What changed in this filing

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Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 210 added, 131 removed, 376 unchanged (48% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

3 unchanged sentences

Property and equipment, net

Equipment deposits

Security deposits

5 unchanged sentences

Accrued expenses and other current liabilities

Notes payable, net of debt discount of $ 0 and $ 128,198 at September 30, 2021 and December 31, 2020, respectively

Accrued issuable equity

Notes payable, net of debt discount of $ 0 and $ 128,198 at June 30, 2021 and December 31, 2020, respectively

Loan payable, current portion

9 unchanged sentences

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

none issued and outstanding at June 30, 2021 and December 31, 2020

none issued and outstanding at September 30, 2021 and December 31, 2020

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

0 and 13,972 shares issued and outstanding and liquidation preference of $ 0 and $ 13,972 at June 30, 2021 and December 31, 2020, respectively

0 and 13,972 shares issued and outstanding and liquidation preference of $ 0 and $ 13,972 at September 30, 2021 and December 31, 2020, respectively

Series C Preferred Stock, 400 shares designated;

none issued and outstanding at June 30, 2021 and December 31, 2020

none issued and outstanding at September 30, 2021 and December 31, 2020

Series D Preferred Stock, 650 shares designated;

none issued and outstanding at June 30, 2021 and December 31, 2020

none issued and outstanding at September 30, 2021 and December 31, 2020

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

100,567,930 and 89,908,600 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

101,992,963 and 89,908,600 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

9 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenue

6 unchanged sentences

( 7,500,645 )

( 1,663,327 )

Other (Expense) Income

3 unchanged sentences

Change in fair value of accrued issuable equity

Loss on foreign currency transactions

Total Other Expenses, net

1 unchanged sentence

( 1,012,259 )

Deemed dividend to Series D preferred stockholders

( 7,837,798 )

( 1,991,497 )

Deemed dividend to Series D preferred stockholders

( 2,624,326 )

Net Loss Attributable to Common Stockholders

1 unchanged sentence

( 1,012,259 )

( 10,462,124 )

( 1,991,497 )

Net Loss Per Share

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

Series B Convertible

31 unchanged sentences

( 15,988,274 )

[1] Represents relative fair value of preferred stock issued, net of cash issuance costs of $ 365,000 .

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020

Common stock issued upon the exercise of warrants

Stock-based compensation:

Common stock issued for services

Restricted common stock issued

Amortization of restricted common stock

Amortization of stock options

Amortization of market-based award

( 3,095,932 )

Balance - September 30, 2021

( 19,084,206 )

[1] Represents gross proceeds of $ 6,500,000 , net of cash issuance costs of $ 365,000 .

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

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

Series B Convertible

18 unchanged sentences

( 9,375,550 )

[2] Amount represents gross proceeds of $ 757,695 less $ 78,258 of amortized deferred offering costs.

Common stock issued pursuant to the

SEDA agreement

Common stock to be issued pursuant to the SEDA agreement

Stock-based compensation:

Amortization of stock options

Common stock issued upon

conversion of Series B Convertible

Preferred Stock

Common stock issued upon

conversion of Series C Convertible Preferred Stock

( 1,012,259 )

Balance - September 30, 2020

( 10,387,809 )

[1] Represents gross proceeds of $ 757,695 less $ 78,258 of amortized deferred offering costs.

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash Flows From Operating Activities:

( 7,837,798 )

( 1,991,497 )

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

Amortization of debt discount

Depreciation expense

Depreciation and amortization expense

Bad debt expense

15 unchanged sentences

Cash Flows From Investing Activities:

Deposits for equipment purchases

( 1,029,805 )

Purchase of property and equipment

Net Cash Used In Investing Activities

( 1,386,864 )

Cash Flows from Financing Activities:

6 unchanged sentences

Proceeds from note payable

Proceeds from line of credit, net

Payment of debt issuance costs

4 unchanged sentences

Cash - End of Period

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 investor.

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

For the Six Months Ended

For the Nine Months Ended

September 30,

Supplemental Disclosures of Cash Flow Information:

3 unchanged sentences

Beneficial conversion feature on Series D Convertible Preferred Stock

Common stock issued upon the conversion of Series D convertible preferred stock

Common stock issued as a commitment fee for the SEDA agreement

1 unchanged sentence

Common stock issued upon conversion of Series B Convertible Preferred Stock

Common stock issued upon the conversion of Series C Convertible Preferred Stock

Common stock issued upon the conversion of Series D Convertible Preferred Stock

Common stock issued in satisfaction of accrued issuable equity

Original issuance discount on note payable

14 unchanged sentences

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 June 30, 2021 and for the three and six months ended June 30, 2021 and 2020.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 or any other period.

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, 2021 and for the three and nine months ended September 30, 2021 and 2020.

The results of operations for the three and nine months ended September 30, 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 19, 2021.

3 unchanged sentences

While the Company continues to see signs of economic recovery as certain governments begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, 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 has determined there were no material adverse impacts on the Company’s results of operations and financial position at June 30, 2021.

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

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the six months ended June 30, 2021, the Company raised gross proceeds of $ 6,500,000 in connection with the sale of preferred stock and warrants, and raised proceeds of $ 3,712,500 in connection with the exercise of warrants to purchase common stock.

During the six months ended June 30, 2021, the Company repaid outstanding notes payable in the amount of $ 2,450,000 .

As of June 30, 2021, the Company had cash of $ 12,159,583 and working capital of $ 12,194,403 .

During the nine months ended September 30, 2021, the Company raised gross proceeds of $ 6,500,000 in connection with the sale of preferred stock, common stock and warrants, and raised proceeds of $ 5,206,716 in connection with the exercise of warrants to purchase common stock.

During the nine months ended September 30, 2021, the Company repaid outstanding notes payable in the amount of $ 2,450,000 .

Subsequent to September 30, 2021, the Company received an aggregate of $ 6,500,000 in connection with the exercise of warrants.

See Note 12 – Subsequent Events for additional details.

As of September 30, 2021, the Company had cash of $ 10,990,056 and working capital of $ 10,659,878 .

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 financial statements.

5 unchanged sentences

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 $ 11,833,906 and $ 8,513,010 as of June 30, 2021 and December 31, 2020, respectively.

There was an uninsured balance of $ 10,489,922 and $ 8,513,010 as of September 30, 2021 and December 31, 2020, respectively.

Customer and Revenue Concentrations

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

June 30, 2021

For the Nine Months Ended

September 30,

September 30, 2021

December 31, 2020

2 unchanged sentences

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.

As a result of the Company’s significant customer concentrations, its gross profit and

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Vendor Concentrations

Vendor concentrations are as follows for the three and six months ended June 30, 2021 and 2020:

Vendor concentrations are as follows for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Less than 10%

5 unchanged sentences

Products that are determined to be obsolete, if any, are written down to net realizable value.

As of June 30, 2021 and December 31, 2020, the Company's inventory was comprised solely of finished goods.

As of September 30, 2021 and December 31, 2020, the Company's inventory was comprised solely of finished goods.

Revenue Recognition

8 unchanged sentences

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.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes revenue primarily from the following different types of contracts:

● Product sales – Revenue is recognized at the point in time that the product is transferred to the customer, which is generally at the time products leave the Company’s distribution center.

● 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 and six months ended June 30, 2021 and 2020:

The following table summarizes the Company's revenue recognized during the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Product sales

1 unchanged sentence

Total revenue

As of June 30, 2021 and December 31, 2020, the Company had $ 29,229 and $ 20,000 of deferred revenue, respectively, from contracts with customers.

As of September 30, 2021 and December 31, 2020, the Company had $ 158,816 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 and six months ended June 30, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of June 30, 2021 and December 2020, the Company had $ 109,735 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.

During the three and nine months ended September 30, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of September 30, 2021 and December 31, 2020, the Company had $ 62,908 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 revenue.

4 unchanged sentences

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 and dilutive common-equivalent shares outstanding during each period.

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

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, less unvested issued restricted stock.

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 period, if not antidilutive.

KULR TECHNOLOGY GROUP, INC.

2 unchanged sentences

The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

September 30,

Series B Convertible Preferred Stock

16 unchanged sentences

The guidance becomes effective for the Company on January 1, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this new standard on its condense consolidated financial statements.

The Company is currently evaluating the impact of this new standard on its condensed consolidated financial statements.

On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

5 unchanged sentences

If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period.

The Company is evaluating this new standard.

The Company does not expect this new standard to have a material impact on its financial statements.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed.

NOTE 3 PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of June 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:

As of September 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:

September 30,

Deferred labor costs

Deferred inventory costs

Professional fees

Subscriptions

Vendor deposits

Total prepaid expenses

NOTE 4 EQUIPMENT DEPOSITS

The Company entered into agreements with third party contractors for the design and build of a battery packaging and inspection automation system and a cell testing system.

On July 22, 2021 and September 27, 2021, the Company paid deposits of $ 330,000 and $ 699,805 in connection with these agreements.

NOTE 5 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of June 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following:

As of September 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following:

September 30,

Board compensation

Payroll and vacation

Legal and professional fees

Research and development

Total accrued expenses and other current liabilities

NOTE 5 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the six months ended June 30, 2021 is presented below.

Balance, January 1, 2021

Reclassifications to equity

Mark-to market

Balance, June 30, 2021

During the six months ended June 30, 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 $ 183,639 , and settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 40,000 shares with an aggregate fair value of $ 74,800 .

During the three and six months ended June 30, 2021, the Company recorded income (loss) of $ 20,703 and ($ 111,874 ), respectively, related to the change in fair value of accrued issuable equity.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the nine months ended September 30, 2021 is presented below.

Balance, January 1, 2021

Reclassifications to equity upon issuance

Mark-to market

Balance, September 30, 2021

During the nine months ended September 30, 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 $ 208,680 , and settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 100,000 shares with an aggregate fair value of $ 209,200 .

During the three and nine months ended September 30, 2021, the Company recorded income of $ 45,600 and a charge of $ 66,274 , respectively, related to the change in fair value of accrued issuable equity.

NOTE 7 LEASES

On April 5, 2021, the Company entered into a new lease agreement for office space in San Diego, California, effective June 1, 2021.

The intital lease term is three years and there is an option to renew for an additional five years .

The initial lease term is three years and there is an option to renew for an additional five years .

Management does not expect to exercise its option to renew.

Monthly rental payments under the new lease begin at $ 23,787 , which is comprised of $ 18,518 of base rent plus $ 5,268 of common area maintenance fees, with annual escalation of 3.5 %.The Company paid a security deposit of $ 50,213 in connection with the new lease agreement.

The Company determined that that value of the lease liability and the related right-of-use asset at inception was $ 814,817 , using an estimated incremental borrowing rate of 5 %.

Monthly rental payments under the new lease begin at $ 23,787 , which is comprised of $ 18,518 of base rent plus $ 5,268 of common area maintenance fees, with annual escalation of 3.5 %.

The Company paid a security deposit of $ 50,213 in connection with the new lease agreement.

The Company determined that the value of the lease liability and the related right-of-use asset at inception was $ 814,817 , using an estimated incremental borrowing rate of 5 %.

The Company also rents office space in San Diego, California on a month-to-month basis, at monthly rent of $ 5,127 , which is comprised of $ 4,572 of base rent plus $ 555 of association fees.

During the three and six months ended June 30, 2021, aggregate operating lease expense was $ 39,805 and $ 55,207 , respectively.

For the three and six months ended June 30, 2020, operating lease expense was $ 17,200 and $ 27,216 , respectively.

As of June 30, 2021, the Company did not have any financing leases.

Maturities of lease liabilities as of June 30, 2021 were as follows:

During the three and nine months ended September 30, 2021, aggregate operating lease expense was $ 89,305 and $ 144,765 , respectively.

For the three and nine months ended September 30, 2020, operating lease expense was $ 15,616 and $ 42,832 , respectively.

As of September 30, 2021, the Company did not have any financing leases.

Maturities of lease liabilities as of September 30, 2021 were as follows:

Maturity Date

Remaining six months ending December 31, 2021

Remaining three months ending December 31, 2021

Total lease payments

3 unchanged sentences

Lease liabilities, non-current portion

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow information related to the lease was as follows:

For the Nine Months Ended September 30,

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating lease

Right-of-use asset obtained in exchange for lease obligations

Operating lease

NOTE 8 NOTES PAYABLE

A summary of notes payable activity during the six months ended June 30, 2021 is presented below:

A summary of notes payable activity during the nine months ended September 30, 2021 is presented below:

Balance, January 1, 2021

3 unchanged sentences

Amortization of debt discount

Outstanding, June 30, 2021

Outstanding, September 30, 2021

NOTE 9 RELATED PARTY TRANSACTIONS

During the three and nine months ended September 30, 2021, the Company had no material related party transactions.

Accounts Payable – Related Party

Accounts payable – related party consisted of a liability of $ 2,628 and $ 2,628 , as of June 30, 2021 and December 31, 2020, respectively, to Energy Science Laboratories, Inc.

Accounts payable – related party consisted of a liability of $ 0 and $ 2,628 , as of September 30, 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.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 STOCKHOLDERS’ EQUITY

7 unchanged sentences

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.

Provided that the shares of common stock issuable upon conversion of the Series

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company determined that the Series D Preferred was permanent equity given that there was no redemption provision at the holder’s option and it was determined that the conversion option was clearly and closely related to the equity host, so it didn’t need to be bifurcated.

10 unchanged sentences

On June 17, 2021, the Company issued 3,170,730 shares of common stock upon the conversion of 650 shares of Series D Preferred, after which no Series D Preferred shares remained outstanding.

During the three months ended June 30, 2021, the Company issued 3,000,000 shares of common stock upon the exercise of warrants for proceeds of $ 3,712,500 .

Stock-Based Compensation

During the three month and six months ended June 30, 2021, the Company recognized stock-based compensation expense of $ 1,085,891 and $ 1,473,863 , respectively of which $ 7,785 and $ 15,190 , respectively, is included in research and

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

development expenses, and $ 1,078,106 and $ 1,458,673 , respectively, is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

During the three and six months ended June 30, 2020, the Company recognized stock-based compensation expense of $ 82,088 and $ 94,816 , respectively, of which $ 2,163 and $ 10,275 , respectively was charged to research and development expense and $ 79,925 and $ 84,541 , respectively is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

The following table presents information related to stock-based compensation for the three months and six months ended June 30, 2021 and 2020:

During the three month and nine months ended September 30, 2021, the Company recognized stock-based compensation expense of $ 1,292,096 and $ 2,765,959 , respectively of which $ 0 and $ 15,190 , respectively, is included in research and development expenses, and $ 1,292,096 and $ 2,750,770 , respectively, is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

During the three and nine months ended September 30, 2020, the Company recognized stock-based compensation expense of $ 158,014 and $ 252,831 , respectively, of which $ 7,424 and $ 22,961 , respectively was charged to research and development expense and $ 150,590 and $ 229,870 , respectively is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

The following table presents information related to stock-based compensation for the three months and nine months ended September 30, 2021 and 2020:

For the Three Months Ended

For the Six Months Ended

Common stock issued for services

For the Nine Months Ended

September 30,

Common stock for services

Amortization of restricted common stock

1 unchanged sentence

Stock options

Accrued issuable equity (1)

(1) See Note 5 - Accrued Issuable Equity, for additional details.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 2021 and February 2021.

On April 7, 2021, the Company issued 20,000 shares of immediately vested common stock with an aggregate grant date value of $ 25,000 for consulting services.

On June 11, 2021, the Company issued 35,000 shares of immediately vested common stock with an aggregate grant date value of $ 85,000 for services rendered during May and June 2021.

For the three and nine months ended September 30, 2021, the Company issued 85,000 and 160,000 shares of immediately vested common stock, respectively, having an aggregate grant date value of $ 186,399 and $ 346,199 , respectively.

During the three and nine months ended September 30, 2021, the Company issued an aggregate of 1,185,033 and 4,185,033 shares of common stock, respectively, in connection with exercises of outstanding warrants pursuant to which we received gross proceeds in the aggregate amount of $ 1,494,216 and $ 5,206,716 , respectively.

A summary of warrants activity during the nine months ended September 30, 2021 is presented below:

Outstanding, January 1, 2021

( 4,185,033 )

Outstanding, September 30, 2021

Exercisable, September 30, 2021

The following table presents information related to warrants as of September 30, 2021:

Warrants Outstanding

Warrants Exercisable

Remaining Life

Restricted Common Stock

On March 1, 2021, the Company issued 2,000,000 shares of restricted 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.

The shares vest in four equal annual installments beginning on March 1, 2022.

During May 2021, the Company issued 80,000 shares of restricted common stock with an aggregate grant date value of $ 164,000 in connection with the appointment of the Company's Vice President of Operations and granted 50,000 shares of restricted common stock with an aggregate grant date value of $ 99,500 in connection with the appointment of the Company's Senior Director of Product Development.

The shares vest in four equal annual installments beginning in May 2022.

On June 1, 2021, the Company issued 25,000 shares of restricted common stock with an aggregate grant date value of $ 51,750 for services rendered pursuant to a consulting agreement.

The shares vest on the one year anniversary of the grant date.

The following table presents information related to restricted common stock (excluding Market-Based Awards) as of September 30, 2021:

Weighted Average

Shares of Restricted

Non-vested balance, January 1, 2021

Non-vested shares, September 30, 2021

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On June 7, 2021, the Company issued an aggregate of 60,000 shares of restricted common stock with an aggregate grant date value of $ 156,000 as compensation to three recently elected board members.

The shares vest in 15,000 share increments every three months beginning on September 7, 2021.

On June 10, 2021, the Company issued 200,000 shares of restricted common stock with an aggregate grant date value of $ 524,000 in connection with the appointment of the Company’s Vice President of Sales and Marketing.

The shares vest in four equal annual installments beginning June 9, 2022.

The grant date value of the above awards is recognized ratably over the respective vesting periods.

During the three and six months ended June 30, 2021, the Company recorded stock-based compensation of $ 433,689 and $ 560,314 , respectively, in connection with the amortization of restricted stock.

As of June 30, 2021, there was $ 5,731,264 of unrecognized stock-based compensation related to restricted stock awards which will be amortized over the weighted average remaining vesting period of 3.6 years.

As of September 30, 2021, there was $ 5,560,259 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of 3.2 years.

Stock Options

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 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 years.

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

On May 17, 2021, the Company granted five-year options to purchase a total of 10,000 shares of common stock at an exercise price of $ 2.08 per share to an employee pursuant to the 2018 Plan.

One-fourth of the options will vest on the six-month anniversary of the grant date and the remaining options vest annually over three years.

The options had an aggregate grant date value of $ 5,878 which is recognized over the vesting period.

On May 26, 2021, the Company granted five-year options to purchase a total of 10,000 shares of common stock at an exercise price of $ 1.99 per share to an employee pursuant to the 2018 Plan.

One-fourth of the options will vest on the six-month anniversary of the grant date and the remaining options vest annually over three years.

The options had an aggregate grant date value of $ 5,805 which is recognized over the vesting period.

On June 1, 2021, the Company granted two five-year options to purchase a total of 20,000 shares of common stock at an exercise price of $ 2.03 per share to certain employees pursuant to the 2018 Plan.

One-fourth of the options will vest on the six-month anniversary of the grant date and the remaining options vest annually over three years.

The options had an aggregate grant date value of $ 12,145 which is recognized over the vesting period.

On June 17, 2021, the Company granted five-year options to purchase a total of 30,000 shares of common stock at an exercise price of $ 2.27 per share to an employee pursuant to the 2018 Plan.

One-fourth of the options will vest on the six-month anniversary of the grant date and the remaining options vest annually over three years.

The options had an aggregate grant date value of $ 16,726 which is recognized over the vesting period.

As of June 30, 2021 there was $ 120,504 of unrecognized stock-based compensation expense related to stock options, which will be recognized over the weighted average remaining vesting period of 3.3 years.

A summary of options activity (excluding Market-Based Awards) during the nine months ended September 30, 2021 is presented below:

Outstanding, January 1, 2021

Outstanding, September 30, 2021

Exercisable,September 30, 2021

The following table presents information related to stock options (excluding Market-Based Awards) as of September 30, 2021:

Options Outstanding

Options Exercisable

Remaining Life

As of September 30, 2021, there was $ 175,780 of unrecognized stock-based compensation expense related to stock options, which will be recognized over the weighted average remaining vesting period of 2.9 years.

KULR TECHNOLOGY GROUP, INC.

3 unchanged sentences

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

For the Six Months Ended

For the Three Months Ended

For the Nine Months Ended

September 30,

Risk free interest rate

0.20 % - 0.23

0.20 % - 0.85

Expected term (years)

1 unchanged sentence

Expected dividends

A summary of options activity during the six months ended June 30, 2021 is presented below:

Outstanding, January 1, 2021

Outstanding, June 30, 2021

Exercisable, June 30, 2021

The following table presents information related to stock options as of June 30, 2021:

Exercisable Options

Remaining Life

See Market-Based Awards below for an additional option issuance.

For the three and nine months ended September 30, 2021, the stock options had a weighted average grant date value of $ 1.55 and $ 0.80 per option share, respectively.

For the nine months ended September 30, 2020, the stock options had a weighted average grant date value of $ 0.36 per option share.

There were no stock options granted during the three months ended September 30, 2020.

See Market-Based Awards below for additional information.

Market-Based Awards

The following table presents information related to market-based awards as of September 30, 2021:

Restricted stock units

Stock options

On March 1, 2021, in connection with the appointment of the Company’s Chief Operating Officer (the “COO”), the COO became 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.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On June 10, 2021, the Chief Executive Officer (the “CEO”) received an option for the purchase of up to 1,500,000 shares of the Company’s common stock at an exercise price of $ 2.60 , which will be earned based upon achieving certain market capitalization milestones up to $ 4 billion.

4 unchanged sentences

Expected dividend yield

Expected term

Expected life of market-based awards

Fair value of common stock on date of grant

As of June 30, 2021, there was $ 4,870,402 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 2.1 years.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2021, there was $ 4,116,195 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.86 years.

NOTE 11 COMMITMENTS AND CONTINGENCIES

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 on April 1, 2021, January 1, 2022, and January 1, 2023.

The Company paid $ 250,000 on April 1, 2021, which was recorded as a prepaid expense and will be amortized over the performance period.

During the six months ended June 30, 2021, $ 83,333 of expense was recognized related to the 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 $ 900,000 in sponsorship fees, payable in three installments, of which $ 250,000 was paid on April 1, 2021, $ 300,000 is payable on January 1, 2022, and $ 350,000 is payable on January 1, 2023.

The April 1, 2021 payment of $ 250,000 was recorded as a prepaid expense and is being amortized over the performance period.

During the nine months ended September 30, 2021, $ 166,667 of sponsorship fees expense was recognized related to the agreement.

In addition, the Company has committed to paying an aggregate of $ 750,000 related to technology development fees, which is to be paid in three equal installments during 2021, 2022 and 2023.

As of September 30, 2021, no portion of the technology fees has been paid.

Research and Development Agreements

On April 5, 2021, the Company entered into a research and development agreement to develop high-areal-capacity battery electrodes to increase the energy density of batteries.

Pursuant to the terms of the agreement, the Company has committed to spend an aggregate amount of $ 580,375 , payable in eight quarterly installments of $ 72,547 .

During the nine months ended September 30, 2021, $ 145,094 of expense was recognized related to this agreement.

On August 18, 2021, the Company entered into a multi-year research and development agreement for a solid-state rechargeable battery, pursuant to which the Company has committed to spend an aggregate amount of $ 592,196 in eight quarterly payments of $ 74,025 .

During the nine months ended September 30, 2021, $ 24,675 of expense was recognized related to the agreement.

NOTE 12 SUBSEQUENT EVENTS

During July 2021, the Company issued an aggregate of 1,133,333 shares of common stock in connection with exercises of outstanding warrants pursuant to which we received an aggregate of $ 1,416,666 of gross proceeds.

During October 2021, the Company issued an aggregate of 1,600,000 shares of common stock upon the exercise of outstanding warrants pursuant to which the Company received an aggregate of $ 4,000,000 of gross proceeds.

During November 2021, the Company issued 107,744 unregistered shares of common stock as an equity incentive grant, which shares are subject to a four-year vesting schedule.

During November 2021, the Company issued an aggregate of 1,000,000 shares of common stock upon the exercise of outstanding warrants pursuant to which the Company received an aggregate of $ 2,500,000 of gross proceeds.

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