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, ~~2021~~2022

¨☐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~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~organization)		~~81-1004273~~ (~~I.R.S.~~IRS Employer Identification ~~No.)~~Number)


		4863 Shawline Street, San Diego, California92111
~~1999 S. Bascom Ave. Suite 700. Campbell, California~~ (Address of ~~principal executive offices)~~		~~95008~~ ~~(Zip Code)~~Principal Executive Offices)

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

(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~~issuer 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 (§232.405 of this chapter) 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~~the definitions of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”~~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)~~13(a) of the ~~Securities~~Exchange 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, 2021,~~16, 2022, there were ~~94,247,200~~107,022,536 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, ~~2021~~2022

TABLE OF CONTENTS

			Page
PART I – FINANCIAL INFORMATION

	Item 1. Financial Statements.		1 3

	Condensed Consolidated Balance Sheets as of March 31, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021		1 3

	Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021		2 4

	Unaudited Condensed Consolidated ~~Statements~~Statement of Changes in Stockholders’ Equity ~~(Deficiency)~~ for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021		3 5

	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021		4 6

	Notes to Unaudited Condensed Consolidated Financial Statements ~~(unaudited)~~		5 8

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.		17 19

	Item 3. Quantitative and Qualitative Disclosures About Market Risk.		22 23

	Item 4. Controls and Procedures.		22 24

PART II - OTHER INFORMATION

	Item 1. Legal Proceedings.		23 25

	Item 1A. Risk Factors.		23 25

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		23 25

	Item 3. Defaults Upon Senior Securities.		23 25

	Item 4. Mine Safety Disclosures		23 25

	Item 5. Other Information.		23 25

	Item 6. Exhibits.		24 26

~~SIGNATURES~~	SIGNATURES	25	27

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

~~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~~(unaudited)

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~


	March 31,		December 31,
	2022		2021
	(unaudited)
Assets
Current Assets:
Cash	$	10,132,676	$	14,863,301
Accounts receivable		193,092		136,326
Inventory		287,328		191,311
Prepaid expenses and other current assets		1,918,011		570,360
Total Current Assets		12,531,107		15,761,298
Property and equipment, net		357,509		374,475
Vendor deposits		2,381,488		2,153,950
Security deposits		58,941		58,941
Intangible assets, net		213,808		216,952
Right of use asset		470,903		665,687
Total Assets	$	16,013,756	$	19,231,303

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	188,737	$	454,507
Accrued expenses and other current liabilities		1,800,217		1,163,227
Accrued issuable equity		182,281		290,721
Lease liability, current portion		209,560		262,379
Loan payable		155,226		155,226
Deferred revenue		20,000		132,303
Total Current Liabilities		2,556,021		2,458,363
Lease liability, non-current portion		267,900		407,898
Total Liabilities		2,823,921		2,866,261

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; NaN issued and outstanding at March 31, 2022 and December 31, 2021		0		0
Series B Convertible Preferred Stock, 31,000 shares designated; none issued and outstanding at March 31, 2022 and December 31, 2021		0		0
Series C Preferred Stock, 400 shares designated; none issued and outstanding at March 31, 2022 and December 31, 2021		0		0
Series D Preferred Stock, 650 shares designated; none issued and outstanding at March 31, 2022 and December 31, 2021		0		0
Common stock, $0.0001 par value, 500,000,000 shares authorized; 104,870,715 shares issued and 104,792,072 outstanding at March 31, 2022, respectively, and 104,792,072 shares issued and outstanding at December 31, 2021		10,487		10,479
Additional paid-in capital		40,913,190		39,512,122
Treasury stock, at cost; 194,704 and 0 shares held at March 31, 2022 and December 31, 2021		(439,728)		0
Accumulated deficit		(27,294,114)		(23,157,559)
Total Stockholders' Equity		13,189,835		16,365,042
Total Liabilities and Stockholders' Equity	$	16,013,756	$	19,231,303

~~(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.

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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
	March 31,
	2022		2021
Revenue	$	200,499	$	417,905
Cost of revenue		122,918		275,268
Gross Profit		77,581		142,637

Operating Expenses
Research and development		721,347		122,983
Selling, general, and administrative		3,534,923		1,492,811
Total Operating Expenses		4,256,270		1,615,794
Loss From Operations		(4,178,689)		(1,473,157)

Other Income (Expense)
Interest expense, net		(906)		(865)
Amortization of debt discount		—		(108,124)
Change in fair value of accrued issuable equity		43,040		(132,577)
Total Other Income (Expense), net		42,134		(241,566)

Net Loss	$	(4,136,555)	$	(1,714,723)
Net Loss Per Share
- Basic and Diluted	$	(0.04)	$	(0.02)

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		102,561,211		90,078,940

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.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

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

~~(unaudited)~~FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(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 MONTHS ENDED MARCH 31, 2022
				Additional							Total
	Common Stock			Paid-In		Treasury Stock			Accumulated		Stockholders'
	Shares	Amount		Capital		Shares	Amount		Deficit		Equity
Balance - January 1, 2022	104,792,072	$	10,479	$	39,512,122	—	$	—	$	(23,157,559)	$	16,365,042
Treasury stock held upon the vesting of restricted common stock	—		0		0	194,704		(439,728)		0		(439,728)
Common stock issued upon the exercise of warrants	70,143		7		87,672	—		—		0		87,679
Common stock issued upon the exercise of options	2,500		0		5,075	—		—		0		5,075
Stock-based compensation:
Common stock issued for services	6,000		1		43,159	—		—		0		43,160
Amortization of restricted common stock	—		0		519,231	—		—		0		519,231
Amortization of stock options	—		0		15,883	—		—		0		15,883
Amortization of market-based awards	—		0		730,048	—		—		0		730,048
Net loss	—		0		0	—		—		(4,136,555)		(4,136,555)
Balance - March 31, 2022	104,870,715	$	10,487	$	40,913,190	194,704	$	(439,728)	$	(27,294,114)	$	13,189,835


	FOR THE THREE MONTHS ENDED MARCH 31, 2021
	Series B Convertible						Additional					Total
	Preferred Stock			Common Stock			Paid-In		Accumulated		Stockholders'
	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 awards	—		—	—		—		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

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	For the Three Months Ended
	March 31,
	2022		2021
Cash Flows From Operating Activities:
Net loss	$	(4,136,555)	$	(1,714,723)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		0		108,124
Non-cash lease expense		194,784		0
Depreciation and amortization expense		41,461		4,771
Change in fair value of accrued issuable equity		(43,040)		132,577
Stock-based compensation		1,242,922		387,972
Changes in operating assets and liabilities:
Accounts receivable		(56,766)		(289,807)
Inventory		(96,017)		1,317
Prepaid expenses and other current assets		(1,347,651)		(425,178)
Accounts payable		(265,770)		111,838
Accrued expenses and other current liabilities		197,262		19,724
Lease liability		(192,817)		0
Deferred revenue		(112,303)		0
Total Adjustments		(437,935)		51,338
Net Cash Used In Operating Activities		(4,574,490)		(1,663,385)

Cash Flows From Investing Activities:
Vendor deposits for property and equipment		(227,538)		0
Purchases of property and equipment		(21,351)		0
Net Cash Used In Investing Activities		(248,889)		0

Cash Flows from Financing Activities:
Repayments of notes payable		0		(1,050,000)
Proceeds from the exercise of options		5,075		0
Proceeds from the exercise of warrants		87,679		0
Net Cash Provided By (Used In) Financing Activities		92,754		(1,050,000)

Net Decrease In Cash		(4,730,625)		(2,713,385)
Cash - Beginning of Period		14,863,301		8,880,140
Cash - End of Period	$	10,132,676	$	6,166,755

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(unaudited)


	For the Three Months Ended
	March 31,
		2022		2021
Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
Interest	$	642	$	367

Non-cash investing and financing activities:
Common stock held in treasury upon the vesting of restricted common stock	$	(439,728)	$	0
Common stock issued upon the conversion of Series B Convertible Preferred Stock	$	—	$	70

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND ~~BASIS OF PRESENTATION~~RISKS AND UNCERTANTIES

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,~~electric vehicles, 5G communication, cloud computer infrastructure, 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, ~~2021~~2022 and for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021. The results of operations for the three months ended March 31, ~~2021~~2022 are not necessarily indicative of the operating results for the full year ending December 31, ~~2021~~2022 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~~2021 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March ~~19, 2021.~~28, 2022.

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,~~2022, 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~~For example, in response to an outbreak of infection in Shanghai, beginning in March 2022 governmental authorities in China implemented a lockdown order in that city, significantly slowing economic and business activity in that region. We continue to monitor the ~~impact~~rapidly evolving situation and guidance from international and domestic authorities and may take additional actions based on their recommendations and requirements or as we otherwise see fit to protect the health and safety of ~~COVID-19 on its business~~our employees, customers, partners and ~~operational assumptions and estimates, and determined there were no material adverse impacts on the Company’s results of operations and financial position at March 31, 2021.~~

suppliers.

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~~2022 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,~~2021, 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

As of March 31, ~~2021,~~2022, the Company had cash of $10,132,676 and working capital of ~~approximately $6.2 million and $4.7 million, respectively.~~$9,975,086. For the three months ended March 31, ~~2021,~~2022, the Company incurred a net loss of ~~approximately $1.7 million~~$4,136,555 and used cash in operations of approximately ~~$1.7 million.~~$4,574,490. During April 2022, the Company received an aggregate of $2,933,157 of gross proceeds upon the exercise of warrants. On May ~~20, 2021,~~13, 2022, the Company ~~raised approximately $6.5 million in connection with~~issued a ~~convertible preferred financing agreement. In connection with~~$5,000,000 promissory note to an investor for gross proceeds of $4,750,000. On the ~~closing of the financing,~~same date, the Company ~~repaid in full~~entered into a Standby Equity Purchase Agreement, which gives the Company the right, but not the obligation, to sell up to $50,000,000 of its ~~aggregate notes payable obligation~~shares of ~~$1,540,000.~~common stock to the same investor during the commitment period. See Note 10 – Subsequent Events for additional ~~details.~~information on the aforementioned transactions. 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, combined with the cash availability pursuant to the Standby Equity Purchase Agreement, is sufficient in comparison to its anticipated cash usage for a period of at least twelve months ~~subsequent to~~after the filing date of these financial statements.

Use of Estimates

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these unaudited condensed consolidated financial ~~statements.~~statements include, but are not limited to, fair value calculations for equity securities, stock-based compensation and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consisted 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~~were uninsured ~~balance~~balances of ~~$5,659,918~~$9,709,169 and ~~$8,513,010~~$5,659,918 as of March 31, ~~2021~~2022 and ~~December 31, 2020,~~2021, 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
													March 31,				As of		As of
													2022		2021		March 31, 2022		December 31, 2021
Customer A		*			23	%		*			*		*		*		*		34	%
Customer B		*			59	%		*			*		43	%	*		*		*
Customer C		23	%		*			*			*		37	%	51	%	50	%	42	%
Customer D		14	%		*			17	%		*		*		14	%	*		21	%
Customer E		51	%		*			61	%		*		*		23	%	*		*
Customer F		*			*			*			70	%
Customer G		*			*			*			19	%
Customer H		*			*			*			10	%
Total		88	%		82	%		78	%		99	%	80	%	88	%	50	%	97	%

*	Less than 10%

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* Less than 10%KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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.

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

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Vendor Concentrations

~~During~~Vendor concentrations are as follows for the three months ended March 31, 2022 and 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:respectively:

	For the Three Months Ended
	March 31,
	2021			2020

							For the Three Months Ended
							March 31,
							2022		2021
Vendor A		*			11	%	69	%	*
Vendor B		*			13	%	*		26	%
Vendor C		*			15	%	14	%	*
Vendor D		*			23	%	*		67	%
Vendor E		10	%		*
Vendor F		27	%		*
Vendor G		16	%		*
		53	%		61	%
* Less than 10%
							83	%	93	%

*	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~~

Inventory at March 31, ~~2021~~2022 and December 31, ~~2020, the Company’s inventory~~2021 was comprised ~~solely~~ of ~~finished goods.~~the following:


	March 31,		December 31,
	2022		2021
Work-in-process	$	84,410	$	5,500
Finished goods		202,918		185,811
Total inventory	$	287,328	$	191,311

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 core principle:

·●

Step 1: Identify the contract with the customer;

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

·●

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.

·●

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 revenue recognized ~~during the three months ended March 31, 2021 and 2020:~~in its consolidated statements of operations:

	For the Three Months Ended
	March 31,
	2021		2020

					For the Three Months Ended
					March 31,
					2022		2021
Product sales	$	178,249	$	28,000	$	172,599	$	178,249
Contract services		239,656		49,500		27,900		239,656
Total revenue	$	417,905	$	77,500	$	200,499	$	417,905

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, the Company had $20,000 and ~~$20,000~~$132,303 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.,~~contract, or the customers have not officially accepted the goods or services provided under the contract. During the three months ended March 31, 2022, the Company recognized $112,303 of revenues that were included in deferred revenue in a previous period.

During the three months ended March 31, 2021, ~~and 2020,~~ there was no0 revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of March 31, ~~2021~~2022 and December ~~2020,~~31, 2021, the Company ~~recorded $63,612~~had $101,868 and ~~$31,212,~~$84,324, respectively, of deferred labor costs, which is included in prepaid expenses and other current assets in the Company’s unaudited condensed consolidated balance sheets. Deferred labor costs represent costs to fulfill the ~~Company's~~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 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~~

Table of ~~shares~~Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table presents the computation of ~~non-vested restricted stock, if not anti-dilutive.~~ basic and diluted net loss per common share:


	For the Three Months Ended
	March 31,
	2022		2021
Numerator:
Net loss attributable to common stockholders	$	(4,136,555)	$	(1,714,723)

Denominator:
Weighted-average common shares outstanding		104,843,100		90,745,607
Less: weighted-average unvested restricted shares		(2,357,889)		(666,667)
Add: weighted average accrued issuable equity		76,000		—
Denominator for basic and diluted net loss per share		102,561,211		90,078,940

Net loss per share:
Basic and diluted	$	(0.04)	$	(0.02)

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


	March 31,
	2022	2021
Unvested restricted stock	1,925,000	2,000,000
Unvested market -based equity awards	3,000,000	1,500,000
Options	462,716	470,000
Warrants	2,524,410	6,787,911
Total	7,912,126	10,757,911

~~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,~~October 2020, the FASB issued ASU ~~2019-12, “Income Taxes (Topic 740): Simplifying~~2020-10 “Codification Improvements”, which improves consistency by amending the ~~Accounting~~Codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The guidance is effective 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~~Company beginning in ~~Topic 740 and also clarifies and amends existing guidance to improve consistent application.~~the first quarter of fiscal year 2022 with early adoption permitted. The Company adopted ASU ~~2019-12~~2020-10 effective January 1, ~~2021~~2022 and its adoption did not have a material impact on ~~the Company’s~~its condensed consolidated financial ~~statements~~statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and ~~related disclosures.~~ 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 adopted ASU 2021-04 effective January 1, 2022 and its adoption did not have a material impact on its condensed consolidated financial statements.

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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, ~~2021~~2022 and December 31, ~~2020,~~2021, prepaid expenses and other current assets consisted of the following:

	March 31, 2021		December 31, 2020

					March 31,		December 31,
					2022		2021
Marketing					$	992,631	$	10,231
Inventory deposits						593,686		309,688
Other						121,032		31,074
Deferred labor costs	$	63,612	$	31,212		101,868		84,324
Deferred inventory costs		385,363		-
Filing		9,889		9,944
Professional fees						79,379		65,118
Insurance		16,035		10,429		29,415		69,925
Marketing		46,353		56,853
Other		23,263		31,426
Professional		31,129		10,603
Security deposit		8,729		8,729
Total prepaid expenses	$	584,374	$	159,196	$	1,918,011	$	570,360

Includes $958,188 of prepaid marketing expenses pursuant to certain sponsorship agreements which will be amortized over the respective service periods of the agreements. See Note 9 – Commitments and Contingencies.

NOTE 4 VENDOR DEPOSITS

The Company entered into agreements with third party contractors for facility improvements, the design and build of a battery packaging and inspection automation system, and automated robotic tending system.

As of March 31, 2022, the Company had outstanding deposits of $2,381,488 in connection with these agreements.

NOTE 45 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, accrued expenses and other current liabilities consisted of the following:

	March 31, 2021		December 31, 2020

					March 31,		December 31,
					2022		2021
Legal and professional fees					$	645,645	$	418,154
Payroll and vacation	$	108,940	$	279,054		783,698		302,101
Legal and professional fees		209,000		81,902
Research and development						210,932		146,158
Other		96,798		34,056		63,192		84,824
Board compensation						32,500		45,680
Accrued cost of sales						64,250		128,500
Marketing and advertising fees						0		37,810
Total accrued expenses and other current liabilities	$	414,738	$	395,012	$	1,800,217	$	1,163,227

NOTE 5 6 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the three months ended March 31, ~~2021~~2022 is presented ~~below. There was no accrued issuable equity during the three months ended March 31, 2020.~~below:

Balance, January 1, 2021 $ 128,380
Additions 121,990
Reclassifications to equity (49,800 )
Mark-to market 132,576
Balance, March 31, 2021 $ 333,146


	For the Three Months Ended
	March 31, 2022
Beginning Balance	$	290,721
Additions		26,600
Cancelled accrued issuable equity obligations		(92,000)
Mark-to-market		(43,040)
Ending Balance	$	182,281

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Accrued Issuable Equity for Services

During the three months ended March 31, ~~2021,~~2022, 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~~Company. On the respective dates the contracts were entered into, the estimated fair value of ~~$121,989. The Company settled certain of its accrued issuable equity obligations through~~ the ~~issuance of~~shares to be issued was an aggregate of ~~20,000 shares with an aggregate fair value of $49,800.~~

$26,600.

During the three months ended March 31, ~~2021,~~2022, the Company cancelled certain of its accrued issuable equity obligations of an aggregate of 33,333 of its shares with an aggregate fair value of $92,000 due to a reduction in investor relation services.

During the three months ended March 31, 2022, the Company recorded ~~$132,577~~an aggregate of ~~losses~~$43,040 of gains related to the ~~change~~reduction in fair value of accrued issuable ~~equity.~~equity (see Note 8 – Stockholders’ Equity, Stock-Based Compensation for additional details). The fair value of the accrued but unissued shares as of March 31, 2022 was $182,281.

NOTE 7 LEASES

The Company leases office space in San Diego, California. During the three months ended March 31, 2022 and 2021, operating lease expense was $74,080 and $15,598, respectively. As of March 31, 2022, the Company does not have any financing leases.

Maturities of lease liabilities as of March 31, 2022 were as follows:


Maturity Date
April 1 through December 31, 2022		171,202
2023		234,694
2024		99,187
Total lease payments		505,083
Less: Imputed interest		(27,623)
Present value of lease liabilities		477,462
Less: current portion		(209,560)
Lease liabilities, non-current portion	$	267,900

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


	For the Three Months Ended
	March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating lease	$	193,717

NOTE 8STOCKHOLDERS’ EQUITY

Common Stock

During the three months ended March 31, 2022 and 2021, the Company issued an aggregate of 6,000 and 20,000 shares of immediately vested common stock with a grant date value of $43,160 and $49,800, respectively, for legal and consulting services.

Treasury Stock

The Company's equity-based compensation plan allows for the grant of non-vested stock options, RSUs and RSAs to its employees pursuant to the terms of its equity incentive plan. Under the provision of the plan, unless otherwise elected, participants fulfill their related income tax withholding obligation by having shares withheld at the time of vesting. The shares withheld are then transferred to the Company's treasury stock at cost. During the three months ended March 31, 2022, the Company withheld 194,704 shares valued at $439,728 in connection with the vesting of restricted common stock awards during the period.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~NOTE 6 NOTES PAYABLE~~

Warrants

A summary of ~~notes payable~~warrants activity during the three months ended March 31, ~~2021 and 2020,~~2022 is presented below:

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


		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Warrants	Price		Term (Yrs)	Value
Outstanding, January 1, 2022	2,594,553	$	1.25
Issued	—		—
Exercised	(70,143)		(1.25)
Expired	—		—
Forfeited	—		—
Outstanding, March 31, 2022	2,524,410	$	1.25	3.8	$	2,322,457

Exercisable, March 31, 2022	2,524,410	$	1.25	3.8	$	2,322,457

~~During the year ended December 31, 2020, the Company entered into note purchase agreements in the original aggregate principal amount~~A summary 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~~outstanding 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 7 RELATED PARTY TRANSACTIONS~~

~~Accounts Payable – Related Party~~

~~Accounts payable – related party consists of a liability of $2,628 and $2,628,~~exercisable warrants as of March 31, 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.2022 is presented below:


Warrants Outstanding			Warrants Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants
$	1.25	2,524,410	3.8	2,524,410
		2,524,410	3.8	2,524,410

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

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

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

~~Common Stock Issued upon Conversion of Series B Preferred Stock~~

During the three months ended March 31, 2021, the Company issued an aggregate of 698,600 shares of common stock upon the conversion of 13,972 shares of Series B Preferred stock, after which there remained no further Series B Preferred Stock outstanding.

~~Stock-Based Compensation~~

During the three months ended March 31, 2021 and 2020, the Company recognized stock-based compensation expense of $387,972 and $12,728, respectively, related to common stock and restricted common stock, warrants and stock options, of which $7,405 and $8,112, respectively, is included in research and development expenses and $250,322 and $4,616, 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 ended March 31, 2021 and 2020:~~

For the Three Months Ended
March 31,
2021 2020
Common stock issued for services $ 49,800 $ 2,200
Amortization of restricted common stock 126,625 -
Amortization of market-based award 130,245 -
Stock options 9,112 10,528
Accrued issuable equity (common stock) 72,190 -
Total $ 387,972 $ 12,728

~~(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 and February 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 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). The shares vest in four equal annual installments beginning on March 1, 2022. During March 2021, the Company recorded stock-based compensation of $108,750 related to the amortization of the grant date value of the COO Shares.

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

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~As of March 31, 2021, there is $5,178,744 of unrecognized stock-based compensation related to restricted stock awards which will be amortized over the remaining vesting period of 3.89 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.

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 Three Months Ended
							March 31,
							2022		2021
Risk free interest rate		0.85	%		1.58	%	1.18% -2.28	%	0.85	%
Expected term (years)		2.50			2.50		3.5 - 3.8		2.5
Expected volatility		93.00	%		93.00	%	116.00	%	93.00	%
Expected dividends		0.00	%		0.00	%	0.00	%	0.00	%

~~Option forfeitures are accounted for at~~For the ~~time of occurrence. The expected term used is~~three months ended March 31, 2022 and 2021, 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~~was $3.23 and $0.36, respectively.

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

A summary of options activity (excluding Market-Based Awards) 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 months ended March 31, 2021~~2022 is presented below:

			Weighted		Weighted
			Average		Average
	Number of		Exercise		Remaining		Intrinsic
	Options		Price		Term (Yrs)		Value
Outstanding, January 1, 2021		370,000	$	0.66

										Weighted		Weighted
										Average		Average
									Number of	Exercise		Remaining	Intrinsic
									Options	Price		Term (Yrs)	Value
Outstanding, January 1, 2022									405,216	$	1.55
Granted		100,000		2.44					60,000		2.30
Exercised		-		-					(2,500)		0.66
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, March 31, 2022									462,716	$	1.64	3.4	$	287,234

Exercisable, March 31, 2022									225,354	$	1.07	2.5	$	255,819

The following table presents information related to stock options (excluding market-based option awards) as of March 31, ~~2021:~~2022:


Options Outstanding	Options Outstanding			Options Exercisable				Options Outstanding		Options Exercisable
				Weighted
		Outstanding		Average		Exercisable
										Weighted
									Outstanding	Average	Exercisable
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	185,486	1.9	168,125
$	2.44		100,000		-		-	1.99	10,000	4.2	3,333
			470,000		2.8		268,607
$								2.03	17,500	4.2	3,750
$								2.05	10,000	4.4	2,708
$								2.08	10,000	4.1	3,333
$								2.13	20,000	4.4	5,000
$								2.25	10,000	—	—
$								2.27	29,730	4.2	9,105
$								2.31	50,000	—	—
$								2.43	20,000	4.5	5,000
$								2.44	100,000	3.9	25,000
									462,716	2.5	225,355

~~Market-Based Award~~

OnAs of March ~~1, 2021, in connection with~~31, 2022, there was $233,996 of unrecognized stock-based compensation expense related to the ~~appointment of the Company’s COO (see Note 9 – Commitments and Contingencies), the COO is eligible to receive of up to 1,500,000 shares of the Company’s common~~above stock options, which will be ~~earned based upon achieving certain market capitalization milestones up to $4 billion. The grant date value~~recognized over the weighted average remaining vesting period of ~~this award~~3.0 years.

Table 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:Contents

~~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)

Restricted Common Stock

The following table presents information related to restricted common stock (excluding Market-Based Awards) as of March 31, 2022:


		Weighted Average
		Grant Date
	Shares of Restricted	Fair Value
	Common Stock	Per Share
Non-vested balance, January 1, 2022	2,590,000	$	2.52
Vested	(665,000)		2.61
Non-vested shares, March 31, 2022	1,925,000	$	2.49

As of March 31, 2022, there was $4,475,834 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of 2.9 years.

Market-Based Awards

The following table presents information related to market-based awards outstanding as of March 31, 2022:


	Number of	Grant Date
Award	Shares	Fair Value
Restricted stock units	1,500,000	$	2,911,420
Stock options	1,500,000		2,579,000
Total	3,000,000	$	5,490,420

The grant date value for the market-based awards is being amortized over the derived service periods of the awards. As of March 31, 2022, there was $2,648,528 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.44 years.

As of March 31, 2022, none of the market-based awards have vested.

Stock-Based Compensation

During the three months ended March 31, 2022 and 2021, the Company recognized stock-based compensation expense of $1,242,922 and $387,972, respectively, related to restricted common stock, warrants and stock options, of which $1,234,814 and $380,567, respectively are included within selling, general and administrative expenses, and $8,108 and $7,405, respectively are included within research and development expenses on the unaudited condensed consolidated statements of operations.

The following table presents information related to stock-based compensation for the three months ended March 31, 2022 and 2021:


	For the Three Months Ended
	March 31,
	2022		2021
Common stock for services	$	43,160	$	49,800
Amortization of restricted common stock		519,231		126,625
Amortization of market-based awards		730,048		130,245
Stock options		15,883		9,112
Accrued issuable equity (common stock)		(65,400)		72,190
Total	$	1,242,922	$	387,972

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 9COMMITMENTS AND CONTINGENCIES

Sponsorship Agreement

~~Operating Lease~~

~~Effective~~On December ~~22, 2020,~~16, 2021, the Company entered into a ~~lease addendum~~one-year sponsorship agreement which provides the Company with the right to ~~extend~~display its name and logo during certain events during the ~~term of its original lease, for space located in San Diego, California used for research and development activities,~~period from January 1, 2022 through December 31, ~~2020~~2022. The Company has committed to ~~June 30, 2021. Monthly rental payments under~~pay an aggregate of $1,350,000 in sponsorship fees which will be amortized over the ~~renewed lease total $5,127, which~~performance period. The Company paid sponsorship fees of $900,000 during the three months ended March 31, 2022 and is ~~comprised of $4,572 of base rent plus $555 of association fees.~~

recorded as prepaid expenses. During the three months ended March 31, ~~2021 and 2020, operating lease~~2022, $199,107 of sponsorship fees 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 agreement with a new Executive Vice President. The consultant provided management and business development services~~recognized related to the Company. In consideration for services provided in January and February 2021, 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, 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 received an aggregate of 2,000,000 shares of common stock, which shares will vest in four equal annual installments beginning on March 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, which will be earned based on achieving certain market capitalization milestones up to $4 billion (see Note 8 – Stockholders Equity (Deficiency).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 10SUBSEQUENT 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 ~~2021,~~2022, the Company issued an aggregate of ~~300,000~~2,346,525 shares of common stock upon the exercise of ~~outstanding~~ warrants pursuant to which the Company received an aggregate of ~~$375,000~~$2,933,157 of gross proceeds. In connection with the early exercise of such warrants, the Company issued new warrants to purchase an aggregate of 2,346,525 shares of common stock at an exercise price of $1.00 per share. The new warrants expire on December 31, 2025.

~~Securities~~Standy Equity Purchase Agreement

On May ~~19, 2021,~~13, 2022, KULR Technology Group, Inc. (the “Company”) entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company shall have the right, but not the obligation, to sell to Yorkville up to $50,000,000 of its shares of common stock, par value $0.0001 per share, at the Company’s request any time during the commitment period commencing on May 13, 2022 and terminating on the earliest of (i) the first day of the month following the 24-month anniversary of the SEPA and (ii) the date on which Yorkville shall have made payment of any advances requested pursuant to the SEPA for shares of the Company’s common stock equal to the commitment amount of $50,000,000. Each sale the Company requests under the SEPA (an “Advance”) may be for a number of shares of common stock with an aggregate value of up to $5,000,000. The shares would be purchased at 98.0% of the Market Price (as defined below) and would be subject to certain limitations, including that Yorkville could not purchase any shares that would result in it owning more than 4.99% of the Company’s outstanding common stock at the time of an Advance (the "Ownership Limitation") or an aggregate of 19.9% of the Company's outstanding common stock as of the date of the SEPA (the "Exchange Cap"). The Exchange Cap will not apply under certain circumstances, including to any sales of common stock under the SEPA that equal or exceed the Minimum Price (as defined in Section 312.03 of the NYSE Listed Company Manual). “Market Price” is defined in the SEPA as the average of the VWAPs (as defined below) during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville. “VWAP” is defined in the SEPA to mean, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the NYSE American as reported by Bloomberg L.P. during regular trading hours.

Note Purchase Agreement

On May 13, 2022, the Company entered into a ~~Securities~~Note Purchase Agreement ~~(“SPA”~~(the “Note Purchase Agreement”) with ~~an investor,~~Yorkville, pursuant to which the Company ~~agreed to issue~~issued to the ~~investor~~Investor a promissory note with an ~~aggregate of 650 shares of Series D convertible preferred stock~~initial principal amount equal to $5,000,000 (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”~~“Promissory Note”) at a purchase 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~~equal to 95.0% of the ~~Offering. The closing~~principal amount of the ~~Offering occurred on May 20, 2021. In connection with the closing~~Convertible Debentures. The Promissory Note carries an interest rate of ~~the financing, the Company repaid in full its aggregate notes payable obligation~~10% per annum.

Table of ~~$1,540,000.~~Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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~~("KULR") and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”) (collectively referred to as “KULR” or the “Company”) as of ~~March 31, 2021~~ and for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Quarterly Report 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.Report. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this Quarterly Report, ~~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~~Department of Defense (“DOD”) applications, our solutions target high performance applications in direct energy, hypersonic vehicles and satellite communications. For commercial applications, our main focus is a total solution to battery safety and sustainability by which we aim to mitigate the effects of thermal runaway ~~propagation.~~propagation which has been known to cause random fires in lithium-ion (“Li-ion”) batteries. This total battery safety solution can be used for electric vehicles, energy storage, battery recycling transportation, cloud computing and 5G communication devices. Our proprietary core technology is a carbon fiber material that provides what we believe to be superior thermal conductivity and heat dissipation for an ultra-lightweight and pliable material. By leveraging our proprietary cooling solutions that have been developed through longstanding partnerships with advanced technology users like NASA, the Jet Propulsion Lab and others, our products and services make commercial battery powered products safer and electronics systems cooler and lighter.

KULR’s business model continues to evolve from being a component supplier, to providing more design and testing services to our customers. The next step of evolution is to provide total system solutions to address market needs. In order to scale up as a systems provider more quickly and efficiently in (i) the Li-ion battery energy storage and recycling markets, (ii) battery cell design and safety testing, and (iii) advanced thermal management systems, such as hypersonic vehicles, KULR will actively seek partners for joint venture, technology licensing and other strategic partnership models. The goal is to leverage the Company’s thermal design technology expertise to create market leading products, which KULR will take to market directly to capture more value for KULR shareholders.

During Q1’22, we experienced significant impact to our business due to the COVID-19 lockdown in China. We had over $325,000 worth of inventory that we had built that could have been recognized as revenue in the first quarter but ended up not being shipped due to the COVID-19 lockdown. We are happy to report that these products have been shipped to the customer when the lockdown eased a bit. Much of the COVID-related challenges have meant delays in product shipment, not cancellations, so as restrictions ease in the coming months, we expect to make up for lost time and revenue as we move through our sizeable inventory.

As a core part of our growth strategy aimed at providing total system solutions that address market needs, KULR has secured a financing facility allowing us access to $55M in additional capital for procuring battery cell supplies and other key materials, as well as securing supply chain and manufacturing capacities in North America. The Company is working to secure inventory allocations in anticipation of ongoing demand from its key end markets. In total, KULR expects to procure lithium-ion battery cells providing up to 500-megawatt hours (“MWh”) of energy capacity, enough to power approximately 40,000 homes using currently available domestic energy storage options. Within applications for the energy storage and e-mobility markets, the battery cell supplies would equate to our estimation of revenue opportunity of $250-$350 million, although no assurances can be made of our actual acquisition of cells providing such opportunities or that those opportunities will provide such revenues. To further control supply chain and manufacturing costs and risks, the Company also intends to use these funds to bring much of its production capabilities to North America.

We have not yet achieved profitability and expect to continue to incur cash outflows from operations. As a result, we will eventually need to generate significant revenues to achieve profitability. Until that time, we shall have to continue to raise cash, as and when required, through equity or debt financings.

Table of Contents

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,~~2022, 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~~Although recent cases and deaths from the ~~impact~~COVID-19 pandemic have generally declined in the United States, spread of COVID-19 onin China recently resulted in a temporary lockdown covering all of Shanghai, China where our manufacturing partner has its ~~business~~headquarter. During this period, we saw significant inventory buildup in China and ~~operational assumptions and estimates, and determined there~~we were ~~no material adverse impacts on~~unable to recognize over $325,000 in revenue in the ~~Company’s results of operations and financial position at~~quarterly period ended March 31, ~~2021.~~

2022, which inventory buildup was caused by delays in shipment to customers that could not be completed during the COVID-19 lockdown in China. We are now taking active steps to direct our production and supply chain activities to North America to geographically diversify and potentially reduce further COVID-19 impacts.

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~~2022 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.

~~Appointment of Keith Cochran~~Financing Activities

On ~~March 8, 2021, our Board~~May 13, 2022, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company shall have the right, but not the obligation, to sell to Yorkville up to $50,000,000 of ~~Directors (the “Board”) appointed Keith Cochran as President~~its shares of common stock any time during the commitment period commencing on May 13, 2022 and ~~Chief Operating Officer~~terminating on the earliest of (i) the first day of the ~~Company, to hold office until~~month following the ~~earlier~~24-month anniversary of the ~~expiration~~SEPA and (ii) the date on which Yorkville shall have made payment of any advances requested pursuant to 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~~SEPA 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~~equal to the commitment amount of $50,000,000. Each sale the Company ~~in four (4) equal yearly installments,~~requests (an “Advance”) may be for a number of shares of common stock 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~~an aggregate value of up to ~~1,500,000~~$5,000,000. The shares ~~which shall~~would be ~~earned upon~~purchased at 98.0% of the Market Price (as defined in the SEPA) and would be subject to certain limitations. The Company ~~achieving certain market capitalization milestones.~~

~~Technology Development and Sponsorship Agreement~~

~~On March 31, 2021,~~agreed to file a prospectus supplement dated May 13, 2022 to the Company’s prospectus filed as part of the Registration Statement on Form S-3 that was declared effective on July 13, 2021. Concurrently with the SEPA, 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.

~~Operating Lease~~

~~Conversion of Series B 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~~Note Purchase Agreement

~~On May 19, 2021, the Company entered into a SPA~~ (the “Note Purchase Agreement”) with ~~an investor,~~Yorkville, pursuant to which the Company ~~agreed to issue~~issued to the ~~investor~~Investor a promissory note with an ~~aggregate of 650 shares of Series D Preferred pursuant~~initial principal amount equal 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,~~$5,000,000 (the “Promissory Note”) for ~~aggregate~~which the Company received gross proceeds of ~~$6,500,000.~~$4,750,000. The ~~Company will also pay the investor~~Promissory Note carries an interest rate of 10% per annum and is payable in five monthly installments beginning on June 13, 2022.

The foregoing is a ~~commitment fee~~summary description of ~~1,300,000 shares of common stock at the closing~~certain terms of the ~~Offering. The Series D Preferred will have~~SEPA, Note Purchase Agreement and Promissory Note. For a ~~fixed conversion price~~full description of ~~$2.05, will be convertible into an aggregate of 3,170,732 shares of common stock and will have~~all terms, please refer to the ~~right to vote on an as-converted basis. The closing~~copies of the ~~Offering occurred~~SEPA, the Note Purchase Agreement and the Promissory Note that are filed as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 16, 2022 and is incorporated herein by reference.

20 ~~2021. In connection with the closing~~

Table of ~~the financing, the Company repaid in full its aggregate notes payable obligation of $1,540,000.~~Contents

~~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 shares of our common stock to the VPO. The shares vest in four equal yearly installments on each anniversary of the grant date.

~~During April, we issued an aggregate of 300,000 shares of common stock in connection with exercises of outstanding warrant pursuant to which we received an aggregate of $375,000 of gross proceeds.~~

Results of Operations

Three Months Ended March 31, 2022 Compared With Three Months Ended March 31, 2021 ~~Compared With the Three Months Ended March 31, 2020~~

Revenue

~~Revenues~~

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


	For the Three Months Ended
	March 31,
	2022		2021
Product sales	$	172,599	$	178,249
Contract services		27,900		239,656
Total revenue	$	200,499	$	417,905

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, ~~2021~~2022 and ~~2020,~~2021, we generated ~~$417,905~~$200,499 and ~~$77,550~~$417,905 of revenues from 11 and 10 customers, respectively, representing ~~an increase~~a decrease of ~~$340,405,~~$217,406, or ~~439%~~52%. Revenue from product sales during the three months ended March 31, ~~2021 increased~~2022 decreased by ~~537%~~$5,650 or 3% compared to the three months ended March 31, ~~2020, mainly due to four large contracts received~~2021. The Company generated $172,599 of revenues in connection with 11 product sales completed during the ~~three months ended March 31, 2021. Product sales during these periods included~~first quarter of 2022 for the sales of our component product, carbon fiber velvet (“CFV”) thermal management solution, ~~ISC~~internal short circuit (“ISC”) battery cells and devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials. Due to mandated COVID-19 lockdowns in China, we were unable to ship certain finished goods which significantly affected product revenues recognized during the three months ended March 31, 2022. We expect the lockdown protocols to be lifted and our products to ship during the three months ended June 30, 2022, at which time we will recognize revenue of $325,000 related to affected sales. As a result of the restrictions and loss of flexibility we experienced during this period we are looking at bringing a portion of our manufacturing process back home to our US facility. We anticipate that the improvements in logistic flexibility and response times will more than offset increases in assembly labor cost, if any, and enable us to better support our US customers while maintaining our gross margins.

Revenue from contract services during the three months ended March 31, 2022 decreased by approximately $211,756 or 88% compared to the three months ended March 31, 2021. Three large DOD contracts received during the first quarter of 2021 generated $233,656 of revenues. 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~~consisted 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 as compared to revenue from services, so product mix plays an important ~~role~~part 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,~~periods, customers and products due to the learning process, customer negotiating strengths, and product mix.

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, cost of revenues was $122,918 and $275,268, ~~and $30,043,~~ respectively, ~~an increase~~representing a decrease of ~~$245,225~~$152,350, or ~~816%~~55%. The ~~increase~~decrease was primarily due to ~~higher product sales~~decreased costs as a result of decreased revenues. The gross margin percentage was 39% and ~~service revenues earned~~34% for the three months ended March 31, 2022 and 2021, respectively. The increase in margins realized during the three months ended March 31, ~~2021. The~~2022 is primarily attributable to two service contracts that resulted in low gross ~~margin percentage was 34%~~margins of 15% and ~~61% for the three months ended March 31, 2021 and 2020, respectively. The decrease in margins~~13% during the first ~~quarter~~and second quarters of 2021, ~~is primarily the result~~respectively.

Table of ~~a low 15% margin earned on a single large contract during the first quarter of 2021.~~Contents

Research and Development

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

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, R&D expenses were ~~$122,983~~$721,347 and ~~$111,713,~~$122,983, respectively, representing an increase of ~~$11,270~~$598,364 or ~~10%~~487%. The increase isduring 2022 was comprised primarily ~~due~~of $273,051 related to ~~new energy storage development services provided during the period, partially offset by a reduction~~an increase in employee headcount spent on R&D ~~salaries~~ and ~~other salary~~three new projects for automation, battery and drone design initiated in 2021, $168,443 related ~~costs, such as payroll taxes~~to software engineering services, $147,995 related to product development for high-areal capacity battery electrodes and ~~other benefits, due~~3D-engineering for solid state rechargeable batteries, $30,000 related to ~~salary reductions implemented at the end of the first quarter of 2020 as a result of COVID-19.~~ cell check design services, and $23,151 related to drone engineering services.

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~~consisted primarily of ~~travel, salaries,~~stock-based compensation, payroll taxes and other benefits, consulting fees, registration fees, office expenses, rent expense, directors and ~~rent expense.~~

officers insurance, travel and entertainment, marketing and advertising, and filing fees.

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, selling, general and administrative expenses were ~~$1,492,811~~$3,534,923 and ~~$465,410,~~$1,492,811, respectively, an increase of ~~$1,027,401~~$2,042,112, or ~~221%~~137%. The increase is primarily ~~attributable~~due to ~~an increase~~increases of approximately ~~$486,000 of marketing and advertising expense, an increase of approximately $376,000 of~~$854,243 for stock-based compensation ~~resulting primarily from the issuance of restricted stock upon the appointment of the Company’s Chief Operating Officer (“COO”)~~issued to employees and ~~stock granted to~~ consultants, ~~during the period, as well as an increase of approximately $87,000~~$530,314 in labor costs as ~~the~~a result of ~~four~~25 new hires ~~including~~during the ~~appointment~~last twelve months, $185,557 for consulting contractor services, $114,603 for NYSE registration fees, $110,888 for office expenses and supplies, $58,483 for rent expense due to the execution of a new operating lease agreement during the ~~COO.~~period, $28,654 for directors and officers insurance, $24,262 for travel and entertainment due to the lifting of COVID-19 dining and travel restrictions, $20,399 for expanded marketing and advertising expenses, and $14,049 for filing fees.

Other Income (Expense)

~~Other Expenses~~

For the three months ended March 31, 2022 and 2021, other income (expense) was $42,134 and ~~2020, other expenses were $241,566 and $20,587,~~($241,566), respectively, representing ~~an increase~~a change of ~~$220,979.~~$283,700 or 117%. The ~~increase in other expense~~change is primarily ~~due~~attributable to ~~amortization of debt discount of $108,124 related to~~ the ~~issuance of notes payable and $132,577 of~~ change in fair value of accrued issuable equity ~~during~~of $175,617 and the ~~three months ended March 31, 2021.~~

decrease in the amortization of debt discount recorded in connection with notes payable issued in 2020 of $108,124.

Liquidity and Capital Resources

As of March 31, ~~2021~~2022 and December ~~31, 2020,~~2021, we had cash balances of ~~$6,166,755~~$10,132,676 and ~~$8,880,140,~~$14,863,301, respectively, and working capital of ~~$4,699,452~~$9,975,086 and ~~$6,060,695,~~$13,302,935, respectively.

On May 13, 2022, the Company issued a $5,000,000 Promissory Note to an investor for gross proceeds of $4,750,000. On the same date, the Company entered into the SEPA which gives the Company the right, but not the obligation, to sell up to $50,000,000 of its shares of common stock to the same investor during the commitment period. See Financing Activities under Recent Developments above for additional details.

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, cash used in operating activities was $4,574,490 and $1,663,385, respectively. Our cash used in operations for the three months ended March 31, 2022 was primarily attributable to our net loss of $4,136,555, adjusted for non-cash expenses in the aggregate amount of $1,436,127, as well as $1,874,062 of net cash used to fund changes in the levels of operating assets and ~~$698,110, respectively.~~liabilities. Our cash used in operations for the three months ended March 31, 2021 was primarily attributable to our net loss of $1,714,723, adjusted for non-cash expenses in the aggregate amount of $633,444, ~~and~~as well as $582,106 of net cash used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the three months ended March 31, 2020 was primarily attributable to our net loss of $550,253, adjusted for non-cash expenses in the aggregate amount of $32,826, and $180,683 of net cash used to fund changes in the levels of operating assets and liabilities.

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

For the three months ended March 31, 2022 and 2021, cash used in investing activities was $248,889 and $0, respectively. Cash used in investing activities during the three months ended March 31, 2022 was related to deposits paid for equipment of $227,538 and purchases of property and equipment of $21,351.

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For the three months ended March 31, 2022 and 2020, cash provided by (used in) financing activities was $92,754 and ($1,050,000), respectively. Cash provided by financing activities during the three months ended March 31, 2022 was ~~($1,050,000)~~due to proceeds from the exercise of warrants of $87,679 and ~~$1,223,401, respectively.~~proceeds from the exercise of options of $5,075. 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 months ended March 31, 2020 primarily represents $1,410,000 of net proceeds from the issuance of a note payable, offset by the payment of $130,000 of debt issuance costs and repaymentwas due to repayments of notes payable of ~~$50,000.~~$1,050,000.

Future cash requirements for our current liabilities include approximately $1,758,786 for accounts payable and accrued expenses (including lease liabilities) and $155,226 related to our PPP loan, for which we have applied for forgiveness. The Company has also committed to spend $970,546 related to capital expenditures for the construction of a new automation facility, $867,224 for automation and testing equipment, $586,286 for research and development, and $450,000 related to a sponsorship agreement. Cash requirements for long term liabilities consist of $267,900 for lease payments, and $148,049 for research and development. The Company intends to meet these cash requirements from its current cash balance, proceeds from the SEPA and from future revenues.

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into ~~2021,~~2022, 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.

The ~~full extent~~short and long-term worldwide implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions on Russia by the ~~future impact~~United States or other countries and possible counter sanctions by Russia, and the resulting economic impacts on oil prices and other materials and goods, could affect the price of ~~COVID-19 on~~materials used in the ~~Company’s operations~~manufacture of our product candidates. If the price of materials used in the manufacturing of our product candidates increase, that would adversely affect our business and ~~financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on~~ the ~~Company’s business,~~ results of ~~operations,~~our operations.

Our unaudited condensed consolidated financial ~~condition~~statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate our continuation as a going concern and ~~prospects during 2021~~the realization of assets and ~~beyond, including~~satisfaction of liabilities in the ~~demand for its products, interruptions to supply chains, ability to maintain regular R&D~~normal course of business. The carrying amounts of assets and ~~manufacturing schedules as well as~~liabilities presented in the ~~capability to meet customer demands in a timely manner. The~~unaudited condensed consolidated financial statements do not ~~include any adjustments that might result from the outcome of this uncertainty.~~

During the year ended December 31, 2020, we entered into note purchase agreements in the original aggregate principal amount of $4,000,000 for cash proceeds of $3,710,000. Principal in the amount of $1,550,000 was repaid during the year ended December 31, 2020 and principal in the amount of $1,050,000 was repaid 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.

~~In April 2020, the Company received a loan of $155,226 under the government Small Business Administration (“SBA”) sponsored Payroll Protection Program (“PPP”)~~necessarily purport 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 for eligible purposes, including payroll, benefits, rent and utilities and maintains its payroll levels. The amount of forgiveness will be reduced if the borrower terminates employeesrepresent realizable or reduces salaries during the eight-week period. If the PPP Loan is not forgiven, the Company will begin repaying this loan beginning in November 2021. Any unforgiven balance must be repaid in full by 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 the shares under the SEDA. For each advance, 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 Company 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, the Company may not issue shares involving 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.

settlement values.

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~~

Estimates

For a description of our critical accounting ~~policies,~~estimates, see Critical Accounting Estimates in Item 7 of our Annual Report on Form 10-K which was filed with the SEC on March 28, 2022.

Recent Accounting Pronouncements

See Note 2 – Summary of Significant Accounting Policies ~~in Part 1, Item 1~~ of our unaudited condensed consolidated financial statements included within this Quarterly Report ~~on Form 10-Q.~~for a summary of recently adopted accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~

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

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ITEM 4. CONTROLS AND PROCEDURES

~~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,~~2021, 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.~~followed which continued to exist as of March 31, 2022. We are currently in the process of 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~~Over Financial Reporting

~~There~~Except as disclosed above, there has been no change in our internal control over financial reporting that occurred during the first quarter of ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over current or future 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~~ITEM 1. ~~Legal Proceedings~~

LEGAL PROCEEDINGS

None.

~~Item~~ITEM 1A. ~~Risk Factors~~

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.~~28, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Item 2. Unregistered Sales~~During April 2022, the Company issued new warrants to purchase an aggregate of ~~Equity Securities and Use of Proceeds~~

~~In the three months ended March 31, 2021, we issued 698,600~~2,346,525 shares of common stock ~~upon conversion~~at an exercise price of ~~13,972 shares of our Series B Convertible Preferred Stock.~~$1.00 per share. The new warrants expire on December 31, 2025.

Each of the foregoing transactions was exempt from the registrations 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~~ITEM 3. ~~Defaults Upon Senior Securities~~

DEFAULTS UPON SENIOR SECURITIES

None.

~~Item~~ITEM 4. ~~Mine Safety Disclosures~~

MINE SAFETY DISCLOSURES

Not applicable.

~~Item~~ITEM 5. ~~Other Information~~

OTHER INFORMATION

None.

Table of Contents~~Item~~

ITEM 6. ~~Exhibits~~

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

~~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 20022002.

31.2		Certification pursuant to 18 U.S.C. ~~Section~~ Section��1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002.*

101.INS		Inline XBRL Instance*

101.SCH		Inline XBRL Taxonomy Extension Schema*

101.CAL		Inline XBRL Taxonomy Extension Calculation*

101.DEF		Inline XBRL Taxonomy Extension Definition*

101.LAB		Inline XBRL Taxonomy Extension Labels*

101.PRE		Inline XBRL Taxonomy Extension Presentation*

104		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)*

*Filed ~~herewith~~

herewith.

**Furnished ~~herewith~~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.

Dated: May ~~20, 2021~~16, 2022	By By:	/s/ Michael Mo
		Michael Mo
		Chief Executive Officer ~~and Chairman~~
		(Principal Executive Officer)

~~May 20, 2021~~	By	~~/s/~~ ~~Simon Westbrook~~
Dated: May 16, 2022	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

Balance, January 1, 2021	$	128,380
Additions		121,990
Reclassifications to equity		(49,800	)
Mark-to market		132,576
Balance, March 31, 2021	$	333,146

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