CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS’ DEFICIENCY, CONTINUED

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

~~KT High-Tech Marketing,~~KULR Technology Group, Inc. ("KT High-Tech") was incorporated on December 11, 2015. Prior to the reverse recapitalization discussed below, KT High-Tech was an early-stage company planning to market and distribute technology products and components targeting the energy and consumer electronics industries. KT High-Tech intended to market and sell the products to both the end user and supply chain markets and to seek partnerships in developing and distributing such products. After the reverse recapitalization discussed below, KTHT integrated, through its ~~existing business operations with those of its~~wholly-owned subsidiary, KULR Technology ~~Corporation.~~

~~KULR, a wholly-owned subsidiary of KT High-Tech~~Corporation (collectively referred to as “KULR” or the “Company”), ~~was formed in 2013~~develops and ~~is based in Santa Clara, California. KULR is primarily focused on commercializing its~~commercializes high-performance thermal management technologies infor electronics, batteries, and other components across a range of applications. Currently, the Company is focused on targeting both, high ~~value, high-performance consumer electronic~~performance aerospace and energy storage applications. KULR owns proprietary carbon fiber based (Carbon Fiber Velvet or “CFV”) thermal management solutions that it believes are more effective at storing, conducting, and dissipating waste heat generated by an electronic system’s internal components (i.e. semiconductor, integrated circuits “chips”) in comparison to traditional materials, such as copper and aluminum. KULR’s technologies can be applied inside a wide arrayDepartment of ~~electronic~~Defense (“DOD”) applications, such as ~~mobile devices, cloud computing, virtual reality platforms, satellites, internet of things, drones,~~satellite communications, directed energy system and ~~connected cars. In addition~~hypersonic vehicle, and applying them to ~~thermal management of electronic systems, KULR has developed a highly effective, passive~~mass market commercial applications, such as lithium-ion battery energy storage, ~~solution for lithium ion batteries that has been tested~~electrical vehicle, 5G communications, cloud computer infrastructure, consumer and ~~endorsed by the National Aeronautics and Space Administration (“NASA”).~~

On June 8, 2017, KT High-Tech entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with KULR and 100% of the shareholders of KULR (the “KULR Shareholders”). On June 19, 2017 (the “Closing Date”), the Company closed the transaction contemplated by the Share Exchange Agreement. Pursuant to the Share Exchange Agreement, the KULR Stockholders agreed to transfer an aggregate of 25,000,000 shares of KULR’s common stock to the Company in exchange for the Company’s issuance of an aggregate of 50,000,000 shares of the Company’s common stock to the KULR Stockholders (the “Share Exchange”). KULR became a wholly-owned subsidiary of KT High-Tech and the KULR Stockholders now beneficially own approximately 64.57% of KT High-Tech’s common stock on a fully-diluted basis. Upon the closing of the Share Exchange Agreement, a representative of the KULR Stockholders was appointed to be the Company’s second Board Director.industrial devices.

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 September 30, ~~2017~~2020 and for the three and nine months ~~then ended.~~ended September 30, 2020 and 2019. The results of operations for the three and nine months ended September 30, ~~2017~~2020 are not necessarily indicative of the operating results for the full year ending December 31, ~~2017~~2020 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with ~~KULR’s and KT High-Tech’s~~the Company’s audited financial statements and related disclosures as of December 31, ~~2016~~2019 and for the year then ended, which ~~are included in the Form 8-K/A and Form 10-K~~were filed with the Securities and Exchange Commission (“SEC”) on ~~June 19, 2017 and March 30, 2017, respectively.~~Form 10-K on May 14, 2020.

NOTE 2 GOING CONCERN AND MANAGEMENT’S PLANS

The ~~closing~~Company has not yet achieved profitability and expects to continue to incur cash outflows from operations. As of September 30, 2020, the Company had cash of $2,809,656 and a working capital deficit of $404,561. For the nine months ended September 30, 2020 and 2019, the Company incurred net losses of $1,991,497 and $1,454,643, respectively, and used cash in operations of $2,076,035 and $1,206,135, respectively. It is expected that research and development and general and administrative expenses will continue to increase and, as a result, the Company will eventually need to generate significant revenues to achieve profitability. Further, as of September 30, 2020, the Company has debt principal outstanding on notes payable in the amount of $3,150,000 which mature between May 31 and July 20, 2021 and $155,226 of principal outstanding pursuant to the PPP loan agreement that matures in April 2022.

In January 2020, an outbreak of a new strain of coronavirus, COVID-19, was identified in Wuhan, China. Through the first quarter of 2020, the disease became widespread around the world, and on March 11, 2020, the World Health Organization declared a pandemic. Our business is dependent on developing new markets and new products to be used on a global basis, thus restrictions on travel could lead to reduced demand for our products and interruptions to supply chains. Also, the local regulations such as “Shelter in Place” will affect our ability to maintain regular R&D and manufacturing schedules as well as the capability to meet customer demands in a timely manner. Given the uncertainty around the extent and timing of the ~~Share Exchange~~potential future spread or mitigation of the Coronavirus and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows, or financial condition.

Effective February 27, 2020, the Company entered into a twenty-four month Standby Equity Distribution Agreement ~~was accounted~~(“SEDA”) with an Investor, pursuant to which the Company may, at its discretion, sell up to an aggregate of $8,000,000 (subject to the Investor’s approval for amounts over $100,000) of shares of the Company’s common stock at a price equal to 80% of the lowest daily volume weighted average price for the five days immediately following the date the Company delivers notice requiring the Investor 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 the Investor, at least 5 trading days shall have elapsed from the immediately preceding advance date (see Note 11 – Stockholders’ Deficiency). Additionally, the Company applied for, and in April 2020, received, a loan of $155,226 under the government Small Business Administration (“SBA”) sponsored Payroll Protection Program (“PPP”) to support continuing employment during the COVID-19 pandemic.

As of September 30, 2020, the Company had approximately $5,847,300 available in connection with the SEDA, subject to certain conditions, in order to fund its ongoing operations; however, there can be no assurance that the Company will be able to continue to sell common shares pursuant to the SEDA at an acceptable price, or without causing undue dilution to existing investors. Further, there is also no assurance that the Company will be able to continue to obtain additional funds on commercially acceptable terms, if at all. If the Company is unable to obtain adequate funds on reasonable terms, it may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures.

The aforementioned conditions indicate that there is substantial doubt about the Company’s ability to continue as a ~~reverse recapitalization under~~going concern within one year after the ~~provisions~~financial statement issuance date. The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate continuation of the ~~Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 805-40.~~Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited condensed consolidated financial statements ~~of operations herein reflect the historical results of KULR prior to the completion of the reverse recapitalization since it was determined to be the accounting acquirer, and~~ do not include any adjustment that might become necessary should the ~~historical results of operations for KT High-Tech prior~~Company be unable to ~~the completion of the reverse recapitalization. The balance sheet~~continue as of December 31, 2016 presented herein reflects the assets and liabilities of KULR. KT High-Tech’s assets and liabilities are consolidated with the assets and liabilities of KULR as of the Closing Date. The number of shares issued and outstanding and additional paid-in capital of KT High-Tech have been retroactively adjusted to reflect the equivalent number of shares issued by KT High-Tech in the Share Exchange, while KULR’s accumulated deficit is being carried forward as the Company’s accumulated deficit. All costs attributable to the reverse recapitalization were expensed.a going concern.

~~Preparation~~Since the date 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~~Annual Report on Form 10-K for the related notes to the financial statements. The Company’s significant estimates used in these financial statements include, but are not limited to, stock-based compensation, the collectability of receivables, inventory valuations, the recoverability and useful lives of long-lived assets and the valuation allowance relatedyear ended December 31, 2019, there have been no material changes 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 reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.significant accounting policies, except as disclosed in this note.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. A significant portion of the Company’s cash is held at one major financial institution. The Company ~~maintains cash with major financial institutions.~~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 ~~were aggregate~~was an uninsured balance of $2,559,656 as of September 30, 2020 and no uninsured cash balances as of ~~$1,225,642 and $0 at September 30, 2017 and~~ December 31, ~~2016, respectively.~~2019.

~~During the nine months ended September 30, 2016, 100%~~NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

The Company had certain customers whose revenue individually represented 10% or more of the Company’s revenues were generated from Customer A. During the three months ended September 30, 2017, 76% and 24% of the Company’s revenues were generated from Customer C and Customer A, respectively. During the nine months ended September 30, 2017, 44%, 42% and 14% of the Company’s revenues were generated from Customer C, Customer B and Customer A, respectively. As of September 30, 2017, receivables from Customer C, Customer B and Customer A comprised 44%, 42%, and 14%, respectively,total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts ~~receivable.~~ receivable, as follows:

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.

As of September 30, 2020 and December 31, ~~2016, a receivable from Customer A comprised 100%~~2019, certain vendors represented 10% or more of the Company’s total ~~account receivable.~~accounts payable, as follows:

Inventory is comprised of CFV thermal management solutions and heatsinks, which are available for sale. Inventories are stated at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. Inventory that is sold to third parties is included within cost of sales and 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 September 30, 2017 and December 31, 2016, the Company’s inventory was comprised solely of finished goods.

The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with ASC Topic 815. The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Embedded conversion options and any related freestanding instruments are recorded as a discount to the host instrument.

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

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

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

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

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

The carrying amounts of the Company’s financial instruments, such as cash, accounts receivable and accrued expenses and other current liabilities approximate fair values due to the short-term nature of these instruments. The carrying amounts of the Company’s short–term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, are comparable to rates of returns for instruments of similar credit risk.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

The Company recognizes revenue ~~when~~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 ~~realized or realizable~~possible more judgment and ~~earned. The Company considers~~estimates may be required within the revenue ~~realized or realizable~~recognition process, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and ~~earned when all of~~allocating the ~~following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered~~transaction price to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Sales are recognized upon shipment to the customer, free on board shipping point, or the point of customer acceptance.each separate performance obligation.

·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 revenue recognized in the unaudited condensed consolidated statements of operations:

As of September 30, ~~2017~~2020, and ~~2016,~~December 31, 2019, the Company ~~recognized $15,106~~had $36,600 and $0$15,000, respectively, of deferred revenue, ~~related to~~from contracts with customers. The contract liabilities represent payments received from customers for which the ~~sale of PCM heat sinks and CFV thermal interfaces, respectively.~~Company had not yet satisfied its performance obligation under the contract, or the customers have not officially accepted the goods or services provided under the contract. During the nine months ended September 30, ~~2017 and 2016,~~2020, the Company recognized ~~$26,006 and $6,900~~$15,000 of revenues that were included in deferred revenue ~~related to the sale~~as of ~~PCM heat sinks and CFV thermal interfaces, respectively.~~December 31, 2019.

~~Research and development expenses are charged to operations as incurred. During the three months ended September 30, 2017 and 2016,~~Under ASC 815-40-35 (“ASC 815”), the Company ~~incurred $196,643 and $105,733, respectively,~~has adopted a sequencing policy, whereby, in the event that reclassification of ~~research and development expenses. During~~contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the ~~nine months ended September 30, 2017 and 2016, the Company incurred $647,328 and $301,874, respectively,~~Company’s inability to demonstrate it has sufficient authorized shares as a result of ~~research and development expenses.~~

~~The Company measures the cost~~certain securities with a potentially indeterminable number of ~~services received in exchange for an award of equity instruments based~~shares, shares will be allocated on the ~~fair value~~basis of the ~~award. For employees,~~earliest issuance date of potentially dilutive instruments, with the ~~fair value~~earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities as compensation in a share-based payment arrangement are not subject to the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. The fair value of the Company’s restricted equity instruments was estimated by management based on observations of the cash sales prices of both restricted shares and freely tradable shares. Awards granted to directors are treated on the same basis as awards granted to employees. Upon the exercise of an option or warrant, the Company issues new shares of common stock out of its authorized shares.sequencing policy.

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. During the three months ended September 30, 2017 and 2016, 596,241 and 1,720,637 weighted average shares of unvested common stock, respectively, were excluded from weighted average common stock outstanding. During the nine months ended September 30, 2017 and 2016, 782,051 and 4,975,441 weighted average shares of unvested common stock, respectively, were excluded from weighted average common stock outstanding. Diluted net loss per common share is computed by dividing net loss by the weighted average number of ~~vested~~ common shares outstanding, plus the ~~net~~ impact of common shares, ~~(computed using the treasury stock method),~~ if dilutive, resulting from the exercise of outstanding stock options and warrants and the conversion of ~~preferred stock.~~

The ~~Company recognizes deferred tax assets and liabilities for~~following shares were excluded from the ~~expected future tax consequences~~calculation of ~~items that~~weighted average dilutive common shares because their inclusion would have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse.anti-dilutive:

~~The Company utilizes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.~~

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements as of September 30, 2017 and December 31, 2016. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date.

~~The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the condensed statements of operations.~~

AsCertain prior period balances have been reclassified in order to conform to the current period presentation. These reclassifications have no effect on previously reported results of September 30, 2017, the Company had a cash balance, working capital and an accumulated deficit of $1,653,492, $1,050,984 and $3,691,660, respectively. During the three and nine months ended September 30, 2017, the Company incurred a netoperations or loss ~~of $839,252 and $1,757,850 respectively.~~per share.

~~As a result of the closing of the Share Exchange, the Company believes it has sufficient cash to sustain its operations for at least a year from the date of this filing.~~

~~On June 13, 2017, the Company collected the $85,000 note receivable from KULR’s Chief Executive Officer (“CEO”) in full as well as outstanding accrued interest in the amount of $3,488.~~

As of September 30, ~~2017~~2020, and December 31, ~~2016,~~2019, prepaid expenses consisted of the following:

As of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, accrued expenses and other current liabilities consisted of the following:

See Note 10 – Related Party Transactions for additional information on accrued expenses – related party.

As of September 30, ~~2017 and December 31, 2016,~~2020, accrued ~~expenses and other current liabilities – related parties consisted~~issuable equity consists of the following:

During the three and ~~development expenses – related parties consists~~nine months ended September 30, 2020, the Company agreed to issue an aggregate of ~~(a) a liability~~113,453 and 136,786 shares of ~~$110,000~~common stock to certain consultants in exchange for services valued at $147,977 and ~~$77,500~~$164,577, respectively. The shares have not been issued as of September 30, ~~2017 and December 31, 2016, respectively, to~~2020. The fair value of the ~~Company’s Chief Technology Officer (“CTO”) in connection with consulting services provided to the Company; and (b) a liability of $397,041 and $274,040~~accrued but unissued shares as of September 30, ~~2017~~2020 was $183,530. During the three and nine months ended September 30, 2020 the Company recorded $9,947 and ($15,853), respectively, of gains (losses) related to the change in fair value of accrued issuable equity (see Note 11 – Stockholders’ Deficiency, Stock-Based Compensation).

On February 18, 2020, the Company entered into a financing agreement (the “Line of Credit”) wherein it may borrow up to $10,000. The repayment terms (interest rate, repayment amount and number of consecutive weekly periodic installments) are determined at the time the Company borrows proceeds under the Line of Credit.

On February 19, 2020, the Company borrowed and received gross proceeds of $10,000 under the Line of Credit for its working capital needs, which is being repaid weekly for the next 26 weeks at a weekly interest rate of 1.7%. As of September 30, 2020, the outstanding aggregate principal amount on the Line of Credit was $0 During the three and nine months ended September 30, 2020, the Company recorded interest expense of $114 and $2,292, respectively, related to the Line of Credit. There was no accrued interest related to the Line of Credit as of September 30, 2020. The outstanding balance of the line of credit was paid off in July 2020.

On February 27, 2020, the Company entered into a note purchase agreement with the YAII PN, Ltd., a Cayman Island exempt limited partnership (the “Investor”), pursuant to which the Investor purchased a full recourse promissory note (the “Note”) in the original principal amount of $1,500,000 (“Principal Amount”) for cash proceeds of $1,410,000. The Note included an original issue discount of $90,000, which represents the difference between the principal and proceeds received. The original issue discount, along with the $130,000 advisory fee were recorded as a debt discount which is being amortized over the term of the Note using the effective interest rate method.

The Note bears no coupon interest (original issue discount only) and will become immediately due and payable on May 31, 2021 or upon acceleration, redemption or otherwise upon the occurrence of an event of default, as set forth in the Note and which includes the early termination of a standby equity distribution agreement with the Investor (see Note 11 – Stockholders’ Deficiency, Standby Equity Distribution Agreement). The Company is required to repay the Principal Amount in monthly installments as set forth in the agreement. The Company may, at its discretion, prepay any installment amount or the principal amount, subject to a payment premium equal to the 10% of the amount being prepaid.

During the three and nine months ended September 30, 2020, the Company repaid principal on the Note of $250,000 and $475,000, respectively (of which $250,000 and $391,000, respectively, was repaid from proceeds from the SEDA). As of September 30, 2020, the outstanding aggregate principal balance of the Note was $1,025,000. During the three and nine months ended September 30, 2020, the Company recognized amortization of debt discount of $53,709 and $150,620, respectively, related to the Note. Please see Note 13 – Subsequent Events for additional information regarding further repayments of the Note.

The Company also entered into a Note Purchase Agreement, dated July 20, 2020, with the Investor, pursuant to which the Investor purchased a full recourse promissory note (the “July 2020 Note”) in the original principal amount of $2,500,000 (“July 2020 Principal Amount”) for cash proceeds of $2,300,000. The July 2020 Note included an original issue discount of $200,000, which represents the difference between the principal and proceeds received. The original issue discount, along with the $200,000 advisory fee were recorded as a debt discount, which is being amortized over the term of the July 2020 Note using the effective interest rate method.

The July 2020 Note bears no interest (original issuance discount only) and will become immediately due and payable on July 20, 2021 or upon acceleration, redemption or otherwise upon the occurrence of an event of default, as set forth in the July 2020 Note. The Company will repay the July 2020 Principal Amount in monthly installments as set forth in the July 2020 Note. The Company may, at its discretion, prepay any installment amount or the principal amount, subject to a payment premium equal to the 10% of the amount being prepaid. Further, pursuant to the terms of the July 2020 Note, the Company may decrease any installment payment by up to 50%, of which the decreased amount is added to the final installment due on the maturity date.

The Company elected to decrease the monthly installment payments due during May and August 2020 by an aggregate of $225,000. The decrease of $225,000 will be added to the final monthly installment on July 20, 2021.

During the three and nine months ended September 30, 2020, the Company repaid principal on the July 2020 Note of $375,000 (of which $300,000 was repaid from proceeds from the SEDA). As of September 30, 2020, the outstanding aggregate principal balance of the July 2020 Note was $2,125,000. During the three and nine months ended September 30, 2020, the Company recognized amortization of debt discount of $156,693 related to the July 2020 Note. See Note 13 – Subsequent Events for additional information regarding further repayments of the Note.

On April 27, 2020, the Company received $155,226 of cash proceeds pursuant to an unsecured loan (the “PPP” Loan) provided in connection with the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (“CARES Act”).

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, the Company is eligible to apply for and receive forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of the loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”) incurred during the 24 weeks subsequent to funding, and on the maintenance of employee and compensation levels, as defined, following the funding of the PPP Loan. The Company intends to use the proceeds of the PPP Loan for Qualifying Expenses. However, no assurance is provided that KULR will be able to obtain forgiveness of the PPP Loan in whole or in part. Any amounts not forgiven incur interest at 1.0% per annum and monthly repayments of principal and interest are deferred until the Small Business Administration decides on forgiveness. While the Company’s PPP Loan currently has a two-year maturity, the amended law will permit the Company to request a five-year maturity, subject to the approval of the counterparty. During the three and nine months ended September 30, 2020, the Company recognized interest expense of $387 and $659 respectively in connection with the PPP Loan. As of September 30, 2020, and December 31, ~~2016,~~2019, the Company’s accrued interest related to the PPP Loan was $659 and $0, respectively.

Accounts payable – related party consists of a liability of $3,454 and $4,253 as of September 30, 2020 and December 31, 2019, respectively, to Energy Science Laboratories, Inc. (“ESLI”), a company controlled by the Company’s ~~CTO,~~Chief Technology Officer (“CTO”), in connection with consulting services provided to the Company associated with the development of the Company’s carbon fiber velvet (“CFV”) thermal management solutions in prior periods. During the three and nine months ended September 30, 2020, the Company paid $168 and $799, respectively, of certain bills on behalf of ESLI, which reduced the liability owed to ESLI.

Accrued expenses and other current liabilities – related party consist of a liability of $0 and $10,419 as of September 30, 2020 and December 31, 2019, respectively, to Energy Science Laboratories, Inc. (“ESLI”), a company controlled by the Company’s Chief Technology Officer (“CTO”), in connection with consulting services provided by ESLI to the Company associated with the development of the Company’s CFV thermal management solutions.

On February 27, 2020, KULR Technology Group, Inc. entered into a SEDA with the Investor, pursuant to ~~related party consisted~~which the Company may, at its discretion, sell to the Investor up to $8,000,000 of shares of the Company’s common stock (the “Offering”), par value $0.0001 per share (the “Common Stock”). For each share of Common Stock purchased under the SEDA (the “Shares”), the Investor will pay the Company 80% of the lowest daily volume weighted average price of the Common Stock on the OTC Markets OTCQB or other principal market on which the Common Stock is traded for the five days immediately following the date the Company delivers notice requiring the Investor to purchase the Shares under the SEDA.

The Investor’s obligation to purchase the Shares under the SEDA is subject to certain conditions, including the Company maintaining the effectiveness of a registration statement for the securities sold under the SEDA, and is subject to the Investor’s approval for amounts over $100,000. In addition, the Company may not request advances if the Shares to be issued would result in the Investor owning more than 4.99% of the Company’s outstanding Common Stock, with any such request being automatically modified to reduce the advance amount. The Company shall not be able to request advances under the SEDA if the Registration Statement is not effective or if any issuances of Common Stock pursuant to any Advances would violate any rules.

The commitment period under the SEDA commenced on February 27, 2020 (the “Effective Date”) and expires on the earliest to occur of (i) first day of the month following the twenty-four months after the Effective Date, (ii) the date on which the Investor has purchased an aggregate amount of $8,000,000 of Shares under the SEDA, or (iii) the date the SEDA is earlier terminated.

The SEDA contains customary representations, warranties and agreements of the Company and the Investor, indemnification rights and other obligations of the parties. The Company has the right to terminate the SEDA at any time upon prior written notice, at no cost to the Company, provided that (i) there are no outstanding advances which have yet to be issued and (ii) the Company has paid all amounts owed ~~by KULR~~ to ~~KT High-Tech, which were eliminated~~the Investor, including amounts borrowed under the Note (see Note 8 – Notes Payable). The Investor has covenanted not to cause or engage in ~~consolidation as a result~~any manner whatsoever, any direct or indirect short selling or hedging of the ~~reverse recapitalization.~~Company’s shares of Common Stock.

The Company paid cash of $15,000 and issued 95,847 shares of Common Stock to the Investor as consideration for entering into the SEDA. The shares of common stock issued to the Investor had an issuance date fair value of $63,259. The aggregate consideration of $78,259 was recorded as deferred offering costs and additional paid in capital on the condensed consolidated balance sheet. During the three and nine months ended September 30, 2020, the Company recorded $0 and $78,259, respectively, of expense related to the amortization of deferred offering costs.

~~Reverse Recapitalization~~During the three and nine months ended September 30, 2020 the Company issued an aggregate of 1,159,449 and 1,721,013 shares of common stock, at prices between $0.73 - $1.62 and $0.72 - $1.65 per share, for aggregate proceeds of $1,395,000 and $2,152,696, respectively, in connection with notices submitted to the Investor under the SEDA, of which $550,000 and $691,000 of the proceeds, respectively, were applied directly against the Notes (see Note 8 – Notes Payable).

See Note 111 – Stockholders’ Deficiency - ~~Business Organization, Nature~~Shares To Be Issued for additional information.

See Note 13 – Subsequent Events for additional information regarding the sale of ~~Operations and Basis of Presentation~~SEDA shares subsequent to September 30, 2020.

NOTE 11 STOCKHOLDERS’ DEFICIENCY - ~~Reverse Recapitalization for details of the Share Exchange.~~CONTINUED

During the three and nine months ended September 30, ~~2017, the Company received aggregate consideration~~2020, a holder of ~~$32,000 related~~515 shares of Series B Convertible Preferred Stock elected to ~~certain~~convert their shares into 25,758 shares of restricted common ~~stock awards that were issued in 2013 and 2014.~~stock.

During the three and nine months ended September 30, ~~2017~~2020, certain holders of 5.11 shares of Series C Convertible Preferred stock elected to convert their shares into an aggregate of 56,777 shares of restricted common stock.

During the three and ~~2016,~~nine months ended September 30, 2020, the Company issued an aggregate of 35,000 and 65,000 shares of immediately vested common stock with a grant date value of $25,000 and $55,000, respectively, for legal and consulting services provided. During the three and nine months ended September 30, 2019, the Company issued 160,966 and 185,966 shares of immediately vested common stock with a grant date value of $117,160 and $133,660, respectively, for legal and consulting services provided.

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. The Company estimated the fair value of the options using the Black-Scholes Option Pricing Model with the following assumptions: (a) stock price of $0.66 per share; (b) volatility of 93%; (c) expected term of 2.5 years; (d) risk-free interest rate of 1.58%; and (e) a dividend rate of 0.0%.

During the three and nine months ended September 30, 2020, the Company recognized stock-based compensation expense of ~~$187,023~~$158,014 and ~~$8,688, respectively, and during the nine months ended September 30, 2017 and 2016, the Company recognized stock-based compensation expense of $411,181 and $23,636~~$252,831, respectively, related to restricted common stock ~~awards~~and stock options, of which ~~is included within~~$7,424 and $22,961, respectively, was charged to research and development expense and $150,590 and $229,870, respectively, was charged to general and administrative ~~expenses on the condensed statements of operations.~~expense. As of September 30, ~~2017,~~2020, there was ~~$464,846~~$66,290 of unrecognized stock-based compensation expense ~~of which, $341,520 was subject to re-measurement,~~ that will be recognized over the weighted average remaining vesting period of ~~0.6~~1.77 years.

During the three and nine months ended September 30, 2019, the Company recognized stock-based compensation expense of $138,640 and $231,751 (which includes the issuance of 185,966 shares common stock for $133,660 of services provided as described above), respectively, related to restricted common stock, stock options and warrants, which are included within general and administrative expenses on the condensed consolidated statements of operations.

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 11 STOCKHOLDERS’ DEFICIENCY - CONTINUED

Stock-Based Compensation - Continued

Stock-Based Compensation Expense, Continued

The following table presents information related to stock-based compensation for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Common stock (issued)	$	-	$	75,710	$	55,000	$	121,181
Stock options		10,038		9,475		30,155		36,628
Warrants		-		40,976		-		61,463
Accrued issuable equity (common stock)		147,976		12,479		167,676		12,479
Total	$	158,014	$	138,640	$	252,831	$	231,751

Shares To Be Issued

On September 28, 2020, the Company delivered a notice requiring the Investor to purchase 31,250 of shares under the SEDA, at $1.28 price per share, which was equal to 80% of the lowest daily volume weighted average price at which the shares are traded for the five days immediately following the date the Company delivered such notice. The shares were subsequently settled on October 1, 2020 for $40,000 of gross proceeds (see Note 13 – Subsequent Events).

Consulting Agreement

On September 30, 2020, the Company entered into a 2-year consulting agreement with a contractor to provide services as an Advisory Board Member related to government and defense acquisitions in exchange for 60,000 shares of restricted common stock. Pursuant to the consulting agreement, the shares are subject to the Company’s claw back, based upon the achievement of certain performance obligations. As of September 30, 2020, the required performance obligations have not been identified, and the restricted common shares were issued on or about November 9, 2020.

NOTE 12 COMMITMENTS AND CONTINGENCIES

Operating Lease

On June 15, 2020, the Company entered into an agreement to extend the term of its original office space lease from September 30, 2020 to December 31, 2020. Monthly rental payments under the renewed lease total $5,107, which are comprised of $4,552 of base rent plus $555 of association fees. For the three and nine months ended September 30, 2020, operating lease expense was $15,616 and $56,414, respectively. For the three and nine months ended September 30, 2019, operating lease expense was $41,281 and $121,769, respectively. The Company evaluated their operating lease and determined that the short-term exemption available under ASC 842 applies since the lease term is less than 12 months and the lease does not include a purchase option whose exercise is reasonably certain. Since the short-term exemption applies, lease payments are recognized as expense and no right of use asset or lease liability is recorded.

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 13 SUBSEQUENT EVENTS

Standby Equity Distribution Agreement and Repayments of the Notes Payable

Subsequent to September 30, 2020, the Company received cash of $40,000 in satisfaction of subscriptions receivable as of September 30, 2020 and the Company issued 31,250 shares of common stock pursuant to the SEDA (see Note 6 – Accrued Issuable Equity, Accrued Issuable Equity for Subscriptions Receivable and Note 10 – Stockholders’ Deficiency).

Subsequent to September 30, 2020, the Company issued an aggregate of 89,285 shares of additional common stock at a price of $1.12 per share pursuant to new advance notices submitted to the Investor under the SEDA. The entire proceeds of $100,000 were withheld by YAII to pay down a portion of the Notes (see Note 11 – Stockholders’ Deficiency, Standby Equity Distribution Agreement and Note 8 – Notes Payable).

Subsequent to September 30, 2020, the Company made cash payments totaling $250,000 to pay down a portion of the Notes.

Subsequent to September 30, 2020, the Company issued 76,453 shares of restricted common stock in satisfaction of $100,000 of accrued issuable equity, pursuant to a services agreement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations

The following discussion and analysis of the results of operations and financial condition of ~~KT High-Tech Marketing, Inc. ("KT High-Tech" and, including its subsidiary,~~ KULR Technology ~~Corporation (“KULR”), the~~Group, Inc. (the “Company”) as of September 30, ~~2017~~2020 and for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with ~~KULR’s and KT High-Tech’s~~the Company’s audited financial statements and related disclosures as of December 31, ~~2016~~2019 and for the year then ended, which are included in the Form ~~8-K and Form~~ 10-K filed with the Securities and Exchange Commission (“SEC”) on ~~June 19, 2017 and March 30, 2017, respectively.~~May 14, 2020. 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.

~~Forward-Looking Statements~~

~~The information in this report~~ This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains ~~forward-looking statements. All~~ statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other ~~than~~factors. These statements ~~of historical fact made in this report~~ are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can beoften identified by the use of words such as ~~“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,”~~ “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or ~~“should”~~“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 ~~variations or similar words. No assurances can be given~~reports filed with the SEC, and other factors that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual resultswe may ~~differ significantly from management’s expectations.~~

~~The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should~~ not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.know.

Overview

~~KT High-Tech Marketing,~~KULR Technology Group, Inc. (the "Company") was incorporated on December 11, 2015 under the laws of the State of Delaware, and was formerly known as Grant Hill Acquisition Corporation. In April 2016, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Grant Hill Acquisition Corporation to KT High-Tech Marketing, Inc. in April 2016.

~~On June 19, 2017, the Company closed a share exchange agreement (the “Share Exchange Agreement”) with~~, through our wholly-owned subsidiary KULR Technology Corporation, ~~a Delaware Corporation (“KULR”),~~develops and 100% of the shareholders of KULR (the “KULR Shareholders”). Upon the closing of the Share Exchange Agreement, KULR became a wholly owned subsidiary of the Company. The acquisition of KULR is treated as a reverse acquisition, and the business of KULR was integrated into the Company (the transaction, the “Reverse Acquisition”).

~~KULR was formed in 2013 and is based in Santa Clara, California. Since its inception, KULR primarily focused on developing and commercializing its~~commercializes high-performance thermal management technologies for batteries, electronics, and other components across an array of battery-powered applications. For aerospace and DOD applications, our solutions target high performance applications in direct energy, hypersonic vehicles and satellite communications. For commercial applications, our main focus is a total solution to battery safety by which ~~it acquired~~we aim to mitigate the effects of thermal runaway propagation. This total battery safety solution can be used for electric vehicles, energy storage, battery recycling transportation, cloud computing and 5G communication devices. Our proprietary core technology is a carbon fiber material that provides what we believe to be superior thermal conductivity and heat dissipation for an ultra-lightweight and pliable material. By leveraging our proprietary cooling solutions that have been developed through ~~assignment~~longstanding partnerships with NASA, the Jet Propulsion Lab and others, our products and services make commercial battery powered products safer and electronics systems cooler and lighter.

KULR’s business model continues to evolve from being a component supply, to providing more design and ~~license with KULR’s co-founder Dr. Timothy Knowles,~~testing services to our customers. The next step of evolution is to provide total system solution to address market needs. To scale up as a systems provider more quickly and efficiently in the ~~high value, high-performance consumer electronic and~~directed energy, hypersonic vehicle thermal systems, energy storage ~~applications. Prior~~and lithium-ion battery recycling markets, KULR will actively seek partners for joint venture, technology licensing and other strategic partnership models. The goal is to ~~2013,~~leverage the Company’s ~~technologies were~~thermal design technology expertise to create market leading products, which KULR will take to market directly to capture more value for KULR shareholders.

Our management expects high priority and growth in the aerospace and defense sectors, specifically in regard to directed energy, hypersonic weapon programs, and space missions. Directed energy is currently in the spotlight as experts predict it will greatly impact the future of warfare. Our CRUX cathode generates powerful electron pulses by field emission from the tops of our carbon fiber coating which has the potential to further develop the current technology. Thermal management is another critical component of both hypersonic weapons programs and space missions and is another area in which our products excel. Our carbon fiber solutions are used for thermal management in missile defense programs and are particularly effective because of their survivability at very high temperatures. They are also very effective at transferring heat and mitigate the risk of overheating in such high-risk environments. Historically we have provided value to this sector and we expect to further develop our relationships with Airforce Research Lab, Naval Research Lab and prime contractors to market our solutions.

Battery safety technology is becoming increasingly vital to our world in which battery-operated devices are everywhere. Lithium ion (“Li-ion”) batteries are widely used in numerous advanced space and industrial applications for NASA, Boeing, and Raytheon. A few notable achievements were the use of KULR’s technologies in: the Mars Lander/Rover (battery heat sink), X-31 Battery Heat Sink, Mercury Messenger (battery heat sink), and X-51 Scramjet (heat exchanger).

~~Prior to the Reverse Acquisition, the Company was an early-stage company planning to market and distribute technology products and components targeting the energy and~~ consumer electronics, ~~industries. The Company intended to market~~aerospace, marine and ~~sell the products to both the end user and supply chain markets and to seek partnerships in developing and distributing such products.~~

~~After the Reverse Acquisition, the Company integrated~~automotive applications. In recent months, KULR has developed a total battery safety solution for its ~~existing business operations with those of its subsidiary, KULR. KULR owns proprietary carbon fiber based (Carbon Fiber Velvet or “CFV”) thermal management solutions~~customers that it believes are more effective at conducting, dissipating and storing heat generated by an electronic system’s internal components (i.e. semiconductor, integrated circuits “chips”) in comparison to traditional materials, such as copper and aluminum. KULR’s technologies can be applied insidespans a wide array of ~~electronic~~industries and applications. KULR has seen great success in using our patented thermal runaway shield (“TRS”) technology to prevent cell to cell thermal runaway propagation as well as module to module propagation. We have designed a total solution for customers from the design stages incorporating our materials all the way to testing their passive propagation resistant (“PPR”) battery packs. We are flexible and can work with different battery pack configurations across various industries. We developed a PPR reference design for CubeSat battery in December 2019. Based on this reference design platform, we were awarded a dual-used technology development agreement from NASA’s Marshall Space Flight Center to build 3D printed battery systems for manned and robotic space applications ~~such~~in August 2020. Our research and testing, as ~~mobile devices, cloud computing, virtual reality platforms, satellites, internet~~well as working alongside battery experts at NASA Johnson Space Center, has positioned us for further advancements at the forefront of ~~things, drones,~~battery safety.

Hundreds of millions of Li-ion cells are produced and ~~connected cars.~~transported annually and even those packaged to prevent external short can still experience thermal runaway (“TR”) due to internal shorts, caused by latent defects, when fully charged. In these dangerous cases, a torch-like fire is released as energy escapes from the cell and sends nearby cells into TR resulting in a large fire. As part of our total battery safety solution, we have designed a bag out of our TRS material to suppress the flames and prevent the TR event. Suitably placed, the TRS provides a means of protection not only from adjacent batteries but also outside fires of arbitrary origin. Experts at NASA’s Propulsion & Power Division found our TRS successful at extinguishing the fire generated by cells when they intentionally triggered the batteries into dangerous failures. Our TRS bag is currently being used on the International Space Station (“ISS”) through a project with Leidos, for storing laptop batteries in order to reduce the risk of TR.

~~Thermal Management Solutions~~Another key element of our battery safety solution is KULR internal short circuit (“ISC”) device and trigger cells which are used for cell testing and screening. Our patented ISC device, licensed from NASA/NREL, can be inserted by OEMs or manufacturers into cells to mimic failure conditions in a cell. Once the trigger device is placed inside the cell, it can be intentionally triggered on demand causing the cell to short circuit. Currently, we provide ISC devices to OEMs and cell manufacturers, as well as ready-made ISC trigger cells to customers to identify failure modes and safety issues within their systems. Currently we are creating an ecosystem based on our technology which can be applied to different battery architectures and chemistries.

~~Three key vectors have driven advancements~~Our management believes that within commercial markets, aerospace and defense, and high-value applications, cell testing and screening has become a topic of focus. Therefore, we plan to expand our capabilities to include full battery analysis and testing as outlined by NASA Johnson Space Center. We plan to fully incorporate this into our holistic approach to battery safety along with our PPR battery pack design and testing services, ISC device and trigger cell products and TRS bags. With increasing regulations and pressure from government bodies to mitigate the dangers of battery fires and TR, we plan to further develop our capabilities in semiconductors and electronics systems – performance, power, and size. These vectors, however, often counteract one another. As chip performance increases, power consumption increases and more heat is generated as a byproduct. When chip size reduces, there is an increased potential for a hot spot on the chip, which can degrade system performance. Electronic system components must operate within a specific temperature range on both the high and low end to operate properly. KULR resolves many of the tradeoffs associated with other thermal management materials. KULR’s products improve heat storage and dissipation, rigidity problems and durability. Its products are lightweight and reduce manufacturing complexity associated with traditional thermal management materials.this arena.

In addition to evolving demands led by aerospace and defense, we have observed trending manufacturer-led opportunities in industries such as electric motor vehicles (“EV”) that have become increasingly more reliant on the Cloud, portability and high-demand processing power. KULR’s high performance thermal interface materials can be used to accelerate 5G communications development due to our material’s core properties: high thermal conductivity, light weight, and low contact pressure. 5G is one of the biggest opportunities going forward for transportation technology and we plan to take part in testing of digital and RF tests for 5G. Testing is still in early phases for both digital and RF communication chips, however, we are seeing a big growth opportunity for thermal management for 5G. Cloud computing is also an application of ~~electronic systems, KULR has developed, in partnership with NASA JSC, a highly effective, lightweight~~interest since high power communications chips and passive thermal protection technology. Thermal Runaway Shield (TRS) for lithium ion batteries. KULR’s lithium ion battery (Li-B) TRS product prevents a potentially dangerous combustible condition known as thermal runawayoptical communication modules require cooling.

We have not yet achieved profitability and expect to continue to incur cash outflows from ~~occurring in neighboring Li-B cells by acting~~operations, as a ~~shield or barrier~~result, we will eventually need to generate significant revenues to achieve profitability. These conditions indicate that there is substantial doubt about our ability to continue as a going concern within one year after the financial statement issuance date. Historically, we have been able to raise funds to support our business operations, although there can be no assurance, even with the support of borrowing under the SEDA, that we will be successful in ~~between individual Li-B cells~~raising additional funds in ~~a battery pack. Although rare, incidents of thermal runaway occurring spontaneously in Li-B cargo shipments~~the future. Furthermore, we remain focused on growing our operations and ~~inside electronics, including smartphones, hover boards and electric vehicles, are a cause of public concern.~~eventually achieving profitability, although no assurances can be made that we will achieve such goals.

Recent Developments

COVID-19

In January 2020, an outbreak of a new strain of coronavirus, COVID-19, was identified in Wuhan, China. Through the first quarter of 2020, the disease became widespread around the world, and on March 11, 2020, the World Health Organization declared a pandemic. Our business is dependent on developing new markets and new products to be used on a global basis, thus restrictions on travel could lead to reduced demand for our products and interruptions to supply chains. Also, the local regulations such as “Shelter in Place” will affect our ability to maintain regular R&D and manufacturing schedules as well as the capability to meet customer demands in a timely manner. Given the uncertainty around the extent and timing of the potential future spread or mitigation of the Coronavirus and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows, or financial condition.

Standby Equity Distribution Agreement

On ~~June 6, 2017,~~February 27, 2020, we entered into a Standby Equity Distribution Agreement (“SEDA”) with YAII PN, Ltd., a Cayman Island exempt limited partnership (“YAII”), pursuant to which the Company ~~filed a Certificate~~may, at its discretion, subject to certain conditions, sell to YAII up to $8,000,000 of ~~Designation~~shares common stock. For each share of ~~Series A Voting Preferred Stock with~~common stock purchased under the ~~Secretary of State~~SEDA (the “Shares”), YAII will pay the Company 80% of the ~~State~~lowest daily volume weighted average price of ~~Delaware~~the common stock on the OTC Markets OTCQB or other principal market on which the common stock is traded 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. The Company agreed to issue, without receiving additional consideration, to YAII 95,847 shares of common stock as commitment shares in consideration for entering into the SEDA. Through September 30, 2020, the Company issued an aggregate of 1,721,013 shares of common stock at prices between $0.72 - $1.65 per share for aggregate proceeds of $2,152,696 received against advance notices submitted to YAII under the SEDA, of which $691,000 of the proceeds were applied directly against principal owed under a promissory note agreement with YAII (see Promissory Note Agreements, below). Please also refer to Note 7 – Notes Payable, in the accompanying financial statements, for more information.

Promissory Note Agreements

We entered into a Note Purchase Agreement, dated February 27, 2020, with YAII, pursuant to which YAII purchased a full recourse promissory note (the ~~“Certificate~~“Note”) in the original principal amount of ~~Designation”~~$1,500,000 (“Principal Amount”). ~~Pursuant~~In consideration for the issuance of the Note by the Company, the purchase price of the Note paid by YAII was equal to the ~~Certificate~~Principal Amount minus an original issue discount equal to 6%. The Note bears no interest and will become immediately due and payable on May 31, 2021 or upon acceleration, redemption or otherwise upon the occurrence of ~~Designation,~~an event of default, as set forth in the Note. The Company will repay the Principal Amount in monthly installments as set forth in the Note. The Company may, at its discretion, prepay any installment amount or the principal amount, subject to a payment premium equal to the 10% of the amount being prepaid.

We also entered into a Note Purchase Agreement, dated July 20, 2020, with YAII, to which YAII purchased a full recourse promissory note (the “July 2020 Note”) in the original principal amount of $2,500,000. In consideration for the issuance of the July 2020 Note, the purchase price of the July 2020 Note paid by YAII was equal to the Principal Amount minus an original issue discount equal to 8%. The July 2020 Note was issued under substantially the same terms as the Note.

Through September 30, 2020, we repaid principal on the Note and July 2020 Note (together, the “Notes) of $850,000 (of which $691,000 was repaid from proceeds from the SEDA).

Subsequent to September 30, 2020, we received cash of $40,000 in satisfaction of subscriptions receivable as of September 30, 2020 and we issued 31,250 shares of common stock pursuant to the SEDA.

Subsequent to September 30, 2020, we issued an aggregate of 89,285 shares of additional common stock at a price of $1.12 per share pursuant to new advance notices submitted to YAII under the SEDA. The entire proceeds of $100,000 were withheld by YAII to pay down a portion of the Notes.

Subsequent to September 30, 2020, we made cash payments totaling $250,000 to pay down a portion of the Notes.

Common Stock Issuances

Subsequent to September 30, 2020, we issued 76,453 shares of restricted common stock in satisfaction of $100,000 of accrued issuable equity, pursuant to a services agreement.

Subsequent to September 30, 2020, the Company ~~designated 1,000,000~~issued 60,000 shares of ~~preferred “A”~~common stock ~~$0.0001 par value per share (individually or collectively~~to a consultant, which are subject to clawback, at the ~~“Preferred A Stock”). The Preferred A Stock are not convertible into any series or class~~sole discretion of ~~stock~~our Board of ~~the Company. In addition, holders of the Preferred A Stock are not entitled to receive dividends, nor do they have rights to distribution from the assets of the Company~~Directors, in the event ~~of any liquidation, dissolution, or winding up of~~certain milestones are not achieved.

Patents

On July 28, 2020, the ~~Company. Each record holder of Preferred A Stock have the right to vote on any matter with holders of~~U.S. Patent and Trademark Office has issued patent No. 10727462 covering the Company’s common stock and other securities entitled to vote, if any, voting together as one (1) class. Each record holder of Preferred A Stock has that number of votes equal to one-hundred (100) votes per share of Preferred A Stock held by such holder. The record holders of the Preferred A Stock are entitled to the same notice of any regular or special meeting of the shareholders as may or shall be given to holders of common stock entitled to vote at such meetings.

As discussed above, effective on June 19, 2017, pursuant to the Share Exchange Agreement, KULR became a wholly-owned subsidiary of the Company. Accordingly, the Company, through its subsidiary, KULR, will primarily focus its operations on KULR’s thermal ~~management business.~~runaway shield technology.

~~Upon closing of~~On August 4, 2020, the ~~Share Exchange Agreement on June 19, 2017,~~U.S. Patent and Trademark Office has issued patent No. 10734302 covering the ~~following persons constituted the executive officers and directors of the Company:~~

~~Name~~		~~Title(s)~~
~~Michael Mo~~		~~Chairman of the Board and Chief Executive Officer~~
Dr. Timothy Knowles*		~~Director, Chief Technical Officer and Secretary~~
George Henschke*		~~Treasurer and Interim Principal Financial Officer~~
Michael Carpenter*		~~Vice President of Engineering~~

* newly appointed as of June 19, 2017Company’s fiber thermal interface technology.

Results of Operations

The closing of the Share Exchange Agreement was accounted for as a reverse recapitalization under the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 805-40. The condensed consolidated statements of operations herein reflect the historical results of KULR prior to the completion of the reverse recapitalization since it was determined to be the accounting acquirer,

Three and ~~do not include the historical results of operations for KT High-Tech prior to the completion of the reverse recapitalization.~~Nine Months Ended September 30, 2020 Compared With Three and Nine Months Ended September 30, 2019

Revenues

~~Revenues~~Our revenues consisted of ~~sales of our CFV thermal management solution and PCM heat sinks.~~the following types:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Product sales	$	136,849	$	464,772	$	235,979	$	686,522
Contract services		-		61,950		179,498		91,462
Total revenue	$	136,849	$	526,722	$	415,477	$	777,984

For the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, we generated ~~$15,106~~$136,849 and $0$526,722 of revenues, respectively, ~~an increase~~representing a decrease of ~~$15,106.~~$389,873, or 74%. Revenue from product sales during the three months ended September 30, 2020 decreased by 71% compared to the three months ended September 30, 2019, mainly due to a large contract received during the three months ended September 30, 2019. Product sales during these periods included sales of our component products, carbon fiber velvet (“CFV”) thermal management solutions, ISC battery cells and devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials. Contract services during the comparable period consisted of certain research and development contracts and onsite engineering services.

For the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, we generated ~~$26,006~~$415,477 and ~~$6,900~~$777,984 of revenues ~~an increase~~from 20 and 21 customers, respectively, representing a decrease of ~~$19,106,~~$362,507, or ~~277%~~47%. Revenue from product sales during the nine months ended September 30, 2019 decreased by 66% compared to the nine months ended September 30, 2019, mainly due to a large DOD contract of about $355,000 received during the three months ended September 30, 2019. The customer has pushed the next shipment of product to 2021. Product sales during these periods included sales of our component products, CFV thermal management solutions, ISC battery cells and devices, patented technology, and thermal FTI materials. Revenue from services increased by 96% for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, due to increased project requirements from some of our new and existing customers. Our service revenues, which include certain research and development contracts and onsite engineering services, were not hampered by restrictions arising from working under COVID-19 shelter-in-place regulations.

Our customers and prospective customers are large organizations with multiple levels of management, controls/procedures, and contract evaluation/authorization. Furthermore, our solutions are new and do not necessarily fit into pre-existing patterns of purchase commitment. Accordingly, the business activity cycle between expression of initial customer interest to shipping, acceptance and billing can be lengthy, unpredictable, and lumpy, which can influence the timing, consistency and reporting of sales growth.

Cost of Revenues

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

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

For the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, cost of revenues ~~were $52,384~~was $60,967 and ~~$0,~~$109,051, respectively, ~~an increase~~a decrease of ~~$52,384.~~$48,084 or 44%. The ~~increase~~decrease was primarily due to~~research~~ higher salaries paid and purchase of materials related to higher product sales during the three months ended September 30, 2019. The gross margin percentage was 55% and 79% for the three months ended September 30, 2020 and 2019, respectively. The decrease in margins during 2020 reflects our ongoing efforts to build upon existing customer relationships over a growing pool of referrals and business development ~~expenses that were attributable~~leads. We are pivoting solutions to cater to the specific needs of existing customers, which requires a ~~sales agreement.~~higher up-front cost as compared to the preceding period.

For the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, cost of revenues ~~were $108,579~~was $128,306 and ~~$7,749,~~$199,118, respectively, ~~an increase~~a decrease of ~~$100,830,~~$70,812, or ~~1,301%~~36%. The ~~increase~~decrease was primarily due to ~~research~~reduced costs as a result of reduced revenues. The gross margin percentage was 69% and ~~development expenses that were attributable~~74% for the nine months ended September 30, 2020 and 2019, respectively. The decrease in margins during 2020 was primarily the result of an unfavorable change in product mix and higher up-front costs related to ~~a sales agreement.~~existing customer service contracts.

Research and Development

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

For the three months ended September 30, ~~2017, research~~2020 and ~~development~~2019, R&D expenses ~~increased to $157,876 from $14,090 in the comparable 2016 period, an increase~~were $51,820 and $137,970, respectively, representing a decrease of ~~$143,786,~~$86,150 or ~~1,020%~~62%. The ~~increase~~decrease is primarily ~~attributable~~due to ~~a research consulting agreement which commenced~~reductions in ~~September 2016~~salaries and other salary related costs, such as payroll taxes and other benefits, implemented during the end of the first quarter of 2020 due to COVID-19, as well as ~~new consulting agreements and service contracts which commenced~~a reduction in head count between the ~~third quarter of 2017.~~comparable periods.

For the nine months ended September 30, ~~2017, research~~2020 and ~~development~~2019, R&D expenses ~~increased to $207,504 from $16,173 in the comparable 2016 period, an increase~~were $221,524 and $365,709, respectively, representing a decrease of ~~$191,331,~~$144,185 or ~~1,183%~~39%. The ~~increase~~decrease is ~~primarily~~ attributable to ~~a research consulting agreement which commenced~~reductions in ~~September 2016~~salaries and other salary related costs, such as payroll taxes and other benefits, implemented during the end of the first quarter of 2020 due to COVID-19, as well as ~~new consulting agreements and service contracts which commenced~~a reduction in head count between the ~~third quarter of 2017.~~comparable periods.

We expect that our ~~research and development~~R&D expenses will ~~to continue~~ increase ~~in the future.~~as we expand our future operations.

~~Research~~Selling, General and ~~Development – Related Parties~~Administrative

~~Research~~Selling, general and ~~development – related parties includes~~administrative expenses ~~associated with the development~~consist primarily of ~~our CFV thermal management solutions provided by Energy Science Laboratories, Inc. (“ESLI”), a research~~travel, salaries, payroll taxes and ~~development company owned by our Chief Technology Officer (“CTO”)”, as well as services provided from our CTO. Research~~other benefits, and ~~development – related parties expenses are expensed as they are incurred.~~rent expense.

For the three months ended September 30, ~~2017, research~~2020 and ~~development –~~2019, selling, general and administrative expenses were $834,582 and $546,982, respectively, an increase of $287,600 or 53%. The increase is primarily attributable to an increase of approximately $215,000 of marketing and advertising expense, $104,000 of stock-based compensation related ~~parties decreased~~to consultants and employees, partially offset by~~$52,876, or 58%, to $38,767 from $91,643 in the comparable 2016 period. The~~ a decrease isof $26,000 of rent expense due to the termination of an operating lease during the end of the fourth quarter of 2019 and a $17,000 decrease in professional and legal fees.

For the nine months ended September 30, 2020 and 2019, selling, general and administrative expenses were $1,728,974 and $1,666,735, respectively, an increase of $62,239, or 4%. The increase is primarily due to an increase of approximately $260,000 of marketing and advertising expense, $139,000 of stock-based compensation related to consultants and employees, partially offset by a decrease inof $103,000 of travel, meals, and entertainment expense due to COVID-19 restrictions, $78,000 of rent expense due to the ~~amount~~termination of ~~work provided by ESLI~~an operating lease during the ~~2017 period~~end of the fourth quarter of 2019, $75,000 of professional fees, $71,000 of payroll and benefits due to salary reductions implemented during the end of the first quarter of 2020 as ~~we brought more~~a result of ~~our research~~COVID-19, and ~~development in-house.~~$13,000 of conference and seminar expenses due to the travel restrictions and stay-at-home orders as a result of COVID-19.

Other Expenses

For the three months ended September 30, 2020 and 2019, other expense was $201,739 and $253, respectively, an increase of $201,486. The increase in other expense is primarily due to the amortization of debt discount related to the issuance of notes payable.

For the nine months ended September 30, ~~2017, research~~2020 and ~~development – related parties increased by$154,123, or 54%, to $439,824 from $285,701 in the comparable 2016 period.~~2019, other expense was $328,170 and $1,065, respectively, an increase of $327,105. The increase ~~is due to an increase~~ in ~~the amount of work provided by ESLI during the 2017 period.~~

~~We expect that our research and development expenses will continue to increase in the future.~~

~~General and Administrative~~

~~General and administrative expenses consist primarily of salaries, payroll taxes and~~ other ~~benefits, legal and professional fees, stock-based compensation, marketing, travel, rent and office expenses.~~

~~For the three months ended September 30, 2017, general and administrative expenses increased by $512,915, or 555%, to $605,273 from $92,358 in the comparable 2016 period. The increase~~expense is primarily due to ~~an increase in non-cash stock-based compensation expense~~the amortization of ~~approximately $178,000, increased payroll expenses from the hiring of new employees in the third quarter of 2017, increased marketing expenses as well as increased professional fees~~debt discount related to ~~being a public company.~~the issuance of notes payable and the change in fair value of accrued issuable equity during the period.

~~For the nine months ended~~Liquidity and Capital Resources

As of September 30, ~~2017, general~~2020 and ~~administrative expenses increased by $720,911, or242%, to $1,019,235 from $298,324 in the comparable 2016 period. The increase is primarily to an increase in non-cash stock-based compensation expense~~December 31, 2019, we had cash balances of approximately $388,000, increased payroll expenses from the hiring of new employees in the third quarter of 2017, increased marketing expenses as well as increased professional fees incurred with regards to the Share Exchange$2,809,656 and ~~being a public company.~~

~~Interest Income – Related Party~~

~~Interest income – related party consists of income generated from our loan receivable from our CEO.~~

For the three months ended September 30, 2017, interest income – related party decreased by $750 to $0 from $750. The decrease was due to the collection of a note receivable in the second quarter of 2017.$108,857, respectively, and working capital deficits $404,561 and $824,481, respectively.

For the nine months ended September 30, ~~2017, interest income – related party decreased by $65 to $1,337 from $1,402. The decrease was due to the collection of a note receivable in the second quarter of 2017.~~

~~Interest Expense – Related Party~~

~~Interest expense – related party consists of interest on a KT High-Tech promissory note purchased by KULR in 2017. Since the KT High-Tech~~2020 and ~~KULR reverse recapitalization, all interest expense related to the promissory note has been eliminated in consolidation.~~

~~For the nine months ended September 30, 2017, interest expense – related party was $9,593.~~

~~Liquidity and Capital Resources~~

~~Operating Activities~~

~~For the nine months ended September 30, 2017 and 2016,~~2019, cash used in operating activities was ~~$263,585~~$2,076,035 and ~~$553,453,~~$1,206,135, respectively. Our cash used in operations for the nine months ended September 30, ~~2017~~2020 was primarily attributable to our net loss of ~~$1,757,850,~~$1,991,497, adjusted for ~~net~~ non-cash ~~expense~~expenses in the aggregate amount of ~~$414,555, partially offset by $1,079,710~~$587,503, and $672,041 of net cash ~~provided by~~used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the nine months ended September 30, ~~2016~~2019 was primarily attributable to our net loss of ~~$600,221,~~$1,454,643, adjusted for ~~net~~ non-cash ~~expense~~expenses in the aggregate amount of ~~$24,136,~~$241,285, partially offset by ~~$22,632~~$7,223 of net cash provided by changes in the levels of operating assets and liabilities.

~~Investing Activities~~

For the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, cash ~~provided by (used in)~~used in investing activities was ~~$1,907,990~~$46,087 and ~~$(85,000),~~$0, respectively. Cash ~~provided by~~used in investing activities during the nine months ended September 30, ~~2017 resulted from $1,859,261 of cash acquired in connection with~~2020 was related to the ~~Share Exchange as well as $85,000 of proceeds received from the collection of our note receivable from our CEO, partially offset by $36,271 of~~ purchases of ~~property and~~ equipment. ~~Our cash used in investing activities for~~

For the nine months ended September 30, ~~2016 was related to the purchase of a note receivable in the amount of $85,000 from our CEO.~~

~~Financing Activities~~

~~Net~~2020 and 2019, cash provided by financing activities ~~for nine months ended September 30, 2016~~ was ~~$550,000 which was related to the issuance of an aggregate of 1,833,334 shares of Series A1 convertible preferred stock to investors. There were no~~$4,822,921 and $1,052,300, respectively. Our cash ~~flows from~~provided by financing activities for the nine months ended September 30, ~~2017.~~2020 was due to $3,710,000 of net proceeds from the issuance of notes payable, $155,226 of proceeds from the Paycheck Protection Program loan, and $1,461,695 of net proceeds from the sale of common stock. These amounts were partially offset by $330,000 for the payment of debt issuance costs, $159,000 for the repayments on notes and $15,000 of cash paid in offering costs. Cash provided by financing activities during the nine months ended September 30, 2019 consisted of $898,300 of proceeds from the sale of common stock and $169,000 of proceeds from the sale of Series C Convertible Preferred Stock and warrants, offset by $15,000 cash paid for offering costs.

~~Summary~~In January 2020, an outbreak of a new strain of coronavirus, COVID-19, was identified in Wuhan, China. Through the first quarter of 2020, the disease became widespread around the world, and on March 11, 2020, the World Health Organization declared a pandemic. Our business is dependent on developing new markets and new products to be used on a global basis, thus restrictions on travel could lead to reduced demand for our products and interruptions to supply chains. Also, the local regulations such as “Shelter in Place” will affect our ability to maintain regular R&D and manufacturing schedules as well as the capability to meet customer demands in a timely manner. Given the uncertainty around the extent and timing of the potential future spread or mitigation of the Coronavirus and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows, or financial condition.

During the nine months ended September 30, 2020, we received net proceeds of $3,710,000 pursuant to a two Note Purchase Agreements with YAII (the “Notes”). The Notes bear no interest and mature between May 31 through July 20, 2020 and will be paid in monthly installments through the maturity date.

Additionally, in April 2020, the Company received a loan of $155,226 under the government Small Business Administration (“SBA”) sponsored Payroll Protection Program (“PPP”) to support continuing employment during the COVID-19 pandemic.

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 September 30, 2020, the Company issued an aggregate of 1,721,013 shares of common stock at prices between $0.72 - $1.65 per share for aggregate proceeds of $2,152,696 in connection with advance notices submitted to YAII under the SEDA, of which $691,000 of the proceeds were applied directly against the principal due under the Notes.

As of September 30, ~~2017,~~2020, we had approximately $5,847,300 available in connection with the SEDA, in order to fund our ongoing operations; however, there can be no assurance that we will be able to continue sell common shares pursuant to the SEDA at an acceptable price, or without causing undue dilution to our existing investors.

Subsequent to September 30, 2020, we issued an aggregate of 89,285 shares of common stock at a price of $1.12 per share pursuant to advance notices submitted to the Investor under the SEDA. The entire proceeds of $100,000 were withheld by the Investor to pay down a portion of the principal due under the Notes.

Subsequent to September 30, 2020, we made cash ~~balance,~~payments totaling $250,000 to pay down a portion of the principal due under the Notes.

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 the SEDA or other sources, there is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital of and ~~an accumulated deficit of $1,653,492, $1,050,984 and $3,691,660, respectively. During~~capital expenditures. The conditions outlined above indicate that there is substantial doubt about our ability to continue as a going concern within one year after the ~~three and nine months ended September 30, 2017, we incurred a net loss of $839,252 and $1,757,850, respectively.~~financial statement issuance date.

AsOur unaudited condensed consolidated financial 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 ~~result~~going concern and the realization of assets and satisfaction of liabilities in the ~~closing~~normal course of business. The carrying amounts of assets and liabilities presented in the ~~Share Exchange, we believe we have sufficient cash~~unaudited condensed consolidated financial statements do not necessarily purport to ~~sustain our operations for at least a year~~represent realizable or settlement values. The unaudited condensed consolidated financial statements do not include any adjustment that might result from the ~~date~~outcome of this ~~filing.~~uncertainty.

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

~~There are no material changes from the~~For a description of our critical accounting policies, ~~set forth~~see Note 3 – Summary of Significant Accounting Policies in ~~“Management’s Discussion and Analysis~~Part 1, Item 1 of ~~Financial Condition and Results of Operations” of our Current~~this Quarterly Report on Form ~~8-K which was filed with the SEC on June 19, 2017. Please refer to that document for disclosures regarding the critical accounting policies related to our business.~~10-Q.

~~Off Balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements.~~

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

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

Item 4. Controls and ~~Procedures.~~Procedures

Evaluation of Disclosure Controls and Procedures

Our management, ~~has evaluated, under the supervision and~~ with the participation of our principal executive officer and principal financial ~~officers,~~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, ~~pursuant to Rule 13a-15(b)~~as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934 (the “Exchange Act”).~~Act. Based on ~~that~~this evaluation, our management, with the participation of our principal executive officer and principal financial ~~officers~~officer, concluded that, as of the end of the period covered by this report, ~~due to the inadequate recordation of certain transactions and communication of those transactions to those integral to our disclosure procedures,~~ our disclosure controls and procedures were effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure. at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There ~~have~~has been no ~~changes~~change in our internal control over financial reporting that occurred during the ~~period covered by this report~~second quarter of 2020 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

PART ~~II.~~II – OTHER INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings

None.

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

~~Not applicable. See, however,~~There have been no material changes to the risk factors discussed in Item ~~1A of~~1A. Risk Factors in our ~~Current~~Annual Report on Form ~~8-K,~~10-K which was filed with the ~~Securities and Exchange Commission~~SEC on ~~June 19, 2017.~~May 14, 2020.

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

~~None.~~

In the three months ended September 30, 2020, we issued 25,758 shares of common stock upon conversion of 515 shares of our Series B Convertible Preferred Stock.

In the three months ended September 30, 2020, we issued 56,777 shares of common stock upon conversion of 5.11 shares of our Series C Convertible Preferred Stock.

Subsequent to September 30, 2020, we issued 60,000 shares of common stock to a consultant, which are subject to clawback, at the sole discretion of our Board of Directors, in the event certain milestones are not achieved.

Subsequent to September 30, 2020, we issued 76,453 shares of restricted common stock in satisfaction of $100,000 of accrued issuable equity, pursuant to a services agreement.

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 3. Defaults Upon Senior ~~Securities.~~Securities

None.

Item 4. Mine Safety Disclosures

Not ~~Applicable.~~applicable.

Item 5. Other ~~Information.~~Information

None.

~~None.~~

Item 6. ~~Exhibits.~~Exhibits

Exhibit No.		Description
10.1		Note Purchase Agreement dated July 20, 2020 (1)
10.2		Promissory Note dated July 20, 2020 (1)
31.1		~~Rule 13a-14(a) / 15d-14(a)~~ Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of Chief Executive Officer.the Sarbanes-Oxley Act of 2002

31.2		~~Rule 13a-14(a) / 15d-14(a)~~ Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of Chief Financial Officer.the Sarbanes-Oxley Act of 2002

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

~~32.2~~		Section 1350 Certifications of Chief Financial Officer.**

101.INS		XBRL Instance Document*
		Instance*
101.SCH		XBRL Taxonomy Extension Schema*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase*
		Calculation*
101.DEF		XBRL Taxonomy Extension Definition Linkbase*
		Definition*
101.LAB		XBRL Taxonomy Extension Label Linkbase*
		Labels*
101.PRE		XBRL Taxonomy Extension Presentation LinkbasePresentation

*Filed herewith

**Furnished herewith

(1) Previously filed as exhibits to the Form 8-K filed on July 21, 2020 and incorporated herein by this reference.

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.

November ~~17, 2017~~13, 2020	By	/s/Michael Mo
		Michael Mo
		Chief Executive Officer
		and Chairman (Principal Executive Officer)

November ~~17, 2017~~13, 2020	By	/s/~~George Henschke~~Simon Westbrook
		~~George Henschke~~
		~~Interim~~ Simon Westbrook Chief Financial Officer
		(~~Interim~~ Principal Financial and Accounting Officer)

Title of each class	Trading Symbol	Name of each exchange on which registered
None.	N/A	N/A

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨x	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	x
			Emerging growth company	¨

	Page

PART I – FINANCIAL INFORMATION

Item 1. Financial ~~Statements.~~Statements		1

Condensed Consolidated Balance Sheets as of September 30, ~~2017 (Unaudited)~~2020 (unaudited) and December 31, ~~2016~~2019		1

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019		2

Unaudited Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders’ Deficiency for the Nine Months Ended September 30, ~~2017~~2020		3

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficiency for the Nine Months Ended September 30, 2019		4

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019		45

Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (unaudited)		57

Item 2. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations		1019

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk		1426

Item 4. Controls and ~~Procedures.~~Procedures		1526

PART II –- OTHER INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings		1627

Item 1A. Risk ~~Factors.~~Factors		1627

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds		1627

Item 3. Defaults Upon Senior ~~Securities.~~Securities		1627

Item 4. Mine Safety Disclosures		1627

Item 5. Other ~~Information.~~Information		1627

Item 6. ~~Exhibits.~~Exhibits		1628

SIGNATURES		1729

	September 30,			December 31,
	2017			2016
	(Unaudited)
Assets

Current Assets:
Cash	$	1,653,492		$	9,087
Accounts receivable		26,006			6,900
Note receivable - related party		-			85,000
Interest receivable - related party		-			2,152
Other current receivable		-			30,000
Other current receivable - related parties		-			2,000
Inventory		28,083			12,932
Prepaid expenses		141,443			12,344
Other current assets		8,727			3,648

Total Current Assets		1,857,751			164,063

Property and equipment, net		33,359			462

Total Assets	$	1,891,110		$	164,525

Liabilities and Stockholders' Equity (Deficiency)

Current Liabilities:
Accrued expenses and other current liabilities	$	299,726		$	72,445
Accrued expenses and other current liabilities - related parties		507,041			359,241

Total Current Liabilities		806,767			431,686

Commitments and contingencies

Stockholders' Equity (Deficiency):

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 September 30, 2017 and December 31, 2016		-			-
Common stock, $0.0001 par value, 100,000,000 shares authorized; 77,440,000 and 50,000,000 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		7,744			5,000
Additional paid-in capital		4,768,259			1,661,649
Accumulated deficit		(3,691,660	)		(1,933,810	)

Total Stockholders' Equity (Deficiency)		1,084,343			(267,161	)

Total Liabilities and Stockholders' Equity (Deficiency)	$	1,891,110		$	164,525

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016

Revenue	$	15,106		$	-		$	26,006		$	6,900

Cost of revenue		52,384			-			108,579			7,749

Gross Loss		(37,278	)		-			(82,573	)		(849	)

Operating Expenses:

Research and development		157,876			14,090			207,504			16,173
Research and development - related parties		38,767			91,643			439,824			285,701
General and administrative		605,273			92,358			1,019,235			298,324

Total Operating Expenses		801,916			198,091			1,666,563			600,198

Loss From Operations		(839,194	)		(198,091	)		(1,749,136	)		(601,047	)

Other Income (Expense):
Interest income		142			6			142			24
Interest income - related party		-			750			1,337			1,402
Interest expense - related party		-			-			(9,593	)		-

Total Other (Expense) Income		142			756			(8,114	)		1,426

Loss Before Income Taxes		(839,052	)		(197,335	)		(1,757,250	)		(599,621	)

Income tax expense		200			200			600			600

Net Loss	$	(839,252	)	$	(197,535	)	$	(1,757,850	)	$	(600,221	)

Net Loss Per Share
- Basic and Diluted	$	(0.01	)	$	(0.00	)	$	(0.03	)	$	(0.01	)

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		76,843,759			48,279,363			59,570,769			45,024,559

					Additional
	Common Stock				Paid-In		Accumulated
	Shares		Amount		Capital		Deficit			Total

Balance - December 31, 2016		50,000,000	$	5,000	$	1,661,649	$	(1,933,810	)	$	(267,161	)

Stock-based compensation		-		-		411,181		-			411,181

Equity of KT High-Tech Marketing, Inc. at
the time of the reverse recapitalization		27,440,000		2,744		2,695,429		-			2,698,173

Net loss		-		-		-		(1,757,850	)		(1,757,850	)

Balance - September 30, 2017		77,440,000	$	7,744	$	4,768,259	$	(3,691,660	)	$	1,084,343

	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

	Series B Convertible					Series C Convertible									Shares		Additional						Total
	Preferred Stock					Preferred Stock					Common Stock				to be		Paid-In			Accumulated			Stockholders'
	Shares			Amount		Shares			Amount		Shares		Amount		Issued		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	)

Stock-based compensation:
Options		-			-		-			-		-		-		-		10,528			-			10,528

Common stock issued for the commitment fee pursuant to the SEDA agreement		-			-		-			-		95,847		10		-		63,249			-			63,259

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	)

Stock-based compensation:
Common stock		-			-		-			-		30,000		3		-		29,997			-			30,000
Options		-			-		-			-		-		-		-		9,588			-			9,588

Common stock issued pursuant to the SEDA agreement [1]		-			-		-			-		561,564		56		-		679,381			-			679,437

Net loss		-			-		-			-		-		-		-		-			(428,985	)		(428,985	)

Balance - June 30, 2020		14,487		$	1		24.01		$	-		81,759,242	$	8,176	$	-	$	8,383,982		$	(9,375,550	)	$	(983,391	)

Stock-based compensation:
Common stock		-			-		-			-		35,000		3		-		24,997			-			25,000
Options		-			-		-			-		-		-		-		10,038			-			10,038

Common stock issued pursuant to the SEDA agreement		-			-		-			-		1,159,449		116		-		1,394,884			-			1,395,000

Common stock to be issued pursuant to the SEDA agreement		-			-		-			-		-		-		40,000		-			-			40,000

Common stock issued upon conversion of
Series B Convertible Preferred Stock		(515	)		-		-			-		25,758		3		-		(3	)		-			-

Common stock issued upon conversion of
Series C Convertible Preferred Stock		-			-		(5.11	)		-		56,777		6		-		(6	)		-			-

Net loss		-			-		-			-		-		-		-		-			(1,012,259	)		(1,012,259	)

Balance - September 30, 2020		13,972		$	1		18.90		$	-		83,036,226	$	8,304	$	40,000	$	9,813,892		$	(10,387,809	)	$	(525,612	)

	For the Nine Months Ended September 30,
	2020			2019
Cash Flows From Operating Activities:
Net loss	$	(1,991,497	)	$	(1,454,643	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		307,313			-
Depreciation expense		10,573			9,444
Bad debt expense		933			-
Write-down of inventory		-			90
Change in fair value of accrued issuable equity		15,853			-
Stock-based compensation		252,831			231,751
Changes in operating assets and liabilities:
Accounts receivable		(40,915	)		(283,482	)
Inventory		(21,070	)		(34,141	)
Prepaid expenses and other current assets		(97,267	)		(18,131	)
Accounts payable		(253,461	)		214,754
Accounts payable - related party		(799	)		-
Accrued expenses and other current liabilities		(269,710	)		158,223
Accrued expenses and other current liabilities - related party		(10,419	)		(30,000	)
Deferred revenue		21,600			-

Total Adjustments		(84,538	)		248,508

Net Cash Used In Operating Activities		(2,076,035	)		(1,206,135	)

Cash Flows From Investing Activities:
Purchase of property and equipment		(46,087	)		-

Net Cash Used In Investing Activities		(46,087	)		-

Cash Flows from Financing Activities:
Proceeds from note payable		3,710,000			-
Repayments of note payable		(159,000	)		-
Payment of debt issuance costs		(330,000	)		-
Proceeds from Paycheck Protection Program loan		155,226			-
Proceeds from sale of Series C Convertible Preferred Stock and warrants		-			169,000
Proceeds from sale of common stock [1]		1,461,695			898,300
Payment of offering costs		(15,000	)		(15,000	)

Net Cash Provided By Financing Activities		4,822,921			1,052,300

Net Increase (Decrease) In Cash		2,700,799			(153,835	)

Cash - Beginning of Period		108,857			229,896

Cash - End of Period	$	2,809,656		$	76,061

	Accounts Payable
	As of		As of
	September 30, 2020		December 31, 2019
Vendor A	*		15	%
Vendor B	*		16	%
Vendor C	*		17	%
Vendor D	*		12	%
Vendor E	47	%	*
Vendor F	10	%	*
All other vendors	43	%	40	%
	100	%	100	%
* Less than 10%

	September 30, 2017		December 31, 2016
	(unaudited)
Business development services	$	70,000	$	-
Research and development services		60,000		-
Professional fees		10,000		-
Salary		-		7,500
Conference fees		1,286		4,844
Other		157		-
Total prepaid expenses	$	141,443	$	12,344

	September 30,
	2020
Accrued issuable equity for services, current portion	$	83,530
Accrued issuable equity for services, non-current portion		100,000
	$	183,530

	September 30,		December 31,
	2020		2019
Marketing	$	61,298	$	-
Other		29,767		12,232
Professional		26,201		4,134
Filing		14,474		9,858
Security deposit		8,728		16,977
Total prepaid expenses	$	140,468	$	43,201