* Less than 10%

Concentrations of Credit Risk – Continued

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 are as follows:

Deferred Offering Costs

Deferred offering costs, which consist of direct, incremental professional fees incurred in connection with closing the SEDA for a potential sale of the Company’s equity securities (as described in Note 9 – Stockholders’ Deficiency), are capitalized as non-current assets on the balance sheet. Upon continued utilization of the SEDA, the deferred offering costs will be offset against the equity offering proceeds. As of March 31, 2020, the Company incurred deferred offering costs in the amount of $78,259. See Note – 9 Stockholders’ Deficiency, Standby Equity Distribution Agreement for more information.

Revenue Recognition

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

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

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

Note 3    Summary of Significant Accounting Policies – Continued

Revenue Recognition – Continued

The following table summarizes our revenue recognized in our unaudited condensed consolidated statements of operations:

As of March 31, 20192020 and December 31, 2018,2019, the Company did not have any contract assets or contract liabilitieshad $47,000 and $15,000 of deferred revenue, respectively, from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract. During the three months ended March 31, 2020 and 2019, and 2018, $0 ofthere was no revenue was recognized from performance obligations satisfied (or partially satisfied) in previous periods.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding, during each period. Dilutive common-equivalent shares consistplus the impact of sharescommon share, if dilutive, resulting from the exercise of non-vested restrictedoutstanding stock if not anti-dilutive.options and warrants and the conversion of convertible instruments.

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

Operating LeasesReclassification

The Company leases properties under operating leases. For leasesCertain prior period balances have been reclassified in order to conform to the current period presentation. These reclassifications have no effect upon adoptionon previously reported results of Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” at January 1, 2019 and for any leases commencing thereafter, the Company recognizes a liability to make lease payments, the “lease liability”, and an asset representing the right to use the underlying asset during the lease term, the “right-of-use asset”. The lease liability is measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate. The right-of-use asset is measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaidoperations or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset. Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset.loss per share.

The Company evaluated their operating leases and elected to apply the short-term lease measurement and recognition exemption in which the right of use assets and lease liabilities are not recognized for short-term leases.

As of March 31, 2020 and December 31, 2019, prepaid expenses consisted of the following:

Note 4    Accrued Expenses and Other Current Liabilities

As of March 31, 20192020 and December 31, 2018,2019, accrued expenses and other current liabilities consisted of the following:

See Note 8 – Related Party Transactions for more information on accrued expenses – related party.

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

On February 19, 2020, the Company borrowed and received gross proceeds of $10,000 under the Line of Credit for its working capital needs, which is being repaid weekly for the next 26 weeks at a weekly interest rate of 1.7%. As of March 31, 2020, the outstanding aggregate principal amount on the Line of Credit was $8,401. During the three months ended March 31, 2020 and 2019, the Company recorded interest expense of $797 and $0, respectively, related to the Line of Credit. There was no accrued interest related to the Line of Credit as of March 31, 2020.

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

The Company has agreed toNote bears no coupon interest (original issue discount only) and will become immediately due and payable on May 31, 2021 or upon acceleration, redemption or otherwise upon the occurrence of an aggregateevent of 25,000 sharesdefault, as set forth in the Note and which includes the early termination of common stock for legal and consulting fees. Seea standby equity distribution agreement with the Investor (see Note 69 – Stockholders’ Deficiency – Stock-Based CompensationStandby Equity Distribution Agreement for detailsadditional details). The Company will repay the Principal Amount in monthly installments as set forth in the Note. The Company may, at its discretion, prepay any installment amount or the principal amount, subject to a payment premium equal to the 10% of related expense recognized. Asthe amount being prepaid. During the three months ended March 31, 2020, the Company repaid principal on the Note of $50,000, and as of March 31, 2019,2020, the shares had not been issued and, as a result, $15,840outstanding aggregate principal balance of accrued issuable equity at fair value is included within accrued expenses and other current liabilities.the Note was $1,450,000. During the three months ended March 31, 2020, the Company recognized amortization of debt discount of $19,220 related to the Note.

Note 5    Related Party Transactions

Accrued Expenses and Other Current LiabilitiesAccounts Payable – Related Party

Accrued expenses and other current liabilitiesAccounts payable – related parties consistparty consists of a liability of $68,919$3,622 and $83,919$4,253 as of March 31, 20192020 and December 31, 2018,2019, respectively, to Energy Science Laboratories, Inc. (“ESLI”), a company controlled by the Company’s Chief Technology Officer (“CTO”), in connection with consulting services provided to the Company associated with the development of the Company’s CFV thermal management solutions in prior periods.

Note 6    Stockholders' Deficiency

Common StockAccrued Expenses and Other Current Liabilities – Related Party

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

Standby Equity Distribution Agreement

On February 27, 2020, KULR Technology Group, Inc. entered into a SEDA with the Investor, pursuant to which the Company may, at its discretion, sell to the Investor up to $8,000,000 of shares of the Company’s common stock (the “Offering”), par value $0.0001 per share (the “Common Stock”). For each share of Common Stock purchased under the SEDA (the “Shares”), the Investor will pay the Company 80% of the lowest daily volume weighted average price of the Common Stock on the OTC Markets OTCQB or other principal market on which the Common Stock is traded for the five days immediately following the date the Company delivers notice requiring the Investor to purchase the Shares under the SEDA. See Note 7 – Note Payable.

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

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

The SEDA contains customary representations, warranties and agreements of the Company and the Investor, indemnification rights and other obligations of the parties. The Company has the right to terminate the SEDA at any time upon prior written notice, at no cost to the Company, provided that (i) there are no outstanding advances which have yet to be issued and (ii) the Company has paid all amounts owed to the Investor, including amounts borrowed under the Note (see Note 7 – Note Payable for additional details). The Investor has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares of Common Stock.

Standby Equity Distribution Agreement – Continued

The Company paid cash of $15,000 and issued to the Investor 95,847 shares of Common Stock to the Investor and as consideration for entering into the SEDA. The shares of common stock issued to the Investor had an issuance date fair value of $63,259. The aggregate consideration of $78,259 was recorded as deferred offering costs and additional paid in capital on the condensed consolidated balance sheet.

The Company did not sell any Shares pursuant to the SEDA during the three months ended March 31, 2019,2020. Please see Note 11 – Subsequent Events for additional details regarding the sale of Shares subsequent to March 31, 2020.

Stock Options

On January 1, 2020, the Company sold an aggregategranted five-year options to purchase a total of 234,84910,000 shares of common stock at an exercise price of $0.66 per share to accredited investors foran employee pursuant to the 2018 Plan. One-fourth of the options will vest on the first-year anniversary of the grant date and the remaining options vest monthly over three years. The options had an aggregate gross proceedsgrant date value of $155,000.$3,609 which is recognized over the vesting period. The Company estimated the fair value of the options using the Black-Scholes Option Pricing Model with the following assumptions: (a) stock price of $0.66 per share; (b) volatility of 93%; (c) expected term of 2.5 years; (d) risk-free interest rate of 1.58%; and (e) a dividend rate of 0.0%.

Stock-Based Compensation

During the three months ended March 31, 20192020 and 2018,2019, the Company recognized stock-based compensation expense of $12,728 and $47,940 (which includes the issuance of 25,000 shares of immediately-vested common stock for legal fees) and $182,957,, respectively, related to restricted common stock and stock options, of which are included within$8,112 and $16,300, respectively was charged to research and development expense and $4,616 and $31,640, respectively was charged to general and administrative expenses on the condensed consolidated statements of operations.expense. As of March 31, 2019,2020, there was $83,095$85,917 of unrecognized stock-based compensation expense that will be recognized over the weighted average remaining vesting period of 2.752.22 years.

Note 7    Leases

The Company has two operating leasesfollowing table presents information related to stock-based compensation for real estate which have remaining terms that are less than one year. The Company elected not to recognize short-term leases on the balance sheet and all costs were recognized as selling, general and administrative expenses on the condensed consolidated statements of operations. For the three months ended March 31, 20192020 and 2018, operating lease expense was $40,385 and $15,161, respectively. As of March 31, 2019, the Company does not have any financing leases.2019:

Note 8     Commitments and Contingencies

Patent License AgreementOperating Lease

On January 1, 2020, KULR Technology Group, Inc. renewed a lease agreement for the 5,296 square feet of space located in San Diego, California under a six-month lease agreement ending June 30, 2020. The base rent was increased to $4,552 per month plus association fees of $555 per month. For the three months ended March 21, 2018,31, 2020 and 2019, operating lease expense was $10,016 and $40,385, respectively. The Company evaluated their operating lease and determined that the Company entered into an agreement withshort-term exemption available under ASC 842 applies since the National Renewable Energy Laboratory (“NREL”) grantinglease term is less than 12 months and the Company an exclusive license to commercialize its patented Internal Short Circuit technology. The agreement shall be effective forlease does not include a purchase option whose exercise is reasonably certain. Since the short-term exemption applies, lease payments are recognized as long as the licensed patents are enforceable, subject to certain early termination provisions specified in the agreement. In consideration, the Company agreed to pay to NREL the following: (i) a cash paymentexpense and no right of $12,000 payable over one year, (ii) royalties ranging from 1.5% to 3.75% on the net sales price of the licensed products, as defined in the agreement, with minimum annual royalty payments ranging from $0 to $7,500. In addition, the Company shall use commercially reasonable efforts to bring the licensed products to market through a commercialization program that requires that certain milestones be met, as specified in the agreement. As of the date of filing, there had been no sales of the licensed products, such that no royalties had been earned. asset or lease liability is recorded.

Note 9    Subsequent Events

Common Stock

On April 12, 2019,Subsequent to March 31, 2020, the Company soldissued an aggregate of 717,120421,197 shares of common stock at $0.66prices between $0.72 - $1.53 per share to accredited investors for aggregate gross proceeds of $473,300.$526,000 received against advance notices submitted to the Investor under the SEDA.

On April 30, 2019,June 12, 2020, the Company conducted a closing for the sale of an aggregate of 409,090issued 30,000 shares of common stock at $0.66 per sharethat vest immediately with a grant date value of approximately $30,000 related to accredited investors for aggregate gross proceeds of $270,000, which represented the final closing of its private placement offering of its common stock.consulting services provided.

SecuritiesNote Purchase Agreement and Promissory Note

Subsequent to March 31, 2020, and pursuant to the terms of the Note, the Company repaid an aggregate of $175,000 against the Principal Amount.

Paycheck Protection Program Loan

On April 2, 2019,27, 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 Company intends to use the proceeds of their PPP Loans for Qualifying Expenses. However, no assurance is provided KULR will be able to obtain forgiveness of the PPP Loans in whole or in part. Any amounts not forgiven incur interest at 1.0% per annum and monthly repayments of principal and interest are deferred until the Small Business Administration decides on forgiveness. While the Company’s PPP loans currently have a two-year maturity, the amended law will permit the Company to request a five-year maturity.

Operating Lease Renewal

On June 15, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) withan agreement to extend the stockholders (the “Sellers”) holding 100%term of its original lease from June 30, 2020 to December 31, 2020. Monthly rental payments under the ownership interest in TECHTOM Co., Ltd. (“TECHTOM”), a Japanese limited liability company, pursuant torenewed lease total $5,107, which the Company agreed to purchase from the Sellers, subject to the satisfactioncomprises of certain closing conditions, all ownership interests in TECHTOM and any and all claims, notes and other liabilities owed by TECHTOM to the Sellers (the “Acquisition”). Although no assurances can be made that the Acquisition will be completed, upon such Acquisition, TECHTOM would become a wholly-owned subsidiary$4,552 of the Company.

Pursuant to the Purchase Agreement, the Company agreed to pay the Sellers, against deliverybase rent plus $555 of all Ownership and Claims, the following aggregate acquisition price: (i) $1,700,000 cash consideration (the “Cash Consideration”); and (ii) one hundred (100) shares of the Company’s Series C Convertible Preferred Stock (“Series C Preferred”), which class of Series C Preferred is to be designated prior to the closing of the Acquisition. It is contemplated that the Series C Preferred will have, among others, the following rights, preferences and limitation: (i) a stated value of $10,000 per share; (ii) no right to receive dividends; (iii) the right to convert each share into twenty thousand shares of the Company’s common stock, which right is subject to a 4.99% beneficial ownership limitation; and (iv) the right to vote with the Company’s shareholders on an as-converted basis. The rights and preferences of the Series C Preferred are set forth in further detail in the form of Certificate of Designation attached as an exhibit to the Purchase Agreement and which description is qualified in its entirety to such exhibit, which is incorporated herein by reference.association fees.

Note 10  Revision of Financial Statements for the Quarter Ended March 31, 2018

During the course of preparing the quarterly report on Form 10-Q for the quarter ended June 30, 2018, the Company identified certain errors related to cost of revenue not being recorded in connection with a product sale to a customer, which resulted in the understatement of its net loss for the three months ended March 31, 2018. The reason for the error was related to certain information not being provided to the Company’s accounting staff as a result of the Company’s transition of certain accounting duties from its then-Interim Chief Financial Officer, who left the Company in the first quarter of 2018.

The following tables reconcile the prior period as reported balances to the as revised balances:

In accordance with SEC Staff Accounting Bulletin No 108, the Company has evaluated this error, based on an analysis of quantitative and qualitative factors, as to whether it was material to the condensed consolidated statement of operations for the three months ended March 31, 2018 and if amendments of previously filed financial statements with the SEC are required. The Company has determined that quantitatively and qualitatively, the error has no material impact to the condensed consolidated statement of operations for the three months ended March 31, 2018 or other prior periods.

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

The following discussion and analysis of the results of operations and financial condition of KULR Technology Group, Inc. (the “Company”) as of March 31, 20192020 and for the three months ended March 31, 20192020 and 20182019 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 20182019 and for the year then ended, which are included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29 , 2019.May 14, 2020. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this AnnualQuarterly Report, in our other reports filed with the SEC, and other factors that we may not know.

Overview

KULR Technology Group, Inc., through our wholly-owned subsidiary KULR Technology Corporation, develops and commercializes high-performance thermal management technologies for batteries, electronics, batteries, and other components across an array of applications. Currently, our main focus is a total solution to battery safety by which we are focused on targetingaim to mitigate the effects of thermal runaway propagation. We also target and provide thermal solutions for the following applications: electric vehicles, and autonomous driving systems (collectively referred to herein as “E-Mobility”); artificial intelligence and Cloud computing; energy storage; andcloud computing, 5G communication technologies.technologies, and energy storage for commercial markets as well as directed energy weapons and high-power missile programs for aerospace and defense. Our proprietary, core technology is a carbon fiber material with roots in aerospace and defense, that provides what we believe to be superior thermal conductivity and heat dissipation infor an ultra-lightweight and pliable material. By leveraging our proprietary cooling solutions and that have been developed through longstanding partnerships with NASA, the Jet Propulsion Lab and others, our products and services make E-Mobility products and othercommercial battery powered products safer and more stable.electronics systems cooler and lighter.

Battery safety technology is becoming increasingly vital to our world in which battery-operated devices are everywhere. Lithium ion (“Li-ion”) batteries are widely used in consumer electronics, aerospace, marine and automotive applications. In recent months, KULR has developed a total battery safety solution for its customers that spans a wide array of industries and applications. KULR has seen great success in using our patented thermal runaway shield (“TRS”) technology to prevent cell to cell thermal runaway propagation as well as module to module propagation. We have designed a total solution for customers from the design stages incorporating our materials all the way to testing their passive propagation resistant (“PPR”) battery packs. We are flexible and can work with different battery pack configurations across various industries. We developed a PPR reference design for CubeSat battery in December 2019. Our research and testing, as well as working alongside battery experts at NASA Johnson Space Center, has positioned us for further advancements at the forefront of battery safety.

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

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

Our management believes that within commercial markets, aerospace and defense, and high-value applications, cell testing and screening has become a topic of focus. Therefore, we plan to expand our capabilities to include full battery screening and testing as outlined by NASA Johnson Space Center. We plan to fully incorporate this into our holistic approach to battery safety along with our PPR battery pack design and testing services, ISC device and trigger cell products and TRS bags. With increasing regulations and pressure from government bodies to mitigate the E-Mobility industry has createddangers of battery fires and TR, we plan to further develop our capabilities in this arena.

Our management projects high priority and growth in the aerospace and defense sectors, specifically in regard to directed energy, hypersonic weapon programs, and space missions. Directed energy is currently in the spotlight as experts predict it will create significant new opportunities forgreatly impact the applicationfuture of warfare. Our CRUX cathode generates powerful electron pulses by field emission from the tops of our technologycarbon fiber coating which has the potential to further develop the current technology. Thermal management is another critical component of both hypersonic weapons programs and know-how. We believe these new opportunities will be further driven by certain changing preferences that we’ve observedspace missions and is another area in younger generations that must increasingly cope with higher population density, global warming,which our products excel. Our carbon fiber velvets are used for thermal management in missile defense programs and the rapidly evolving communications and computing needsare particularly effective because of their personal devicessurvivability at very high temperatures. They are also very effective at transferring heat, and mitigate the surrounding infrastructure. As a result,risk of overheating in such high-risk environments. Historically we predict that the younger generations will increasingly preferhave provided value to attend meetings by video conference; rent a car, bike, or scooter, or call an app-based car service instead of owning a vehicle;this sector and leverage the Cloudwe look forward to perform tasks traditionally done in person, such as shopping for lunch, clothes, electronicsfurther developing our relationships with Airforce Research Lab, Naval Research Lab and other consumer goods that also leverages an expanding E-Mobility delivery network.prime contractors to market our solutions.

In addition to evolving demands led by consumer-preferences,aerospace and defense, we have observed trending manufacturer-led opportunities in industries such as electric motor vehicles (“EV”) that have become increasingly more reliant on the Cloud, on portability and on high-demand processing power. For example, car manufacturers are increasingly providing options that take over the responsibility for driving, diagnosing its own service requirementsKULR’s high performance thermal interface materials can be used to accelerate 5G communications development due to our material’s core properties: high thermal conductivity, light weight, and analyzing on-board systems data and efficiency. The communications and entertainment industries are leveraging increasingly more powerful and portable devices to deliver live and high-definition content and experiences. These innovations will require high bandwidth communication devices that can handle the power drain and computational requirements to keep up with the sophisticated security and software tools that will power these advanced product offerings. As a result of these manufacturer and consumer trends, we believe that the new generations of high-powered, small form-factor semiconductors are out-pacing the development inlithium ion batteries.

The above-described advances in micro technology, portable power, and compact energy efficient devices linked to an ever-widening Internet of Things (“IoT”) via the Cloud are driving opportunities that forms the focuslow contact pressure. 5G is one of the Company’s business development plan.We believe that our corebiggest opportunities going forward for transportation technology and historical development focus on improving lithium-ion battery performancewe would like to take part in testing of digital and safety, positions usRF tests for 5G. Testing is still in early phases for both digital and RF communication chips, however, we are seeing a competitively advantageous position to enhance key components to the evolving mobile applicationsbig growth opportunity for a wide range of consumer products and IoT. We have found thatas 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, or even cause spontaneous combustion. However, electronic system components must operate within a specific temperature range on both the high and low end to operate properly. After strenuous testing, we believe we have developed heat management solutions that significantly improve upon traditional heat storage and dissipation solutions and that improve upon their rigidity and durability. We also believe that the traditional solutions are not equipped to handle the evolving marketplace. However, through a combination of custom design services and provision of proprietary hardware solutions, our products reduce manufacturing complexity and provide a lighter weight solution than traditional thermal management materialsfor 5G. Cloud computing is also an application of interest since high power communications chips and we believe, can meet the heat management demands of components and batteries being designed into the newest mobile technologies and applications.optical communication modules require cooling.

Our management’s growth strategy has put particular focus on targeting E-Mobility applications for its core technology. We believe we are well-positioned to provide a broad range of E-mobility solutions, and intend to expand our business through internal growth and acquisition. In the case of potential acquisitions, we seek to acquire businesses in related markets that are synergistic to our existing operations, technologies, and management experience. This focus will highlight markets in which we can: (1) integrate our existing technology into the acquiree’s product offerings or simultaneously offer our products and services through the acquiree’s customer base and channels; (2) gain a leading market position and provide vertically integrated services where we can secure economies of scale, premium market positioning, and operational synergies; and/or (3) establish a leading position in selected markets and channels of the acquiree through a joint broad-based, hi-tech, E-Mobility branding campaign. We have developed an acquisition discipline based on a set of financial, market and management criteria to evaluate opportunities. To date, we have evaluated two acquisition opportunities under such criteria and, together with the management of the potential target, determined that the anticipated synergies would not be realized in the anticipated timetable. If we were to successfully close an acquisition, we would seek to integrate it while minimizing disruption to our existing operations and those of the acquired business, while exploiting the technical and managerial synergies from integration.

We have not yet achieved profitability and expect to continue to incur cash outflows from operations. It is expected that our research and development and general and administrative expenses will continue to increase and, as a result, we will eventually need to generate significant product revenues to achieve profitability. These conditions indicate that there is substantial doubt about our ability to continue as a going concern within one year after the financial statement issuance date. Historically, we have been able to raise funds to support our business operations, although there can be no assurance that we will be successful in raising additional funds in the future. Furthermore, as described below, we remain focused on growing our operations in order to limit cash outflows and eventually achieve profitability, although no assurances can be made that we will achieve such goals.

Recent Developments

Common StockCOVID-19

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

Decontamination Solutions

In response to the unprecedented demand for solutions to combat the spread of COVID-19 (and other viruses) and in response to an opportunity that arose out of the recognition of our technical and thermal expertise by our governmental clients, we recently explored the launch of a suite of products that utilize a Hypochlorous-Acid based microbial decontamination liquid. Although no assurance can be made that we will be able to commercialize these decontamination products or that there will be demand for such products, we believe that we are capable of producing or acquiring substantial quantities of the decontamination liquid to deploy in a suite of decontamination delivery products and technology that we are actively developing. In order to advance these efforts and to test the efficacy of the decontamination liquid, we engaged an independent lab to test our solution, but we do not yet have any lab results.

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 Company intends to use the proceeds of their PPP Loans for Qualifying Expenses. However, no assurance is provided KULR will be able to obtain forgiveness of the PPP Loans in whole or in part. Any amounts not forgiven incur interest at 1.0% per annum and monthly repayments of principal and interest are deferred until the Small Business Administration decides on forgiveness. While the Company’s PPP loans currently have a two-year maturity, the amended law will permit the Company to request a five-year maturity.

Standby Equity Distribution Agreement

On February 27, 2020, we entered into a Standby Equity Distribution Agreement (“SEDA”) with YAII PN, Ltd., a Cayman Island exempt limited partnership (“YAII”), pursuant to which the Company may, at its discretion, subject to certain conditions, sell to YAII up to $8,000,000 of shares common stock. For each share of common stock purchased under the SEDA (the “Shares”), YAII will pay the Company 80% of the lowest daily volume weighted average price of the common stock on the OTC Markets OTCQB or other principal market on which the common stock is traded for the five days immediately following the date the Company delivers notice requiring YAII to purchase the Shares under the SEDA. For each advance, the Company shall have delivered all shares relating to all prior advances, and, unless waived by the Investor, at least 5 trading days shall have elapsed from the immediately preceding advance date. The Company agreed to issue, without receiving additional consideration, to YAII 95,847 shares of common stock as commitment shares in consideration for entering into the SEDA.

Subsequent to the three months ended March 31, 2020, we issued an aggregate of 421,197 shares of common stock at a price between $0.72 - $1.53 per share for $526,000 of proceeds received against advance notices submitted to YAII under the SEDA.

Note Purchase Agreement and Promissory Note

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

During the three months ended March 31, 2019,2020, the Company repaid $50,000 of the Principal Amount on the Note. Subsequent to March 31, 2020, and pursuant to the terms of the Note, we soldrepaid an aggregate of 234,849 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $155,000.

On April 12, 2019, we sold an aggregate of 717,120 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $473,300.

On April 30, 2019, we conducted a final closing for$175,000 against the sale of an aggregate of 409,090 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $270,000, which represented the final closing of our private placement offering of our common stock.Principal Amount.

Securities PurchasePPR Product License and Supply Agreement - Americase’s Battery Bag

On April 2, 2019, the Company13, 2020, we announced that we entered into a Securities Purchase Agreement (the “Purchase Agreement”)license and supply agreement with the stockholders (the “Sellers”) holding 100%Americase, LLC, granting a license for Americase’s use of the ownership interest in TECHTOM Co., Ltd. (“TECHTOM”), a Japanese limited liability company, pursuantour passive propagation resistant (PPR) technology and agreeing to which the Company agreed to purchase from the Sellers, subject to the satisfaction of certain closing conditions, all ownership interests in TECHTOM and any and all claims, notes and other liabilities owed by TECHTOM to the Sellers (the “Acquisition”). Although no assurances can be made that the Acquisition will be completed, upon such Acquisition, TECHTOM would become a wholly-owned subsidiary of the Company.supply our PPR materials for Americase’s “Battery Bag” products.

Common Stock

Pursuant to the Purchase Agreement, the Company agreed to pay the Sellers, against delivery of all Ownership and Claims, the following aggregate acquisition price: (i) $1,700,000 cash consideration (the “Cash Consideration”); and (ii) one hundred (100)

On June 12, 2020, we issued 30,000 shares of the Company’s Series C Convertible Preferred Stock (“Series C Preferred”), which class of Series C Preferred is to be designated prior to the closing of the Acquisition. It is contemplatedcommon stock that the Series C Preferred will have, among others, the following rights, preferences and limitation: (i)vest immediately with a statedgrant date value of $10,000 per share; (ii) no rightapproximately $30,000 related to receive dividends; (iii)consulting services provided.

Operating Lease Renewal

On June 15, 2020, we entered into an agreement to extend the rightterm of our original lease from June 30, 2020 to convert each share into twenty thousand sharesDecember 31, 2020. Monthly rental payments under the renewed lease total $5,107, which comprises of the Company’s common stock, which right is subject to a 4.99% beneficial ownership limitation; and (iv) the right to vote with the Company’s shareholders on an as-converted basis. The rights and preferences$4,552 of the Series C Preferred are set forth in further detail in the formbase rent plus $555 of Certificate of Designation attached as an exhibit to the Purchase Agreement and which description is qualified in its entirety to such exhibit, which is incorporated herein by reference.association fees.

Results of Operations

Three Months Ended March 31, 20192020 Compared With Three Months Ended March 31, 20182019

Revenues

Our revenues consisted of the following types:

For the three months ended March 31, 20192020 and 2018,2019, we generated $194,952$77,500 and $228,040$194,952 of revenues, a decrease of $33,088,$117,452, or 15%60%. The decrease in product shipments in 2019 was primarily due to a decrease inthe impact of COVID-19 related shut-downs by us, and by our clients, which restricted decisions on the timing of shipments. Because our service contract completions during the first quarter of 2019.based revenue was not restricted by physical shipment issues, we were actually able to increase service revenues.

Our revenues during the three months ended March 31, 2020 and 2019 consisted of sales of our component product, CFV thermal management solution, ISC battery cell product as well as certain research and development contract services. Our revenues during the three months ended March 31, 2018 consisted of sales of our CFV thermal management solution and PCM heat sinksproducts, as well as certain research and development contract services.

Our revenue forcustomers 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 three months ended March 31, 2019business activity cycle between expression of initial customer interest to shipping, acceptance and 2018 was generated from 10billing can be lengthy, unpredictable and 4 different customers, respectively.lumpy, which can influence the timing, consistency and reporting of sales growth.

Cost of Revenues

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

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

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.

For the three months ended March 31, 20192020 and 2018,2019, cost of revenues was $61,517$25,926 and $149,947,$61,517, respectively. The decrease was primarily due to lower sales of higher margin products.

We generated a gross profit of $51,574 for the three months ended March 31, 2020 as compared to a gross profit of $133,435 for the three months ended March 31, 2019, as compared torepresenting a decrease in gross profit of $78,093$81,861, or 61%. The gross margin percentage was 67% and 68% for the three months ended March 31, 2018, representing an improvement in gross profit of $55,342, or 71%.2020 and 2019, respectively. The gross margin percentage was 68% and 34% fordecrease during the three months ended March 31, 2019 and 2018, respectively. The increase during the 2019 period resulted primarily from a more favorable product mix being sold as compared2020 is attributable to the previous period.change of product mix.

Research and Development

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

For the three months ended March 31, 2019,2020, R&D expenses decreased by $6,492$17,779 or 14%, to $113,192$129,492 from $119,684$113,192, for the three months ended March 31, 2018.2019. The decrease is attributableprimarily due to a decrease in the purchase$7,000 of R&D consumable supplies.patent costs and $8,000 of stock-based compensation.

We expect that our R&D expenses will increase as we expand our future operations.

Selling, General and Administrative

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

For the three months ended March 31, 2019,2020, selling, general and administrative expenses decreased by $198,749$99,664 or 18%, to $585,491$469,527 from $784,240$569,191 for the three months ended March 31, 2018.2019. The decrease is primarily due to decreased non-cash stock-based compensationan approximate $43,000 decrease in travel expenses, $29,000 decrease in rent expense of approximately $135,000 due to certain awards becoming fully vested in the secondtermination of an operating lease during the end of fourth quarter of 2018, decreased2019, and $20,000 decrease in salaries and other benefits of approximately $35,000 from the allocation of employers payroll taxes to cost of goods sold and R&D, decreased professional fees of approximately $34,000, decreased travel expenses of approximately $20,000, partially offset by an increase in rent expense of approximately $25,000 due to entering into a new lease agreement.the salary cuts implemented during the end of the current quarter due to COVID-19.

Other Expense

For the three months ended March 31, 2019,2020, other expense increased by $431$20,142 to $445$20,587 from $14$445 for the three months ended March 31, 2018.2019. The increase in other expense is primarily due to increased interest expensethe amortization of debt discount related to the financingissuance of the D&O insurance policy acquireda note payable during the fourth quarter of 2018.current quarter.

Liquidity and Capital Resources

As of March 31, 2020 and December 31, 2019, we had cash balances of $634,148 and $108,857, respectively, and working capital deficits of $1,163,280 and $824,481, respectively.

For the three months ended March 31, 20192020 and 2018,2019, cash used in operating activities was $698,110 and $286,420, respectively. Our cash used in operations for the three months ended March 31, 2020 was primarily attributable to our net loss of $550,253, adjusted for non-cash expenses in the aggregate amount of $32,826, and $470,370, respectively.$180,683 of net cash used in the levels of operating assets and liabilities. Our cash used in operations for the three months ended March 31, 2019 was primarily attributable to our net loss of $565,693, adjusted for non-cash expenses in the aggregate amount of $51,030, partially offset by $228,243 of net cash provided by changes in the levels of operating assets and liabilities. Our cash used in operations for the three months ended March 31, 2018 was primarily attributable to our net loss of $825,845, adjusted for non-cash expenses in the aggregate amount of $188,578, partially offset by $166,897 of net cash provided by changes in the levels of operating assets and liabilities.

There were no cash flows from investing activities for the three months ended March 31, 20192020 and 2018.2019.

For the three months ended March 31, 20192020 and 2018,2019, cash provided by financing activities was $155,000$1,223,401 and $0,$155,000, respectively. Our cash provided by financing activities for the three months ended March 31, 20192020 was due to the$1,410,000 of net proceeds from the issuance of oura note payable, offset by the payment of debt issuance costs and a debt repayment. The cash provided from financing activities during the three months ended March 31, 2019 was proceeds from the sale of common stock offering.stock.

We have not yet achieved profitability and expect to continue to incur cash outflows from operations. It is expected that our research and development and general and administrative expenses will continue to increase and, as a result, we will eventually need to generate significant product revenues and/or raise additional capital to fund our operations. These conditions indicate thatFurther, as of March 31, 2020, there is substantial doubt aboutoutstanding debt principal in the amount of $1,450,000 which matures on May 31, 2021.

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

Effective February 27, 2020, the Company entered into a twenty-four month Standby Equity Distribution Agreement (“SEDA”) with an Investor, pursuant to which the Company may, at its discretion, sell to up to an aggregate of $8,000,000 (subject to the Investor’s approval for amounts over $100,000) of shares of the Company’s common stock at a price equal to Company 80% of the lowest daily volume weighted average price for the five days immediately following the date the Company delivers notice requiring the Investor to purchase the shares under the SEDA. For each advance, the Company shall have delivered all shares relating to all prior advances, and, unless waived by the Investor, at least 5 trading days shall have elapsed from the immediately preceding advance date. See Note 9 – Stockholder Deficiency for additional details. Additionally, the Company applied for, and in April 2020, received, a loan of $155,000 under the government Small Business Administration (“SBA”) sponsored Payroll Protection Program (“PPP”) to support continuing employment during the COVID-19 pandemic (see Note 11 – Subsequent Events).

The Company currently has $8,000,000 available in connection with the SEDA, in order to fund its ongoing operations; however, there can be no assurance that the Company will be able to continue sell common shares pursuant to the SEDA at an acceptable price, or without causing undue dilution to existing investors beyond what the Company sold subsequent to March 31, 2020. Further, there is also no assurance that the Company will be able to continue to obtain additional funds on commercially acceptable terms, if at all. If the Company is unable to obtain adequate funds on reasonable terms, it may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures.

We are currently funding our operations on a month-to-month basis.

Although our management believes that we have access to capital resources there are currently no commitments in place for new financing at this time andthrough the SEDA or other sources, there is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. The conditions outlined above indicate that there is substantial doubt about our ability to continue as a going concern within one year after the financial statement issuance date.

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 consolidated financial statements do not necessarily purport to represent realizable or settlement values. The unaudited condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies

For a description of our critical accounting policies, see Note 3 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our management, with the participation of our principal executive officer and principal financial officer, concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

Effective January 1, 2019, we adopted Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC 842”). ASC 842 requires management to make significant judgments and estimates. As a result, we implemented changes to our internal controls related to lease evaluation for the three months ended March 31, 2019. These changes include updated accounting policies affected by ASC 842 as well as redesigned internal controls over financial reporting related to ASC 842 implementation. Additionally, management has expanded data gathering procedures to comply with the additional disclosure requirements.

There has been no change in our internal control over financial reporting that occurred during the first quarter of 20192020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except as noted above.reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on March 29, 2019.May 14, 2020.

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

During the three months ended March 31, 2019, we sold an aggregate of 234,849 shares of common stock at $0.66 per share to certain accredited investors in aggregate gross proceeds of $155,000, which proceeds will be used for general corporate expenses and other research and development expenses. The issuances of securities were made pursuant to the exemption from registration under Section 4(a)(2), Regulation S and Rule 506 of Regulation D under the Securities Act for transactions not involving a public offering and transactions with “accredited investors” as defined under the Securities Act.None.

On April 12, 2019, we sold an aggregate of 717,120 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $473,300. The issuances of securities were made pursuant to the exemption from registration under Section 4(a)(2), Regulation S and Rule 506 of Regulation D under the Securities Act for transactions not involving a public offering and transactions with “accredited investors” as defined under the Securities Act.

On April 30, 2019, the Company conducted a final closing of a private placement offering of its common stock at $0.66 per share. In connection with the final closing, the Company received gross proceeds of $270,000, for which it issued 409,090 shares of common stock to accredited investors. The aggregate proceeds received by the Company in connection with the offering was an aggregate of $1,612,300, against which the Company issued an aggregate of 2,442,879 shares of common stock. In connection with this offering, the Company and the accredited investors entered into a Subscription Agreement, as supplemented, which Subscription Agreement is filed as Exhibit 10.1 hereto and incorporated herein by reference. The offering was conducted and the issuance of securities were made pursuant to the exemption from registration under Section 4(a)(2), Regulation S and Rule 506 of Regulation D under the Securities Act for transactions not involving a public offering and transactions with “accredited investors” as defined under the Securities Act.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits. 

*Filed herewith

**Furnished herewith

(1) Previously filed as an exhibit to Form 8-K on March 4, 2020 and incorporated herein by this reference.

SIGNATURES

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