What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-12 · 90 added, 106 removed, 71 unchanged (73% of the section changed)

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The following discussion and analysis of the results of operations and financial condition of KULR Technology Group, Inc.

(“KULR”) and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”) (collectively referred to as “KULR” or the “Company”) as of and for the years ended December 31, 2023 and 2022 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included in Item 8 in this Annual Report.

(“KULR”) and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”) (collectively referred to as “KULR” or the “Company”) as of and for the years ended December 31, 2024 and 2023 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report.

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company.

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These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations.

Actual results could differ materially because of the factors discussed in Item 1A “Risk Factors” in this Annual Report, and other factors that we may not know.

Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this Annual Report, and other factors that we may not know.

KULR Technology Group, Inc., through our wholly-owned subsidiary KULR Technology Corporation, develops and commercializes high-performance thermal management technologies for batteries, electronics, and other components across an array of battery-powered applications.

For aerospace and Department of Defense (“DOD”) applications, our solutions target high performance applications in direct energy, hypersonic vehicles and satellite communications.

For commercial applications, our main focus is a total solution to battery safety and sustainability by which we aim to mitigate the effects of thermal runaway propagation which has been known to cause random fires in lithium-ion (“Li-ion”) batteries.

For commercial applications, our main focus is a total solution to battery safety and sustainability by which we aim to mitigate the effects of thermal runaway propagation which has been

known to cause random fires in lithium-ion (“Li-ion”) batteries.

This total battery safety solution can be used for electric vehicles, energy storage, battery recycling transportation, cloud computing and 5G communication devices.

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The goal is to leverage the Company’s thermal design technology expertise to create market leading products, which KULR will take to market directly to capture more value for KULR shareholders.

We have not yet achieved profitability and expect to continue to incur cash outflows from operations, as a result, we will eventually need to generate significant revenues to achieve profitability.

Until that time, we shall have to continue to raise cash, as and when required, through equity or debt financings.

We have not yet achieved profitability and expect to continue to incur cash outflows from operations, and as a result, we will eventually need to generate significant revenues to achieve profitability.

Until that time, we may continue to raise cash, as and when required, through equity or debt financings.

Recent Developments

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The Company reported record annual revenues of $10.7 million for 2024, as compared to its previous revenues of $9.8 million for 2023.

Liability Repayment

Subsequent to December 31, 2023, the Company repaid in full all remaining principal and interest owed in connection with the prepaid advance liability.

Equity Financing

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.

On December 22, 2023, the Company completed a public offering of 5,175,000 shares of common stock, priced at $0.20 per share, with gross proceeds of $1,035,000 less issuance costs of $257,800, for net proceeds of $777,200.

Bitcoin Strategy

On December 4, 2024, the Board approved, and the Company publicly announced its decision to include Bitcoin (“BTC”) as a primary asset in its treasury program.

On December 22, 2024, the Company completed its initial acquisition of BTC through Coinbase (the primary broker) and a total of 217.18 bitcoin was purchased at a weighted average price of approximately $96,696 per bitcoin, or an aggregate cost of $21 million.

Subsequent to December 31, 2024, the Company purchased 449.45 Bitcoin via trade orders on Coinbase, at an average cost of $99,008 per Bitcoin for an aggregate $44,499,352.

Additionally, on March 7, 2025, the Company entered into a sixty-day Machine Lease Agreement with a bitcoin mining services company to operate 2,500 S-19 bitcoin mining machines on KULR’s behalf, at a total lease cost of $850,000.

As of March 27, 2025, 2.48 bitcoin have been mined pursuant to the Machine Lease Agreement, at an average cost of $84,225 per bitcoin.

At the Market Offering

On July 3, 2024, the Company entered into an At the Market Offering agreement (the “Sales Agreement”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock for aggregate gross proceeds of up to $20,000,000 in “at the market” offerings through or to the Agent (the “ATM”).

Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of the sale, or as otherwise agreed with the Agent.

The Agent will receive a commission from the Company of 3% of the gross proceeds of any shares of common stock sold pursuant to the ATM.

On December 4, 2024, the Company increased the maximum aggregate offering amount of the shares of the Company’s common stock issuable under the ATM from approximately $20 million to $46 million.

On December 26, 2024, the Company increased the maximum aggregate offering amount of the shares of the Company’s common stock issuable under the ATM by an additional $50 million, to $96 million, and the Company entered into an amendment (the “Amendment”) to the Sales Agreement with the Agent, entered into on July 3, 2024, to provide that the Agent’s compensation payable under the Sales Agreement shall be 2.5% of gross proceeds of any sales of shares of common stock sold under the Sales Agreement.

During the year ended December 31, 2024, the Company issued a total of 74,781,217 shares of common stock pursuant to the ATM for aggregate gross proceeds of $61,912,798.

During the period from January 2, 2025, through March 27, 2025, the Company has sold 19,387,610 shares of common stock pursuant to this offering, with gross proceeds of $51,122,190.

License and Opportunities for KULR VIBE Fan Balancing Applications

On September 29, 2024, we entered into a licensing agreement for our proprietary vibration reduction technology named KULR Xero Vibe (“KXV”).

The $2.35M agreement includes a $1.1M minimum guaranteed license and royalty fee, a unique opportunity for the licensee to purchase proprietary balancing equipment directly from the Company and additional revenue upside to the Company based on volume and technology upgrades.

The licensee, a leading Japanese corporation, specializing in systems integration and the

distribution of advanced semiconductor solutions, intends to use the KXV technology to balance industrial-scale fan systems used in data center computer cooling, HVAC and other industrial applications.

On December 29, 2024 the Company entered into a ten-year licensing agreement with a customer located in Japan, for the use of intellectual property in connection with its CF Cathode Design technology (including the specifications, diagrams, schematics and instructions (together the “KULR CF Intellectual Property”) for the production of the CF Cathode (the “License”).

The Agreement gives the customer the exclusive license to use the KULR CF Intellectual Property to manufacture CF Cathodes in Japan, and a non-exclusive license to manufacture CF Cathodes in several other countries, including Taiwan, China, India and Korea.

The Company is exploring additional license opportunities based on geographic regions in tangential power-consuming applications, where the Company expects substantial upside revenue potential as product sales and royalty income scales along with its customers’ growth.

Change in Address of Principal Executive Offices

In the third quarter of 2024, we moved our principal executive offices to 555 Forge River Road, Suite 100, Webster, Texas 77598.

Issuance of Non-Convertible Series A Voting Preferred Stock

On January 26, 2024, the Board of Directors (“Board”) of the Company, following extensive strategic evaluation, including consultation with advisors, 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, subject to certain limitations as set forth below.

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.

On January 16, 2025, the Board of Directors approved the issuance of an additional 270,000 shares of Non-convertible Series A Voting Preferred Stock (“Series A Voting Preferred”) to the Chief Executive Officer, bringing his total holdings up to 1,000,000 shares of Series A Voting Preferred Stock.

The issuance is 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.

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The Independent Members of the Board have determined that the issuance represents a pivotal strategic move to reinforce and enhance the Company’s flexibility to optimize the Company’s negotiating position in any potential current and/or future engagements with commercial, financial, and/or strategic parties, and to provide defenses against potential hostile third-party actions.

Appointment of Officers and Management

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 a Chief Financial Officer (the “CFO”) 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.

Management Equity Incentive Grants

On July 12, 2023, the Board unanimously approved an equity grant to the Chief Technology Officer, of 350,000 shares of restricted common stock.

The restricted common stock had a grant date fair value of $266,000 and vests in four equal annual installments beginning on July 12, 2024.

Merchant Cash Advance Agreement

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.

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.

On February 26, 2024, the Company entered into a merchant cash advance agreement (the “Second Cash Advance Agreement”) with the 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.

Recent Shareholder Vote by Majority Written Consent

On February 9, 2024, the shareholders of the Company, acted by way of majority written consent (in lieu of a special meeting of stockholders) to approve resolutions authorizing the Company’s Board of Directors to take the following actions:

(1) to issue shares of Common Stock to current or future engagements with commercial or strategic parties, which may result in issuances of over 20% of

the issued and outstanding shares of Common Stock;

(2) to amend the Company’s Bylaws to decrease the number of shares of Common Stock needed to establish a quorum for meetings of stock holders to thirty-three-and-one-third percent (33 1/3 %) of the outstanding voting securities of the Company;

(3) to amend the Certificate of Incorporation of the Company to effect a reverse split within a ratio range between 1-for-2 and 1-for-80;

(4) to issue shares of common stock, in connection with an existing financing facility, which may result in the potential issuance of over 20% of the issued and outstanding shares.

The resolution was approved by shareholders holding in aggregate of 55.72% of outstanding shares as of February 9, 2024.

Risks Associated with Ongoing Conflicts

The short and long-term worldwide implications of Russia’s invasion of Ukraine are difficult to predict at this time.

The imposition of sanctions on Russia by the United States or other countries and possible counter sanctions by Russia, and the resulting economic impacts on oil prices and other materials and goods, could affect the price of materials used in the manufacture of our product candidates.

If the price of materials used in the manufacturing of our product candidates increase, that would adversely affect our business and the results of our operations.

Additionally, we do not have operations or material net sales in Israel or Gaza and we currently do not expect the recent hostilities in that region to have a material impact on our business.

We cannot predict how the events described above will evolve.

If the events continue for a significant period of time or expand to other countries, and depending on the ultimate outcomes of these conflicts, which remain uncertain, they could heighten certain risks disclosed in Item 1A in this Form 10-K, including, but not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending;

cyber-incidents;

disruptions to our or our business partners’ global technology infrastructure, including through cyber-attack or cyber-intrusion;

adverse changes in international trade policies and relations;

claims, litigation and regulatory enforcement;

our ability to implement and execute our business strategy;

terrorist activities;

our exposure to foreign currency fluctuations;

reputational risk;

and constraints, volatility, or disruption in the capital markets, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Executive Officers

Effective as of August 4, 2023, Dr.

Timothy Knowles resigned from the Board of Directors, as well as any other position that he occupied with the Company.

Consolidated Results of Operations

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For the Years Ended

Revenues Recognized at a Point in Time:

Product sales

Contract services

Revenues Recognized Over Time:

Contract services

Total Revenues

Total Revenue

For the years ended December 31, 2024 and 2023, we generated $10,737,481 and $9,830,166 of revenue from 71 and 53 customers, respectively, representing an increase of $907,315, or 9%.

Revenue from product sales during the year ended December 31, 2023 increased by $4,260,663 or 161% compared to the year ended December 31, 2022, reflecting the growth in the number of customers of 39 in 2023 from 33 in 2022.

Product sales during these periods include sales of our component product, carbon fiber velvet (“CFV”) thermal management solution, internal short circuit (“ISC”) battery cells and devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials.

Revenue from product sales during the year ended December 31, 2024 decreased by $3,259,748 or 47% compared to the year ended December 31, 2023.

We had 53 product sales customers in 2024, compared with 39 in 2023.

The decline in product revenue can be attributed to several expected 2024 orders, which management now expects to receive in a later period.

We can provide no assurance as to when we will receive the expected orders.

Product sales during these periods include sales of our component product, carbon fiber

velvet (“CFV”) thermal management solution, internal short circuit (“ISC”) battery cells and devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials.

Revenue from contract services during the year ended December 31, 2024 increased by $1,479,845 or 51% compared to the year ended December 31, 2023.

The increase in revenue for the year ended December 31, 2023 is primarily due to growth in customers of 17 in 2023 from 14 in 2022.

The increase in revenue for the year ended December 31, 2024 is primarily due to growth in customers to 34 in 2024 from 17 in 2023.

This work includes unique engineering design and testing projects customized for specific customers.

Revenue from IP licensing during the year ended December 31, 2024, was $2,687,218.

License revenue consists of contracts with customers for the rights to use our patented KULR VIBE technology and CF Cathode Design technology.

This includes revenue from minimum royalty fees of $600,000.

Minimum royalty fees consist of guaranteed amounts due to the Company for contracts with customers for the rights to use its patented KULR VIBE technology.

These contracts were executed during the year ended December 31, 2024.

There was no license revenue recognized prior to this period.

Our customers and prospective customers are large organizations with multiple levels of management, controls/procedures, and contract evaluation/authorization.

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Accordingly, the business activity cycle between expression of initial customer interest to shipping, acceptance and billing can be lengthy, unpredictable, and lumpy, which can influence the timing, consistency and reporting of sales growth.

Cost of Revenue

Cost of revenue consisted of the cost of our products as well as labor and production overhead expenses directly related to product sales or research contract services.

Cost of Revenue, Gross Profit and Gross Profit Margin

Cost of revenue consists of the cost of our products as well as labor expenses directly related to product sales or contract services.

Product mix plays an important part in our reported average margins for any period.

Because we are introducing new products at an early stage in our development cycle and the margins earned can vary significantly between periods, customers, products and services due to the learning process, customer negotiating strengths, and product mix.

For the years ended December 31, 2023 and 2022, cost of revenues was $6,164,310 and $1,630,527, respectively, representing an increase of $4,533,783, or 278%.

The increase was primarily due to the increased number of customers and revenue during 2023, and the resultant cost increases from additional headcount and materials, and depreciation of automation equipment placed in service during 2023.

Additionally, there was a $0.3 million write down of our inventory to net realizable value.

The gross margin percentage was 37% in 2023, compared with 59% in 2022.

The margin on product sales was 26% and 44% for the years ended December 31, 2023 and 2022, respectively.

The margin on contract services was 63% and 89% for the years ended December 31, 2023 and 2022, respectively.

During the year ended December 31, 2023, the Company had depreciation expense for new automation equipment and increased costs related to finished goods manufactured internally.

In addition, the Company recorded an inventory write down that represented 2% of the related revenue.

For the years ended December 31, 2024 and 2023, cost of revenues was $5,254,283 and $6,164,310, respectively, representing a decrease of $910,027, or 15%.

During the years ended December 31, 2024 and 2023, gross profit was $5,483,198 and $3,665,856, respectively, an increase of $1,817,342 or 50%.

Our gross profit margins were 51% and 37%, during the years ended December 31, 2024 and 2023, respectively.

The increase in the current period profit margin resulted primarily from our licensing agreements that generated $2,687,218 of revenue in 2024, which had no corresponding cost of revenue.

Research and Development

Research and development (“R&D”) includes expenses incurred in connection with the R&D of our CFV thermal management solution, high-areal-capacity battery electrodes, and 3D engineering for a rechargeable battery, including non-cash stock-based compensation expenses.

Research and development expenses are charged to operations as incurred.

For the years ended December 31, 2023 and 2022, R&D expenses were $6,195,400 and $4,196,313, respectively, representing an increase of $1,999,087 or 48%.

The increase is primarily comprised of $1,980,948 related to planned increases in headcount in order to build future capacity, amortization of prepaid cash consideration related to the Vibetech asset purchase agreement of $375,000, stock-based compensation for equity awards of $142,684 and rent expense of $79,831 for a new facility for R&D initiatives designed to build future revenue growth, partially offset by a reduction in outsourced R&D costs of $649,492.

For the years ended December 31, 2024 and 2023, R&D expenses were $4,738,305 and $7,135,452, respectively, representing a decrease of $2,397,147 or 34%.

The decrease was comprised primarily of $2,193,643 of engineering labor and other costs charged that were reduced or redeployed to revenue-generating activities and were charged to costs of revenue, $784,827 related to a planned decrease in R&D consulting services, partially offset by an increase in building related expenses of $335,142 for the new, larger facility in Texas, and an increase in stock-based compensation of $98,525.

We expect that our R&D expenses will increase as we expand our future operations.

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Selling, general and administrative expenses consisted primarily of stock-based compensation, marketing and advertising, salaries, payroll taxes and other benefits, Board compensation, accounting and tax, consulting fees, travel and entertainment, rent expense, office expenses, and legal and professional fees.

For the years ended December 31, 2023 and 2022, selling, general and administrative expenses were $19,882,402 and $16,453,776, respectively, an increase of $3,428,626, or 21%.

The increase is primarily due to increases in labor costs of $1,564,020, depreciation and amortization expense of $1,512,509 due to expansion of our facility and equipment placed in service during 2023, consulting fees to build future revenue growth of $546,880, software license and utility fees of $350,689, and costs to attend conferences and seminars of $119,897, partially offset by a decrease in stock-based compensation of $814,965.

For the years ended December 31, 2024 and 2023, selling, general and administrative expenses were $15,979,852 and $18,942,350, respectively, a decrease of $2,962,498, or 16%.

The decrease is primarily due to a decrease in stock-based compensation of $908,574 primarily due to forfeited restricted stock units, a decrease of $881,950 in depreciation expense primarily due to leasehold improvements for the San Diego facility being fully depreciated as of June 30, 2024, a planned decrease in advertising and marketing services of $466,254, and a planned decrease in outsourced professional services of $399,508.

Other (Expense) Income

For the years ended December 31, 2024 and 2023, other expenses, net, were $2,288,670 and $1,281,610, respectively, representing an increase of $1,007,060 or 79%.

The increase is primarily attributable to an increase in the amortization of debt discount

of $218,405 associated with the prepaid advance liability, and a $158,675 decline in PPP loan forgiveness, partially offset by a $217,454 decrease in a cash repayment premium recorded in satisfaction of a note payable in September 2022.

The change is primarily attributable to an increase of $718,826 for the unrealized loss on Bitcoin holdings, an increase of $421,429 for amortization of debt discount in connection with merchant cash advances, an increase of $395,817 for the change in fair value of accrued issuable equity, partially offset by a decrease of $508,603 in interest expense due to the full repayment of the prepaid advance liability on March 27, 2024.

Our Bitcoin Acquisition Strategy

In December 2024, we adopted bitcoin as our primary treasury reserve asset on an ongoing basis, subject to market conditions and our anticipated cash needs.

Our strategy includes acquiring and holding bitcoin using cash that exceeds our working capital requirements, and from time to time, subject to market conditions, issuing equity or debt securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase bitcoin.

For example, we began issuing shares under our “at-the-market” offering program in the second half of 2024, and used proceeds from this capital markets transaction to acquire bitcoin.

We view our bitcoin holdings as long term holdings and expect to continue to accumulate bitcoin.

We have not set any specific target for the amount of bitcoin we seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional bitcoin purchases.

This overall strategy also contemplates that we may periodically sell bitcoin for general corporate purposes or in connection with strategies that generate tax benefits in accordance with applicable law, enter into additional capital raising transactions, including those that could be collateralized by our bitcoin holdings, and consider pursuing strategies to create income streams or otherwise generate funds using our bitcoin holdings.

The following table presents a summary of our bitcoin holdings, including additional information related to our bitcoin purchases and change in fair value within the period.

Average Fair Value

Digital Assets (1)

Per Bitcoin (in $)

Beginning balance at January 1, 2024

Fair value of digital assets purchased

Cost to acquire digital assets

Cost basis of digital assets held

Change in fair value of digital assets

Balance as of December 31, 2024

(1) The source of capital used to purchase Bitcoin was primarily proceeds from ATM offerings.

Liquidity and Capital Resources

As of December 31, 2024 and 2023, we had cash balances of $29,831,858 and $1,194,764, respectively, and working capital (deficit) of $29,498,421 and $(2,994,753), respectively.

As of December 31, 2024 and 2023, we had Bitcoin holdings of $20,281,184 and $0, respectively.

For the years ended December 31, 2024 and 2023, cash used in operating activities was $17,341,675 and $11,965,387, respectively.

Our cash used in operations for the year ended December 31, 2023 was primarily attributable to our net loss of $23,693,556, adjusted for non-cash expenses in the aggregate amount of $6,841,828, as well as $4,886,340 of net cash generated by changes in the levels of operating assets and liabilities.

Our cash used in operations for the year ended December 31, 2024 was primarily attributable to our net loss of $17,523,629, adjusted for non-cash expenses in the aggregate amount of $7,087,296, as well as $6,905,342 of net cash used to fund changes in the levels of operating assets and liabilities.

Our cash used in operations for the year ended December 31, 2023 was primarily attributable to our net loss of $23,693,556, adjusted for non-cash expenses in the aggregate amount of $6,841,833, as well as $4,886,336 of net cash generated by changes in the levels of operating assets and liabilities.

For the years ended December 31, 2024 and 2023, cash used in investing activities was $21,596,192 and $1,046,113, respectively.

Cash used in investing activities during the year ended December 31, 2024 was related to investments in digital assets of $21,000,010, purchases of property and equipment of $573,444 and deposits paid for purchases of property and equipment of $22,738.

Cash used in investing activities during the year ended December 31, 2023 was related to deposits paid for purchases of property and equipment of $644,963, purchases of property and equipment of $266,150, and an acquisition of intangible assets of $135,000.

Cash used in investing activities during the year ended December 31, 2022 was related to purchases of property and equipment of $2,682,970, deposits paid for purchases of property and equipment of $1,421,432 and acquisition of intangible assets of $543,572.

For the years ended December 31, 2024 and 2023, cash provided by financing activities was $67,574,961 and $3,872,701, respectively.

Financing activities during the year ended December 31, 2023 consisted primarily of $3,227,702 for equity financing, net of issuance costs and the repurchase of common stock, $2,220,000 for debt financing, net of issuance costs and $1,575,000 for debt repayments.

Financing activities for the year ended December 31, 2022 consisted primarily of $15,220,868 for debt financing, net of issuance costs, $3,074,293 for the exercise of warrants and stock options, $1,000,000 for debt repayments and $177,200 for equity financing.

As of December 31, 2023, future cash requirements for our current liabilities include $6,232,888 for accounts payable and accrued expenses, $1,609,200 for merchant cash advances, $1,323,963 for capital expenditures and $102,186 for future payments under operating leases.

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

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 consolidated financial statements are issued.

Subsequent to December 31, 2023, the Company repaid in full the remaining balance of the prepaid advance liability, classified in the non-current liabilities section of our consolidated balance sheets.

As of the filing date of this Form 10-K, there is no balance due on the prepaid advance.

We intend to meet the rest of these cash requirements from our current cash balance, proceeds from the SEPA, proceeds from future financing activities and from future revenues, but the Company can provide no assurance that these initiatives will be successful.

Financing activities during the year ended December 31, 2024 was primarily due to net proceeds from ATM equity financing totaling $60,131,816, proceeds from SEPA Advance Notices totaling $9,104,949, net proceeds from notes payable totaling $2,563,900, and proceeds from the exercise of stock options totaling $23,455, partially offset by notes payable repayments of $3,341,597, repurchase of common stock of $500,000, and payments for deferred financing costs of $406,109.

Financing activities during the year ended December 31, 2023 consisted primarily of net proceeds from equity financing totaling $3,456,950, net proceeds from prepaid advance liability debt financing totaling $1,970,000, and proceeds from notes payable of $250,000, partially offset by debt repayments totaling $1,575,000 and the repurchase of common stock totaling $229,249.

As of December 31, 2024, future cash requirements for our current liabilities include $3,199,961 for accounts payable and accrued expenses, $599,425 for secured promissory notes and $495,931 for future payments under operating and finance leases.

Future cash requirements for long-term liabilities include $822,602 for future payments under operating and finance leases.

Our primary source of liquidity has historically been cash generated from equity and debt offerings.

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We have a history of recurring net losses, recurring use of cash in operations and declining working capital.

On December 20, 2023, we received a Stockholders’ Equity Notice stating we are not in compliance with Section 1003(a)(iii) of the Company Guide since we reported stockholders’ equity of $1,200,172 at September 30, 2023, and losses from continuing operations and/or net losses in our five most recent fiscal years.

On February 12, 2024, we received a Letter from NYSE stating we are not in compliance with Section 1003(f)(v) of the Company guide since our securities were trading at an average of less than $0.20 per share for 30 days.

Subsequent to December 31, 2023, the Company issued 40,276,430 shares of common stock, at purchase prices per share ranging from $0.13 to $0.41, pursuant to Advance Notices submitted by the Company to Yorkville for aggregate proceeds of $8,326,457.

Of the gross proceeds, $2,610,650 was retained by the Company to help fund operations.

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

During the first quarter of 2024, the Company entered into two agreements whereby the Company received $1,007,100 of cash (net of underwriting fees of $72,900) with the obligation to repay a total of $1,609,200 over a total of thirty-two weekly payments.

See Note 18 – Subsequent Events – Merchant Cash Advance Agreement for additional details.

On January 9, 2024, the Company announced that it had completed a reduction of its total workforce of approximately 15% in an effort to allocate its resources to key business priorities to focus on improving the profitability of commercial customer engagements.

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

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 18 – Subsequent Events – Promissory Notes for additional information.

On April 9, 2024, the Company received cash proceeds of $200,000 related to a 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 18 – Subsequent Events – Promissory Notes for additional information.

Our consolidated financial statements included elsewhere in this Annual Report on Form 10-K have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), which contemplate our continuation as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.

The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values.

During the year ended December 31, 2024, the Company received gross proceeds of $61,912,798 pursuant to the ATM.

Given our December 31, 2024 cash, Bitcoin and working capital balances, there is no substantial doubt about the Company’s ability to meet its obligations as they become due within the twelve months from the date these consolidated financial statements are available to be issued.

While no assurance can be provided that we will be successful in raising additional capital from the ATM.

During the year ended December 31, 2024, we received aggregate gross proceeds of $61,912,798.

During the period from January 1, 2025 through March 27, 2025, the Company issued 19,387,610 shares of common stock for gross proceeds of $51,122,190 pursuant to the ATM.

As of March 27, 2025, our cash and Bitcoin balances were approximately $25 million and $58 million, respectively.

Off-Balance Sheet Arrangements

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Recently Issued Accounting Pronouncements

See Note 2 – Summary of Significant Accounting Policies of our consolidated financial statements included within Item 8 of this Annual Report for a summary of recently issued and adopted accounting pronouncements.

See Note 2 – Summary of Significant Accounting Policies of our consolidated financial statements included within this Annual Report for a summary of recently issued and adopted accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-K

Item 7. Management’s Discussion and Analysis