What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-16 · 236 added, 144 removed, 450 unchanged (46% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

26 unchanged sentences

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

none issued and outstanding at June 30, 2023 and December 31, 2022

none issued and outstanding at September 30, 2023 and December 31, 2022

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

none issued and outstanding at June 30, 2023 and December 31, 2022

none issued and outstanding at September 30, 2023 and December 31, 2022

Series C Preferred Stock, 400 shares designated;

none issued and outstanding at June 30, 2023 and December 31, 2022

none issued and outstanding at September 30, 2023 and December 31, 2022

Series D Preferred Stock, 650 shares designated;

none issued and outstanding at June 30, 2023 and December 31, 2022

none issued and outstanding at September 30, 2023 and December 31, 2022

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

118,885,728 shares issued and 118,754,566 shares outstanding at June 30, 2023;

127,697,113 shares issued and 127,565,951 shares outstanding at September 30, 2023;

113,202,749 shares issued and 113,071,587 shares outstanding at December 31, 2022

1 unchanged sentence

Treasury stock, at cost;

131,162 shares held at June 30, 2023 and December 31, 2022

131,162 shares held at September 30, 2023 and December 31, 2022

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

Gain on forgiveness of PPP loan and interest

Amortization of debt discount

Loss on debt extinguishment

Change in fair value of accrued issuable equity

4 unchanged sentences

( 18,500,127 )

( 14,977,825 )

Net Loss Per Share

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

Treasury Stock

22 unchanged sentences

( 55,531,891 )

Common stock issued pursuant to the equity financing:

For cash, net of issuance costs (1)

Stock-based compensation:

Restricted stock awards granted

Common stock issued for services

Amortization of restricted common stock

Amortization of stock options

( 5,562,274 )

Balance - September 30, 2023

( 61,094,165 )

(1) Equity financing gross proceeds of $ 2,875,000 less issuance costs of $ 588,230 .

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

2 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

( 32,548,799 )

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

( 38,184,203 )

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

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash Flows From Operating Activities:

3 unchanged sentences

Amortization of debt discount

Non-cash rent expense

Non-cash lease expense

Loss on debt extinguishment

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

4 unchanged sentences

Prepaid expenses and other current assets

( 1,187,561 )

Security deposits

9 unchanged sentences

Deposits for purchase of property and equipment

( 2,198,626 )

Purchases of property and equipment

1 unchanged sentence

Net Cash Used In Investing Activities

( 2,772,568 )

Cash Flows from Financing Activities:

Proceeds from equity financing

Issuance costs on equity financing

Proceeds from the SEPA

Proceeds from prepaid advance liability

Financing costs of prepaid advance liability

Issuance costs on prepaid advance liability

Repayments of prepaid advance liability

( 1,575,000 )

Proceeds from notes payable (1)

Payment of issuance costs

Issuance costs on notes payable

Repayments of note payable

( 1,000,000 )

Payment of financing costs incurred in connection with the SEPA

Payment of financing costs incurred in connection with notes payable

Repurchase of common stock

2 unchanged sentences

Net Cash Provided By Financing Activities

Net Decrease In Cash

( 9,012,912 )

Net (Decrease) Increase In Cash

( 9,166,248 )

6 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:

4 unchanged sentences

Treasury stock issued upon the exercise of stock options

Receivable recorded for pending cash deposit of stock option exercise proceeds

Original issue discount on prepaid advance liability

Common stock issued in satisfaction of prepaid advance liability and interest

Prepaid advance for repayment of note payable

Shares issued in satisfation of note payable

Shares issued in satisfaction of prepaid advance liability and accrued interest

Deposits applied to purchases of property and equipment

1 unchanged sentence

Equipment deposits included in accounts payable

Common stock issued in satisfaction of accrued issuable equity

Accrual of equity financing issuance costs

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

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTANTIES

Organization and Operations

6 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, 2023 and for the three and six months ended June 30, 2023 and 2022.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 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, 2023 and for the three and nine months ended September 30, 2023 and 2022.

The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 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, 2022 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 28, 2023.

3 unchanged sentences

Going Concern and Management’s Liquidity Plans

As of June 30, 2023, the Company had cash of $ 1,320,651 and a working capital deficit of $ 4,719,810 .

For the six months ended June 30, 2023, the Company incurred a net loss of $ 12,937,853 and used cash in operations of $ 9,858,687 .

As of September 30, 2023, the Company had cash of $ 1,167,315 and a working capital deficit of $ 6,355,104 , which includes the prepaid advance liability of $ 5,910,405 (see Note 9 – Prepaid Advance Liability).

For the nine months ended September 30, 2023, the Company incurred a net loss of $ 18,500,127 and used cash in operations of $ 10,893,050 .

The Company’s primary source of liquidity has historically been cash generated from equity and debt offerings.

2 unchanged sentences

However, since the Company’s inception we have had a history of recurring net losses from operations, recurring use of cash in operating activities and declining working capital.

Future cash requirements for our current liabilities include $ 3,939,449 for accounts payable and accrued expenses and $ 242,078 for future payments under operating leases.

Further, pursuant to an agreement with Yorkville executed on August 16, 2023, $ 3,150,000 owed in connection with the Company’s prepaid advance liability must be paid by August 25, 2023, and three additional payments, each in the amount of $ 1,383,333 , are to be paid on the last day of each of October 2023, November 2023 , and December 2023 .

The Company has also committed to spend $ 807,515 related to capital expenditures for automation equipment, $ 500,000 in connection with an asset purchase agreement, and $ 441,192 for research and development.

These factors raise substantial doubt about the Company’s ability to meet its obligations as they become due within the twelve months from the date these condensed consolidated financial statements are issued.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Management’s plans to mitigate the factors which raise substantial doubt include (i) revenue growth, (ii) reducing operating expenses through careful cost management, (iii) raising additional funds through future financings, and (iv) negotiating an extension and/or conversion to equity of the Company’s prepaid advance liability (see Note 14 – Subsequent Events).

Future cash requirements for our current liabilities include $ 4,831,517 for accounts payable and accrued expenses and $ 172,569 for future payments under operating leases.

Further, pursuant to an amended agreement with Yorkville executed on November 7, 2023 (see Note 14 – Subsequent Events - Prepaid Advance Liability for further details), the Company is required to repay the Prepaid Advance balance as follows:

$ 1,500,000 on or before December 31, 2023 plus accrued interest as well as a 5 % cash payment premium;

$ 2,000,000 plus accrued interest as well as a 5 % cash payment premium on or before January 31, 2024;

and the remaining principal amount of the Advance of $ 2,471,238 plus accrued interest as well as a 5 % cash payment premium on or before March 1, 2024.

The Company has also committed to spend $ 809,379 related to capital expenditures for automation equipment, and $ 500,000 in connection with an asset purchase agreement (see Note 14 – Subsequent Events – Common Stock).

The Company’s ability to continue as a going concern is dependent upon its ability to successfully execute the aforementioned initiatives.

On September 15, 2023, the Company completed a public offering of 8,214,285 shares of common stock at $ 0.35 per share, with gross proceeds of $ 2,875,000 less issuance costs of $ 588,230 , for net proceeds of $ 2,286,770 .

On September 18, 2023, the Company repaid an aggregate amount of $ 1,839,731 , consisting of a principal amount of $ 1,500,000 , accrued interest in the amount of $ 264,731 and a payment premium in the amount of $ 75,000 to Yorkville against its outstanding Prepaid Advances.

As of the date of the issuance of these financial statements, the Company has no additional commitments to obtain additional funding through future financings and there is no assurance that the Company will be able to successfully negotiate an extension of the prepaid advance liability repayments or its conversion to equity, or that the Company will be able to obtain additional funds on commercially acceptable terms, if at all.

There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations.

The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of liabilities that may be necessary should we be unable to continue as a going concern.

The aforementioned factors indicate that management’s plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

The condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the amounts and classification of liabilities that may be necessary should we be unable to continue as a going concern.

Use of Estimates

6 unchanged sentences

Balances 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 $ 820,651 and $ 12,491,732 as of June 30, 2023 and 2022, respectively.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

There were uninsured balances of $ 667,315 and $ 9,833,451 as of September 30, 2023 and December 31, 2022, 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:

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue for certain of the periods presented, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

Accounts Receivable

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Less than 10%

3 unchanged sentences

Vendor Concentrations

Vendor purchase concentrations are as follows for the three and six months ended June 30, 2023 and 2022, respectively:

Vendors representing 10% or more of our purchases for the three and nine months ended September 30, 2023 and 2022, are as follows:

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

The Company capitalizes inventory costs associated with products when future commercialization is considered probable, and a future economic benefit is expected to be realized.

4 unchanged sentences

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.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company periodically reviews for slow-moving, excess or obsolete inventories.

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.

1 unchanged sentence

Certain raw materials are held off-site with our contract manufacturers.

Inventory at June 30, 2023 and December 31, 2022 was comprised of the following:

Inventory at September 30, 2023 and December 31, 2022 consisted of the following:

September 30,

Raw materials

13 unchanged sentences

The Company recognizes revenue primarily from the following different types of contracts:

● Product sales – Revenue is primarily 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.

However, for internally developed, customized products with no alternative use where the Company has an enforceable right to payment for performance completed to date, revenue is recognized over time as the Company satisfies its performance obligations.

● 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.

● 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.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

● Contract services – Revenue is recognized pursuant to the terms of each individual contract when the Company satisfies the respective performance obligations, which could be recognized at a point in time or over the term of the contract.

The following table summarizes the Company’s revenue recognized by type of contract in its condensed 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

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.

The contract liabilities included in deferred revenue 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.

The Company expects to satisfy the remaining performance obligations and recognize the revenue related to its deferred revenue balance within the next twelve months.

During the three and six months ended June 30, 2023 and 2022, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of June 30, 2023 and December 31, 2022, the Company had $ 41,261 and $ 34,402 of deferred labor and other costs, respectively, 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, 2023 and 2022, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of September 30, 2023 and December 31, 2022, the Company had $ 43,413 and $ 34,402 of deferred labor and other costs, respectively, which is included in prepaid expenses and other current assets in the Company’s unaudited condensed consolidated balance sheets.

Deferred labor and other costs represent costs to fulfill the Company’s contract revenue.

The Company will recognize the deferred labor and other costs as cost of revenues at the point in time that the Company recognizes the related revenue, which is generally at the time the services are provided and/or the product/service is accepted by the customer.

The Company will recognize the deferred labor and other costs as cost of revenue at the point in time that the Company recognizes the related revenue, which is generally at the time the services are provided and/or the product/service is accepted by the customer.

Net Loss Per Common Share

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net loss attributable to common stockholders

14 unchanged sentences

Basic and diluted net loss per common share

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

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

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,

Prepaid advance (1)

2 unchanged sentences

Restricted stock units

(1) Shares issuable estimated using the floor price of $ 0.75 per share pursuant to the supplemental agreement to the SEPA (see Note 9 – Prepaid Advance Liability).

(1) Shares to be issued if the Company defaults on any of its cash payment obligations.

The shares are estimated using $ 0.29 per share, which is the effective floor price as of September 30, 2023 pursuant to the amendment to the letter agreement to the SEPA (see Note 9 – Prepaid Advance Liability).

Recently Issued Accounting Pronouncements

In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity;

Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements.

Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium.

As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt.

The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance.

The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year.

Management does not expect the adoption of this pronouncement will have a material effect on the Company’s financial statements.

Recently Adopted Accounting Pronouncements

7 unchanged sentences

NOTE 3 ASSET ACQUISITION

On May 4, 2023 (the “Asset Purchase Date”), KULR Technology Group, Inc.

(the “Company”) entered into an agreement (the “Asset Purchase Agreement”) with a seller (the “Seller”), pursuant to which the Company purchased all of the assets, primarily intellectual property, of the Seller (the “Acquired Assets”) for consideration of $ 75,000 (the “Total Consideration”), which was paid in cash on May 11, 2023.

On May 4, 2023 (the “Asset Purchase Date”), the Company entered into an agreement (the “Asset Purchase Agreement”) with a seller (the “Seller”), pursuant to which the Company purchased all of the assets, primarily intellectual property, of the Seller (the “Acquired Assets”) for consideration of $ 75,000 (the “Total Consideration”), which was paid in cash on May 11, 2023.

In addition, the seller has been employed by the Company.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

NOTE 4 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 June 30, 2023 and December 31,2022, the Company had outstanding inventory deposits of $ 44,728 and $ 285,260 , respectively.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Inventory deposits consist 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, 2023 and December 31,2022, the Company had outstanding inventory deposits of $ 91,033 and $ 285,260 , respectively.

NOTE 5 PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of June 30, 2023 and December 31, 2022, prepaid expenses and other current assets consisted of the following:

Marketing and sponsorships

As of September 30, 2023 and December 31, 2022, prepaid expenses and other current assets consisted of the following:

September 30,

Compensation costs

Dues and subscriptions

Conferences and seminars

Marketing and sponsorships

Security Deposits (Note 10)

Deferred expenses

Conferences and seminars

Professional fees

2 unchanged sentences

Total prepaid expenses and other current assets

Prepaid marketing and sponsorships shown in the table above, as of June 30, 2023, includes $ 658,333 of prepaid marketing expenses pursuant to certain sponsorship agreements which will be amortized over the respective service periods of the agreements.

Prepaid marketing and sponsorship costs as of December 31, 2022, primarily consist of two sponsorship agreements with a marketing partner whereby the Company is required to make upfront payments which were amortized over the respective service periods of the agreements.

As of September 30, 2023, the sponsorship costs were fully amortized.

NOTE 6 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, 2023 and December 31,2022, the Company had outstanding deposits of $ 1,537,656 and $ 3,514,937 , respectively, in connection with these agreements.

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

As of September 30, 2023 and December 31,2022, the Company had outstanding deposits of $ 1,615,286 and $ 3,514,937 , respectively, in connection with these agreements.

The decrease is due to equipment being transferred to property and equipment upon completion by third party contractors.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of June 30, 2023 and December 31, 2022, accrued expenses and other current liabilities consisted of the following:

As of September 30, 2023 and December 31, 2022, accrued expenses and other current liabilities consisted of the following:

September 30,

Professional fees

7 unchanged sentences

Total accrued expenses and other current liabilities

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the six months ended June 30, 2023 is presented below:

For the Six Months Ended

June 30, 2023

A summary of the accrued issuable equity activity during the nine months ended September 30, 2023 is presented below:

For the Nine Months Ended

September 30, 2023

Beginning Balance

1 unchanged sentence

Ending Balance

During the six months ended June 30, 2023, 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 $ 203,980 .

The Company recorded gains in the aggregate amount of $ 74,079 and $ 138,187 during the three and six months ended June 30, 2023, respectively, and recorded gains in the aggregate amount of $ 52,680 and $ 95,720 during the three and six months ended June 30, 2022, respectively, related to changes in the fair value of accrued issuable equity (see Note 13 – Stockholders’ Equity, Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of June 30, 2023 was $ 293,749 , based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets.

During the nine months ended September 30, 2023, the Company entered into and settled 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 $ 145,130 based on the quoted market prices of the shares.

In addition, the Company settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 136,000 shares with an aggregate fair value of $ 96,559 , remeasured at the date of settlement based on the quoted market prices of the shares.

The Company recorded (losses) gains in the aggregate amount of $( 42,773 ) and $ 177,987 during the three and nine months ended September 30, 2023, respectively, and recorded gains in the aggregate amount of $ 27,401 and $ 123,121 during the three and nine months ended September 30, 2022, respectively, related to changes in the fair value of accrued issuable equity (see Note 13 – Stockholders’ Equity, Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of September 30, 2023 was $ 98,540 , based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 PREPAID ADVANCE LIABILITY

7 unchanged sentences

Original issue discount on prepaid advance

Repayments in cash

( 1,500,000 )

( 1,575,000 )

Repayments in shares of common stock

1 unchanged sentence

( 4,032,658 )

Amortization of original issue discount

Amortization of debt discount

Outstanding, June 30, 2023

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”).

Outstanding, September 30, 2023

(1) The current portion of this liability was $ 5,655,612 as of December 31, 2022.

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

3 unchanged sentences

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.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On March 10, 2023, the Company and Yorkville agreed and closed on a second Prepaid Advance (the “Second Advance”).

1 unchanged sentence

Interest accrues on the outstanding balance of each Prepaid Advance at an annual rate of 10 %, subject to an increase to 15 % upon events of default, as defined.

During the six months ended June 30, 2023, the Company issued 4,078,971 shares of common stock, at purchase prices per share ranging from $ 0.57 to $ 1.20 , pursuant to Investor Notices submitted by Yorkville for aggregate proceeds of $ 4,466,626 .

On August 16, 2023, and as amended on August 23, 2023 and August 30, 2023, the Company and Yorkville entered into a letter agreement (the “Letter Agreement”), intended to supplement and modify the Supplemental Agreement to extend the repayment date of the Prepaid Advance balance as follows:

(i) an initial payment of $ 1,500,000 plus accrued interest as well as a 5 % cash payment premium on or before September 22, 2023 or the date of the closing of any financing conducted by the Company;

(ii) $ 1,500,000 on or before November 30, 2023 plus accrued interest as well as a 5 % cash payment premium;

(iii) $ 2,000,000 plus accrued interest as well as a 5 % cash payment premium on or before December 31, 2023;

and (iv) the remaining principal amount of the Advance of $ 2,471,238 plus accrued interest as well as a 5 % cash payment premium on or before January 31, 2024.

In addition, Yorkville shall not submit Investor Notices prior to December 1, 2023.

See Note 14 – Subsequent Events – Prepaid Advance Liability for details regarding a new amendment.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the nine months ended September 30, 2023, the Company issued 4,078,971 shares of common stock, at purchase prices per share ranging from $ 0.57 to $ 1.20 , pursuant to Investor Notices submitted by Yorkville for aggregate proceeds of $ 4,466,626 .

The proceeds were applied against the principal and interest due for the Initial Advance in the aggregate amounts of $ 4,032,656 and $ 433,970 , respectively.

As of June 30, 2023, the gross principal balance on the Prepaid Advance liability is $ 7,546,237 , which consists of Initial Advance and Second Advance of $ 5,440,974 and $ 2,105,263 , respectively, including the original issue discount of $ 290,974 and $ 105,263 , respectively.

During the three and six months ended June 30, 2023, the Company recorded interest expense in the amount of $ 197,110 and $ 357,041 , respectively, and recorded amortization of debt discount in the amount of $ 214,554 and $ 460,874 , respectively, in connection with the Prepaid Advance liability.

See Note 14 – Subsequent Events, Repayment Agreement for additional information related to the prepaid advance liability.

As of September 30, 2023, the gross principal balance on the Prepaid Advance liability is $ 5,971,238 , which consists of Initial Advance and Second Advance of $ 3,865,975 and $ 2,105,263 , respectively, including the original issue discount of $ 215,975 and $ 105,263 , respectively.

During the three and nine months ended September 30, 2023, the Company recorded interest expense in the amount of $ 184,645 and $ 541,686 , respectively, and recorded amortization of debt discount in the amount of $ 234,899 and $ 695,773 , respectively, in connection with the Prepaid Advance liability.

NOTE 10 LEASES

4 unchanged sentences

The Company also leases office space in San Diego, California pursuant to an operating lease which expires May 31, 2024.

As of June 30, 2023, the Company does not have any financing leases.

During the three and six months ended June 30, 2023, operating lease expense was $ 65,873 and $ 131,746 , respectively.

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

Maturities of lease liabilities as of June 30, 2023 were as follows:

For the period from July 1, 2023 through December 31, 2023

During the three and nine months ended September 30, 2023, operating lease expenses were $ 67,838 and $ 199,584 , respectively.

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

As of September 30, 2023, the Company did not have any financing leases.

Maturities of lease liabilities as of September 30, 2023 were as follows:

For the period from October 1, 2023 through December 31, 2023

Total future minimum lease payments

3 unchanged sentences

Lease liabilities, non current portion

The Company paid a security deposit of $ 50,213 in connection with the San Diego lease agreement which is recorded within the prepaid expenses and other current assets section of the balance sheet as of September 30, 2023.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the Six Months Ended

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

For the Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

8 unchanged sentences

Effective August 26, 2022, the Company entered into an eight-month consulting agreement with the father of the Company’s Chief Technology Officer (the “Related Consultant”), which shall automatically renew for an additional four months unless otherwise terminated.

During the three and six months ended June 30, 2023, expense recognized for services provided by the Related Consultant was $ 16,755 and $ 27,210 , respectively are included within selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

No related party expense was recognized during the six months ended June 30, 2022.

As of June 30, 2023 and December 31, 2022, the Company did no t have material accounts payable outstanding with related parties.

During the three and nine months ended September 30, 2023, expense recognized for services provided by the Related Consultant were $ 4,845 and $ 32,055 , respectively, and are included within selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

For the three and nine months ended September 30, 2022, expenses recognized for services provided by the Related Consultant was $ 2,115 and $ 2,115 .

On July 24, 2023, the Related Consultant accepted an employment offer by the Company which became effective on August 7, 2023.

As of September 30, 2023 and December 31, 2022, the Company did no t have material accounts payable outstanding with related parties.

NOTE 12 COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

In consideration, the Company agreed to pay the following:

(i) a cash payment of $ 60,000 payable upon the execution of this agreement (which was capitalized as an intangible asset and will be amortized over its useful life), and (ii) royalties of 5.5 % on the net sales price of royalty-based products and services for each accounting period, as defined in the agreement, with minimum annual royalty payments of $ 20,000 .

(i) a cash payment of $ 60,000 payable upon the execution of the agreement (which was capitalized as an intangible asset and will be amortized over its useful life), and (ii) royalties of 5.5 % on the net sales price of royalty-based products and services for each accounting period, as defined in the agreement, with minimum annual royalty payments of $ 20,000 .

Appointment of Vice President, Sales

17 unchanged sentences

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.

There were no issuances under the SEPA during the three and six months ended June 30, 2023.

The proceeds were applied against the principal and interest due for the Initial Advance in the aggregate amounts of $ 4,032,656 and $ 433,970 , respectively.

As of September 30, 2023, the gross principal balance on the Prepaid Advance liability is $ 5,971,238 , which consists of the Initial Advance and Second Advance of $ 3,865,975 and $ 2,105,263 , respectively, including the original issue discount of $ 215,975 and $ 105,263 , respectively.

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

During the six months ended June 30, 2023, the Company issued an aggregate of 5,500 shares of immediately vested common stock with a grant date value of $ 6,820 for legal services.

On September 15, 2023, the Company completed a public offering of 8,214,285 shares of common stock, priced at $ 0.35 per share, with gross proceeds of $ 2,875,000 less issuance costs of $ 588,230 , for net proceeds of $ 2,286,770 .

During the nine months ended September 30, 2023, the Company issued an aggregate of 232,600 shares of immediately vested common stock with a grant date value of $ 144,480 for legal services.

See Note 13 - Stockholders' Equity - Restricted Stock Awards, for details related to restricted equity grants and Note 9 - Prepaid Advance Liability for details related to additional share issuances.

Stock Options

2 unchanged sentences

For The Three Months Ended

For The Six Months Ended

For The Nine Months Ended

September 30,

Risk free interest rate

7 unchanged sentences

Expected dividends

For the three and six months ended June 30, 2023, the weighted average grant date fair value per share of options was $ 0.48 and $ 0.74 , respectively, compared to $ 2.97 and $ 1.47 , respectively, for the three and six months ended June 30, 2022.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of options activity during the six months ended June 30, 2023 is presented below:

For the three and nine months ended September 30, 2023, the weighted average grant date fair value per share of options was $ 0.18 and $ 0.47 , respectively, compared to $ 1.08 and $ 1.31 , respectively, for the three and nine months ended September 30, 2022.

A summary of options activity during the nine months ended September 30, 2023 is presented below:

Outstanding, January 1, 2023

Outstanding, June 30, 2023

Exercisable, June 30, 2023

The following table presents information related to stock options as of June 30, 2023:

Outstanding, September 30, 2023

Exercisable, September 30, 2023

The following table presents information related to stock options as of September 30, 2023:

Options Outstanding

Options Exercisable

Remaining Term

Remaining Life

$ 0.62 - $ 0.99

2 unchanged sentences

$ 2.05 - $ 2.44

As of June 30, 2023, there was $ 476,124 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 3.0 years.

As of September 30, 2023, there was $ 418,069 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 2.8 years.

Restricted Stock Awards

The following table presents information related to restricted stock awards as of June 30, 2023:

The following table presents information related to restricted stock awards as of September 30, 2023:

Weighted Average

Non-vested RSAs, January 1, 2023

Non-vested RSAs, June 30, 2023

Non-vested RSAs, September 30, 2023

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On March 31, 2021, the Company granted 2,000,000 restricted shares of common stock to the Company’s President and Chief Operating Officer.

2 unchanged sentences

The withholding and cancellation of the 175,000 shares represented a retirement of shares at a price per share equal to $ 1.31 , the closing price per share of our common stock on the trading day prior to the March 1, 2023, the effective date of the share cancellation.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2023, there was $ 8,009,225 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 2.91 years.

As of September 30, 2023, there was $ 4,246,243 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 2.72 years.

Restricted Stock Units

The following table presents information related to restricted stock units (“RSUs”) as of June 30, 2023:

Shares of Restricted

The following table presents information related to restricted stock units (“RSUs”) as of September 30, 2023:

Weighted Average

Shares of Restricted

Non-vested RSUs, January 1, 2023

Non-vested RSUs, June 30, 2023

As of June 30, 2023, there was $ 3,510,072 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 3.3 years.

Non-vested RSUs, September 30, 2023

As of September 30, 2023, there was $ 3,240,067 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 3.09 years.

Stock-Based Compensation

During the three and six months ended June 30, 2023, the Company recognized stock-based compensation expense of $ 964,201 and $ 1,884,356 , respectively, related to restricted common stock, warrants and stock options, of which $ 927,375 and $ 1,831,370 , respectively are included within selling, general and administrative expenses, and $ 36,826 and $ 52,986 , respectively are included within research and development expenses on the unaudited condensed consolidated statements of operations.

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.

The following table presents information related to stock-based compensation for the three and six months ended June 30, 2023 and 2022:

During the three and nine months ended September 30, 2023, the Company recognized stock-based compensation expense of $ 846,633 and $ 2,730,989 , respectively, related to restricted stock awards, restricted stock units, warrants and stock options, of which $ 560,139 and $ 2,391,509 , respectively, are included within selling, general and administrative expenses, and $ 286,494 and $ 339,480 , respectively, are included within research and development expenses on the unaudited condensed consolidated statements of operations.

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 stock awards, restricted stock units, 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.

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 and nine months ended September 30, 2023 and 2022:

For The Three Months Ended

For The Six Months Ended

For The Nine Months Ended

September 30,

Common stock for services

Accrued issuable equity (common stock)

True up to accrued issuable equity

Amortization of stock options

2 unchanged sentences

NOTE 14 SUBSEQUENT EVENTS

Restricted Stock Award

On July 12, 2023, the Company granted an award for 350,000 shares of restricted common stock with an aggregate grant date value of $ 266,000 , which shall vest in four equal annual installments beginning July 12, 2024.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Director Resignation

As disclosed in a Form 8-K filed with the SEC on August 7, 2023, on August 4, 2023, Dr.

Timothy Knowles resigned from the Board of Directors of the Company, as well as his role as Executive Technical Fellow.

Knowles’ resignation is a result of his decision to retire.

Repayment Agreement

On August 16, 2023 the Company entered into an agreement with Yorkville (the “Repayment Agreement”), pursuant to which, if the Company closes a financing in excess of $ 15,000,000 , 105 % of the outstanding principal amount of the prepaid advance liability (see Note 9 – Prepaid Advance Liability) and all accrued related interest will be paid to Yorkville, and the SEPA and the Supplemental Agreement will be automatically terminated.

If the prepaid advance liability has not been paid in full by the payment dates cited below, then:

on or before the earlier of August 25, 2023 or the date of the closing of any financing by the Company, the Company will pay to Yorkville a sum equal to (i) principal in the amount $ 3,000,000 , (ii) a payment premium in the amount of $ 150,000 , and (iii) all accrued interest outstanding on such payment (the “August Repayment”).

On the last day of each of October 2023, November 2023 and December 2023 , the Company will pay to Yorkville a cash sum equal to (i) principal in the amount of $ 1,383,333 ;

(ii) a payment premium equal to 5 % of each principal payment, and (iii) all accrued interest outstanding on such payment (each amount, a “Repayment”).

Provided that each Repayment is timely received, Yorkville agrees not to submit Investor Notices to the Company.

If the August Repayment is not received on a timely basis, Yorkville may submit Investor Notices to the Company pursuant to the terms of the Supplemental Agreement.

If the August Repayment is submitted on a timely basis, but subsequent Repayments are not received on a timely basis, Yorkville may submit Investor Notices for an aggregate amount up to the missed payment(s) amount.

On October 6, 2023, the Company issued 273,723 shares of immediately vested common stock with a value of $ 109,489 as equity consideration pursuant to the terms of an agreement (the “Asset Purchase Agreement”) executed on October 6, 2022.

Prepaid Advance Liability

On November 7, 2023, the Company and Yorkville executed an amended Letter Agreement revising repayment terms, as follows:

a) On or before December 31, 2023, the Company shall pay (i) $ 1,500,000 in principal, (ii) 5 % payment premium and (iii) all outstanding accrued and unpaid interest.

b) On or before January 31, 2024, the Company shall pay (i) $ 2,000,000 in principal, (ii) 5 % payment premium and (iii) all outstanding accrued and unpaid interest.

c) On or before March 1, 2024, the Company shall pay (i) the remaining principal amount, (ii) 5 % payment premium and (iii) all outstanding accrued and unpaid interest.

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