What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 331 added, 158 removed, 395 unchanged (55% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Accounts receivable

Inventory deposits

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net

Vendor deposits

Equipment deposits

Security deposits

1 unchanged sentence

Right of use asset

Deferred financing costs

Deferred offering costs

Liabilities and Stockholders' Equity

4 unchanged sentences

Lease liability, current portion

Loan payable, current portion

Prepaid advance liability, net of discount (Note 9)

Deferred revenue

Notes payable, net of debt discount

Total Current Liabilities

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 June 30, 2022 and December 31, 2021

none issued and outstanding at September 30, 2022 and December 31, 2021

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

none issued and outstanding at June 30, 2022 and December 31, 2021

none issued and outstanding at September 30, 2022 and December 31, 2021

Series C Preferred Stock, 400 shares designated;

none issued and outstanding at June 30, 2022 and December 31, 2021

none issued and outstanding at September 30, 2022 and December 31, 2021

Series D Preferred Stock, 650 shares designated;

none issued and outstanding at June 30, 2022 and December 31, 2021

none issued and outstanding at September 30, 2022 and December 31, 2021

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

107,223,240 shares issued and 107,061,536 outstanding at June 30, 2022 respectively, and 104,792,072 shares issued and outstanding at December 31, 2021

107,700,085 shares issued and 107,568,923 outstanding at September 30, 2022, respectively, and 104,792,072 shares issued and outstanding at December 31, 2021

Additional paid-in capital

Treasury stock, at cost;

161,704 and 0 shares held at June 30, 2022 and December 31, 2021

131,162 and 0 shares held at September 30, 2022 and December 31, 2021

Accumulated deficit

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenue

10 unchanged sentences

Interest expense, net

Gain on forgiveness of PPP loan and interest

Debt redemption costs

Amortization of debt discount

Loss on debt extinguishment

Change in fair value of accrued issuable equity

Loss on foreign currency transactions

Total Other (Expense) Income, net

5 unchanged sentences

( 2,624,326 )

Net Loss Attributable to Common Stockholders

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

Treasury Stock

25 unchanged sentences

( 32,595,104 )

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021

Treasury stock issued upon the exercise of options

Common stock issued pursuant to the SEPA agreement:

For cash, net of issuance costs (1)

In satisfaction of notes payable

For the repayment of prepaid advances

Stock-based compensation:

Amortization of restricted common stock

Amortization of stock options

Amortization of market-based awards

( 5,586,585 )

Balance - September 30, 2022

( 38,230,508 )

(1) Represents gross proceeds of $ 250,000 less $ 2,129 for amortization of issuance costs.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

Series B Convertible

29 unchanged sentences

( 15,988,274 )

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 awards

( 3,095,932 )

Balance - September 30, 2021

( 19,084,206 )

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

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash Flows From Operating Activities:

4 unchanged sentences

Non-cash lease expense

Loss on extinguishment of note payable

Depreciation and amortization expense

Gain on forgiveness of PPP loan and interest

Change in fair value of accrued issuable equity

Non-cash interest expense

Stock-based compensation

1 unchanged sentence

Accounts receivable

Prepaid expenses and other current assets

( 1,208,646 )

Prepaid expenses and other current assets

Inventory deposits

Security deposits

9 unchanged sentences

Cash Flows From Investing Activities:

Vendor deposits for property and equipment

Equipment deposits for property and equipment

( 2,198,626 )

( 1,029,805 )

Purchases of property and equipment

Net Cash Used In Investing Activities

( 2,772,568 )

( 1,386,864 )

Cash Flows from Financing Activities:

Repayments of notes payable

Proceeds from the SEPA

Net proceeds from the prepaid advance liability (1)

Issuance costs on prepaid advance liability

Proceeds from note payable (2)

Note payable issuance costs

Repayments of note payable

( 1,000,000 )

Proceeds from notes payable (1)

Payment of issuance costs

( 2,450,000 )

Payment of financing costs incurred in connection with the SEPA

Payment of financing costs incurred in connection with note payable

Proceeds from the sale of Series D convertible preferred stock, common stock and warrants

3 unchanged sentences

Net Cash Provided By Financing Activities

Net (Decrease) Increase In Cash

( 1,871,569 )

Net Increase In Cash

Cash - Beginning of Period

Cash - End of Period

(1) Face value of $ 5,000,000 , less $ 250,000 original issue discount.

(1) Consists of principal of $ 15,000,000 on prepaid advance liability, less $ 3,850,000 and $ 566,932 withheld to repay note payable and related interest and premiums, respectively, owed to same investor, and $ 10,000 withheld for issuance costs.

(2) Note payable face of $ 5,000,000 , less $ 250,000 original issue discount.

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

For the Six Months Ended

For the Nine Months Ended

September 30,

Supplemental Disclosures of Cash Flow Information:

2 unchanged sentences

Right of use asset for lease liability

Additions to property and equipment included in accounts payable

Beneficial conversion feature on Series D convertible preferred stock

2 unchanged sentences

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

Common stock issued in satisfaction of accrued issuable equity

Prepaid advance for repayment of note payable

Shares issued in satisfaction of note payable

Shares issued in satisfaction of prepaid advance liability and accrued interest

Treasury stock issued upon the exercise of stock options

Receivable recorded for pending cash deposit of stock option exercise proceeds

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

4 unchanged sentences

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.

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 energy 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 space exploration, satellite communications, and underwater vehicles, and applying them to mass market commercial applications, such as lithium-ion battery energy storage, electric mobility, 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 June 30, 2022 and for the three and six months ended June 30, 2022 and 2021.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the operating results for the full year ending December 31, 2022 or any other period.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021.

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

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation.

Certain prior quarter activity reported in the Condensed Consolidated Statement of Changes in Stockholders’ Equity has been reclassified in order to conform to the current quarter presentation.

These reclassifications had no effect on previously reported results of operations or loss per share.

Risks and Uncertainties

2 unchanged sentences

While the Company continues to see signs of economic recovery as certain governments begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions.

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 and adversely affecting our ability to import product material required to fulfill some customer commitments.

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.

7 unchanged sentences

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.

During April 2022, the Company received an aggregate of $ 2,933,156 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 9 – Stockholders’ Equity for additional information on the aforementioned transactions.

As of June 30, 2022, the Company had cash of $ 12,991,732 and working capital of $ 8,477,713 .

During the six months ended June 30, 2022, the Company incurred a net loss of $ 9,391,240 and used cash in operations of $ 9,010,695 .

On May 13, 2022, 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.

Further, on September 23, 2022, the Company entered into the Supplemental SEPA, pursuant to which the Company may request advances (“Prepaid Advances”) up to an aggregate of $ 50,000,000 from Yorkville.

Yorkville has the right to receive shares, and may select the timing and delivery of such shares, in an amount up to the balance of the Prepaid Advance in order to pay down the Prepaid Advance liability.

During the period ended September 30, 2022, the Company received aggregate gross proceeds of $ 15,400,000 under the SEPA and the Supplemental SEPA.

The Company is not permitted to initiate additional sales of its common stock under the SEPA until the Prepaid Advance liability ($ 15,539,474 at September 30, 2022) is settled.

During October 2022, the Company issued 5,153,664 shares of common stock, at purchase prices per share ranging from $ 0.99 to $ 1.84 , in satisfaction of the initial Prepaid Advance liability in the aggregate amount of $ 5,750,000 .

As of November 14, 2022, the remaining balance on the initial Prepaid Advance liability is $ 9,000,000 .

See Note 9 – Prepaid Advance Liability and Note 11 – Stockholders’ Equity for additional information.

As of September 30, 2022, the Company had cash of $ 16,168,863 and working capital of $ 2,077,848 .

During the nine months ended September 30, 2022, the Company incurred a net loss of $ 14,977,825 and used cash in operations of $ 13,366,007 .

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.

2 unchanged sentences

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.

The Company’s significant estimates used in these unaudited condensed consolidated financial statements include, but are not limited to, fair value calculations for prepaid advance liability, 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.

Treasury Stock

The Company records repurchases of its own common stock at cost.

Repurchased common stock is presented as a reduction of equity in the Consolidated Balance Sheets.

Subsequent reissuances of treasury stock are accounted for on a weighted average cost basis.

Differences between the cost of treasury stock and the re-issuance proceeds are charged to additional paid-in capital.

Gains on the reissuance of treasury stock are credited to additional paid in capital.

Losses resulting from the reissuance of treasury stock are debited to additional paid-in capital to the extent previous net gains from such reissuances are included in additional paid-in capital;

any losses in excess of that amount are then charged to retained earnings.

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.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 were uninsured balances of $ 12,491,732 and $ 14,363,301 as of June 30, 2022 and December 31, 2021, respectively.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

There were uninsured balances of $ 15,668,863 and $ 14,363,301 as of September 30, 2022 and December 31, 2021, respectively.

Customer and Revenue Concentrations

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

June 30, 2022

For the Nine Months Ended

September 30,

September 30, 2022

December 31, 2021

4 unchanged sentences

Vendor Concentrations

Vendor concentrations are as follows for the three and six months ended June 30, 2022 and 2021, respectively:

Vendor concentrations are as follows for the three and nine months ended September 30, 2022 and 2021, respectively:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Less than 10%

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Inventory is comprised of carbon fiber velvet (“CFV”) thermal interface solutions and internal short circuit batteries, which are available for sale.

4 unchanged sentences

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

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Inventory at June 30, 2022 and December 31, 2021 was comprised of the following:

Inventory at September 30, 2022 and December 31, 2021 was consisted of the following:

September 30,

Raw materials

Work-in-process

14 unchanged sentences

● 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.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Product sales

1 unchanged sentence

Total revenue

As of June 30, 2022 and December 31, 2021, respectively, the Company had $ 20,000 and $ 132,303 of deferred revenue, respectively, from contracts with customers.

As of September 30, 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 six months ended June 30, 2022, the Company recognized $ 0 and $ 112,303 , respectively, that was included in deferred revenue in a previous period.

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

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 and December 31, 2021, the Company had $ 29,887 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.

During the three and nine months ended September 30, 2022, the Company recognized $ 0 and $ 112,303 , respectively, that was included in deferred revenue in a previous period.

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

As of September 30, 2022 and December 31, 2021, the Company had $ 8,535 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.

5 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net income (loss)

( 5,586,585 )

( 3,095,932 )

( 14,977,825 )

( 7,837,798 )

Deemed dividend to Series D preferred stockholders

( 2,624,326 )

Net loss attributable to common stockholders

3 unchanged sentences

( 10,462,124 )

Weighted-average common shares outstanding

weighted-average unvested restricted shares

Denominator (weighted-average quantities):

Common shares issued

Less:Treasury shares purchased

Less:Unvested restricted shares

( 1,948,370 )

2 unchanged sentences

( 1,825,659 )

weighted average accrued issuable equity

Add:Accrued issuable equity

Denominator for basic and diluted net loss per share

Net loss per share:

Basic and diluted

Basic and diluted net loss per common share

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30,

Unvested restricted stock

4 unchanged sentences

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.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO 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):

6 unchanged sentences

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.

NOTE 3 INVENTORY DEPOSITS

Inventory deposits consists of amounts paid in advance to vendors to secure future deliveries of specific finished goods and raw materials which will be received and sold in future periods.

As of September 30, 2022 and December 31,2021, the Company had outstanding inventory deposits of $ 1,031,150 and $ 309,688 , respectively.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of June 30, 2022 and December 31, 2021, prepaid expenses and other current assets consisted of the following:

Inventory deposits

As of September 30, 2022 and December 31, 2021, prepaid expenses and other current assets consisted of the following:

September 30,

Vendor receivables

Professional fees

1 unchanged sentence

Deferred labor costs

Receivable for option exercise

Total prepaid expenses

Prepaid marketing costs consist of two sponsorship agreements with a marketing partner whereby the Company is required to make upfront payments.

These agreements expire in September 2022 and December 2022.

As of June 30, 2022, total prepayments made towards such contracts were $ 2,000,000 , of which $ 722,321 remains unamortized and is included in prepaid marketing costs.

Total prepaid expenses and other current assets

Prepaid marketing costs primarily consist of two sponsorship agreements with a marketing partner whereby the Company is required to make upfront payments.

These agreements expire in December 2022 and December 2023.

As of September 30, 2022, total prepayments made towards such contracts were $ 2,150,000 , of which $ 575,000 remains unamortized and is included in prepaid marketing costs.

See Note 12 – Commitments and Contingencies for additional information.

NOTE 4 VENDOR DEPOSITS

NOTE 5 EQUIPMENT 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 June 30, 2022, the Company had outstanding deposits of $ 2,582,958 in connection with these agreements.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2022 and December 31,2021, the Company had outstanding deposits of $ 4,465,937 and $ 2,153,950 , respectively, in connection with these agreements.

NOTE 6 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of June 30, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following:

As of September 30, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following:

September 30,

Legal and professional fees

2 unchanged sentences

Board compensation

Marketing and advertising fees

Accrued cost of sales

Marketing and advertising fees

Total accrued expenses and other current liabilities

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the six months ended June 30, 2022 is presented below:

For the Six Months Ended

June 30, 2022

A summary of the accrued issuable equity activity during the nine months ended September 30, 2022 is presented below:

For the Nine Months Ended

September 30, 2022

Beginning Balance

2 unchanged sentences

Ending Balance

Accrued Issuable Equity for Services

During the six months ended June 30, 2022, the Company entered into certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company.

During the nine months ended September 30, 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 $ 62,640 .

During the six months ended June 30, 2022, the Company cancelled certain of its accrued issuable equity obligations of an aggregate of 33,333 of its shares, respectively, with an aggregate fair value of $ 92,000 , respectively, due to a reduction in investor relation services.

During the six months ended June 30, 2022, the Company recorded an aggregate of $ 95,720 of gains related to the reduction in fair value of accrued issuable equity (see Note 9 – Stockholders’ Equity, Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of June 30, 2022 was $ 148,801 .

During the nine months ended September 30, 2022, the Company cancelled certain of its accrued issuable equity obligations of an aggregate of 33,333 of its shares, respectively, with an aggregate fair value of $ 92,000 , respectively, due to a reduction in investor relation services.

During the nine months ended September 30, 2022, the Company recorded an aggregate of $ 123,121 of gains related to the reduction in fair value of accrued issuable equity (see Note 11 – Stockholders’ Equity, Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of September 30, 2022 was $ 138,240 .

NOTE 8 LEASES

The Company leases office space in San Diego, California.

During the three and six months ended June 30, 2022, operating lease expense was $ 57,849 and $ 131,930 , respectively.

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

As of June 30, 2022, the Company did not have any financing leases.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities as of June 30, 2022 were as follows:

During the three and nine months ended September 30, 2022, operating lease expense was $ 57,522 and $ 188,854 , respectively.

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

As of September 30, 2022, the Company did not have any financing leases.

Maturities of lease liabilities as of September 30, 2022 were as follows:

Maturity Date

July 1 through December 31, 2022

October 1 through December 31, 2022

Total lease payments

3 unchanged sentences

Lease liabilities, non-current portion

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

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

For the Six Months Ended

June 30, 2022

For the Nine Months Ended

September 30, 2022

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating lease

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 PREPAID ADVANCE LIABILITY

On September 23, 2022, the Company entered into a Supplemental Agreement (the “Supplemental Agreement”) to its Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd.

(“Yorkville”).

Under the Supplemental Agreement, the Company may from time to time request advances of up to $ 15,000,000 (each, a “Prepaid Advance”) from Yorkville with a limitation on the aggregate amount of such advances of $ 50,000,000 .

At any time that there is a balance outstanding under a Prepaid Advance, the Company is not permitted to deliver Advance Notices (as defined in Note 11, Stockholders’ Equity) under the SEPA.

Each Prepaid Advance matures 12 months after the date of the closing of such advance (the “Prepaid Advance Date”), and accrues interest at 10 % per annum, subject to an increase to 15 % per annum upon events of default as defined.

Any Prepaid Advance balance that remains outstanding at maturity must be repaid in cash.

Pursuant to the terms of the Supplemental Agreement, Yorkville has the right to receive shares to pay down Prepaid Advances, and may select the timing and delivery of such shares (via an “Investor Notice”), in an amount up to the balance of the Prepaid Advance at a price equal to the lower of (a) 135 % of the volume weighted average price (“VWAP”) of the Company’s common stock on the day immediately prior the closing of the Prepaid Advance, or (b) 95 % of the lowest VWAP during the three days immediately prior to the Investor Notice.

The Company may prepay amounts owed for a Prepaid Advance in cash, provided that the Company gives Yorkville 10 days ’ notice of its intent to repay in cash (the “Prepayment Notice”) and provided that the daily VWAP of the Company’s common stock on the date of Prepayment Notice is not less than $ 0.75 .

The prepayment amount will be delivered on the 11 th trading day after the Prepayment Notice, such that Yorkville has 10 days to deliver an Investor Notice with respect to the outstanding Prepaid Advance.

The prepayment amount will be equal to the amount of Prepaid Advance to be repaid, plus all accrued and unpaid interest owed on the Prepaid Advance, as well as a payment premium equal to 5 % of the principal amount being repaid.

Upon the occurrence of certain triggering events, as defined, the Company may be required to make monthly repayments of amounts outstanding under a Prepaid Advance, with each monthly repayment to be in an amount equal to the sum of (x) $ 3.0 million, (y) 5 % (the “Payment Premium”) in respect of such amount, and (z) all outstanding accrued and unpaid interest in respect of such Prepaid Advance as of each payment date.

On September 23, 2022, the Company recorded an initial Prepaid Advance liability in the amount of $ 15,000,000 , which consisted of $ 15,000,000 of gross cash proceeds (the “Initial Advance”), plus an original issue discount of $ 789,474 .

The original issue discount was recorded as a debt discount to be amortized ratably over the term of the Initial Advance.

Of the $ 15,000,000 Initial Advance amount, $ 3,850,000 was used to repay amounts due under a Note Purchase Agreement with Yorkville (see Note 10, Notes and Loans Payable).

On September 29, 2022, the Company issued 221,605 shares of common stock as a partial repayment of the Initial Advance principal amount of $ 250,000 and interest in the amount of $ 24,658 .

See Note 13, Subsequent Events for details related to shares issued in satisfaction of the Initial Advance subsequent to September 30, 2022.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of the Prepaid Advance liability during the nine months ended September 30, 2022 is presented below:

Gross Amount of

Prepaid Advance

Liability, net of

Balance, January 1, 2022

Proceeds from prepaid advance

Original issue discount

Repayments in cash

Repayments in shares of common stock

Amortization of debt discount

Outstanding, September 30, 2022

NOTE 10 NOTES AND LOANS PAYABLE

Note Purchase Agreement

On May 13, 2022, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with YAII PN, Ltd., a Cayman Island exempt limited partnership (the “Investor”), pursuant to which the Investor purchased a full recourse promissory note with an initial principal amount equal to $ 5,000,000 (the “Promissory Note”) for cash proceeds of $ 4,750,000 .

On May 13, 2022, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with YAII PN, Ltd., a Cayman Island exempt limited partnership, pursuant to which the Investor purchased a full recourse promissory note with an initial principal amount equal to $ 5,000,000 (the “Promissory Note”) for net cash proceeds of $ 4,750,000 .

The Promissory Note included an original issue discount of $ 250,000 , a structuring fee of $ 10,000 , and legal fees of $ 7,200 , which represents the difference between the principal and proceeds received.

The original issue discount, along with structuring fees were recorded as a debt discount which is being amortized over the term of the Note using the effective interest rate method.

The original issue discount, along with structuring fees were recorded as a debt discount to be amortized over the term of the Note using the effective interest rate method.

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

The Company is required to repay the principal and interest in monthly installments by the maturity date of November 13, 2022.

A summary of notes payable activity during the six months ended June 30, 2022 is presented below:

As of September 23, 2022, the Company had fully repaid the principal and interest due in the amounts of $ 5,000,000 and $ 165,493 , respectively, of which $ 3,850,000 and $ 0 , respectively, were paid from the proceeds of the Initial Advance (see Note 9 - Prepaid Advance Liability).

During the three and nine months ended September 30, 2022, the Company recorded interest expense related to the Promissory note in the amounts of $ 608,027 and $ 650,493 , respectively, which included $ 123,027 and $ 165,493 , respectively, of stated interest, a 10 % payment premium in the amount of $ 385,000 and a late payment premium in the amount of $ 100,000 .

A summary of notes payable activity during the nine months ended September 30, 2022 is presented below:

Balance, January 1, 2022

1 unchanged sentence

Debt discount

Repayments in cash

( 4,850,000 )

Repayments in shares of common stock

Amortization of debt discount

Outstanding, June 30, 2022

Paycheck Protection Program Loan

On April 27, 2020, the Company received approximately $ 155,000 of cash proceeds pursuant to an unsecured loan provided in connection with the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (“CARES Act”).

Loss on debt extinguishment

Outstanding, September 30, 2022

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Paycheck Protection Program Loan

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, the Company is eligible to apply for and receive forgiveness for all or a portion of their respective PPP Loans.

Such forgiveness will be determined, subject to limitations, based on the use of the loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”) incurred during the 24 weeks subsequent to funding, and on the maintenance of employee and compensation levels, as defined, following the funding of the PPP Loan.

The initial term of the loan was two years and has been extended to five years with a maturity date of April 27, 2025.

The Company has applied for forgiveness of the PPP loan, which was approved by the Small Business Administration and the PPP loan was fully forgiven effective July 18, 2022.

During the three and six months ended June 30, 2022, the Company recognized interest expense of $ 387 and $ 651 , respectively, related to the PPP loan.

As of June 30, 2022 and December 31, 2021, the Company’s accrued expense related to the loan was $ 2,352 and $ 1,701 , respectively.

The initial term of the loan was two years and was extended to five years with a maturity date of April 27, 2025.

The Company applied for forgiveness of the PPP loan, which was approved by the Small Business Administration, and the PPP loan was fully forgiven effective July 18, 2022.

The Company has recorded this as a gain on forgiveness of the PPP loan and interest of approximately $ 155,226 and $ 3,449 , respectively, as other income in the condensed consolidated statement of operations.

NOTE 11 STOCKHOLDERS’ EQUITY

Standby 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 a cumulative 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.

There were no issuances pursuant to the SEPA during the three and six months ended June 30, 2022.

On May 13, 2022, the Company entered into the SEPA with Yorkville.

Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville up to an aggregate of $ 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 first day of the month following the 24-month anniversary of the SEPA.

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

Shares are sold under the SEPA at 98.0 % of the average of the VWAPs during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance Notice to Yorkville.

Advances are subject to certain limitations, including that Yorkville will 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, or more than the amount of shares registered under the registration statement in effect at the time of the Advance.

Further, the aggregate amount of shares purchased under the SEPA (as defined) cannot exceed 19.9 % of the Company’s outstanding common stock as of the date of the SEPA.

As of September 30, 2022, the Company issued Advance Notices to receive $ 350,000 in exchange for 255,240 shares of common stock pursuant to the SEPA.

At any time that there is a balance outstanding under a Prepaid Advance, the Company is not permitted to deliver Advance Notices under the SEPA.

See Note 9 – Prepaid Advance Liability, for details related to a supplemental agreement to the SEPA.

During March 2022, the Company issued an aggregate of 70,143 shares of common stock upon the exercise of warrants pursuant to which the Company received an aggregate of $ 87,679 of gross proceeds.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 $ 2,933,156 of gross proceeds.

5 unchanged sentences

risk free rate – 2.88 %, expected term – 3.69 , expected volatility – 100 %, expected dividends – 0 %.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three and six months ended June 30, 2022, the Company issued an aggregate of 6,000 and 12,000 shares of immediately vested common stock with a grant date value of $ 10,261 and $ 53,421 , respectively, for legal services.

During the six months ended June 30, 2022, the Company issued an aggregate of 35,500 shares of common stock upon the exercise of stock options, of which 33,000 shares were issued from treasury stock.

During July 2022, the Company issued an aggregate of 160,782 shares of common stock pursuant to an Advance Notice issued under the SEPA for an aggregate of $ 250,000 of gross proceeds.

During August 2022, the Company issued an aggregate of 94,458 shares of common stock as a partial payment of principal balance due on the Promissory note in the amount of $ 150,000 .

On September 29, 2022, the Company issued 221,605 shares of common stock as a partial repayment of the Initial Advance principal amount of $ 250,000 and interest in the amount of $ 24,658 .

During the three and nine months ended September 30, 2022, the Company issued an aggregate of 0 and 12,000 shares of immediately vested common stock with a grant date value of $ 0 and $ 53,421 , respectively, for legal services.

During the three and nine months ended September 30, 2022, the Company issued an aggregate of 30,542 and 66,042 shares, respectively, of common stock upon the exercise of stock options, of which 30,542 and 63,542 shares, respectively, were issued from treasury stock.

Treasury Stock

2 unchanged sentences

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

During the six months ended June 30, 2022, the Company withheld 194,704 shares valued at $ 439,728 in connection with the vesting of restricted common stock awards during the period.

During the nine months ended September 30, 2022, the Company withheld 194,704 shares valued at $ 439,728 in connection with the vesting of restricted common stock awards during the period.

Pursuant to the exercise of options, the Company transferred 63,542 shares that were held in treasury for an aggregate of $ 48,382 gross proceeds.

As of June 30, 2022, the Company has 161,704 shares of held in treasury valued at $ 365,199 .

A summary of warrants activity during the six months ended June 30, 2022 is presented below:

As of September 30, 2022, the Company has 131,162 shares held in treasury valued at their cost of $ 296,222 .

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of warrants activity during the nine months ended September 30, 2022 is presented below:

Outstanding, January 1, 2022

( 2,416,668 )

Outstanding, June 30, 2022

Exercisable, June 30, 2022

See the Common Stock discussion above for additional information.

A summary of outstanding and exercisable warrants as of June 30, 2022 is presented below:

Outstanding, September 30, 2022

Exercisable, September 30, 2022

A summary of outstanding and exercisable warrants as of September 30, 2022 is presented below:

Warrants Outstanding

1 unchanged sentence

Remaining Life

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

1 unchanged sentence

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

For The Six Months Ended

For The Three Months Ended

For The Nine Months Ended

September 30,

Risk free interest rate

2.85 % - 4.21 %

0.20 % - 0.23 %

1.18 % - 4.21 %

0.20 % - 0.85 %

Expected term (years)

Expected volatility

106 % - 116 %

Expected dividends

For the six months ended June 30, 2022 and 2021, the weighted average grant date fair value per share of options was $ 1.47 and $ 0.66 , respectively.

A summary of options activity (excluding Market-Based Awards) during the six months ended June 30, 2022 is presented below:

For the three and nine months ended September 30, 2022, the weighted average grant date fair value per share of options was $ 1.08 and $ 1.31 , respectively.

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.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of options activity (excluding Market-Based Awards) during the nine months ended September 30, 2022 is presented below:

Outstanding, January 1, 2022

Outstanding, June 30, 2022

Exercisable, June 30, 2022

The following table presents information related to stock options (excluding market-based option awards) as of June 30, 2022:

Outstanding, September 30, 2022

Exercisable, September 30, 2022

The following table presents information related to stock options (excluding market-based option awards) as of September 30, 2022:

Options Outstanding

1 unchanged sentence

Remaining Life

As of September 30, 2022, there was $ 335,308 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 3.2 years.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022, there was $ 292,920 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 3.2 years.

Restricted Common Stock

The following table presents information related to restricted common stock (excluding Market-Based Awards) as of June 30, 2022:

The following table presents information related to restricted common stock (excluding Market-Based Awards) as of September 30, 2022:

Weighted Average

1 unchanged sentence

Non-vested balance, January 1, 2022

Non-vested shares, June 30, 2022

As of June 30, 2022, there was $ 4,365,706 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of 2.7 years.

Non-vested shares, September 30, 2022

As of September 30, 2022, there was $ 3,963,192 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of 2.53 years.

Market-Based Awards

The following table presents information related to market-based awards outstanding as of June 30, 2022:

The following table presents information related to market-based awards, that vest upon achieving specified KULR market capitalizations, outstanding as of September 30, 2022:

Restricted stock units

1 unchanged sentence

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

As of June 30, 2022, there was $ 2,083,108 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.4 years.

As of June 30, 2022, none of the market-based awards have vested.

As of September 30, 2022, there was $ 1,605,407 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.18 years.

As of September 30, 2022, none of the market-based awards have vested.

See Note 13 – Subsequent Events, Stock-Based Compensation Restructuring regarding cancellation of the market-based awards.

Stock-Based Compensation

During the three and six months ended June 30, 2022, the Company recognized stock-based compensation expense of $ 1,043,545 and $ 2,286,467 , respectively, related to restricted common stock, warrants and stock options, of which $ 1,033,851 and $ 2,268,665 , respectively are included within selling, general and administrative expenses, and $ 9,694 and $ 17,802 , respectively are included within research and development expenses in the unaudited condensed consolidated statements of operations.

During the three and six months ended June 30, 2021, the Company recognized stock-based compensation expense of $ 1,085,891 and $ 1,473,863 , respectively, related to restricted common stock, warrants and stock options, of which $ 1,078,106 and $ 1,458,673 , respectively are included within selling, general and administrative expenses, and $ 7,785 and $ 15,190 , respectively are included within research and development expenses on the unaudited condensed consolidated statements of operations.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents information related to stock-based compensation for the three months ended June 30, 2022 and 2021:

The following table presents information related to stock-based compensation for the three and nine months ended September 30, 2022 and 2021:

For The Three Months Ended

For The Six Months Ended

For The Nine Months Ended

September 30,

Common stock for services

3 unchanged sentences

Accrued issuable equity (common stock)

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three and nine months ended September 30, 2022, the Company recognized stock-based compensation expense of $ 922,311 and $ 3,208,778 , respectively, related to restricted common stock, market-based awards and stock options, of which $ 916,708 and $ 3,185,373 , respectively are included within selling, general and administrative expenses, and $ 5,603 and $ 23,405 , respectively are included within research and development expenses in the unaudited condensed consolidated statements of operations.

During the three and nine months ended September 30, 2021, the Company recognized stock-based compensation expense of $ 1,292,096 and $ 2,765,959 , respectively, related to restricted common stock, market-based awards and stock options, of which $ 1,292,096 and $ 2,750,769 , respectively are included within selling, general and administrative expenses, and $ 0 and $ 15,190 , respectively are included within research and development expenses on the unaudited condensed consolidated statements of operations.

NOTE 12 COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

The agreement provides the Company with the right to publicize and highlight the sponsorship and display its name and logo during certain events and use digital marketing and social media platforms throughout the 2023 calendar year.

The Company has committed to pay an aggregate of $ 1,450,000 in sponsorship fees in three installments, which are due July 2022, January 2023, and April 2023.

On July 8, 2022, the Company paid $ 500,000 which will be recorded as a prepaid expense and amortized over the performance period of January 1, 2023 to December 31, 2023 using the straight-line method.

The Company has committed to pay an aggregate of $ 1,450,000 in sponsorship fees in three installments, which are due in July 2022, January 2023, and April 2023.

On July 8, 2022, the Company paid $ 500,000 which was recorded as a prepaid expense (see Note 4 - Prepaid Expenses and Other Current Assets) and will be amortized over the performance period of January 1, 2023 to December 31, 2023 using the straight-line method.

The total remaining commitment amount to be paid for sponsorship agreements is $ 950,000 .

NOTE 13 SUBSEQUENT EVENTS

Purchase Agreement

On October 5, 2022, KULR Technology Group, Inc.

(the “Company”) entered into an agreement (the “Purchase Agreement”) with a seller (the “Seller”), pursuant to which the Company purchased all of the assets, including intellectual property, of the Seller (the “Acquired Assets”) for consideration of $ 3,500,000 , of which, $ 2,000,000 (the “Cash Consideration”) will be paid in cash and the Company will issue shares of common stock worth $ 1,500,000 (the “Equity Consideration”).

The Company will issue the Equity Consideration in four equal installments on the following dates:

(i) October 5, 2023, (ii) October 5, 2024, (iii) October 5, 2025, and (iv) October 5, 2026.

The Company will pay the Cash Consideration as follows:

$ 1,000,000 on October 6, 2022, $ 500,000 on April 5, 2023, and $ 500,000 on October 5, 2023.

The Purchase Agreement includes customary representations, warranties and covenants of the Company and the Seller.

The Purchase Agreement also contains post-closing indemnification provisions pursuant to which the parties have agreed to indemnify each other against losses resulting from certain events, including breaches of representations and warranties, covenants and certain other matters.

The Company is evaluating whether this agreement meets the criteria of a business combination in accordance with the applicable accounting guidance.

Supplemental Agreement to the SEPA

During October 2022, the Company issued 5,153,664 shares of common stock, at purchase prices per share ranging from $ 0.99 to $ 1.84 , pursuant to Investor Notices submitted by Yorkville for aggregate proceeds of $ 5,850,000 .

The proceeds were applied against the principal and interest due for the initial Prepaid Advance liability in the in the aggregate amounts of $ 5,750,000 and $ 100,000 , respectively.

As of November 14, 2022, the remaining balance on the initial Prepaid Advance liability is $ 9,000,000 .

See Note 9 - Prepaid Advance Liability for additional information.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation Restructuring

On November 1, 2022, the Company terminated the market-based restricted stock unit grant of 1,500,000 shares to vest upon certain market-cap milestones to the Chief Operating Officer (the “COO”) and granted an award of restricted stock units whereby the COO became eligible to receive up to 1,500,000 shares of the Company’s stock which will vest in four equal annual installments beginning on November 1, 2023.

On November 1, 2022, the Company terminated the market-based option grant for the purchase of up to 1,500,000 shares to vest upon certain market-cap milestones to the Chief Executive Officer (the “CEO”) and granted an award of restricted stock units whereby the CEO became eligible to receive up to 1,500,000 shares of the Company’s stock which will vest in four equal annual installments beginning on November 1, 2023.

Appointment of Chief Technology Officer

On March 16, 2022, the Company hired an individual to serve as the Director of Engineering.

Effective November 1, 2022, the Company appointed this individual as Chief Technology Officer (the “CTO”) of the Company, upon which the Company issued 100,000 shares of restricted common stock with an aggregate grant date value of $ 205,000 , which shall vest in four equal annual installments beginning November 1, 2023.

Director Compensation

Effective November 1, 2022, the Board of the Company appointed a Lead Independent Director (“Lead Director”) of the Board, to hold office until the earlier of the expiration of the term of office of the director whom they have replaced, successors are duly elected and qualified, or the earlier of such director’s death, resignation, disqualification, or removal.

Furthermore, the Lead Director will receive annual cash compensation equal to $ 150,000 upon their appointment and the non-Lead Independent Director (“non-Lead Director”) will receive annual cash compensation equal to $ 95,000 .

Additionally, all independent Board members will be granted 37,500 shares of common stock of which shares shall vest quarterly in 7,500 share installments with the first installment vesting December 31, 2022.

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