What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-13 · 180 added, 154 removed, 96 unchanged (78% of the section changed)

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

(“KULR”) and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”) (collectively referred to as “KULR” or the “Company”) as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Quarterly Report.

(“KULR”) and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”) (collectively referred to as “KULR” or the “Company”) as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Quarterly Report.

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

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There have been no material changes to the risk factors discussed in Item 1A.

Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on April 12, 2024, unless disclosed elsewhere in this Quarterly Report.

KULR Technology Group, Inc., through our wholly owned subsidiary KULR Technology Corporation, maintains expertise in three key technology domain areas:

(1) energy storage systems and recycling, (2) thermal management solutions, and (3) rotary system vibration reduction.

Historically, KULR, focused on thermal energy management solutions for space and Department of Defense (DoD) applications, with recent expansion into energy storage and vibration reduction markets as the logical next step.

Combined, this energy management platform consists of high-performance thermal management technologies for batteries and electronics, AI-powered battery management and vibration mitigation software solutions, and reusable energy storage modules.

Our mission is to advance and apply these technologies to make our world more sustainable by using less energy;

using energy more efficiently;

making energy consumption safer and cooler;

using less materials to achieve these goals;

and completing the circular economy through recycling.

Active government initiatives propelled by industry and regulatory tailwinds are increasing demand for energy storage, battery recycling and clean energy, resulting in an expanding total addressable market for KULR’s solutions.

According to Precedence Research, global energy storage systems market is to grow from $210B in 2021 to $435B by 2030.

Global lithium-ion battery recycling industry is to grow from $4.6B in 2021 to $22.8B by 2030, according to Market and Markets Research.

Additionally, the domain driving the growth of KULR’s battery design and production capabilities is the private space exploration market sector, which requires highly custom, safe, and reliable energy storage systems, and is expected to reach $1,110.8B by 2030 according to CoherentMI.

The Company’s disruptive technologies strive to fulfill an addressable $24 billion thermal management systems market (estimated based on market data projections published by Converged Markets stating that the thermal management systems market size was projected to grow to $24.8 billion by 2025).

E-aviation growth and continued reliance on traditional aviation vehicles drives an aircraft maintenance market size that is expected to reach $127.2B by 2032, an increase from $82.7B in 2023, according to Precedence Research.

KULR VIBE, the Company’s rotary system vibration reduction software, positions KULR to access this market area.

As companies and governments around the world pledge to meet net zero emissions over the next few decades, KULR is uniquely positioned to accelerate the adoption of clean energy solutions and sustainable products and facilitate the migration to a global circular economy.

The Company’s goal is to provide total battery safety solutions for more efficient battery systems, increased sustainability, and end-of-life battery management, making KULR a key technology solutions provider in the migration to a global circular economy.

Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on March 31, 2025, unless disclosed elsewhere in this Quarterly Report.

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

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

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

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

Our proprietary core technology is a carbon fiber material that provides what we believe to be superior thermal conductivity and heat dissipation for an ultra-lightweight and pliable material.

By leveraging our proprietary cooling solutions that have been developed through longstanding partnerships with advanced technology users like NASA, the Jet Propulsion Lab and others, our products and services make commercial battery powered products safer and electronics systems cooler and lighter.

KULR’s business model continues to evolve from being a component supplier, to providing more design and testing services to our customers.

The next step of evolution is to provide total system solutions to address market needs.

In order to scale up as a systems provider more quickly and efficiently in (i) the Li-ion battery energy storage and recycling markets, (ii) battery cell design and safety testing, and (iii) advanced thermal management systems, such as hypersonic vehicles, KULR will actively seek partners for joint venture, technology licensing and other strategic partnership models.

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

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

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

KULR ONE and KULR ONE Design Solutions (K1DS)

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(5) Rapid prototyping and production capabilities,

(6) Pack and system level thermal, mechanical, electrical, and abuse testing capabilities,

(6) Pack level thermal, mechanical, electrical, and abuse testing capabilities,

(7) Battery system-level testing and characterization,

(8) Expertise in battery management, controls, and monitoring,

(9) Ability to support beginning of life to end of life requirements for transport and recycling.

To address the need for a holistic approach, KULR developed a battery product and service portfolio over the course of the last decade that provides products, safety testing services, modeling and analysis services, electrical testing services, transport and recycling packaging and logistics, and battery design solutions.

The implementation of a holistic approach resulted in the onboarding and development of a product and service portfolio over the course of the last decade that provides products, safety testing services, modeling and analysis services, electrical testing services, transport and recycling packaging and logistics, and battery design solutions.

Collectively, this is referred to as KULR ONE Design Solutions (K1-DS) , which is actively leveraged by the Company to facilitate engagement with customers no matter the battery life cycle phase they are in.

Currently, the primary aspects of K1-DS utilized by industry are product sales of trigger cells and TRS, the safety testing methodologies, and the utilization of the K1-DS platform as a whole to develop customized energy storage solutions.

Internally, KULR has leveraged K1-DS to develop off the shelf KULR ONE architecture which represents a groundbreaking innovation that is driving the world’s transition to a more sustainable electrification economy.

Internally, KULR has leveraged K1-DS to develop off the shelf KULR ONE architecture which represent a groundbreaking innovation that is driving the world’s transition to a more sustainable electrification economy.

These revolutionary designs offer a unique combination of cutting-edge features, including unparalleled safety, exceptional performance, intelligent functionality, modular construction, reliability, and customizability.

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With its unparalleled combination of safety, performance, intelligence, modularity, reliability, and customizability, KULR ONE is positioned to revolutionize the way we think about energy storage and powering the world’s most demanding applications.

KULR ONE Space

The KULR ONE Space (K1S) platform is the more mature of the KULR ONE architectures and is currently leveraged by multiple customers for upcoming space exploration missions which require energy storage with thermal runaway safe designs.

The K1S is built upon a passively propagation resistant and flame arresting (PPRFA) architecture.

This architecture, combined with KULR’s utilization of MOLICEL lithium-ion cells, provides one of the safest and highest performing off-the-shelf space flight battery designs available today.

The 400 series of the K1S platform serves as the first ever commercial offering of a 20793 rated battery with final certification expected from NASA in Q2 2025.

KULR Battery Management System (BMS) + AI = KULR Core TM

KULR’s path towards 20793 certification required the development of custom battery management system (BMS) technology built with radiation tolerant chipset.

The development of the BMS in multiple forms is nearing completion of qualification campaigns at which point they will be added to KULR’s product offering.

The ready to fly design posts radiation tolerance up to 75 kRad, 8 string control and passive balancing, and a listing of key safety features (e.g.

overcharge, overdischarge, overcurrent protections).

Moving forward, this BMS will serve as a foundation for KULR’s step into facilitating edge-AI for space applications.

KULR works to integrate the Company’s BMS, developed initially for space applications, with the Nvidia Jetson platform such that the processing and control of the BMS will be facilitated with the Jetson chipset.

The resulting combination of computing and battery control capabilities is the KULR Core TM .

The all in one AI compute chipset combined with BMS controls for the batteries will result in every battery flown with the KULR Core TM being AI enabled, thus providing KULR’s stepping stone into edge-AI.

In addition to BMS functionality, the KULR Core TM will provide every user with a flight (or mission) computer and additional data processing capabilities with the leading chipset available.

Additional targeted capabilities of the KULR Core TM include the following:

● Operation of the Jetson platform in a radiation tolerant enclosure,

● Dual or triple redundant processing and fault checking for ensuring fault tolerance of critical operations,

● AI driven battery state-of-health monitoring and subsequent optimization of related functionality (charging, discharging, solar array interaction),

The KULR Core TM will first serve to replace the BMS and flight (mission) computer.

Moving forward, the powerful capabilities of the Jetson platform will be leveraged to facilitate other spacecraft functions for GNC, thermal management, and communications.

The end result will be a mission autonomous spacecraft.

Battery Design and Analysis

For the technology domain of battery design and analysis, KULR provides custom batteries, batteries designed based on KULR ONE architectures (Space, Guardian and Air), and related off-the-shelf products (such as trigger cells, NASA WI37A screened cells, and TRS).

These product and service offerings are outlined with the following figure.

Cell and Battery Testing

KULR has invested heavily in an expansive cell and battery testing suite of services over the last 3 years.

Testing capabilities are grouped between abuse testing, electrical testing, and environmental testing and are reflected with the following figure.

Battery Production

A natural progression for the Company following the development of the KULR ONE platforms was to expand into the low volume production space for custom, high-end, and/or boutique lithium-ion batteries that require manual or semi manual assembly.

Reducing pricing and lead times to a level suitable for the emerging commercialized space and defense sectors also required the onboarding of machining and fabrication equipment.

KULR’s battery component fabrication and assembly production capabilities are highlighted with the following figure.

KULR VIBE Solution

During 2022, we acquired intellectual property from Vibetech International, LLC (“Vibetech”), which allows KULR to expand itself as a vertically integrated energy management company focused on sustainable energy solutions.

In 2022, we acquired intellectual property from Vibetech International, LLC (“Vibetech”), which allows KULR to expand itself as a vertically integrated energy management company focused on sustainable energy solutions.

For nearly twenty years, the primary application has been aviation.

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Same motors, same blades, KULR VIBE optimized.

In addition to working with aviation applications, we have developed KULR Xero Vibration technology to eliminate vibration for cooling fans for data center server applications with the following key benefits:

We are eliminating wasted energy due to vibration

We will make cooling of AI servers more efficient with more airflow to the chips

Fans will produce less noise pollution for enhanced working environment in the data center environment

Fans will last longer due to less wear and tear caused by vibration

According to Technavio in an updated May 2024 report, the global wind turbine monitoring systems market is forecast to increase by USD 8.72 billion at a CAGR of 19.34% between 2023 and 2028.

Per the report, the market is expected to experience significant growth due to the increasing demand for optimizing energy production and ensuring the reliable operation of wind farms.

In particular, the vibration monitoring segment is estimated to witness significant growth during the forecast period.

The KULR VIBE suite of products and services have provided vibration analysis and mitigation to global companies across multiple industries and sectors.

According to Fact.MR, an insights-driven global market intelligence company, the global vibration motor market is forecasted to reach $24.1 billion by 2032.

According to Fact.MR, an insights-driven global market intelligence company, the global vibration motor market is estimated at $6.5 billion in 2023 and is forecast to reach $24.1 billion by 2032, growing at a Compounded Annual Growth Rate (“CAGR”) of 14.1% during 2023-2032.

KULR Xero Vibe Fan

Key challenges for server and data centers are cooling of components, power consumption, and acoustics.

KULR has leveraged the KULR VIBE software, developed initially for helicopter balancing applications, to develop the Xero Vibe fan.

The unprecedented low vibration levels of the Xero Vibe fan provide for increased cooling efficiency, higher fan RP, and decreased power consumption.

KULR works actively to finalize the qualification of the Xero Vibe fan and automate the balancing techniques to facilitate enough meaningful throughput to be able to provide solution for the server and data center industry.

The Future is Energy + AI

We believe the future of KULR is Energy + AI.

We are building our AI infrastructure on industry leading Nvidia and AMD semiconductor platforms, and they are hosted on a hybrid of private cloud and Microsoft Azure.

As the world faces shortages of both technical expertise to design batteries and raw materials to build batteries, KULR aims to address this need with KULR ONE AI (K1AI).

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● Residential and commercial energy storage systems

Robotics, KULR ONE, and KULR CoreTM

KULR believes one of most logical terrestrial verticals for the KULR ONE platform and the KULR CoreTM is robotics;

specifically battery powered exoskeletons.

Right now, battery powered exosuits and exoskeletons rely on OTS batteries that are swappable in nature.

This is a limiting factor.

KULR will address this with the KULR ONE roadmap which focuses on high energy high power cell combinations, such as the MOLICEL 21700-P50B and its eventual successor.

KULR believes this will address two limiting factors for the robotic industry (1) increasing energy and power needs and (2) heat generation and dissipation issues.

A pack designed around the KULR ONE reference design, using MOLICEL power cells, means the utilization of a low heat generating pack due to significantly lower resistance of the cells.

This “robotics” variation of the KULR ONE platform will be KULR CoreTM enabled.

Battery Recycling and Management

KULR’s SafeCASE technology provides a safe and cost-effective solution to commercially store and transport lithium batteries, which is increasing in frequency as supply chain challenges necessitate battery recycling and end-of-lifecycle management.

Whether shipping a single battery, a battery-powered device or a load shipment of batteries, KULR’s technology mitigates the impacts of cell-to-cell thermal runaway propagation and ensures a safe journey.

KULR’s Thermal Runaway Shield (TRS) technology is trusted by NASA to ship and store astronauts’ laptop batteries on the International Space Station.

KULR is serving a total addressable market for a circular economic model for batteries that will reach over $21 billion by 2025 (estimated based on market data projections published by Grand View Research, Inc.

stating that the global battery recycling market size is expected to reach $21.04 billion by 2025).

Aerospace/Defense

KULR’s thermal management solutions enable the defense and aerospace industries to safely deploy electronic technologies that support critical missions and protect national security.

Technology in this sector is developing at increasing rates - the space industry alone will be worth nearly $3 trillion in 30 years.

The electronic devices being placed into aircrafts, satellites, and missiles are becoming ever smaller and more powerful.

Lithium-ion batteries, which are already prone to overheating and propagation, are exposed to harsh thermal environments as well as shock and vibration during aerospace and defense operations.

The Company has partnered with Lockheed Martin, Leidos and other prime contractors to develop and supply mission-critical technologies for hypersonic vehicles, high-power magnetic wave, and other defense systems.

Recent Developments

Bitcoin Strategy

During the first three months of March 31, 2025, the Company purchased 449.45 Bitcoin via trade orders on Coinbase (the prime broker), 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 bitcoin mining services company to operate 2,500 S-19 bitcoin mining machines on KULR’s behalf, at a total lease cost of $850,000.

Through 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 period from April 1, 2025 through May 13, 2025, the Company purchased 42.37 Bitcoin, at an average cost of $94,403 per Bitcoin, and earned 4.48 Bitcoin from mining services.

See the section “Our Bitcoin Acquisition Strategy” below for further information regarding our Bitcoin purchases, including the source of capital used to purchase Bitcoin.

At the Market Offering

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

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

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

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.

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

Merchant Cash Advance Agreement

On January 22, 2024, the Company entered into a merchant cash advance agreement (the “Cash Advance Agreement”) with a lender, pursuant to which the Company received $504,900 of cash (net of underwriting fees of $35,100), with the obligation to repay a total of $804,600 over thirty-two weekly payments of $25,143.75, beginning January 30, 2024.

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

On July 11, 2024, this merchant cash advance was repaid in full.

On February 26, 2024, the Company entered into a merchant cash advance agreement (the “Second Cash Advance Agreement”) with the lender mentioned above, pursuant to which the Company received $502,200 of cash (net of underwriting fees of $37,800), with the obligation to repay a total of $804,600 over thirty weekly payments of $26,820, beginning February 29, 2024.

On July 11, 2024, the parties amended the agreement whereby the weekly repayment amount was reduced from $26,820 to $15,620 and the repayment due date was extended from September 27, 2024 to November 15, 2024.

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

As of November 13, 2024, the Company is current with its payments and the outstanding principal balance is $13,388.

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

As of November 13, 2024, the Company is current with its payments and the outstanding principal balance is $797,442.

Promissory Notes

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.

This promissory note was paid in full on October 31, 2024.

Resignation of COO

Effective August 20, 2024, the Company entered into a Separation and General Release Agreement (the “Separation Agreement”) with Keith Cochran, pursuant to which Mr.

Cochran resigned as President and Chief Operating Officer of the Company, and all other appointments and positions held with the Company.

Cochran’s resignation from the Company is a result of his decision to pursue alternative professional and personal endeavors and not a result of any disagreements with the Company or the Board of Directors of the Company on any matter relating to its operations, policies or practices.

Pursuant to the terms of the Separation Agreement, on the effective date, Mr.

Cochran received termination benefits of (i) a lump sum payment of $99,551, (ii) early settlement of vested grants and accelerated vesting of a portion of Mr.

Cochran’s outstanding equity awards in the aggregate amount of 875,000 shares of the Company’s common stock, deliverable no earlier than November 25, 2024, and (iii) continuation of COBRA health insurance premiums for four months, in exchange for a release of claims in favor of the Company and its affiliates.

License and Opportunities for KULR VIBE Fan Balancing Applications

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

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

The licensee, a leading Japanese corporation, specializing in systems integration and the distribution of advanced semiconductor solutions, intends to use the KXV technology to balance industrial-scale fan systems used in data center computer cooling, HVAC and other industrial applications.

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

Change in Address of Principal Executive Offices

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

On January 24, 2025, the Company increased the maximum aggregate offering amount of the shares of the Company’s common stock issuable under the ATM by an additional $50 million, bringing the total aggregate offering amount to $146 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 for aggregate gross proceeds of $51,152,353.

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.

Issuance of Non-Convertible Series A Voting 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 Voting Preferred”) to the Chief Executive Officer (“CEO”), bringing his total holdings up to 1,000,000 shares of Series A Preferred Stock.

The issuance is subject to the Board reserving the full and unequivocal right to revoke, rescind, transfer or otherwise cancel the issued Non-convertible Series A Voting Preferred Stock in the event the CEO is removed from any position with the Company or resigns from all positions with the Company.

This conditional arrangement is designed to ensure that the voting power conferred by the Series A Voting Preferred Stock remains tied to the active leadership of the Company.

This underscores the Board’s commitment to maintaining alignment with the long-term interests of the Company and its stockholders.

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

Change in Auditors

On November 1, 2024, CBIZ CPAs P.C.

(“CBIZ”) acquired the attest business of Marcum LLP (“Marcum”), and substantially all of the partners and staff that provided attestation services for Marcum joined CBIZ.

On April 29, 2025, we were notified that Marcum resigned as the independent registered accounting firm of the Company.

On April 30, 2025, upon Marcum’s resignation as auditors of the Company and with the approval of the Audit Committee of the Board of Directors of the Company, CBIZ was engaged as the Company’s independent registered public accounting firm.

Risks Associated with Ongoing Conflicts

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

Risks Associated with the Tariff War

Geopolitical developments, such as the recent changes in tariff policies by the United States and the retaliatory tariff and non-tariff responses by other countries, especially with China, Canada and Mexico, the prospect of further changes in tariff and trade policies add an additional negative affect on the supply chain.

The increased tariffs the U.S.

has imposed with these countries could have an adverse effect on our supply chain, potentially causing financial difficulty for our direct or indirect customers and reduced demand of our products.

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

Tariffs could increase the cost of our products and the components that go into making them.

These increased costs could adversely impact the gross margin that we earn on our products.

Tariffs could also make our products more expensive for customers, which could make our products less competitive and reduce consumer demand.

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

We cannot predict how the events described above will evolve.

If the events continue for a significant period of time or expand to other countries, and depending on the ultimate outcomes of these conflicts, which remain uncertain, they could heighten certain risks disclosed in Item 1A in our Annual Report on Form 10-K which was filed with the SEC on April 12, 2024, including, but not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending;

If the events continue for a significant period of time or expand to other countries, and depending on the ultimate outcomes of these conflicts, which remain uncertain, they could heighten certain risks disclosed in Item 1A in our Annual Report on Form 10-K which was filed with the SEC on March 31, 2025, including, but not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending;

cyber-incidents;

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terrorist activities;

our exposure to foreign currency fluctuations;

our exposure to

foreign currency fluctuations;

reputational risk;

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

Compliance with NYSE American Continued Listing Requirements

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

Section 1003(a)(iii) of the Company Guide requires a listed company to have stockholders’

equity of $6 million or more if the listed company has reported losses from continuing operations and/or net losses in its five most recent fiscal years.

As required by the Stockholders’ Equity Notice, on January 19, 2024, the Company submitted a plan (the “Plan”) to NYSE advising of actions it has taken or will take to regain compliance with the continued listing standards by June 20, 2025.

NYSE staff will review the Company periodically for compliance with the initiatives outlined in the Plan.

If the Company is not in compliance with the continued listing standards by June 20, 2025, or if the Company does not make progress consistent with the Plan during the Plan period, NYSE staff will initiate delisting proceedings as appropriate.

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.

Results of Operations

Three and Nine Months Ended September 30, 2024, Compared With Three and Nine Months Ended September 30, 2023

Our revenues consisted of the following contract types:

Three Months Ended March 31, 2025, Compared With Three Months Ended March 31, 2024

For the Three Months Ended

For the Nine Months Ended

September 30,

Product sales

Contract services

Mining of digital assets

Total Revenue

For the three months ended September 30, 2024 and 2023, we generated $3,185,778 and $3,041,007 of revenues from 33 and 18 customers, respectively, representing an increase of $144,771, or 5%.

For the nine months ended September 30, 2024 and 2023, we generated $7,366,887 and $7,496,315 of revenues from 62 and 37 customers, respectively, representing a decrease of $129,428, or 2%.

Revenue from product sales during the three months ended September 30, 2024, decreased by $1,131,269 or 60% compared to the three months ended September 30, 2023.

Product sales include the sales of our component product, internal short circuit (“ISC”) battery cells and devices, and safe cases.

We had 20 product sales customers in the third quarter of 2024, compared with 13 in the third quarter of 2023.

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

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

Revenue from product sales during the nine months ended September 30, 2024, decreased by $2,968,035 or 54% compared to the nine months ended September 30, 2023.

We had 47 product sales customers in the nine months of 2024, compared with 29 in the nine months of 2023.

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

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

Revenue from contract services during the three months ended September 30, 2024, increased by $247,273 or 22% compared to the three months ended September 30, 2023.

Service revenues include certain research and development contracts and onsite engineering services.

We had 17 contract services customers in the third quarter of 2024, compared with 7 in the third quarter of 2023.

Contract services customers increased in both design and testing services for new and existing customers.

Revenue from contract services during the nine months ended September 30, 2024, increased by $1,809,840 or 90% compared to the nine months ended September 30, 2023.

We had 30 contract services customers in the nine months of 2024, compared with 14 in the nine months of 2023.

We expect to continue expansion in number of contract service customers and total revenue contribution.

Revenue from IP license agreement during the three months ended September 30, 2024, was $1,028,767.

License revenue consists of a contract with a customer for the right to use our patented KULR VIBE technology.

This contract was executed during the three months ended September 30, 2024.

There was no license revenue recognized prior to this period.

For the three months ended March 31, 2025 and 2024, we generated $2,448,606 and $1,749,104 of revenues from 26 and 34 customers, respectively.

Revenue from product sales during the three months ended March 31, 2025, increased by $545,466 or 87% compared to the three months ended March 31, 2024.

We had 16 product sales customers in the first quarter of 2025, compared with 25 in the first quarter of 2024.

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

Although the number of customers decreased, the increase in revenue was driven primarily by contracts with two new customers we did not have contracts with during the three months ended March 31, 2024.

Revenue from contract services during the three months ended March 31, 2025, decreased by $95,718 or 8% compared to the three months ended March 31, 2024.

The decrease in revenue is primarily due to a decline in customers to 12 in the first quarter of 2025, from 14 in the first quarter of 2024.

Service revenue includes unique engineering design and testing projects customized for specific customers.

Revenue from mining digital assets during the three months ended March 31, 2025, was $249,754.

The contract was entered into on March 7, 2025.

There was no mining of digital asset revenue recognized prior to this period.

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

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Cost of Revenue, Gross Profit and Gross Profit Margin

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

Cost of revenue consisted of the cost of our products, labor expenses directly related to product sales or contract services and lease costs incurred pursuant to the Machine Lease Agreement in connection with mining digital assets.

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

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

For the three months ended September 30, 2024 and 2023, cost of revenues was $928,326 and $1,703,553, respectively, representing a decrease of $775,227 or 46%.

For the three months ended September 30, 2024 and 2023, gross profit was $2,257,452 and $1,337,454, respectively, an increase of $919,998 or 69%.

Our gross profit margins were 71% and 44%, during the three months ended September 30, 2024 and 2023, respectively.

The increase in the current period profit margin resulted primarily from an IP licensing agreement that generated $1,028,767 of revenue which had no corresponding cost of revenue.

For the nine months ended September 30, 2024 and 2023, cost of revenues was $4,026,018 and $4,513,285, respectively, representing an decrease of $487,267 or 11%.

For the nine months ended September 30, 2024 and 2023, gross profit was $3,340,869 and $2,983,030, respectively, an increase of $357,839 or 12%.

Our gross profit margins were 45% and 40%, during the nine months ended September 30, 2024 and September 30, 2023, respectively.

The increase in the current period profit margin resulted primarily from an IP licensing agreement that generated $1,028,767 of revenue which had no corresponding cost of revenue.

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

For the three months ended March 31, 2025 and 2024, cost of revenues was $2,242,261 and $1,238,315, respectively, representing an increase of $1,003,946 or 81%.

For the three months ended March 31, 2025 and 2024, gross profit was $206,345 and $510,789, respectively, a decline of $304,444 or 60%.

Our gross profit margins were 8% and 29%, during the three months ended March 31, 2025 and 2024, respectively.

The decrease in the current period profit margin resulted primarily from increased hours spent on service contracts and a net loss on mining of digital assets.

Research and Development

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Research and development expenses are charged to operations as incurred.

For the three months ended September 30, 2024 and 2023, R&D expenses were $1,232,333 and $1,821,658, respectively, representing a decrease of $589,325 or 32%.

The decrease was comprised primarily of $538,784 of labor costs allocated to cost of revenue due to the increase in service revenue, $180,075 related to a planned decrease in R&D consulting services to conserve cash and a $69,267 decrease in stock-based compensation, partially offset by an increase in building related expenses of approximately $208,399 for the facility in Texas.

For the nine months ended September 30, 2024 and 2023, R&D expenses were $3,492,144 and $5,842,611, respectively, representing a decrease of $2,350,467 or 40%.

The decrease was comprised primarily of $1,437,862 of labor and other R&D costs allocated to cost of revenue due to the increase in service revenue, $779,425 related to a planned decrease in R&D consulting services to conserve cash and a $232,829 decrease in stock-based compensation, partially offset by an increase in building related expenses of approximately $273,709 for the facility in Texas.

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

For the three months ended March 31, 2025 and 2024, R&D expenses were $2,449,900 and $954,625, respectively, representing an increase of $1,495,275 or 157%.

The increase was comprised primarily of $908,215 for R&D consulting services, a $366,309 increase in stock-based compensation, an $111,669 increase in building related expenses for the facility in Texas, partially offset by $48,304 of engineering labor and other costs charged that were reduced or redeployed to revenue-generating activities and charged to costs of revenue.

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

Selling, General and Administrative

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

For the three months ended September 30, 2024 and 2023, selling, general and administrative expenses were $2,735,419 and $4,612,824, respectively, representing a decrease of $1,877,405 or 41%.

The decrease is primarily due to a reduction in stock-based compensation due to clawing back amortization for unvested, cancelled restricted stock awards of $638,592, a decrease in advertising expense of $571,238 due to a sponsorship agreement terminating in 4Q23, and a decrease of $481,661 in depreciation expense primarily due to leasehold improvements for the San Diego facility being fully depreciated in 2Q24.

For the nine months ended September 30, 2024 and 2023, selling, general and administrative expenses were $11,542,820 and $14,578,145, respectively, representing a decrease of $3,035,325 or 21%.

The decrease is primarily due to a planned decrease in advertising and marketing services of $1,345,581, a decrease in stock-based compensation of of $687,004 primarily due to clawing back amortization for unvested, cancelled restricted stock units, a planned decrease in outsourced professional services of $602,438, and a decrease in labor costs of $182,533 due to the workforce reduction in December of 2023.

Other (Expense) Income

For the three months ended September 30, 2024 and 2023, other expense, net, was a net expense of $293,464 and $465,246, respectively, representing a decrease of $171,782, or 37%.

The change is primarily attributable to a decrease in interest expense of $158,686 due to the full repayment of the prepaid advance liability during 1Q24, a decrease of $56,210 due to the change in fair value of of accrued issuable equity, partially offset by an increase of $43,114 for amortization of debt discount in connection with merchant cash advances.

For the nine months ended September 30, 2024 and 2023, other expense, net, was a net expense of $1,209,073 and $1,062,401, respectively, representing an increase of $146,672, or 14%.

The change is primarily attributable to an increase of $284,516 for amortization of debt discount in connection with merchant cash advances, an increase of $180,289 for the change in fair value of accrued issuable equity and $31,358 related to a 2024 loss on the extinguishment of debt related to the Prepaid Advance Liability, partially offset by a decrease of $349,491 in interest due to the full repayment of the prepaid advance liability during 1Q24.

For the three months ended March 31, 2025 and 2024, selling, general and administrative expenses were $7,200,250 and $4,212,898, respectively, representing an increase of $2,987,352 or 71%.

The increase is primarily due to a planned increase in advertising and marketing services of $1,238,607, a write down of equipment deposits of $568,777, an increase in stock-based compensation of $425,129 primarily due to new equity award grants, a planned increase in insurance of $307,042, a planned increase in consulting fees for exploring new business opportunities of $246,288, an increase in accounting and tax services of $173,462, and a planned increase in outsourced professional services of $144,780, partially offset by a decrease in labor costs of $160,631.

Other Income (Expense)

For the three months ended March 31, 2025 and 2024, other expense (net) was $9,362,853 and $352,142, respectively, representing an increase of $9,010,711, or 2,559%.

The change is primarily attributable to the $9,748,600 unrealized loss on Bitcoin holdings due to the change in market price of Bitcoin to $82,549 as of March 31, 2025, partially offset by an increase of $273,600 for the change in fair value of accrued issuable equity, an increase of $168,424 from interest earned from the licensing agreements, a decrease of $122,305 in interest expense due to the full repayment of the prepaid advance liability on March 27, 2024, and a decrease of $92,202 for amortization of debt discount in connection with merchant cash advances.

Our Bitcoin Acquisition Strategy

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

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

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

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

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

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

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

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

The following table presents bitcoin activity during the three months ended March 31, 2025.

Average Fair Value

Digital Assets (1)

Per Bitcoin (in $)

Beginning balance at January 1, 2025

Fair value of digital assets purchased

Cost to acquire digital assets

Cost basis of digital assets held

Fair value of digital assets mined

Change in fair value of digital assets

Balance as of March 31, 2025

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

Liquidity and Capital Resources

As of September 30, 2024 and December 2023, we had cash balances of $912,417 and $1,194,764, respectively, and a working capital deficit of $1,157,755 and $2,994,753, respectively.

For the nine months ended September 30, 2024 and 2023, net cash used in operating activities was $12,498,818 and $10,893,050, respectively.

Our net cash used in operating activities for the nine months ended September 30, 2024, was primarily attributable to our net loss of $12,903,168, adjusted for non-cash expenses in the aggregate amount of $4,721,844, plus $4,317,494 of net cash used to fund changes in the levels of operating assets and liabilities.

Our net cash used in operating activities for the nine months ended September 30, 2023, was primarily attributable to our net loss of $18,500,127, adjusted for non-cash expenses in the aggregate amount of $4,968,456, as well as $2,638,621 of net cash provided by changes in the levels of operating assets and liabilities.

For the nine months ended September 30, 2024 and 2023, net cash used in investing activities was $211,005 and $993,699, respectively.

Net cash used in investing activities during the nine months ended September 30, 2024, was related to purchases of property and equipment of $188,267 and deposits paid for purchases of property and equipment of $22,738.

Net cash used in investing activities during the nine months ended September 30, 2023, was related to deposits paid for purchases of property and equipment of $621,107, purchases of property and equipment of $237,592, and an acquisition of intangible assets of $135,000.

For the nine months ended September 30, 2024 and 2023, net cash provided by financing activities was $12,427,476 and $2,720,501, respectively.

Net cash provided by financing activities during the nine months ended September 30, 2024, was primarily due to proceeds from SEPA Advance Notices totaling $9,104,950, net proceeds from ATM equity financing totaling $3,327,372, and net proceeds from notes payable totaling $2,563,900, partially offset by notes payable repayments of $2,439,855, and payments for deferred financing costs of $128,041.

Net cash provided by financing activities during the nine months ended September 30, 2023 was due to the net proceeds from a public offering of $2,554,750 and net proceeds from prepaid advances of $1,970,000, partially offset by repayments of the Prepaid Advance of $1,575,000, and repurchases of common stock of $229,249.

Future cash requirements for our current liabilities as of September 30, 2024, include $4,375,171 for accounts payable and accrued expenses, $1,245,529 for secured notes payable and $507,959 for payments under operating and finance leases.

Future cash requirements for long-term liabilities as of September 30, 2024, include $930,361 for operating and finance leases, and $266,604 for notes payable.

As of March 31, 2025 and December 31, 2024, we had cash balances of $24,449,297 and $29,831,858, respectively, and working capital of $27,418,991 and $29,498,421, respectively.

As of March 31, 2025 and December 31, 2024, we also had Bitcoin holdings of $55,281,690 and $20,281,184, respectively.

For the three months ended March 31, 2025 and 2024, net cash used in operating activities was $9,771,951 and $3,907,406, respectively.

Our net cash used in operations for the three months ended March 31, 2025, was primarily attributable to our net loss of $18,806,658, adjusted for non-cash expenses in the aggregate amount of $11,891,113, plus $2,856,406 of net cash used to fund changes in the levels of operating assets and liabilities.

Our net cash used in operations for the three months ended March 31, 2024, was primarily attributable to our net loss of $5,008,876, adjusted for non-cash expenses in the aggregate amount of $1,853,354, plus $751,884 of net cash used to fund changes in the levels of operating assets and liabilities.

For the three months ended March 31, 2025 and 2024, net cash used in investing activities was $44,716,519 and $13,400, respectively.

Net cash used in investing activities during the three months ended March 31, 2025, was related to investments in digital assets of $44,499,352, purchases of property and equipment of $120,229 and deposits paid for purchases of property and equipment of $96,938.

Net cash used in investing activities during the three months ended March 31, 2024, was related to purchases of property and equipment.

For the three months ended March 31, 2025 and 2024, net cash provided by financing activities was $49,105,909 and $3,524,885, respectively.

Net cash provided by financing activities during the three months ended March 31, 2025, was primarily due to net proceeds from ATM equity financing totaling $49,871,627 and proceeds from the exercise of stock options totaling $7,565, partially offset by notes payable repayments of $577,675, and payments for deferred financing costs of $195,000.

Net cash provided by financing activities during the three months ended March 31, 2024, was due to proceeds from SEPA Advance Notices totaling $2,910,651, and net proceeds from notes payable totaling $963,900, partially offset by notes payable repayments of $349,666.

Future cash requirements for our current liabilities include approximately $2,723,883 for accounts payable and accrued expenses and $421,711 for future payments under operating and finance leases.

Future cash requirements for long-term liabilities include $777,439 for future payments under operating and finance leases plus other non-current liabilities.

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

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

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

On July 3, 2024, the Company entered into an At the Market Offering agreement (the “ATM”) to raise up to $20,000,000 through sales of the Company’s common stock.

During the period from October 1, 2024 through November 12, 2024, the Company has sold 13,045,200 shares of common stock pursuant to this offering, with gross proceeds of $4,319,699.

As of the filing date of this Quarterly Report, our outstanding notes payable have been reduced to $1,060,831.

As of the date of the issuance of these consolidated financial statements, the Company has no additional commitments to obtain additional funding through future debt or equity financings, and there is no assurance that the Company will be able to obtain additional funds on commercially acceptable terms, if at all.

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

Our 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.

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

We have a history of recurring net losses and recurring use of cash in operations.

During the three months ended March 31, 2025, the Company received gross proceeds of $51,152,353 pursuant to the ATM.

Given our cash balance as of March 31, 2025, there is no substantial doubt about the Company’s ability to meet its obligations as they become due within the twelve months from the date these condensed consolidated financial statements are available to be issued.

While no assurance can be provided that we will be successful in raising additional capital from the ATM, during the period from April 1, 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.

Off-Balance Sheet Arrangements

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Critical Accounting Estimates

We prepare our condensed consolidated financial statements in accordance with U.S.

We prepare our consolidated financial statements in accordance with U.S.

generally accepted accounting principles, which require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.

To the extent that there are material differences between these estimates and actual results, our financial results will be affected.

The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the notes to our financial statements.

We consider an accounting estimate to be critical if:

(i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

There are items within our financial statements that require estimation but are not deemed critical, as defined above.

There are items within our consolidated financial statements that require estimation but are not deemed critical, as defined above.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis