UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: ~~September~~June 30, ~~2017~~2022

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

For the transition period fromto

Commission File Number:

~~000-55564~~001-40454

~~KT HIGH-TECH MARKETING,~~KULR TECHNOLOGY GROUP, INC.

(Exact name of registrant as specified in its charter)


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



~~14440 Big Basin Way #12, Saratoga,~~ 4863 Shawline Street, San Diego, California		92111
(Address of principal executive offices)	~~95070~~	(Zip Code)

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

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

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	KULR	NYSE American LLC

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes¨☒ Nox☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~7(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act.¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule ~~12b-2~~12b-2 of the ~~Exchange~~ Act). Yes¨☐ Nox☒

As of ~~November 16, 2017,~~August 11, 2022, there were ~~77,440,000~~107,252,860 shares ~~of Common Stock, $0.0001 par value, issued and~~ outstanding.

Table of Contents

~~KT HIGH-TECH MARKETING,~~KULR TECHNOLOGY GROUP, INC. &AND SUBSIDIARY

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2022

TABLE OF CONTENTS

			Page

PART I – FINANCIAL INFORMATION

	Item 1. Financial ~~Statements.~~Statements.		3

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017 (Unaudited)~~2022 (unaudited) and December 31, ~~2016~~2021	1	3

	Unaudited Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021	2	4

	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ ~~Deficiency~~Equity for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2017~~2022 and 2021	3	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021	4	6

	Notes to Unaudited Condensed Consolidated Financial Statements	5	8

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations.	10	21

	Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk.	14	27

	Item 4. Controls and ~~Procedures.~~Procedures.	15	28

PART II –- OTHER INFORMATION

	Item 1. Legal ~~Proceedings.~~Proceedings.	16	29

	Item 1A. Risk ~~Factors.~~Factors.	16	29

	Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds.	16	29

	Item 3. Defaults Upon Senior ~~Securities.~~Securities.	16	29

	Item 4. Mine Safety Disclosures	16	29

	Item 5. Other ~~Information.~~Information.	16	29

	Item 6. ~~Exhibits.~~Exhibits.	16	30

~~SIGNATURES~~	17SIGNATURES		31

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

~~Item 1. Financial Statements.~~

~~KT HIGH-TECH MARKETING, INC. & SUBSIDIARY~~

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,		December 31,
	2022		2021
	(unaudited)
Assets
Current Assets:
Cash	$	12,991,732	$	14,863,301
Accounts receivable		564,229		136,326
Inventory		284,572		191,311
Prepaid expenses and other current assets		1,786,145		570,360
Total Current Assets		15,626,678		15,761,298
Property and equipment, net		409,992		374,475
Vendor deposits		2,582,958		2,153,950
Security deposits		58,941		58,941
Intangible assets, net		210,663		216,952
Right of use asset		419,142		665,687
Deferred financing costs		72,800		0
Total Assets	$	19,381,174	$	19,231,303

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	301,480	$	454,507
Accrued expenses and other current liabilities		1,571,755		1,163,227
Accrued issuable equity		148,801		290,721
Lease liability, current portion		214,166		262,379
Loan payable, current portion		56,744		155,226
Deferred revenue		20,000		132,303
Notes payable, net of debt discount		4,836,019		0
Total Current Liabilities		7,148,965		2,458,363
Lease liability, non-current portion		212,852		407,898
Loan payable, non-current portion		98,482		0
Total Liabilities		7,460,299		2,866,261

Commitments and contingencies (Note 10)

Stockholders' Equity
Preferred stock, $0.0001 par value, 20,000,000 shares authorized;
Series A Preferred Stock, 1,000,000 shares designated; NaN issued and outstanding at June 30, 2022 and December 31, 2021		0		0
Series B Convertible Preferred Stock, 31,000 shares designated; NaN issued and outstanding at June 30, 2022 and December 31, 2021		0		0
Series C Preferred Stock, 400 shares designated; none issued and outstanding at June 30, 2022 and December 31, 2021		0		0
Series D Preferred Stock, 650 shares designated; none issued and outstanding at June 30, 2022 and December 31, 2021		0		0
Common stock, $0.0001 par value, 500,000,000 shares authorized; 107,223,240 shares issued and 107,061,536 outstanding at June 30, 2022 respectively, and 104,792,072 shares issued and outstanding at December 31, 2021		10,722		10,479
Additional paid-in capital		44,824,151		39,512,122
Treasury stock, at cost; 161,704 and 0 shares held at June 30, 2022 and December 31, 2021		(365,199)		0
Accumulated deficit		(32,548,799)		(23,157,559)
Total Stockholders' Equity		11,920,875		16,365,042
Total Liabilities and Stockholders' Equity	$	19,381,174	$	19,231,303

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

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

Table of Contents~~KT HIGH-TECH MARKETING,~~

KULR TECHNOLOGY GROUP, INC. &AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~(Unaudited)~~(unaudited)


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenue	$	587,546	$	628,244	$	788,045	$	1,046,149
Cost of revenue		423,672		439,206		546,590		714,474
Gross Profit		163,874		189,038		241,455		331,675

Operating Expenses
Research and development		999,484		352,741		1,720,831		475,724
Selling, general, and administrative		4,326,162		2,723,303		7,861,085		4,216,114
Total Operating Expenses		5,325,646		3,076,044		9,581,916		4,691,838
Loss From Operations		(5,161,772)		(2,887,006)		(9,340,461)		(4,360,163)

Other (Expense) Income
Interest expense, net		(42,374)		(766)		(43,280)		(1,631)
Debt redemption costs		—		(140,000)		—		(140,000)
Amortization of debt discount		(103,219)		(20,074)		(103,219)		(128,198)
Change in fair value of accrued issuable equity		52,680		20,703		95,720		(111,874)
Total Other (Expense) Income, net		(92,913)		(140,137)		(50,779)		(381,703)

Net Loss		(5,254,685)		(3,027,143)		(9,391,240)		(4,741,866)
Deemed dividend to Series D preferred stockholders		—		(2,624,326)		—		(2,624,326)
Net Loss Attributable to Common Stockholders	$	(5,254,685)	$	(5,651,469)	$	(9,391,240)	$	(7,366,192)

Net Loss Per Share
- Basic and Diluted	$	(0.05)	$	(0.06)	$	(0.09)	$	(0.08)

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		104,545,799		92,513,238		103,537,473		91,302,814

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

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

Table of Contents~~KT HIGH-TECH MARKETING,~~

KULR TECHNOLOGY GROUP, INC. &AND SUBSIDIARY

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

~~FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017~~

~~(Unaudited)~~

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

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

~~KT HIGH-TECH MARKETING, INC. & SUBSIDIARY~~(unaudited)

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~


	FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
				Additional							Total
	Common Stock			Paid-In		Treasury Stock			Accumulated		Stockholders'
	Shares	Amount		Capital		Shares	Amount		Deficit		Equity
Balance - January 1, 2022	104,792,072	$	10,479	$	39,512,122	—	$	—	$	(23,157,559)	$	16,365,042
Treasury stock held upon the vesting of restricted common stock	—		0		0	194,704		(439,728)		0		(439,728)
Common stock issued upon the exercise of warrants	70,143		7		87,672	—		—		0		87,679
Common stock issued upon the exercise of options	2,500		0		5,075	—		—		0		5,075
Stock-based compensation:
Common stock issued for services	6,000		1		43,159	—		—		0		43,160
Amortization of restricted common stock	—		0		519,231	—		—		0		519,231
Amortization of stock options	—		0		15,883	—		—		0		15,883
Amortization of market-based awards	—		0		730,048	—		—		0		730,048
Net loss	—		0		0	—		—		(4,136,555)		(4,136,555)
Balance - March 31, 2022	104,870,715		10,487		40,913,190	194,704		(439,728)		(27,294,114)		13,189,835
Treasury stock issued upon the exercise of options	—		0		(46,305)	(33,000)		74,529		0		28,224
Common stock issued upon the exercise of warrants	2,346,525		234		2,932,922	—		—		0		2,933,156
Stock-based compensation:
Common stock issued for services	6,000		1		10,260	—		—		0		10,261
Amortization of restricted common stock	—		0		422,128	—		—		0		422,128
Amortization of stock options	—		0		26,535	—		—		0		26,535
Amortization of market-based awards	—		0		565,421	—		—		0		565,421
Net loss	—		0		0	—		—		(5,254,685)		(5,254,685)
Balance - June 30, 2022	107,223,240	$	10,722	$	44,824,151	161,704	$	(365,199)	$	(32,548,799)	$	11,920,875

~~(Unaudited)~~


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

For the Nine Months Ended
September 30,
2017 2016
Cash Flows From Operating Activities:
Net loss $ (1,757,850 ) $ (600,221 )
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense 3,374 500
Stock-based compensation 411,181 23,636
Changes in operating assets and liabilities:
Accounts receivable (19,106 ) (3,600 )
Other current receivable 30,000 -
Other current receivable - related parties 2,000 -
Interest receivable - related party 2,152 (1,402 )
Inventory (15,151 ) 7,749
Prepaid expenses (115,945 ) (34,292 )
Other current assets 861,377 -
Accrued expenses and other current liabilities 189,083 (70,134 )
Accrued expenses and other current liabilities - related parties 145,300 124,311

Total Adjustments 1,494,265 46,768

Net Cash Used In Operating Activities (263,585 ) (553,453 )

Cash Flows From Investing Activities:
Purchase of note receivable - related party - (85,000 )
Proceeds from collection of note receivable - related party 85,000 -
Cash acquired in reverse recapitalization 1,859,261 -
Purchases of property and equipment (36,271 ) -

Net Cash Provided By (Used In) Investing Activities 1,907,990 (85,000 )

Cash Flows From Financing Activities:
Proceeds from issuance of Series A1 convertible preferred stock - 550,000

Net Cash Provided By Financing Activities - 550,000

Net Increase (Decrease) In Cash 1,644,405 (88,453 )

Cash - Beginning 9,087 138,753

Cash - Ending $ 1,653,492 $ 50,300

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ 1,600 $ -

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

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

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	For the Six Months Ended
	June 30,
	2022		2021
Cash Flows From Operating Activities:
Net loss	$	(9,391,240)	$	(4,741,866)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		103,219		128,198
Non-cash lease expense		102,905		0
Depreciation and amortization expense		88,548		9,908
Change in fair value of accrued issuable equity		(95,720)		111,874
Stock-based compensation		2,286,467		1,473,863
Changes in operating assets and liabilities:
Accounts receivable		(427,903)		(559,292)
Inventory		(93,261)		(127,006)
Prepaid expenses and other current assets		(1,187,561)		(338,070)
Security deposits		0		(50,213)
Right of use asset		0		21,048
Accounts payable		(153,028)		53,140
Accrued expenses and other current liabilities		(31,199)		(51,986)
Lease liability		(99,619)		(20,392)
Deferred revenue		(112,303)		9,229
Total Adjustments		380,545		660,301
Net Cash Used In Operating Activities		(9,010,695)		(4,081,565)
Cash Flows From Investing Activities:
Vendor deposits for property and equipment		(429,008)		0
Purchases of property and equipment		(117,776)		(36,492)
Net Cash Used In Investing Activities		(546,784)		(36,492)
Cash Flows from Financing Activities:
Repayments of notes payable		0		(2,450,000)
Proceeds from notes payable ⁽¹⁾		4,750,000		0
Payment of issuance costs		(17,200)		0
Payment of financing costs incurred in connection with the SEPA		(72,800)		0
Proceeds from the sale of Series D convertible preferred stock, common stock and warrants		0		6,500,000
Proceeds from the exercise of options		5,075		3,712,500
Proceeds from the exercise of warrants		3,020,835		0
Payment of financing costs		0		(365,000)
Net Cash Provided By Financing Activities		7,685,910		7,397,500
Net (Decrease) Increase In Cash		(1,871,569)		3,279,443
Cash - Beginning of Period		14,863,301		8,880,140
Cash - End of Period	$	12,991,732	$	12,159,583

⁽¹⁾ Face value of $5,000,000, less $250,000 original issue discount.

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

Table of Contents

~~KT HIGH-TECH MARKETING,~~KULR TECHNOLOGY GROUP, INC. &AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(unaudited)


	For the Six Months Ended
	June 30,
	2022		2021
Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
Interest	$	43,553	$	735

Non-cash investing and financing activities:
Right of use asset for lease liability	$	143,640	$	814,817
Beneficial conversion feature on Series D convertible preferred stock	$	—	$	2,624,326
Common stock issued upon the conversion of Series D convertible preferred stock	$	—	$	317
Common stock held in treasury upon the vesting of restricted common stock	$	(439,728)	$	0
Common stock issued upon the conversion of Series B Convertible Preferred Stock	$	—	$	70
Treasury stock issued upon the exercise of stock options	$	74,529	$	0
Receivable recorded for pending cash deposit of stock option exercise proceeds	$	28,224	$	0

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

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTANTIES

~~(UNAUDITED)~~

~~Note 1~~

~~Business Organization, Nature of Operations and Basis of Presentation~~

Organization and Operations

~~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 systems and ~~connected cars. In addition~~hypersonic vehicles, 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~~electric vehicles, 5G communication, cloud computer infrastructure, consumer and ~~endorsed by the National Aeronautics and Space Administration (“NASA”).~~industrial devices.

~~Reverse Recapitalization~~

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.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of ~~September~~June 30, ~~2017~~2022 and for the three and ~~nine~~six months ~~then ended.~~ended June 30, 2022 and 2021. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 are not necessarily indicative of the operating results for the full year ending December 31, ~~2017~~2022 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~~2021 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~~Form 10-K on March 28, 2022.

Risks and Uncertainties

In March ~~30, 2017, respectively.~~

2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2022, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. For example, in response to an outbreak of infection in Shanghai, beginning in March 2022, governmental authorities in China implemented a lockdown order in that city, significantly slowing economic and business activity in that region. We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities and may take additional actions based on their recommendations and requirements or as we otherwise see fit to protect the health and safety of our employees, customers, partners and suppliers.

The ~~closing~~full extent of the ~~Share Exchange Agreement was accounted for as~~future impact of COVID-19 on the Company’s operations and financial condition is uncertain. Accordingly, COVID-19 could have a ~~reverse recapitalization under~~material adverse effect on the ~~provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 805-40. The condensed consolidated statements~~Company’s business, results of operations, ~~herein reflect~~financial condition and prospects during 2022 and beyond, including the ~~historical results of KULR prior~~demand for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules as well as the ~~completion of the reverse recapitalization since it was determined~~capability to ~~be the accounting acquirer, and~~meet customer demands in a timely manner. The financial statements do not include any adjustments that might result from the ~~historical results~~outcome of ~~operations for KT High-Tech prior to the completion~~this uncertainty.

Table of the reverse recapitalization. The balance sheet 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 Contents

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.TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~Note 2~~

~~Summary of Significant Accounting Policies~~

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Since the date of the Annual Report on Form 10-K for the year ended December 31, 2021, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.

Liquidity

During April 2022, the Company received an aggregate of $2,933,156 of gross proceeds upon the exercise of warrants. On May 13, 2022, the Company issued a $5,000,000 promissory note to an investor for gross proceeds of $4,750,000. On the same date, the Company entered into a Standby Equity Purchase Agreement, which gives the Company the right, but not the obligation, to sell up to $50,000,000 of its shares of common stock to the same investor during the commitment period. See Note 9 – Stockholders’ Equity for additional information on the aforementioned transactions.

As of June 30, 2022, the Company had cash of $12,991,732 and working capital of $8,477,713. During the six months ended June 30, 2022, the Company incurred a net loss of $9,391,240 and used cash in operations of $9,010,695.

While the Company anticipates it will continue to incur operating losses and use cash in operating activities for the foreseeable future, the Company believes that its current working capital, combined with the cash availability pursuant to the Standby Equity Purchase Agreement, is sufficient in comparison to its anticipated cash usage for a period of at least twelve months after the filing date of these financial statements.

Use of Estimates

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these unaudited condensed consolidated financial statements include, but are not limited to, fair value calculations for equity securities, stock-based compensation ~~the collectability of receivables, inventory valuations, the recoverability and useful lives of long-lived assets~~ and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is ~~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.

Concentrations of Credit Risk

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

Cash Concentrations

A significant portion of the Company’s cash is held at one major financial institution. The Company ~~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~~ uninsured ~~cash~~ balances of ~~$1,225,642~~$12,491,732 and ~~$0 at September~~$14,363,301 as of June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Customer and Revenue Concentrations

The Company had certain customers whose revenue individually represented 10% or more of the ~~nine months ended September 30, 2016, 100%~~Company's total revenue, or whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as follows:


	Revenues								Accounts Receivable
	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,				As of		As of
	2022		2021		2022		2021		June 30, 2022		December 31, 2021
Customer A	*		69	%	12	%	62	%	*		42	%
Customer B	56	%	*		42	%	*		59	%	*
Customer C	28	%	*		21	%	*		30	%	34	%
Customer D	*		20	%	*		14	%	*		*
Customer E	*		*		*		12	%	*		*
Customer F	*		*		11	%	*		*		*
Customer G	*		*		*		*		*		21	%
Total	84	%	89	%	86	%	88	%	89	%	97	%

*	Less than 10%

There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s ~~revenues were generated from Customer A. During~~significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the ~~three months ended September 30, 2017, 76%~~Company’s business and ~~24%~~prospects. As a result of the Company’s ~~revenues were generated~~significant customer concentrations, its gross profit and results from ~~Customer C and Customer A, respectively. During~~operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the ~~nine months ended September 30, 2017, 44%, 42% and 14%~~loss of, reduction of business from, or less favorable terms with any of the Company’s ~~revenues were generated from Customer C, Customer B~~significant customers.

Vendor Concentrations

Vendor concentrations are as follows for the three and ~~Customer A, respectively. As of September~~six months ended June 30, ~~2017, receivables from Customer C, Customer B~~2022 and Customer A comprised 44%, 42%, and 14%, respectively, of the Company’s total accounts receivable. As of December 31, 2016, a receivable from Customer A comprised 100% of the Company’s total account receivable.2021, respectively:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Vendor A	65	%	*		51	%	*
Vendor B	*		85	%	*		43	%
Vendor C	*		*		*		48	%
Vendor D	*		*		17	%	*
	65	%	85	%	68	%	91	%

*	Less than 10%

Inventory

~~Inventory~~

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Inventory at June 30, ~~2017~~2022 and December 31, ~~2016, the Company’s inventory~~2021 was comprised ~~solely of finished goods.~~

~~Convertible Instruments~~

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.following:


	June 30,		December 31,
	2022		2021
Work-in-process	$	91,188	$	5,500
Finished goods		193,384		185,811
Total inventory	$	284,572	$	191,311

~~Fair Value of Financial Instruments~~

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 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.

Revenue Recognition

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.~~ estimates may be required within the revenue recognition process, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

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

●

Step 1: Identify the contract with the customer;

●

Step 2: Identify the performance obligations in the contract;

●

Step 3: Determine the transaction price;

●

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

●

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

The Company ~~considers~~recognizes revenue ~~realized or realizable and earned when all of~~primarily from the following ~~criteria are met: (i) persuasive evidence~~different types of ~~an arrangement exists, (ii)~~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 ~~services have been rendered to~~Company’s revenue recognized in its consolidated statements of operations:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Product sales	$	557,664	$	577,360	$	730,263	$	755,609
Contract services		29,882		50,884		57,782		290,540
Total revenue	$	587,546	$	628,244	$	788,045	$	1,046,149

As of June 30, 2022 and December 31, 2021, respectively, the ~~customer, (iii)~~Company had $20,000 and $132,303 of deferred revenue, respectively, from contracts with customers. The contract liabilities represent payments received from customers for which the ~~sales price is fixed or determinable, and (iv) collectability is reasonably assured. Sales are recognized upon shipment to~~Company had not yet satisfied its performance obligation under the ~~customer, free on board shipping point,~~contract, or the ~~point of customer acceptance.~~

customers have not officially accepted the goods or services provided under the contract. During the three and six months ended ~~September~~June 30, ~~2017 and 2016,~~2022, the Company recognized ~~$15,106~~$0 and ~~$0 of~~$112,303, respectively, that was included in deferred revenue related to the sale of PCM heat sinks and CFV thermal interfaces, respectively. During the nine months ended September 30, 2017 and 2016, the Company recognized $26,006 and $6,900 of revenue related to the sale of PCM heat sinks and CFV thermal interfaces, respectively.

~~Research and Development~~

~~Research and development expenses are charged to operations as incurred.~~in a previous period. During the three and six months ended ~~September~~June 30, ~~2017~~2021, there was 0 revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As of June 30, 2022 and ~~2016,~~December 31, 2021, the Company ~~incurred $196,643~~had $29,887 and ~~$105,733,~~$84,324, respectively, of ~~research~~deferred labor costs, which is included in prepaid expenses and ~~development expenses. During~~other current assets in the ~~nine months ended September 30, 2017 and 2016,~~Company’s unaudited condensed consolidated balance sheets. Deferred labor costs represent costs to fulfill the Company’s contract service revenue. The Company will recognize the deferred labor costs as cost of revenues at the point in time that the Company ~~incurred $647,328 and $301,874, respectively, of research and development expenses.~~

~~Stock-Based Compensation~~

~~The Company measures~~satisfies its performance obligation under the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees, the fair value of the award is measured on the grant date and for non-employees, the fair value of the awardrespective contract, which is generally ~~re-measured on vesting dates and interim financial reporting dates until~~at the ~~service period is complete. The fair value amount is then recognized over~~time the ~~period during which~~ services are ~~required to be provided in exchange for~~fulfilled and/or accepted by 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.customer.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. 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 and dilutive common-equivalent shares outstanding during each period.

The following table presents the computation of basic and diluted net loss per common share:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Numerator:
Net loss attributable to common stockholders	$	(5,254,685)	$	(5,651,469)	$	(9,391,240)	$	(7,366,192)

Denominator:
Weighted-average common shares outstanding		106,348,239		94,513,238		105,578,313		92,639,830
Less: weighted-average unvested restricted shares		(2,019,011)		(2,000,000)		(2,187,514)		(1,337,017)
Add: weighted average accrued issuable equity		216,571		—		146,674		—
Denominator for basic and diluted net loss per share		104,545,799		92,513,238		103,537,473		91,302,814

Net loss per share:
Basic and diluted	$	(0.05)	$	(0.06)	$	(0.09)	$	(0.08)

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


	June 30,
	2022	2021
Unvested restricted stock	1,957,500	2,475,000
Unvested market -based equity awards	3,000,000	3,000,000
Options	482,216	540,000
Warrants	2,524,410	6,387,911
Total	7,964,126	12,402,911

Recently Adopted Accounting Pronouncements

In October 2020, the ~~net impact~~FASB issued ASU 2020-10 “Codification Improvements”, which improves consistency by amending the Codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of ~~common shares (computed using~~various provisions in the ~~treasury stock method), if dilutive, resulting from~~Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The guidance is effective for the ~~conversion~~Company beginning in the first quarter of ~~preferred stock.~~

~~Income Taxes~~

fiscal year 2022 with early adoption permitted. The Company ~~recognizes deferred tax assets~~adopted ASU 2020-10 effective January 1, 2022 and ~~liabilities~~its adoption did not have a material impact on its condensed consolidated financial statements.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the ~~expected future tax consequences of items that have been included~~new standard prospectively to modifications or ~~excluded in~~exchanges occurring after the ~~financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis~~effective date of the ~~difference between~~new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the ~~tax basis~~new standard in an interim period, the guidance should be applied as of ~~assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for~~ the ~~years in which~~beginning of the ~~temporary differences are expected to reverse.~~

fiscal year that includes that interim period. The Company ~~utilizes~~adopted ASU 2021-04 effective January 1, 2022 and its adoption did not have a ~~recognition threshold and measurement process for~~material impact on its condensed consolidated financial ~~statement recognition and measurement~~statements.

NOTE 3 PREPAID EXPENSES AND OTHER CURRENT ASSETS

As 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~~June 30, ~~2017~~2022 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~~2021, prepaid expenses and ~~penalties as general and administrative expenses in the condensed statements of operations.~~

~~Liquidity and Management’s Plans~~

As 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 net loss of $839,252 and $1,757,850 respectively.

~~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.~~

~~Note 3~~

~~Note Receivable – Related Party~~

~~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.~~

~~Note 4~~

~~Prepaid Expenses~~

~~As of September 30, 2017 and December 31, 2016, prepaid expenses~~other current assets consisted of the following:

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


	June 30,		December 31,
	2022		2021
Marketing	$	726,422	$	10,231
Inventory deposits		691,006		309,688
Professional fees		164,558		65,118
Subscriptions		71,774		0
Insurance		40,733		69,925
Other		33,541		31,074
Deferred labor costs		29,887		84,324
Receivable for option exercise		28,224		0
Total prepaid expenses	$	1,786,145	$	570,360

Prepaid marketing costs consist of two sponsorship agreements with a marketing partner whereby the Company is required to make upfront payments. These agreements expire in September 2022 and December 2022. As of June 30, 2022, total prepayments made towards such contracts were $2,000,000, of which $722,321 remains unamortized and is included in prepaid marketing costs. See Note 10 – Commitments and Contingencies for additional information.

NOTE 4 VENDOR DEPOSITS

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

As of June 30, 2022, the Company had outstanding deposits of $2,582,958 in connection with these agreements.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~Note 5~~

~~Accrued Expenses and Other Current Liabilities~~

NOTE 5 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, accrued expenses and other current liabilities consisted of the following:


	June 30,		December 31,
	2022		2021
Legal and professional fees	$	862,047	$	418,154
Payroll and vacation		397,809		302,101
Research and development		194,444		146,158
Board compensation		56,541		45,680
Other		38,160		84,824
Marketing and advertising fees		20,563		37,810
Accrued cost of sales		2,191		128,500
Total accrued expenses and other current liabilities	$	1,571,755	$	1,163,227

September 30, 2017 December 31, 2016
(unaudited)
Accrued legal and professional fees $ 116,667 $ 18,000
Accrued payroll and vacation 88,615 -
Payroll and income tax payable 12,742 36,422
Accrued research and development expenses 32,717 6,250
Credit card payable 25,101 9,521
Other 23,884 2,252
Total accrued expenses and other current liabilities $ 299,726 $ 72,445

NOTE 6 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the six months ended June 30, 2022 is presented below:

~~Note 6~~

~~Accrued Expenses and Other Current Liabilities – Related Parties~~


	For the Six Months Ended
	June 30, 2022
Beginning Balance	$	290,721
Additions		45,800
Cancelled accrued issuable equity obligations		(92,000)
Mark-to market		(95,720)
Ending Balance	$	148,801

Accrued Issuable Equity for Services

During the six months ended June 30, 2022, the Company entered into certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company. On the respective dates the contracts were entered into, the estimated fair value of the shares to be issued was an aggregate of $45,800.

During the six months ended June 30, 2022, the Company cancelled certain of its accrued issuable equity obligations of an aggregate of 33,333 of its shares, respectively, with an aggregate fair value of $92,000, respectively, due to a reduction in investor relation services.

During the six months ended June 30, 2022, the Company recorded an aggregate of $95,720 of gains related to the reduction in fair value of accrued issuable equity (see Note 9 – Stockholders’ Equity, Stock-Based Compensation for additional details). The fair value of the accrued but unissued shares as of June 30, 2022 was $148,801.

NOTE 7 LEASES

The Company leases office space in San Diego, California. During the three and six months ended June 30, 2022, operating lease expense was $57,849 and $131,930, respectively. During the three and six months ended June 30, 2021, operating lease expense was $39,805 and $55,207, respectively. As of ~~September~~June 30, ~~2017~~2022, the Company did not have any financing leases.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Maturities of lease liabilities as of June 30, 2022 were as follows:


Maturity Date
July 1 through December 31, 2022	$	114,999
2023		234,694
2024		99,187
Total lease payments		448,880
Less: Imputed interest		(21,862)
Present value of lease liabilities		427,018
Less: current portion		(214,166)
Lease liabilities, non-current portion	$	212,852

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


	For the Six Months Ended
	June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating lease	$	99,619

NOTE 8 NOTES AND LOANS PAYABLE

Note Purchase Agreement

On May 13, 2022, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with YAII PN, Ltd., a Cayman Island exempt limited partnership (the “Investor”), pursuant to which the Investor purchased a full recourse promissory note with an initial principal amount equal to $5,000,000 (the “Promissory Note”) for cash proceeds of $4,750,000. The Promissory Note included an original issue discount of $250,000, a structuring fee of $10,000, and legal fees of $7,200, which represents the difference between the principal and proceeds received. The original issue discount, along with structuring fees were recorded as a debt discount which is being amortized over the term of the Note using the effective interest rate method. The Promissory Note carries an interest rate of 10% per annum. The Company is required to repay the principal and interest in monthly installments by the maturity date of November 13, 2022.

A summary of notes payable activity during the six months ended June 30, 2022 is presented below:


	Notes		Debt
	Payable		Discount		Total
Balance, January 1, 2022	$	0	$	0	$	0
Proceeds from promissory note		5,000,000		—		5,000,000
Debt discount		—		(267,200)		(267,200)
Amortization of debt discount		—		103,219		103,219
Outstanding, June 30, 2022	$	5,000,000	$	(163,981)	$	4,836,019

Paycheck Protection Program Loan

On April 27, 2020, the Company received approximately $155,000 of cash proceeds pursuant to an unsecured loan provided in connection with the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (“CARES Act”).

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 their respective PPP Loans. 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 initial term of the loan was two years and has been extended to five years with a maturity date of April 27, 2025. The Company has applied for forgiveness of the PPP loan, which was approved by the Small Business Administration and the PPP loan was fully forgiven effective July 18, 2022. During the three and six months ended June 30, 2022, the Company recognized interest expense of $387 and $651, respectively, related to the PPP loan. As of June 30, 2022 and December 31, ~~2016,~~2021, the Company’s accrued ~~expenses~~expense related to the loan was $2,352 and ~~other current liabilities – related parties consisted~~$1,701, respectively.

NOTE 9STOCKHOLDERS’ EQUITY

Standby Equity Purchase Agreement

On May 13, 2022, KULR Technology Group, Inc. (the “Company”) entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company shall have the right, but not the obligation, to sell to Yorkville up to $50,000,000 of its shares of common stock, par value $0.0001 per share, at the Company’s request any time during the commitment period commencing on May 13, 2022 and terminating on the earliest of (i) the first day of the ~~following:~~

September 30, 2017 December 31, 2016
(unaudited)
Accrued research and development expenses - related parties $ 507,041 $ 351,540
Due to related party - 7,701
Total accrued expenses and other current liabilities - related parties $ 507,041 $ 359,241

~~Accrued research~~month following the 24-month anniversary of the SEPA and ~~development expenses – related parties consists~~(ii) the date on which Yorkville shall have made payment of ~~(a)~~any advances requested pursuant to the SEPA for shares of the Company’s common stock equal to the commitment amount of $50,000,000. Each sale the Company requests under the SEPA (an “Advance”) may be for a ~~liability~~number of ~~$110,000~~shares of common stock with an aggregate value of up to $5,000,000. The shares would be purchased at 98.0% of the Market Price (as defined below) and ~~$77,500~~would be subject to certain limitations, including that Yorkville could not purchase any shares that would result in it owning more than 4.99% of the Company’s outstanding common stock at the time of an Advance (the “Ownership Limitation”) or a cumulative aggregate of 19.9% of the Company’s outstanding common stock as of ~~September~~the date of the SEPA (the “Exchange Cap”). The Exchange Cap will not apply under certain circumstances, including to any sales of common stock under the SEPA that equal or exceed the Minimum Price (as defined in Section 312.03 of the NYSE Listed Company Manual). “Market Price” is defined in the SEPA as the average of the VWAPs (as defined below) during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville. “VWAP” is defined in the SEPA to mean, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the NYSE American as reported by Bloomberg L.P. during regular trading hours. There were 0 issuances pursuant to the SEPA during the three and six months ended June 30, ~~2017 and~~2022.

Common Stock

During March 2022, the Company issued an aggregate of 70,143 shares of common stock upon the exercise of warrants pursuant to which the Company received an aggregate of $87,679 of gross proceeds.

During April 2022, the Company issued an aggregate of 2,346,525 shares of common stock upon the exercise of warrants pursuant to which the Company received an aggregate of $2,933,156 of gross proceeds. In connection with an inducement offer from the Company, the Company issued new warrants to purchase an aggregate of 2,346,525 shares of common stock at an exercise price of $1.00 per share (the “New Warrants”). The New Warrants expire on December 31, ~~2016,~~2025. The value of the New Warrants provided to the exercising warrant holders was deemed to be an offering cost associated with an equity financing to raise capital, pursuant to ASU 2021-04. Because the New Warrants were determined to be classified as equity, the credit to additional paid-in capital associated with the issuance of the New Warrants is offset by the debit to additional paid-in capital related to the offering cost. The warrants had a grant date value of $3,657,763, calculated using the Black Scholes pricing model with the following assumptions used: risk free rate – 2.88%, expected term – 3.69, expected volatility – 100%, expected dividends – 0%.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

During the three and six months ended June 30, 2022, the Company issued an aggregate of 6,000 and 12,000 shares of immediately vested common stock with a grant date value of $10,261 and $53,421, respectively, for legal services.

During the six months ended June 30, 2022, the Company issued an aggregate of 35,500 shares of common stock upon the exercise of stock options, of which 33,000 shares were issued from treasury stock.

Treasury Stock

The 2018 KULR Technology Group Equity Incentive Plan (the “Plan”) allows for the grant of non-vested stock options, RSUs and RSAs to the Company’s ~~Chief Technology Officer (“CTO”)~~employees pursuant to the terms of the Plan. Under the provision of the Plan, unless otherwise elected, participants fulfill their related income tax withholding obligation by having shares withheld at the time of vesting. The shares withheld are then transferred to the Company’s treasury stock at cost. During the six months ended June 30, 2022, the Company withheld 194,704 shares valued at $439,728 in connection with ~~consulting services provided to~~ the ~~Company; and (b) a liability~~vesting of $397,041 and $274,040 as of September 30, 2017 and December 31, 2016, respectively, to Energy Science Laboratories, Inc. (“ESLI”), a company controlled by the Company’s CTO, in connection with consulting services provided to the Company associated with the development of the Company’s CFV thermal management solutions.

~~Due to related party consisted of certain amounts owed by KULR to KT High-Tech, which were eliminated in consolidation as a result of the reverse recapitalization.~~

~~Note 7~~

~~Stockholders' Equity (Deficiency)~~

~~Reverse Recapitalization~~

~~See Note 1 - Business Organization, Nature of Operations and Basis of Presentation - Reverse Recapitalization for details of the Share Exchange.~~

~~Common Stock~~

~~During the nine months ended September 30, 2017, the Company received aggregate consideration of $32,000 related to certain~~ restricted common stock awards during the period. Pursuant to the exercise of options, the Company transferred 33,000 shares that were ~~issued~~held in ~~2013 and 2014.~~treasury for an aggregate of $28,224 gross proceeds. As of June 30, 2022, the Company has 161,704 shares of held in treasury valued at $365,199.

Warrants

~~During~~A summary of warrants activity during the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 is presented below:


		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Warrants	Price		Term (Yrs)	Value
Outstanding, January 1, 2022	2,594,553	$	1.25
Issued	2,346,525		1.00
Exercised	(2,416,668)		(1.25)
Expired	—		—
Forfeited	—		—
Outstanding, June 30, 2022	2,524,410	$	1.02	3.5	$	1,343,954

Exercisable, June 30, 2022	2,524,410	$	1.25	3.5	$	1,343,954

See the Common Stock discussion above for additional information.

A summary of outstanding and ~~2016,~~exercisable warrants as of June 30, 2022 is presented below:


Warrants Outstanding			Warrants Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants
$	1.25	177,885	3.5	177,885
$	1.00	2,346,525	3.5	2,346,525
		2,524,410	3.5	2,524,410

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Stock Options

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


	For The Six Months Ended
	June 30,
	2022		2021
Risk free interest rate	1.18% -2.94	%	1.58	%
Expected term (years)	3.5 - 3.9		2.5 - 3.5
Expected volatility	116	%	93% - 109	%
Expected dividends	0	%	0	%

For the six months ended June 30, 2022 and 2021, the weighted average grant date fair value per share of options was $1.47 and $0.66, respectively.

A summary of options activity (excluding Market-Based Awards) during the six months ended June 30, 2022 is presented below:


		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Options	Price		Term (Yrs)	Value
Outstanding, January 1, 2022	405,216	$	2.29
Granted	130,000		2.03
Exercised	(35,500)		0.76
Expired	—		—
Forfeited	(17,500)		2.03
Outstanding, June 30, 2022	482,216	$	1.65	3.5	$	167,783

Exercisable, June 30, 2022	207,355	$	1.19	2.4	$	125,267

The following table presents information related to stock options (excluding market-based option awards) as of June 30, 2022:


Options Outstanding			Options Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Options	In Years	Options
$	0.66	152,486	1.7	140,750
$	1.28	10,000	—	—
$	1.55	20,000	—	—
$	1.99	10,000	3.9	3,958
$	2.05	50,000	4.1	3,333
$	2.08	10,000	3.9	3,958
$	2.13	20,000	4.2	6,250
$	2.25	10,000	4.6	625
$	2.27	29,730	4.0	10,980
$	2.31	50,000	—	—
$	2.43	20,000	4.2	6,250
$	2.44	100,000	3.7	31,250
		482,216	2.4	207,355

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As of June 30, 2022, there was $292,920 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of ~~$187,023 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 respectively,~~3.2 years.

Restricted Common Stock

The following table presents information related to restricted common stock ~~awards which is included within general and administrative expenses on the condensed statements~~(excluding Market-Based Awards) as of ~~operations.~~ June 30, 2022:


		Weighted Average
		Grant Date
	Shares of Restricted	Fair Value
	Common Stock	Per Share
Non-vested balance, January 1, 2022	2,590,000	$	2.52
Granted	150,000		2.08
Vested	(782,500)		2.48
Non-vested shares, June 30, 2022	1,957,500	$	2.50

As of ~~September~~June 30, ~~2017,~~2022, there was ~~$464,846~~$4,365,706 of unrecognized stock-based compensation expense ~~of which, $341,520 was subject~~related to ~~re-measurement,~~restricted stock that will be recognized over the weighted average remaining vesting period of ~~0.6~~2.7 years.

Market-Based Awards

The following table presents information related to market-based awards outstanding as of June 30, 2022:


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

The grant date value for the market-based awards is being amortized over the derived service periods of the awards. As of June 30, 2022, there was $2,083,108 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.4 years.

As of June 30, 2022, NaN of the market-based awards have vested.

Stock-Based Compensation

During the three and six months ended June 30, 2022, the Company recognized stock-based compensation expense of $1,043,545 and $2,286,467, respectively, related to restricted common stock, warrants and stock options, of which $1,033,851 and $2,268,665, respectively are included within selling, general and administrative expenses, and $9,694 and $17,802, respectively are included within research and development expenses in the unaudited condensed consolidated statements of operations. During the three and six months ended June 30, 2021, the Company recognized stock-based compensation expense of $1,085,891 and $1,473,863, respectively, related to restricted common stock, warrants and stock options, of which $1,078,106 and $1,458,673, respectively are included within selling, general and administrative expenses, and $7,785 and $15,190, respectively are included within research and development expenses on the unaudited condensed consolidated statements of operations.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table presents information related to stock-based compensation for the three months ended June 30, 2022 and 2021:


	For The Three Months Ended				For The Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Common stock for services	$	10,261	$	110,000	$	53,421	$	159,800
Amortization of restricted common stock		422,128		433,689		941,359		560,314
Amortization of market-based awards		565,421		489,774		1,295,469		620,019
Stock options		26,535		15,779		42,418		24,891
Accrued issuable equity (common stock)		19,200		36,649		(46,200)		108,839
Total	$	1,043,545	$	1,085,891	$	2,286,467	$	1,473,863

NOTE 10COMMITMENTS AND CONTINGENCIES

Sponsorship Agreement

On June 15, 2022, the Company amended the Second Sponsorship Agreement (see Note 3 - Prepaid Expenses and Other Current Assets) to extend the term through December 31, 2023. The agreement provides the Company with the right to publicize and highlight the sponsorship and display its name and logo during certain events and use digital marketing and social media platforms throughout the 2023 calendar year. The Company has committed to pay an aggregate of $1,450,000 in sponsorship fees in three installments, which are due July 2022, January 2023, and April 2023. On July 8, 2022, the Company paid $500,000 which will be recorded as a prepaid expense and amortized over the performance period of January 1, 2023 to December 31, 2023 using the straight-line method. The total remaining commitment amount to be paid for sponsorship agreements is $950,000.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition of ~~KT High-Tech Marketing,~~KULR Technology Group, Inc. ~~("KT High-Tech"~~(“KULR”) and ~~including~~ its wholly-owned subsidiary, KULR Technology Corporation (“~~KULR”~~KTC”), (collectively referred to as “KULR” or the “Company”) as of ~~September 30, 2017~~ and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with KULR’s and KT High-Tech’s audited financial statements and related disclosures as of December 31, 2016 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.Report. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company.

~~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, and other ~~variations or similar words. No assurances can be given~~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 Department of Defense (“DOD”) applications, our solutions target high performance applications in direct energy, hypersonic vehicles and satellite communications. For commercial applications, our main focus is a total solution to battery safety and sustainability by which ~~it acquired~~we aim to mitigate the effects of thermal runaway propagation which has been known to cause random fires in lithium-ion (“Li-ion”) batteries. This total battery safety solution can be used for electric vehicles, energy storage, battery recycling transportation, cloud computing and 5G communication devices. Our proprietary core technology is a carbon fiber material that provides what we believe to be superior thermal conductivity and heat dissipation for an ultra-lightweight and pliable material. By leveraging our proprietary cooling solutions that have been developed through ~~assignment~~longstanding partnerships with advanced technology users like NASA, the Jet Propulsion Lab and others, our products and services make commercial battery powered products safer and electronics systems cooler and lighter.

KULR’s business model continues to evolve from being a component supplier, to providing more design and ~~license with KULR’s co-founder Dr. Timothy Knowles,~~testing services to our customers. The next step of evolution is to provide total system solutions to address market needs. In order to scale up as a systems provider more quickly and efficiently in the ~~high value, high-performance consumer electronic and~~Li-ion battery energy storage ~~applications. Prior~~and 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 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~~thermal design technology expertise to ~~the Reverse Acquisition, the Company was an early-stage company planning~~create market leading products, which KULR will take to market directly to capture more value for KULR shareholders.

In June, KULR achieved significant milestone in executing this strategy by securing an initial order for over 75 megawatt hours (“MWh”) of Li-ion battery cell capacity from Taiwan’s E-One Moli Energy Corporation (“Molicel”) to design and ~~distribute technology products and components targeting~~build battery applications with the highest safety ratings. As part of the strategic relationship, KULR would purchase over 700MWh of battery energy ~~and consumer electronics industries. The Company intended~~capacity to ~~market and sell the products to both the end user~~further accelerate its production and supply chain ~~markets and~~localization initiatives within North America. Securing this Molicel battery cell supply accelerates our ability to ~~seek partnerships in developing and distributing such products.~~provide total solutions to high value customer applications with revenue potential that could exceed $350 million.

~~After~~Through the Reverse Acquisition, the Company integrated its existing business operations with those of its subsidiary, KULR. KULR owns proprietary carbon fiber based (Carbon Fiber Velvet or “CFV”) thermal management solutions 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 inside a wide array of electronic applications, such as mobile devices, cloud computing, virtual reality platforms, satellites, internet of things, drones, and connected cars.

~~Thermal Management Solutions~~

Three key vectors have driven advancements 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.

~~In addition to thermal management of electronic systems, KULR has developed, in~~ partnership with ~~NASA JSC,~~Molicel, KULR will apply a ~~highly effective, lightweight~~holistic and ~~passive~~comprehensive solution to battery safety and thermal ~~protection technology.~~energy management with a suite of technologies including its: Passive Propagation Resistant (“PPR”) design and testing, Internal Short Circuit (“ISC”) trigger cells, Fractional Thermal Runaway ~~Shield (TRS) for lithium ion batteries. KULR’s lithium ion~~Calorimeter (“FTRC”) testing and AI-powered CellCheck battery (Li-B) TRS product prevents a potentially dangerous combustible condition known as thermal runaway from occurring in neighboring Li-B cells by acting as a shield or barrier in between individual Li-B cells in a battery pack. Although rare, incidentsmanagement system, to target the following markets:

●

Aerospace and defense systems, such as CubeSat batteries meeting JSC 20793 safety requirements and the strategic battery reserve program initiated by NASA

●

Energy storage systems

●

High-performance electric vehicles and electric vertical take-off and landing (“eVOTL”)

●

Premium industrial and consumer electronics

Table of ~~thermal runaway occurring spontaneously in Li-B cargo shipments and inside electronics, including smartphones, hover boards and electric vehicles, are a cause of public concern.~~Contents

Recent Developments

Sales and Marketing

The KULR Sales and Marketing group further expanded with the onboarding of a Director of Product Marketing, Internal Sales Manager, and Technical Sales Lead. These individuals bring over 60+ years of experience to the KULR team and will bring more focus on sales related to energy storage and recycling. Additionally, KULR has added an additional Manufacturer’s Representative team to support East Coast sales. With the increase in product platforms and expanded sales and marketing capabilities, KULR now has in excess of 300 customers in our active sales funnel.

The Sales team were successful in landing four major commercial accounts for our SafeCase products with deployment trials underway. Additionally, with support of our major recycling partner, KULR were able to obtain UPS permits allowing for shipment of batteries utilizing the KULR SafeCase products. This is a major milestone for the expansion of SafeCase utilization.

Additionally, KULR received a follow-on order for the space-developed phase change material (“PCM”) heat sink technology from leading aerospace and defense company Lockheed Martin Corporation.

Operations and HR

The KULR organization took a tremendous leap forward in completing ISO 9001 certification for our San Diego headquarter facility during the quarter. This is an exceptional accomplishment for the team and demonstrates KULR’s dedication is pursuit of manufacturing excellence and operational controls.

Our fully automated battery testing capability has begun installation with initial processing capabilities of approximately 500,000 18650/21700 cells annually in support of NASA WI-37. System installation will complete in Q3’22 with full capacity processing initiating in Q4’22. This capability will be used to support NASA and DOD battery cell deployments as well as for internal demands related to KULR qualified cells deployments.

KULR hired an additional 10 permanent employees during the second quarter and maintains an outsource strategy for software development and volume TRS manufacturing. We have 42 full-time and two part-time employees as of June 30, 2022.

COVID-19

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2022, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. Although recent cases and deaths from the COVID-19 pandemic have generally declined in the United States, spread of COVID-19 in China recently resulted in a temporary lockdown covering all of Shanghai, China where our manufacturing partner has its headquarter. During the first quarter of 2022, we experienced significant impact to our business due to the COVID-19 lockdown in China. As of March 2022, inventory in excess of $325,000 could not be shipped due to the COVID-19 lockdown in Shanghai. The product was shipped, and revenue was recognized during the second quarter. COVID-related challenges have resulted in delays in product shipment, not cancellations. As restrictions ease in the coming months, we expect to make up for lost time and revenue as we move through our sizeable inventory. We are currently taking active steps to direct our production and supply chain activities to North America to geographically diversify and potentially reduce further COVID-19 impacts.

The full extent of the future impact of COVID-19 on the Company’s operations and financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during 2022 and beyond, including the demand for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules, as well as the capability to meet customer demands in a timely manner. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Table of Contents

Financing Activities

On ~~June 6, 2017, the Company filed~~May 13, 2022, we entered into a ~~Certificate of Designation of Series A Voting Preferred Stock~~Standby Equity Purchase Agreement (the “SEPA”) with ~~the Secretary of State of the State of Delaware (the “Certificate of Designation”~~YA II PN, Ltd. (“Yorkville”). Pursuant to the ~~Certificate of Designation,~~SEPA, the Company designated 1,000,000 shares of preferred “A” stock, $0.0001 par value per share (individually or collectively the “Preferred A Stock”). The Preferred A Stock are not convertible into any series or class of stock 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 in the event of any liquidation, dissolution, or winding up of the Company. Each record holder of Preferred A Stockshall have the right, but not the obligation, to ~~vote~~sell to Yorkville up to $50,000,000 of its shares of common stock any time during the commitment period commencing on May 13, 2022 and terminating on the earliest of (i) the first day of the month following the 24-month anniversary of the SEPA and (ii) the date on which Yorkville shall have made payment of any ~~matter with holders~~advances requested pursuant to the SEPA for shares of the Company’s common stock ~~and other securities entitled~~equal to ~~vote, if any, voting together as one (1) class.~~the commitment amount of $50,000,000. Each ~~record holder of Preferred A Stock has that~~sale the Company requests (an “Advance”) may be for a 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 holdersshares of common stock ~~entitled~~with an aggregate value of up to ~~vote~~$5,000,000. The shares would be purchased at ~~such meetings.~~

~~As discussed above,~~98.0% of the Market Price (as defined in the SEPA) and would be subject to certain limitations. The Company agreed to file a prospectus supplement dated May 13, 2022 to the Company’s prospectus filed as part of the Registration Statement on Form S-3 that was declared effective on ~~June 19, 2017,~~July 13, 2021. Concurrently with the SEPA, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Yorkville, pursuant to which the ~~Share Exchange Agreement, KULR became~~Company issued to the Investor a ~~wholly-owned subsidiary~~promissory note with an initial principal amount equal to $5,000,000 (the “Promissory Note”) for which the Company received gross proceeds of $4,750,000. The Promissory Note carries an interest rate of 10% per annum and is payable in five monthly installments beginning on June 13, 2022.

The foregoing Is a summary description of certain terms of the ~~Company. Accordingly,~~SEPA, Note Purchase Agreement and Promissory Note. For a full description of all terms, please refer to the ~~Company, through its subsidiary, KULR, will primarily focus its operations on KULR’s thermal management business.~~

~~Upon closing~~copies of the ~~Share Exchange~~SEPA, the Note Purchase Agreement and the Promissory Note that are filed as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3 to the Company’s Current Report on ~~June 19, 2017, the following persons constituted the executive officers and directors~~Form 8-K filed on May 16, 2022.

Table of ~~the Company:~~Contents

~~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, 2017

Results of Operations

Three and Six Months Ended June 30, 2022 Compared With Three and Six Months Ended June 30, 2021

~~The closing~~Revenue

Our revenues consisted 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, and do not include the historical results of operations for KT High-Tech prior to the completion of the reverse recapitalization.following types:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Product sales	$	557,664	$	577,360	$	730,263	$	755,609
Contract services		29,882		50,884		57,782		290,540
Total revenue	$	587,546	$	628,244	$	788,045	$	1,046,149

~~Revenues~~

~~Revenues consisted of sales of our CFV thermal management solution and PCM heat sinks.~~

For the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, we generated ~~$15,106~~$587,546 and $0$628,244 of revenues from 12 and 6 customers, respectively, representing a decrease of $40,698, or 6%. For the six months ended June 30, 2022 and 2021, we generated $788,045 and $1,046,149 of revenues, respectively, ~~an increase~~representing a decrease of ~~$15,106.~~$258,104, or 25%, resulting from three contracts received during the first quarter of 2021.

~~For~~Revenue from product sales during the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2022 decreased by $19,696 or 3% compared to the three months ended June 30, 2021. Revenue from product sales during the six months ended June 30, 2022 decreased by $25,346 or 3% compared to the six months ended June 30, 2021. Product sales during these periods include sales of our component product, carbon fiber velvet (“CFV”) thermal management solution, internal short circuit (“ISC”) battery cells and ~~2016, we~~devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials.

Revenue from contract services during the three months ended June 30, 2022 decreased by approximately $21,002 or 41% compared to the three months ended June 30, 2021. Revenue from contract services during the six months ended June 30, 2022 decreased by approximately $232,758 or 80% compared to the six months ended June 30, 2021. The decrease in revenue for the six months ended June 30, 2022 is primarily attributable to three large DOD contracts received during the first quarter of 2021 generated ~~$26,006 and $6,900~~$233,656 of revenues ~~an increase~~during the six months ended June 30, 2021. Our service revenues, which include certain research and development contracts and onsite engineering services, have not been hampered by restrictions arising from working under COVID-19 shelter-in-place regulations.

Our customers and prospective customers are large organizations with multiple levels of ~~$19,106, or 277%.~~management, controls/procedures, and contract evaluation/authorization. Furthermore, our solutions are new and do not necessarily fit into pre-existing patterns of purchase commitment. Accordingly, the business activity cycle between expression of initial customer interest to shipping, acceptance and billing can be lengthy, unpredictable, and lumpy, which can influence the timing, consistency and reporting of sales growth.

Cost of Revenues

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

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

Table of ~~our CFV thermal management solution and PCM heat sinks.~~Contents

For the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, cost of revenues ~~were $52,384~~was $423,672 and ~~$0,~~$439,206, respectively, representing an increase of ~~$52,384. The increase was due toresearch and development expenses that were attributable to a sales agreement.~~

~~For the nine months ended September 30, 2017 and 2016, cost of revenues were $108,579 and $7,749, respectively, an increase of $100,830,~~$15,534, or ~~1,301%~~4%. The increase was primarily due to ~~research~~increased labor costs to produce finished goods, costs to procure component material for a new product line, and ~~development expenses that were~~shipping costs from our foreign manufacturer. The gross margin percentage was 28% and 30% for the three months ended June 30, 2022 and 2021, respectively. The decrease in margins realized during the three months ended June 30, 2022 is primarily attributable to an increase in headcount for production, new costs related to material for our new Safe Case product, and shipping costs from our foreign manufacturers.

For the six months ended June 30, 2022 and 2021, cost of revenues was $546,590 and $714,474, respectively, representing a ~~sales agreement.~~decrease of $167,884, or 23%. The decrease was primarily due to decreased costs as a result of decreased revenues. The gross margin percentage was 31% and 32% for the six months ended June 30, 2022 and 2021, respectively. The decrease in margins realized during the six months ended June 30, 2022 is primarily attributable to an increase in headcount for production, new costs for material for our new Safe Case product, and shipping costs from our foreign manufacturers.

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.~~solution, high-areal-capacity battery electrodes, 3D engineering for a rechargeable battery and non-cash stock-based compensation expenses. Research and development expenses are ~~expensed~~charged to operations as ~~they are~~ incurred.

For the three months ended ~~September~~June 30, ~~2017, research~~2022 and ~~development~~2021, R&D expenses ~~increased to $157,876 from $14,090 in the comparable 2016 period,~~were $999,484 and $352,741, respectively, representing an increase of ~~$143,786,~~$646,743 or ~~1,020%~~183%. The increase during 2022 was comprised primarily of $350,617 related to an increase in employee headcount spent on R&D and three new projects for automation, battery and drone design initiated in 2021, $148,513 related to cell check design services, $74,024 related to product development for high-areal capacity battery electrodes and 3D-engineering for solid state rechargeable batteries, $37,000 related to software design services and $17,950 related to drone engineering services.

For the six months ended June 30, 2022 and 2021, R&D expenses were $1,720,831 and $475,724, respectively, representing an increase of $1,245,107 or 262%. The increase is primarily ~~attributable~~comprised of $625,577 related to athe increase in employee headcount spent on battery and drone design, $316,956 related to research ~~consulting agreement which commenced~~ in ~~September 2016 as well as new consulting agreements~~cell check technology, $222,020 related to research in solid state batteries and ~~service contracts which commenced in the third quarter of 2017.~~3D engineering services, and $67,000 related to cell check design services.

For the nine months ended September 30, 2017, research and development expenses increased to $207,504 from $16,173 in the comparable 2016 period, an increase of $191,331, or 1,183%. The increase is primarily attributable to a research consulting agreement which commenced in September 2016 as well as new consulting agreements and service contracts which commenced in the third quarter of 2017.

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

Selling, General and Administrative

~~Research~~Selling, general and ~~Development – Related Parties~~administrative expenses consisted primarily of stock-based compensation, payroll taxes and other benefits, consulting fees, registration fees, office expenses, rent expense, directors and officers insurance, travel and entertainment, marketing and advertising, and filing fees.

Research and development – related parties includes expenses associated with the development of our CFV thermal management solutions provided by Energy Science Laboratories, Inc. (“ESLI”), a research and development company owned by our Chief Technology Officer (“CTO”)”, as well as services provided from our CTO. Research and development – related parties expenses are expensed as they are incurred.

For the three months ended ~~September~~June 30, ~~2017, research~~2022 and ~~development – related parties decreased by~~$52,876, or 58%, to $38,767 from $91,643 in the comparable 2016 period. The decrease is due to a decrease in the amount of work provided by ESLI during the 2017 period as we brought more of our research and development in-house.

~~For the nine months ended September 30, 2017, research and development – related parties increased by$154,123, or 54%, to $439,824 from $285,701 in the comparable 2016 period. 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,~~2021, selling, general and administrative expenses ~~increased by $512,915,~~were $4,326,162 and $2,723,303, respectively, an increase of $1,602,859, or ~~555%, to $605,273 from $92,358 in the comparable 2016 period.~~59%. The increase is primarily due to anincreases of approximately $530,484 in labor costs as a result of 25 new hires during the last twelve months, $515,984 for expanded marketing and advertising expenses, $130,389 for legal and professional services, $123,518 for office related expenses and supplies resulting from the increase in ~~non-cash stock-based compensation~~headcount, $94,904 for travel and entertainment expenses due to the lifting of COVID-19 restrictions, $37,913 for membership dues and subscriptions, $37,120 for depreciation expense ~~of approximately $178,000, increased payroll expenses from~~primarily due to facility improvements and computer equipment for the ~~hiring of new employees~~increase in ~~the third quarter of 2017, increased marketing expenses as well as increased professional fees related to being a public company.~~headcount, and $26,825 for directors and officers insurance.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022 and 2021, selling, general and administrative expenses ~~increased by $720,911,~~were $7,861,085 and $4,216,114, respectively, an increase of $3,644,971, or~~242%, to $1,019,235 from $298,324 in the comparable 2016 period.~~ 86%. The increase is primarily due to anincreases of approximately $1,052,004 in labor costs as a result of 25 new hires during the last twelve months, $809,991 for stock-based compensation issued to employees and consultants, $536,383 for expanded marketing and advertising expenses, $319,723 for legal and professional services, $149,000 for NYSE registration fees, $234,406 for office related expenses and supplies, $119,166 for travel and entertainment due to the lifting of COVID-19 restrictions, $76,200 for rent expense due to the execution of a new operating lease agreement during the period, $69,645 for depreciation expense primarily due to facility improvements, and computer equipment for the increase in ~~non-cash stock-based compensation expense~~headcount, and $55,479 for directors and officers insurance.

Table 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 and being a public company.Contents

Other (Expense) Income

~~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~~June 30, ~~2017, interest income – related party decreased by $750 to $0 from $750.~~2022 and 2021, net other expense was $92,913 and $140,137, respectively, representing a decrease of $47,224 or 34%. The ~~decrease was due~~change is primarily attributable to the ~~collection~~decrease in debt redemption costs of ~~a note receivable~~$140,000, and the change in fair value of accrued issuable equity of $31,977, partially offset by an increase in the ~~second quarter~~amortization of ~~2017.~~the debt discount and interest expense recorded in connection with notes payable issued in 2022 of $83,145 and $41,608, respectively.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017, interest income – related party decreased by $65 to $1,337 from $1,402.~~2022 and 2021, net other expense was $50,779 and $381,703, respectively, representing a change of $330,924 or 87%. The ~~decrease was due~~change is primarily attributable to the ~~collection~~change in fair value of accrued issuable equity of $207,594, the decrease in debt redemption costs of $140,000, and a ~~note receivable~~decrease in the ~~second quarter~~amortization of ~~2017.~~

~~Interest Expense – Related Party~~

~~Interest expense – related party consists~~debt discount of ~~interest on a KT High-Tech promissory note purchased~~$24,979, partially offset by ~~KULR~~an increase in ~~2017. Since the KT High-Tech and KULR reverse recapitalization, all~~ interest expense ~~related to~~of $41,649 recorded in connection with the ~~promissory note has been eliminated~~notes payable issued in ~~consolidation.~~

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

2022.

Liquidity and Capital Resources

As of June 30, 2022 and December 2021, we had cash balances of $12,991,732 and $14,863,301, respectively, and working capital of $8,477,713 and $13,302,935, respectively.

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

under Recent Developments above for additional details.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, cash used in operating activities was ~~$263,585~~$9,010,695 and ~~$553,453,~~$4,081,565, respectively. Our cash used in operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was primarily attributable to our net loss of ~~$1,757,850,~~$9,391,240, adjusted for ~~net~~ non-cash ~~expense~~expenses in the aggregate amount of ~~$414,555, partially offset by $1,079,710~~$2,485,419, as well as $2,104,874 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~~six months ended ~~September~~June 30, ~~2016~~2021 was primarily attributable to our net loss of ~~$600,221,~~$4,741,866, adjusted for ~~net~~ non-cash ~~expense~~expenses in the aggregate amount of ~~$24,136, partially offset by $22,632~~$1,723,843, and $1,063,542 of net cash ~~provided by~~used to fund changes in the levels of operating assets and liabilities.

~~Investing Activities~~

For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and 2016, cash provided by (used in) investing activities was $1,907,990 and $(85,000), respectively. Cash provided by investing activities during the nine months ended September 30, 2017 resulted from $1,859,261 of cash acquired in connection with 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. Our2021, cash used in investing activities ~~for~~was $546,784 and $36,492, respectively. Cash used in investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2022 was related to deposits paid for equipment of $429,008 and purchases of property and equipment of $117,776.

For the ~~purchase of a note receivable in the amount of $85,000 from our CEO.~~

~~Financing Activities~~

~~Net~~six months ended June 30, 2022 and 2021, cash provided by financing activities ~~for nine~~was $7,685,910 and $7,397,500, respectively. Cash provided by financing activities during the six months ended ~~September~~June 30, ~~2016~~2022 was ~~$550,000 which was~~due to proceeds from a promissory note of $4,750,000, proceeds from the exercise of warrants of $3,020,835 and proceeds from the exercise of options of $5,075, partially offset by issuance costs related to the ~~issuance~~note payable and deferred financing costs related to the SEPA for $17,200 and $72,800, respectively. Cash provided by financing activities during the six months ended June 30, 2021 was due to $6,500,000 of ~~an aggregate~~proceeds from the sale of ~~1,833,334 shares of Series A1 convertible~~ preferred stock and $3,712,500 received in connection with the exercise of warrants, partially offset by the $2,450,000 of principal repayments on notes payable and $365,000 of financing costs paid during the period.

Future cash requirements for our current liabilities include approximately $5,056,744, of principal for the promissory note and loan payable, $2,087,402 for accounts payable and accrued expenses (including lease liabilities). The Company has also committed to ~~investors. There were no~~spend $1,800,000 related to various sponsorship agreements, $981,648 related to capital expenditures for the construction of a new automation facility, $357,119 for automation and testing equipment, and $610,960 for research and development. Cash requirements for long term liabilities consist of $212,852 for lease payments, $98,482 for loans payable, and $49,350 for research and development. The Company intends to meet these cash requirements from its current cash balance, proceeds from the SEPA and from future revenues.

Table of Contents

The short and long-term worldwide implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions on Russia by the ~~nine months ended September 30, 2017.~~United States or other countries and possible counter sanctions by Russia, and the resulting economic impacts on oil prices and other materials and goods, could affect the price of materials used in the manufacture of our product candidates. If the price of materials used in the manufacturing of our product candidates increase, that would adversely affect our business and the results of our operations.

Our 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 going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the unaudited condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values.

~~Summary~~

As of September 30, 2017, we had a cash balance, working capital of 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, we incurred a net loss of $839,252 and $1,757,850, respectively.

~~As a result of the closing of the Share Exchange, we believe we have sufficient cash to sustain our operations for at least a year from the date of this filing.~~

~~Critical Accounting Policies~~

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 ~~changes from the~~to stockholders.

Critical Accounting Estimates

For a description of our critical accounting ~~policies set forth~~estimates, see Critical Accounting Estimates in ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations”~~Item 7 of our ~~Current~~Annual Report on Form ~~8-K~~10-K which was filed with the SEC on ~~June 19, 2017. Please refer to that document~~March 28, 2022.

Recent Accounting Pronouncements

See Note 2 – Summary of Significant Accounting Policies of our unaudited condensed consolidated financial statements included within this Quarterly Report for ~~disclosures regarding the critical~~a summary of recently adopted accounting ~~policies related to our business.~~pronouncements.

~~Off Balance Sheet Arrangements~~

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

~~Item 4. Controls and 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 not effective ~~in ensuring that information required to be disclosed~~at the reasonable assurance level.

During the year ended December 31, 2021, our management identified a material weakness in our ~~Exchange Act reports~~internal control over financial reporting whereas we did not design or maintain effective controls to ensure that there is ~~(1) recorded, processed, summarized~~an independent review and ~~reported~~approval of electronic payments (wires, EFT’s, ACH’s and credit card payments) as our policy of providing timely support to ensure completeness and accuracy of the payment was not followed which continued to exist as of June 30, 2022. We are currently in the process of implementing a ~~timely manner,~~detailed plan for remediation of the material weakness, including developing and ~~(2) accumulated and communicated~~maintaining preventative controls around the electronic payment process to ~~our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.~~ ensure proper segregation of duties.

Changes in Internal Control ~~over~~Over Financial Reporting

~~There have~~Except as disclosed above, there has been no ~~changes~~change in our internal control over financial reporting that occurred during the ~~period covered by this report~~second quarter of 2022 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over current or future financial reporting.

Inherent Limitations of the Effectiveness of Controls

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

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PART ~~II.~~II – OTHER INFORMATION

~~Item~~ITEM 1. ~~Legal Proceedings.~~

LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

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

~~Not applicable. See, however, Item 1A of~~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.~~March 28, 2022.

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

During April 2022, the Company issued new warrants to purchase an aggregate of 2,346,525 shares of common stock at an exercise price of $1.00 per share. The new warrants expire on December 31, 2025.

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

~~None.~~

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

DEFAULTS UPON SENIOR SECURITIES

None.

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

MINE SAFETY DISCLOSURES

Not ~~Applicable.~~applicable.

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

OTHER INFORMATION

None.

Table of Contents~~Item~~

ITEM 6. ~~Exhibits.~~

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

~~31.1~~		Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.*
Exhibit No.		Description
~~31.2~~ 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 Financial Officer.~~the Sarbanes-Oxley Act of 2002.*

~~32.1~~ 31.2		Certification pursuant to 18 U.S.C. Section 1350 ~~Certifications~~as adopted pursuant to Section 302 of ~~Chief Executive Officer.~~the Sarbanes-Oxley Act of 2002.**

~~32.2~~ 32.1		Certification pursuant to 18 U.S.C. Section 1350, ~~Certifications~~as adopted pursuant to Section 906 of ~~Chief Financial Officer.~~the Sarbanes-Oxley Act of 2002.**

101.INS		Inline XBRL Instance DocumentInstance

101.SCH		Inline XBRL Taxonomy Extension Schema*

101.CAL		Inline XBRL Taxonomy Extension Calculation LinkbaseCalculation

101.DEF		Inline XBRL Taxonomy Extension Definition LinkbaseDefinition

101.LAB		Inline XBRL Taxonomy Extension Label LinkbaseLabels

101.PRE		Inline XBRL Taxonomy Extension Presentation LinkbasePresentation

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

*Filed ~~herewith~~herewith. A summary of the accrued issuable equity activity during the six months ended June 30, 202

**Furnished ~~herewith~~herewith.

Table of Contents

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~~ Dated: August 15, 2022	By By:	/s/Michael Mo
		Michael Mo
		Chief Executive Officer
		(Principal Executive Officer)

~~November 17, 2017~~	By	~~/s/~~~~George Henschke~~
Dated: August 15, 2022	By:	~~George Henschke~~ /s/ Simon Westbrook
		~~Interim~~ Simon Westbrook
		Chief Financial Officer
		(~~Interim~~ Principal Financial and Accounting Officer)

	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

	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