What changed in this filing

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Item 1. Financial Statements

2024-05-15 compared with 2023-11-14 · 310 added, 363 removed, 323 unchanged (68% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

8 unchanged sentences

Right-of-use asset, net

Deferred financing costs

Liabilities and Stockholders' Equity

Deferred financing costs, net

Liabilities and Stockholders’ Equity (Deficit)

Current Liabilities:

2 unchanged sentences

Accrued issuable equity

Lease liability, current portion

Prepaid advance liability, net of discount, current portion

Lease liabilities, current portion

Notes payable, net of discount, current portion

Deferred revenue

Total Current Liabilities

Lease liability, non-current portion

Notes payable, non-current portion

Lease liabilities, non-current portion

Prepaid advance liability, net of discount, non-current portion

Accrued interest, non-current

Accrued interest, non-current portion

Total Liabilities

Commitments and contingencies (Note 16)

Stockholders’ Equity

Stockholders’ Equity (Deficit)

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, 2023 and December 31, 2022

730,000 and 0 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

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

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

none issued and outstanding at March 31, 2024 and December 31, 2023

Series C Preferred Stock, 400 shares designated;

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

none issued and outstanding at March 31, 2024 and December 31, 2023

Series D Preferred Stock, 650 shares designated;

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

none issued and outstanding at March 31, 2024 and December 31, 2023

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

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

173,310,469 and 173,179,307 shares issued and outstanding at March 31, 2024, respectively;

134,031,669 and 133,900,507 shares issued and outstanding at December 31, 2023, respectively

Additional paid-in capital

Treasury stock, at cost;

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

131,162 shares held at March 31, 2024 and December 31, 2023

Accumulated deficit

1 unchanged sentence

( 66,287,594 )

Total Stockholders’ Equity

Total Liabilities and Stockholders' Equity

Total Stockholders’ Equity (Deficit)

( 2,182,696 )

Total Liabilities and Stockholders’ Equity (Deficit)

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

3 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Cost of revenue

6 unchanged sentences

( 6,260,718 )

( 17,437,726 )

( 14,298,865 )

Other (Expense) Income

Interest expense

Gain on forgiveness of PPP loan and interest

Amortization of debt discount

4 unchanged sentences

( 6,602,861 )

( 5,586,585 )

( 18,500,127 )

( 14,977,825 )

Net Loss Per Share

5 unchanged sentences

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2024

Preferred Stock

Treasury Stock

Stockholders’

Equity (Deficit)

Balance - January 1, 2024

( 66,287,594 )

Common stock issued for the repayment of prepaid advance liability and related interest accrual

Shares repurchased for payroll taxes and canceled

Stock-based compensation:

Restricted stock awards granted

Unvested restricted stock awards canceled

Common stock issued for services

Amortization of restricted common stock

Amortization of stock options

( 2,182,696 )

( 6,602,861 )

Balance - March 31, 2023

( 49,196,899 )

Common stock issued for the repayment of prepaid advance liability and related interest accrual

Preferred stock issued for no consideration

Common stock issued for the repayment of prepaid advance liability and related interest accrual pursuant to Advance Notices (1)

Common stock issued for cash pursuant to Advance Notices (2)

Stock-based compensation:

Amortization of restricted common stock

Amortization of stock options

( 6,334,992 )

Balance - June 30, 2023

Restricted stock awards exchanged for restricted stock units

( 2,168,508 )

Common stock issued pursuant to the equity financing:

For cash, net of issuance costs (1)

Stock-based compensation:

Restricted stock awards granted

Restricted stock units vested

Common stock issued for services

3 unchanged sentences

( 5,008,876 )

Balance - September 30, 2023

Balance - March 31, 2024

( 71,296,470 )

(1) Equity financing gross proceeds of $ 6,068,407 less issuance costs of $ 13,577 .

(2) Equity financing gross proceeds of $ 2,910,651 less issuance costs of $ 4,238 .

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

1 unchanged sentence

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

Treasury Stock

2 unchanged sentences

( 42,594,038 )

Treasury stock held upon the vesting of restricted common stock

Common stock issued upon the exercise of warrants

Common stock issued upon the exercise of options

Common stock issued for the repayment of prepaid advance liability and related interest accrual pursuant to Investor Notices

Shares repurchased for payroll taxes and canceled

Stock-based compensation:

Restricted stock awards granted

Unvested restricted stock awards canceled

Common stock issued for services

1 unchanged sentence

Amortization of stock options

Amortization of market-based awards

( 6,602,861 )

2 unchanged sentences

( 49,196,899 )

Treasury stock issued upon the exercise of options

Common stock issued upon the exercise of warrants

Stock-based compensation:

Common stock issued for services

Amortization of restricted common stock

Amortization of stock options

Amortization of market-based awards

( 5,254,685 )

Balance - June 30, 2022

( 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 Nine Months Ended

September 30,

For the Three Months Ended

Cash Flows From Operating Activities:

6 unchanged sentences

Depreciation and amortization expense

Gain on forgiveness of PPP loan and interest

Change in fair value of accrued issuable equity

Non-cash interest expense

Stock-based compensation

1 unchanged sentence

Accounts receivable

( 1,208,646 )

Inventory deposits

10 unchanged sentences

Cash Flows From Investing Activities:

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

1 unchanged sentence

Issuance costs on prepaid advance liability

Repayments of prepaid advance liability

( 1,575,000 )

Proceeds from notes payable (1)

Net proceeds from notes payable (1)

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

Proceeds from the exercise of options

Proceeds from the exercise of warrants

Repayments of notes payable

Net Cash Provided By Financing Activities

Net (Decrease) Increase In Cash

Net Decrease In Cash

( 3,147,529 )

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

For the Nine Months Ended

September 30,

For the Three Months Ended

Supplemental Disclosures of Cash Flow Information:

2 unchanged sentences

Right-of-use asset for lease liability

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

Treasury stock issued upon the exercise of stock options

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

Shares repurchased for payroll taxes (not paid as of period-end) and canceled

Restricted stock awards converted to restricted stock units

Restricted stock units vested

Original issue discount on indebtedness

Common stock issued pursuant to Investor Notices in satisfaction of prepaid advance liability and interest

Common stock issued pursuant to Advance Notices in satisfaction of prepaid advance liability and interest

Deposits applied to purchases of property and equipment

Additions to property and equipment included in accounts payable

Equipment deposits included in accounts payable

Common stock issued in satisfaction of accrued issuable equity

Accrual of equity financing issuance costs

Additions to property and equipment included in accrued purchases

Deferred financing costs charged to additional paid-in capital

Accrued underwriting fees for notes payable

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 RISKS AND UNCERTANTIES

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Organization and Operations

KULR Technology Group, Inc., through its wholly-owned subsidiary, KULR Technology Corporation (collectively referred to as “KULR” or the “Company”), develops and commercializes high-performance thermal management technologies for electronics, batteries, and other components across a range of applications.

Currently, the Company is focused on targeting both high performance aerospace and United States 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 vehicles, 5G communication, cloud computer infrastructure, consumer and industrial devices.

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 vehicles, fifth generation (“5G”) communication, cloud computer infrastructure, consumer and industrial devices.

Basis of Presentation

3 unchanged sentences

GAAP for annual financial statements.

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

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of March 31, 2024, and for the three months ended March 31, 2024 and 2023.

The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the operating results for the full year ending December 31, 2024 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, 2023 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on April 12, 2024.

The accompanying condensed consolidated balance sheet as of December 31, 2023, has been derived from the audited financial statements included in the Form 10-K.

2 unchanged sentences

Going Concern and Management’s Liquidity Plans

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.

As of March 31, 2024, the Company had cash of $ 798,843 and working capital deficit of $ 3,907,626 .

For the three months ended March 31, 2024, the Company incurred a net loss of $ 5,008,876 and used cash in operating activities of $ 3,907,406 .

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

Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet future financial obligations as they become due within one year after the date that these financial statements are issued.

The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

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.

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

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 working capital deficits.

Future cash requirements for our current liabilities include $ 5,800,667 for accounts payable and accrued expenses, $ 1,259,534 for merchant cash advances (see Note 9 – Notes Payable), $ 981,371 for capital expenditures and $ 435,707 for future payments under operating leases.

Future cash requirements for long-term liabilities include $ 250,000 for unsecured promissory notes.

On December 20, 2023, the Company received a notice of noncompliance from NYSE Regulation (“NYSE”) stating it is not in compliance with Section 1003(a) (iii) in the NYSE American Company Guide (the “Company Guide”) since the Company reported stockholders’ equity of $ 1,200,172 at September 30, 2023, and losses from continuing operations and/or net losses in its five most recent fiscal years.

On February 12, 2024, the Company received a second notice letter from NYSE stating it is not in compliance with Section 1003 (f) (v) of the Company guide since the Company’s securities were trading at an average of less than $ 0.20 per share for 30 days.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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).

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.

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 9 – Prepaid Advance Liability).

On March 5, 2024, the Company received a notification from the NYSE that the Company’s plan to regain compliance with Section 1003 (a) (iii) of the Company Guide was accepted and so long as the Company meets its interim objectives, the Company will have until June 20, 2025, to regain compliance with the minimum stockholders’ equity requirement.

On May 1, 2024, the Company received a notification from the NYSE stating that the Company had regained compliance with Section 1003 (f) (v) of the Company Guide given the increase in the trading price of the Company’s securities.

The factors above 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.

Management’s plans to mitigate the factors which raise substantial doubt include (i) revenue growth, (ii) reducing operating expenses through careful cost management, and (iii) raising additional funds through future financings.

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.

On April 2, 2024, the Company received cash proceeds of $ 440,000 related to an unsecured Promissory Note comprised of an initial principal amount of $ 500,000 and discount of $ 60,000 , for cash proceeds of $ 440,000 .

The Promissory Note carries an annual interest rate of 0 % and increases to 15 % in the event of default and shall be repaid in cash representing all outstanding principal and accrued and unpaid interest due on October 2, 2024, as defined by the terms of the agreement.

See Note 12 – Subsequent Events – Promissory Notes for additional information.

On April 9, 2024, the Company received cash proceeds of $ 200,000 related to an unsecured Promissory Note which matures on the first anniversary of its issuance and carries an annual interest rate of 16 %.

In the event the promissory note is prepaid within 9 months of its issuance, the holder is entitled to the repayment of principal and cash payment of interest equal to 12 % of the prepayment amount.

See Note 12 – Subsequent Events – Promissory Notes for additional information.

Subsequent to March 31, 2024, and through May 13, 2024, the Company issued a total of 9,453,767 shares of common stock pursuant to SEPA Advance Notices submitted by the Company to Yorkville for aggregate proceeds of $ 4,321,479 .

See Note 12 – Subsequent Events – Standby Equity Purchase Agreement for additional information.

As of the date of the issuance of these condensed consolidated financial statements, the Company has no additional commitments to obtain additional funding through future debt or equity financings, or assurance 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 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.

These unaudited 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 the Company be unable to continue as a going concern.

Use of Estimates

1 unchanged sentence

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

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

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

1 unchanged sentence

Concentrations of Credit Risk

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

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

The Company’s concentrations of credit risk also include concentrations from key customers and vendors.

KULR TECHNOLOGY GROUP, INC.

5 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 $ 667,315 and $ 9,833,451 as of September 30, 2023 and December 31, 2022, respectively.

There were uninsured balances of $ 298,843 and $ 694,763 as of March 31, 2024 and December 31, 2023, respectively.

Customer and Revenue Concentrations

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:

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:

Accounts Receivable

For the Three Months Ended

For the Nine Months Ended

September 30,

Less than 10%

1 unchanged sentence

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 of 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.

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

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

The Company had vendors whose purchases of inventory individually represented 10% or more of the Company’s total purchases of inventory, as follows:

For the Three Months Ended

For the Nine Months Ended

September 30,

Less than 10%

Accounts Receivable

Accounts receivable are carried at their contractual amounts, less an estimate for credit losses.

As of March 31, 2024 and December 31, 2023, no allowances for credit losses were determined to be necessary.

Management estimates the allowance for credit losses based on

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

existing economic conditions, the financial conditions of the customers, and the amount and age of past due accounts.

Receivables are considered past due if full payment is not received by the contractual due date.

Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted.

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

1 unchanged sentence

Inventory is comprised of carbon fiber velvet (“CFV”) thermal interface solutions and internal short circuit batteries, which are available for sale, as well as raw materials and work in process related primarily to the manufacture of safe cases.

Safe cases provide a safe and cost-effective solution to commercially store and transport lithium batteries and mitigate the impacts of cell-to-cell thermal runway propagation.

Inventories are stated at the lower of cost or net realizable value.

Cost is determined using the first-in, first-out method.

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.

1 unchanged sentence

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

Finished goods inventory is held on-site at the Company’s San Diego, California location.

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

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

September 30,

On occasion, the Company pays for inventory prior to receiving the goods.

These payments are recorded as inventory deposits until the goods are received and these costs are included in the current asset section of the consolidated balance sheet.

As of March 31, 2024 and December 31, 2023, inventory deposits were $ 27,500 .

Finished goods inventory is held on-site at the San Diego, California and Webster, Texas locations.

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

Inventory at March 31, 2024 and December 31, 2023 was comprised of the following:

Raw materials

Work-in-process

Finished goods

10 unchanged sentences

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.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

● 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.

Contract services revenue that is recognized over time, may be recognized using the input method, based on labor hours expended, or using the output method based on milestones achieved, depending on 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 Nine Months Ended

September 30,

Revenue Recognized at a Point in Time:

Product sales

Contract services

Revenue Recognized Over Time:

Contract services

Total Revenue

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 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 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 Nine Months Ended

September 30,

Net loss attributable to common stockholders

( 5,008,876 )

( 6,602,861 )

( 18,500,127 )

( 14,977,825 )

Denominator (weighted average quantities):

4 unchanged sentences

( 2,170,717 )

( 2,952,892 )

( 2,106,923 )

Accrued issuable equity

5 unchanged sentences

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)

Unvested restricted stock awards

Unvested market-based equity awards

Restricted stock units

(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).

Operating Leases

The Company leases properties under operating leases.

For leases in effect upon adoption of Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” at January 1, 2020, and for any leases commencing thereafter, the Company recognizes a liability to make lease payments, the “lease liability”, and an asset representing the right to use the underlying asset during the lease term, the “right-of-use asset”.

The lease liability is measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate.

The right-of-use asset is measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset.

Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset.

The Company elected the accounting policy to include both the lease and non-lease components of the agreements as a single component and account for them as a lease.

Reclassifications

Certain prior period balances have been reclassified in order to conform to the current period presentation.

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

Subsequent Events

The Company has evaluated subsequent events through the date on which these unaudited condensed consolidated financial statements were issued.

Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed in Note 12 – Subsequent Events.

Recently Issued Accounting Pronouncements

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

In November 2023, the Financial Accounting Standards Board (the “FASB”) FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” These amendments require a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

Public entities with a single reporting segment are required to provide both the new disclosures and all of the existing disclosures required under ASC 280.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows.

The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

This update also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments in ASU 2023 – 09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted.

Since this new ASU addresses only disclosures, the Company

KULR TECHNOLOGY GROUP, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

does not expect the adoption to have any material effects on its financial condition, results of operation or cash flows.

The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023–09.

Recently Adopted Accounting Pronouncements

In August 2020, the 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.

2 unchanged sentences

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

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies.

The guidance is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted.

The Company adopted this ASU on January 1, 2023, using the modified retrospective approach and it did not have a material impact on its condensed consolidated financial statements.

NOTE 3 ASSET ACQUISITION

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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Asset 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 determined that the transaction should be accounted for as an asset acquisition because substantially all of the fair value of the Acquired Assets is concentrated in a single asset.

The total cost of the intellectual property acquired of $ 75,000 is included in intangible assets on the accompanying condensed consolidated balance sheet and is being amortized over its estimated useful life of 5 years .

NOTE 4 INVENTORY DEPOSITS

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.

The guidance is effective for the Company in 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.

The Company adopted this ASU on January 1, 2024, and the adoption did not have a material impact on its condensed consolidated financial statements.

NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

September 30,

As of March 31, 2024 and December 31, 2023, prepaid expenses and other current assets consisted of the following:

Compensation costs

Dues and subscriptions

Marketing and sponsorships

Security Deposits (Note 10)

Deferred expenses

Conferences and seminars

Security deposits

Professional fees

Dues and subscriptions

Vendor receivables

Research and development

Conferences and seminars

Investor relationships

Total prepaid expenses and other current assets

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 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.

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NOTE 4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

September 30,

As of March 31, 2024 and December 31, 2023, accrued expenses and other current liabilities consisted of the following:

Professional fees

1 unchanged sentence

Research and development

Refund due to customer

Inventory purchases

Tools and supplies

Board compensation

Marketing and advertising fees

Subscriptions

Total accrued expenses and other current liabilities

Accrued interest, non-current

Total accrued expenses and other current liabilities

Total accrued expenses and other liabilities

NOTE 5 – ACCRUED ISSUABLE EQUITY

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

A summary of the accrued issuable equity activity during the three months ended March 31, 2024 is presented below:

For the Three Months Ended

March 31, 2024

Beginning balance at January 1, 2024

Mark-to-market

Ending Balance

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.

Fair value at March 31, 2024

During the three months ended March 31, 2024, 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 $ 26,003 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended March 31, 2024 and 2023, the Company recorded gains (losses) in the aggregate amount of $( 13,002 ) and $ 64,108 , respectively, related to changes in the fair value of accrued issuable equity (see Note 10 – Stockholders’ Equity, Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of March 31, 2024, was $ 52,007 , based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets.

NOTE 6 – PREPAID ADVANCE LIABILITY

4 unchanged sentences

net of discount

Balance, December 31, 2022

Proceeds from prepaid advance

Original issue discount on prepaid advance

Repayments in cash

( 1,500,000 )

( 1,575,000 )

Repayments in shares of common stock

Balance, January 1, 2024

Repayments pursuant to Advance Notices

( 5,918,430 )

Amortization of original issue discount

Amortization of debt discount

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 .

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 13, 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.

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

The Company recorded additional prepaid advance liability in the amount of $ 2,105,263 , which consisted of $ 2,000,000 cash proceeds received, plus an original issue discount of $ 105,263 .

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.

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.

Balance, March 31, 2024

KULR TECHNOLOGY GROUP, INC.

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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 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.

On January 9, 2024, the Company entered into a letter agreement with Yorkville to defer the Company’s December 31, 2023 (the “December Payment”) payment of $ 2,000,000 plus accrued interest and a 5 % cash payment premium until February 29, 2024.

On February 13, 2024, the Company and Yorkville entered into another agreement to extend all payment due dates and defer all payment obligations to December 31, 2024.

During the three months ended March 31, 2024, the Company issued 41,027,181 shares of common stock pursuant to SEPA Advance Notices submitted by the Company to Yorkville for aggregate proceeds of $ 8,979,058 .

Of the shares issued pursuant to the SEPA Advance Notices, 21,798,830 shares valued at $ 6,068,402 were issued in satisfaction of $ 5,918,430 of principal and $ 118,614 of accrued interest owed in connection with the Company’s prepaid advance liability.

The Company recorded $ 31,358 in extinguishment loss, and charged $ 13,577 of deferred financing costs to additional paid-in capital in connection with the shares issued in satisfaction of the prepaid advance liability.

As of March 31, 2024, the Prepaid Advance Liability and the related accrued interest has been repaid in full.

The remaining 19,228,351 shares issued pursuant to the SEPA Advance Notices were issued for cash proceeds of $ 2,910,651 , which was used to fund the operations of the Company.

Deferred financing costs in the amount of $ 4,243 were charged to additional paid in capital in connection with the shares issued for cash.

NOTE 7 – LEASES

On January 18, 2023, the Company entered into a new lease agreement for office space in Webster, Texas.

The initial lease term is twelve months and thirteen days.

Monthly rental payments under the new lease are $ 5,047 , which is comprised of $ 4,245 of base rent plus $ 802 of common area maintenance fees.

The Company determined that the value of the lease liability and the related right-of-use asset at inception was $ 51,154 , using an estimated incremental borrowing rate of 5 %.

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

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

On January 31, 2024, the initial lease for Webster, Texas dated January 18, 2023, expired.

The Company expects to recover the security deposit of $ 5,095 , which is included in the prepaid expenses and other current assets section of the condensed consolidated balance sheet.

On January 27, 2024, the Company entered into a lease agreement for new office space in Webster, Texas.

The initial lease term is 63 months .

Monthly rental payments under the new lease are $ 30,086 , which is comprised of $ 21,950 of base rent and $ 11,136 of common area maintenance fees.

No cash payments are due for the first three months of the lease.

The Company determined that the value of the lease liability and related right-of-use asset at inception was $ 1,085,497 , using an incremental borrowing rate of 10 %.

The Company paid a security deposit of $ 37,930 in connection with the Webster lease agreement which is recorded within the security deposits section of the balance sheet as of March 31, 2024.

The Company also leases office space at 4863 Shawline Street, San Diego, CA 92111, pursuant to an operating lease which expires May 31, 2024 (the “San Diego Lease”).

On January 25, 2024, the Company entered into an amendment to the lease dated April 5, 2021, for the facility located at 4863 Shawline Street, San Diego, CA 92111 (the “First Renewal”).

Pursuant to the amendment, the lease is extended for a period of eighteen months commencing June 1, 2024, and terminating November 30, 2025.

Monthly rental payments under the amendment are $ 29,337 .

The Company determined that the value of the modified lease liability and related right-of-use asset to be $ 490,422 , using an incremental borrowing rate of 10 %.

As of March 31, 2024, the Company does not have any financing leases.

During the three months ended March 31, 2024 and 2023, operating lease expense was $ 111,902 and $ 65,873 , respectively.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities as of March 31, 2024, were as follows:

4/1/24 to 12/31/24

Total future minimum lease payments

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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.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the Nine Months Ended

September 30,

For the Three Months Ended

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

2 unchanged sentences

Operating leases

Weighted Average Remaining Lease Term (Years)

Operating leases

Weighted Average Discount Rate

Operating leases

NOTE 8 – RELATED PARTY TRANSACTIONS

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 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 .

Effective August 26, 2022, the Company entered into a consulting agreement with the father of the Company’s Chief Technology Officer (the “Related Consultant”).

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

Patent License Agreement

During February 2023, the Company entered into a licensing agreement whereby the Company obtained an exclusive license to commercialize its patented Format Fractional Thermal Runaway Calorimeter.

The agreement is effective as long as the licensed patents are enforceable, subject to certain early termination provisions specified in the agreement.

In consideration, the Company agreed to pay the following:

(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

On January 16, 2023, the Company appointed a Vice President of Sales (the “VP of Sales”), and issued the VP of Sales 298,507 shares of restricted common stock.

The restricted common stock had a grant date fair value of $ 400,000 , and vests in four equal annual installments beginning January 16, 2024 based solely on continued service.

The grant date fair value will be amortized ratably over the vesting period.

In addition, the Company committed to a one-year guaranteed commission of $ 200,000 , payable in four quarterly installments as well as a severance package of $ 250,000 and one-year of family health insurance if the VP of Sales is terminated without cause (as defined) within one year of hire.

Appointment of Chief Financial Officer

On March 31, 2023, the Company appointed an individual to serve as Chief Financial Officer (the “CFO”) of the Company and issued the CFO 1,500,000 shares of restricted stock.

The restricted common stock had an aggregate grant date fair value of $ 1,380,000 , and vests in five equal annual installments beginning March 31, 2024 based solely on continued service.

During the three months ended March 31, 2023, expense recognized for services provided by the Related Consultant were $ 10,455 , and is included within selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

As of March 31, 2024 and December 31, 2023, the Company did no t have any accounts payable outstanding with related parties.

KULR TECHNOLOGY GROUP, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 STOCKHOLDERS’ EQUITY

NOTE 9-NOTES PAYABLE

A summary of the notes payable activity during the three months ended March 31, 2024, is presented below:

Outstanding, January 1, 2024

Proceeds from merchant cash advances

Issuance costs paid in cash

Issuance costs to be paid in equity

Underwriting fees paid in cash

Repayments in cash

Amortization of debt discount

Notes payable, current-portion

Notes payable, non-current portion

Total Notes payable as of March 31, 2024

On January 22, 2024, the Company entered into a merchant cash advance agreement (the “Cash Advance Agreement”) whereby the Company received $ 504,900 of cash (net of underwriting fees of $ 35,100 ), and paid finder’s fees in cash of $ 21,600 and finder’s fees to be issued in equity with an aggregate value of $ 16,200 , with the obligation to repay a total of $ 804,600 over thirty-two weekly payments of $ 25,143.75 , beginning January 30, 2024.

The difference between the total repayment amount and the net proceeds received is being accounted for as an original issue discount, and along with the finder’s fees, is being amortized over thirty-two weeks using the effective interest rate method and an annualized effective interest rate of 184 %.

The Cash Advance Agreement is secured by the Company’s accounts receivable and related cash receipts.

On February 26, 2024, the parties added an addendum to the agreement for an early payoff discount whereby the Company will owe $ 756,000 if paid by March 22, 2024, or $ 783,000 if paid by April 22, 2024.

The Company did not take advantage of the early payoff discount and will continue making weekly payments over the original thirty-two week term.

On February 26, 2024, the Company entered into a merchant cash advance agreement (the “Second Cash Advance Agreement”) with the same lender mentioned above whereby the Company received $ 502,200 of cash (net of underwriting fees of $ 37,800 ), and paid finder’s fees in cash of $ 21,600 and finder’s fees to be issued in equity with an aggregate value of $ 16,200 , with the obligation to repay a total of $ 804,600 over thirty weekly payments of $ 26,820 , beginning February 29, 2024.

The difference between the total repayment amount and the net proceeds received is being accounted for as an original issue discount, and along with the finder’s fees, is being amortized over thirty weeks using the effective interest rate method and an annualized effective interest rate of 195 %.

The Second Cash Advance is secured by the Company’s accounts receivable and related cash receipts.

See Note 12 – Subsequent Events – Promissory Notes for information related to notes payable issued subsequent to March 31, 2024, and warrants subsequently issued to satisfy the equity obligation.

NOTE 10 - STOCKHOLDERS’ EQUITY (DEFICIT)

Standby Equity Purchase Agreement (“SEPA”) and Supplemental SEPA

2 unchanged sentences

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.

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.

Shares are sold under the SEPA at 98.0 % of the average of the volume-weighted average price (“VWAP”) 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

KULR TECHNOLOGY GROUP, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Of the gross proceeds, $ 2,910,651 was retained by the Company to fund operations.

The remaining proceeds were applied against the principal and interest owed in connection with the Prepaid Advance Liability.

As of March 27, 2024, The Prepaid Advance Liability and the related accrued interest has been repaid in full.

See Note 6 – Prepaid Advance Liability, for details related to a supplemental agreement to the SEPA.

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.

During the three months ended March 31, 2024, the Company issued an aggregate of 35,500 shares of immediately vested common stock with a grant date value of $ 6,390 for legal services.

During the three months ended March 31, 2024, the Company issued 384,627 shares of common stock upon the vesting of restricted stock units previously granted.

See Note 10 - Stockholders’ Equity - Restricted Stock Awards, for details related to restricted equity grants and Note 6 - Prepaid Advance Liability for details related to additional share issuances.

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 range of weighted average assumptions:

For The Three Months Ended

For The Nine Months Ended

September 30,

Risk free interest rate

4.77 % - 5.40 %

2.85 % - 4.21 %

3.92 % - 5.40 %

1.18 % - 4.21 %

Expected term (years)

Expected volatility

105 % - 109 %

Expected dividends

Preferred Stock

On January 26, 2024, the Board of Directors (“Board”), approved, authorized, and ratified the issuance of 730,000 shares of previously designated Non-convertible Series A Voting Preferred Stock to the Chairman and Chief Executive Officer of the Company, Michael Mo, for no consideration, subject to the Board reserving the full and unequivocal right to revoke, rescind, transfer or otherwise cancel the issued Non-convertible Series A Voting Preferred Stock in the event Michael Mo is removed from any position with the Company or resigns from all positions with the Company.

The issuance of up to 1,000,000 shares of Non-convertible Series A Voting Preferred Stock was previously approved and authorized by a vote of the majority stockholders of the Company.

Holders of Non-convertible Series A Voting Preferred Stock shall not be entitled to dividends, shall not convert into another series or class of stock of the Company and have no rights to distributions in the event of any liquidation.

Each record holder of Non-convertible Series A Voting Preferred Stock shall have that number of votes (identical in every other respect to the voting rights of the holders of Common Stock entitled to vote at any regular or special meeting of the shareholders or by written consent) equal to one-hundred (100) votes per share of Non-convertible Series A Voting Preferred Stock held by such record holder.

Treasury Stock

As of March 31, 2024 and December 31, 2023, the Company has 131,162 shares held in treasury recorded at their cost of $ 296,222 .

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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:

A summary of warrants activity during the three months ended March 31, 2024, is presented below:

Outstanding, January 1, 2024

Outstanding, September 30, 2023

Exercisable, September 30, 2023

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

Outstanding, March 31, 2024

Exercisable, March 31, 2024

A summary of outstanding and exercisable warrants as of March 31, 2024, is presented below:

Warrants Outstanding

Warrants Exercisable

Remaining Life

Stock Options

A summary of stock options activity during the three months ended March 31, 2024, is presented below:

Outstanding, January 1, 2024

Outstanding, March 31, 2024

Exercisable, March 31, 2024

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents information related to stock options as of March 31, 2024:

Options Outstanding

5 unchanged sentences

$ 2.05 - $ 2.44

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.

For the three months ended March 31, 2024 and 2023, the weighted average grant date fair value per share of options was $ 0.14 and $ 0.67 , respectively.

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 range of assumptions:

For The Three Months Ended

Risk free interest rate

3.92 % - 4.52

Expected term (years)

Expected volatility

Expected dividends

Option forfeitures are accounted for at the time of occurrence.

The expected term used is the estimated period of time that options granted are expected to be outstanding.

The Company utilizes the “simplified” method to develop an estimate of the expected term of employee option grants.

The Company utilizes an expected volatility figure based on the historical volatility of its common stock over a period of time equivalent to the expected term of the instrument being valued.

The risk-free interest rate was determined from the implied yields from U.S.

Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

As of March 31, 2024, there was $ 269,531 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 2.3 years.

Restricted Stock Awards

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

The following table presents information related to restricted stock awards activity during the three months ended March 31, 2024:

Weighted Average

Non-vested RSAs, January 1, 2024

Non-vested RSAs, September 30, 2023

RSAs exchanged for RSUs

( 2,168,508 )

Non-vested RSAs, March 31, 2024

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

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.

The restricted shares vest in four (4) equal annual installments, the first installment of which vested on March 1, 2023.

On March 31, 2023, and effective as of March 1, 2023, the Company withheld and cancelled 175,000 shares of its common stock to satisfy an aggregate of $ 229,249 of payroll tax withholdings and remittance obligations in connection with vesting of 500,000 shares of restricted stock, resulting in a net settlement of 325,000 shares.

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.

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.

During the three months ended March 31, 2024, the Company issued 2,168,508 restricted stock units in exchange for the same quantity of restricted stock awards.

The exchange of RSAs for RSUs did not result in a modification of any other terms, such as the grant date fair value and vesting period.

As of March 31, 2024, there was $ 1,513,146 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 1.13 years.

Restricted Stock Units

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

The following table presents information related to restricted stock units (“RSUs”) activity during the three months ended March 31, 2024:

Weighted Average

Shares of Restricted

Non-vested RSUs, January 1, 2024

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.

RSAs exchanged for RSUs

Non-vested RSUs, March 31, 2024

As of March 31, 2024, there was $ 4,348,245 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 3.0 years.

Stock-Based Compensation

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:

During the three months ended March 31, 2024 and 2023, the Company recognized stock-based compensation expense of $ 845,930 and $ 920,155 , respectively, related to restricted stock awards, restricted stock units and stock options, of which $ 808,106 and $ 903,995 , respectively, is included within selling, general and administrative expenses, and $ 37,824 and $ 16,160 , respectively is 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 months ended March 31, 2024 and 2023:

For The Three Months Ended

For The Nine Months Ended

September 30,

Common stock for services

Accrued issuable equity (common stock)

True up to accrued issuable equity

Common stock for services (includes accrued, unissued shares)

Amortization of stock options

Amortization of market-based awards

Amortization of restricted stock awards and units

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company may be involved in litigation and arbitrations from time to time in the ordinary course of business.

As of March 31, 2024, the Company was not involved in any ongoing litigation.

The Company records legal costs associated with loss contingencies as incurred.

Settlements are accrued when, and if, they become probable and estimable.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - SUBSEQUENT EVENTS

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.

Promissory Notes

On April 2, 2024, the Company entered into an agreement (the “Promissory Note”), with a lender (the “Lender”), pursuant to which the Lender purchased an unsecured promissory note with an initial principal amount of $ 500,000 .

The Company received cash proceeds of $ 440,000 , resulting in a discount of $ 60,000 , made up of an original issue discount of $ 50,000 and debt issuance costs of $ 10,000 .

The Promissory Note carries an annual interest rate of 0 %, which shall increase to 15 % in the event of default, and has a maturity date of October 2, 2024, after which all outstanding principal and accrued interest will become immediately due.

On April 9, 2024, the Company entered into a note purchase agreement pursuant to which the Company issued an unsecured promissory note with an initial principal amount of $ 200,000 and which matures on the first anniversary of its issuance.

The Company received cash proceeds of $ 200,000 .

The promissory note carries an annual interest rate of 16 %.

In the event the promissory note is prepaid within 9 months of its issuance, the holder is entitled to the repayment of principal and cash payment of interest equal to 12 % of the prepayment amount.

Board of Director Activities and Compensation

On April 15, 2024, the Company announced the appointment of a new independent director, Donna H.

Grier, to the Company’s Board of Directors (the “Board”).

Grier will serve as Chair of the Audit Committee, and a member of both the Nominating and Corporate Governance, and Compensation Committees of the Board.

Grier was granted cash compensation of $ 17,500 per quarter, and 140,000 restricted stock units of the Company’s common stock, which vest over four quarters in 35,000 share increments, beginning on June 30, 2024.

Concurrent with the appointment of Ms.

Grier, director Mr.

Morio Kurosaki retired from the Board, and was issued immediately vested equity compensation of 15,000 shares of common stock.

In addition, director Dr.

Joanna Massey was issued 15,000 shares of immediately vested common stock, and 140,000 restricted stock units of the Company’s common stock, which vest over four quarters in 35,000 share increments, beginning on June 30, 2024.

Standby Equity Purchase Agreement

Pursuant to the January 2024 and February 2024 Merchant Cash Advance Agreements (see Note 9 – Notes Payable), on April 9, 2024, the Company issued and delivered a total of 190,177 warrants to the FINRA-registered financial advisor that assisted with arranging the facility in satisfaction of the obligation to issue equity to the advisor.

The warrants grant the advisor the right to purchase one share of common stock for each warrant, at prices ranging from $ 0.14 per share to $ 0.19 per share, with a final expiration date of February 26, 2027 .

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