KULR Technology Group, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 ​ ​ (unaudited) ​ ​ ​ Assets ​ ​ Current Assets: ​ ​ Cash ​ $ 10,132,676 ​ $ 14,863,301 Accounts receivable ​ 193,092 ​ 136,326 Inventory ​ 287,328 ​ 191,311 Prepaid expenses and other current assets ​ 1,918,011 ​ 570,360 Total Current Assets ​ 12,531,107 ​ 15,761,298 Property and equipment, net ​ 357,509 ​ 374,475 Vendor deposits ​ ​ 2,381,488 ​ ​ 2,153,950 Security deposits ​ ​ 58,941 ​ ​ 58,941 Intangible assets, net ​ ​ 213,808 ​ ​ 216,952 Right of use asset ​ ​ 470,903 ​ ​ 665,687 Total Assets ​ $ 16,013,756 ​ $ 19,231,303 ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ Current Liabilities: ​ ​ ​ Accounts payable ​ $ 188,737 ​ $ 454,507 Accrued expenses and other current liabilities ​ 1,800,217 ​ 1,163,227 Accrued issuable equity ​ ​ 182,281 ​ ​ 290,721 Lease liability, current portion ​ ​ 209,560 ​ ​ 262,379 Loan payable ​ ​ 155,226 ​ ​ 155,226 Deferred revenue ​ ​ 20,000 ​ ​ 132,303 Total Current Liabilities ​ 2,556,021 ​ 2,458,363 Lease liability, non-current portion ​ ​ 267,900 ​ ​ 407,898 Total Liabilities ​ ​ 2,823,921 ​ ​ 2,866,261 ​ ​ ​ ​ Commitments and contingencies (Note 9) ​ ​ ​ ​ ​ 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 March 31, 2022 and December 31, 2021 ​ ​ — ​ ​ — Series B Convertible Preferred Stock, 31,000 shares designated; none issued and outstanding at March 31, 2022 and December 31, 2021 ​ — ​ — Series C Preferred Stock, 400 shares designated; none issued and outstanding at March 31, 2022 and December 31, 2021 ​ ​ — ​ ​ — Series D Preferred Stock, 650 shares designated; none issued and outstanding at March 31, 2022 and December 31, 2021 ​ ​ — ​ ​ — Common stock, $ 0.0001 par value, 500,000,000 shares authorized; 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 ​ 10,487 ​ 10,479 Additional paid-in capital ​ 40,913,190 ​ 39,512,122 Treasury stock, at cost; 194,704 and 0 shares held at March 31, 2022 and December 31, 2021 ​ ​ ( 439,728 ) ​ ​ — Accumulated deficit ​ ( 27,294,114 ) ​ ( 23,157,559 ) Total Stockholders' Equity ​ 13,189,835 ​ 16,365,042 Total Liabilities and Stockholders' Equity ​ $ 16,013,756 ​ $ 19,231,303 ​ 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 ​ ​ March 31, ​ 2022 2021 Revenue ​ $ 200,499 ​ $ 417,905 Cost of revenue ​ ​ 122,918 ​ ​ 275,268 Gross Profit ​ 77,581 ​ 142,637 ​ ​ ​ ​ ​ Operating Expenses ​ ​ ​ ​ Research and development ​ 721,347 ​ 122,983 Selling, general, and administrative ​ 3,534,923 ​ 1,492,811 Total Operating Expenses ​ 4,256,270 ​ 1,615,794 Loss From Operations ​ ( 4,178,689 ) ​ ( 1,473,157 ) ​ ​ ​ ​ ​ Other Income (Expense) ​ ​ ​ ​ Interest expense, net ​ ( 906 ) ​ ( 865 ) Amortization of debt discount ​ ​ — ​ ​ ( 108,124 ) Change in fair value of accrued issuable equity ​ ​ 43,040 ​ ​ ( 132,577 ) Total Other Income (Expense), net ​ 42,134 ​ ( 241,566 ) ​ ​ ​ ​ ​ Net Loss ​ $ ( 4,136,555 ) ​ $ ( 1,714,723 ) Net Loss Per Share ​ ​ ​ ​ - Basic and Diluted ​ $ ( 0.04 ) ​ $ ( 0.02 ) ​ ​ ​ ​ ​ Weighted Average Number of Common Shares Outstanding ​ ​ ​ ​ - Basic and Diluted ​ 102,561,211 ​ 90,078,940 ​ 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 FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FOR THE THREE MONTHS ENDED MARCH 31, 2022 ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-In ​ Treasury Stock ​ Accumulated ​ Stockholders' ​ Shares Amount Capital ​ Shares ​ Amount Deficit Equity Balance - January 1, 2022 104,792,072 ​ $ 10,479 ​ $ 39,512,122 ​ — ​ $ — ​ $ ( 23,157,559 ) ​ $ 16,365,042 Treasury stock held upon the vesting of restricted common stock ​ — ​ ​ — ​ ​ — ​ 194,704 ​ ​ ( 439,728 ) ​ ​ — ​ ​ ( 439,728 ) Common stock issued upon the exercise of warrants 70,143 ​ 7 ​ 87,672 ​ — ​ ​ — ​ — ​ 87,679 Common stock issued upon the exercise of options ​ 2,500 ​ ​ — ​ ​ 5,075 ​ — ​ ​ — ​ ​ — ​ ​ 5,075 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services ​ 6,000 ​ ​ 1 ​ ​ 43,159 ​ — ​ ​ — ​ ​ — ​ ​ 43,160 Amortization of restricted common stock ​ — ​ ​ — ​ ​ 519,231 ​ — ​ ​ — ​ ​ — ​ ​ 519,231 Amortization of stock options ​ — ​ ​ — ​ ​ 15,883 ​ — ​ ​ — ​ ​ — ​ ​ 15,883 Amortization of market-based awards ​ — ​ ​ — ​ ​ 730,048 ​ — ​ ​ — ​ ​ — ​ ​ 730,048 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 4,136,555 ) ​ ​ ( 4,136,555 ) Balance - March 31, 2022 104,870,715 ​ $ 10,487 ​ $ 40,913,190 ​ 194,704 ​ $ ( 439,728 ) ​ $ ( 27,294,114 ) ​ $ 13,189,835 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FOR THE THREE MONTHS ENDED MARCH 31, 2021 ​ ​ Series B Convertible ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ Total ​ ​ Preferred Stock ​ Common Stock ​ Paid-In ​ Accumulated ​ Stockholders' ​ 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 awards ​ — ​ ​ — ​ — ​ ​ — ​ ​ 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 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 5 Table of Contents ​ KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ March 31, ​ 2022 2021 Cash Flows From Operating Activities: ​ ​ Net loss ​ $ ( 4,136,555 ) ​ $ ( 1,714,723 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Amortization of debt discount ​ ​ — ​ ​ 108,124 Non-cash lease expense ​ ​ 194,784 ​ ​ — Depreciation and amortization expense ​ 41,461 ​ 4,771 Change in fair value of accrued issuable equity ​ ​ ( 43,040 ) ​ ​ 132,577 Stock-based compensation ​ 1,242,922 ​ 387,972 Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ( 56,766 ) ​ ( 289,807 ) Inventory ​ ( 96,017 ) ​ 1,317 Prepaid expenses and other current assets ​ ( 1,347,651 ) ​ ( 425,178 ) Accounts payable ​ ( 265,770 ) ​ 111,838 Accrued expenses and other current liabilities ​ 197,262 ​ 19,724 Lease liability ​ ​ ( 192,817 ) ​ ​ — Deferred revenue ​ ​ ( 112,303 ) ​ ​ — Total Adjustments ​ ( 437,935 ) ​ 51,338 Net Cash Used In Operating Activities ​ ​ ( 4,574,490 ) ​ ( 1,663,385 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows From Investing Activities: ​ ​ ​ ​ ​ ​ Vendor deposits for property and equipment ​ ​ ( 227,538 ) ​ ​ — Purchases of property and equipment ​ ​ ( 21,351 ) ​ ​ — Net Cash Used In Investing Activities ​ ​ ( 248,889 ) ​ ​ — ​ ​ ​ ​ ​ Cash Flows from Financing Activities: ​ ​ ​ ​ Repayments of notes payable ​ — ​ ( 1,050,000 ) Proceeds from the exercise of options ​ ​ 5,075 ​ ​ — Proceeds from the exercise of warrants ​ ​ 87,679 ​ ​ — Net Cash Provided By (Used In) Financing Activities ​ 92,754 ​ ( 1,050,000 ) ​ ​ ​ ​ ​ Net Decrease In Cash ​ ( 4,730,625 ) ​ ( 2,713,385 ) Cash - Beginning of Period ​ 14,863,301 ​ 8,880,140 Cash - End of Period ​ $ 10,132,676 ​ $ 6,166,755 ​ 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, continued (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ March 31, ​ ​ 2022 ​ 2021 Supplemental Disclosures of Cash Flow Information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid during the period for: ​ ​ ​ ​ ​ ​ Interest ​ $ 642 ​ $ 367 ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Common stock held in treasury upon the vesting of restricted common stock ​ $ ( 439,728 ) ​ $ — Common stock issued upon the conversion of Series B Convertible Preferred Stock ​ $ — ​ $ 70 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 7 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 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 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 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. Risks and Uncertainties In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2022, 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. 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. Accordingly, COVID-19 could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during 2022 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, 2021, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note. 8 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Liquidity 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 consisted primarily of cash, accounts receivable, revenue and accounts payable. Cash Concentrations A significant portion of the Company’s cash is held at one major financial institution. The Company has not experienced any losses in such accounts. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 at each institution. There were uninsured balances of $ 9,709,169 and $ 5,659,918 as of March 31, 2022 and 2021, 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 ​ ​ ​ ​ ​ ​ March 31, ​ As of As of ​ 2022 2021 March 31, 2022 ​ December 31, 2021 Customer A * ​ * ​ * ​ 34 % Customer B 43 % * ​ * ​ * ​ Customer C 37 % 51 % 50 % 42 % Customer D * ​ 14 % * ​ 21 % Customer E * ​ 23 % * ​ * ​ Total 80 % 88 % 50 % 97 % ​ * Less than 10% ​ 9 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers. Vendor Concentrations Vendor concentrations are as follows for the three months ended March 31, 2022 and 2021, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ March 31, ​ ​ 2022 2021 ​ Vendor A 69 % * ​ Vendor B * 26 % Vendor C 14 % * ​ Vendor D * ​ 67 % ​ 83 % 93 % ​ * 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. Inventory at March 31, 2022 and December 31, 2021 was comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2022 ​ 2021 Work-in-process ​ $ 84,410 ​ $ 5,500 Finished goods ​ 202,918 ​ 185,811 Total inventory ​ $ 287,328 ​ $ 191,311 ​ 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 that core principle: ● Step 1: Identify the contract with the customer; 10 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ● 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. The Company recognizes revenue primarily from the following different types of contracts: ● Product sales – Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies its performance obligation, which is generally at the time it ships the product to the customer. ● Contract services – Revenue is recognized at the point in time that the Company satisfies its performance obligation under the contract, which is generally at the time the services are fulfilled and/or accepted by the customer. The following table summarizes the Company’s revenue recognized in its consolidated statements of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ March 31, ​ 2022 2021 Product sales ​ $ 172,599 ​ $ 178,249 Contract services ​ 27,900 ​ 239,656 Total revenue ​ $ 200,499 ​ $ 417,905 ​ 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 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. Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. ​ 11 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table presents the computation of basic and diluted net loss per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ March 31, ​ ​ 2022 2021 Numerator: ​ ​ Net loss attributable to common stockholders ​ $ ( 4,136,555 ) ​ $ ( 1,714,723 ) ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ Weighted-average common shares outstanding ​ 104,843,100 ​ 90,745,607 Less: weighted-average unvested restricted shares ​ ( 2,357,889 ) ​ ( 666,667 ) Add: weighted average accrued issuable equity ​ 76,000 ​ — Denominator for basic and diluted net loss per share ​ ​ 102,561,211 ​ ​ 90,078,940 ​ ​ ​ ​ ​ ​ ​ Net loss per share: ​ ​ Basic and diluted ​ $ ( 0.04 ) ​ $ ( 0.02 ) ​ The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ 2022 2021 Unvested restricted stock ​ 1,925,000 ​ 2,000,000 Unvested market -based equity awards ​ 3,000,000 ​ 1,500,000 Options 462,716 470,000 Warrants ​ 2,524,410 ​ 6,787,911 Total 7,912,126 10,757,911 ​ Recently Adopted Accounting Pronouncements 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. 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 adopted ASU 2021-04 effective January 1, 2022 and its adoption did not have a material impact on its condensed consolidated financial statements. ​ ​ 12 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 3 PREPAID EXPENSES AND OTHER CURRENT ASSETS As of March 31, 2022 and December 31, 2021, prepaid expenses and other current assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ 2022 2021 Marketing ​ $ 992,631 ​ $ 10,231 Inventory deposits ​ ​ 593,686 ​ ​ 309,688 Other ​ ​ 121,032 ​ ​ 31,074 Deferred labor costs ​ ​ 101,868 ​ ​ 84,324 Professional fees ​ ​ 79,379 ​ ​ 65,118 Insurance ​ ​ 29,415 ​ ​ 69,925 Total prepaid expenses ​ $ 1,918,011 ​ $ 570,360 ​ 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 March 31, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Legal and professional fees ​ $ 645,645 ​ $ 418,154 Payroll and vacation ​ ​ 783,698 ​ ​ 302,101 Research and development ​ 210,932 ​ 146,158 Other ​ 63,192 ​ 84,824 Board compensation ​ ​ 32,500 ​ ​ 45,680 Accrued cost of sales ​ ​ 64,250 ​ ​ 128,500 Marketing and advertising fees ​ ​ — ​ ​ 37,810 Total accrued expenses and other current liabilities ​ $ 1,800,217 ​ $ 1,163,227 ​ ​ 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 ​ $ 290,721 Additions ​ ​ 26,600 Cancelled accrued issuable equity obligations ​ ​ ( 92,000 ) Mark-to-market ​ ​ ( 43,040 ) Ending Balance ​ $ 182,281 ​ 13 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 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 ​ April 1 through December 31, 2022 ​ ​ 171,202 2023 ​ 234,694 2024 ​ 99,187 Total lease payments ​ 505,083 Less: Imputed interest ​ ( 27,623 ) Present value of lease liabilities ​ 477,462 Less: current portion ​ ( 209,560 ) Lease liabilities, non-current portion ​ $ 267,900 ​ Supplemental cash flow information related to the lease was as follows: ​ ​ ​ ​ ​ ​ 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 ​ $ 193,717 ​ ​ ​ NOTE 8 STOCKHOLDERS’ EQUITY Common Stock ​ 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. 14 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Warrants A summary of warrants activity during the three months ended March 31, 2022 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ Number of ​ Exercise ​ Remaining ​ Intrinsic ​ Warrants Price Term (Yrs) Value Outstanding, January 1, 2022 2,594,553 ​ $ 1.25 ​ Issued — ​ — ​ Exercised ( 70,143 ) ​ ( 1.25 ) ​ Expired — ​ — ​ Forfeited — ​ — ​ Outstanding, March 31, 2022 2,524,410 ​ $ 1.25 3.8 ​ $ 2,322,457 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable, March 31, 2022 2,524,410 ​ $ 1.25 3.8 ​ $ 2,322,457 ​ A summary of outstanding and exercisable warrants as of March 31, 2022 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants Outstanding ​ Warrants Exercisable ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Outstanding ​ Average ​ Exercisable Exercise ​ Number of ​ Remaining Life ​ Number of Price Warrants In Years Warrants $ 1.25 2,524,410 3.8 2,524,410 ​ ​ 2,524,410 3.8 2,524,410 ​ 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 ​ ​ March 31, ​ 2022 2021 Risk free interest rate ​ 1.18 % - 2.28 % 0.85 % Expected term (years) ​ 3.5 - 3.8 ​ 2.5 ​ Expected volatility ​ 116.00 % 93.00 % Expected dividends ​ 0.00 % 0.00 % ​ 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. 15 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) A summary of options activity (excluding Market-Based Awards) during the three months ended March 31, 2022 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ Number of ​ Exercise ​ Remaining ​ Intrinsic ​ Options Price Term (Yrs) Value Outstanding, January 1, 2022 405,216 ​ $ 1.55 ​ Granted 60,000 ​ 2.30 ​ Exercised ( 2,500 ) ​ 0.66 ​ Expired — ​ — ​ Forfeited — ​ — ​ Outstanding, March 31, 2022 462,716 ​ $ 1.64 3.4 ​ $ 287,234 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable, March 31, 2022 225,354 ​ $ 1.07 2.5 ​ $ 255,819 ​ The following table presents information related to stock options (excluding market-based option awards) as of March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Exercisable ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Outstanding ​ Average ​ Exercisable Exercise ​ Number of ​ Remaining Life ​ Number of Price Options In Years Options $ 0.66 185,486 1.9 168,125 $ 1.99 ​ 10,000 ​ 4.2 ​ 3,333 $ 2.03 ​ 17,500 ​ 4.2 ​ 3,750 $ 2.05 ​ 10,000 ​ 4.4 ​ 2,708 $ 2.08 ​ 10,000 ​ 4.1 ​ 3,333 $ 2.13 20,000 4.4 5,000 $ 2.25 ​ 10,000 ​ — ​ — $ 2.27 ​ 29,730 ​ 4.2 ​ 9,105 $ 2.31 ​ 50,000 ​ — ​ — $ 2.43 ​ 20,000 ​ 4.5 ​ 5,000 $ 2.44 ​ 100,000 ​ 3.9 ​ 25,000 ​ ​ 462,716 2.5 225,355 ​ 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. 16 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Restricted Common Stock ​ The following table presents information related to restricted common stock (excluding Market-Based Awards) as of March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ ​ ​ Grant Date ​ ​ Shares of Restricted ​ Fair Value ​ Common Stock Per Share Non-vested balance, January 1, 2022 2,590,000 ​ $ 2.52 Vested ( 665,000 ) ​ 2.61 Non-vested shares, March 31, 2022 1,925,000 ​ $ 2.49 ​ 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 outstanding as of March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Grant Date Award Shares Fair Value Restricted stock units 1,500,000 ​ $ 2,911,420 Stock options 1,500,000 ​ ​ 2,579,000 Total 3,000,000 ​ $ 5,490,420 ​ 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 ​ March 31, ​ 2022 2021 Common stock for services ​ $ 43,160 ​ $ 49,800 Amortization of restricted common stock ​ 519,231 ​ 126,625 Amortization of market-based awards ​ 730,048 ​ 130,245 Stock options ​ 15,883 ​ 9,112 Accrued issuable equity (common stock) ​ ​ ( 65,400 ) ​ ​ 72,190 Total ​ $ 1,242,922 ​ $ 387,972 ​ ​ ​ 17 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 9 COMMITMENTS AND CONTINGENCIES 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 Common Stock 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. ​ ​ ​ 18 Table of Contents