KULR Technology Group, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 ​ ​ (unaudited) ​ ​ ​ Assets ​ ​ Current Assets: ​ ​ Cash ​ $ 16,168,863 ​ $ 14,863,301 Accounts receivable ​ 1,344,972 ​ 136,326 Inventory ​ 342,174 ​ 191,311 Inventory deposits ​ ​ 1,031,150 ​ ​ 309,688 Prepaid expenses and other current assets ​ 1,030,833 ​ 260,672 Total Current Assets ​ 19,917,992 ​ 15,761,298 Property and equipment, net ​ 829,111 ​ 374,475 Equipment deposits ​ ​ 4,465,937 ​ ​ 2,153,950 Security deposits ​ ​ 58,941 ​ ​ 58,941 Intangible assets, net ​ ​ 207,519 ​ ​ 216,952 Right of use asset ​ ​ 378,186 ​ ​ 665,687 Deferred offering costs ​ ​ 70,671 ​ ​ — Total Assets ​ $ 25,928,357 ​ $ 19,231,303 ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ Current Liabilities: ​ ​ ​ Accounts payable ​ $ 957,947 ​ $ 454,507 Accrued expenses and other current liabilities ​ 1,823,148 ​ 1,163,227 Accrued issuable equity ​ ​ 138,240 ​ ​ 290,721 Lease liability, current portion ​ ​ 218,875 ​ ​ 262,379 Loan payable ​ ​ — ​ ​ 155,226 Prepaid advance liability, net of discount (Note 9) ​ ​ 14,681,934 ​ ​ — Deferred revenue ​ ​ 20,000 ​ ​ 132,303 Total Current Liabilities ​ 17,840,144 ​ 2,458,363 Lease liability, non-current portion ​ ​ 155,765 ​ ​ 407,898 Total Liabilities ​ ​ 17,995,909 ​ ​ 2,866,261 ​ ​ ​ ​ Commitments and contingencies (Note 12) ​ ​ ​ ​ ​ Stockholders' Equity ​ ​ Preferred stock, $ 0.0001 par value, 20,000,000 shares authorized; ​ ​ ​ ​ Series A Preferred Stock, 1,000,000 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021 ​ ​ — ​ ​ — Series B Convertible Preferred Stock, 31,000 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021 ​ — ​ — Series C Preferred Stock, 400 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021 ​ ​ — ​ ​ — Series D Preferred Stock, 650 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021 ​ ​ — ​ ​ — Common stock, $ 0.0001 par value, 500,000,000 shares authorized; 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 ​ 10,770 ​ 10,479 Additional paid-in capital ​ 46,448,408 ​ 39,512,122 Treasury stock, at cost; 131,162 and 0 shares held at September 30, 2022 and December 31, 2021 ​ ​ ( 296,222 ) ​ ​ — Accumulated deficit ​ ( 38,230,508 ) ​ ( 23,157,559 ) Total Stockholders' Equity ​ 7,932,448 ​ 16,365,042 Total Liabilities and Stockholders' Equity ​ $ 25,928,357 ​ $ 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 ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2022 2021 2022 2021 Revenue ​ $ 1,393,185 ​ $ 600,921 ​ $ 2,181,230 ​ $ 1,647,070 Cost of revenue ​ 932,364 ​ 155,138 ​ ​ 1,478,954 ​ ​ 869,612 Gross Profit ​ 460,821 ​ 445,783 ​ 702,276 ​ 777,458 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 1,069,852 ​ 481,855 ​ 2,790,683 ​ 957,579 Selling, general, and administrative ​ 4,349,373 ​ 3,104,410 ​ 12,210,458 ​ 7,320,524 Total Operating Expenses ​ 5,419,225 ​ 3,586,265 ​ 15,001,141 ​ 8,278,103 Loss From Operations ​ ( 4,958,404 ) ​ ( 3,140,482 ) ​ ( 14,298,865 ) ​ ( 7,500,645 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (Expense) Income ​ ​ ​ ​ ​ ​ ​ ​ Interest expense, net ​ ( 633,342 ) ​ ( 758 ) ​ ( 676,622 ) ​ ( 2,389 ) Gain on forgiveness of PPP loan and interest ​ ​ 158,675 ​ ​ — ​ ​ 158,675 ​ ​ — Debt redemption costs ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 140,000 ) Amortization of debt discount ​ ​ ( 172,407 ) ​ ​ — ​ ​ ( 275,626 ) ​ ​ ( 128,198 ) Loss on debt extinguishment ​ ​ ( 8,508 ) ​ ​ — ​ ​ ( 8,508 ) ​ ​ — Change in fair value of accrued issuable equity ​ ​ 27,401 ​ ​ 45,600 ​ ​ 123,121 ​ ​ ( 66,274 ) Loss on foreign currency transactions ​ — ​ ( 292 ) ​ — ​ ( 292 ) Total Other (Expense) Income, net ​ ( 628,181 ) ​ 44,550 ​ ( 678,960 ) ​ ( 337,153 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net 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 ​ $ ( 5,586,585 ) ​ $ ( 3,095,932 ) ​ $ ( 14,977,825 ) ​ $ ( 10,462,124 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Per Share ​ ​ ​ ​ ​ ​ ​ ​ - Basic and Diluted ​ $ ( 0.05 ) ​ $ ( 0.03 ) ​ $ ( 0.14 ) ​ $ ( 0.11 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Number of Common Shares Outstanding ​ ​ ​ ​ ​ ​ ​ ​ - Basic and Diluted ​ 105,572,820 ​ 99,018,630 ​ 104,223,378 ​ 93,816,203 ​ 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 (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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 Treasury stock issued upon the exercise of options ​ — ​ ​ — ​ ​ — ​ ( 33,000 ) ​ ​ 74,529 ​ ​ ( 46,305 ) ​ ​ 28,224 Common stock issued upon the exercise of warrants ​ 2,346,525 ​ ​ 234 ​ ​ 2,932,922 ​ — ​ ​ — ​ ​ — ​ ​ 2,933,156 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services ​ 6,000 ​ ​ 1 ​ ​ 10,260 ​ — ​ ​ — ​ ​ — ​ ​ 10,261 Amortization of restricted common stock ​ — ​ ​ — ​ ​ 422,128 ​ — ​ ​ — ​ ​ — ​ ​ 422,128 Amortization of stock options ​ — ​ ​ — ​ ​ 26,535 ​ — ​ ​ — ​ ​ — ​ ​ 26,535 Amortization of market-based awards ​ — ​ ​ — ​ ​ 565,421 ​ — ​ ​ — ​ ​ — ​ ​ 565,421 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 5,254,685 ) ​ ​ ( 5,254,685 ) Balance - June 30, 2022 107,223,240 ​ ​ 10,722 ​ ​ 44,870,456 ​ 161,704 ​ ​ ( 365,199 ) ​ ​ ( 32,595,104 ) ​ ​ 11,920,875 Treasury stock issued upon the exercise of options ​ — ​ ​ — ​ ​ — ​ ( 30,542 ) ​ ​ 68,977 ​ ​ ( 48,819 ) ​ ​ 20,158 Common stock issued pursuant to the SEPA agreement: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For cash, net of issuance costs (1) ​ 160,782 ​ ​ 16 ​ ​ 247,855 ​ — ​ ​ — ​ ​ — ​ ​ 247,871 In satisfaction of notes payable ​ 94,458 ​ ​ 9 ​ ​ 149,991 ​ — ​ ​ — ​ ​ — ​ ​ 150,000 For the repayment of prepaid advances ​ 221,605 ​ ​ 22 ​ ​ 274,635 ​ — ​ ​ — ​ ​ — ​ ​ 274,658 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization of restricted common stock ​ — ​ ​ — ​ ​ 403,812 ​ — ​ ​ — ​ ​ — ​ ​ 403,812 Amortization of stock options ​ — ​ ​ — ​ ​ 23,959 ​ — ​ ​ — ​ ​ — ​ ​ 23,959 Amortization of market-based awards ​ — ​ ​ — ​ ​ 477,700 ​ — ​ ​ — ​ ​ — ​ ​ 477,700 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 5,586,585 ) ​ ​ ( 5,586,585 ) Balance - September 30, 2022 ​ 107,700,085 ​ $ 10,770 ​ $ 46,448,408 ​ 131,162 ​ $ ( 296,222 ) ​ $ ( 38,230,508 ) ​ $ 7,932,448 (1) Represents gross proceeds of $ 250,000 less $ 2,129 for amortization of issuance costs. ​ ​ 5 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 ​ ​ Series B Convertible ​ Series D Convertible ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ Total ​ ​ Preferred Stock ​ Preferred Stock ​ Common Stock ​ Paid-In ​ Accumulated ​ Stockholders' ​ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance - January 1, 2021 13,972 ​ $ 1 ​ — ​ $ — ​ 89,908,600 ​ $ 8,991 ​ $ 17,355,968 ​ $ ( 11,246,408 ) ​ $ 6,118,552 Common stock issued upon conversion of Series B Convertible Preferred Stock ( 13,972 ) ​ ( 1 ) ​ — ​ ​ — ​ 698,600 ​ 70 ​ ( 69 ) ​ — ​ — Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services — ​ — ​ — ​ ​ — ​ 20,000 ​ 2 ​ 49,798 ​ — ​ 49,800 Restricted common stock issued ​ — ​ ​ — ​ — ​ ​ — ​ 2,000,000 ​ ​ 200 ​ ​ ( 200 ) ​ ​ — ​ ​ — Amortization of restricted common stock — ​ — ​ — ​ ​ — ​ — ​ — ​ 126,625 ​ — ​ 126,625 Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 9,112 ​ ​ — ​ ​ 9,112 Amortization of market-based 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 Issuance of Series D Convertible Preferred Stock, Common Stock, and warrants for cash (1) ​ — ​ ​ — ​ 650 ​ ​ — ​ 1,300,000 ​ ​ 130 ​ ​ 6,134,870 ​ ​ — ​ ​ 6,135,000 Common stock issued upon the conversion of Series D Convertible Preferred Stock ​ — ​ ​ — ​ ( 650 ) ​ ​ — ​ 3,170,730 ​ ​ 317 ​ ​ ( 317 ) ​ ​ — ​ ​ — Common stock issued upon the exercise of warrants ​ — ​ ​ — ​ — ​ ​ — ​ 3,000,000 ​ ​ 300 ​ ​ 3,712,200 ​ ​ — ​ ​ 3,712,500 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services ​ — ​ ​ — ​ — ​ ​ — ​ 55,000 ​ ​ 6 ​ ​ 109,994 ​ ​ — ​ ​ 110,000 Restricted common stock issued ​ — ​ ​ — ​ — ​ ​ — ​ 415,000 ​ ​ 42 ​ ​ ( 42 ) ​ ​ — ​ ​ — Amortization of restricted common stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 433,689 ​ ​ — ​ ​ 433,689 Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 15,779 ​ ​ — ​ ​ 15,779 Amortization of market-based awards ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 489,774 ​ ​ — ​ ​ 489,774 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 3,027,143 ) ​ ​ ( 3,027,143 ) Balance - June 30, 2021 ​ — ​ ​ — ​ — ​ ​ — ​ 100,567,930 ​ ​ 10,058 ​ ​ 28,567,426 ​ ​ ( 15,988,274 ) ​ ​ 12,589,210 Common stock issued upon the exercise of warrants ​ — ​ ​ — ​ — ​ ​ — ​ 1,185,033 ​ ​ 119 ​ ​ 1,494,097 ​ ​ — ​ ​ 1,494,216 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services ​ — ​ ​ — ​ — ​ ​ — ​ 85,000 ​ ​ 9 ​ ​ 186,391 ​ ​ — ​ ​ 186,399 Restricted common stock issued ​ — ​ ​ — ​ — ​ ​ — ​ 155,000 ​ ​ 15 ​ ​ ( 15 ) ​ ​ — ​ ​ — Amortization of restricted common stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 440,333 ​ ​ — ​ ​ 440,333 Amortization of stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 20,516 ​ ​ — ​ ​ 20,516 Amortization of market-based awards ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 754,207 ​ ​ — ​ ​ 754,207 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 3,095,932 ) ​ ​ ( 3,095,932 ) Balance - September 30, 2021 ​ — ​ $ — ​ — ​ $ — ​ 101,992,963 ​ $ 10,201 ​ $ 31,462,955 ​ $ ( 19,084,206 ) ​ $ 12,388,949 (1) Represents relative fair value of preferred stock issued, net of cash issuance costs of $ 365,000 . ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 6 Table of Contents ​ KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ ​ September 30, ​ 2022 2021 Cash Flows From Operating Activities: ​ ​ Net loss ​ $ ( 14,977,825 ) ​ $ ( 7,837,798 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Amortization of debt discount ​ ​ 275,626 ​ ​ 128,198 Non-cash lease expense ​ ​ 143,861 ​ ​ — Loss on extinguishment of note payable ​ ​ 8,508 ​ ​ — Depreciation and amortization expense ​ 140,829 ​ 29,166 Gain on forgiveness of PPP loan and interest ​ ​ ( 158,675 ) ​ ​ — Change in fair value of accrued issuable equity ​ ​ ( 123,121 ) ​ ​ 66,274 Non-cash interest expense ​ ​ 576,932 ​ ​ — Stock-based compensation ​ 3,208,778 ​ 2,765,959 Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ( 1,208,646 ) ​ ( 494,887 ) Inventory ​ ( 150,863 ) ​ ( 135,314 ) Prepaid expenses and other current assets ​ ( 741,937 ) ​ ( 300,288 ) Inventory deposits ​ ​ ( 721,462 ) ​ ​ — Security deposits ​ ​ — ​ ​ ( 50,213 ) Right of use asset ​ ​ — ​ ​ 84,702 Accounts payable ​ 377,987 ​ ( 1,806 ) Accrued expenses and other current liabilities ​ 248,301 ​ 294,334 Lease liability ​ ​ ( 151,997 ) ​ ​ ( 82,079 ) Deferred revenue ​ ​ ( 112,303 ) ​ ​ 138,816 Total Adjustments ​ 1,611,818 ​ 2,442,862 Net Cash Used In Operating Activities ​ ​ ( 13,366,007 ) ​ ( 5,394,936 ) Cash Flows From Investing Activities: ​ ​ ​ ​ ​ ​ Equipment deposits for property and equipment ​ ​ ( 2,198,626 ) ​ ​ ( 1,029,805 ) Purchases of property and equipment ​ ​ ( 573,942 ) ​ ​ ( 357,059 ) Net Cash Used In Investing Activities ​ ​ ( 2,772,568 ) ​ ​ ( 1,386,864 ) Cash Flows from Financing Activities: ​ ​ ​ ​ Proceeds from the SEPA ​ ​ 247,871 ​ ​ — Net proceeds from the prepaid advance liability (1) ​ ​ 10,573,068 ​ ​ — Issuance costs on prepaid advance liability ​ ​ ( 85,000 ) ​ ​ — Proceeds from note payable (2) ​ ​ 4,750,000 ​ ​ — Note payable issuance costs ​ ​ ( 17,200 ) ​ ​ — Repayments of note payable ​ ​ ( 1,000,000 ) ​ ​ ( 2,450,000 ) Payment of financing costs incurred in connection with the SEPA ​ ​ ( 72,800 ) ​ ​ — Payment of financing costs incurred in connection with note payable ​ ​ 2,129 ​ ​ — Proceeds from the sale of Series D convertible preferred stock, common stock and warrants ​ ​ — ​ ​ 6,500,000 Proceeds from the exercise of options ​ ​ 25,233 ​ ​ — Proceeds from the exercise of warrants ​ ​ 3,020,836 ​ ​ 5,206,716 Payment of financing costs ​ ​ — ​ ​ ( 365,000 ) Net Cash Provided By Financing Activities ​ 17,444,137 ​ 8,891,716 Net Increase In Cash ​ 1,305,562 ​ 2,109,916 Cash - Beginning of Period ​ 14,863,301 ​ 8,880,140 Cash - End of Period ​ $ 16,168,863 ​ $ 10,990,056 (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. ​ 7 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ September 30, ​ 2022 2021 Supplemental Disclosures of Cash Flow Information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid during the period for: ​ ​ ​ ​ ​ ​ Interest ​ $ 676,281 ​ $ 735 ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Right of use asset for lease liability ​ $ 143,640 ​ $ 814,817 Additions to property and equipment included in accounts payable ​ $ 125,451 ​ $ — Beneficial conversion feature on Series D convertible preferred stock ​ $ — ​ $ 2,624,326 Common stock issued upon the conversion of Series D convertible preferred stock ​ $ — ​ $ 317 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 Common stock issued in satisfaction of accrued issuable equity ​ $ — ​ $ 209,200 Prepaid advance for repayment of note payable ​ $ 3,850,000 ​ $ — Shares issued in satisfaction of note payable ​ $ 150,000 ​ $ — Shares issued in satisfaction of prepaid advance liability and accrued interest ​ $ 274,658 ​ $ — Treasury stock issued upon the exercise of stock options ​ $ 143,506 ​ $ — ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 8 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND 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 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 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 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 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 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. 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. ​ 9 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. Liquidity 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. 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 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. 10 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 $ 15,668,863 and $ 14,363,301 as of September 30, 2022 and December 31, 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 ​ For the Nine Months Ended ​ ​ ​ ​ ​ ​ September 30, ​ September 30, ​ As of As of ​ 2022 2021 2022 2021 September 30, 2022 ​ December 31, 2021 Customer A * ​ 88 % * ​ 41 % * ​ 42 % Customer B 67 % * ​ 58 % * ​ 70 % * ​ Customer C 24 % * ​ 23 % * ​ 25 % * ​ Customer D * ​ * ​ * ​ 40 % * ​ * ​ Customer E * ​ * ​ * ​ * ​ * ​ 21 % Customer F * ​ * ​ * ​ * * ​ 34 % Total 91 % 88 % 81 % 81 % 95 % 97 % * Less than 10% ​ There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers. Vendor Concentrations Vendor concentrations are as follows for the three and nine months ended September 30, 2022 and 2021, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended For the Nine Months Ended ​ ​ September 30, September 30, ​ ​ 2022 2021 2022 2021 ​ Vendor A 65 % * ​ 83 % * ​ Vendor B * ​ 10 % * 42 % Vendor C * ​ * ​ * ​ 47 % ​ 65 % 10 % 83 % 89 % * Less than 10% ​ 11 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 September 30, 2022 and December 31, 2021 was consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2022 ​ 2021 Raw materials ​ $ 61,388 ​ $ — Work-in-process ​ ​ 70,195 ​ ​ 5,500 Finished goods ​ 210,591 ​ 185,811 Total inventory ​ $ 342,174 ​ $ 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; ● 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. 12 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table summarizes the Company’s revenue recognized in its consolidated statements of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2022 2021 2022 2021 Product sales ​ $ 1,369,857 ​ $ 600,921 ​ $ 2,100,120 ​ $ 1,356,530 Contract services ​ 23,328 ​ — ​ 81,110 ​ 290,540 Total revenue ​ $ 1,393,185 ​ $ 600,921 ​ $ 2,181,230 ​ $ 1,647,070 ​ 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 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. 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. ​ The following table presents the computation of basic and diluted net loss per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2022 2021 ​ 2022 2021 Numerator: ​ ​ ​ ​ 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 ​ $ ( 5,586,585 ) ​ $ ( 3,095,932 ) ​ $ ( 14,977,825 ) ​ $ ( 10,462,124 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator (weighted-average quantities): ​ ​ ​ ​ ​ ​ ​ ​ Common shares issued ​ 107,402,727 ​ 101,548,848 ​ 106,271,765 ​ 95,641,862 Less:Treasury shares purchased ​ ( 131,494 ) ​ — ​ ( 122,944 ) ​ — Less:Unvested restricted shares ​ ( 1,948,370 ) ​ ( 2,530,217 ) ​ ( 2,106,923 ) ​ ​ ( 1,825,659 ) Add:Accrued issuable equity ​ ​ 249,957 ​ ​ — ​ ​ 181,480 ​ ​ — Denominator for basic and diluted net loss per share ​ ​ 105,572,820 ​ ​ 99,018,630 ​ ​ 104,223,378 ​ ​ 93,816,203 ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic and diluted net loss per common share ​ $ ( 0.05 ) ​ $ ( 0.03 ) ​ $ ( 0.14 ) ​ $ ( 0.11 ) ​ ​ 13 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2022 2021 Unvested restricted stock ​ 1,897,500 ​ 2,615,000 Unvested market -based equity awards ​ 3,000,000 ​ 3,000,000 Options 510,216 590,000 Warrants ​ 2,524,410 ​ 5,202,878 Total 7,932,126 11,407,878 ​ 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. ​ ​ 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. 14 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ NOTE 4 PREPAID EXPENSES AND OTHER CURRENT ASSETS As of September 30, 2022 and December 31, 2021, prepaid expenses and other current assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ 2022 2021 Marketing ​ $ 650,766 ​ $ 10,231 Vendor receivables ​ ​ 100,000 ​ ​ — Other ​ ​ 98,535 ​ ​ 31,074 Professional fees ​ ​ 83,711 ​ ​ 65,118 Subscriptions ​ ​ 47,217 ​ ​ — Insurance ​ ​ 42,069 ​ ​ 69,925 Deferred labor costs ​ ​ 8,535 ​ ​ 84,324 Total prepaid expenses and other current assets ​ $ 1,030,833 ​ $ 260,672 ​ 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 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 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 September 30, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 Legal and professional fees ​ $ 1,088,561 ​ $ 418,154 Payroll and vacation ​ ​ 435,246 ​ ​ 302,101 Research and development ​ ​ 169,497 ​ ​ 146,158 Other ​ ​ 105,803 ​ ​ 84,824 Board compensation ​ 24,041 ​ 45,680 Accrued cost of sales ​ ​ — ​ ​ 128,500 Marketing and advertising fees ​ ​ — ​ ​ 37,810 Total accrued expenses and other current liabilities ​ $ 1,823,148 ​ $ 1,163,227 ​ ​ 15 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 7 ACCRUED ISSUABLE EQUITY 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 ​ $ 290,721 Additions ​ ​ 62,640 Cancelled accrued issuable equity obligations ​ ​ ( 92,000 ) Mark-to market ​ ​ ( 123,121 ) Ending Balance ​ $ 138,240 ​ 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 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 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 ​ ​ October 1 through December 31, 2022 ​ $ 57,499 2023 ​ 234,694 2024 ​ 99,187 Total lease payments ​ 391,380 Less: Imputed interest ​ ( 16,740 ) Present value of lease liabilities ​ 374,640 Less: current portion ​ ( 218,875 ) Lease liabilities, non-current portion ​ $ 155,765 ​ 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 Nine Months Ended ​ September 30, 2022 Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ Operating cash flows from operating lease ​ $ 143,861 ​ ​ ​ 16 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. 17 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) A summary of the Prepaid Advance liability during the nine months ended September 30, 2022 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Amount of Less: Prepaid Advance ​ ​ Prepaid Advance ​ Debt ​ Liability, net of ​ ​ Liability ​ Discount ​ discount Balance, January 1, 2022 ​ $ — ​ $ — ​ $ — Proceeds from prepaid advance ​ 15,000,000 ​ — ​ 15,000,000 Original issue discount ​ 789,474 ​ ( 789,474 ) ​ — Legal fees ​ ​ — ​ ​ ( 85,000 ) ​ ​ ( 85,000 ) Repayments in cash ​ ​ — ​ ​ — ​ ​ — Repayments in shares of common stock ​ ( 250,000 ) ​ — ​ ( 250,000 ) Amortization of debt discount ​ ​ — ​ ​ 16,934 ​ ​ 16,934 Outstanding, September 30, 2022 ​ $ 15,539,474 ​ $ ( 857,540 ) ​ $ 14,681,934 ​ ​ 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, 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 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Notes Debt ​ ​ ​ Payable ​ Discount ​ Total Balance, January 1, 2022 ​ $ — ​ $ — ​ $ — Proceeds from promissory note ​ 5,000,000 ​ ( 250,000 ) ​ 4,750,000 Debt discount ​ — ​ ( 17,200 ) ​ ( 17,200 ) Repayments in cash ​ ​ ( 4,850,000 ) ​ ​ — ​ ​ ( 4,850,000 ) Repayments in shares of common stock ​ ​ ( 150,000 ) ​ ​ — ​ ​ ( 150,000 ) Amortization of debt discount ​ — ​ 258,691 ​ 258,691 Loss on debt extinguishment ​ ​ — ​ ​ 8,509 ​ ​ 8,509 Outstanding, September 30, 2022 ​ $ — ​ $ — ​ $ — ​ ​ 18 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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”). 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 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, 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. Common Stock ​ 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. 19 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. In connection with an inducement offer from the Company, 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”). The New Warrants expire on December 31, 2025. The value of the New Warrants provided to the exercising warrant holders was deemed to be an offering cost associated with an equity financing to raise capital, pursuant to ASU 2021-04. Because the New Warrants were determined to be classified as equity, the credit to additional paid-in capital associated with the issuance of the New Warrants is offset by the debit to additional paid-in capital related to the offering cost. The warrants had a grant date value of $ 3,657,763 , calculated using the Black Scholes pricing model with the following assumptions used: risk free rate – 2.88 %, expected term – 3.69 , expected volatility – 100 %, expected dividends – 0 %. 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 ​ The 2018 KULR Technology Group Equity Incentive Plan (the “Plan”) allows for the grant of non-vested stock options, RSUs and RSAs to the Company’s employees pursuant to the terms of the 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 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 September 30, 2022, the Company has 131,162 shares held in treasury valued at their cost of $ 296,222 . 20 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Warrants A summary of warrants activity during the nine months ended September 30, 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 2,346,525 ​ 1.00 ​ Exercised ( 2,416,668 ) ​ ( 1.25 ) ​ Expired — ​ — ​ Forfeited — ​ — ​ Outstanding, September 30, 2022 2,524,410 ​ $ 1.02 3.3 ​ $ 662,364 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable, September 30, 2022 2,524,410 ​ $ 1.02 3.3 ​ $ 662,364 ​ A summary of outstanding and exercisable warrants as of September 30, 2022 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants Outstanding ​ Warrants Exercisable ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Outstanding ​ Average ​ Exercisable Exercise ​ Number of ​ Remaining Life ​ Number of Price Warrants In Years Warrants $ 1.25 177,885 3.3 177,885 $ 1.00 2,346,525 3.3 2,346,525 ​ ​ 2,524,410 3.3 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 ​ For The Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2022 2021 2022 2021 Risk free interest rate ​ 2.85 % - 4.21 % ​ 0.20 % - 0.23 % ​ 1.18 % - 4.21 % ​ 0.20 % - 0.85 % ​ Expected term (years) ​ 3.8 ​ 3.5 ​ 3.5 - 3.9 ​ 2.5 - 3.5 ​ Expected volatility ​ 106 % 109 % 106 % - 116 % ​ 93 % - 109 % ​ Expected dividends ​ 0 % 0 % 0 % 0 % ​ 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. 21 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 nine months ended September 30, 2022 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted ​ ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ Number of ​ Exercise ​ Remaining ​ Intrinsic ​ Options Price Term (Yrs) Value Outstanding, January 1, 2022 405,216 ​ $ 2.29 ​ Granted 200,000 ​ 1.86 ​ Exercised ( 66,042 ) ​ 0.71 ​ Expired — ​ — ​ Forfeited ( 28,958 ) ​ 1.49 ​ Outstanding, September 30, 2022 510,216 ​ $ 1.78 3.5 ​ $ 68,501 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable, September 30, 2022 184,799 ​ $ 1.37 2.3 ​ $ 65,143 ​ The following table presents information related to stock options (excluding market-based option awards) as of September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Exercisable ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Outstanding ​ Average ​ Exercisable Exercise ​ Number of ​ Remaining Life ​ Number of Price Options In Years Options $ 0.66 110,486 1.3 105,070 $ 1.28 ​ 10,000 ​ — ​ — $ 1.35 ​ 10,000 ​ — ​ — $ 1.47 ​ 10,000 ​ — ​ — $ 1.55 ​ 30,000 ​ — ​ — $ 1.59 ​ 40,000 ​ — ​ — $ 1.99 ​ 10,000 ​ 3.7 ​ 4,583 $ 2.05 ​ 50,000 ​ 3.9 ​ 3,958 $ 2.08 10,000 3.6 4,583 $ 2.13 ​ 20,000 ​ 3.9 ​ 7,500 $ 2.25 ​ 10,000 ​ 4.3 ​ 1,250 $ 2.27 ​ 29,730 ​ 3.7 ​ 12,855 $ 2.31 ​ 50,000 ​ — ​ — $ 2.43 ​ 20,000 ​ 4.0 ​ 7,500 $ 2.44 100,000 3.4 37,500 ​ ​ ​ 510,216 ​ 2.3 ​ 184,799 ​ 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. 22 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 September 30, 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 Granted 150,000 ​ 2.08 Vested ( 842,500 ) ​ 2.38 Non-vested shares, September 30, 2022 1,897,500 ​ $ 2.54 ​ 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, that vest upon achieving specified KULR market capitalizations, outstanding as of September 30, 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 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 ​ 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 Nine Months Ended ​ September 30, ​ September 30, ​ 2022 2021 2022 2021 Common stock for services ​ $ — ​ $ 77,040 ​ $ 53,421 ​ $ 345,679 Amortization of restricted common stock ​ 403,812 ​ 440,333 ​ 1,345,171 ​ 1,000,647 Amortization of market-based awards ​ 477,700 ​ 754,207 ​ 1,773,169 ​ 1,374,226 Stock options ​ 23,959 ​ 20,516 ​ 66,377 ​ 45,407 Accrued issuable equity (common stock) ​ ​ 16,840 ​ ​ — ​ ​ ( 29,360 ) ​ ​ — Total ​ $ 922,311 ​ $ 1,292,096 ​ $ 3,208,778 ​ $ 2,765,959 ​ 23 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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 Sponsorship Agreement On June 15, 2022, the Company amended the Second Sponsorship Agreement (see Note 4 - Prepaid Expenses and Other Current Assets) to extend the term through December 31, 2023. 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 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. 24 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. ​ ​ ​ ​ 25 Table of Contents