What changed in this filing

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Item 1. Financial Statements

2022-05-16 compared with 2021-11-15 · 200 added, 339 removed, 247 unchanged (69% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

3 unchanged sentences

Property and equipment, net

Equipment deposits

Vendor deposits

Security deposits

Intangible assets, net

Right of use asset

2 unchanged sentences

Accounts payable

Accounts payable - related party

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

Loan payable, current portion

Lease liability, current portion

2 unchanged sentences

Lease liability, non-current portion

Loan payable, non-current portion

Total Liabilities

3 unchanged sentences

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

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

none issued and outstanding at March 31, 2022 and December 31, 2021

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

none issued and outstanding at March 31, 2022 and December 31, 2021

Series C Preferred Stock, 400 shares designated;

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

none issued and outstanding at March 31, 2022 and December 31, 2021

Series D Preferred Stock, 650 shares designated;

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

none issued and outstanding at March 31, 2022 and December 31, 2021

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

104,870,715 shares issued and 104,792,072 outstanding at March 31, 2022, respectively, and 104,792,072 shares issued and outstanding at December 31, 2021

Additional paid-in capital

Treasury stock, at cost;

194,704 and 0 shares held at March 31, 2022 and December 31, 2021

Accumulated deficit

8 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Cost of revenue

6 unchanged sentences

( 1,473,157 )

( 1,663,327 )

Other (Expense) Income

Other Income (Expense)

Interest expense, net

Debt redemption costs

Amortization of debt discount

Change in fair value of accrued issuable equity

Loss on foreign currency transactions

Total Other Expenses, net

( 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 )

Total Other Income (Expense), net

( 4,136,555 )

7 unchanged sentences

AND SUBSIDIARY

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

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

Series B Convertible

Series C Convertible

Series D Convertible

Preferred Stock

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

FOR THE THREE MONTHS ENDED MARCH 31, 2022

Treasury Stock

Stockholders'

1 unchanged sentence

( 23,157,559 )

Common stock issued upon conversion of Series B Convertible Preferred Stock

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

( 1,714,723 )

Balance - March 31, 2021

( 12,961,131 )

Issuance of Series D Convertible Preferred Stock, common stock and warrants for cash [1]

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

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

( 3,027,143 )

Balance - June 30, 2021

( 15,988,274 )

Treasury stock held upon the vesting of restricted common stock

Common stock issued upon the exercise of warrants

Common stock issued upon the exercise of options

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

Amortization of market-based awards

( 4,136,555 )

Balance - September 30, 2021

Balance - March 31, 2022

( 27,294,114 )

[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

FOR THE THREE MONTHS ENDED MARCH 31, 2021

Series B Convertible

Series C Convertible

Series D Convertible

Preferred Stock

Stockholders'

1 unchanged sentence

( 11,246,408 )

Common stock issued as a commitment fee for the Standby Equity Distribution Agreement

Stock-based compensation:

Amortization of stock options

Balance - March 31, 2020

( 8,946,565 )

( 1,273,431 )

Common stock issued as a commitment fee for the Standby Equity Distribution Agreement [1]

Stock-based compensation:

Amortization of stock options

Balance - June 30, 2020

( 9,375,550 )

Common stock issued pursuant to the

SEDA agreement

Common stock to be issued pursuant to the SEDA agreement

Common stock issued upon conversion of Series B Convertible Preferred Stock

Stock-based compensation:

Common stock issued for services

Restricted common stock issued

Amortization of restricted common stock

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

Amortization of market-based awards

( 1,714,723 )

Balance - September 30, 2020

Balance - March 31, 2021

( 12,961,131 )

[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 Nine Months Ended

September 30,

For the Three Months Ended

Cash Flows From Operating Activities:

3 unchanged sentences

Amortization of debt discount

Non-cash lease expense

Depreciation and amortization expense

Bad debt expense

Change in fair value of accrued issuable equity

3 unchanged sentences

Prepaid expenses and other current assets

Security deposits

Right of use asset

( 1,347,651 )

Accounts payable

7 unchanged sentences

Cash Flows From Investing Activities:

Deposits for equipment purchases

( 1,029,805 )

Purchase of property and equipment

Vendor deposits for property and equipment

Purchases of property and equipment

Net Cash Used In Investing Activities

( 1,386,864 )

Cash Flows from Financing Activities:

Proceeds from sale of Series D Convertible Preferred Stock, common stock and warrants

Proceeds from sale of common stock [1]

Repayments of notes payable

( 1,050,000 )

Proceeds from the exercise of options

Proceeds from the exercise of warrants

Proceeds from Paycheck Protection Program loan

Proceeds from note payable

Payment of debt issuance costs

Payment of financing costs

Net Cash Provided By Financing Activities

Net Increase In Cash

Net Cash Provided By (Used In) Financing Activities

( 1,050,000 )

Net Decrease In Cash

( 4,730,625 )

( 2,713,385 )

Cash - Beginning of Period

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.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

For the Nine Months Ended

September 30,

For the Three Months Ended

Supplemental Disclosures of Cash Flow Information:

1 unchanged sentence

Non-cash investing and financing activities:

Right of use asset for lease liability

Beneficial conversion feature on Series D Convertible Preferred Stock

Common stock issued as a commitment fee for the SEDA agreement

Deferred offering costs reclassified to equity

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

Common stock issued for repayment of note payable

Subscriptions receivable for accrued issuable equity

Common stock held in treasury upon the vesting of restricted common stock

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

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

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTANTIES

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.

Currently, the Company is focused on targeting both, 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, electric vehicles, 5G communication, cloud computer infrastructure, consumer and industrial devices.

Basis of Presentation

3 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 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.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of March 31, 2022 and for the three months ended March 31, 2022 and 2021.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the operating results for the full year ending December 31, 2022 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, 2021 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 28, 2022.

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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.

For example, in response to an outbreak of infection in Shanghai, beginning in March 2022 governmental authorities in China implemented a lockdown order in that city, significantly slowing economic and business activity in that region.

We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities and may take additional actions based on their recommendations and requirements or as we otherwise see fit to protect the health and safety of our employees, customers, partners and suppliers.

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 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.

As of March 31, 2022, the Company had cash of $ 10,132,676 and working capital of $ 9,975,086 .

For the three months ended March 31, 2022, the Company incurred a net loss of $ 4,136,555 and used cash in operations of approximately $ 4,574,490 .

During April 2022, the Company received an aggregate of $ 2,933,157 of gross proceeds upon the exercise of warrants.

On May 13, 2022, the Company issued a $ 5,000,000 promissory note to an investor for gross proceeds of $ 4,750,000 .

On the same date, the Company entered into a Standby Equity Purchase Agreement, which gives the Company the right, but not the obligation, to sell up to $ 50,000,000 of its shares of common stock to the same investor during the commitment period.

See Note 10 – Subsequent Events for additional information on the aforementioned transactions.

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, combined with the cash availability pursuant to the Standby Equity Purchase Agreement, is sufficient in comparison to its anticipated cash usage for a period of at least twelve months after the filing date of these financial statements.

Use of Estimates

Preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements.

The Company’s significant estimates used in these unaudited condensed consolidated financial statements include, but are not limited to, fair value calculations for equity securities, stock-based compensation and the valuation allowance related to the Company’s deferred tax assets.

Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions.

It is possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

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.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consisted primarily of cash, accounts receivable, revenue and accounts payable.

Cash Concentrations

2 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 $ 10,489,922 and $ 8,513,010 as of September 30, 2021 and December 31, 2020, respectively.

There were uninsured balances of $ 9,709,169 and $ 5,659,918 as of March 31, 2022 and 2021, respectively.

Customer and Revenue Concentrations

2 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30, 2021

March 31, 2022

December 31, 2021

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

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.

There is no assurance the Company will continue to receive significant revenues from any of these customers.

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.

Vendor Concentrations

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

Vendor concentrations are as follows for the three months ended March 31, 2022 and 2021, respectively:

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

Inventory at March 31, 2022 and December 31, 2021 was comprised of the following:

Work-in-process

Finished goods

Total inventory

Revenue Recognition

2 unchanged sentences

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:

The following five steps are applied to achieve that core principle:

Identify the contract with the customer;

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Identify the performance obligations in the contract;

2 unchanged sentences

Recognize revenue when the company satisfies a performance obligation.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

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.

● Product sales – Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies its performance obligation, which is generally at the time it ships the product to the customer.

● Contract services – Revenue is recognized at the point in time that the Company satisfies its performance obligation under the contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

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

The following table summarizes the Company’s revenue recognized in its consolidated statements of operations:

For the Three Months Ended

For the Nine Months Ended

September 30,

Product sales

1 unchanged sentence

Total revenue

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.

As of March 31, 2022 and December 31, 2021, respectively, the Company had $ 20,000 and $ 132,303 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.

During the three months ended March 31, 2022, the Company recognized $ 112,303 of revenues that were included in deferred revenue in a previous period.

During the three months ended March 31, 2021, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of March 31, 2022 and December 31, 2021, the Company had $ 101,868 and $ 84,324 , respectively, of deferred labor costs, which is included in prepaid expenses and other current assets in the Company’s unaudited 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.

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.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the computation of basic and diluted net loss per common share:

For the Three Months Ended

Net loss attributable to common stockholders

( 4,136,555 )

( 1,714,723 )

Weighted-average common shares outstanding

weighted-average unvested restricted shares

( 2,357,889 )

weighted average accrued issuable equity

Denominator for basic and diluted net loss per share

Net loss per share:

Basic and diluted

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

Series C Convertible Preferred Stock

Unvested restricted stock

Market-based equity awards

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.

Unvested market -based equity awards

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):

In October 2020, the FASB issued ASU 2020-10 “Codification Improvements”, which improves consistency by amending the Codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology.

The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted.

The Company adopted ASU 2020-10 effective January 1, 2022 and its adoption did not have a material impact on its condensed consolidated financial statements.

In May 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.

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

The Company adopted ASU 2021-04 effective January 1, 2022 and its adoption did not have a material impact on its condensed consolidated 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 September 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:

September 30,

As of March 31, 2022 and December 31, 2021, prepaid expenses and other current assets consisted of the following:

Inventory deposits

Deferred labor 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.

Includes $ 958,188 of prepaid marketing expenses pursuant to certain sponsorship agreements which will be amortized over the respective service periods of the agreements.

See Note 9 – Commitments and Contingencies.

NOTE 4 VENDOR DEPOSITS

The Company entered into agreements with third party contractors for facility improvements, the design and build of a battery packaging and inspection automation system, and automated robotic tending system.

As of March 31, 2022, the Company had outstanding deposits of $ 2,381,488 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,

Board compensation

Payroll and vacation

As of March 31, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following:

Legal and professional fees

Payroll and vacation

Research and development

Board compensation

Accrued cost of sales

Marketing and advertising fees

Total accrued expenses and other current liabilities

NOTE 6 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the three months ended March 31, 2022 is presented below:

For the Three Months Ended

March 31, 2022

Beginning Balance

Cancelled accrued issuable equity obligations

Mark-to-market

Ending Balance

KULR TECHNOLOGY GROUP, INC.

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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.

Accrued Issuable Equity for Services

During the three months ended March 31, 2022, the Company entered into certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company.

On the respective dates the contracts were entered into, the estimated fair value of the shares to be issued was an aggregate of $ 26,600 .

During the three months ended March 31, 2022, the Company cancelled certain of its accrued issuable equity obligations of an aggregate of 33,333 of its shares with an aggregate fair value of $ 92,000 due to a reduction in investor relation services.

During the three months ended March 31, 2022, the Company recorded an aggregate of $ 43,040 of gains related to the reduction in fair value of accrued issuable equity (see Note 8 – Stockholders’ Equity, Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of March 31, 2022 was $ 182,281 .

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:

The Company leases office space in San Diego, California.

During the three months ended March 31, 2022 and 2021, operating lease expense was $ 74,080 and $ 15,598 , respectively.

As of March 31, 2022, the Company does not have any financing leases.

Maturities of lease liabilities as of March 31, 2022 were as follows:

Maturity Date

Remaining three months ending December 31, 2021

April 1 through December 31, 2022

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,

For the Three Months Ended

March 31, 2022

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 nine months ended September 30, 2021 is presented below:

Balance, January 1, 2021

Repayments in cash

( 2,450,000 )

Amortization of debt discount

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 8 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

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.

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.

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,

Common stock for services

Amortization of restricted common stock

Amortization of market-based awards

Stock options

During the three months ended March 31, 2022 and 2021, the Company issued an aggregate of 6,000 and 20,000 shares of immediately vested common stock with a grant date value of $ 43,160 and $ 49,800 , respectively, for legal and consulting services.

Treasury Stock

The Company's equity-based compensation plan allows for the grant of non-vested stock options, RSUs and RSAs to its employees pursuant to the terms of its equity incentive plan.

Under the provision of the plan, unless otherwise elected, participants fulfill their related income tax withholding obligation by having shares withheld at the time of vesting.

The shares withheld are then transferred to the Company's treasury stock at cost.

During the three months ended March 31, 2022, the Company withheld 194,704 shares valued at $ 439,728 in connection with the vesting of restricted common stock awards during the period.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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:

A summary of warrants activity during the three months ended March 31, 2022 is presented below:

Outstanding, January 1, 2022

( 4,185,033 )

Outstanding, September 30, 2021

Exercisable, September 30, 2021

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

Outstanding, March 31, 2022

Exercisable, March 31, 2022

A summary of outstanding and exercisable warrants as of March 31, 2022 is presented below:

Warrants Outstanding

1 unchanged sentence

Remaining Life

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

Non-vested balance, January 1, 2021

Non-vested shares, September 30, 2021

Stock Options

The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model.

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

For The Three Months Ended

Risk free interest rate

1.18 % - 2.28

Expected term (years)

Expected volatility

Expected dividends

For the three months ended March 31, 2022 and 2021, the weighted average grant date fair value per share of options was $ 3.23 and $ 0.36 , respectively.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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:

A summary of options activity (excluding Market-Based Awards) during the three months ended March 31, 2022 is presented below:

Outstanding, January 1, 2022

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:

Outstanding, March 31, 2022

Exercisable, March 31, 2022

The following table presents information related to stock options (excluding market-based option awards) as of March 31, 2022:

Options Outstanding

1 unchanged sentence

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.

As of March 31, 2022, there was $ 233,996 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 3.0 years.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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,

Risk free interest rate

0.20 % - 0.23

0.20 % - 0.85

Expected term (years)

Expected volatility

Expected dividends

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.

Restricted Common Stock

The following table presents information related to restricted common stock (excluding Market-Based Awards) as of March 31, 2022:

Weighted Average

Shares of Restricted

Non-vested balance, January 1, 2022

Non-vested shares, March 31, 2022

As of March 31, 2022, there was $ 4,475,834 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of 2.9 years.

Market-Based Awards

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

The following table presents information related to market-based awards outstanding as of March 31, 2022:

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.

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.

Risk free interest rate

Expected volatility

Expected dividend yield

Expected life of market-based awards

Fair value of common stock on date of grant

The grant date value for the market-based awards is being amortized over the derived service periods of the awards.

As of March 31, 2022, there was $ 2,648,528 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.44 years.

As of March 31, 2022, none of the market-based awards have vested.

Stock-Based Compensation

During the three months ended March 31, 2022 and 2021, the Company recognized stock-based compensation expense of $ 1,242,922 and $ 387,972 , respectively, related to restricted common stock, warrants and stock options, of which $ 1,234,814 and $ 380,567 , respectively are included within selling, general and administrative expenses, and $ 8,108 and $ 7,405 , respectively are included within research and development expenses on the unaudited condensed consolidated statements of operations.

The following table presents information related to stock-based compensation for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

Common stock for services

Amortization of restricted common stock

Amortization of market-based awards

Stock options

Accrued issuable equity (common stock)

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

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 9 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.

Sponsorship Agreement

On December 16, 2021, the Company entered into a one-year sponsorship agreement which provides the Company with the right to display its name and logo during certain events during the period from January 1, 2022 through December 31, 2022.

The Company has committed to pay an aggregate of $ 1,350,000 in sponsorship fees which will be amortized over the performance period.

The Company paid sponsorship fees of $ 900,000 during the three months ended March 31, 2022 and is recorded as prepaid expenses.

During the three months ended March 31, 2022, $ 199,107 of sponsorship fees expense was recognized related to the agreement.

NOTE 10 SUBSEQUENT EVENTS

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.

During April 2022, the Company issued an aggregate of 2,346,525 shares of common stock upon the exercise of warrants pursuant to which the Company received an aggregate of $ 2,933,157 of gross proceeds.

In connection with the early exercise of such warrants, the Company issued new warrants to purchase an aggregate of 2,346,525 shares of common stock at an exercise price of $ 1.00 per share.

The new warrants expire on December 31, 2025.

Standy Equity Purchase Agreement

On May 13, 2022, KULR Technology Group, Inc.

(the “Company”) entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd.

(“Yorkville”).

Pursuant to the SEPA, the Company shall have the right, but not the obligation, to sell to Yorkville up to $ 50,000,000 of its shares of common stock, par value $ 0.0001 per share, at the Company’s request any time during the commitment period commencing on May 13, 2022 and terminating on the earliest of (i) the first day of the month following the 24-month anniversary of the SEPA and (ii) the date on which Yorkville shall have made payment of any advances requested pursuant to the SEPA for shares of the Company’s common stock equal to the commitment amount of $ 50,000,000 .

Each sale the Company requests under the SEPA (an “Advance”) may be for a number of shares of common stock with an aggregate value of up to $ 5,000,000 .

The shares would be purchased at 98.0 % of the Market Price (as defined below) and would be subject to certain limitations, including that Yorkville could not purchase any shares that would result in it owning more than 4.99 % of the Company’s outstanding common stock at the time of an Advance (the "Ownership Limitation") or an aggregate of 19.9 % of the Company's outstanding common stock as of the date of the SEPA (the "Exchange Cap").

The Exchange Cap will not apply under certain circumstances, including to any sales of common stock under the SEPA that equal or exceed the Minimum Price (as defined in Section 312.03 of the NYSE Listed Company Manual).

“Market Price” is defined in the SEPA as the average of the VWAPs (as defined below) during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville.

“VWAP” is defined in the SEPA to mean, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the NYSE American as reported by Bloomberg L.P.

during regular trading hours.

Note Purchase Agreement

On May 13, 2022, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Yorkville, pursuant to which the Company issued to the Investor a promissory note with an initial principal amount equal to $ 5,000,000 (the “Promissory Note”) at a purchase price equal to 95.0 % of the principal amount of the Convertible Debentures.

The Promissory Note carries an interest rate of 10 % per annum.

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