KULR Technology Group, Inc. 10-Q

Item 1. Financial Statements KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2021 2020 ​ ​ (unaudited) ​ ​ ​ Assets ​ ​ Current Assets: ​ ​ Cash ​ $ 10,990,056 ​ $ 8,880,140 Accounts receivable ​ 550,379 ​ 55,492 Inventory ​ 190,766 ​ 55,452 Prepaid expenses and other current assets ​ 450,756 ​ 150,468 Total Current Assets ​ 12,181,957 ​ 9,141,552 Property and equipment, net ​ 385,750 ​ 57,857 Equipment deposits ​ ​ 1,029,805 ​ ​ — Security deposits ​ ​ 58,941 ​ ​ 8,728 Right of use asset ​ ​ 730,115 ​ ​ — Total Assets ​ $ 14,386,568 ​ $ 9,208,137 ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ Current Liabilities: ​ ​ ​ Accounts payable ​ $ 67,359 ​ $ 66,537 Accounts payable - related party ​ ​ — ​ ​ 2,628 Accrued expenses and other current liabilities ​ 689,346 ​ 395,012 Notes payable, net of debt discount of $ 0 and $ 128,198 at September 30, 2021 and December 31, 2020, respectively ​ — ​ 2,321,802 Accrued issuable equity ​ ​ 194,134 ​ ​ 128,380 Loan payable, current portion ​ ​ 155,226 ​ ​ 12,936 Lease liability, current portion ​ ​ 257,198 ​ ​ — Deferred revenue ​ ​ 158,816 ​ ​ 20,000 Total Current Liabilities ​ 1,522,079 ​ 2,947,295 Lease liability, non-current portion ​ ​ 475,540 ​ ​ — Loan payable, non-current portion ​ ​ — ​ ​ 142,290 Total Liabilities ​ ​ 1,997,619 ​ ​ 3,089,585 ​ ​ ​ ​ Commitments and contingencies (Note 11) ​ ​ ​ ​ ​ 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, 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 September 30, 2021 and December 31, 2020, respectively ​ — ​ 1 Series C Preferred Stock, 400 shares designated; none issued and outstanding at September 30, 2021 and December 31, 2020 ​ ​ — ​ ​ — Series D Preferred Stock, 650 shares designated; none issued and outstanding at September 30, 2021 and December 31, 2020 ​ ​ — ​ ​ — Common stock, $ 0.0001 par value, 500,000,000 shares authorized; 101,992,963 and 89,908,600 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively ​ 10,200 ​ 8,991 Additional paid-in capital ​ 31,462,955 ​ 17,355,968 Accumulated deficit ​ ( 19,084,206 ) ​ ( 11,246,408 ) Total Stockholders' Equity ​ 12,388,949 ​ 6,118,552 Total Liabilities and Stockholders' Equity ​ $ 14,386,568 ​ $ 9,208,137 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 3 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2021 2020 2021 2020 Revenue ​ $ 600,921 ​ $ 136,849 ​ $ 1,647,070 ​ $ 415,477 Cost of revenue ​ 155,138 ​ 63,403 ​ ​ 869,612 ​ ​ 138,180 Gross Profit ​ 445,783 ​ 73,446 ​ 777,458 ​ 277,297 Operating Expenses: ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 481,855 ​ 51,820 ​ 957,579 ​ 221,524 Selling, general, and administrative ​ 3,104,410 ​ 832,146 ​ 7,320,524 ​ 1,719,100 Total Operating Expenses ​ 3,586,265 ​ 883,966 ​ 8,278,103 ​ 1,940,624 Loss From Operations ​ ( 3,140,482 ) ​ ( 810,520 ) ​ ( 7,500,645 ) ​ ( 1,663,327 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (Expense) Income ​ ​ ​ ​ ​ ​ ​ ​ Interest expense, net ​ ( 758 ) ​ ( 1,284 ) ​ ( 2,389 ) ​ ( 5,004 ) Debt redemption costs ​ ​ — ​ ​ — ​ ​ ( 140,000 ) ​ ​ — Amortization of debt discount ​ ​ — ​ ​ ( 210,402 ) ​ ​ ( 128,198 ) ​ ​ ( 307,313 ) Change in fair value of accrued issuable equity ​ ​ 45,600 ​ ​ 9,947 ​ ​ ( 66,274 ) ​ ​ ( 15,853 ) Loss on foreign currency transactions ​ ( 292 ) ​ — ​ ( 292 ) ​ — Total Other Expenses, net ​ 44,550 ​ ( 201,739 ) ​ ( 337,153 ) ​ ( 328,170 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ ​ ( 3,095,932 ) ​ ​ ( 1,012,259 ) ​ ​ ( 7,837,798 ) ​ ​ ( 1,991,497 ) Deemed dividend to Series D preferred stockholders ​ ​ — ​ ​ — ​ ​ ( 2,624,326 ) ​ ​ — Net Loss Attributable to Common Stockholders ​ $ ( 3,095,932 ) ​ $ ( 1,012,259 ) ​ $ ( 10,462,124 ) ​ $ ( 1,991,497 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Per Share ​ ​ ​ ​ ​ ​ ​ ​ - Basic and Diluted ​ $ ( 0.03 ) ​ $ ( 0.01 ) ​ $ ( 0.11 ) ​ $ ( 0.02 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Number of Common Shares Outstanding ​ ​ ​ ​ ​ ​ ​ ​ - Basic and Diluted ​ 99,018,630 ​ 82,466,734 ​ 93,816,203 ​ 82,042,241 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 4 Table of Contents ​ KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Series B Convertible ​ Series C Convertible ​ Series D Convertible ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ ​ Preferred Stock ​ Preferred Stock ​ Preferred Stock ​ Common Stock ​ Paid-In ​ Accumulated ​ Stockholders' ​ Shares Amount Shares Amount ​ Shares ​ Amount Shares Amount Capital Deficit Equity Balance - January 1, 2021 13,972 ​ $ 1 ​ — ​ $ — ​ — ​ $ — 89,908,600 ​ $ 8,991 ​ $ 17,355,968 ​ $ ( 11,246,408 ) ​ $ 6,118,552 Common stock issued upon conversion of Series B Convertible Preferred Stock ( 13,972 ) ​ ( 1 ) ​ — ​ — ​ — ​ ​ — 698,600 ​ 70 ​ ( 69 ) ​ — ​ — Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 20,000 ​ ​ 2 ​ ​ 49,798 ​ ​ — ​ ​ 49,800 Restricted common stock issued ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 2,000,000 ​ ​ 200 ​ ​ ( 200 ) ​ ​ — ​ ​ — Amortization of restricted common stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 126,625 ​ ​ — ​ ​ 126,625 Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 9,112 ​ ​ — ​ ​ 9,112 Amortization of market-based award ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 130,245 ​ ​ — ​ ​ 130,245 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 1,714,723 ) ​ ​ ( 1,714,723 ) Balance - March 31, 2021 — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — 92,627,200 ​ ​ 9,263 ​ ​ 17,671,479 ​ ​ ( 12,961,131 ) ​ ​ 4,719,611 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuance of Series D Convertible Preferred Stock, common stock and warrants for cash [1] ​ — ​ ​ — ​ — ​ ​ — ​ 650 ​ ​ — ​ 1,300,000 ​ ​ 130 ​ ​ 6,134,870 ​ ​ — ​ ​ 6,135,000 Common stock issued upon the conversion of Series D Convertible Preferred Stock — ​ — ​ — ​ — ​ ( 650 ) ​ ​ — 3,170,730 ​ 317 ​ ( 317 ) ​ — ​ — Common stock issued upon the exercise of warrants ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 3,000,000 ​ ​ 300 ​ ​ 3,712,200 ​ ​ — ​ ​ 3,712,500 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 55,000 ​ ​ 6 ​ ​ 109,994 ​ ​ — ​ ​ 110,000 Restricted common stock issued — ​ — ​ — ​ — ​ — ​ ​ — 415,000 ​ 42 ​ ( 42 ) ​ — ​ — Amortization of restricted common stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 433,689 ​ ​ — ​ ​ 433,689 Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 15,779 ​ ​ — ​ ​ 15,779 Amortization of market-based award ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 489,774 ​ ​ — ​ ​ 489,774 Net loss — ​ — ​ — ​ — ​ — ​ ​ — — ​ — ​ — ​ ( 3,027,143 ) ​ ( 3,027,143 ) Balance - June 30, 2021 ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 100,567,930 ​ ​ 10,058 ​ ​ 28,567,426 ​ ​ ( 15,988,274 ) ​ ​ 12,589,210 Common stock issued upon the exercise of warrants ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 1,185,033 ​ ​ 119 ​ ​ 1,494,097 ​ ​ — ​ ​ 1,494,216 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 85,000 ​ ​ 9 ​ ​ 186,391 ​ ​ — ​ ​ 186,399 Restricted common stock issued ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 155,000 ​ ​ 15 ​ ​ ( 15 ) ​ ​ — ​ ​ — Amortization of restricted common stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 440,333 ​ ​ — ​ ​ 440,333 Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 20,516 ​ ​ — ​ ​ 20,516 Amortization of market-based award ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 754,207 ​ ​ — ​ ​ 754,207 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 3,095,932 ) ​ ​ ( 3,095,932 ) Balance - September 30, 2021 — ​ $ — ​ — ​ $ — ​ — ​ $ — 101,992,963 ​ $ 10,200 ​ $ 31,462,955 ​ $ ( 19,084,206 ) ​ $ 12,388,949 ​ [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 ​ 5 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 ​ ​ Series B Convertible ​ Series C Convertible ​ Series D Convertible ​ ​ ​ ​ ​ ​ Shares ​ Additional ​ ​ ​ ​ ​ Total ​ ​ Preferred Stock ​ Preferred Stock ​ Preferred Stock ​ Common Stock ​ to be ​ Paid-In ​ Accumulated ​ Stockholders' ​ Shares Amount Shares Amount Shares Amount Shares Amount Issued Capital Deficit Deficiency Balance - January 1, 2020 14,487 ​ $ 1 ​ 24.01 ​ $ — ​ — ​ $ — ​ 81,071,831 ​ $ 8,107 ​ $ — ​ $ 7,591,239 ​ $ ( 8,396,312 ) ​ $ ( 796,965 ) Common stock issued as a commitment fee for the Standby Equity Distribution Agreement ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 95,847 ​ ​ 10 ​ ​ — ​ ​ 63,249 ​ ​ — ​ ​ 63,259 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 10,528 ​ ​ — ​ ​ 10,528 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 550,253 ) ​ ​ ( 550,253 ) Balance - March 31, 2020 ​ 14,487 ​ ​ 1 ​ 24.01 ​ ​ — ​ — ​ ​ — ​ 81,167,678 ​ ​ 8,117 ​ ​ — ​ ​ 7,665,016 ​ ​ ( 8,946,565 ) ​ ​ ( 1,273,431 ) Common stock issued as a commitment fee for the Standby Equity Distribution Agreement [1] ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 561,564 ​ ​ 56 ​ ​ — ​ ​ 679,381 ​ ​ — ​ ​ 679,437 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 30,000 ​ ​ 3 ​ ​ — ​ ​ 29,997 ​ ​ — ​ ​ 30,000 Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 9,588 ​ ​ — ​ ​ 9,588 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 428,985 ) ​ ​ ( 428,985 ) Balance - June 30, 2020 ​ 14,487 ​ ​ 1 ​ 24.01 ​ ​ — ​ — ​ ​ — ​ 81,759,242 ​ ​ 8,176 ​ ​ — ​ ​ 8,383,982 ​ ​ ( 9,375,550 ) ​ ​ ( 983,391 ) Common stock issued pursuant to the SEDA agreement ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 1,159,449 ​ ​ 116 ​ ​ — ​ ​ 1,394,884 ​ ​ — ​ ​ 1,395,000 Common stock to be issued pursuant to the SEDA agreement ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 40,000 ​ ​ — ​ ​ — ​ ​ 40,000 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 35,000 ​ ​ 3 ​ ​ — ​ ​ 24,997 ​ ​ — ​ ​ 25,000 Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 10,038 ​ ​ — ​ ​ 10,038 Common stock issued upon conversion of Series B Convertible Preferred Stock ​ ( 515 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25,758 ​ ​ 3 ​ ​ — ​ ​ ( 3 ) ​ ​ — ​ ​ — Common stock issued upon conversion of Series C Convertible Preferred Stock ​ — ​ ​ ​ ​ ( 5.11 ) ​ ​ — ​ ​ ​ ​ ​ ​ 56,777 ​ ​ 6 ​ ​ — ​ ​ ( 6 ) ​ ​ — ​ ​ — Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,012,259 ) ​ ​ ( 1,012,259 ) Balance - September 30, 2020 ​ 13,972 ​ $ 1 ​ 18.90 ​ $ — ​ — ​ $ — ​ 83,036,226 ​ $ 8,304 ​ $ 40,000 ​ $ 9,813,892 ​ $ ( 10,387,809 ) ​ $ ( 525,612 ) ​ [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. ​ ​ 6 Table of Contents ​ KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ ​ September 30, ​ 2021 2020 Cash Flows From Operating Activities: ​ ​ Net loss ​ $ ( 7,837,798 ) ​ $ ( 1,991,497 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Amortization of debt discount ​ ​ 128,198 ​ ​ 307,313 Depreciation and amortization expense ​ 29,166 ​ 10,573 Bad debt expense ​ ​ — ​ ​ 933 Change in fair value of accrued issuable equity ​ ​ 66,274 ​ ​ 15,853 Stock-based compensation ​ 2,765,959 ​ 252,831 Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ( 494,887 ) ​ ( 40,915 ) Inventory ​ ( 135,314 ) ​ ( 21,070 ) Prepaid expenses and other current assets ​ ( 300,288 ) ​ ( 97,267 ) Security deposits ​ ​ ( 50,213 ) ​ ​ — Right of use asset ​ ​ 84,702 ​ ​ — Accounts payable ​ ( 1,806 ) ​ ( 254,260 ) Accrued expenses and other current liabilities ​ 294,334 ​ ( 280,129 ) Lease liability ​ ​ ( 82,079 ) ​ ​ — Deferred revenue ​ ​ 138,816 ​ ​ 21,600 Total Adjustments ​ 2,442,862 ​ ( 84,538 ) Net Cash Used In Operating Activities ​ ​ ( 5,394,936 ) ​ ( 2,076,035 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows From Investing Activities: ​ ​ ​ ​ ​ ​ Deposits for equipment purchases ​ ​ ( 1,029,805 ) ​ ​ — Purchase of property and equipment ​ ​ ( 357,059 ) ​ ​ ( 46,087 ) Net Cash Used In Investing Activities ​ ​ ( 1,386,864 ) ​ ​ ( 46,087 ) ​ ​ ​ ​ ​ Cash Flows from Financing Activities: ​ ​ ​ ​ Proceeds from sale of Series D Convertible Preferred Stock, common stock and warrants ​ ​ 6,500,000 ​ ​ — Proceeds from sale of common stock [1] ​ ​ — ​ ​ 1,461,695 Repayments of notes payable ​ ( 2,450,000 ) ​ ( 159,000 ) Proceeds from the exercise of warrants ​ ​ 5,206,716 ​ ​ — Proceeds from Paycheck Protection Program loan ​ ​ — ​ ​ 155,226 Proceeds from note payable ​ ​ — ​ ​ 3,710,000 Payment of debt issuance costs ​ ​ — ​ ​ ( 330,000 ) Payment of financing costs ​ ​ ( 365,000 ) ​ ​ ( 15,000 ) Net Cash Provided By Financing Activities ​ 8,891,716 ​ 4,822,921 ​ ​ ​ ​ ​ Net Increase In Cash ​ 2,109,916 ​ 2,700,799 Cash - Beginning of Period ​ 8,880,140 ​ 108,857 Cash - End of Period ​ $ 10,990,056 ​ $ 2,809,656 ​ [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 investor. The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 7 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ September 30, ​ ​ 2021 ​ 2020 Supplemental Disclosures of Cash Flow Information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid during the period for: ​ ​ ​ ​ ​ ​ Interest ​ $ 735 ​ $ 3,890 Income taxes ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Right of use asset for lease liability ​ $ 814,817 ​ $ — Beneficial conversion feature on Series D Convertible Preferred Stock ​ $ 2,624,326 ​ $ — Common stock issued as a commitment fee for the SEDA agreement ​ $ — ​ $ 63,259 Deferred offering costs reclassified to equity ​ $ — ​ $ 13,042 Common stock issued upon conversion of Series B Convertible Preferred Stock ​ $ 70 ​ $ 3 Common stock issued upon the conversion of Series C Convertible Preferred Stock ​ $ — ​ $ 6 Common stock issued upon the conversion of Series D Convertible Preferred Stock ​ $ 317 ​ $ — Common stock issued in satisfaction of accrued issuable equity ​ $ 209,200 ​ $ — Original issuance discount on note payable ​ $ — ​ $ 290,000 Common stock issued for repayment of note payable ​ $ — ​ $ 691,000 Subscriptions receivable for accrued issuable equity ​ $ — ​ $ 40,000 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 8 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 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 high performance aerospace and Department of Defense ("DOD") applications, such as satellite communications, directed energy systems and hypersonic vehicles, and applying them to mass market commercial applications, such as lithium-ion battery energy storage, electrical vehicles, 5G communication, cloud computer infrastructure, and consumer and industrial devices. 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 (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, 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, 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. ​ 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 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 September 30, 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. ​ NOTE 2 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. 9 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Liquidity 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. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist 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. 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 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues ​ Accounts Receivable ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ ​ ​ ​ ​ September 30, ​ September 30, ​ As of As of ​ 2021 2020 2021 2020 September 30, 2021 ​ December 31, 2020 Customer A 88 % * ​ 41 % * ​ 96 % * ​ Customer B * ​ 26 % * ​ * ​ * ​ 70 % Customer C * ​ * ​ * ​ 12 % * * ​ Customer D * ​ * 40 % * ​ * ​ * ​ Customer E * ​ 35 % * ​ 44 % * ​ * ​ Customer F * ​ 12 % * ​ * * ​ * ​ Customer G ​ * ​ * ​ * ​ * ​ * ​ 19 % Customer H ​ * ​ * ​ * ​ * ​ * ​ 10 % Total 88 % 73 % 81 % 56 % 96 % 99 % ​ * 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 10 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 nine months ended September 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended For the Nine Months Ended ​ ​ September 30, September 30, ​ ​ 2021 2020 2021 2020 ​ Vendor A * ​ 29 % * ​ 17 % Vendor B * ​ 13 % * * ​ Vendor C * ​ * ​ * ​ 11 % Vendor D * ​ * ​ * ​ 13 % Vendor E ​ * ​ 11 % * ​ * ​ Vendor F ​ * ​ * ​ 11 % * ​ Vendor G 26 % * ​ 11 % * ​ Vendor H 10 % * ​ * ​ * ​ Vendor I ​ 12 % * ​ * ​ * ​ ​ 48 % 53 % 22 % 41 % ​ * Less than 10% Inventory 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 September 30, 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” (“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 the core principle of ASC 606: ● Step 1: Identify the contract with the customer; ● Step 2: Identify the performance obligations in the contract; ● Step 3: Determine the transaction price; ● Step 4: Allocate the transaction price to the performance obligations in the contract; and ● Step 5: Recognize revenue when the company satisfies a performance obligation. 11 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 nine months ended September 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2021 2020 2021 2020 Product sales ​ $ 600,921 ​ $ 136,849 ​ $ 1,356,530 ​ $ 235,979 Contract services ​ — ​ — ​ 290,540 ​ 179,498 Total revenue ​ $ 600,921 ​ $ 136,849 ​ $ 1,647,070 ​ $ 415,477 ​ 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 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. 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 revenues on the accompanying condensed consolidated statements of operations. Net Loss Per Common Share 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. 12 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2021 2020 Series B Convertible Preferred Stock — 698,600 Series C Convertible Preferred Stock ​ — ​ 189,000 Unvested restricted stock ​ 2,615,000 ​ — Market-based equity awards ​ 3,000,000 ​ — Options 590,000 395,000 Warrants ​ 5,202,878 ​ 210,025 Total 11,407,878 1,492,625 ​ Reclassifications 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 net loss. ​ Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (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. ​ Recently Issued Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260, Earnings per Share , relating to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. 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 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): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. 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 does not expect this new standard to have a material impact on its financial statements. ​ 13 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 September 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ 2021 2020 Deferred labor costs ​ $ 62,908 ​ $ 31,212 Filing ​ ​ 2,729 ​ ​ 9,944 Insurance ​ ​ 66,572 ​ ​ 16,035 Marketing ​ ​ 115,794 ​ ​ 58,103 Other ​ ​ 11,662 ​ ​ 25,820 Professional fees ​ ​ 63,582 ​ ​ 9,354 Subscriptions ​ ​ 30,009 ​ ​ — Vendor deposits ​ ​ 97,500 ​ ​ — Total prepaid expenses ​ $ 450,756 ​ $ 150,468 ​ ​ 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 September 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2021 2020 Board compensation ​ $ 60,808 ​ $ — Payroll and vacation ​ ​ 219,547 ​ ​ 278,854 Legal and professional fees ​ 232,200 ​ 81,902 Research and development ​ 97,222 ​ — Other ​ 79,569 ​ 34,256 Total accrued expenses and other current liabilities ​ $ 689,346 ​ $ 395,012 ​ ​ 14 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 $ 128,380 Additions ​ 208,680 Reclassifications to equity upon issuance ​ ​ ( 209,200 ) Mark-to market ​ ​ 66,274 Balance, September 30, 2021 ​ $ 194,134 ​ 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 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 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 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 three months ending December 31, 2021 ​ $ 71,361 2022 ​ 289,981 2023 ​ 297,917 2024 ​ 125,530 Total lease payments ​ 784,789 Less: Imputed interest ​ ( 52,051 ) Present value of lease liabilities ​ 732,738 Less: current portion ​ ( 257,198 ) Lease liabilities, non-current portion ​ $ 475,540 ​ 15 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Supplemental cash flow information related to the lease was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ 2021 2020 Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ ​ Operating cash flows from operating lease ​ $ 82,079 ​ $ — ​ ​ ​ ​ ​ ​ ​ Right-of-use asset obtained in exchange for lease obligations ​ ​ ​ ​ ​ ​ Operating lease ​ $ 814,817 ​ $ — ​ ​ ​ NOTE 8 NOTES PAYABLE A summary of notes payable activity during the nine months ended September 30, 2021 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Notes ​ Debt ​ ​ ​ Payable Discount Total Balance, January 1, 2021 ​ $ 2,450,000 ​ $ ( 128,198 ) ​ $ 2,321,802 Repayments in cash ​ ( 2,450,000 ) ​ — ​ ( 2,450,000 ) Amortization of debt discount ​ — ​ 128,198 ​ 128,198 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 $ 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. ​ NOTE 10 STOCKHOLDERS’ EQUITY Series D Preferred Stock 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 also agreed to 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 remaining notes payable obligation of $ 1,400,000 . The Series D Preferred have a fixed conversion price of $ 2.05 , are convertible into an aggregate of 3,170,732 shares of common stock and have the right to vote on an as-converted basis. 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 16 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. The Company further determined that the $ 10,000 cash structuring fee paid to the investor, would be accounted for as a reduction of the $ 6,500,000 of gross proceeds. The remaining proceeds of $ 6,490,000 were allocated on a relative fair value basis to the Series D Preferred ($ 3,875,675 ), the commitment shares ($ 1,339,582 ) and the Warrant ($ 1,274,743 ). The Company used the Black-Scholes option pricing model to determine the fair value of the Warrant using the following assumptions: exercise price of $ 2.50 per share, market price of $ 2.05 per share, expected term of 1.0 year, volatility of 142 % and a risk-free interest rate of 0.05 %. Finally, the Company determined that the Series D Preferred had a beneficial conversion feature equal to $ 2,624,326 which is a deemed dividend and represents an adjustment to the numerator in the loss per share calculation. The cash issuance costs of $ 365,000 (inclusive of the $ 10,000 cash structuring fee) were charged to additional paid-in-capital. On June 17, 2021, all of the outstanding shares of Series D Preferred were converted into common stock. See “Common Stock”, below. Common Stock ​ On May 20, 2021, the Company issued 1,300,000 shares of common stock with an issuance date value of $ 2,665,000 as a commitment fee to the investor, for the purchase of Series D Preferred. The value of the shares of common stock issued was accounted for as a reduction of the proceeds from the sale of the Series D Preferred. ​ 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. ​ Stock-Based Compensation ​ 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 Nine Months Ended ​ September 30, ​ September 30, ​ 2021 2020 2021 2020 Common stock for services ​ $ 77,040 ​ $ 147,976 ​ $ 345,679 ​ $ 222,676 Amortization of restricted common stock ​ 440,333 ​ — ​ 1,000,647 ​ — Amortization of market-based awards ​ 754,207 ​ — ​ 1,374,226 ​ — Stock options ​ 20,516 ​ 10,038 ​ 45,407 ​ 30,155 Total ​ $ 1,292,096 ​ $ 158,014 ​ $ 2,765,959 ​ $ 252,831 ​ 17 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Common Stock Issued for Services ​ 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. ​ Warrants 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ Number of ​ Exercise ​ Remaining ​ Intrinsic ​ Warrants Price Term (Yrs) Value Outstanding, January 1, 2021 6,787,911 ​ $ 1.25 ​ Issued 2,600,000 ​ 2.50 ​ Exercised ( 4,185,033 ) ​ ( 1.24 ) ​ Expired — ​ — ​ Forfeited — ​ — ​ Outstanding, September 30, 2021 5,202,878 ​ $ 1.88 4.4 ​ $ 2,158,307 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable, September 30, 2021 5,202,878 ​ $ 1.88 4.4 ​ $ 2,158,307 ​ The following table presents information related to warrants as of September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants Outstanding ​ Warrants Exercisable ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Outstanding ​ Average ​ Exercisable Exercise ​ Number of ​ Remaining Life ​ Number of Price Warrants In Years Warrants $ 1.25 2,594,553 4.3 2,594,553 $ 1.50 8,325 0.2 8,325 $ 2.50 2,600,000 4.6 2,600,000 ​ ​ 5,202,878 4.4 5,202,878 ​ Restricted Common Stock ​ The following table presents information related to restricted common stock (excluding Market-Based Awards) as of September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ Shares of Restricted ​ Grant Date ​ Common Stock Fair Value Non-vested balance, January 1, 2021 72,500 ​ $ 1.24 Granted 2,570,000 ​ 2.55 Vested ( 27,500 ) ​ 2.06 Forfeited — ​ — Non-vested shares, September 30, 2021 2,615,000 ​ $ 2.52 ​ 18 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 ​ A summary of options activity (excluding Market-Based Awards) during the nine months ended September 30, 2021 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ Number of ​ Exercise ​ Remaining ​ Intrinsic ​ Options Price Term (Yrs) Value Outstanding, January 1, 2021 370,000 ​ $ 0.66 ​ Granted 220,000 ​ 2.30 ​ Exercised — ​ — ​ Expired — ​ — ​ Forfeited — ​ — ​ Outstanding, September 30, 2021 590,000 ​ $ 1.27 3.2 ​ $ 527,600 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable,September 30, 2021 324,167 ​ $ 0.66 2.3 ​ $ 460,317 ​ The following table presents information related to stock options (excluding Market-Based Awards) as of September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Exercisable ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Outstanding ​ Average ​ Exercisable Exercise ​ Number of ​ Remaining Life ​ Number of Price Options In Years Options $ 0.66 370,000 2.3 324,167 $ 1.99 ​ 10,000 ​ — ​ — $ 2.03 ​ 20,000 ​ — ​ — $ 2.05 ​ 10,000 ​ — ​ — $ 2.08 ​ 10,000 ​ — ​ — $ 2.13 20,000 — — $ 2.27 ​ 30,000 ​ — ​ — $ 2.43 ​ 20,000 ​ — ​ — $ 2.44 ​ 100,000 ​ — ​ — ​ ​ 590,000 2.3 324,167 ​ 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. ​ 19 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2021 2020 ​ 2021 2020 Risk free interest rate ​ 0.20 % - 0.23 % N/A ​ ​ 0.20 % - 0.85 % ​ 1.58 % Expected term (years) ​ 3.50 ​ N/A ​ 2.5 - 3.5 ​ 2.50 ​ Expected volatility ​ 109.00 % N/A ​ ​ 93 % - 109 % ​ 93.00 % Expected dividends ​ 0 % N/A ​ ​ 0 % ​ 0 % ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Grant Date Award Shares Fair Value Restricted stock units 1,500,000 ​ $ 1.94 Stock options 1,500,000 ​ $ 1.72 Total 3,000,000 ​ $ 3.66 ​ 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. ​ 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. The grant date value of this award of $ 2,579,000 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 in applying the Monte Carlo valuation model to the Company’s market-based awards described above. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 1, ​ June 10, ​ ​ 2021 2021 ​ Risk free interest rate ​ 0.71 % ​ 0.73 % Expected volatility ​ 98.9 % ​ 98.5 % Expected dividend yield ​ 0 % ​ 0 % Expected life of market-based awards ​ 2.1 years ​ 2.2 years Fair value of common stock on date of grant ​ $ 2.61 ​ $ 2.62 ​ ​ 20 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 $ 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 Common Stock 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. ​ ​ ​ 21 Table of Contents