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 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,~~11, 2022, there were ~~77,440,000~~112,746,587 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 30, ~~2017~~2022

TABLE OF CONTENTS

			Page

PART I – FINANCIAL INFORMATION

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

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

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

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

	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021	4	7

	Notes to Unaudited Condensed Consolidated Financial Statements	5	9

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations.	10	26

	Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk.	14	35

	Item 4. Controls and ~~Procedures.~~Procedures.	15	35

PART II –- OTHER INFORMATION

	Item 1. Legal ~~Proceedings.~~Proceedings.	16	36

	Item 1A. Risk ~~Factors.~~Factors.	16	36

	Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds.	16	36

	Item 3. Defaults Upon Senior ~~Securities.~~Securities.	16	36

	Item 4. Mine Safety Disclosures	16	36

	Item 5. Other ~~Information.~~Information.	16	36

	Item 6. ~~Exhibits.~~Exhibits.	16	37

~~SIGNATURES~~	17SIGNATURES		38

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


	September 30,		December 31,
	2022		2021
	(unaudited)
Assets
Current Assets:
Cash	$	16,168,863	$	14,863,301
Accounts receivable		1,344,972		136,326
Inventory		342,174		191,311
Inventory deposits		1,031,150		309,688
Prepaid expenses and other current assets		1,030,833		260,672
Total Current Assets		19,917,992		15,761,298
Property and equipment, net		829,111		374,475
Equipment deposits		4,465,937		2,153,950
Security deposits		58,941		58,941
Intangible assets, net		207,519		216,952
Right of use asset		378,186		665,687
Deferred offering costs		70,671		—
Total Assets	$	25,928,357	$	19,231,303

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	957,947	$	454,507
Accrued expenses and other current liabilities		1,823,148		1,163,227
Accrued issuable equity		138,240		290,721
Lease liability, current portion		218,875		262,379
Loan payable		—		155,226
Prepaid advance liability, net of discount (Note 9)		14,681,934		—
Deferred revenue		20,000		132,303
Total Current Liabilities		17,840,144		2,458,363
Lease liability, non-current portion		155,765		407,898
Total Liabilities		17,995,909		2,866,261

Commitments and contingencies (Note 12)

Stockholders' Equity
Preferred stock, $0.0001 par value, 20,000,000 shares authorized;
Series A Preferred Stock, 1,000,000 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Series B Convertible Preferred Stock, 31,000 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Series C Preferred Stock, 400 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Series D Preferred Stock, 650 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized; 107,700,085 shares issued and 107,568,923 outstanding at September 30, 2022, respectively, and 104,792,072 shares issued and outstanding at December 31, 2021		10,770		10,479
Additional paid-in capital		46,448,408		39,512,122
Treasury stock, at cost; 131,162 and 0 shares held at September 30, 2022 and December 31, 2021		(296,222)		—
Accumulated deficit		(38,230,508)		(23,157,559)
Total Stockholders' Equity		7,932,448		16,365,042
Total Liabilities and Stockholders' Equity	$	25,928,357	$	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 Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenue	$	1,393,185	$	600,921	$	2,181,230	$	1,647,070
Cost of revenue		932,364		155,138		1,478,954		869,612
Gross Profit		460,821		445,783		702,276		777,458

Operating Expenses
Research and development		1,069,852		481,855		2,790,683		957,579
Selling, general, and administrative		4,349,373		3,104,410		12,210,458		7,320,524
Total Operating Expenses		5,419,225		3,586,265		15,001,141		8,278,103
Loss From Operations		(4,958,404)		(3,140,482)		(14,298,865)		(7,500,645)

Other (Expense) Income
Interest expense, net		(633,342)		(758)		(676,622)		(2,389)
Gain on forgiveness of PPP loan and interest		158,675		—		158,675		—
Debt redemption costs		—		—		—		(140,000)
Amortization of debt discount		(172,407)		—		(275,626)		(128,198)
Loss on debt extinguishment		(8,508)		—		(8,508)		—
Change in fair value of accrued issuable equity		27,401		45,600		123,121		(66,274)
Loss on foreign currency transactions		—		(292)		—		(292)
Total Other (Expense) Income, net		(628,181)		44,550		(678,960)		(337,153)

Net Loss		(5,586,585)		(3,095,932)		(14,977,825)		(7,837,798)
Deemed dividend to Series D preferred stockholders		—		—		—		(2,624,326)
Net Loss Attributable to Common Stockholders	$	(5,586,585)	$	(3,095,932)	$	(14,977,825)	$	(10,462,124)

Net Loss Per Share
- Basic and Diluted	$	(0.05)	$	(0.03)	$	(0.14)	$	(0.11)

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		105,572,820		99,018,630		104,223,378		93,816,203

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)

~~(Unaudited)~~


	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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	—		—		—	194,704		(439,728)		—		(439,728)
Common stock issued upon the exercise of warrants	70,143		7		87,672	—		—		—		87,679
Common stock issued upon the exercise of options	2,500		—		5,075	—		—		—		5,075
Stock-based compensation:
Common stock issued for services	6,000		1		43,159	—		—		—		43,160
Amortization of restricted common stock	—		—		519,231	—		—		—		519,231
Amortization of stock options	—		—		15,883	—		—		—		15,883
Amortization of market-based awards	—		—		730,048	—		—		—		730,048
Net loss	—		—		—	—		—		(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	—		—		—	(33,000)		74,529		(46,305)		28,224
Common stock issued upon the exercise of warrants	2,346,525		234		2,932,922	—		—		—		2,933,156
Stock-based compensation:
Common stock issued for services	6,000		1		10,260	—		—		—		10,261
Amortization of restricted common stock	—		—		422,128	—		—		—		422,128
Amortization of stock options	—		—		26,535	—		—		—		26,535
Amortization of market-based awards	—		—		565,421	—		—		—		565,421
Net loss	—		—		—	—		—		(5,254,685)		(5,254,685)
Balance - June 30, 2022	107,223,240		10,722		44,870,456	161,704		(365,199)		(32,595,104)		11,920,875
Treasury stock issued upon the exercise of options	—		—		—	(30,542)		68,977		(48,819)		20,158
Common stock issued pursuant to the SEPA agreement:
For cash, net of issuance costs ⁽¹⁾	160,782		16		247,855	—		—		—		247,871
In satisfaction of notes payable	94,458		9		149,991	—		—		—		150,000
For the repayment of prepaid advances	221,605		22		274,635	—		—		—		274,658
Stock-based compensation:
Amortization of restricted common stock	—		—		403,812	—		—		—		403,812
Amortization of stock options	—		—		23,959	—		—		—		23,959
Amortization of market-based awards	—		—		477,700	—		—		—		477,700
Net loss	—		—		—	—		—		(5,586,585)		(5,586,585)
Balance - September 30, 2022	107,700,085	$	10,770	$	46,448,408	131,162	$	(296,222)	$	(38,230,508)	$	7,932,448

⁽¹⁾ Represents gross proceeds of $250,000 less $2,129 for amortization of issuance costs.

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.~~

Table of Contents

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

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

~~(Unaudited)~~(unaudited)


	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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
Common stock issued upon the exercise of warrants	—		—	—		—	1,185,033		119		1,494,097		—		1,494,216
Stock-based compensation:
Common stock issued for services	—		—	—		—	85,000		9		186,391		—		186,399
Restricted common stock issued	—		—	—		—	155,000		15		(15)		—		—
Amortization of restricted common stock	—		—	—		—	—		—		440,333		—		440,333
Amortization of stock options	—		—	—		—	—		—		20,516		—		20,516
Amortization of market-based awards	—		—	—		—	—		—		754,207		—		754,207
Net loss	—		—	—		—	—		—		—		(3,095,932)		(3,095,932)
Balance - September 30, 2021	—	$	—	—	$	—	101,992,963	$	10,201	$	31,462,955	$	(19,084,206)	$	12,388,949

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 Nine Months Ended
	September 30,
	2022		2021
Cash Flows From Operating Activities:
Net loss	$	(14,977,825)	$	(7,837,798)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		275,626		128,198
Non-cash lease expense		143,861		—
Loss on extinguishment of note payable		8,508		—
Depreciation and amortization expense		140,829		29,166
Gain on forgiveness of PPP loan and interest		(158,675)		—
Change in fair value of accrued issuable equity		(123,121)		66,274
Non-cash interest expense		576,932		—
Stock-based compensation		3,208,778		2,765,959
Changes in operating assets and liabilities:
Accounts receivable		(1,208,646)		(494,887)
Inventory		(150,863)		(135,314)
Prepaid expenses and other current assets		(741,937)		(300,288)
Inventory deposits		(721,462)		—
Security deposits		—		(50,213)
Right of use asset		—		84,702
Accounts payable		377,987		(1,806)
Accrued expenses and other current liabilities		248,301		294,334
Lease liability		(151,997)		(82,079)
Deferred revenue		(112,303)		138,816
Total Adjustments		1,611,818		2,442,862
Net Cash Used In Operating Activities		(13,366,007)		(5,394,936)
Cash Flows From Investing Activities:
Equipment deposits for property and equipment		(2,198,626)		(1,029,805)
Purchases of property and equipment		(573,942)		(357,059)
Net Cash Used In Investing Activities		(2,772,568)		(1,386,864)
Cash Flows from Financing Activities:
Proceeds from the SEPA		247,871		—
Net proceeds from the prepaid advance liability ⁽¹⁾		10,573,068		—
Issuance costs on prepaid advance liability		(85,000)		—
Proceeds from note payable ⁽²⁾		4,750,000		—
Note payable issuance costs		(17,200)		—
Repayments of note payable		(1,000,000)		(2,450,000)
Payment of financing costs incurred in connection with the SEPA		(72,800)		—
Payment of financing costs incurred in connection with note payable		2,129		—
Proceeds from the sale of Series D convertible preferred stock, common stock and warrants		—		6,500,000
Proceeds from the exercise of options		25,233		—
Proceeds from the exercise of warrants		3,020,836		5,206,716
Payment of financing costs		—		(365,000)
Net Cash Provided By Financing Activities		17,444,137		8,891,716
Net Increase In Cash		1,305,562		2,109,916
Cash - Beginning of Period		14,863,301		8,880,140
Cash - End of Period	$	16,168,863	$	10,990,056

(1)

Consists of principal of $15,000,000 on prepaid advance liability, less $3,850,000 and $566,932 withheld to repay note payable and related interest and premiums, respectively, owed to same investor, and $10,000 withheld for issuance costs.

(2)	Note payable face of $5,000,000, less $250,000 original issue discount.

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

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(unaudited)


	For the Nine Months Ended
	September 30,
	2022		2021
Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
Interest	$	676,281	$	735

Non-cash investing and financing activities:
Right of use asset for lease liability	$	143,640	$	814,817
Additions to property and equipment included in accounts payable	$	125,451	$	—
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)	$	—
Common stock issued upon the conversion of Series B Convertible Preferred Stock	$	—	$	70
Common stock issued in satisfaction of accrued issuable equity	$	—	$	209,200
Prepaid advance for repayment of note payable	$	3,850,000	$	—
Shares issued in satisfaction of note payable	$	150,000	$	—
Shares issued in satisfaction of prepaid advance liability and accrued interest	$	274,658	$	—
Treasury stock issued upon the exercise of stock options	$	143,506	$	—

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND 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 commercializes high-performance energy management technologies for electronics, batteries, and other components across a range of applications. Currently, the Company is ~~based in Santa Clara, California. KULR is primarily~~ focused on ~~commercializing its thermal management technologies in the~~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,~~space exploration, satellite communications, and ~~connected cars. In addition~~underwater 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 mobility, 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 30, ~~2017~~2022 and for the three and nine months ~~then ended.~~ended September 30, 2022 and 2021. The results of operations for the three and nine months ended September 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.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. Certain prior quarter activity reported in the Condensed Consolidated Statement of Changes in Stockholders’ Equity has been reclassified in order to conform to the current quarter presentation. These reclassifications had no effect on previously reported results of operations or loss per share.

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 and adversely affecting our ability to import product material required to fulfill some customer commitments. 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

On May 13, 2022, 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. Further, on September 23, 2022, the Company entered into the Supplemental SEPA, pursuant to which the Company may request advances (“Prepaid Advances”) up to an aggregate of $50,000,000 from Yorkville. Yorkville has the right to receive shares, and may select the timing and delivery of such shares, in an amount up to the balance of the Prepaid Advance in order to pay down the Prepaid Advance liability. During the period ended September 30, 2022, the Company received aggregate gross proceeds of $15,400,000 under the SEPA and the Supplemental SEPA. The Company is not permitted to initiate additional sales of its common stock under the SEPA until the Prepaid Advance liability ($15,539,474 at September 30, 2022) is settled. During October 2022, the Company issued 5,153,664 shares of common stock, at purchase prices per share ranging from $0.99 to $1.84, in satisfaction of the initial Prepaid Advance liability in the aggregate amount of $5,750,000. As of November 14, 2022, the remaining balance on the initial Prepaid Advance liability is $9,000,000. See Note 9 – Prepaid Advance Liability and Note 11 – Stockholders’ Equity for additional information.

As of September 30, 2022, the Company had cash of $16,168,863 and working capital of $2,077,848. During the nine months ended September 30, 2022, the Company incurred a net loss of $14,977,825 and used cash in operations of $13,366,007.

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 prepaid advance liability, 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.

Treasury Stock

The Company records repurchases of its own common stock at cost. Repurchased common stock is presented as a reduction of equity in the Consolidated Balance Sheets. Subsequent reissuances of treasury stock are accounted for on a weighted average cost basis. Differences between the cost of treasury stock and the re-issuance proceeds are charged to additional paid-in capital. Gains on the reissuance of treasury stock are credited to additional paid in capital. Losses resulting from the reissuance of treasury stock are debited to additional paid-in capital to the extent previous net gains from such reissuances are included in additional paid-in capital; any losses in excess of that amount are then charged to retained earnings.

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.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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~~$15,668,863 and ~~$0 at~~$14,363,301 as of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively.

Customer and Revenue Concentrations

~~During~~The Company had certain customers whose revenue individually represented 10% or more of the 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 Nine Months Ended
	September 30,				September 30,				As of		As of
	2022		2021		2022		2021		September 30, 2022		December 31, 2021
Customer A	*		88	%	*		41	%	*		42	%
Customer B	67	%	*		58	%	*		70	%	*
Customer C	24	%	*		23	%	*		25	%	*
Customer D	*		*		*		40	%	*		*
Customer E	*		*		*		*		*		21	%
Customer F	*		*		*		*		*		34	%
Total	91	%	88	%	81	%	81	%	95	%	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 significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers.

Vendor Concentrations

Vendor concentrations are as follows for the three and nine months ended September 30, ~~2016, 100%~~2022 and 2021, respectively:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Vendor A	65	%	*		83	%	*
Vendor B	*		10	%	*		42	%
Vendor C	*		*		*		47	%
	65	%	10	%	83	%	89	%

*	Less than 10%

Table of the Company’s revenues were generated from Customer A. During the three months ended September 30, 2017, 76% and 24% of the Company’s revenues were generated from Customer C and Customer A, respectively. During the nine months ended September 30, 2017, 44%, 42% and 14% of the Company’s revenues were generated from Customer C, Customer B and Customer A, respectively. As of September 30, 2017, receivables from Customer C, Customer B and Customer A comprised 44%, 42%, and 14%, respectively, 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.Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

~~Inventory~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 of~~

Inventory at September 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 asconsisted 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:


	September 30,		December 31,
	2022		2021
Raw materials	$	61,388	$	—
Work-in-process		70,195		5,500
Finished goods		210,591		185,811
Total inventory	$	342,174	$	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.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Product sales	$	1,369,857	$	600,921	$	2,100,120	$	1,356,530
Contract services		23,328		—		81,110		290,540
Total revenue	$	1,393,185	$	600,921	$	2,181,230	$	1,647,070

As of September 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 ~~months ended September 30, 2017~~ and ~~2016, the Company recognized $15,106 and $0 of revenue related to the sale of PCM heat sinks and CFV thermal interfaces, respectively. During the~~ nine months ended September 30, ~~2017 and 2016,~~2022, the Company recognized ~~$26,006~~$0 and ~~$6,900 of~~$112,303, respectively, that was included in deferred 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 ~~months ended September 30, 2017~~ and ~~2016, the Company incurred $196,643 and $105,733, respectively, of research and development expenses. During the~~ nine months ended September 30, ~~2017~~2021, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of September 30, 2022 and ~~2016,~~December 31, 2021, the Company ~~incurred $647,328~~had $8,535 and ~~$301,874,~~$84,324, respectively, of ~~research~~deferred labor costs, which is included in prepaid expenses and ~~development expenses.~~

~~Stock-Based Compensation~~

other current assets in the Company’s unaudited condensed consolidated balance sheets. Deferred labor costs represent costs to fulfill the Company’s contract service revenue. The Company ~~measures~~will recognize the deferred labor costs as cost of ~~services received~~revenues at the point in ~~exchange for an award of equity instruments based on~~time that the ~~fair value of~~Company satisfies its performance obligation under 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 award~~respective 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 Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Numerator:
Net income (loss)	$	(5,586,585)	$	(3,095,932)	$	(14,977,825)	$	(7,837,798)
Deemed dividend to Series D preferred stockholders		—		—		—		(2,624,326)
Net loss attributable to common stockholders	$	(5,586,585)	$	(3,095,932)	$	(14,977,825)	$	(10,462,124)

Denominator (weighted-average quantities):
Common shares issued		107,402,727		101,548,848		106,271,765		95,641,862
Less:Treasury shares purchased		(131,494)		—		(122,944)		—
Less:Unvested restricted shares		(1,948,370)		(2,530,217)		(2,106,923)		(1,825,659)
Add:Accrued issuable equity		249,957		—		181,480		—
Denominator for basic and diluted net loss per share		105,572,820		99,018,630		104,223,378		93,816,203

Basic and diluted net loss per common share	$	(0.05)	$	(0.03)	$	(0.14)	$	(0.11)

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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


	September 30,
	2022	2021
Unvested restricted stock	1,897,500	2,615,000
Unvested market -based equity awards	3,000,000	3,000,000
Options	510,216	590,000
Warrants	2,524,410	5,202,878
Total	7,932,126	11,407,878

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.

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~~material impact on its condensed consolidated financial statements.

NOTE 3INVENTORY DEPOSITS

Inventory deposits consists of amounts paid in advance to vendors to secure future deliveries of specific finished goods and ~~measurement process for financial statement recognition~~raw materials which will be received and ~~measurement of a tax position taken or expected to be taken~~sold in ~~a tax return.~~

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

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

~~Liquidity and Management’s Plans~~

future periods.

As of September 30, ~~2017,~~2022 and December 31,2021, the Company had ~~a cash balance, working capital~~outstanding inventory deposits of $1,031,150 and ~~an accumulated deficit~~$309,688, respectively.

Table of ~~$1,653,492, $1,050,984 and $3,691,660, respectively. During the three and nine months ended~~Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 4 PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of September 30, ~~2017,~~2022 and December 31, 2021, prepaid expenses and other current assets consisted of the following:


	September 30,		December 31,
	2022		2021
Marketing	$	650,766	$	10,231
Vendor receivables		100,000		—
Other		98,535		31,074
Professional fees		83,711		65,118
Subscriptions		47,217		—
Insurance		42,069		69,925
Deferred labor costs		8,535		84,324
Total prepaid expenses and other current assets	$	1,030,833	$	260,672

Prepaid marketing costs primarily consist of two sponsorship agreements with a marketing partner whereby the Company ~~incurred~~is required to make upfront payments. These agreements expire in December 2022 and December 2023. As of September 30, 2022, total prepayments made towards such contracts were $2,150,000, of which $575,000 remains unamortized and is included in prepaid marketing costs. See Note 12 – Commitments and Contingencies for additional information.

NOTE 5 EQUIPMENT DEPOSITS

The Company entered into agreements with third party contractors for facility improvements, the design and build of a ~~net loss of $839,252~~battery packaging 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~~

inspection automation system, and automated robotic tending system.

As of September 30, ~~2017~~2022 and December ~~31, 2016, prepaid expenses consisted~~31,2021, the Company had outstanding deposits of ~~the following:~~$4,465,937 and $2,153,950, respectively, in connection with these agreements.

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

~~Note 5~~

~~Accrued Expenses and Other Current Liabilities~~

NOTE 6 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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


	September 30,		December 31,
	2022		2021
Legal and professional fees	$	1,088,561	$	418,154
Payroll and vacation		435,246		302,101
Research and development		169,497		146,158
Other		105,803		84,824
Board compensation		24,041		45,680
Accrued cost of sales		—		128,500
Marketing and advertising fees		—		37,810
Total accrued expenses and other current liabilities	$	1,823,148	$	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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

~~Note 6~~

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As(unaudited)

NOTE 7 ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the nine months ended September 30, ~~2017 and December 31, 2016, accrued expenses and other current liabilities – related parties consisted of the following:~~2022 is presented below:

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


	For the Nine Months Ended
	September 30, 2022
Beginning Balance	$	290,721
Additions		62,640
Cancelled accrued issuable equity obligations		(92,000)
Mark-to market		(123,121)
Ending Balance	$	138,240

Accrued research and development expenses – related parties consists of (a) a liability of $110,000 and $77,500 as of September 30, 2017 and December 31, 2016, respectively, to the Company’s Chief Technology Officer (“CTO”) in connection with consulting services provided to the Company; and (b) a liability of $397,041 and $274,040 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,~~2022, the Company ~~received aggregate consideration~~entered into certain contractual arrangements for services in exchange for a fixed number of ~~$32,000 related to certain restricted~~shares of common stock ~~awards that~~of the Company. On the respective dates the contracts were entered into, the estimated fair value of the shares to be issued ~~in 2013 and 2014.~~

was an aggregate of $62,640.

During the ~~three~~nine months ended September 30, ~~2017 and 2016,~~2022, the Company ~~recognized stock-based compensation~~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 nine months ended September 30, 2022, the Company recorded an aggregate of $123,121 of gains related to the reduction in fair value of accrued issuable equity (see Note 11 – Stockholders’ Equity, Stock-Based Compensation for additional details). The fair value of the accrued but unissued shares as of September 30, 2022 was $138,240.

NOTE 8 LEASES

The Company leases office space in San Diego, California. During the three and nine months ended September 30, 2022, operating lease expense was $57,522 and $188,854, respectively. During the three and nine months ended September 30, 2021, operating lease expense was $89,305 and $144,765, respectively. As of ~~$187,023~~September 30, 2022, the Company did not have any financing leases.

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


Maturity Date
October 1 through December 31, 2022	$	57,499
2023		234,694
2024		99,187
Total lease payments		391,380
Less: Imputed interest		(16,740)
Present value of lease liabilities		374,640
Less: current portion		(218,875)
Lease liabilities, non-current portion	$	155,765

The Company paid a security deposit of $50,213 in connection with the new lease agreement.

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


	For the Nine Months Ended
	September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating lease	$	143,861

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 9PREPAID ADVANCE LIABILITY

On September 23, 2022, the Company entered into a Supplemental Agreement (the “Supplemental Agreement”) to its Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”). Under the Supplemental Agreement, the Company may from time to time request advances of up to $15,000,000 (each, a “Prepaid Advance”) from Yorkville with a limitation on the aggregate amount of such advances of $50,000,000. At any time that there is a balance outstanding under a Prepaid Advance, the Company is not permitted to deliver Advance Notices (as defined in Note 11, Stockholders’ Equity) under the SEPA.

Each Prepaid Advance matures 12 months after the date of the closing of such advance (the “Prepaid Advance Date”), and ~~$8,688, respectively,~~accrues interest at 10% per annum, subject to an increase to 15% per annum upon events of default as defined. Any Prepaid Advance balance that remains outstanding at maturity must be repaid in cash.

Pursuant to the terms of the Supplemental Agreement, Yorkville has the right to receive shares to pay down Prepaid Advances, and may select the timing and delivery of such shares (via an “Investor Notice”), in an amount up to the balance of the Prepaid Advance at a price equal to the lower of (a) 135% of the volume weighted average price (“VWAP”) of the Company’s common stock on the day immediately prior the closing of the Prepaid Advance, or (b) 95% of the lowest VWAP during the three days immediately prior to the Investor Notice.

The Company may prepay amounts owed for a Prepaid Advance in cash, provided that the Company gives Yorkville 10 days’ notice of its intent to repay in cash (the “Prepayment Notice”) and provided that the daily VWAP of the Company’s common stock on the date of Prepayment Notice is not less than $0.75. The prepayment amount will be delivered on the 11^th trading day after the Prepayment Notice, such that Yorkville has 10 days to deliver an Investor Notice with respect to the outstanding Prepaid Advance. The prepayment amount will be equal to the amount of Prepaid Advance to be repaid, plus all accrued and unpaid interest owed on the Prepaid Advance, as well as a payment premium equal to 5% of the principal amount being repaid.

Upon the occurrence of certain triggering events, as defined, the Company may be required to make monthly repayments of amounts outstanding under a Prepaid Advance, with each monthly repayment to be in an amount equal to the sum of (x) $3.0 million, (y) 5% (the “Payment Premium”) in respect of such amount, and (z) all outstanding accrued and unpaid interest in respect of such Prepaid Advance as of each payment date.

On September 23, 2022, the Company recorded an initial Prepaid Advance liability in the amount of $15,000,000, which consisted of $15,000,000 of gross cash proceeds (the “Initial Advance”), plus an original issue discount of $789,474. The original issue discount was recorded as a debt discount to be amortized ratably over the term of the Initial Advance. Of the $15,000,000 Initial Advance amount, $3,850,000 was used to repay amounts due under a Note Purchase Agreement with Yorkville (see Note 10, Notes and Loans Payable).

On September 29, 2022, the Company issued 221,605 shares of common stock as a partial repayment of the Initial Advance principal amount of $250,000 and interest in the amount of $24,658.

See Note 13, Subsequent Events for details related to shares issued in satisfaction of the Initial Advance subsequent to September 30, 2022.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

A summary of the Prepaid Advance liability during the nine months ended September 30, ~~2017 and 2016,~~2022 is presented below:


	Gross Amount of		Less:		Prepaid Advance
	Prepaid Advance		Debt		Liability, net of
	Liability		Discount		discount
Balance, January 1, 2022	$	—	$	—	$	—
Proceeds from prepaid advance		15,000,000		—		15,000,000
Original issue discount		789,474		(789,474)		—
Legal fees		—		(85,000)		(85,000)
Repayments in cash		—		—		—
Repayments in shares of common stock		(250,000)		—		(250,000)
Amortization of debt discount		—		16,934		16,934
Outstanding, September 30, 2022	$	15,539,474	$	(857,540)	$	14,681,934

NOTE 10 NOTES AND LOANS PAYABLE

Note Purchase Agreement

On May 13, 2022, the Company ~~recognized~~entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with YAII PN, Ltd., a Cayman Island exempt limited partnership, 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 net 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 to be amortized over the term of the Note using the effective interest rate method. The Promissory Note carries an interest rate of 10% per annum. As of September 23, 2022, the Company had fully repaid the principal and interest due in the amounts of $5,000,000 and $165,493, respectively, of which $3,850,000 and $0, respectively, were paid from the proceeds of the Initial Advance (see Note 9 - Prepaid Advance Liability).

During the three and nine months ended September 30, 2022, the Company recorded interest expense related to the Promissory note in the amounts of $608,027 and $650,493, respectively, which included $123,027 and $165,493, respectively, of stated interest, a 10% payment premium in the amount of $385,000 and a late payment premium in the amount of $100,000.

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


	Notes		Debt
	Payable		Discount		Total
Balance, January 1, 2022	$	—	$	—	$	—
Proceeds from promissory note		5,000,000		(250,000)		4,750,000
Debt discount		—		(17,200)		(17,200)
Repayments in cash		(4,850,000)		—		(4,850,000)
Repayments in shares of common stock		(150,000)		—		(150,000)
Amortization of debt discount		—		258,691		258,691
Loss on debt extinguishment		—		8,509		8,509
Outstanding, September 30, 2022	$	—	$	—	$	—

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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”).

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 was extended to five years with a maturity date of April 27, 2025. The Company 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. The Company has recorded this as a gain on forgiveness of the PPP loan and interest of approximately $155,226 and $3,449, respectively, as other income in the condensed consolidated statement of operations.

NOTE 11STOCKHOLDERS’ EQUITY

Standby Equity Purchase Agreement

On May 13, 2022, the Company entered into the SEPA with Yorkville. Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville up to an aggregate of $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 first day of the month following the 24-month anniversary of the SEPA.

Each sale (an “Advance”) that the Company requests under the SEPA (via an “Advance Notice”) may be for a number of shares of common stock with an aggregate value of up to $5,000,000. Shares are sold under the SEPA at 98.0% of the average of the VWAPs during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance Notice to Yorkville. Advances are subject to certain limitations, including that Yorkville will 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, or more than the amount of shares registered under the registration statement in effect at the time of the Advance. Further, the aggregate amount of shares purchased under the SEPA (as defined) cannot exceed 19.9% of the Company’s outstanding common stock as of the date of the SEPA.

As of September 30, 2022, the Company issued Advance Notices to receive $350,000 in exchange for 255,240 shares of common stock pursuant to the SEPA. At any time that there is a balance outstanding under a Prepaid Advance, the Company is not permitted to deliver Advance Notices under the SEPA.

See Note 9 – Prepaid Advance Liability, for details related to a supplemental agreement to the SEPA.

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.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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, 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%.

During July 2022, the Company issued an aggregate of 160,782 shares of common stock pursuant to an Advance Notice issued under the SEPA for an aggregate of $250,000 of gross proceeds.

During August 2022, the Company issued an aggregate of 94,458 shares of common stock as a partial payment of principal balance due on the Promissory note in the amount of $150,000.

On September 29, 2022, the Company issued 221,605 shares of common stock as a partial repayment of the Initial Advance principal amount of $250,000 and interest in the amount of $24,658.

During the three and nine months ended September 30, 2022, the Company issued an aggregate of 0 and 12,000 shares of immediately vested common stock with a grant date value of $0 and $53,421, respectively, for legal services.

During the three and nine months ended September 30, 2022, the Company issued an aggregate of 30,542 and 66,042 shares, respectively, of common stock upon the exercise of stock options, of which 30,542 and 63,542 shares, respectively, 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 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 nine months ended September 30, 2022, the Company withheld 194,704 shares valued at $439,728 in connection with the vesting of restricted common stock awards during the period. Pursuant to the exercise of options, the Company transferred 63,542 shares that were held in treasury for an aggregate of $48,382 gross proceeds. As of September 30, 2022, the Company has 131,162 shares held in treasury valued at their cost of $296,222.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Warrants

A summary of warrants activity during the nine months ended September 30, 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, September 30, 2022	2,524,410	$	1.02	3.3	$	662,364

Exercisable, September 30, 2022	2,524,410	$	1.02	3.3	$	662,364

A summary of outstanding and exercisable warrants as of September 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	3.3	177,885
$	1.00	2,346,525	3.3	2,346,525
		2,524,410	3.3	2,524,410

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 used the following assumptions:


	For The Three Months Ended				For The Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Risk free interest rate	2.85% - 4.21%		0.20% - 0.23%		1.18% - 4.21%		0.20% - 0.85%
Expected term (years)	3.8		3.5		3.5 - 3.9		2.5 - 3.5
Expected volatility	106	%	109	%	106% - 116%		93% - 109%
Expected dividends	0	%	0	%	0	%	0	%

For the three and nine months ended September 30, 2022, the weighted average grant date fair value per share of options was $1.08 and $1.31, respectively. For the three and nine months ended September 30, 2021, the stock options had a weighted average grant date value of $1.55 and $0.80 per option share, respectively.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

A summary of options activity (excluding Market-Based Awards) during the nine months ended September 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	200,000		1.86
Exercised	(66,042)		0.71
Expired	—		—
Forfeited	(28,958)		1.49
Outstanding, September 30, 2022	510,216	$	1.78	3.5	$	68,501

Exercisable, September 30, 2022	184,799	$	1.37	2.3	$	65,143

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


Options Outstanding			Options Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Options	In Years	Options
$	0.66	110,486	1.3	105,070
$	1.28	10,000	—	—
$	1.35	10,000	—	—
$	1.47	10,000	—	—
$	1.55	30,000	—	—
$	1.59	40,000	—	—
$	1.99	10,000	3.7	4,583
$	2.05	50,000	3.9	3,958
$	2.08	10,000	3.6	4,583
$	2.13	20,000	3.9	7,500
$	2.25	10,000	4.3	1,250
$	2.27	29,730	3.7	12,855
$	2.31	50,000	—	—
$	2.43	20,000	4.0	7,500
$	2.44	100,000	3.4	37,500
		510,216	2.3	184,799

As of September 30, 2022, there was $335,308 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of ~~$411,181 and $23,636 respectively,~~3.2 years.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Restricted Common Stock

The following table presents information related to restricted common stock ~~awards which is included within general and administrative expenses on the condensed statements~~(excluding Market-Based Awards) as of ~~operations.~~ September 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	(842,500)		2.38
Non-vested shares, September 30, 2022	1,897,500	$	2.54

As of September 30, ~~2017,~~2022, there was ~~$464,846~~$3,963,192 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~~2.53 years.

Market-Based Awards

The following table presents information related to market-based awards, that vest upon achieving specified KULR market capitalizations, outstanding as of September 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 September 30, 2022, there was $1,605,407 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.18 years.

As of September 30, 2022, none of the market-based awards have vested.

See Note 13 – Subsequent Events, Stock-Based Compensation Restructuring regarding cancellation of the market-based awards.

Stock-Based Compensation

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


	For The Three Months Ended				For The Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Common stock for services	$	—	$	77,040	$	53,421	$	345,679
Amortization of restricted common stock		403,812		440,333		1,345,171		1,000,647
Amortization of market-based awards		477,700		754,207		1,773,169		1,374,226
Stock options		23,959		20,516		66,377		45,407
Accrued issuable equity (common stock)		16,840		—		(29,360)		—
Total	$	922,311	$	1,292,096	$	3,208,778	$	2,765,959

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

During the three and nine months ended September 30, 2022, the Company recognized stock-based compensation expense of $922,311 and $3,208,778, respectively, related to restricted common stock, market-based awards and stock options, of which $916,708 and $3,185,373, respectively are included within selling, general and administrative expenses, and $5,603 and $23,405, respectively are included within research and development expenses in the unaudited condensed consolidated statements of operations. During the three and nine months ended September 30, 2021, the Company recognized stock-based compensation expense of $1,292,096 and $2,765,959, respectively, related to restricted common stock, market-based awards and stock options, of which $1,292,096 and $2,750,769, respectively are included within selling, general and administrative expenses, and $0 and $15,190, respectively are included within research and development expenses on the unaudited condensed consolidated statements of operations.

NOTE 12COMMITMENTS AND CONTINGENCIES

Sponsorship Agreement

On June 15, 2022, the Company amended the Second Sponsorship Agreement (see Note 4 - 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 in July 2022, January 2023, and April 2023. On July 8, 2022, the Company paid $500,000 which was recorded as a prepaid expense (see Note 4 - Prepaid Expenses and Other Current Assets) and will be 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.

NOTE 13SUBSEQUENT EVENTS

Purchase Agreement

On October 5, 2022, KULR Technology Group, Inc. (the “Company”) entered into an agreement (the “Purchase Agreement”) with a seller (the “Seller”), pursuant to which the Company purchased all of the assets, including intellectual property, of the Seller (the “Acquired Assets”) for consideration of $3,500,000, of which, $2,000,000 (the “Cash Consideration”) will be paid in cash and the Company will issue shares of common stock worth $1,500,000 (the “Equity Consideration”).

The Company will issue the Equity Consideration in four equal installments on the following dates: (i) October 5, 2023, (ii) October 5, 2024, (iii) October 5, 2025, and (iv) October 5, 2026. The Company will pay the Cash Consideration as follows: $1,000,000 on October 6, 2022, $500,000 on April 5, 2023, and $500,000 on October 5, 2023.

The Purchase Agreement includes customary representations, warranties and covenants of the Company and the Seller. The Purchase Agreement also contains post-closing indemnification provisions pursuant to which the parties have agreed to indemnify each other against losses resulting from certain events, including breaches of representations and warranties, covenants and certain other matters.

The Company is evaluating whether this agreement meets the criteria of a business combination in accordance with the applicable accounting guidance.

Supplemental Agreement to the SEPA

During October 2022, the Company issued 5,153,664 shares of common stock, at purchase prices per share ranging from $0.99 to $1.84, pursuant to Investor Notices submitted by Yorkville for aggregate proceeds of $5,850,000. The proceeds were applied against the principal and interest due for the initial Prepaid Advance liability in the in the aggregate amounts of $5,750,000 and $100,000, respectively. As of November 14, 2022, the remaining balance on the initial Prepaid Advance liability is $9,000,000. See Note 9 - Prepaid Advance Liability for additional information.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Stock-Based Compensation Restructuring

On November 1, 2022, the Company terminated the market-based restricted stock unit grant of 1,500,000 shares to vest upon certain market-cap milestones to the Chief Operating Officer (the “COO”) and granted an award of restricted stock units whereby the COO became eligible to receive up to 1,500,000 shares of the Company’s stock which will vest in four equal annual installments beginning on November 1, 2023.

On November 1, 2022, the Company terminated the market-based option grant for the purchase of up to 1,500,000 shares to vest upon certain market-cap milestones to the Chief Executive Officer (the “CEO”) and granted an award of restricted stock units whereby the CEO became eligible to receive up to 1,500,000 shares of the Company’s stock which will vest in four equal annual installments beginning on November 1, 2023.

Appointment of Chief Technology Officer

On March 16, 2022, the Company hired an individual to serve as the Director of Engineering. Effective November 1, 2022, the Company appointed this individual as Chief Technology Officer (the “CTO”) of the Company, upon which the Company issued 100,000 shares of restricted common stock with an aggregate grant date value of $205,000, which shall vest in four equal annual installments beginning November 1, 2023.

Director Compensation

Effective November 1, 2022, the Board of the Company appointed a Lead Independent Director (“Lead Director”) of the Board, to hold office until the earlier of the expiration of the term of office of the director whom they have replaced, successors are duly elected and qualified, or the earlier of such director’s death, resignation, disqualification, or removal. Furthermore, the Lead Director will receive annual cash compensation equal to $150,000 upon their appointment and the non-Lead Independent Director (“non-Lead Director”) will receive annual cash compensation equal to $95,000. Additionally, all independent Board members will be granted 37,500 shares of common stock of which shares shall vest quarterly in 7,500 share installments with the first installment vesting December 31, 2022.

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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 months ended September 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~~factors that we may not know.

Overview

KULR Technology Group develops and commercializes an energy management platform to accelerate the global transition to a sustainable electrification economy. This energy management platform consists of high-performance thermal management technologies for batteries and electronics, AI-powered battery management and vibration mitigation software solutions, and reusable energy storage modules. Our mission is advance and apply these technologies to make our world more sustainable by using less energy; using energy more efficiently; making energy consumption safer and cooler; using less materials to achieve these goals; and completing the circular economy through recycling.

KULR’s holistic suite of battery safety and thermal energy management products and services include: Passive Propagation Resistant (“PPR”) design and testing, Internal Short Circuit (“ISC”) trigger cells, Fractional Thermal Runaway Calorimeter (“FTRC”) testing and an AI-powered CellCheck battery management system. The following picture illustrates the different products and services offered by KULR in this holistic approach.

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As a result of this holistic approach, KULR offers a wide range of products and services as part of a total solutions package for battery thermal and safety management shown below:

Here is an example of how our holistic approach helps an electric aviation customer. Last year, KULR provided H55, a leading enabler for electric aviation offering certified electric propulsion and battery solutions, with a thermal management solution for its hybrid-electric propulsion flight demonstrator program with Pratt & Whitney Canada. Utilizing KULR’s thermal design architecture, H55 was awarded production organization approval (“POA”) by the Swiss Federal Office for Civil Aviation in January 2022 followed by its design organization approval (“DOA”) from the European Union Aviation Safety Agency (“EASA”) in June 2022. With the DOA and POA secured, H55 is expected to receive its type certificate for its 100kW electric propulsion system targeted for CS23 aircrafts at the end of 2023.

Through the VibeTech acquisition, KULR is expanding itself as a vertically integrated energy management company focused on sustainable energy solutions. The new product KULR VIBE is a patented artificial intelligence (AI) solution with “learning” algorithms that utilize data from sensors to reduce vibration for a more energy efficient system. For nearly twenty years, the primary application has been aviation. However, advances in measurement and computing technologies have allowed KULR VIBE to provide transformative and scalable solutions across transportation, renewable energy (wind farm), manufacturing, industrial, performance racing and autonomous aerial (drone) applications among others.

KULR VIBE Solution

KULR VIBE addresses one the most challenging issues with advanced machinery today; excessive energy robbing vibrations that are destructive to both the machinery and in many cases the operator. The KULR VIBE suite of technologies utilize proprietary sensor processes with advanced learning algorithms to both achieve precision balancing solutions, and successfully predict component failure based on its comprehensive database of vibration signatures. Its enhanced AI learning algorithms pinpoint areas where excess vibrations cause a loss of energy that can lead to system malfunctions, weakened performance, and maintenance issues.

This innovative technology can be ~~given that~~utilized as a standalone solution or be paired with existing track and balance technology to facilitate vibration reduction, achieve increased energy production, and reduce mechanical failures thereby extending platform life. KULR VIBE recently balanced the motors and blades of a mission critical drone to demonstrate the benefits of the technology. The results were a 23% increase in battery life and a lift increase of 45%. Same motors, same blades, KULR VIBE optimized.

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The KULR VIBE suite of products and services have provided vibration analysis and mitigation to global companies across multiple industries and sectors. According to Fact.MR, an insights-driven global market intelligence company, the global vibration motor market is estimated at $6.5 billion in 2022 and is forecast to reach $24.1 billion by 2032, growing at a Compounded Annual Growth Rate (“CAGR”) of 14.1% during 2022-2032.

The Future is Energy + AI

We believe the future ~~results anticipated~~of KULR is Energy + AI. We are building our AI infrastructure on industry leading Nvidia and AMD semiconductor platforms, and they are hosted on a hybrid of private cloud and Microsoft Azure. As the world faces shortages in supply of raw materials to produce enough Li-ion batteries to power everything from EV’s to smartphones, KULR is developing a modular battery storage architecture that can be used across multiple applications with real-time monitoring by AI-powered CellCheck. This product is to target the following markets:

●

Aerospace and defense systems, such as CubeSat batteries meeting JSC 20793 safety requirements by NASA

●

Power tools and industrial equipment

●

High-performance electric vehicles

●

Electric vertical take-off and landing (“eVOTL”)

●

Electric micro-mobility vehicles

●

Residential and commercial energy storage systems

Through our partnership with MoliCel, KULR has access to best-in-class Li-ion battery cells with high power and energy to build battery modules with the highest safety ratings. As part of the strategic relationship, KULR has access to over 700MWh of battery energy capacity to further accelerate its production and supply chain localization initiatives within North America. Securing this MoliCel battery cell supply accelerates our ability to provide total solutions to high value customer applications with revenue potential that could exceed $350 million annually in five years.

Recent Developments

Sales and Marketing

The KULR sales and marketing team expands its customer engagements through direct sales and Manufacturer’s Representative team to support some East Coast customers. KULR has over 300 customer engagements by the ~~forward-looking statements~~end of Q3 2022 with some of the world’s largest industrial and commercial companies such as Lockheed Martin, Ball Aerospace, SAFT, General Motors, Cirba, Redwood Materials, Leidos Holdings, Meta Platforms Inc, Viridi and BOSCH. As we continue to expand our relationship with major partners such Lockheed Martin across our product portfolio, we expect to cross-sell and up-sell our total solution package to these customers.

In September, KULR received approval from the Department of Transportation (“DoT”) to increase the energy levels in three special permits from 2.1 kWh to 2.5 kWh, expanding usage for its SafeCase product. KULR will utilize the permit upgrades to support a recently-awarded project with one of the three largest outdoor rider landscaping companies in the world for the safe shipment and storage of Li-Ion batteries. The permit approval restates the safety of KULR’s SafeCase product for transportation and storage of Li-Ion batteries, and will enable the large landscaping equipment customer to safely transport its batteries for services or end of life (“EOL”) on its new line of higher-capacity landscaping electric vehicles. In addition to this project, the permit upgrades are expected to generate expanded use cases for the SafeCase product with existing and new customers.

With the signing of Assembly Bill No. 1346 in October 2021, California was the first state to prohibit the sale of gas-powered landscaping equipment. The legislation came following Governor Newsom’s 2020 executive order prohibiting the sale of all gas-powered vehicles by 2035. The bill is expected to drive the growth of e-powered landscaping equipment, which is projected to hit $43.2 billion by 2029 and exhibit a CAGR of 5.3% during the forecast period.

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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 Q4’22 with full capacity processing. This capability will be ~~achieved. Forward-looking statements reflect management’s current expectations~~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 8 permanent employees during the third quarter and maintains an outsource strategy for software development and volume TRS manufacturing. We have 50 full-time and two part-time employees as of September 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 we 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 headquarters. 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 ~~inherently uncertain. Our actual results may differ significantly from management’s expectations.~~

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 ~~following discussion~~full extent of the future impact of COVID-19 on our operations and ~~analysis should be read~~financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on our 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 ~~conjunction with our~~a timely manner. The financial statements ~~included herewith. This discussion should~~do not ~~be construed~~include any adjustments that might result from the outcome of this uncertainty.

Financing Activities

On May 13, 2022, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to ~~imply that~~ the ~~results discussed herein will necessarily continue into~~SEPA, we have the ~~future, or that any conclusion reached herein will necessarily be indicative of actual operating results in~~right, but not the ~~future. Such discussion represents only the best present assessment~~obligation, to sell to Yorkville up to $50,000,000 of our ~~management.~~shares of common stock any time during the 24-month term of the agreement. Please refer to Note 11 to the condensed consolidated financial statements of this Quarterly Report on Form 10-Q for additional details regarding the SEPA.

~~Overview~~

~~KT High-Tech Marketing, Inc.~~Concurrently with the SEPA, we entered into a Note Purchase Agreement (the ~~"Company"~~“Note Purchase Agreement”) ~~was incorporated~~with Yorkville, pursuant to which we issued to the Investor a promissory note which bears interest at 10% with an initial principal amount equal to $5,000,000 (the “Promissory Note”) for which we received gross proceeds of $4,750,000. As of September 20, principal and interest owed on ~~December 11, 2015~~this promissory note has been paid in full. Please refer to Note 10 to the condensed consolidated financial statements of this Quarterly Report on Form 10-Q for additional details regarding the Note Purchase Agreement.

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On September 23, 2022, we entered into a Supplemental Agreement (the “Supplemental Agreement”) to the SEPA. Under the Supplemental Agreement, we may from time to time request cash advances of up to $15,000,000 (each, a “Prepaid Advance”) from Yorkville. Cash proceeds received under the ~~laws~~SEPA and the Supplemental Agreement are limited to an aggregate amount of $50,000,000. Pursuant to the terms of the ~~State~~Supplemental Agreement, Yorkville has the right to receive shares to pay down Prepaid Advances, and may select the timing and delivery of ~~Delaware, and was formerly known as Grant Hill Acquisition Corporation. In April 2016,~~such shares in an amount up to the balance of the Prepaid Advance. On September 23, 2022, the Company ~~implemented~~received an Initial Advance for gross proceeds of $15,000,000, of which, $3,850,000 was used to repay amounts due under a ~~change~~Note Purchase Agreement with Yorkville. We may not sell stock to Yorkville pursuant to the SEPA at any time that there is an outstanding Prepaid Advance liability balance. Please refer to Note 9 to the condensed consolidated financial statements of ~~control by issuing shares~~this Quarterly Report on Form 10-Q for additional details regarding the Supplemental Agreement.

Purchase Agreement

On October 5, 2022, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with a seller (the “Seller”), pursuant to ~~new shareholders, redeeming~~which the Company purchased all of the assets, including intellectual property, of the Seller (the “Acquired Assets”) for consideration of $3,500,000, of which, $2,000,000 (the “Cash Consideration”) will be paid in cash and the Company will issue shares of ~~existing shareholders, electing new officers~~common stock worth $1,500,000 (the “Equity Consideration”).

The Company will issue the Equity Consideration in four equal installments on the following dates: (i) October 5, 2023, (ii) October 5, 2024, (iii) October 5, 2025, and ~~directors~~(iv) October 5, 2026. The Company will pay the Cash Consideration as follows: $1,000,000 on October 6, 2022, $500,000 on April 5, 2023, and ~~accepting the resignations of its then existing officers~~$500,000 on October 5, 2023.

The Purchase Agreement includes customary representations, warranties and ~~directors. In connection with the change of control, the shareholders~~covenants 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 KULR Technology Corporation, a Delaware Corporation (“KULR”), and 100% of the shareholders of KULR (the “KULR Shareholders”). Upon the closing of the Share ExchangeSeller. The Purchase 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 thermal management technologies, which it acquired through assignment from and license with KULR’s co-founder Dr. Timothy Knowles, in the high value, high-performance consumer electronic and energy storage applications. Prior to 2013, 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 to the Reverse Acquisition, the Company was an early-stage company planning to market and distribute technology products and components targeting the energy and consumer electronics industries. The Company intended to market and sell the products to both the end user and supply chain markets and to seek partnerships in developing and distributing such products.

After the Reverse Acquisition, the Company integrated 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, a highly effective, lightweight and passive thermal protection technology. Thermal Runaway Shield (TRS) for lithium ion batteries. KULR’s lithium ion battery (Li-B) TRS product prevents a potentially dangerous combustible condition known as thermal 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, incidents 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.

~~Recent Developments~~

On June 6, 2017, the Company filed a Certificate of Designation of Series A Voting Preferred Stock with the Secretary of State of the State of Delaware (the “Certificate of Designation”). Pursuant to the Certificate of Designation, 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 Stock have the right to vote on any matter with holders of the Company’s common stock and other securities entitled to vote, if any, voting together as one (1) class. Each record holder of Preferred A Stock has that number of votes equal to one-hundred (100) votes per share of Preferred A Stock held by such holder. The record holders of the Preferred A Stock are entitled to the same notice of any regular or special meeting of the shareholders as may or shall be given to holders of common stock entitled to vote at such meetings.

~~As discussed above, effective on June 19, 2017,~~also contains post-closing indemnification provisions pursuant to which the ~~Share Exchange Agreement, KULR became a wholly-owned subsidiary~~parties have agreed to indemnify each other against losses resulting from certain events, including breaches of ~~the Company. Accordingly, the Company, through its subsidiary, KULR, will primarily focus its operations on KULR’s thermal management business.~~representations and warranties, covenants and certain other matters.

~~Upon closing~~30

Table of ~~the Share Exchange Agreement on June 19, 2017, the following persons constituted the executive officers and directors 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 Nine Months Ended September 30, 2022 Compared With Three and Nine Months Ended September 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 Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Product sales	$	1,369,857	$	600,921	$	2,100,120	$	1,356,530
Contract services		23,328		—		81,110		290,540
Total revenue	$	1,393,185	$	600,921	$	2,181,230	$	1,647,070

~~Revenues~~

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

For the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, we generated ~~$15,106~~$1,393,185 and $0$600,921 of revenues from 16 and 7 customers, respectively, representing an increase of ~~$15,106.~~

$792,264, or 132%. For the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, we generated ~~$26,006~~$2,181,230 and ~~$6,900~~$1,647,070 of revenues, respectively, representing an increase of ~~$19,106,~~$534,160, or ~~277%.~~32%, resulting from two contracts received during the third quarter of 2022.

Revenue from product sales during the three months ended September 30, 2022 increased by $768,936 or 128% compared to the three months ended September 30, 2021. Revenue from product sales during the nine months ended September 30, 2022 increased by $743,590 or 55% compared to the nine months ended September 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 devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials.

Revenue from contract services during the three months ended September 30, 2022 increased by approximately $23,328 compared to the three months ended September 30, 2021. Revenue from contract services during the nine months ended September 30, 2022 decreased by approximately $209,430 or 72% compared to the nine months ended September 30, 2021. The decrease in revenue for the nine months ended September 30, 2022 is primarily attributable to three large DOD contracts which generated $263,656 of revenues during the nine months ended September 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 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~~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 margins earned can vary significantly between periods, customers and products due to the learning process, customer negotiating strengths, and product mix. The Company expects that margins will normalize as it prepares for the ~~cost~~anticipated volume production of ~~our CFV thermal management solution and PCM heat sinks.~~its product mix.

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For the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, cost of revenues ~~were $52,384~~was $932,364 and ~~$0,~~$155,138, respectively, representing an increase of ~~$52,384.~~$777,226, or 501%. The increase was primarily due to~~research~~ increased labor costs to produce finished goods, costs to procure customized finished goods and ~~development expenses that were~~component material for a new product line, and shipping costs from our foreign manufacturer. The gross margin percentage was 33% and 74% for the three months ended September 30, 2022 and 2021, respectively. The decrease in margins realized during the three months ended September 30, 2022 is primarily attributable to ~~a sales agreement.~~the large concentration of new product shipments to customers, an increase in headcount for production, new costs related to material for our new Safe Case product and customized RPS50 kits, and shipping costs from our foreign manufacturers.

For the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, cost of revenues ~~were $108,579~~was $1,478,954 and ~~$7,749,~~$869,612, respectively, representing an increase of ~~$100,830,~~$609,342, or ~~1,301%~~70%. The increase was primarily due to ~~research~~increased labor costs to produce finished goods, costs to procure customized finished goods and ~~development expenses that were~~component material for a new product line, and shipping costs from our foreign manufacturer. The gross margin percentage was 32% and 47% for the nine months ended September 30, 2022 and 2021, respectively. The decrease in margins realized during the nine months ended September 30, 2022 is primarily attributable to ~~a sales agreement.~~new product shipments to customers, an increase in headcount for production, new costs for materials for our new Safe Case product and customized RPS50 kits, 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 30, ~~2017, research~~2022 and ~~development~~2021, R&D expenses ~~increased to $157,876 from $14,090 in the comparable 2016 period,~~were $1,069,852 and $481,855, respectively, representing an increase of ~~$143,786,~~$587,997 or ~~1,020%~~122%. The increase isduring 2022 was comprised primarily ~~attributable~~of approximately $352,000 related to ~~a research consulting agreement which commenced~~planned increases in ~~September 2016 as well as new consulting agreements~~headcount in order to build future capacity, and ~~service contracts which commenced in the third quarter of 2017.~~$236,000 related to R&D initiatives designed to build future revenue growth.

For the nine months ended September 30, ~~2017, research~~2022 and ~~development~~2021, R&D expenses ~~increased to $207,504 from $16,173 in the comparable 2016 period,~~were $2,790,683 and $957,579, respectively, representing an increase of ~~$191,331,~~$1,833,104 or ~~1,183%~~191%. The increase is primarily ~~attributable~~comprised of approximately $977,000 related to ~~a research consulting agreement which commenced~~planned increases in ~~September 2016 as well as new consulting agreements~~headcount in order to build future capacity, and ~~service contracts which commenced in the third quarter of 2017.~~$856,000 related to R&D initiatives designed to build future revenue growth.

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 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 $4,349,373 and $3,104,410, respectively, an increase of $1,244,963, or ~~555%, to $605,273 from $92,358 in the comparable 2016 period.~~40%. The increase is primarily due to an increase in ~~non-cash stock-based compensation expense of approximately $178,000, increased payroll expenses from the hiring of new employees in the third quarter of 2017, increased~~ marketing and advertising expenses as well as ~~increased professional fees related~~an increase in labor costs to ~~being a public company.~~build future capacity for planned revenue growth.

For the nine months ended September 30, ~~2017,~~2022 and 2021, selling, general and administrative expenses ~~increased by $720,911,~~were $12,210,458 and $7,320,524, respectively, an increase of $4,889,934, or~~242%, to $1,019,235 from $298,324 in the comparable 2016 period.~~ 67%. The increase is primarily due to an increase in ~~non-cash stock-based compensation expense of approximately $388,000, increased payroll expenses from the hiring of new employees in the third quarter of 2017, increased~~ marketing and advertising expenses as well as ~~increased professional fees incurred with regards~~an increase in labor costs to ~~the Share Exchange and being a public company.~~build future capacity for planned revenue growth.

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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 30, ~~2017, interest~~2022 and 2021, net other (expense) income ~~– related party decreased by $750 to $0 from $750.~~was ($628,181) and $44,550, respectively, representing a change of $672,731. The ~~decrease was due~~increase in expense is primarily attributable to the ~~collection~~increase in interest expense and discount amortization recorded in connection with notes payable and the Prepaid Advance issued in 2022 of approximately $633,000, and increase in the amortization of debt discount of approximately $172,000, the loss on debt extinguishment of approximately $9,000, and the change in fair value of accrued issuable equity of approximately $18,000, partially offset by the gain recorded in connection with the forgiveness of the PPP Loan of approximately $159,000. During the three months ended September 30, 2022, the Company recorded interest expense related to a note ~~receivable~~payable in the ~~second quarter~~amount of ~~2017.~~$608,028 which included $123,027 of stated interest, $385,000 for a 10% payment premium, and $100,000 for a late payment premium.

For the nine months ended September 30, 2022 and 2021, net other expense was $678,960 and $337,153, respectively, representing a change of $341,807. The change is primarily attributable to the increase in interest expense and discount amortization recorded in connection with notes payable and the Prepaid Advance of approximately $674,000, an increase in the amortization of debt discount of approximately $147,000, and the loss on debt extinguishment of approximately $9,000, partially offset by the change in fair value of accrued issuable equity of approximately $189,000, the gain recorded in connection with the forgiveness of the PPP Loan of approximately $159,000, and the decrease in debt redemption costs of approximately $140,000. During the nine months ended September 30, 2022, the Company recorded interest expense related to a note payable in the amount of $650,493, which included $165,493 of stated interest incurred, $385,000 for 10% payment premium, and $100,000 for a late payment premium.

Liquidity and Capital Resources

As of September 30, 2022 and December 31, 2021, we had cash balances of $16,168,863 and $14,863,301, respectively, and working capital of $2,077,848 and $13,302,935, respectively.

On May 13, 2022, we issued a $5,000,000 Promissory Note to Yorkville for gross proceeds of $4,750,000. On the same date, we entered into the SEPA which gives us the right, but not the obligation, to sell up to $50,000,000 of shares of our common stock to Yorkville during the 24 months following the effective date of the SEPA. Further, on September 23, 2022, we entered into the Supplemental SEPA, which allows us to request advances (“Prepaid Advances”), still up to an aggregate of $50,000,000, from Yorkville. Pursuant to the terms of the Supplemental SEPA, Yorkville has the right to receive shares, and may select the timing and delivery of such shares (via an “Investor Notice”), in an amount up to the balance of the Prepaid Advance in order to pay down the Prepaid Advance. The aggregate common shares issued under the SEPA and the Supplemental SEPA cannot exceed $50,000,000. We may not request that the investor purchase shares pursuant to the SEPA at any time that there is an outstanding balance owed under a Prepaid Advance. See Financing Activities under Recent Developments above for additional details.

During September and October 2022, the Company issued 5,375,269 shares of common stock, at purchase prices per share ranging from $0.99 to $1.84, in satisfaction of the initial Prepaid Advance liability in the amount of $6,000,000. As of November 14, 2022, the remaining balance on the initial Prepaid Advance is $9,000,000. See Note 9 - Prepaid Advance Liability for additional information.

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

~~Interest Expense – Related Party~~

~~Interest expense – related party consists of interest on a KT High-Tech promissory note purchased by KULR in 2017. Since the KT High-Tech~~2022 and ~~KULR reverse recapitalization, all interest expense related to the promissory note has been eliminated in consolidation.~~

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

~~Liquidity and Capital Resources~~

~~Operating Activities~~

~~For the nine months ended September 30, 2017 and 2016,~~2021, cash used in operating activities was ~~$263,585~~$13,366,007 and ~~$553,453,~~$5,394,936, respectively. Our cash used in operations for the nine months ended September 30, ~~2017~~2022 was primarily attributable to our net loss of ~~$1,757,850,~~$14,977,825, adjusted for ~~net~~ non-cash ~~expense~~expenses in the aggregate amount of ~~$414,555, partially offset by $1,079,710~~$4,072,738, as well as $2,460,920 of net cash ~~provided by~~used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the nine months ended September 30, ~~2016~~2021 was primarily attributable to our net loss of ~~$600,221,~~$7,837,798, adjusted for ~~net~~ non-cash ~~expense~~expenses in the aggregate amount of ~~$24,136, partially offset by $22,632~~$2,989,597, and $546,735 of net cash ~~provided by~~used to fund changes in the levels of operating assets and liabilities.

~~Investing Activities~~

For the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, cash ~~provided by (used in)~~used in investing activities was ~~$1,907,990~~$2,772,568 and ~~$(85,000),~~$1,386,864, respectively. Cash ~~provided by~~used in investing activities during the nine months ended September 30, ~~2017 resulted from $1,859,261~~2022 was related to deposits paid for equipment 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~~$2,198,626 and purchases of property and ~~equipment. Our cash~~equipment of $573,942. Cash used in investing activities ~~for~~during the nine months ended September 30, ~~2016~~2021 was related to ~~the purchase~~deposits paid for equipment of ~~a note receivable in the amount~~$1,029,805 and purchases of ~~$85,000 from our CEO.~~

~~Financing Activities~~

~~Net cash provided by financing activities for nine months ended September 30, 2016 was $550,000 which was related to the issuance~~property and equipment of ~~an aggregate~~$357,059.

Table of ~~1,833,334 shares of Series A1 convertible preferred stock to investors. There were no cash flows from financing activities for~~Contents

For the nine months ended September 30, ~~2017.~~

~~Summary~~

2022 and 2021, cash provided by financing activities was $17,444,137 and $8,891,716, respectively. Cash provided by financing activities during the nine months ended September 30, 2022 was due to proceeds from the Prepaid Advance of $10,573,068, proceeds from a promissory note of $4,750,000, proceeds from the exercise of warrants of $3,020,836, proceeds from the SEPA of $247,871, and proceeds from the exercise of options of $25,233, partially offset by repayments of the promissory note of $1,000,000, and payments of issuance costs related to the prepaid advance liability of $85,000, deferred financing costs related to the SEPA for $72,800 and payments of issuance costs in connection with notes payable for $17,200. Cash provided by financing activities during the nine months ended September 30, 2021 was due to $6,500,000 of proceeds from the sale of preferred stock, common stock and warrants, and $5,206,716 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.

As of September 30, ~~2017, we had~~2022, future cash requirements for our current liabilities include approximately $2,781,095 for accounts payable and accrued expenses and approximately $218,875 for future payments under operating leases. The Company has also committed to spend $950,000 related to the extension of a sponsorship agreement, $1,112,239 related to capital expenditures for automation and testing equipment, approximately $946,836 for the construction of a new automation facility, and $464,389 for research and development. Future cash ~~balance, working capital~~commitments for long term liabilities consists of ~~and an accumulated deficit~~$155,765 for the long-term lease. As of ~~$1,653,492, $1,050,984 and $3,691,660, respectively. During the three and nine months ended~~ September 30, ~~2017, we incurred~~2022, the Company also has $14,750,000 of principal outstanding for a ~~net loss~~prepaid advance liability pursuant to the Supplemental SEPA. Subsequent to September 30, 2022, the Company issued 5,153,664 shares of ~~$839,252 and $1,757,850, respectively.~~

common stock to pay down $5,750,000 of Prepaid Advance. 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~~filing date of this ~~filing.~~Form 10-Q, the principal balance due on the Prepaid Advance is $9,000,000. While the Company expects that the prepaid advance liability will be repaid with the issuance of common stock, any prepaid advance balances outstanding for more than twelve months must be repaid in cash. The Company intends to meet its cash requirements from its current cash balance, proceeds from the SEPA or the Supplemental SEPA, and from future revenues.

~~Critical Accounting Policies~~The short and long-term worldwide implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions on Russia by the United States or other countries and possible counter sanctions by Russia, and the resulting economic impacts on oil prices and other materials and goods, could affect the price of materials used in the manufacture of our products. If the price of materials used in the manufacturing of our products increase, that could 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.

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.

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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.

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~~internal control over financial reporting whereas we did not design or maintain effective controls to ensure that there is an independent review and approval of electronic payments (wires, EFT’s, ACH’s and credit card payments) as our policy of providing timely support to ensure completeness and accuracy of the payment was not followed which continued to exist as of September 30, 2022. The Company has taken measures to address these material weaknesses, including amending the Company’s policy to enforce more timely submissions of expense reports, ~~is (1) recorded, processed, summarized~~ and ~~reported~~requiring additional approvals for electronic payments. While there can no assurance, the Company expects that these weaknesses will be fully remediated by the end of the year. 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~~third 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

None.

~~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.

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ITEM 6. ~~Exhibits.~~

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

~~31.1~~ Exhibit No.		Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.* Description
31.1		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
~~31.2~~		Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.*
31.2		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
~~32.1~~
32.1		Certification pursuant to 18 U.S.C. Section 1350, ~~Certifications~~as adopted pursuant to Section 906 of ~~Chief Executive Officer.~~the Sarbanes-Oxley Act of 2002.**

~~32.2~~ 101.INS		Section 1350 Certifications of Chief Financial Officer.** Inline XBRL Instance*

~~101.INS~~ 101.SCH		XBRL Instance Document*

~~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.

**Furnished ~~herewith~~herewith.

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SIGNATURES

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

Dated: November ~~17, 2017~~14, 2022	By By:	/s/Michael Mo
		Michael Mo
		Chief Executive Officer
		(Principal Executive Officer)

~~November 17, 2017~~	By	~~/s/~~~~George Henschke~~
Dated: November 14, 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