concern within one year after

the financial statement issuance date.

Our unaudited condensed

consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared in conformity

with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), which contemplate our

continuation as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.

The carrying amounts of assets and liabilities presented in the unaudited condensed consolidated financial statements do not necessarily

purport to represent realizable or settlement values.

The unaudited condensed consolidated financial statements do not include

any adjustment that might result from the outcome of this uncertainty.

2020, the Company entered into a twenty-four month Standby Equity Distribution Agreement (“SEDA”) with YAII, pursuant to which

the Company may, at its discretion, sell to up to an aggregate of $8,000,000 (subject to YAII’s approval for amounts over $100,000)

of shares of the Company’s common stock at a price equal to Company 80% of the lowest daily volume weighted average price for the

five days immediately following the date the Company delivers notice requiring YAII to purchase the shares under the SEDA.

For each advance,

the Company shall have delivered all shares relating to all prior advances, and, unless waived by YAII, at least 5 trading days shall

have elapsed from the immediately preceding advance date.

Through March 31, 2021 , the Company issued an aggregate of 1,841,548 shares

of common stock at prices between $0.73 - $1.65 per share for aggregate proceeds of $2,214,437 in connection with advance notices submitted

to YAII under the SEDA, of which $791,000 of the proceeds were applied directly against the principal due under the Notes.

a registered public offering on December 31, 2020, the Company may not issue shares involving variable rate transactions (including shares

issuable pursuant to the SEDA), so long as warrants issued in connection with the registered public offering remain outstanding.

On May 19, 2021, the Company

entered into a SPA with an investor, pursuant to which the Company agreed to issue to the investor an aggregate of 650 shares of Series

D Preferred pursuant to a new designation of preferred stock, and one-year warrants to purchase 2,600,000 shares of common stock at a

price of $2.50 per share, for aggregate gross proceeds of $6,500,000.

The Company will also pay the investor a commitment fee of 1,300,000

shares of common stock at the closing of the Offering.

The Series D Preferred will have a fixed conversion price of $2.05, will be convertible

into an aggregate of 3,170,732 shares of common stock and will have the right to vote on an as-converted basis.

The closing of the Offering

occurred on May 20, 2021.

In connection with the closing of the financing, the Company repaid in full its aggregate notes payable obligation

of $1,540,000.

We have not yet achieved profitability

and expect to continue to incur cash outflows from operations.

It is expected that our research and development and general and administrative

expenses will continue to increase and, as a result, we will eventually need to generate significant revenues and/or raise additional

capital to fund our operations.

Although our management believes that we have access to capital resources through various sources, there

is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all.

Our operating needs include the planned

costs to operate our business, including amounts required to fund working capital and capital expenditures.

While we believe that we will

continue to incur operating losses and use cash in operating activities for the foreseeable future, we believe that our current working

capital is sufficient in comparison to our anticipated cash usage for a period of at least the next twelve months subsequent to the filing

date of these condensed consolidated financial statements.

Off-Balance Sheet Arrangements

There are no off-balance

sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial

conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital

resources that is material to stockholders.

There are no off-balance sheet

arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial conditions,

changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that

is material to stockholders.

Critical Accounting Policies

For a description of

our critical accounting policies, see Note 3 –

Summary of Significant Accounting Policies in Part 1, Item 1 of

this Quarterly Report on Form 10-Q.

Quantitative and Qualitative Disclosures About Market

The Company is a smaller

reporting company, as defined by Rule 229.10(f)(1), and is not required to provide the information required by this Item.

For a description of our critical

accounting policies, see Note 2 –

Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report

on Form 10-Q.

Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting

company, as defined by Rule 229.10(f)(1), and is not required to provide the information required by this Item.

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-Q

Item 1. Financial Statements