KULR Technology Group, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this Quarterly Report, and other factors that we may not know. 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 March 31, 2025, unless disclosed elsewhere in this Quarterly Report. Overview 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) KULR’s primary technical domain that is shaping the future landscape of the Company is safe, high-performance energy storage solutions. To effectively support and provide energy storage solutions, a holistic approach is necessary. Batteries are an interdisciplinary technology which require: (1) Multi-disciplinary expertise to address related electrical, thermal, mechanical, and electrochemical requirements, (2) Cell supply access to top-tier OEMs, (3) Cell level testing capabilities to characterize performance, quality, and safety behavior at the cell level, (4) Expertise in early concept design, modeling, and analysis, 27 Table of Contents (5) Rapid prototyping and production 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. ​ 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. 28 Table of Contents 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 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. The KULR ONE battery packs have been engineered to meet the exacting demands of the world’s most demanding applications. As of now, the Company is focused on the KULR ONE Space for space exploration, the KULR ONE Guardian for military applications, and the KULR ONE Max for rack-style grid energy storage systems, also referred to as Battery Energy Storage Systems (BESS). These architectures collectively offer a comprehensive solution that addresses the critical need for safe and reliable energy storage in a wide range of industries, from aerospace and defense to electric vehicles and consumer electronics. One of the key features of the KULR ONE family of battery packs is the modularity and consistency of the architectures. This allows for greater flexibility as customers can easily adjust the size and configuration of the battery pack to suit their specific application requirements while still also benefitting from testing previously conducted by the KULR team for their specific architecture. In addition to offering exceptional performance and reliability, the KULR ONE battery packs are also designed with safety as a top priority. They incorporate state-of-the-art thermal management technology to prevent overheating and ensure safe operation even in the most challenging environments. Overall, the KULR ONE family of battery packs, depicted with the following picture, is at the forefront of the global drive towards sustainable electrification. 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. ​ ​ 29 Table of Contents 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). 30 Table of Contents 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. 31 Table of Contents 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. 32 Table of Contents 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. 33 Table of Contents KULR VIBE Solution 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. However, advances in measurement and computing technologies have allowed KULR VIBE to provide transformative and scalable solutions across transportation, renewable energy (wind farm), manufacturing, industrial, performance racing and autonomous aerial (drone) applications among others. KULR VIBE addresses one the most challenging issues with advanced machinery today; excessive energy robbing vibrations that are destructive to both the machinery and in many cases the operator. The KULR VIBE suite of technologies utilize proprietary sensor processes with advanced learning algorithms to both achieve precision balancing solutions, and successfully predict component failure based on its comprehensive database of vibration signatures. Its enhanced AI learning algorithms pinpoint areas where excess vibrations cause a loss of energy that can lead to system malfunctions, weakened performance, and maintenance issues. This innovative technology can be utilized as a standalone solution or be paired with existing track and balance technology to facilitate vibration reduction, achieve increased energy production, and reduce mechanical failures thereby extending platform life. KULR VIBE recently balanced the motors and blades of a mission critical drone to demonstrate the benefits of the technology. The results were a 23% increase in battery life and a lift increase of 45%. Same motors, same blades, KULR VIBE optimized. 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 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). The Company is collecting large quantities of performance and safety test datasets for the most highly used commercial lithium-ion cells and combining that data with AI techniques to drive battery design and reduce engineering touch time to market. This product is to target the following markets: ● Aerospace and defense systems, such as CubeSat batteries meeting JSC 20793 safety requirements by NASA ● Power tools and industrial equipment ● High-performance electric vehicles ● Electric vertical take-off and landing (“eVOTL”) ● Electric micro-mobility vehicles ● Residential and commercial energy storage systems 34 Table of Contents 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 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. 35 Table of Contents 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 The short and long-term worldwide implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions on Russia by the United States or other countries and possible counter sanctions by Russia, and the resulting economic impacts on oil prices and other materials and goods, could affect the price of materials used in the manufacture of our product candidates. If the price of materials used in the manufacturing of our product candidates increase, that would adversely affect our business and the results of our operations. Additionally, we do not have operations or material net sales in Israel or Gaza and we currently do not expect the recent hostilities in that region to have a material impact on our business. 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 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; disruptions to our or our business partners’ global technology infrastructure, including through cyber-attack or cyber-intrusion; adverse changes in international trade policies and relations; claims, litigation and regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to 36 Table of Contents 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. Results of Operations Three Months Ended March 31, 2025, Compared With Three Months Ended March 31, 2024 Revenue ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ March 31, ​ ​ 2025 2024 Product sales ​ $ 1,160,559 ​ $ 615,093 Contract services ​ 1,038,293 ​ 1,134,011 Mining of digital assets ​ ​ 249,754 ​ ​ — Total Revenue ​ $ 2,448,606 ​ $ 1,749,104 ​ 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. Furthermore, our solutions are new and do not necessarily fit into pre-existing patterns of purchase commitments. Accordingly, the business activity cycle between expression of initial customer interest to shipping, acceptance and billing can be lengthy, unpredictable, and lumpy, which can influence the timing, consistency and reporting of sales growth. Cost of Revenue, Gross Profit and Gross Profit Margin 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 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. 37 Table of Contents Research and Development Research and development (“R&D”) includes expenses incurred in connection with the R&D of our CFV thermal management solution, high-areal-capacity battery electrodes, and 3D engineering for a rechargeable battery. Research and development expenses are charged to operations as incurred. 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 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. 38 Table of Contents 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Approximate ​ Average Fair Value ​ ​ Digital Assets (1) ​ Bitcoin Held ​ Per Bitcoin (in $) Beginning balance at January 1, 2025 ​ $ 20,281,184 217.18 ​ $ 93,384 Fair value of digital assets purchased ​ 44,401,250 449.45 ​ 98,860 Cost to acquire digital assets ​ 98,102 ​ Cost basis of digital assets held ​ 64,780,536 ​ Fair value of digital assets mined ​ 249,754 2.97 ​ Change in fair value of digital assets ​ (9,748,600) ​ Balance as of March 31, 2025 ​ $ 55,281,690 669.60 ​ $ 82,559 (1) The source of capital used to purchase Bitcoin was primarily proceeds from ATM offerings. ​ Liquidity and Capital Resources 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, 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. 39 Table of Contents 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 There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. Critical Accounting Estimates 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 below. 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 consolidated financial statements that require estimation but are not deemed critical, as defined above. ​ ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company, as defined by Rule 229.10(f)(1) and are not required to provide the information required by this Item. ​