UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~March 31,~~June 30, 2021

¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number:

~~000-55564~~001-40454

KULR TECHNOLOGY GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	81-1004273
(State or Other Jurisdiction of Incorporation or Organization)		~~81-1004273~~ (I.R.S. Employer Identification No.)

4863 Shawline Street, ~~1999 S. Bascom Ave. Suite 700. Campbell,~~ San Diego,California	92111
(Address of principal executive offices)		~~95008~~ (Zip Code)

Registrant’s telephone number, including area code: ~~408-663-5247~~408-663-5247

KULR Technology Group, Inc., 1999 S. Bascom Ave. Suite 700. Campbell, California 95008

(Former name, former address and former fiscal year, if changed since last report)~~N/A~~

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
~~None.~~ Common Stock	~~N/A~~ KULR	~~N/A~~ NYSE American LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x⌧ No ¨◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x⌧ No ¨◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b- 2 of the Exchange Act.

Large accelerated filer	¨ ◻	Accelerated filer	¨ ◻
Non-accelerated filer	x ⌧	Smaller reporting company	x ☒
		Emerging growth company	¨ ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule ~~12b-2~~12b-2 of the Exchange Act). Yes ¨☐ No x⌧

As of ~~May 20,~~August 16, 2021, there were ~~94,247,200~~101,701,263 shares of Common Stock, $0.0001 par value, issued and outstanding.

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~MARCH 31,~~JUNE 30, 2021

TABLE OF CONTENTS

			Page
PART I – FINANCIAL INFORMATION

	Item 1. Financial Statements		1 3

	Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2021 (unaudited) and December 31, 2020		1 3

	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended ~~March 31,~~June 30, 2021 and 2020		2 4

	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) for the Three and Six Months Ended ~~March 31,~~June 30, 2021 and 2020		3 5

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2021 and 2020		4 6

	Notes to Condensed Consolidated Financial Statements (unaudited)		5 8

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		17 20

	Item 3. Quantitative and Qualitative Disclosures About Market Risk		22 24

	Item 4. Controls and Procedures		22 25

PART II - OTHER INFORMATION

	Item 1. Legal Proceedings		23 26

	Item 1A. Risk Factors		23 26

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		23 26

	Item 3. Defaults Upon Senior Securities		23 26

	Item 4. Mine Safety Disclosures		23 26

	Item 5. Other Information		23 26

	Item 6. Exhibits		24 27

~~SIGNATURES~~	SIGNATURES	25	28

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, December 31
2021 2020
(unaudited)
Assets
Current Assets:
Cash $ 6,166,755 $ 8,880,140
Accounts receivable 345,299 55,492
Inventory 54,135 55,452
Prepaid expenses and other current assets 584,374 159,196
Total Current Assets 7,150,563 9,150,280
Property and equipment, net 53,086 57,857
Total Assets $ 7,203,649 $ 9,208,137

Liabilities and Stockholders' Equity

Current Liabilities:
Accounts payable $ 178,374 $ 66,537
Accounts payable - related party 2,628 2,628
Accrued expenses and other current liabilities 414,738 395,012
Accrued issuable equity 333,146 128,380
Notes payable, net of debt discount of $20,074 and $128,198 at March 31, 2021 and December 31, 2020, respectively 1,379,926 2,321,802
Loan payable, current portion 122,299 12,936
Deferred revenue 20,000 20,000
Total Current Liabilities 2,451,111 2,947,295
Loan payable, non-current portion 32,927 142,290
Total Liabilities 2,484,038 3,089,585

Commitments and contingencies (Note 9)
Stockholders' Equity:
Preferred stock, $0.0001 par value, 20,000,000 shares authorized;
Series A Preferred Stock, 1,000,000 shares designated; none issued and outstanding at March 31, 2021 and December 31, 2020 - -
Series B Convertible Preferred Stock, 31,000 shares designated; 0 and 13,972 shares issued and outstanding and liquidation preference of $0 and $13,972 at March 31, 2021 and December 31, 2020 , respectively - 1
Series C Preferred Stock, 400 shares designated; none issued and outstanding at March 31, 2021 and December 31, 2020 - -
Series D Convertible Preferred Stock, 650 shares designated,
none issued and outstanding at March 31, 2021 and December 31, 2020 (see Note 10) - -
Common stock, $0.0001 par value, 500,000,000 shares authorized; 92,627,200 and 89,908,600 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 9,263 8,991
Additional paid-in capital 17,671,479 17,355,968
Accumulated deficit (12,961,131 ) (11,246,408 )
Total Stockholders' Equity 4,719,611 6,118,552
Total Liabilities and Stockholders' Equity $ 7,203,649 $ 9,208,137

~~KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~


	June 30,		December 31,
	2021		2020
	(unaudited)
Assets

Current Assets:
Cash	$	12,159,583	$	8,880,140
Accounts receivable		614,784		55,492
Inventory		182,458		55,452
Prepaid expenses and other current assets		488,538		150,468
Total Current Assets		13,445,363		9,141,552
Property and equipment, net		84,441		57,857
Security deposits		58,941		8,728
Right of use asset		793,769		0
Total Assets	$	14,382,514	$	9,208,137

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	119,677	$	66,537
Accounts payable - related party		2,628		2,628
Accrued expenses and other current liabilities		343,026		395,012
Accrued issuable equity		349,093		128,380
Notes payable, net of debt discount of $0 and $128,198 at June 30, 2021 and December 31, 2020, respectively		0		2,321,802
Loan payable, current portion		155,226		12,936
Lease liability, current portion		252,081		0
Deferred revenue		29,229		20,000
Total Current Liabilities		1,250,960		2,947,295
Lease liability, non-current portion		542,344		0
Loan payable, non-current portion		0		142,290
Total Liabilities		1,793,304		3,089,585

Commitments and contingencies (Note 10)

Stockholders' Equity
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; Series A Preferred Stock, 1,000,000 shares designated; NaN issued and outstanding at June 30, 2021 and December 31, 2020		0		0
Series B Convertible Preferred Stock, 31,000 shares designated; 0 and 13,972 shares issued and outstanding and liquidation preference of $0 and $13,972 at June 30, 2021 and December 31, 2020, respectively		0		1
Series C Preferred Stock, 400 shares designated; NaN issued and outstanding at June 30, 2021 and December 31, 2020		0		0
Series D Preferred Stock, 650 shares designated; NaN issued and outstanding at June 30, 2021 and December 31, 2020		0		0
Common stock, $0.0001 par value, 500,000,000 shares authorized; 100,567,930 and 89,908,600 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		10,058		8,991
Additional paid-in capital		28,567,426		17,355,968
Accumulated deficit		(15,988,274)		(11,246,408)
Total Stockholders' Equity		12,589,210		6,118,552
Total Liabilities and Stockholders' Equity	$	14,382,514	$	9,208,137

~~(unaudited)~~

For the Three Months Ended
March 31,
2021 2020
Revenue $ 417,905 $ 77,500
Cost of revenue 275,268 30,043
Gross Profit 142,637 47,457
Operating Expenses:
Research and development 122,983 111,713
Selling, general, and administrative 1,492,811 465,410
Total Operating Expenses 1,615,794 577,123
Loss From Operations (1,473,157 ) (529,666 )
Other Expenses
Interest expense, net (865 ) (1,367 )
Amortization of debt discount (108,124 ) (19,220 )
Change in fair value of accrued issuable equity (132,577 ) -
Total Other Expenses (241,566 ) (20,587 )
Net Loss $ (1,714,723 ) $ (550,253 )

Net Loss Per Share
- Basic and Diluted $ (0.02 ) $ (0.01 )

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted 90,078,940 81,098,163

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

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)~~OPERATIONS

(unaudited)

FOR THE THREE MONTHS ENDED MARCH 31, 2021
Series B Convertible Series C Convertible Additional Total
Preferred Stock Preferred Stock Common Stock Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Shares Amount Capital Deficit Equity
Balance - January 1, 2021 13,972 $ 1 - $ - 89,908,600 $ 8,991 $ 17,355,968 $ (11,246,408 ) $ 6,118,552
Common stock issued upon conversion of Series B Convertible Preferred Stock (13,972 ) (1 ) - - 698,600 70 (69 ) - -
Stock-based compensation:
Common stock issued for services - - - - 20,000 2 49,798 - 49,800
Restricted common stock issued - - - - 2,000,000 200 (200 ) - -
Amortization of restricted
common stock - - - - - - 126,625 - 126,625
Amortization of stock options - - - - - - 9,112 - 9,112
Amortization of market-based award - - - - - - 130,245 - 130,245
Net loss - - - - - - - (1,714,723 ) (1,714,723 )
Balance - March 31, 2021 - $ - - $ - 92,627,200 $ 9,263 $ 17,671,479 $ (12,961,131 ) $ 4,719,611


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

Revenue	$	628,244	$	201,128	$	1,046,149	$	278,628
Cost of revenue		439,206		44,734		714,474		74,777
Gross Profit		189,038		156,394		331,675		203,851
Operating Expenses:
Research and development		352,741		57,991		475,724		169,704
Selling, general, and administrative		2,723,303		421,544		4,216,114		886,954
Total Operating Expenses		3,076,044		479,535		4,691,838		1,056,658
Loss From Operations		(2,887,006)		(323,141)		(4,360,163)		(852,807)

Other (Expense) Income
Interest expense, net		(766)		(2,353)		(1,631)		(3,720)
Debt redemption costs		(140,000)		0		(140,000)		—
Amortization of debt discount		(20,074)		(77,691)		(128,198)		(96,911)
Change in fair value of accrued issuable equity		20,703		(25,800)		(111,874)		(25,800)
Total Other Expenses, net		(140,137)		(105,844)		(381,703)		(126,431)

Net Loss		(3,027,143)		(428,985)		(4,741,866)		(979,238)
Deemed dividend to Series D preferred stockholders		(2,624,326)		0		(2,624,326)		—
Net Loss Attributable to Common Stockholders	$	(5,651,469)	$	(428,985)	$	(7,366,192)	$	(979,238)


Net Loss Per Share
- Basic and Diluted	$	(0.06)	$	(0.01)	$	(0.08)	$	(0.01)

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		92,513,238		81,234,608		91,302,814		81,166,393

FOR THE THREE MONTHS ENDED MARCH 31, 2020
Series B Convertible Series C Convertible Additional Total
Preferred Stock Preferred Stock Common Stock Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Shares Amount Capital Deficit Deficiency
Balance - January 1, 2020 14,487 $ 1 24.01 $ - 81,071,831 $ 8,107 $ 7,591,239 $ (8,396,312 ) $ (796,965 )
Common stock issued as a commitment fee for the Standby Equity Distribution Agreement - - - - 95,847 10 63,249 - 63,259
Stock-based compensation:
Amortization of stock options - - - - - - 10,528 - 10,528
Net loss - - - - - - - (550,253 ) (550,253 )
Balance - March 31, 2020 14,487 $ 1 24.01 $ - 81,167,678 $ 8,117 $ 7,665,016 $ (8,946,565 ) $ (1,273,431 )

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

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

(unaudited)

For the Three Months Ended
March 31,
2021 2020
Cash Flows From Operating Activities:
Net loss $ (1,714,723 ) $ (550,253 )
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount 108,124 19,220
Depreciation expense 4,771 543
Bad debt expense - 335
Change in fair value of accrued issuable equity 132,577 -
Stock-based compensation 387,972 12,728
Changes in operating assets and liabilities:
Accounts receivable (289,807 ) (27,046 )
Inventory 1,317 (4,514 )
Prepaid expenses and other current assets (425,178 ) (39,142 )
Accounts payable 111,838 (135,283 )
Accrued expenses and other current liabilities 19,724 (6,698 )
Accrued expenses and other current liabilities - related party - -
Deferred revenue - 32,000
Total Adjustments 51,338 (147,857 )
Net Cash Used In Operating Activities (1,663,385 ) (698,110 )

Cash Flows from Financing Activities:
Proceeds from note payable - 1,410,000
Payment of debt issuance costs - (130,000 )
Repayments of notes payable (1,050,000 ) (50,000 )
Proceeds from line of credit, net - 8,401
Payment of financing costs - (15,000 )
Net Cash (Used In) Provided By Financing Activities (1,050,000 ) 1,223,401

Net (Decrease) Increase In Cash (2,713,385 ) 525,291
Cash - Beginning of Period 8,880,140 108,857
Cash - End of Period $ 6,166,755 $ 634,148

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
Interest $ 367 $ 1,367
Income taxes $ - $ -

Non-cash investing and financing activities:
Value of common stock issued as a commitment fee for the SEDA agreement $ - $ 63,259
Common stock issued upon conversion of Series B Convertible Preferred Stock $ 70 $ -
Original issuance discount on note payable $ - $ 90,000


	FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
	Series B Convertible			Series C Convertible			Series D Convertible						Additional				Total
	Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Paid-In		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity
Balance - January 1, 2021	13,972	$	1	—	$	—	—	$	—	89,908,600	$	8,991	$	17,355,968	$	(11,246,408)	$	6,118,552
Common stock issued upon conversion of Series B Convertible Preferred Stock	(13,972)		(1)	—		—	—		—	698,600		70		(69)		0		0
Stock-based compensation:
Common stock issued for services	—		—	—		—	—		—	20,000		2		49,798		0		49,800
Restricted common stock issued	—		—	—		—	—		—	2,000,000		200		(200)		0		0
Amortization of restricted common stock	—		—	—		—	—		—	0		0		126,625		0		126,625
Amortization of stock options	—		—	—		—	—		—	0		0		9,112		0		9,112
Amortization of market-based award	—		—	—		—	—		—	0		0		130,245		0		130,245
Net loss	—		—	—		—	—		—	0		0		0		(1,714,723)		(1,714,723)
Balance - March 31, 2021	—		—	—		—	—		—	92,627,200		9,263		17,671,479		(12,961,131)		4,719,611
														—				—
Issuance of Series D Convertible Preferred Stock, Common Stock, and warrants for cash [1]	—		—	—		—	650		—	1,300,000		130		6,134,870		0		6,135,000
Common stock issued upon the conversion of Series D Convertible Preferred Stock	—		—	—		—	(650)		—	3,170,730		317		(317)		0		0
Common stock issued upon the exercise of warrants	—		—	—		—	—		—	3,000,000		300		3,712,200		0		3,712,500
Stock-based compensation:
Common stock issued for services	—		—	—		—	—		—	55,000		6		109,994		0		110,000
Restricted common stock issued	—		—	—		—	—		—	415,000		42		(42)		0		0
Amortization of restricted common stock	—		—	—		—	—		—	0		0		433,689		0		433,689
Amortization of stock options	—		—	—		—	—		—	0		0		15,779		0		15,779
Amortization of market-based award	—		—	—		—	—		—	0		0		489,774		0		489,774
Net loss	—		—	—		—	—		—	0		0		0		(3,027,143)		(3,027,143)
Balance - June 30, 2021	—	$	—	—	$	—	—	$	—	100,567,930	$	10,058	$	28,567,426	$	(15,988,274)	$	12,589,210

[1] Represents relative fair value of preferred stock issued, net of cash issuance costs of $365,000.


	FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020
	Series B Convertible			Series C Convertible			Series D Convertible						Additional					Total
	Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Paid-In		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Deficiency

Balance - January 1, 2020	14,487	$	1	24.01	$	—	—	$	—	81,071,831	$	8,107	$	7,591,239	$	(8,396,312)	$	(796,965)
Common stock issued as a commitment fee for the Standby Equity Distribution Agreement	0		0	—		—	—		—	95,847		10		63,249		0		63,259
Stock-based compensation:
Amortization of stock options	0		0	—		—	—		—	0		0		10,528		0		10,528
Net loss	0		0	—		—	—		—	0		0		0		(550,253)		(550,253)
Balance - March 31, 2020	14,487		1	24.01		—	—		—	81,167,678		8,117		7,665,016		(8,946,565)		(1,273,431)
Common stock issued as a commitment fee for the Standby Equity Distribution Agreement [2]	0		0	—		—	—		—	561,564		56		679,381		0		679,437
Stock-based compensation:
Common Stock	0		0	—		—	—		—	30,000		3		29,997		0		30,000
Amortization of stock options	0		0	—		—	—		—	0		0		9,588		0		9,588
Net loss	0		0	—		—	—		—	0		0		0		(428,985)		(428,985)
Balance - June 30, 2020	14,487	$	1	24.01	$	—	—	$	—	81,759,242	$	8,176	$	8,383,982	$	(9,375,550)	$	(983,391)

[2] Amount represents gross proceeds of $757,695 less $78,258 of amortized deferred offering costs.

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

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	For the Six Months Ended
	June 30,
	2021		2020

Cash Flows From Operating Activities:
Net loss	$	(4,741,866)	$	(979,238)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		128,198		96,911
Depreciation expense		9,908		5,534
Bad debt expense		0		933
Change in fair value of accrued issuable equity		111,874		25,800
Stock-based compensation		1,473,863		94,816
Changes in operating assets and liabilities:
Accounts receivable		(559,292)		(43,513)
Inventory		(127,006)		(13,585)
Prepaid expenses and other current assets		(338,070)		(1,119)
Security deposits		(50,213)		0
Right of use asset		21,048		0
Accounts payable		53,140		(235,754)
Accrued expenses and other current liabilities		(51,986)		(203,212)
Lease liability		(20,392)		0
Deferred revenue		9,229		(15,000)
Total Adjustments		660,301		(288,189)
Net Cash Used In Operating Activities		(4,081,565)		(1,267,427)

Cash Flows From Investing Activities:
Purchase of property and equipment		(36,492)		(30,000)
Net Cash Used In Investing Activities		(36,492)		(30,000)

Cash Flows from Financing Activities:
Proceeds from sale of Series D convertible preferred stock, common stock and warrants		6,500,000		0
Proceeds from sale of common stock		0		757,695
Repayments of notes payable		(2,450,000)		(225,000)
Proceeds from the exercise of warrants		3,712,500		0
Proceeds from Paycheck Protection Program loan		0		155,226
Proceeds from note payable		0		1,410,000
Proceeds from line of credit, net		0		3,555
Payment of debt issuance costs		0		(130,000)
Payment of financing costs		(365,000)		(15,000)
Net Cash Provided By Financing Activities		7,397,500		1,956,476

Net Increase In Cash		3,279,443		659,049
Cash - Beginning of Period		8,880,140		108,857
Cash - End of Period	$	12,159,583	$	767,906

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

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(unaudited)


	For the Six Months Ended
	June 30,
		2021		2020
Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
Interest	$	735	$	2,824
Income taxes	$	—	$	0

Non-cash investing and financing activities:
Right of use asset for lease liability	$	814,817	$	0
Beneficial conversion feature on Series D convertible preferred stock	$	2,624,326	$	0
Common stock issued upon the conversion of Series D convertible preferred stock	$	317	$	0
Common stock issued as a commitment fee for the SEDA agreement	$	—	$	63,259
Deferred offering costs reclassified to equity	$	—	$	13,042
Common stock issued upon conversion of Series B Convertible Preferred Stock	$	70	$	0
Original issuance discount on note payable	$	—	$	90,000
Common stock issued for repayment of note payable	$	—	$	141,000
Subscriptions receivable for accrued issuable equity	$	—	$	220,000

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

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Organization and Operations

KULR Technology Group, Inc., through its wholly-owned subsidiary, KULR Technology Corporation (collectively referred to as “KULR” or the “Company”), develops and commercializes high-performance thermal management technologies for electronics, batteries, and other components across a range of applications. Currently, the Company is focused on targeting ~~both,~~ high performance aerospace and Department of Defense ~~(“DOD”~~("DOD") applications, such as satellite communications, directed energy ~~system~~systems and hypersonic ~~vehicle,~~vehicles, and applying them to mass market commercial applications, such as lithium-ion battery energy storage, electrical ~~vehicle,~~vehicles, 5G communication, cloud computer infrastructure, and consumer and industrial devices.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of ~~March 31,~~June 30, 2021 and for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. The results of operations for the three and six months ended ~~March 31,~~June 30, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2020 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 19, 2021.

Risks and Uncertainties

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments ~~began~~begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, ~~accelerated,~~ the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. The Company continues to monitor the impact of COVID-19 on its business and operational assumptions and estimates and has determined there were no material adverse impacts on the Company’s results of operations and financial position at ~~March 31,~~June 30, 2021.

The full extent of the future impact of COVID-19 on the Company’s operations and financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during 2021 and beyond, including the demand for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules as well as the capability to meet customer demands in a timely manner. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Since the date of the Annual Report on Form 10-K for the year ended December 31, 2020, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.

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~~Liquidity~~KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Liquidity

During the six months ended June 30, 2021, the Company raised gross proceeds of $6,500,000 in connection with the sale of preferred stock and warrants, and raised proceeds of $3,712,500 in connection with the exercise of warrants to purchase common stock. During the six months ended June 30, 2021, the Company repaid outstanding notes payable in the amount of $2,450,000. As of ~~March 31,~~June 30, 2021, the Company had cash of $12,159,583 and working capital of approximately $6.2 million and $4.7 million, respectively. For the three months ended March 31, 2021, the Company incurred a net loss of approximately $1.7 million and used cash in operations of approximately $1.7 million. On May 20, 2021, the Company raised approximately $6.5 million in connection with a convertible preferred financing agreement. In connection with the closing of the financing, the Company repaid in full its aggregate notes payable obligation of $1,540,000. See Note 10 – Subsequent Events for additional details.$12,194,403. While the Company anticipates it will continue to incur operating losses and use cash in operating activities for the foreseeable future, the Company believes that its current working capital is sufficient in comparison to its anticipated cash usage for a period of at least twelve months subsequent to the filing date of these ~~condensed consolidated~~ financial statements.

Concentrations of Credit Risk

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

Cash Concentrations

A significant portion of the Company’s cash is held at one major financial institution. The Company has not experienced any losses in such accounts. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. There was an uninsured balance of ~~$5,659,918~~$11,833,906 and $8,513,010 as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

Customer and Revenue Concentrations

The Company had certain customers whose revenue individually represented 10% or more of the ~~Company’s~~Company's total revenue, or whose accounts receivable balances individually represented 10% or more of the ~~Company’s~~Company's total accounts receivable, as follows:

	Revenues						Accounts Receivable
	For the Three Months Ended
	March 31,						As of			As of
	2021			2020			March 31, 2021			December 31, 2020

													Revenues								Accounts Receivable
													For the Three Months Ended				For the Six Months Ended
													June 30,				June 30,				As of		As of
													2021		2020		2021		2020		June 30, 2021		December 31, 2020

Customer A		*			23	%		*			*		20	%	*		14	%	*		35	%	*
Customer B		*			59	%		*			*		*		*		*		*		*		70	%
Customer C		23	%		*			*			*		*		25	%	*		18	%	*		*
Customer D		14	%		*			17	%		*		*		*		*		*		*		19	%
Customer E		51	%		*			61	%		*		*		*		*		*		*		10	%
Customer F		*			*			*			70	%	69	%	*		62	%	*		56	%	*
Customer G		*			*			*			19	%	*		*		12	%	*		*		*
Customer H		*			*			*			10	%	*		44	%	*		48	%	*		*
Total		88	%		82	%		78	%		99	%	89	%	69	%	88	%	66	%	91	%	99	%

*	Less than 10%

* Less than 10%

There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Vendor Concentrations

~~During~~Vendor concentrations are as follows for the three and six months ended ~~March 31,~~June 30, 2021 ~~three vendors represented more than 10% of the Company’s purchases~~ and ~~during the three months ended March 31, 2020, four different vendors represented more than 10% of the Company’s purchases, as follows:~~2020:

	For the Three Months Ended
	March 31,
	2021			2020

							For the Three Months Ended				For the Six Months Ended
							June 30,				June 30,
							2021		2020		2021		2020

Vendor A		*			11	%	13	%	*		14	%	*
Vendor B		*			13	%	*		20	%	*		17	%
Vendor C		*			15	%	11	%	17	%	*		19	%
Vendor D		*			23	%	10	%	*		*		*
Vendor E		10	%		*
Vendor F		27	%		*
Vendor G		16	%		*
		53	%		61	%
* Less than 10%
							34	%	37	%	14	%	36	%

*	Less than 10%

Inventory

~~Inventory~~

Inventory is comprised of carbon fiber velvet ~~(“CFV”~~("CFV") thermal interface solutions and internal short circuit batteries, which are available for sale. Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. The cost of inventory that is sold to third parties is included within cost of sales and the cost of inventory that is given as samples is included within operating expenses. The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down to net realizable value. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the ~~Company’s~~Company's inventory was comprised solely of finished goods.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

~~KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

The following five steps are applied to achieve ~~that~~the core ~~principle:~~

principle of ASC 606:

·●

Step 1: Identify the contract with the customer;

·●

Step 2: Identify the performance obligations in the contract;

·●

Step 3: Determine the transaction price;

·●

Step 4: Allocate the transaction price to the performance obligations in the contract; and

·●

Step 5: Recognize revenue when the company satisfies a performance obligation.

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

·●

Product sales – Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies its performance obligation, which is generally at the time it ships the product to the customer.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

·●

Contract services – Revenue is recognized at the point in time that the Company satisfies its performance obligation under the contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

The following table summarizes the ~~Company’s~~Company's revenue recognized during the three and six months ended ~~March 31,~~June 30, 2021 and 2020:

	For the Three Months Ended
	March 31,
	2021		2020

					For the Three Months Ended				For the Six Months Ended
					June 30,				June 30,
					2021		2020		2021		2020

Product sales	$	178,249	$	28,000	$	577,360	$	67,130	$	755,609	$	99,130
Contract services		239,656		49,500		50,884		133,998		290,540		179,498
Total revenue	$	417,905	$	77,500	$	628,244	$	201,128	$	1,046,149	$	278,628

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had ~~$20,000~~$29,229 and $20,000 of deferred revenue, respectively, from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract., or the customers have not officially accepted the goods or services provided under the contract. During the three and six months ended ~~March 31,~~June 30, 2021 and 2020, there was no0 revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of ~~March 31,~~June 30, 2021 and December 2020, the Company ~~recorded $63,612~~had $109,735 and $31,212, respectively, of deferred labor costs, which is included in prepaid expenses and other current assets in the ~~Company’s~~Company's condensed consolidated balance sheets. Deferred labor costs represent costs to fulfill the Company's contract service revenue. The Company will recognize the deferred labor costs as cost of revenues at the point in time that the Company satisfies its performance obligation under the respective contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

Shipping and Handling Costs

Amounts billed to a customer in a sales transaction related to shipping and handling are recorded as revenue. Costs incurred for shipping and handling are included as cost of ~~sales~~revenues on the accompanying condensed consolidated statements of operations.

~~KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares of non-vested restricted stock, if not anti-dilutive.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

	For the Three Months Ended
	March 31,
	2021		2020

					June 30,
					2021	2020

Series B Convertible Preferred Stock		-		724,350	—	724,350
Series C Convertible Preferred Stock		-		240,100	—	240,100
Unvested Restricted Stock		2,000,000		-
Market-based equity award		1,500,000		-
Unvested restricted stock					2,475,000	—
Market-based equity awards					3,000,000	—
Options		470,000		395,000	540,000	395,000
Warrants		6,787,911		210,025	6,387,911	210,025
Total		10,757,911		1,569,475	12,402,911	1,569,475

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated net loss.

Recently Adopted Accounting Pronouncements

In December 2019, the ~~FASB~~Financial Accounting Standards Board (the "FASB") issued ASU 2019-12, ~~“Income~~"Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,”" which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 effective January 1, 2021 and its adoption did not have a material impact on the ~~Company’s~~Company's condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260, Earnings per Share, relating to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. The guidance becomes effective for the Company on January 1, 2024, with early adoption permitted. The Company is currently evaluating the impact of this new standard on its condense consolidated financial statements.

On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company is evaluating this new standard.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 3 PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of ~~March 31,~~June 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:

	March 31, 2021		December 31, 2020

					June 30,		December 31,
					2021		2020
Deferred labor costs	$	63,612	$	31,212	$	109,735	$	31,212
Deferred inventory costs		385,363		-		18,409		—
Filing		9,889		9,944		4,139		9,944
Insurance		16,035		10,429		88,292		16,035
Marketing		46,353		56,853		187,599		56,853
Other		23,263		31,426		16,271		25,820
Professional		31,129		10,603
Security deposit		8,729		8,729
Professional fees						64,093		10,604
Total prepaid expenses	$	584,374	$	159,196	$	488,538	$	150,468

NOTE 4 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of ~~March 31,~~June 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following:

	March 31, 2021		December 31, 2020

					June 30,		December 31,
					2021		2020

Payroll and vacation	$	108,940	$	279,054	$	177,353	$	278,854
Legal and professional fees		209,000		81,902		118,150		81,902
Other		96,798		34,056		47,523		34,256
Total accrued expenses and other current liabilities	$	414,738	$	395,012	$	343,026	$	395,012

NOTE 5 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the ~~three~~six months ended ~~March 31,~~June 30, 2021 is presented below. ~~There was no accrued issuable equity during the three months ended March 31, 2020.~~


Balance, January 1, 2021	$	128,380		$	128,380
Additions		121,990			183,639
Reclassifications to equity		(49,800	)		(74,800)
Mark-to market		132,576			111,874
Balance, March 31, 2021	$	333,146
Balance, June 30, 2021				$	349,093

During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company entered into certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company, having an aggregate grant date value of ~~$121,989. The Company~~$183,639, and settled certain of its accrued issuable equity obligations through the issuance of an aggregate of ~~20,000~~40,000 shares with an aggregate fair value of ~~$49,800.~~$74,800.

During the three and six months ended ~~March 31,~~June 30, 2021, the Company recorded ~~$132,577~~income (loss) of ~~losses~~$20,703 and ($111,874), respectively, related to the change in fair value of accrued issuable equity.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 6 LEASES

On April 5, 2021, the Company entered into a new lease agreement for office space in San Diego, California, effective June 1, 2021. The intital lease term is three years and there is an option to renew for an additional five years. Management does not expect to exercise its option to renew. Monthly rental payments under the new lease begin at $23,787, which is comprised of $18,518 of base rent plus $5,268 of common area maintenance fees, with annual escalation of 3.5%.The Company paid a security deposit of $50,213 in connection with the new lease agreement.

The Company determined that that value of the lease liability and the related right-of-use asset at inception was $814,817, using an estimated incremental borrowing rate of 5%.

The Company also rents office space in San Diego, California on a month-to-month basis, at monthly rent of $5,127, which is comprised of $4,572 of base rent plus $555 of association fees.

During the three and six months ended June 30, 2021, aggregate operating lease expense was $39,805 and $55,207, respectively. For the three and six months ended June 30, 2020, operating lease expense was $17,200 and $27,216, respectively. As of June 30, 2021, the Company did not have any financing leases.

Maturities of lease liabilities as of June 30, 2021 were as follows:


Maturity Date
Remaining six months ending December 31, 2021	$	142,722
2022		289,981
2023		297,917
2024		125,530
Total lease payments		856,150
Less: Imputed interest		(61,725)
Present value of lease liabilities		794,425
Less: current portion		(252,081)
Lease liabilities, non-current portion	$	542,344

NOTE 7 NOTES PAYABLE

A summary of notes payable activity during the ~~three~~six months ended ~~March 31,~~June 30, 2021 ~~and 2020,~~ is presented below:

	Notes			Debt
	Payable			Discount			Total

										Notes		Debt
										Payable		Discount		Total
Balance, January 1, 2021	$	2,450,000		$	(128,198	)	$	2,321,802		$	2,450,000	$	(128,198)	$	2,321,802
Repayments in cash		(1,050,000	)		-			(1,050,000	)		(2,450,000)		—		(2,450,000)
Amortization of debt discount		-			108,124			108,124			—		128,198		128,198
Outstanding, March 31, 2021	$	1,400,000		$	(20,074	)	$	1,379,926
Outstanding, June 30, 2021										$	—	$	—	$	—

During the year ended December 31, 2020, the Company entered into note purchase agreements in the original aggregate principal amount of $4,000,000 (“Principal Amount”) for cash proceeds of $3,710,000. The Notes included an original issue discount of $290,000, which represents the difference between the principal and proceeds received. The original issue discount, along with the $340,000 advisory fees were recorded as a debt discount which are being amortized over the term of the respective Notes using the effective interest rate method.

The Notes bears no coupon interest (original issue discount only). The Company repaid principal $1,550,000 during the year ended December 31, 2020 and repaid additional principal in the amount of $1,050,000 during the three months ended March 31, 2021. Of the $1,400,000 principal balance remaining at March 31, 2021, $525,000 matures on May 31, 2021 and $875,000 matures on June 30, 2021.

During the three months ended March 31, 2021 and 2020, the Company recorded amortization of debt discount in the amount of $108,124 and $19,220, respectively. Subsequent to March 31, 2021, the Company repaid principal on the Notes in the aggregate amount of $350,000.

NOTE 78 RELATED PARTY TRANSACTIONS

Accounts Payable – Related Party

Accounts payable – related party ~~consists~~consisted of a liability of $2,628 and $2,628, as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, to Energy Science Laboratories, Inc. (“ESLI”), a company controlled by the Company’s Chief Technology Officer (“CTO”), in connection with consulting services provided to the Company associated with the development of the Company’s CFV thermal management solutions in prior periods.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 9STOCKHOLDERS’ EQUITY

Series D Preferred Stock

~~NOTE 8 STOCKHOLDERS' EQUITY (DEFICIENCY)~~

~~Common Stock Issued upon Conversion~~On May 19, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with an investor, pursuant to which the Company agreed to issue to the investor an aggregate of 650 shares of Series BD convertible preferred stock (the “Series D Preferred”) pursuant to a new designation of preferred stock, and one-year warrants to purchase 2,600,000 shares of common stock (the “Warrants”) at a price of $2.50 per share, for aggregate gross proceeds of $6,500,000 (the “Offering”). The Company also agreed to pay the investor a commitment fee of 1,300,000 shares of common stock at the closing of the Offering. The closing of the Offering occurred on May 20, 2021. In connection with the closing of the financing, the Company repaid in full its aggregate remaining notes payable obligation of $1,400,000.

The Series D Preferred ~~Stock~~have a fixed conversion price of $2.05, are convertible into an aggregate of 3,170,732 shares of common stock and have the right to vote on an as-converted basis. Holders of the Series D Preferred shall be entitled to receive cumulative dividends annually at an annual rate equal to ten percent (10%). Dividends shall be payable in cash or, at the option of the holder of the Series D Preferred, converted into shares of common stock as provided in the certificate of designation for the Series D Preferred. Provided that the shares of common stock issuable upon conversion of the Series D Preferred is registered pursuant to an effective registration statement, the Company shall have the option, but not the obligation, to redeem, in cash, all or part of the Series D Preferred.

The Company determined that the Series D Preferred was permanent equity given that there was no redemption provision at the holder’s option and it was determined that the conversion option was clearly and closely related to the equity host, so it didn’t need to be bifurcated. The Company further determined that the $10,000 cash structuring fee paid to the investor, would be accounted for as a reduction of the $6,500,000 of gross proceeds. The remaining proceeds of $6,490,000 were allocated on a relative fair value basis to the Series D Preferred ($3,875,675), the commitment shares ($1,339,582) and the Warrant ($1,274,743). The Company used the Black-Scholes option pricing model to determine the fair value of the Warrant using the following assumptions: exercise price of $2.50 per share, market price of $2.05 per share, expected term of 1.0 year, volatility of 142% and a risk-free interest rate of 0.05%. Finally, the Company determined that the Series D Preferred had a beneficial conversion feature equal to $2,624,326 which is a deemed dividend and represents an adjustment to the numerator in the loss per share calculation. The cash issuance costs of $365,000 (inclusive of the $10,000 cash structuring fee) were charged to additional paid-in-capital.

~~During~~On June 17, 2021, all of the ~~three months ended March 31,~~outstanding shares of Series D Preferred were converted into common stock. See “Common Stock”, below.

Common Stock

On May 20, 2021, the Company issued 1,300,000 shares of common stock with an ~~aggregate~~issuance date value of ~~698,600~~$2,665,000 as a commitment fee to the investor, for the purchase of Series D Preferred. The value of the shares of common stock issued was accounted for as a reduction of the proceeds from the sale of the Series D Preferred.

On June 17, 2021, the Company issued 3,170,730 shares of common stock upon the conversion of ~~13,972~~650 shares of Series BD Preferred, ~~stock,~~ after which ~~there~~no Series D Preferred shares remained ~~no further Series B Preferred Stock~~ outstanding.

~~Stock-Based Compensation~~

During the three months ended ~~March 31,~~June 30, 2021, the Company issued 3,000,000 shares of common stock upon the exercise of warrants for proceeds of $3,712,500.

Stock-Based Compensation

During the three month and six months ended June 30, 2021, the Company recognized stock-based compensation expense of $1,085,891 and $1,473,863, respectively of which $7,785 and $15,190, respectively, is included in research and

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

development expenses, and $1,078,106 and $1,458,673, respectively, is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. During the three and six months ended June 30, 2020, the Company recognized stock-based compensation expense of ~~$387,972~~$82,088 and ~~$12,728,~~$94,816, respectively, ~~related to common stock and restricted common stock, warrants and stock options,~~ of which ~~$7,405~~$2,163 and ~~$8,112,~~$10,275, respectively ~~is included in~~was charged to research and development ~~expenses~~expense and ~~$250,322~~$79,925 and ~~$4,616,~~$84,541, respectively is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

The following table presents information related to stock-based compensation ~~expense~~ for the three months and six months ended ~~March 31,~~June 30, 2021 and 2020:

	For the Three Months Ended
	March 31,
	2021		2020

					For the Three Months Ended				For the Six Months Ended
					June 30,				June 30,
					2021		2020		2021		2020
Common stock issued for services	$	49,800	$	2,200	$	110,000	$	30,000	$	159,800	$	30,000
Amortization of restricted common stock		126,625		-		433,689		—		560,314		—
Amortization of market-based award		130,245		-
Amortization of market-based awards						489,774		—		620,019		—
Stock options		9,112		10,528		15,779		9,588		24,891		20,116
Accrued issuable equity (common stock)		72,190		-
Accrued issuable equity (1)						36,649		42,500		108,839		44,700
Total	$	387,972	$	12,728	$	1,085,891	$	82,088	$	1,473,863	$	94,816

(1)

See Note 5 –- Accrued Issuable Equity, for additional details.

Common Stock Issued for Services

On February 26, 2021, the Company issued 20,000 shares of immediately vested common stock with an aggregate grant date value of $49,800 for consulting services provided during January 2021 and February 2021.

On April 7, 2021, the Company issued 20,000 shares of immediately vested common stock with an aggregate grant date value of $25,000 for consulting services.

On June 11, 2021, the Company issued 35,000 shares of immediately vested common stock with an aggregate grant date value of $85,000 for services rendered during May and June 2021.

Restricted Common Stock

During the three months ended March 31, 2021, the Company recorded stock-based compensation of $17,875 in connection with the amortization of restricted stock issued pursuant to consulting agreements during the fourth quarter of 2020.

On March 1, 2021, the Company issued 2,000,000 shares of ~~its~~restricted common stock (the “COO Shares”) with an aggregate grant date value of $5,220,000 in connection with the appointment of the Company’s Chief Operating ~~Officer (see Note 9 – Commitments and Contingencies).~~Officer. The shares vest in four equal annual installments beginning on March 1, 2022.

During ~~March~~May 2021, the Company issued 80,000 shares of restricted common stock with an aggregate grant date value of $164,000 in connection with the appointment of the Company's Vice President of Operations and granted 50,000 shares of restricted common stock with an aggregate grant date value of $99,500 in connection with the appointment of the Company's Senior Director of Product Development. The shares vest in 4 equal annual installments beginning in May 2022.

On June 1, 2021, the Company issued 25,000 shares of restricted common stock with an aggregate grant date value of $51,750 for services rendered pursuant to a consulting agreement. The shares vest on the one year anniversary of the grant date.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On June 7, 2021, the Company issued an aggregate of 60,000 shares of restricted common stock with an aggregate grant date value of $156,000 as compensation to 3 recently elected board members. The shares vest in 15,000 share increments every three months beginning on September 7, 2021.

On June 10, 2021, the Company issued 200,000 shares of restricted common stock with an aggregate grant date value of $524,000 in connection with the appointment of the Company’s Vice President of Sales and Marketing. The shares vest in four equal annual installments beginning June 9, 2022.

The grant date value of the above awards is recognized ratably over the respective vesting periods. During the three and six months ended June 30, 2021, the Company recorded stock-based compensation of ~~$108,750 related to~~$433,689 and $560,314, respectively, in connection with the amortization of ~~the grant date value of the COO Shares.~~restricted stock.

~~KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

As of ~~March 31,~~June 30, 2021, there ~~is $5,178,744~~was $5,731,264 of unrecognized stock-based compensation related to restricted stock awards which will be amortized over the weighted average remaining vesting period of ~~3.89~~3.6 years.

Stock Options

On January 1, 2020, the Company granted five-year options to purchase a total of 10,000 shares of common stock at an exercise price of $0.66 per share to an employee pursuant to the 2018 Plan. One-fourth of the options will vest on the first-year anniversary of the grant date and the remaining options vest monthly over three years. The options had an aggregate grant date value of $3,609 which is recognized over the vesting period.

On March 12, 2021, in connection with the hire of its Senior Director of Product Development, the Company granted a five-year option to purchase 100,000 shares of common stock ~~to its Senior Director of Product Development.~~ pursuant to the 2018 Plan. The option is exercisable at an exercise price of $2.44 per share. One-fourth of the options will vest on the first-year anniversary of the grant date and the remaining options vest monthly over three years. The options had an aggregate grant date value of $57,819 which is recognized over the vesting period.

On May 17, 2021, the Company granted five-year options to purchase a total of 10,000 shares of common stock at an exercise price of $2.08 per share to an employee pursuant to the 2018 Plan. One-fourth of the options will vest on the six-month anniversary of the grant date and the remaining options vest annually over three years. The options had an aggregate grant date value of $5,878 which is recognized over the vesting period.

On May 26, 2021, the Company granted five-year options to purchase a total of 10,000 shares of common stock at an exercise price of $1.99 per share to an employee pursuant to the 2018 Plan. One-fourth of the options will vest on the six-month anniversary of the grant date and the remaining options vest annually over three years. The options had an aggregate grant date value of $5,805 which is recognized over the vesting period.

On June 1, 2021, the Company granted two five-year options to purchase a total of 20,000 shares of common stock at an exercise price of $2.03 per share to certain employees pursuant to the 2018 Plan. One-fourth of the options will vest on the six-month anniversary of the grant date and the remaining options vest annually over three years. The options had an aggregate grant date value of $12,145 which is recognized over the vesting period.

On June 17, 2021, the Company granted five-year options to purchase a total of 30,000 shares of common stock at an exercise price of $2.27 per share to an employee pursuant to the 2018 Plan. One-fourth of the options will vest on the six-month anniversary of the grant date and the remaining options vest annually over three years. The options had an aggregate grant date value of $16,726 which is recognized over the vesting period.

As of June 30, 2021 there was $120,504 of unrecognized stock-based compensation expense related to stock options, which will be recognized over the weighted average remaining vesting period of 3.3 years.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model. In applying the Black-Scholes option pricing model, the Company used the following assumptions:

	For the Three Months Ended
	March 31,
	2021			2020

							For the Six Months Ended
							June 30,
							2021		2020

Risk free interest rate		0.85	%		1.58	%	0.33% - 0.85	%	1.58	%
Expected term (years)		2.50			2.50		2.5 - 3.5		2.50
Expected volatility		93.00	%		93.00	%	93% - 109	%	93	%
Expected dividends		0.00	%		0.00	%	0	%	0	%

Option forfeitures are accounted for at the time of occurrence. The expected term used is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company does not yet have a trading history to support its historical volatility calculations. Accordingly, the Company is utilizing an expected volatility figure based on a review of the historical volatility of comparable entities over a period of time equivalent to the expected life of the instrument being valued. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

~~The weighted average grant date fair value per share of options granted during the three months ended March 31, 2021 and 2020 was $0.58 and $0.36, respectively.~~

~~KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

A summary of options activity during the ~~three~~six months ended ~~March 31,~~June 30, 2021 is presented below:

			Weighted		Weighted
			Average		Average
	Number of		Exercise		Remaining		Intrinsic
	Options		Price		Term (Yrs)		Value

										Weighted		Weighted
										Average		Average
									Number of	Exercise		Remaining	Intrinsic
									Options	Price		Term (Yrs)	Value
Outstanding, January 1, 2021		370,000	$	0.66					370,000	$	0.66
Granted		100,000		2.44					170,000		2.31
Exercised		-		-					—		—
Expired		-		-					—		—
Forfeited		-		-					—		—
Outstanding, March 31, 2021		470,000	$	1.04		2.3	$	677,400

Exercisable, March, 2021		268,607	$	0.66		2.8	$	488,865
Outstanding, June 30, 2021									540,000	$	0.90	3.5	$	672,700

Exercisable, June 30, 2021									293,173	$	0.66	2.6	$	530,642

The following table presents information related to stock options as of ~~March 31,~~June 30, 2021:

Options Outstanding				Options Exercisable
				Weighted
		Outstanding		Average		Exercisable

										Exercisable Options
										Weighted
									Outstanding	Average
Exercise	Exercise	Number of		Remaining Life		Number of		Exercise	Number of	Remaining Life	Number of
Price	Price	Options		In Years		Options		Price	Options	In Years	Options
$	0.66		370,000		2.8		268,607	0.66	370,000	2.6	293,173
$	2.44		100,000		-		-	1.99	10,000	—	—
			470,000		2.8		268,607
$								2.03	20,000	—	—
$								2.08	10,000	—	—
$								2.27	30,000	—	—
$								2.44	100,000	—	—
									540,000	2.6	293,173

See Market-Based Awards below for an additional option issuance.

Market-Based ~~Award~~Awards

On March 1, 2021, in connection with the appointment of the Company’s ~~COO (see Note 9 – Commitments and Contingencies)~~Chief Operating Officer (the “COO”), the COO isbecame eligible to receive of up to 1,500,000 shares of the Company’s common stock which will be earned based upon achieving certain market capitalization milestones up to $4 billion. The grant date value of this award of $2,911,420 was determined using a Monte Carlo valuation model for market-based vesting awards and will be amortized over each of the tranches’ prospective derived service period. ~~The following assumptions were used:~~

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~~Risk free interest rate~~		~~0.71%~~
~~Expected volatility~~		~~98.9%~~
~~Expected dividend yield~~		~~0.00%~~
~~Weighted average derived service period~~		~~2.20 years~~
~~Fair value of common stock on date of grant~~		~~$2.61~~

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On June 10, 2021, the Chief Executive Officer (the “CEO”) received an option for the purchase of up to 1,500,000 shares of the Company’s common stock at an exercise price of $2.60, which will be earned based upon achieving certain market capitalization milestones up to $4 billion. The grant date value of this award of $2,579,000 was determined using a Monte Carlo valuation model for market-based vesting awards and will be amortized over each of the tranches’ prospective derived service period.

The following assumptions were used in applying the Monte Carlo valuation model to the Company’s market-based awards described above.


	March 1,			June 10,
	2021			2021
Risk free interest rate		0.71	%		0.73	%
Expected volatility		98.9	%		98.5	%
Expected dividend yield		0	%		0	%
Expected term		2.1	years		2.2	years
Fair value of common stock on date of grant	$	2.61		$	2.62

As of June 30, 2021, there was $4,870,402 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 2.1 years.

NOTE 9 10COMMITMENTS AND CONTINGENCIES

Technology Development and Sponsorship Agreement

~~Operating Lease~~

Effective December 22, 2020, the Company entered into a lease addendum to extend the term of its original lease, for space located in San Diego, California used for research and development activities, from December 31, 2020 to June 30, 2021. Monthly rental payments under the renewed lease total $5,127, which is comprised of $4,572 of base rent plus $555 of association fees.

~~During the three months ended~~On March 31, ~~2021 and 2020, operating lease expense was $15,402 and $10,016, respectively. As of March 31, 2021, the Company does not have any financing leases.~~

~~Appointment of President and Chief Operating Officer~~

~~On January 4,~~ 2021, the Company entered into a ~~consulting~~multi-year technology development and sponsorship agreement, ~~with a new Executive Vice President. The consultant provided management and business development services~~pursuant to ~~the Company. In consideration for services provided in January and February 2021,~~which the Company compensated the consultant with $10,000 per month and 10,000 shares of its common stock per month. Effective March 1, 2021, the Company appointed the consultant as President and Chief Operating Officer (“COO”) of the Company,has committed to hold office until the earlier of the expiration of the term of office, a successor is duly elected and qualified, or the earlier of such officer’s death, resignation, disqualification, or removal. In connection with his appointment to COO, the COO receivedspend an aggregate of ~~2,000,000 shares of common stock,~~$1,650,000 in 3 installments which ~~shares will vest in four equal annual installments beginning~~are due on ~~March~~April 1, ~~2022. Additionally, the COO is eligible for incentive-based share grants totaling up to 1,500,000 shares of the Company’s common stock,~~2021, January 1, 2022, and January 1, 2023. The Company paid $250,000 on April 1, 2021, which was recorded as a prepaid expense and will be ~~earned based on achieving certain market capitalization milestones up~~amortized over the performance period. During the six months ended June 30, 2021, $83,333 of expense was recognized related to ~~$4 billion (see Note 8 – Stockholders Equity (Deficiency).~~the agreement.

~~Director Compensation~~

On February 2, 2021, the Board of the Company appointed three new directors on the Board, to hold office until the earlier of the expiration of the term of office of the director whom they have replaced, a successor is duly elected and qualified, or the earlier of such director’s death, resignation, disqualification, or removal. The three directors appointment is contingent upon the Company’s common stock being approved for uplisting to a national exchange. Furthermore, once appointed, each director will receive quarterly cash compensation equal to $10,000 and each director will be granted 20,000 shares of common stock, which shares shall vest quarterly in 5,000 share installments with the first installment vesting immediately upon their appointment.

~~KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

NOTE 10 11SUBSEQUENT EVENTS

~~Technology Development and Sponsorship Agreement~~

On March 31, 2021, the Company entered into a multi-year technology development and sponsorship agreement, pursuant to which the Company has committed to spend an aggregate of $1,650,000 in three installments which are due April 1, 2021, January 1, 2022, and January 1, 2023.

~~Operating Lease~~

On April 5, 2021, the Company entered into an agreement to lease office space for a thirty-six-month period, commencing June 1, 2021. Monthly rental payments under the new lease total $23,787, which are comprised of $18,518 of base rent plus $5,269 for common area costs.

Common Stock

On April 6, 2021, the Company issued 20,000 shares of immediately vested common stock with an aggregate grant date value of $51,000 for legal services. The shares were issued pursuant to the Company’s 2018 Incentive Plan.

During ~~April~~July 2021, the Company issued an aggregate of ~~300,000~~1,133,333 shares of common stock ~~upon the exercise~~in connection with exercises of outstanding warrants pursuant to which ~~the Company~~we received an aggregate of ~~$375,000~~$1,416,666 of gross proceeds.

~~Securities Purchase Agreement~~

~~On May~~ 19 ~~2021, the Company entered into a Securities Purchase Agreement (“SPA”) with an investor, pursuant to which the Company agreed to issue to the investor an aggregate~~

Table of 650 shares of Series D convertible preferred stock (the “Series D Preferred”) pursuant to a new designation of preferred stock, and one-year warrants to purchase 2,600,000 shares of common stock (the “Warrants”) at a price of $2.50 per share, for aggregate gross proceeds of $6,500,000 (the “Offering”). The Company will also pay the investor a commitment fee of 1,300,000 shares of common stock at the closing of the Offering. The closing of the Offering occurred on May 20, 2021. In connection with the closing of the financing, the Company repaid in full its aggregate notes payable obligation of $1,540,000.Contents

The Series D Preferred will have a fixed conversion price of $2.05, will be convertible into an aggregate of 3,170,732 shares of common stock and will have the right to vote on an as-converted basis. Holders of the Series D Preferred shall be entitled to receive cumulative dividends annually at an annual rate equal to ten percent (10%). Dividends shall be payable in cash or, at the option of the holder of the Series D Preferred, converted into shares of common stock as provided in the certificate of designation for the Series D Preferred. Provided that the shares of common stock issuable upon conversion of the Series D Preferred is registered pursuant to an effective registration statement, the Company shall have the option, but not the obligation, to redeem, in cash, all or part of the Series D Preferred.

As a condition to entering into the SPA, the investor agreed that, commencing on the closing date and until the earliest of (i) listing of the Company’s common stock on a national exchange or (ii) June 4, 2021, the Series D Preferred and the Warrants will be subject to a standard lock-up provision.

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. (the “Company”) as of ~~March 31,~~June 30, 2021 and for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 should be read in conjunction with our condensed consolidated financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2020 and for the year then ended, which are included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 19, 2021. 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, in our other reports filed with the SEC, and other factors that we may not know.

Overview

~~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 DOD applications, our solutions target high performance applications in direct energy, hypersonic vehicles and satellite communications. For commercial applications, our main focus is a total solution to battery safety by which we aim to mitigate the effects of thermal runaway propagation. 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 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.

Recent Developments

COVID-19

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments ~~began~~begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, ~~accelerated,~~ the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. The Company continues to monitor the impact of COVID-19 on its business and operational ~~assumptions~~assumptions; however, given the uncertainty around the extent and ~~estimates,~~timing of the potential future spread or mitigation of the Coronavirus and ~~determined there were no material adverse impacts on~~around the ~~Company’s~~imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, ~~and~~cash flows, or financial ~~position at March 31, 2021.~~condition.

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New Officer Hires

~~The full extent of~~During 2021, the ~~future impact of COVID-19 on~~Company hired the Company’s operations and financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during 2021 and beyond, including the demand for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules as well as the capability to meet customer demands in a timely manner. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.following officers:

●

On March 8, 2021, Keith Cochran joined KULR as President and Chief Operating Officer.

●

On April 19, 2021, Antonio Martinez joined the Company as its new Vice President of Operations.

●

On June 10, 2021, Greg Provenzano joined the Company as its new Vice President of Sales and Marketing.

Appointment of ~~Keith Cochran~~

~~On March 8, 2021, our~~Members to the Board of Directors (the “Board”) appointed Keith Cochran as President and Chief Operating Officer of the Company, to hold office until the earlier of the expiration of the term of office, a successor is duly elected and qualified, or the earlier of such officer’s death, resignation, disqualification, or removal.

As compensation for his services as President and Chief Operating Officer of the Company, Mr. Cochran will receive: (1) a salary of $250,000 per annum and commensurate benefits; (2) 2,000,000 restricted shares of the Company’s common stock, which shares shall vest, so long as Mr. Cochran remains employed by the Company, in four (4) equal yearly installments, with the first installment amount to vest on March 1, 2022 and annually thereafter; and (3) eligibility, also subject to Mr. Cochran’s continued employment with the Company, for incentive based grants of up to 1,500,000 shares, which shall be earned upon the Company achieving certain market capitalization milestones.

~~Technology Development and Sponsorship Agreement~~

On ~~March 31,~~June 7, 2021, the Company entered into a multi-year technology development and sponsorship agreement where the Company has committed to spend an aggregate of $1,650,000 payable in three installments, which are due April 1, 2021, January 1, 2022, and January 1, 2023.following new independent director appointments became effective:

●

Morio Kurosaki (Chair of Audit Committee)

●

Stayce Harris (Chair of Compensation Committee)

●

Joanna Massey (Chair of Nominating and Governance Committee)

Operating Lease

On April 5, 2021, ~~the Company~~we entered into an agreement to lease office space for a thirty-six-month period, commencing June 1, ~~2021.~~2021 with the option to renew for an additional 5 years. Monthly rental payments under the new lease total $23,787, which are comprised of $18,518 of base rent plus $5,269 for common area ~~costs.~~costs, with annual escalation of 3.5%.

~~Conversion of~~ Series BD Preferred Stock

In March 2021, KULR issued an aggregate of 698,600 shares of our common stock upon conversion of 13,972 shares of our Series B Preferred Stock, after which there remained no further Series B Preferred Stock outstanding.

~~Securities Purchase Agreement~~

On May ~~19,~~20, 2021, ~~the Company entered into a SPA with an investor, pursuant to which the Company agreed to issue to the investor~~we sold an aggregate of 650 shares of Series D Preferred pursuant to a new designation of preferred stock, and one-year warrants to purchase 2,600,000 shares of common stock at a price of $2.50 per share, for aggregate gross proceeds of $6,500,000. The ~~Company will~~Series D Preferred shares were convertible into an aggregate of 3,170,732 shares of common stock at a fixed conversion price of $2.05 and had the right to vote on an as-converted basis. We also ~~pay~~paid the investor a commitment fee of 1,300,000 shares of common stock atin connection with the sale of the Series D Preferred. Notes payable obligations in the aggregate amount of $1,540,000, were paid in full upon the closing of the ~~Offering. The~~sale of the Series D ~~Preferred will have a fixed conversion price of $2.05, will be convertible into~~Preferred.

On June 17, 2021, we issued an aggregate of 3,170,732 shares of common stock and will have the right to vote on an as-converted basis. The closing of the Offering occurred on May 20, 2021. In connection with the closing of the financing, the Company repaid in full its aggregate notes payable obligation of $1,540,000.

~~Common Stock~~

~~On April 6, 2021, we issued 20,000 shares of immediately vested common stock with a grant date value of approximately $51,000 for legal services.~~

~~On April 19, 2021, in connection with the appointment of a new Vice President of Operations (the “VPO”) the Board of Directors granted 80,000 restricted~~3,170,730 shares of our common stock ~~to the VPO. The~~upon conversion of 650 shares ~~vest in four equal yearly installments on each anniversary~~ of ~~the grant date.~~our Series D Preferred Stock, after which no Series D Preferred shares remained outstanding.

Exercise of Warrants

During ~~April,~~the three months ended June 30, 2021, we issued 3,000,000 shares of common stock upon the exercise of warrants for proceeds of $3,712,500.

During July 2021, we issued an aggregate of ~~300,000~~1,133,333 shares of common stock in connection with exercises of outstanding ~~warrant pursuant to which we received an aggregate~~warrants for proceeds of ~~$375,000~~$1,416,666.

NYSE American Exchange Listing

On June 7, 2021, the Company’s common stock was up listed and now trades on the NYSE American Exchange.

Table of ~~gross proceeds.~~Contents

Results of Operations

Three and Six Months Ended ~~March 31,~~June 30, 2021 Compared With the Three and Six Months Ended ~~March 31,~~June 30, 2020

Revenues

Our revenues consisted of the following during the three months ended ~~March 31,~~June 30, 2021 and 2020:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

Product sales	$	577,360	$	67,130	$	755,609	$	99,130
Contract services		50,884		133,998		290,540		179,498
Total revenue	$	628,244	$	201,128	$	1,046,149	$	278,628

For the Three Months Ended
March 31,
2021 2020
Product sales $ 178,249 $ 28,000
Contract services 239,656 49,500
Total revenue $ 417,905 $ 77,500

For the three months ended ~~March 31,~~June 30, 2021 and 2020, we generated ~~$417,905~~$628,244 and ~~$77,550~~$201,128 of revenues, respectively, representing an increase of ~~$340,405,~~$427,116, or ~~439%~~212%. For the six months ended June 30, 2021 and 2020, we generated $1,046,149 and $278,628 of revenues, respectively, representing an increase of $767,521, or 275%, resulting from four new contracts received during the first quarter of 2021. Revenue from product sales during the three and six months ended ~~March 31,~~June 30, 2021 increased by ~~537%~~760% and 662%, respectively, compared to the three and six months ended ~~March 31,~~June 30, 2020, mainly due to four large contracts received during the ~~three months ended March 31,~~first quarter of 2021. Product sales during these periods included sales of our component product, carbon fiber velvet (“CFV”) thermal management solution, ISC battery cells and devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials. Our service revenues, which include certain research and development contracts and onsite engineering services, have not been hampered by restrictions arising from working under COVID-19 shelter-in-place regulations.

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 commitment. 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 Revenues

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

Generally, we earn greater margins on revenue from products compared to revenue from services, so product mix plays an important role in our reported average margins for any period. Also, we are introducing new products at an early stage in our development cycle and the margins earned can vary significantly between period, customers and products, due to the learning process, customer negotiating strengths, and product mix.

For the three months ended ~~March 31,~~June 30, 2021 and 2020, cost of revenues was ~~$275,268~~$439,206 and ~~$30,043,~~$44,734, respectively, an increase of ~~$245,225~~$394,472 or ~~816%~~882%. The increase was ~~primarily~~partially due to higher ~~product sales and service~~ revenues earned during the three months ended ~~March 31,~~June 30, 2021. The gross margin percentage was ~~34%~~30% and ~~61%~~78% for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The decrease in margins during the second quarter of 2021 is primarily the result changes in product mix sold during the second quarter.

For the six months ended June 30, 2021 and 2020, cost of revenues was $714,474 and $74,777, respectively, an increase of $639,697 or 855%. The increase was partially due to higher revenues earned during the six months ended June 30, 2021. The gross margin percentage was 32% and 73% for the six months ended June 30, 2021 and 2020, respectively. The decrease in margins during the first ~~quarter~~half of 2021 is primarily the result ~~of a low 15% margin earned on a single large contract~~changes in product mix sold during the first ~~quarter~~half of 2021.

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Research and Development

Research and development expenses (“R&D”) include expenses incurred in connection with the R&D of our CFV thermal management solution. R&D expenses are expensed as they are incurred.

For the three months ended ~~March 31,~~June 30, 2021 and 2020, R&D expenses were ~~$122,983~~$352,741 and ~~$111,713,~~$57,991, respectively, representing an increase of ~~$11,270~~$294,750 or ~~10%~~508%. For the six months ended June 30, 2021 and 2020, R&D expenses were $475,724 and $169,704, respectively, representing an increase of $306,020 or 180%. The increase is primarily due to ~~new~~thermal energy management report fees and energy storage development services provided during the period, partially offset by a reduction in R&D salaries and other salary related costs, such as payroll taxes and other benefits, due to salary reductions implemented at the end of the first quarter of 2020 as a result of COVID-19.period. We expect that our R&D expenses will increase as we expand our future operations.

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of travel, salaries, payroll taxes and other benefits, and rent expense.

For the three months ended ~~March 31,~~June 30, 2021 and 2020, selling, general and administrative expenses were ~~$1,492,811~~$2,723,303 and ~~$465,410,~~$421,544, respectively, an increase of ~~$1,027,401~~$2,301,759 or ~~221%~~546%. The increase is primarily attributable to an increase of approximately ~~$486,000~~$998,000 of stock-based compensation, an increase of approximately $651,000 of marketing and advertising expense, an increase of approximately ~~$376,000 of stock-based compensation~~$214,000 for professional fees resulting ~~primarily~~ from ~~the issuance of restricted stock upon the appointment of the Company’s Chief Operating Officer (“COO”)~~engagements for financial services, quality and ~~stock granted to consultants during the period,~~automation services, as well as an increase of approximately ~~$87,000~~$241,000 in labor costs as the result of ~~four~~five new hires, ~~including~~an increase of approximately $148,000 of miscellaneous expenses, and an increase of approximately $50,000 of travel and entertainment expenses due to the ~~appointment~~lifting of COVID-19 dining and traveling restrictions.

For the ~~COO.~~six months ended June 30, 2021 and 2020, selling, general and administrative expenses were $4,216,114 and $886,954, respectively, an increase of $3,329,160 or 375%. The increase is primarily attributable to an increase of approximately $1,374,000 of stock-based compensation, an increase of approximately $1,137,000 of marketing and advertising expense, an increase of approximately $327,000 in labor costs as the result of five new hires, an increase of approximately $220,000 for professional fees resulting from engagements for financial services, quality and automation services, and an increase of approximately $200,000 of miscellaneous expenses, and an increase of approximately $71,000 of travel and entertainment expenses due to the lifting of COVID-19 dining and traveling restrictions.

Other Expenses

For the three months ended ~~March 31,~~June 30, 2021 and 2020, other expenses were ~~$241,566~~$140,137 and ~~$20,587,~~$105,844, respectively, representing an increase of ~~$220,979.~~$34,293 or 32%. The increase in other expenses is primarily due to the redemption costs associated with the repayment of notes payable of $140,000, partially offset by the decreases in amortization of debt discount of $58,000 and the change in fair value of accrued issuable equity of $47,000.

For the six months ended June 30, 2021 and 2020, other expenses were $381,703 and $126,431, respectively, representing an increase of $255,272 or 202%. The increase in other expense is primarily due to the debt redemptions costs of $140,000 associated with the repayment of notes payable, an increase of amortization of debt discount of ~~$108,124~~$31,000, and an increase of $86,000 related to the ~~issuance of notes payable and $132,577 of~~ change in fair value of accrued issuable equity during the ~~three~~six months ended ~~March 31,~~June 30, 2021.

Liquidity and Capital Resources

As of ~~March 31,~~June 30, 2021, ~~and December 31, 2020,~~ we had a cash ~~balances~~balance of ~~$6,166,755 and $8,880,140, respectively,~~$12,159,583 and working capital of ~~$4,699,452~~$12,194,403. We incurred a net loss of $4,741,866 during the six months ended June 30, 2021 and ~~$6,060,695, respectively.~~had an accumulated deficit totaling $15,988,274 as of June 30, 2021. While the Company anticipates it will continue to incur operating losses and use cash in operating activities for the near future, the Company believes that its current working capital is sufficient in comparison to its anticipated cash usage for a period of at least twelve months subsequent to the filing date of these financial statements.

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For the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, cash used in operating activities was ~~$1,663,385~~$4,081,565 and ~~$698,110,~~$1,267,427, respectively. Our cash used in operations for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was primarily attributable to our net loss of ~~$1,714,723,~~$4,741,866, adjusted for non-cash expenses in the aggregate amount of ~~$633,444,~~$1,723,843, and ~~$582,106~~$1,063,542 of net cash used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the ~~three~~six months ended ~~March 31,~~June 30, 2020 was primarily attributable to our net loss of ~~$550,253,~~$979,238, adjusted for non-cash expenses in the aggregate amount of ~~$32,826,~~$223,994, and ~~$180,683~~$512,183 of net cash used to fund changes in the levels of operating assets and liabilities.

~~There were no cash flows from investing activities for~~For the ~~three~~six months ended ~~March 31, 2021 and 2020.~~

~~For the three months ended March 31,~~June 30, 2021 and 2020, cash ~~(used in)~~used in investing activities was $36,492 and $30,000, respectively, related to purchases of property and equipment and to improvements to the new executive offices.

For the six months ended June 30, 2021 and 2020, cash provided by financing activities was ~~($1,050,000)~~$7,397,500 and ~~$1,223,401,~~$1,956,476, respectively. Cash ~~used in financing activities during the three months ended March 31, 2021 represents principal payments on notes payable. The cash~~ provided by financing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2021 represents $6,500,000 of proceeds from the sale of preferred stock and $3,712,500 received in connection with the exercise of warrants, partially offset by the $2,450,000 principal repayments on notes payable and $365,000 of financing costs paid during the period. Cash provided by financing activities during the six months ended June 30, 2020 ~~primarily represents~~consisted of $1,410,000 of net proceeds from the issuance of a note payable, $155,226 of proceeds from the Paycheck Protection Program loan, $757,695 of net proceeds from the sale of common stock and $3,555 proceeds from the Company’s line of credit. These amounts were partially offset by $130,000 for the payment ~~of $130,000~~ of debt issuance costs, ~~and repayment of~~$225,000 for the repayments on notes payable and $15,000 of ~~$50,000.~~

cash paid in offering costs.

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments ~~began~~begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, ~~accelerated,~~ the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. The Company continues to monitor the impact of COVID-19 on its business and operational ~~assumptions~~assumptions; however, given the uncertainty around the extent and ~~estimates,~~timing of the potential future spread or mitigation of the Coronavirus and ~~determined there were no material adverse impacts on~~around the ~~Company’s~~imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, ~~and~~cash flows, or financial ~~position at March 31, 2021.~~

The full extent of the future impact of COVID-19 on the Company’s operations and financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during 2021 and beyond, including the demand for its products, interruptions to supply chains, ability to maintain regular R&D and manufacturing schedules as well as the capability to meet customer demands in a timely manner. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

condition.

During the ~~year~~six months ended ~~December 31, 2020, we entered into note purchase agreements in~~June 30, 2021, the ~~original~~Company raised aggregate ~~principal amount of $4,000,000 for cash~~gross proceeds of ~~$3,710,000. Principal~~$6,500,000 and $3,712,500 in connection with the ~~amount~~sale of ~~$1,550,000 was repaid during~~preferred stock, common stock and warrants in a public offering and the ~~year ended December 31, 2020 and principal in the amount~~sale of ~~$1,050,000 was repaid during the three months ended March 31, 2021.~~common stock pursuant to warrant exercises, respectively. Of the aggregate proceeds received, $1,400,000 was used to repay principal ~~balance remaining at March 31, 2021, $525,000 matures~~due on ~~May 31, 2021 and $875,000 matures on June 30, 2021.~~

~~In April 2020,~~ the ~~Company received a loan of $155,226 under the government Small Business Administration (“SBA”) sponsored~~YAII Notes. The Company’s Payroll Protection Program (“PPP”) loan remains outstanding as of June 30, 2021, and the the Company intends to ~~support continuing employment during the COVID-19 pandemic. The PPP Loan (“Note”) and accrued interest may be forgiven as long as the borrower uses the loan proceeds~~apply for ~~eligible purposes, including payroll, benefits, rent and utilities and maintains its payroll levels. The amount~~full forgiveness of ~~forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. If~~ the PPP ~~Loan is not forgiven,~~Loan. While the Company ~~will begin repaying this loan beginning in November 2021. Any unforgiven balance must be repaid in full by~~has additional availability of approximately $5,707,000 under its ~~maturity date, February 28, 2022.~~

~~Effective February 27, 2020, the Company entered into a twenty-four month~~ Standby Equity Distribution Agreement (“SEDA”) with YAII, ~~pursuant to~~ which the Company may, at its discretion, sell to up to an aggregate of $8,000,000 (subject to YAII’s approval for amounts over $100,000) of shares of the Company’s common stock at a price equal to Company 80% of the lowest daily volume weighted average price for the five days immediately following the date the Company delivers notice requiring YAII to purchase theexpires on February 7, 2022, it is currently precluded from issuing any shares under the ~~SEDA. For each advance,~~SEDA, so long as the Company shall have delivered all shares relating to all prior advances, and, unless waived by YAII, at least 5 trading days shall have elapsed from the immediately preceding advance date. Through March 31, 2021 , the Companywarrants issued an aggregate of 1,841,548 shares of common stock at prices between $0.73 - $1.65 per share for aggregate proceeds of $2,214,437 in connection with advance notices submitted to YAII under the SEDA, of which $791,000 of the proceeds were applied directly against the principal due under the Notes. Pursuant to a registered public offering on December 31, 2020 in an unrelated transaction remain outstanding, because the warrants preclude the Company ~~may not issue~~from issuing shares ~~involving~~in a variable rate ~~transactions (including shares issuable pursuant to the SEDA), so long as warrants issued in connection with the registered public offering remain outstanding.~~

On May 19, 2021, the Company entered into a SPA with an investor, pursuant to which the Company agreed to issue to the investor an aggregate of 650 shares of Series D Preferred pursuant to a new designation of preferred stock, and one-year warrants to purchase 2,600,000 shares of common stock at a price of $2.50 per share, for aggregate gross proceeds of $6,500,000. The Company will also pay the investor a commitment fee of 1,300,000 shares of common stock at the closing of the Offering. The Series D Preferred will have a fixed conversion price of $2.05, will be convertible into an aggregate of 3,170,732 shares of common stock and will have the right to vote on an as-converted basis. The closing of the Offering occurred on May 20, 2021. In connection with the closing of the financing, the Company repaid in full its aggregate notes payable obligation of $1,540,000.

We have not yet achieved profitability and expect to continue to incur cash outflows from operations. It is expected that our research and development and general and administrative expenses will continue to increase and, as a result, we will eventually need to generate significant revenues and/or raise additional capital to fund our operations. Although our management believes that we have access to capital resources through various sources, there is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. While we believe that we will continue to incur operating losses and use cash in operating activities for the foreseeable future, we believe that our current working capital is sufficient in comparison to our anticipated cash usage for a period of at least the next twelve months subsequent to the filing date of these condensed consolidated financial statements.

transaction.

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 Policies

For a description of our critical accounting policies, see Note 2 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting company, as defined by Rule 229.10(f)(1), and is not required to provide the information required by this Item.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our management, with the participation of our principal executive officer and principal financial officer, concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective at the reasonable assurance level.

During the year ended December 31, 2020, our management identified a material weakness in our internal control over financial reporting whereas we did not design or maintain effective controls to ensure that there is an independent review and approval of electronic payments (wires, EFT’s, ACH’s and credit card payments) as our policy of providing timely support to ensure completeness and accuracy of the payment was not followed. We are currently implementing a detailed plan for remediation of the material weakness, including developing and maintaining preventative controls around the electronic payment process to ensure proper segregation of duties.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the ~~first~~second quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. A control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

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 19, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~In the three months ended March 31,~~On May 20, 2021, we issued ~~698,600~~1,300,000 shares of common stock as commitment shares in connection with the sale of 650 shares of Series D Convertible Preferred Stock.

On June 17, 2021, we issued 3,170,730 shares of common stock upon conversion of ~~13,972~~650 shares of our Series BD Convertible Preferred Stock.

Each of the foregoing transactions was exempt from the ~~registrations~~registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof. In the alternative, the common stock issued upon the exercise of conversion rights is an exempt security pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

~~Exhibit~~ ~~No.~~		~~Description~~
~~31.1~~ Exhibit No.		Description
31.1		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

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101.SCH		Inline XBRL Taxonomy Extension SchemaSchema Document

101.CAL		Inline XBRL Taxonomy Extension CalculationCalculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension DefinitionDefinition Linkbase Document

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101.PRE		Inline XBRL Taxonomy Extension PresentationPresentation Linkbase Document

104		Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

*Filed herewith

**Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned hereunto duly authorized.

~~May 20,~~ August 16, 2021	By	/s/ Michael Mo
		Michael Mo
		Chief Executive Officer and Chairman
		(Principal Executive Officer)

~~May 20,~~
August 16, 2021	By	/s/ Simon Westbrook
		Simon Westbrook
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

	March 31,			December 31
	2021			2020
		(unaudited)
Assets
Current Assets:
Cash	$	6,166,755		$	8,880,140
Accounts receivable		345,299			55,492
Inventory		54,135			55,452
Prepaid expenses and other current assets		584,374			159,196
Total Current Assets		7,150,563			9,150,280
Property and equipment, net		53,086			57,857
Total Assets	$	7,203,649		$	9,208,137

Liabilities and Stockholders' Equity

Current Liabilities:
Accounts payable	$	178,374		$	66,537
Accounts payable - related party		2,628			2,628
Accrued expenses and other current liabilities		414,738			395,012
Accrued issuable equity		333,146			128,380
Notes payable, net of debt discount of $20,074 and $128,198 at March 31, 2021 and December 31, 2020, respectively		1,379,926			2,321,802
Loan payable, current portion		122,299			12,936
Deferred revenue		20,000			20,000
Total Current Liabilities		2,451,111			2,947,295
Loan payable, non-current portion		32,927			142,290
Total Liabilities		2,484,038			3,089,585

Commitments and contingencies (Note 9)
Stockholders' Equity:
Preferred stock, $0.0001 par value, 20,000,000 shares authorized;
Series A Preferred Stock, 1,000,000 shares designated; none issued and outstanding at March 31, 2021 and December 31, 2020		-			-
Series B Convertible Preferred Stock, 31,000 shares designated; 0 and 13,972 shares issued and outstanding and liquidation preference of $0 and $13,972 at March 31, 2021 and December 31, 2020 , respectively		-			1
Series C Preferred Stock, 400 shares designated; none issued and outstanding at March 31, 2021 and December 31, 2020		-			-
Series D Convertible Preferred Stock, 650 shares designated, none issued and outstanding at March 31, 2021 and December 31, 2020 (see Note 10)		-			-
Common stock, $0.0001 par value, 500,000,000 shares authorized; 92,627,200 and 89,908,600 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		9,263			8,991
Additional paid-in capital		17,671,479			17,355,968
Accumulated deficit		(12,961,131	)		(11,246,408	)
Total Stockholders' Equity		4,719,611			6,118,552
Total Liabilities and Stockholders' Equity	$	7,203,649		$	9,208,137

	For the Three Months Ended March 31,
	2021			2020
Revenue	$	417,905		$	77,500
Cost of revenue		275,268			30,043
Gross Profit		142,637			47,457
Operating Expenses:
Research and development		122,983			111,713
Selling, general, and administrative		1,492,811			465,410
Total Operating Expenses		1,615,794			577,123
Loss From Operations		(1,473,157	)		(529,666	)
Other Expenses
Interest expense, net		(865	)		(1,367	)
Amortization of debt discount		(108,124	)		(19,220	)
Change in fair value of accrued issuable equity		(132,577	)		-
Total Other Expenses		(241,566	)		(20,587	)
Net Loss	$	(1,714,723	)	$	(550,253	)

Net Loss Per Share
- Basic and Diluted	$	(0.02	)	$	(0.01	)

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		90,078,940			81,098,163

	FOR THE THREE MONTHS ENDED MARCH 31, 2021
	Series B Convertible						Series C Convertible								Additional						Total
	Preferred Stock						Preferred Stock				Common Stock				Paid-In			Accumulated			Stockholders'
	Shares			Amount			Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance - January 1, 2021		13,972		$	1			-	$	-		89,908,600	$	8,991	$	17,355,968		$	(11,246,408	)	$	6,118,552
Common stock issued upon conversion of Series B Convertible Preferred Stock		(13,972	)		(1	)		-		-		698,600		70		(69	)		-			-
Stock-based compensation:
Common stock issued for services		-			-			-		-		20,000		2		49,798			-			49,800
Restricted common stock issued		-			-			-		-		2,000,000		200		(200	)		-			-
Amortization of restricted common stock		-			-			-		-		-		-		126,625			-			126,625
Amortization of stock options		-			-			-		-		-		-		9,112			-			9,112
Amortization of market-based award		-			-			-		-		-		-		130,245			-			130,245
Net loss		-			-			-		-		-		-		-			(1,714,723	)		(1,714,723	)
Balance - March 31, 2021		-		$	-			-	$	-		92,627,200	$	9,263	$	17,671,479		$	(12,961,131	)	$	4,719,611