What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-15 compared with 2024-11-13 · 392 added, 487 removed, 367 unchanged (71% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Accounts receivable, current portion

Accounts receivable billed, current portion

Accounts receivable unbilled, current portion

Inventory deposits

1 unchanged sentence

Total Current Assets

Digital assets

Accounts receivable, non-current portion

3 unchanged sentences

Intangible assets, net

Operating lease right-of-use asset

Operating lease right-of-use assets

Finance lease right-of-use asset, net

Deferred financing costs

Liabilities and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Current Liabilities:

9 unchanged sentences

Finance lease liability, non-current portion

Notes payable, non-current portion

Prepaid advance liability, net of discount

Accrued interest

Other non-current liabilities

Total Liabilities

Commitments and contingencies (Note 10)

Stockholders’ Equity (Deficit)

Stockholders’ Equity

Preferred stock, $ 0.0001 par value, 20,000,000 shares authorized

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

730,000 and 0 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively;

1,000,000 and 730,000 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively;

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

none issued and outstanding at September 30, 2024 and December 31, 2023

none issued and outstanding at March 31, 2025 and December 31, 2024

Series C Preferred Stock, 400 shares designated;

none issued and outstanding at September 30, 2024 and December 31, 2023

none issued and outstanding at March 31, 2025 and December 31, 2024

Series D Preferred Stock, 650 shares designated;

none issued and outstanding at September 30, 2024 and December 31, 2023

none issued and outstanding at March 31, 2025 and December 31, 2024

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

201,313,770 and 201,182,608 shares issued and outstanding at September 30, 2024, respectively;

284,679,792 and 284,521,094 shares issued and outstanding at March 31, 2025, respectively;

264,801,650 and 264,670,488 shares issued and outstanding at December 31, 2024, respectively

1 unchanged sentence

Treasury stock, at cost;

131,162 shares held at September 30, 2024 and December 31, 2023

158,698 and 131,162 shares held at March 31, 2025 and December 31, 2024, respectively.

Accumulated deficit

1 unchanged sentence

( 83,811,223 )

Total Stockholders’ Equity (Deficit)

( 2,182,696 )

Total Liabilities and Stockholders’ Equity (Deficit)

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

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

( 4,656,734 )

( 11,694,095 )

( 17,437,726 )

Other (Expense) Income

Interest expense

Interest income

Amortization of debt discount

Loss on debt extinguishment

Gain (loss) on debt extinguishment, net

Change in fair value of accrued issuable equity

Total Other Expense, net

( 1,209,073 )

( 1,062,401 )

Change in fair value of digital assets

( 9,748,600 )

Total Other Expense, net

( 9,362,853 )

8 unchanged sentences

AND SUBSIDIARY

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

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2025

Preferred Stock

1 unchanged sentence

Stockholders’

Equity (Deficit)

Balance - January 1, 2025

( 83,811,223 )

( 2,182,696 )

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)

Shares returned to treasury for employee payroll tax obligations

Common stock issued upon the exercise of options

Common stock issued for at the market offering (1)

Common stock issued upon vesting of restricted stock units

Shares withheld for employee payroll tax obligations

Stock-based compensation:

Restricted stock awards exchanged for restricted stock units

( 2,168,508 )

Restricted stock units vested

Common stock issued for services

5 unchanged sentences

( 102,617,881 )

Warrants isued for consulting services in connection with issuance of notes payable

Common stock issued for cash pursuant to Advance Notices (3)

Stock-based compensation:

Restricted stock units vested

Common stock issued for services

Amortization of restricted common stock

Amortization of stock options

( 5,890,528 )

Balance - June 30, 2024

( 77,186,998 )

Common stock issued for cash pursuant to ATM offering (4)

Stock-based compensation:

Restricted stock units vested

Common stock issued for services

Amortization of restricted common stock

Amortization of stock options

( 2,003,764 )

Balance - September 30, 2024

( 79,190,762 )

(1) Represents gross proceeds of $ 51,152,353 , less issuance costs of $ 1,509,423 .

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

(3) Represents gross proceeds of $ 6,194,299 , less issuance costs of $ 52,792 .

(4) Represents gross proceeds of $ 3,431,090 , less issuance costs $ 136,631 .

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

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

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY, continued

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

CONDENSED CONSOLIDATED STATEMENTS 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 and issued

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 $ 2,875,000 less issuance costs of $ 588,230 .

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

(2) Represents 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.

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:

4 unchanged sentences

Non-cash operating lease expense

Loss on debt extinguishment

Gain on debt extinguishment

Depreciation and amortization expense

Write down equipment deposits

Change in fair value of accrued issuable equity

Change in fair value of digital assets

Stock-based compensation

Loss on disposal of property and equipment

Mining of digital assets

Changes in operating assets and liabilities:

Accounts receivable

( 2,147,542 )

Accounts receivable billed

Accounts receivable unbilled

Inventory deposits

2 unchanged sentences

Accounts payable

( 1,748,580 )

Accrued expenses and other current liabilities

8 unchanged sentences

Purchases of property and equipment

Acquisition of intangible assets

Purchases of digital assets

( 44,499,352 )

Net Cash Used In Investing Activities

( 44,716,519 )

Cash Flows from Financing Activities:

Proceeds from equity financing

Issuance costs on equity financing

Proceeds from ATM equity financing

Issuance costs on ATM equity financing (1)

Proceeds from the SEPA

Proceeds from prepaid advance liability

Issuance costs on prepaid advance liability

Repayments of prepaid advance liability

( 1,280,726 )

Proceeds from the SEPA

Proceeds from exercise of stock options

Proceeds from notes payable (2)

1 unchanged sentence

Repayments of notes payable

( 2,439,855 )

Repurchase of common stock

Payments for deferred financing costs

5 unchanged sentences

Cash - End of Period

(1) Excludes $ 228,697 amortization of deferred financing costs.

(2) Face value of $ 1,609,200 , less $ 529,200 original issue discount.

3 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:

1 unchanged sentence

Non-cash investing and financing activities:

Common stock issued in satisfaction of prepaid advance liability and interest

Right-of-use asset for operating lease liability

Original issue discount on indebtedness

Deferred financing costs included in accounts payable

Value of warrants issued in connection with notes payable

Deferred financing costs charged to additional paid-in capital

Additions to property and equipment included in note payable

Additions to property and equipment included in accounts payable and accrued expenses

Shares withheld for employee payroll tax obligations

Accounts payable and accrued expenses for property and equipment

Common stock issued in satisfaction of accrued issuable equity

Right-of-use asset for finance lease liability

Restricted stock awards converted to restricted stock units

Preferred shares issued for no consideration

Shares returned to treasury for employee payroll tax obligations

Common shares issued for restricted stock units vested

Deposits applied to purchases of property and equipment

Equipment deposits included in accounts payable

Accrual of equity financing issuance costs

Preferred shares issued for no consideration

Right-of-use asset for lease liability

Restricted stock awards converted to restricted stock units

Original issue discount on indebtedness

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

Additions to property and equipment included in accrued purchases

Accrued underwriting fees for notes payable

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

6 unchanged sentences

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.

During the first quarter of 2025, the Company commenced digital asset mining operations.

Risks and Uncertainties

The Company operates in a dynamic and highly competitive industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows:

ability to obtain future financing;

advances and trends in new technologies and industry standards;

regulatory approval and market acceptance of the Company’s products;

development of sales channels;

certain strategic relationships;

litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors;

and the Company’s ability to attract and retain employees necessary to support its growth.

The “Tariff War”, especially with China, Canada and Mexico, could have an adverse effect on the Company’s supply chain potentially causing financial difficulty for the Company’s direct or indirect customers and reduced demand of the Company’s products.

A continuation of these conflicts could have adverse changes in international trade policies and relations.

Tariffs could increase the cost of the Company’s products and the components that go into making them.

These increased costs could adversely impact the gross margin that the Company earns on its products.

Tariffs could also make the Company’s products more expensive for customers, which could make the Company’s products less competitive and reduce consumer demand.

Changing the Company’s operations in accordance with new or changed trade restrictions can be expensive, time-consuming and disruptive to the Company’s operations.

In addition, the Company has invested in Bitcoin, which is a digital asset.

Digital assets are loosely regulated and there is no central marketplace for asset exchange.

Supply is determined by a computer code, not by a central bank, and prices have been extremely volatile.

Certain digital asset exchanges have been closed due to fraud, failure or security breaches.

Any of the Company’s digital assets that reside on an exchange that shuts down may be lost.

Several factors may affect the price of digital assets, including, but not limited to:

supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of digital assets, and the use of digital assets as a form of payment.

There is no assurance that digital assets will maintain their long-term value in terms of purchasing power in the future, or that acceptance of digital asset payments by mainstream retail merchants and commercial businesses will continue to grow.

As digital assets have grown in popularity and market size, various countries and jurisdictions have begun to develop regulations governing the digital asset industry.

To the extent future regulatory actions or policies limit the ability to exchange digital assets or utilize them for payments, the demand for digital assets could be reduced.

Furthermore, regulatory actions may limit the ability of end-users to convert digital assets into fiat currency (e.g., U.S.

dollars) or use digital assets to pay for goods and services.

Such regulatory actions or policies could result in a reduction of demand, and in turn, a decline in the underlying digital asset unit prices.

The effect of any future regulatory change on digital assets in general is impossible to predict, but such change could be substantial and adverse to the Company and the value of the Company’s investments in digital assets.

Digital assets are not insured or protected under the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Company (“SIPC”).

Accordingly, with respect to its Bitcoin investment, the Company does not enjoy the same protection as other assets covered by the FDIC or SIPC.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, 2024, and for the three and nine months ended September 30, 2024 and 2023.

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

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, 2025, and for the three months ended March 31, 2025 and 2024.

The results of operations for the three months ended March 31, 2025, are not necessarily indicative of the operating results for the full year ending December 31, 2025, 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, 2024 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 31, 2025.

The accompanying condensed consolidated balance sheet as of December 31, 2024, has been derived from the audited financial statements included in the Form 10-K.

1 unchanged sentence

Since the date of the Annual Report on Form 10-K for the year ended December 31, 2024, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.

Going Concern and Management’s Liquidity Plans

As of September 30, 2024, the Company had cash of $ 912,417 and a working capital deficit of $ 1,157,755 .

For the nine months ended September 30, 2024, the Company incurred a net loss of $ 12,903,168 and used cash in operating activities of $ 12,498,818 .

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 condensed consolidated financial statements have been prepared on the basis that the Company 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, it has 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 $ 4,375,171 for accounts payable and accrued expenses, $ 1,145,529 for secured promissory notes (see Note 9 – Notes Payable), $ 507,959 for future payments under financing and operating leases and $ 100,000 for unsecured promissory notes.

Future cash requirements for long-term liabilities include $ 930,361 for future payments under financing and operating leases and $ 266,604 for unsecured promissory notes.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 20, 2023, the Company received a notice of noncompliance from NYSE Regulation (“NYSE”) stating that 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.

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.

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 having an aggregate offering price 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 receives a commission from the Company of 3 % of the gross proceeds of any shares of common stock sold under the Sales Agreement.

During the period from July 3, 2024, through September 30, 2024, the Company issued a total of 12,822,356 shares of common stock pursuant to the Sales Agreement for aggregate gross proceeds of $ 3,431,090 .

Furthermore, the Company received aggregate gross proceeds of $ 4,319,699 for 13,045,200 shares issued during the period from October 1, 2024 through November 12, 2024.

See Note 10 – Stockholders’ Equity (Deficit) – At the Market Offering for additional information.

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

There is 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.

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

5 unchanged sentences

Concentrations of Credit Risk

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

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

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

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash Concentrations

2 unchanged sentences

Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution.

There were uninsured balances of $ 487,367 and $ 694,764 as of September 30, 2024 and December 31, 2023, respectively.

There were uninsured balances of $ 23,949,297 and $ 29,331,858 as of March 31, 2025 and December 31, 2024, respectively.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Customer and Revenue Concentrations

2 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Less than 10%

2 unchanged sentences

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

The Company had vendors whose purchases of inventory individually represented 10% or more of the Company’s total purchases of inventory, for the three and nine months ended September 30, 2024 and 2023, as follows:

For the Three Months Ended

For the Nine Months Ended

September 30,

Less than 10%

Custody of Digital Assets

The Company currently holds and intends to continue to hold all of its digital assets in a custodial account at a U.S.

based, institutional-grade custodian (who may hold the Company’s digital assets in the United States or other territories) that has demonstrated records of regulatory compliance and information security.

The custodian may also serve as a liquidity provider.

If the Company’s custodially-held digital assets were considered to be the property of the custodian’s estates in the event that the custodian were to enter bankruptcy, receivership or similar insolvency proceedings, the Company could be treated as a general unsecured creditor of the custodian, inhibiting the Company’s ability to exercise ownership rights with respect to such digital assets and this may ultimately result in the loss of the value related to some or all of such digital assets.

Additionally, the digital assets the Company holds with our custodian and transact with our trade execution partners does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation.

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Vendor Concentrations

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

Less than 10%

Accounts Receivable

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

As of September 30, 2024 and December 31, 2023, no allowances for credit losses were determined to be necessary.

As of March 31, 2025 and December 31, 2024, no allowances for credit losses were determined to be necessary.

Management estimates the allowance for credit losses based on 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 credit losses only after all collection attempts have been exhausted.

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

Digital Assets

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), which provides an update to existing digital asset guidance and requires an entity to measure certain digital assets at fair value.

In addition, this guidance requires disclosures related to digital assets once it is adopted.

As of January 1, 2024, the Company has adopted ASU 2023-08.

The Company reflects digital assets held at fair value on the consolidated balance sheets and consolidated statements of cash flows, the activity from the remeasurement of digital assets at fair value on the consolidated statements of operations, and the required expanded disclosures in Note 3, Digital Assets.

There was no cumulative effect adjustment to the Company’s retained earnings balance as a result of the adoption of ASU 2023-08.

Digital assets are generally valued using prices as reported on reputable and liquid exchanges and may involve using an average of bid and ask quotes using closing prices provided by such exchanges as of the date and time of determination.

Since the digital assets are traded on a 24-hour period, the Company uses the price at 4:00pm Eastern Standard Time (“EST”) to value its digital assets.

Mining of Digital Assets

The Company leased digital asset mining equipment, which provides hashrates to a mining pool operator.

The Company derives a portion of its revenue from its digital asset mining activities by providing hashrates as part of transaction verification services within the digital currency networks of cryptocurrencies, such as bitcoin, commonly termed “cryptocurrency mining.” In consideration for these services, the Company receives digital awards which are recorded as revenue, based on the daily amount of bitcoin earned.

The Company’s digital assets are recorded on the balance sheet at their fair value according to the Company’s accounting practices for digital assets.

Unrealized gains or losses on the remeasurement of digital assets mined are recorded in the statement of operations.

Lease costs associated with the digital asset mining operation are recorded as cost of revenue.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

These costs consist of finished goods, raw materials, manufacturing-related costs, transportation and freight, and other indirect overhead costs.

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.

Inventory is comprised of carbon fiber velvet 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.

1 unchanged sentence

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 revenue and the cost of inventory that is given as samples is included within operating expenses.

The cost of inventory that is sold to third parties is included within cost of sales and the cost of inventory that is given as samples is included within operating expenses.

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

1 unchanged sentence

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 condensed consolidated balance sheets.

As of September 30, 2024 and December 31, 2023, the Company had inventory deposits of $ 20,925 and $ 27,500 , respectively.

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 September 30, 2024 and December 31, 2023 was comprised of the following:

September 30,

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

Inventory at March 31, 2025 and December 31, 2024 was comprised of the following:

Raw materials

1 unchanged sentence

Total inventory

As of March 31, 2025 and December 31, 2024, inventory deposits were $ 787,626 and $ 0 , respectively, which consists of inventory purchases of goods that were paid for but not received as of period end.

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.

Fair Value Measurements

The Company measures the fair value of financial assets and liabilities based on the guidance of Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

The carrying amounts of the Company’s financial assets, such as cash, accounts receivable, accrued expenses and other current liabilities, notes payable and Prepaid Advance Liability approximate fair values due to the short-term nature of these instruments.

The carrying amount of the Company’s digital assets are recorded at fair value in accordance with ASC 820, Fair Value Measurement (“ASC 820”), based on quoted prices on the active exchange(s) that the Company has determined is the principal market for such assets (Level I inputs).

The cost basis of digital assets is determined using the specific identification of each unit received.

Realized and unrealized gains and losses are now recorded to other (expense) income, net in our consolidated statement of operations.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

7 unchanged sentences

Allocate the transaction price to the performance obligations in the contract;

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recognize revenue when the company satisfies a performance obligation.

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

For sales contracts with terms of more than one year, the Company recognizes any significant financing component as revenue over the contractual period using the effective interest method, and the associated interest income is reflected accordingly on the consolidated statements of operations and included in other income.

During the three months ended March 31, 2025 and 2024, the Company recognized 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.

For certain product sales contracts, the Company acts as an agent and revenue in connection with these contracts is presented net of the related costs.

● 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.

● IP license – Revenue is recognized pursuant to the type of intellectual property (“IP”) being licensed for 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.

IP license revenue for the right to access symbolic IP is recognized over time and the right to use functional IP is recognized at a point in time.

License fees – revenue from the right to use IP is recognized immediately at a point in time.

Minimum royalty fees – revenue is recognized immediately at a point in time.

Royalty fees above the minimum – revenue is recognized when and if amounts become probable and estimable.

Software maintenance fees – revenue is recognized over time over the term of the agreement.

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

● Mining of digital assets – The Company has entered into a lease agreement with a digital asset mining services company to operate digital asset mining machines on behalf of the Company and provide mining pool operating and hosting services.

Pursuant to the agreement, the Company provides computing power to the mining pool operator.

The Company is entitled to digital asset awards once it begins to perform hash calculations for the pool operator in accordance with the operator’s specifications.

The Company’s fractional share is based on the total blocks expected to be generated on the Bitcoin network for the daily 24-hour period.

Revenue from digital assets is considered non-cash consideration.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the Company’s revenue recognized 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:

2 unchanged sentences

Revenue Recognized Over Time:

Mining of digital assets

Contract services

Total Revenue

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

License Agreement

On September 29, 2024, the Company entered into a three-year licensing agreement (the “Agreement”) with a customer located in Japan to use its KULR VIBE software to measure and reduce fan vibration levels.

The Agreement gives the customer the exclusive license to use the software in Japan (for Japanese customers) for the sole purpose of operating the Balancer.

The Balancer is a hardware device used to measure vibration levels.

Pursuant to this Agreement, the Company received a one-time, non-refundable license fee for the right to use the IP of $ 500,000 for which revenue was recognized immediately.

The customer will pay royalty fees to the Company of $ 0.20 per unit of any rotational system balanced by a Balancer, and 3 % of gross sales of all Balancers the customer manufactures and sells to a third party.

The customer will make quarterly royalty payments to the company which may vary from period to period, but the minimum payment of $ 50,000 per quarter ($ 600,000 over the three-year life of the Agreement) is guaranteed.

Since the payment of the minimum royalty occurs significantly after performance, this indicates a significant financing component.

Therefore, the Company immediately recognized revenue in an amount equal to the present value ($ 528,767 ) of the $ 600,000 to be received, using the prevailing interest rate in the relevant market (prime rate) of 8.0 %.

Royalty fees above the minimum amount will be recognized when and if amounts become probable and estimable.

While the Agreement contains a software maintenance provision, the Company expects the resources that will be dedicated to the software maintenance services to be negligible and determined an amount to be allocated to this software maintenance performance obligation to be de minimis.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenues (contract liabilities) on the Consolidated Balance Sheet.

Generally, billing occurs subsequent to revenue recognition, resulting in contract assets.

However, we sometimes receive advances or deposits from our customers resulting in contract liabilities.

As of March 31, 2025, the Company had billed accounts receivable of $ 4,346,111 and unbilled accounts receivable of $ 196,695 .

As of December 31, 2024, the Company had billed accounts receivable of $ 3,431,007 and unbilled accounts receivable of $ 660,672 .

Deferred revenues were $ 21,141 and $ 32,768 as of March 31, 2025 and December 31, 2024, respectively.

Net Loss Per Common Share

3 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

( 18,806,658 )

( 5,008,876 )

( 12,903,168 )

( 18,500,127 )

Denominator (weighted average quantities):

3 unchanged sentences

( 1,071,495 )

( 2,952,892 )

Accrued issuable equity

6 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 liability (1)

Unvested restricted stock awards

Unvested restricted stock units

(1) Shares issuable estimated using the floor price of $ 0.75 per share pursuant to the supplemental agreement to the SEPA (see Note 6 – Prepaid Advance Liability).

Operating and Finance Leases

The Company determines if an arrangement is a lease or contains a lease at inception.

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 either (1) the rate implicit in the lease, if available, or (2) 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.

Classification criteria in Topic 842 is applied in order to determine whether the lease is a finance lease or an operating lease.

Operating lease expense is recorded on a straight-line basis over the life of the lease and is included in research and development and general and administrative expenses on the accompanying statements of operations.

Finance lease right-of-use assets are depreciated on a straight-line base over the estimated useful life of the asset;

the depreciation expense is included in research and development expense on the accompanying statements of operations.

Finance lease liabilities are subsequently remeasured by increasing the liability to reflect interest accrued during a period and decreasing the liability to reflect payments made during the period.

Interest expense incurred on finance leases is included in interest expense on the statements of operations.

Reclassifications

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

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.

2 unchanged sentences

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 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

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 impact 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.

Segment Reporting

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance.

Management has determined that the Company has two significant operating segments:

Energy Management Platform and Mining of Digital Assets, as discussed more fully in Note 11.

In determining the appropriateness of segment definition, the Company considers the criteria of Accounting Standards Codification (“ASC”) 280, Segment Reporting.

Recent Issued Accounting Pronouncements

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

5 unchanged sentences

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.

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

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

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

The guidance is effective for 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.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – DIGITAL ASSETS

The Company’s digital assets are comprised solely of Bitcoin.

In accordance with ASC Topic 820, Fair Value Measurement, the Company measures the fair value of its Bitcoin based on the quoted price at 4:00pm EST on the measurement date for a single Bitcoin on an active trading platform, Coinbase.

Management has determined that Coinbase, an active exchange market, represents a principal market for Bitcoin and at 4:00pm EST, the price is both readily available and representative of fair value (Level 1 inputs).

The following table sets forth the units held, cost basis, and fair value of Bitcoin held, as shown on the consolidated balance sheet as of March 31, 2025 and as of December 31, 2024.

Digital assets held:

Digital assets purchased

Digital assets mined

During the first three months of March 31, 2025, the Company purchased 449.45 Bitcoin at an average cost of $ 99,008 per Bitcoin, inclusive of fees and expenses, for an aggregate cost of $ 44,499,352 .

Additionally, on March 7, 2025, the Company entered into a sixty-day lease agreement (the “Machine Lease Agreement”) with a digital asset mining services company to operate digital assets mining machines on KULR’s behalf, at a total lease cost of $ 850,000 .

As of March 31, 2025, 2.97 Bitcoin have been earned pursuant to the Machine Lease Agreement, at an average value of $ 84,186 per Bitcoin.

During the three months ended March 31, 2025, the Company recognized revenue of $ 249,754 , and recognized a loss of $ 90,237 , in connection with its digital assets mining operations.

The following table presents a reconciliation of the fair values of the Company’s Bitcoin as of March 31, 2025:

Beginning balance at January 1, 2025

Additions - purchased

Additions - mined

Unrealized loss, net

( 9,748,600 )

Balance, March 31, 2025

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of September 30, 2024 and December 31, 2023, prepaid expenses and other current assets consisted of the following:

September 30,

Compensation costs

As of March 31, 2025 and December 31, 2024, prepaid expenses and other current assets consisted of the following:

Deferred expenses

Dues and subscriptions

Digital assets mining lease

Compensation costs

Marketing and advertising

Professional fees

Vendor receivables

Security deposits

Conferences and seminars

Investor relations

Vendor receivables

Dues and subscriptions

Total prepaid expenses and other current assets

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of September 30, 2024 and December 31, 2023, accrued expenses and other current liabilities consisted of the following:

September 30,

Professional fees

NOTE 5 – ACCRUED EXPENSES AND OTHER LIABILITIES

As of March 31, 2025 and December 31, 2024, accrued expenses and other current liabilities consisted of the following:

Payroll and vacation

Research and development

Professional fees

Inventory purchases

Sales tax payable

Equipment purchases

Research and development

Interest payable

Board compensation

Refund due to customer

Cost of sales

Total accrued expenses and other current liabilities

Accrued interest, non-current

Total accrued expenses and other liabilities

current portion

( 1,511,775 )

( 1,160,446 )

Other non-current liabilities

NOTE 6 – ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the nine months ended September 30, 2024 is presented below:

For the Nine Months Ended

September 30, 2024

A summary of the accrued issuable equity activity during the three months ended March 31, 2025 is presented below:

For the Three Months Ended

March 31, 2025

Beginning balance at January 1, 2025

1 unchanged sentence

Shares issued in satisfaction of accrued issuable equity

Fair value at September 30, 2024

During the nine months ended September 30, 2024, the Company became obligated to issue a fixed number of shares of common stock of the Company as consideration for services provided by an employee pursuant to a contractual arrangement previously entered into with the employee.

On the date the contract was entered into, the estimated fair value of the shares to be issued was an aggregate of $ 87,737 based on the quoted market prices of the shares.

During the nine months ended September 30, 2024, the Company settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 80,000 of its shares for an aggregate fair value of $ 26,400 , measured as of the settlement date based on the quoted market prices of the shares.

The Company recorded (losses) gains in the aggregate amount of $ 13,437 and $( 2,302 ) during the three and nine months ended September 30, 2024, respectively, and recorded (losses) gains in the aggregate amount of $( 42,773 ) and $ 177,987 during the three and nine months ended September 30, 2023, 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 September 30, 2024, was $ 76,641 , based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – PREPAID ADVANCE LIABILITY, NET OF DISCOUNT

The Company’s prepaid advance liability, net of discount, consists of the following:

Gross Amount of

Prepaid Advance

net of discount

Balance, January 1, 2024

Repayments pursuant to Advance Notices

( 5,918,430 )

Amortization of debt discount

Balance, September 30, 2024

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 nine months ended September 30, 2024, the Company issued 55,659,476 shares of common stock pursuant to SEPA Advance Notices submitted by the Company to Yorkville for aggregate proceeds of $ 15,173,357 .

Of the shares issued pursuant to the SEPA Advance Notices, 21,798,830 shares valued at $ 6,068,407 were issued in satisfaction of $ 5,918,430 of principal and $ 118,619 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 September 30, 2024, the Prepaid Advance Liability and the related accrued interest has been repaid in full and the SEPA has been terminated.

See Note 10 – Stockholders’ Equity (Deficit) - Standby Equity Purchase Agreement (“SEPA”) and Supplemental SEPA for additional information.

The remaining 33,860,646 shares issued pursuant to the SEPA Advance Notices were issued for cash proceeds of $ 9,104,950 , which was used to fund the operations of the Company.

Deferred financing costs in the amount of $ 57,030 were charged to additional paid-in capital in connection with the shares issued for cash.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair value at March 31, 2025

During the three months ended March 31, 2025, the Company entered into certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company.

The estimated fair value of the shares to be issued was an aggregate of $ 90,329 based on the quoted market prices of the shares as of the respective contract dates.

During the three months ended March 31, 2025, the Company settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 50,000 of its shares of common stock with an aggregate fair value of $ 69,500 , remeasured as of the date of settlement based on the quoted market prices of the shares.

During the three months ended March 31, 2025 and 2024, the Company recorded gains (losses) in the aggregate amount of $ 260,598 and $( 13,002 ), respectively, related to changes in the fair value of accrued issuable equity (see Note 9 – Stockholders’ Equity (Deficit), Stock-Based Compensation for additional details).

The fair value of the accrued but unissued shares as of March 31, 2025, was $ 180,658 , based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets.

NOTE 7 – LEASES

1 unchanged sentence

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

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

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

The initial lease term is 63 months .

The lease contains an option to renew for an additional 36 months , which is not reasonably certain to be exercised and therefore is not included in the measurement of the ROU asset and lease liability.

The lease contains an option to renew for an additional 36 months , which is not reasonably certain to be exercised and therefore is not included in the measurement of the operating lease ROU asset and related lease liability.

Monthly rental payments under the new lease are $ 33,818 , which is comprised of $ 22,682 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 September 30, 2024.

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

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company determined that the value of the operating lease liability and related right-of-use asset at inception was $ 1,085,498 , 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, 2025.

The Company also leases office space at 4863 Shawline Street, San Diego, CA 92111, pursuant to an operating lease which originally expired 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”).

1 unchanged sentence

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 %.

During the three and nine months ended September 30, 2024, operating lease expense was $ 150,846 and $ 377,554 , respectively.

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

The Company determined that the value of the modified operating lease liability and related right-of-use asset to be $ 449,404 , using an incremental borrowing rate of 10 %.

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 March 31, 2025.

During the three months ended March 31, 2025 and 2024, operating lease expense was $ 150,846 and $ 111,902 , respectively.

Finance Lease

During July 2024, the Company entered into a three - year lease agreement, (the “Equipment Lease”) for the lease of a copy machine (the “Equipment”).

The lease term began on July 18, 2024.

The monthly fixed lease payment is $ 220 .

The Equipment Lease includes a purchase option pursuant to which the Company can purchase the Equipment at the end of the lease term for $ 1 .

The Company recorded an ROU asset and lease liability in the amount of $ 7,768 upon the commencement of the Equipment Lease.

The Company recorded depreciation expense in the amount of $ 388 in connection with ROU assets held under the finance lease during the three and nine months ended September 30, 2024.

The Company recorded interest expense of $ 62 during the three and nine months ended September 30, 2024, in connection with its finance lease liability.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities as of September 30, 2024, were as follows:

The Company recorded depreciation expense in the amount of $ 388 in connection with ROU assets held under the finance lease during the three months ended March 31, 2025.

The Company recorded interest expense of $ 117 during the three months ended March 31, 2025, in connection with its finance lease liability.

Maturities of lease liabilities as of March 31, 2025, were as follows:

Operating Lease

Financing Lease

October 1, 2024 through December 31, 2024

4/1/25 to 12/31/25

Total future minimum lease payments

3 unchanged sentences

Lease liabilities, non current portion

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

For the Nine Months Ended

September 30,

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

For the Three Months Ended

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

10 unchanged sentences

Financing leases

NOTE 8 – RELATED PARTY TRANSACTIONS

During the three and nine months ended September 30, 2023, the Company recognized expenses of $ 4,845 and $ 32,055 , respectively, for consulting services provided by the father of the Company’s Chief Technology Officer, which 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, 2024, there were no expenses with related parties.

As of September 30, 2024 and December 31, 2023, the Company did no t have any accounts payable outstanding with related parties.

KULR TECHNOLOGY GROUP, INC.

2 unchanged sentences

NOTE 8-NOTES PAYABLE

A summary of the notes payable activity during the nine months ended September 30, 2024 is presented below:

A summary of the notes payable activity during the three months ended March 31, 2025, is presented below:

Outstanding, January 1, 2025

Proceeds from merchant cash advances

Proceeds from promissory notes

Equipment received for note payable

Issuance costs paid in cash

Issuance costs paid in equity

Underwriting fees

Repayments in cash

( 2,439,855 )

Amortization of debt discount

Notes payable, current-portion

Notes payable, non-current portion

Total notes payable as of September 30, 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 additional finder’s fees to be issued in equity, with the obligation to repay a total of $ 804,600 over thirty-two weekly payments of $ 25,144 , beginning January 30, 2024.

The difference between the total repayment amount and the net proceeds received was accounted for as debt discount, and along with the finder’s fees, were being amortized over thirty-two weeks using the effective interest rate method and an annualized effective interest rate of 217 %.

The Cash Advance Agreement was 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 continued making weekly payments over the original thirty-two week term.

On July 11, 2024, the Company used proceeds from the Third Cash Advance Agreement to repay this cash advance in full.

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 additional finder’s fees to be issued in equity, 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 was accounted for as debt 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 ranging from 240 % to 249 %.

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

On July 11, 2024, the terms of this agreement were revised whereby the weekly repayment amounts were reduced from $ 26,820 to $ 15,620 and the repayment period was extended from September 27, 2024, to November 15, 2024.

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 , for cash proceeds of $ 440,000 .

The Company recorded a debt discount of $ 60,000 , which consists of an original issue discount of $ 50,000 and cash issuance costs of $ 10,000 .

The debt discount was amortized using the effective interest rate method and an annualized effective interest rate of 26 %.

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 May 28, 2024, the Company repaid the Promissory Note in full, and recognized $ 60,000 of amortization expense related to the debt discount.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On April 4, 2024, the Company and the finder of the First and Second Cash Advance Agreements determined that the equity compensation would be by issuance of warrants to purchase up to 81,788 shares (the “First Warrant”) and up to 108,389 shares (the “Second Warrant”), respectively, of the Company’s common stock at an exercise price of $ 0.1852 per share and $ 0.139 per share, respectively.

The First Warrant and the Second Warrant (collectively the “Warrants”) were exercisable immediately and expire on January 22, 2027 and February 26, 2027, respectively.

The Warrants had a grant date fair value of $ 112,863 .

The value of the Warrants was recognized as additional debt discount, which will be amortized over the repayment period.

The Warrants contain a cashless exercise provision in the form of a net share settlement, whereby, if, at the time the holder exercises the Warrants, there is no effective registration statement registering the common stock subject to the Warrants, the holder may elect to receive the number of shares of the Company’s common stock determined according to a formula set forth in the warrant agreements.

The following assumptions were used in the Black-Scholes Model to measure the fair value of the warrants:

Market price at measurement date

Exercise price

0.14 - $ 0.19

Risk free interest rate

Expected term (years)

Expected volatility

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 instead of 16 %.

As of September 30, 2024, the principal balance of this promissory note was $ 100,000 .

On April 9, 2024, the Company entered into a Conditional Sale Agreement (the “Agreement”) to purchase a Haas Vertical Machining Center (the “Equipment”), pursuant to which the Company issued a promissory note with an initial principal amount of $ 42,788 .

The promissory note carries an imputed interest rate of 10 %.

The Company will make twenty four consecutive monthly installments of $ 2,003 , beginnning thirty days after the delivery of the Equipment.

The Equipment was received on June 17, 2024.

Total notes payable as of March 31, 2025

On July 11, 2024, the Company entered into a merchant cash advance agreement (the “Third Cash Advance Agreement”) whereby the Company received $ 758,850 of cash (net of underwriting fees of $ 40,000 and $ 201,150 used to pay the remaining balance of the first merchant cash advance), with the obligation to repay a total of $ 1,350,000 over forty - three weekly payments of $ 31,395 , beginning July 18, 2024.

The difference between the total repayment amount and the net proceeds received was accounted for as debt discount and is being amortized over forty - three weeks using the effective interest rate method and an annualized effective interest rate of 86 %.

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

The agreement contains an early payoff discount whereby the Company will owe $ 1,230,000 if paid by August 11, 2024, or $ 1,310,000 if paid by September 11, 2024.

The Company did not take advantage of the early payoff discount and continued making weekly payments over the original forty - three week term.

In addition, the Third Cash Advance Agreement amended the Second Cash Advance Agreement to revise the repayment terms, whereby the weekly repayment amounts were reduced from $ 26,820 to $ 15,620 and the repayment period was extended from September 27, 2024, to November 15, 2024.

See Note 12 - Subesequent Events, for details related to notes payable.

The difference between the total repayment amount and the net proceeds received was accounted for as debt discount which is amortized over the term of the Third Cash Advance Agreement.

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

The Third Cash Advance was repaid in full on January 8, 2025.

NOTE 9 - STOCKHOLDERS’ EQUITY (DEFICIT)

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

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

Pursuant to the SEPA, the Company had the right, but not the obligation, to sell to Yorkville up to an aggregate of $ 50,000,000 of its shares of common stock, at the Company’s request any time during the commitment period commencing on May 13, 2022, and terminating on June 1, 2024.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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 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 number of shares registered under the registration statement in effect at the time of the Advance.

Of the gross proceeds, $ 9,104,950 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 and the SEPA terminated on June 1, 2024.

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

Authorized Capital

The Company is authorized to issue 500,000,000 shares of common stock, par value of $ 0.0001 per share, and 20,000,000 shares of preferred stock, par value of $0.0001 per share.

The holders of the Company’s common stock are entitled to one vote per share.

The preferred stock is designated as follows:

1,000,000 shares designated as Series A Preferred Stock, 31,000 shares designated as Series B Convertible Preferred Stock, 400 shares designated as Series C Preferred Stock, and 650 shares designated as Series D Convertible Preferred Stock.

Equity Incentive Plan

On August 15 and November 5, 2018, the Board of Directors and a majority of the Company’s shareholders, respectively, approved the 2018 Equity Incentive Plan (the “2018 Plan”).

Under the 2018 Plan, 15,000,000 shares of common stock of the Company are authorized for issuance.

The 2018 Plan provides for the issuance of incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants of the Company and its affiliates.

The 2018 Plan requires the exercise price of stock options to be not less than the fair value of the Company’s common stock on the date of grant.

As of March 31, 2025, there were 718,457 shares available for issuance under the 2018 Plan.

At the Market Offering

On July 3, 2024, the Company entered into an At the Market Offering agreement (the “ATM”) 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.

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.

During the nine months ended September 30, 2024, the Company issued a total of 12,822,356 shares of common stock pursuant to the ATM for aggregate gross proceeds of $ 3,431,090 .

During the nine months ended September 30, 2024, the Company issued an aggregate of 241,650 shares of immediately vested common stock with a grant date value of $ 61,161 for legal services.

During the nine months ended September 30, 2024, the Company issued 30,000 shares of immediately vested common stock with a grant date value of $ 17,400 as equity compensation to its independent members of the Board of Directors.

During the nine months ended September 30, 2024, the Company issued an aggregate of 80,000 shares of immediately vested common stock with a grant date value of $ 26,400 for consulting services.

During the nine months ended September 30, 2024, the Company issued 617,127 shares of common stock upon the vesting of restricted stock units previously granted.

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

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.

On January 24, 2025, the Company increased the maximum aggregate offering amount of the shares of the Company’s common stock issuable under its At the Market Offering agreement (the “ATM Agreement”) by an additional $ 50 million.

During the three months ended March 31, 2025, the Company issued a total of 19,407,622 shares of common stock pursuant to the ATM Agreement for aggregate gross proceeds of $ 51,152,353 with cash issuance costs of $ 1,509,423 .

During the three months ended March 31, 2025, the Company issued an aggregate of 61,000 shares of common stock valued at $ 82,040 for legal and consulting services, of which 50,000 shares valued at issuance at $ 69,500 were accrued at January 1, 2025 for services rendered in prior years.

During the three months ended March 31, 2025, the Company issued 8,500 shares of common stock upon the exercise of stock options for gross proceeds of $ 7,565 .

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended March 31, 2025, the Company issued 500,877 shares of common stock upon the vesting of restricted stock units previously granted, of which 127,393 shares were withheld to cover payroll tax obligations.

See At The Market Offering, above, for share issuances pursuant to the Company’s ATM Agreement.

Treasury Stock

The Company’s equity-based compensation plan allows for the grant of non-vested stock options, RSUs and RSAs to its employees pursuant to the terms of its equity incentive plan.

Under the provision of the plan, unless otherwise elected, participants fulfill their related income tax withholding obligation by having shares withheld at the time of vesting.

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

During the three months ended March 31, 2025, the Company withheld 27,536 shares valued at $ 63,332 in connection with the vesting of restricted common stock units during the period.

The Company had 158,698 and 131,162 shares held in treasury as of March 31, 2025 and December 31, 2024, respectively, recorded at their cost of $ 359,554 and $ 296,222 , respectively.

Preferred Stock

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 Preferred”) to the CEO, such that the total shares of Series A Preferred held by the CEO as of March 31, 2025 is 1,000,000 shares.

The issuance of up to 1,000,000 shares of Non-convertible Series A Voting Preferred Stock to the CEO was previously approved and authorized by a vote of the majority stockholders of the Company, 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 the CEO is removed from any position with the Company or resigns from all positions with 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 September 30, 2024 and December 31, 2023, the Company has 131,162 shares held in treasury recorded at their cost of $ 296,222 .

A summary of warrants activity during the nine months ended September 30, 2024, is presented below:

A summary of warrants activity during the three months ended March 31, 2025, is presented below:

Outstanding, January 1, 2025

Outstanding, September 30, 2024

Exercisable, September 30, 2024

A summary of outstanding and exercisable warrants as of September 30, 2024, is presented below:

Outstanding, March 31, 2025

Exercisable, March 31, 2025

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Warrants Outstanding

1 unchanged sentence

Remaining Life

See Note 9 – Notes Payable for additional details related to the 2024 warrant issuances.

Stock-Based Compensation

The following table presents information related to stock-based compensation for the three months ended March 31, 2025 and 2024:

For The Three Months Ended

Shares issued for legal services

Accrued issuable equity (common stock)

Amortization of stock options

Amortization of restricted stock awards and units

During the three months ended March 31, 2025 and 2024, the Company recognized stock-based compensation expense of $ 1,637,368 and $ 845,930 respectively, of which $ 1,233,235 and $ 808,106 , respectively, are included within selling, general and administrative expenses, and $ 404,133 and $ 37,824 , respectively are included within research and development expenses in the condensed consolidated statements of operations.

Stock Options

A summary of stock options activity during the three months ended March 31, 2025, is presented below:

Outstanding, January 1, 2025

Outstanding, March 31, 2025

Exercisable, March 31, 2025

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

A summary of stock options activity during the nine months ended September 30, 2024, is presented below:

Outstanding, January 1, 2024

Outstanding, September 30, 2024

Exercisable, September 30, 2024

The following table presents information related to stock options as of September 30, 2024:

The following table presents information related to stock options as of March 31, 2025:

Options Outstanding

5 unchanged sentences

$ 2.05 - $ 2.44

For the nine months ended September 30, 2024, the weighted average grant date fair value per share of options granted was $ 0.20 , compared to $ 0.30 and $ 0.52 for the three and nine months ended September 30, 2023, respectively.

No options were granted during the three months ended September 30, 2024.

For the three months ended March 31, 2025 and 2024, the weighted average grant date fair value per share of options was $ 1.06 and $ 0.14 , respectively.

The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model.

1 unchanged sentence

For The Three Months Ended

For The Nine Months Ended

September 30,

Risk free interest rate

4.77 % - 5.40

4.27 % - 4.81

3.92 % - 5.40

Expected term (years)

7 unchanged sentences

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

As of September 30, 2024, there was $ 146,091 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 1.89 years.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2025, there was $ 141,372 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 2.4 years.

Restricted Stock Awards

The following table presents information related to restricted stock awards activity during the nine months ended September 30, 2024:

The following table presents information related to restricted stock awards activity during the three months ended March 31, 2025:

Weighted Average

Shares of Restricted

Non-vested RSAs, January 1, 2025

RSAs exchanged for RSUs

( 2,168,508 )

( 1,062,500 )

Non-vested RSAs, September 30, 2024

During the nine months ended September 30, 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 or vesting period.

As of August 20, 2024, the President and Chief Operating Officer (the “COO”) resigned from all positions held with the Company, and the Company agreed to provide the COO with certain separation benefits, which include accelerated vesting of the final tranche of his restricted stock award (“RSA”), consisting of 500,000 unvested shares, previously granted.

As a result, the Company reversed $ 435,000 in amortization expense related to the unvested award.

The fair value of the previously unvested modified award on the modification date was $ 110,000 , which was calculated by multiplying the stock price on the modification date ($ 0.22 ) by the number of shares receiving accelerated vesting ( 500,000 shares).

Accordingly, the Company recorded restricted stock expense related to the modification of the RSA.

See Note - 11 Commitment and Contingencies - Separation and General Release Agreement.

As of September 30, 2024, there was $ 212,771 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 1.55 years.

Non-vested RSAs, March 31, 2025

As of March 31, 2025, there was $ 108,646 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 1.4 years.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

The following table presents information related to restricted stock units (“RSUs”) activity during the nine months ended September 30, 2024:

The following table presents information related to restricted stock units (“RSUs”) activity during the three months ended March 31, 2025:

Weighted Average

1 unchanged sentence

Non-vested RSUs, January 1, 2025

RSAs exchanged for RSUs

( 1,125,000 )

Non-vested RSUs, September 30, 2024

Vested RSUs undelivered September 30, 2024

To date, RSUs have only been granted to employees in accordance with the Company’s 2018 Equity Incentive Plan.

Pursuant to the terms of the restricted stock unit agreements, the vested but undelivered units are to be settled in November 24, 2024, and January 1, 2026.

As of September 30, 2024, there was $ 2,737,474 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 2.60 years.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

During the three and nine months ended September 30, 2024, the Company recognized stock-based compensation expense of $ 56,199 and $ 1,811,156 , respectively, related to restricted stock awards, restricted stock units, stock options and stock issued for services, of which $ 25,561 and $ 1,704,505 , respectively, is included within selling, general and administrative expenses, and $ 30,638 and $ 106,651 , respectively is included within research and development expenses in the unaudited condensed consolidated statements of operations.

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, is 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.

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

Amortization of stock options

Amortization of restricted stock awards and units

Non-vested RSUs, March 31, 2025

Vested RSUs undelivered March 31, 2025

To date, RSUs have only been granted to employees and consultants in accordance with the Company’s 2018 Equity Incentive Plan.

Pursuant to the terms of the restricted stock unit agreements, the vested but undelivered units are to be settled on January 1, 2026.

As of March 31, 2025, there was $ 17,228,607 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 3.5 years.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

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

As of September 30, 2024, the Company was not involved in any ongoing litigation.

As of March 31, 2025, 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.

Separation and General Release Agreement

On August 20, 2024, the Company entered into a Separation and General Release Agreement with the President and Chief Operating Officer of the Company, and resignation from all other appointments and positions held with the Company and any of its affiliated entities.

The COO released the Company from any and all claims he may have against the Company, and the Company agreed to provide certain separation benefits, including (i) a one-time payment of $ 99,551 , subject to legally required payroll withholdings/deductions, (ii) early settlement of 375,000 vested restricted stock units (“RSUs”) previously granted and (iii) accelerated vesting of the final tranche of a restricted stock award (“RSA”), consisting of 500,000 unvested shares, previously granted.

The equity component of the Agreement is to be delivered on November 25, 2024.

See Note 10 – Stockholders’ Equity (Deficit) – Restricted Stock Awards for additional information.

Contingent Loss

Equipment deposits at September 30, 2024, represent amounts paid to a vendor as a downpayment for the manufacture of an automated manufacturing system (the “System”).

Equipment deposits at March 31, 2025 and December 31, 2024 primarily includes amounts paid to a vendor as a downpayment for the manufacture of an automated manufacturing system (the “System”).

To date, the System has not been delivered and the Company and the vendor are in continuing discussions.

There can be no assurance that the Company will recover the full amount of the equipment deposit.

At this time a loss is not considered probable.

Even if a loss were to occur, at this time the Company is not able to estimate the dollar amount of a potential loss.

In an effort to come to a resolution on the matter, the Company has offered to reduce its original demand for full reimbursement by $ 568,777 , which has not yet been accepted by the counterparty.

During the three months ended March 31, 2025, the Company recorded a write-down of $ 568,777 related to the equipment deposits, which is included in selling, general and administrative expense on the accompany unaudited condensed consolidated statement of operations.

The carrying value of equipment deposits of $ 883,335 represents the net realizable value of the asset as of March 31, 2025.

At this time, an additional loss is not considered probable, but negotiations with the vendor are ongoing and we are unable to estimate the dollar amount of any additional potential loss, if any.

NOTE 11 – SEGMENT REPORTING

During the first quarter of 2025, the Company expanded on its treasury strategy and began mining digital assets.

The Company determined these activities met the criteria of an operating segment.

The Company operates as two operating and reporting segments (i) energy management platform, and (ii) mining of digital assets, namely, the development and commercialization of energy management technologies, batteries and other components across a range of applications, and the mining of bitcoin.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The chief operating decision maker (“CODM”), who is the Company’s chief executive officer, reviews profit and loss information on a consolidated basis in order to assess performance, make decisions about the allocation of operating and capital resources, and evaluate pricing strategies related to the energy management platform.

The CODM is not regularly provided disaggregated expense information, other than the expense information included in the consolidated statements of operations.

The CODM reviews financial information for mining digital assets separately

KULR TECHNOLOGY GROUP, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

from the financial information related to the energy management platform for making decisions, allocating resources and assessing financial performance, as well as making strategic operational decisions and managing the organization.

The Company does not have intra-entity sales or transfers.

The CODM does not consider gains and losses associated with digital assets when reviewing the results of operations, or allocating resources to the Company’s operating segments.

Gains and losses associated with the Company’s digital assets (which is not considered an operating segment) are presented separately from segment net income.

Beginning in 2025, the Company has broken out a Corporate & Other category, which is not considered an operating segment, and includes the changes in fair value of the Company’s digital asset holdings.

The following table presents the breakout of the operations of the energy management and digital asset mining segments for the three months ended March 31, 2025 and 2024:

For the Three Months Ended

March 31, 2025

March 31, 2024

Cost of revenue

Operating Expenses

Research and development

Selling, general, and administrative

Total Operating Expenses

Segment Net Loss

( 9,353,559 )

( 9,443,805 )

( 4,656,734 )

Other (Expense) Income

Other segment (expense) income (1)

Change in fair value of digital assets

( 9,748,600 )

Total Other Expense, net

( 9,748,600 )

( 9,362,853 )

Consolidated Net Loss

( 8,967,812 )

( 9,748,600 )

( 18,806,658 )

( 5,008,876 )

March 31, 2025

December 31, 2024

Segment Assets

Digital assets

All other assets

(1) Other segment expenses and losses include interest income, interest expense, amortization of debt discount, gain (loss) on extinguishment of debt and change in fair value of accrued issuable equity.

Geographic Information

As of March 31, 2025, the Company’s long-lived assets are located in the U.S.

During the three months ended March 31, 2025, $ 1,039,423 of revenue was generated from foreign entities.

KULR TECHNOLOGY GROUP, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - SUBSEQUENT EVENTS

Independent Contractor Agreement

Effective October 1, 2024, the Company entered into an independent contractor agreement whereby the contractor will provide consulting services for economic development incentives, grant review, and state governmental affairs within the state of Texas.

The Company has agreed to compensate the contractor with a one-time retainer of $ 10,000 , plus quarterly payments of 50,000 shares of common stock and a commission payout of up to 5 % of awards the contractor secures for the Company.

The agreement may be cancelled by either party by giving 10 days notice.

Repayment of Note Purchase Agreement

On October 31, 2024, the Company repaid the remaining balance of a note payable pursuant to a note purchase agreement entered into on April 9, 2024.

The Company paid $ 102,033 , of which $ 100,000 was applied to the principal balance and $ 2,033 was applied to the outstanding interest.

Investment In Preferred Stock

On May 7, 2025, the Company purchased Series A7 Preferred Shares (the “GB Preferred Shares”) of German Bionic Systems GMBH for an aggregate purchase price of $ 3.3 million.

The GB Preferred Shares rank senior to all outstanding preferred as well as common shares of GB, and are convertible on a 1 :1 basis into common shares of GB at the Company’s option, subject to anti-dilution adjustments.

The Company also has the right to one voting advisory board seat and one non-voting observer seat on GB’s advisory board.

The GB Preferred Shares have a liquidation preference equal to the purchase price of the shares plus any accrued and unpaid dividends thereon.

Lease Amendment

On April 15, 2025, the Company amended its original lease dated January 27, 2024 (the “First Amendment”), for the property located at 555 Forge River Road, Webster, TX, to expand the rentable square footage by approximately 13,535 square feet (the “Expansion Premises”) for a total rentable space of 31,095 square feet.

The First Amendment is effective May 1, 2025 and shall be coterminous with the original lease and shall expire April 30, 2029.

Monthly payments for the Expansion Premises are $ 17,483 , which is comprised of base rent.

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

At the Market Offering

During the period from October 1, 2024 through November 12, 2024, the Company issued 13,045,200 shares of common stock for gross proceeds of $ 4,319,699 pursuant to the ATM.

Repayment of Merchant Cash Advances

During the period from October 1, 2024 through November 12, 2024, the Company repaid $ 313,487 of the merchant cash advances.

As of November 12, 2024, the outstanding balance of the merchant cash advances was $ 810,830 .

During the period from April 23, 2025 through May 15, 2025, the Company issued 13,945,241 shares of common stock for gross proceeds of $ 19,827,210 pursuant to the ATM.

Digital Assets

During the period from April 1, 2025 through May 13, 2025, the Company purchased 42.37 Bitcoin, at an average cost of $ 94,403 per Bitcoin.

As of May 13, 2025, the Company has purchased and holds 709 Bitcoin with a current market value of approximately $ 74 million.

Bitcoin Mining

During the period from April 1, 2025 through May 13, 2025, the Company has earned 4.48 Bitcoin from mining services.

As of May 13, 2025, the company holds 7.45 Bitcoin from mining services with a current market value of approximately $ 777,000 .

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