KULR Technology 10K 2022 Annual report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2022

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

For the transition period from [ ] to [ ]

Commission file number 001-40454

KULR TECHNOLOGY GROUP, INC.

(Name of small business issuer in its charter)


Delaware		81-1004273
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

4863 Shawline Street, San Diego, California 92111

(Address of Principal Executive Offices)

Issuer’s telephone number: (408) 663-5247



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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	KULR	NYSE American LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if registrant is a well-known seasoned issuer, as defined under Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		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 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report to its management’s assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒


Auditor PCAOB ID: 688	Auditor Name: Marcum LLP	Auditor Location: Los Angeles, California

As of June 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common stock held by non-affiliates of the registrant was $106,573,196 based on the closing price of $1.55 as of that date.

As of March 27, 2023, there were 116,230,123 shares of the issuer’s common stock, par value $0.0001 per share, issued and outstanding.

Documents incorporated by reference: None.

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TABLE OF CONTENTS


		Page
Part I
Item 1	Business	3
Item 1A	Risk Factors	12
Item 1B	Unresolved Staff Comments	20
Item 2	Properties	20
Item 3	Legal Proceedings	20
Item 4	Mine Safety Disclosures	20
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6	[Reserved]	22
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operation	22
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	27
Item 8	Financial Statements and Supplementary Data	27
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	27
Item 9A	Controls and Procedures	27
Item 9B	Other Information	28
Item 9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	28
Part III
Item 10	Directors, Executive Officers and Corporate Governance	29
Item 11	Executive Compensation	33
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	34
Item 13	Certain Relationships and Related Transactions, and Director Independence	35
Item 14	Principal Accounting Fees and Services	36
Part IV
Item 15	Exhibits and Financial Statement Schedules	37
Item 16	Form 10-K Summary	39
Signatures		40

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In this report, unless the context indicates otherwise, the terms “Company,” “we,” “us,” “our” and similar words refer to KULR Technology Group, Inc. (“KULR”), a Delaware corporation, and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”), a Delaware corporation.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934 or the “Exchange Act.” These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results.

In some cases, you can identify forward-looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “potential,” or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management’s current expectations and beliefs, which management believes are reasonable. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

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new competitors are likely to emerge and new technologies may further increase competition;

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our operating costs may increase beyond our current expectations and we may be unable to fully implement our current business plan;

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our ability to obtain future financing or funds when needed;

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our ability to successfully obtain and maintain a diverse customer base;

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our ability to protect our intellectual property through patents, trademarks, copyrights and confidentiality agreements;

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our ability to attract and retain a qualified employee base;

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our ability to respond to new developments in technology and new applications of existing technology before our competitors;

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acquisitions, business combinations, strategic partnerships, divestures, and other significant transactions may involve additional uncertainties;

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our ability to maintain and execute a successful business strategy; and

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regardless of these factors the emergence of the COVID-19 virus pandemic has resulted in delays in product shipment, having to take active steps to direct our production and supply chain activities to North America to geographically diversify but the full extent of the future impact of COVID-19 on our operations and financial condition is uncertain. Additionally, other recent macroeconomic events including rising inflation, slowing economic growth, changes in U.S. and foreign government monetary policies, supply chain disruptions, fluctuations in currency exchange rates and the Russian invasion of Ukraine have led to further economic uncertainty. As a result, we are unable to predict the ultimate impact of shipping delays, the impact of other economic conditions and continuous presence of COVID-19 will have on our business, future results of operations, financial position or cash flows.

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Other risks and uncertainties include such factors, among others, as market acceptance and market demand for our products and services, pricing, the changing regulatory environment, the effect of our accounting policies, potential seasonality, industry trends, adequacy of our financial resources to execute our business plan, our ability to attract, retain and motivate key technical, marketing and management personnel, and other risks described from time to time in periodic and current reports we file with the United States Securities and Exchange Commission, or the “SEC.” You should consider carefully the statements under “Item 1A. Risk Factors” and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

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PART I

ITEM 1. BUSINESS

Overview and Market Opportunities

KULR Technology Group, Inc., through our wholly owned subsidiary KULR Technology Corporation, 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.

Active government initiatives propelled by industry and regulatory tailwinds are increasing demand for energy storage, battery recycling and clean energy, resulting in an expanding total addressable market for KULR’s solutions. According to Precedence Research, global energy storage systems market is to grow from $210B in 2021 to $435B by 3030. Global lithium-ion battery recycling industry is to grow from $4.6B in 2021 to $22.8B by 2030, according to Market and Markets Research. The Company’s disruptive technologies strive to fulfill an addressable $24 billion thermal management systems market (estimated based on market data projections published by Converged Markets stating that the thermal management systems market size was projected to grow from $11.1 billion in 2017 to $24.8 billion by 2025. The Company’s integrated design approach offers comprehensive solutions in thermal interface materials, lightweight heat exchangers, and protection against lithium-ion battery thermal runaway propagation. Its high-performance solutions can be designed to fit demanding configurations and applications.

As companies and governments around the world pledge to meet net zero emissions over the next few decades, KULR is uniquely positioned to accelerate the adoption of clean energy solutions and sustainable products and facilitate the migration to a global circular economy. The Company’s goal is to provide total battery safety solutions for more efficient battery systems, increased sustainability, and end-of-life battery management, making KULR a key technology solutions provider in the migration to a global circular economy.

KULR ONE and KULR ONE Design Solutions (K1DS)

The KULR ONE family of battery packs represent a groundbreaking innovation that is driving the world's transition to a more sustainable electrification economy. These revolutionary designs offer a unique combination of cutting-edge features, including unparalleled safety, exceptional performance, intelligent functionality, modular construction, reliability, and customizability. The KULR ONE battery packs have been engineered to meet the exacting demands of the world's most demanding applications. They offer a comprehensive solution that addresses the critical need for safe and reliable energy storage in a wide range of industries, from aerospace and defense to electric vehicles and consumer electronics. One of the key features of the KULR ONE family of battery packs is its modular design. This allows for greater flexibility as customers can easily adjust the size and configuration of the battery pack to suit their specific application requirements. The intelligent functionality of the KULR ONE packs also allows for real-time monitoring and optimization of battery performance, ensuring optimal efficiency and longevity. In addition to offering exceptional performance and reliability, the KULR ONE battery packs are also designed with safety as a top priority. They incorporate state-of-the-art thermal management technology to prevent overheating and ensure safe operation even in the most challenging environments. Overall, the KULR ONE family of battery packs is at the forefront of the global drive towards sustainable electrification. With its unparalleled combination of safety, performance, intelligence, modularity, reliability, and customizability, KULR ONE is positioned to revolutionize the way we think about energy storage and powering the world's most demanding applications.

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K1DS offers a comprehensive approach to designing safe and reliable battery solutions for a wide range of applications. Our services start with the quality and reliable cell supply from North American sources to ensure that our customers receive high-performing and long-lasting batteries. To ensure the performance and safety of our batteries, we have various cell testing capabilities, including cell screening to NASA 37A. We also conduct extensive cell testing to ensure that our batteries meet the highest standards for safety and reliability. Our Multiphysics modeling capabilities, which include the use of GTC Suite software, enable us to optimize battery performance and minimize the risk of failure. Our battery design services focus on designing custom solutions that meet our customers' specific needs. We conduct rigorous testing of those battery packs to ensure reliability and safety, including systems-level testing that helps customers understand the safety and reliability of their applications. Additionally, we provide real-time monitoring of their batteries to ensure battery health and safety in the field, minimizing the risk of failure and prolonging battery life. In summary, KULR ONE design services offer a comprehensive approach to battery design and testing, ensuring that our customers receive high-performing and safe battery solutions that meet their unique needs. We strive to be the go-to provider for reliable and innovative battery solutions that accelerate the global transition to a sustainable electrification economy.

KULR VIBE Solution

During 2022, we acquired intellectual property from Vibetech International, LLC (“Vibetech”), which allows KULR to expand itself as a vertically integrated energy management company focused on sustainable energy solutions. For nearly twenty years, the

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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 addresses one of 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 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.

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 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:

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

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Power tools and industrial equipment

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High-performance electric vehicles

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

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Electric micro-mobility vehicles

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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.

Energy Storage

Lithium-ion batteries are the dominant technology on the market for energy storage because of their cost and availability but do carry well documented safety risks. While rare, cell to cell thermal runaway in lithium-ion batteries can cause a fire or explosion. For example, an explosion at Arizona Public Service’s McMicken battery plant injured four emergency responders in 2019 and overheating caused the 1.2 GWh Moss Landing storage facility in California to go off-line. To reach net zero by mid-century will require an additional 245 GWh of battery capacity each year until 2030, but incidents of the like distill trust in battery technologies and threaten to slow the pace which is needed to achieve decarbonization goals. KULR’s passive propagation resistant (PPR) and thermal runaway shield (TRS) technologies prevent cell to cell thermal runaway propagation and inhibit fire and ejecta of a single cell from exiting the battery enclosure, making battery energy storage packs safe for homes, hospitals, schools, and universities, and more. KULR is partnering with leaders in the energy storage industry such as Volta Energy Products, the subsidiary of Buffalo NY based parent company, Viridi Parente, to increase deployments of safe, reliable, and durable energy storage safety systems to accelerate the broader energy transition.

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Battery Recycling and Management

KULR-Tech Safe Case provides a safe and cost-effective solution to commercially store and transport lithium batteries, which is increasing in frequency as supply chain challenges and ESG commitments necessitate battery recycling and end-of-lifecycle management. Whether shipping a single battery, a battery-powered device or a load shipment of batteries, KULR’s technology mitigates the impacts of cell-to-cell thermal runaway propagation and ensures a safe journey. KULR’s Thermal Runaway Shield (TRS) technology is trusted by NASA to ship and store astronauts’ laptop batteries on the International Space Station. In addition, KULR combines its Passive Propagation Resistant (PPR) solutions with its new CellCheck intelligent battery management system to extend battery life. The CellCheck modular battery management system platform is KULR’s AI-powered battery safety technology for e-mobility, energy storage and fleet applications. It captures real time and lifetime battery intelligence, sensing adverse electrical, environmental, and physical events to analyze and control for maximum battery safety, reliability, and performance. As commercial industries across the board face greater scrutiny to comply with ESG standards, KULR is serving a total addressable market for a circular economic model for batteries that will reach over $21 billion by 2025 (estimated based on market data projections published by Grand View Research, Inc. stating that the global battery recycling market size is expected to reach $21.04 billion by 2025).

E-mobility

KULR is supporting the shift to electrified transport by enabling safer, lighter, and faster charging lithium-ion batteries for electric vehicles and micro mobility solutions. KULR’s passive propagation resistant (PPR) battery pack solutions increase battery energy capacity while preventing thermal runaway events that can lead to hazardous explosions, helping the transportation industry to address growing public safety concerns around electric vehicles, electric aviation and micro-mobility markets.

Vehicle technology advancements and EV range anxiety requires more battery capacity to expand the range and power of existing platforms while adding new, power-demanding components for advances such as 5G data networks. The additional strain on batteries increases the risk for overheating and serious failures and can damage sensitive chip architecture. In addition, overheating has been a key limiting factor for advancing fast charging battery technology. KULR’s carbon fiber thermal management technologies reduce the thermal resistance inside battery cells while increasing electrical conductivity to dissipate heat more efficiently to enable the safe deployment of fast charging batteries. With KULR, automotive OEMs and battery manufacturers can increase the energy capacity of battery cells so less cells are needed, making for lighter vehicles that drive further before needing to be charged.

Aerospace/Defense

KULR’s thermal management solutions enable the defense and aerospace industries to safely deploy electronic technologies that support critical missions and protect national security. Technology in this sector is developing at increasing rates - the space industry alone will be worth nearly $3 trillion in 30 years. The electronic devices being placed into aircrafts, satellites, and missiles are becoming ever smaller and more powerful. Lithium-ion batteries, which are already prone to overheating and propagation, are exposed to harsh thermal environments as well as shock and vibration during aerospace and defense operations. The Company has partnered with Lockheed Martin, Leidos and other prime contractors to develop and supply mission-critical technologies for hypersonic vehicles, high-power magnetic wave, and other defense systems.

High-Powered Computing & 5G

Demand for improved, cost-effective cooling solutions in the rapidly growing 5G and cloud computing industries is ever-increasing. KULR’s portfolio of thermal management solutions target air and liquid-cooling of high-performance computing applications such as crypto mining, cloud computing, AI, and AR/VR simulations to maximize performance, energy efficiency and safety. KULR’s proprietary carbon fiber-based suite of thermal interface materials leverage advanced carbon fiber based heatsink technology that offers customers highly customizable, lightweight, and cost-effective solutions with industrial-level reliability due to their high thermal conductivity, lightweight, and low contact pressure.

New Battery Cell Development

KULR started a research and development initiative using carbon fiber structures to produce battery cells with higher energy density and faster charging capabilities. Fast-charging will be the killer app for next-gen batteries. Right now, overheating is a key limiting factor in advancing fast-charging battery technology. There may be a way to solve that problem by using carbon fiber inside the battery cell to reduce thermal and electrical resistance which can dissipate heat more effectively. The R&D initiatives include thicker cathode with higher loading factor, silicon anode, lithium metal anode and solid-state electrolyte development. This is a long-term strategic development for KULR.

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Commercial Partnerships

KULR has a long-term technology and developmental partnership with Andretti Technologies (ATEC), the advanced technology arm of racing team Andretti Autosport. The alliance will establish a thermal management testing and design platform for high-performance battery solutions with the highest safety ratings that will be adapted to the technical requirements of Andretti’s racing enterprise with the goal of transferring solutions to mass-market electric vehicle (EV) applications.

New Facility and IT-Systems

KULR relocated in October 2021 to a new facility located at 4863 Shawline St, San Diego, CA. The facility is 3 times larger than the previous facility with adequate room to support our new automated battery cell testing capability that will launch in Q123 as well as personnel growth. Additionally, we installed independently enclosed areas to support the machine shop, testing lab, battery lab, and Fiber Thermal Interface Material (“FTI”) manufacturing lab. We have implemented a 5S standard for the entire facility and received ISO 9001 certification in July 2022.

KULR opened a new facility in January 2023 at 1692 N. Texas Avenue, Webster, TX. This facility provides 4800 ft2 space in an industrial complex where KULR will focus on research and development related activities for lithium-ion battery systems. This space will provide room for additional personnel office space, an engineering design and prototyping sandbox, a 3D printing room, an electrical room for tab welding operations, and a small warehouse for storage. Once fully operational, activities will be completed to have the new location included in KULR’s existing ISO 9001 certification.

KULR TRS (Thermal Runaway Shield) Manufacturing: KULR will be onboarding a fully automated TRS manufacturing system in our Texas facility in early Q323. The intent of this system is to further onshore the manufacturing of TRS thereby reducing supply chain risks, costs, and improve LT performance for our customers. This is another example of KULR nearshoring/onshoring our manufacturing of products to gain further direct control of manufacturing. By developing automated systems, we are capable of being very competitive, and in certain cases, more competitive than offshore manufacturing we considering total cost of ownership.

KULR has engaged with Managed Solutions to enhance our IT infrastructure and improve all aspects of Cybersecurity. As a sub-contractor for DOD programs, it is vital that KULR have state of the art IT systems and controls. We believe the best path based on the current scale of the company is to outsource this activity to a professional IT services organization. The result of this activity was an improvement of our NIST score of over 140 points. Additionally, KULR has further increased its Cybersecurity initiatives by hiring FRSecure to act as a VCISO and provide continuous cyber threat training to our personnel. They also will audit our current level of threat sophistication and ensure any weak link is addressed immediately.

Corporate

KULR was incorporated in the State of Delaware in December 2015 and was formerly known as “KT High-Tech Marketing, Inc.” and, prior to that, as “Grant Hill Acquisition Corporation.” In April 2016, KULR implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors.

Our wholly-owned subsidiary, KULR Technology Corp, was formed in 2013 and is based in San Diego, California. Since its inception, KTC primarily focused on developing and commercializing its thermal management technologies, which it acquired through assignment from and license with KTC’s co-founder Dr. Timothy Knowles. Prior to 2013, KTC’s technologies were used in numerous advanced space and industrial applications for NASA, Boeing, and Raytheon. A few notable achievements were the use of KTC’s technologies in the X-31 aircraft (battery heat sink), Mercury Messenger (battery heat sink), and X-51 Scramjet (heat exchanger).

On June 19, 2017, KULR closed a share exchange with KTC and 100% of the shareholders of KTC (the “KTC Shareholders”) whereby the KTC Shareholders agreed to transfer an aggregate of 25,000,000 shares of KTC’s common stock to KULR in exchange for the issuance of an aggregate of 50,000,000 shares of KULR’s common stock to the KTC Shareholders (the “Share Exchange”), resulting in KTC becoming a wholly-owned subsidiary of KULR and KTC’s business of developing and commercializing its thermal management technologies becoming KULR’s main operation.

The Share Exchange was accounted for as a reverse recapitalization in accordance with generally accepted accounting principles in the United States of America, with KTC being treated as the acquiring company for accounting purposes. Accordingly, the financial statements included in this Annual Report reflect the assets, liabilities and historical results of KTC prior to the completion of the Share Exchange.

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On August 30, 2018, KULR changed its name from “KT High-Tech Marketing, Inc.” to “KULR Technology Group, Inc.” by filing a certificate of amendment to its Certificate of Incorporation with the office of the Secretary of State of the State of Delaware.

On December 31, 2018, KULR filed a certificate of amendment with the Secretary of State of the State of Delaware, to increase the number of authorized shares of its common stock from 100,000,000 to 500,000,000. As a result, the aggregate number of the Company’s authorized capital stock became 520,000,000 shares.

Recent Developments

COVID-19

In December 2019, an outbreak of a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. Since then, COVID-19 has spread across the globe, including the U.S., and other countries in which the Company or its affiliates operate, and was recognized as a pandemic by the World Health Organization. The COVID-19 pandemic resulted in a sharp contraction in many areas of the global economy and increased volatility and uncertainty in the capital markets. In response to the pandemic, the governments of many countries, provinces, states, municipalities, and other geographic regions took preventative or protective actions, including closures of certain businesses, mandatory quarantines, limits on individuals’ time outside of their homes, travel restrictions and social distancing or other preventative measures. Such measures have been eased or lifted in varying degrees by different governments of various countries, states and municipalities since implementation in 2020, but the continued spread of COVID-19 and increased infection rates has caused, and may continue to cause, some jurisdictions to roll back reopening plans that had been underway and re-impose quarantines, border closures, closure of certain businesses and stay-at-home orders.

The COVID-19 pandemic continues to impact the global economy and, specifically, the U.S., and the other countries in which the Company or its affiliates operate. We continue to closely monitor and respond, where possible, to the ongoing COVID-19 pandemic. As the global situation continues to change rapidly, ensuring the health and safety of our employees remains one of our top priorities.

In the U.S., numerous states have continued to remove their COVID-19 related restrictions. This has resulted in the re-opening of, and increased occupancy capacities in, retail outlets, including those that sell our products. Any reinstatement of restrictions on the operations of retail outlets could negatively impact our short-term results of operations in the U.S. Additionally, in the U.S., there have been a number of supply chain challenges, such as container ships facing delays due to congestion in ports, impacting many industries, including the industries in which we operate. For example, during the quarterly period ended March 31, 2022, we experienced significant impact to our business due to the COVID-19 lockdown in Shanghai, China, during which time inventory in excess of $325,000 could not be shipped. The product was shipped, and revenue was recognized during the subsequent quarter. COVID-related challenges have resulted in delays in product shipment, not cancellations. As restrictions have eased in recent months, we expect to make up for lost time and revenue as we move through our sizeable inventory. We are currently taking active steps to direct our production and supply chain activities to North America to geographically diversify and potentially reduce further COVID-19 impacts.

Although we have not yet seen a significant impact from supply chain disruptions, we continue to monitor our supply chain closely.

Collectively, the effects of the COVID-19 pandemic have adversely affected our results of operations and, if the effects continue unabated, could continue to do so as long as measures to combat the COVID-19 pandemic remain in effect or supply chains continue to be challenged. At this time, neither the duration nor scope of the disruption can be predicted; therefore, the ultimate impact to our business cannot be reasonably estimated, but such impact could materially adversely affect our business, financial condition and results of operations.

Despite the impacts of the COVID-19 pandemic, we believe that our significant cash on hand and short-term investments will be adequate to meet liquidity and capital requirements for at least the next twelve months.

Appointment of Officers and Management

Appointment of Chief Technology Officer

On November 1, 2022, the Company announced the appointment by the Company’s Board of Directors (the “Board”) of Dr. William Walker as Chief Technology Officer (“CTO”) of the Company.

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Appointment of Lead Director of the Board

On November 1, 2022, the Board appointed Dr. Joanna Massey as lead director (the “Lead Director”) of the Board. Dr. Massey has served on the Board, and its committees, since June 2021. The Board, believing that the Lead Director position would enhance corporate governance and relieve certain duties of the Board’s Chairman, Michael Mo, to allow him to focus on the performance of his Chief Executive Officer duties, designated certain responsibilities to be fulfilled by the Lead Director, including but not limited to: (i) coordinating the activities of the independent directors; (ii) setting the agenda for board meetings in conjunction with the CEO and corporate secretary; (iii) chairing executive sessions of the independent directors; and (iv) performing such other duties as are assigned from time to time by the board.

Management Equity Incentive Grants

On November 1, 2022, the Board unanimously approved equity grants, to each of Dr. Joanna Massey and Morio Kurosaki, equal to 30,000 shares of the Company’s common stock to be vested in four equal quarterly installments (the first vest occurred on December 31, 2022), and grants of a fully vested 7,500 shares for services performed during the quarter ended September 30, 2022.

On November 1, 2022, the Board also unanimously approved the termination of a previously issued equity incentive grant of 1,500,000 shares to each of Keith Cochran and Michael Mo, which grants had vesting schedules corresponding with the achievement of certain market-capitalization milestones. In order to more accurately reflect the incentive compensation that the previously issued grants were intended to achieve, the Board approved replacement equity grants to each of Keith Cochran and Michael Mo in the form of Restricted Stock Units (“RSUs”) for the stock settlement of 1,500,000 shares, which RSUs contain provisions for delayed stock settlement and for vesting to occur in four equal annual installments. The foregoing is a summary description of certain terms of the RSUs.

Sales and Marketing Strategy

The Company employs various channels to market and sell its products and solutions, including direct sales to customers, as well as sales through representatives and strategic partners. We believe that establishing direct relationships with Key Accounts allows for deeper technical interactions, faster turnaround times, and provides valuable feedback that helps inform product development and marketing efforts. To ensure that our target customers fully understand the unique features and benefits of our products and services, we organize technology day events. We use a combination of marketing approaches to reach prospects and customers, such as leveraging employee, representative, and strategic partner relationships, maintaining an informative website, attending industry conferences, and conducting market research. Recently, we expanded our direct sales and marketing teams, and we are excited to welcome Mr. Ted Krupp, a highly experienced professional with important relationships in the Aerospace and Defense sectors, as our new VP of Sales and Marketing. Looking ahead, we plan to further expand our direct sales team to enhance our Key Account coverage and support a growing representative and distributor network.

Advertising and Communications Strategy

We employ a diverse range of advertising and communication tools to reach our audience. These include commissioning impartial white papers and technical papers, participating in industry events, conferences, and symposiums as attendees, sponsors, and guest speakers. We maintain a public relations consultant who oversees our press releases and media relations, ensuring that we maintain a positive presence in newspapers, magazines, and blogs. To bolster our social media outreach activities, we have a dedicated SEO specialist. We leverage our strong reputation within the thermal management and lithium-ion battery safety communities to spread positive feedback through word-of-mouth. Additionally, we utilize several social media platforms, such as LinkedIn, YouTube, Twitter, Instagram, and Facebook, to reach a broader audience.

Intellectual Property and Patent Strategy

Our intellectual property strategy includes pursuing patent protection for new innovations in core carbon fiber architecture development, application development, acquisition of intellectual property, and licensing of third-party patents and intellectual property. As of December 31, 2022, we have twelve patents granted and assigned to KULR, an exclusive license to four third party patents, and ten pending nonprovisional and provisional patent applications.

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Product and Services

In addition to KULR ONE and KULR VIBE, here are some of the technologies and products we offer to customers:

Lithium-Ion Battery Thermal Runaway Shield (“TRS”): KULR has developed a thermal insulation technology aimed at passive resistance to thermal runaway propagation in Li-ion batteries in partnership with National Aeronautics and Space Administration Johnson Space Center (“NASA JSC”). HYDRA TRS acts as a heat sink during normal Li-ion battery pack operation but also prevents thermal runaway propagation, which is a serious concern for aerospace and defense customers and electric vehicle manufacturers. The HYDRA is a vaporizing thermal capacitor that provides passive prevention of thermal runaway propagation (“TRP”) in Li-ion battery packs. Thermal runaway can occur spontaneously in a Li-ion cell due to a short. This can trigger an explosive release of electric energy that ruptures the end cap resulting in a flare and combustion of cell materials. Released heat drives the triggered cell temperatures to > 500°C, causing a dramatic increase in neighboring cell temperatures. Temperatures above the critical 130°C greatly increases the chance for a short in adjacent cells and result in TRP. TRS keeps neighboring cell temperatures from rising above 100°C (well below the 130°C threshold) and prevents TRP.

KULR Automated Battery Cell Screening and Test System: KULR completed the installation of a fully automated battery cell testing platform this January in our Sand Diego facility. The system fully supports the stringent requirements of NASA and the DOD. This platform has been designed to meet the entire specifications of NASA WI-037 battery testing requirements. This fully automated system is believed to be the only fully automated system capable of such performance. We have designed the system to be modular and have installed a minimum of 500K cell capacity annually capable of handling 18650 and 21700 cells. Volume processing will start in February 2023.

CellCheck: A scalable battery management platform to provide a new level of safety, performance optimization and regulatory compliance capabilities to our customers. We achieve this by putting together a modular architecture that is built on large data sets, performing an array of analytics, and then layering on top of it AI algorithms to provide predictive and preventative intelligence to our customers. It’s modular so that we can incorporate new capabilities and enhancements to the platform as the battery evolution accelerates in the coming years. This is another significant step to position KULR as a one-stop-shop total solutions provider of battery thermal energy and safety management.

KULR-Tech Safe Case: This product was developed for the commercial transportation and storage of Li-ion batteries. It is an extension of the product jointly developed with NASA, the TRS Bags which safely store and transport Li-ion batteries to and in the International Space Station. The cases have been tested and granted special permits by the Department of Transportation (DOT) for shipment of Li-ion batteries up to 2.1KWh for shipment of batteries classified as DDR (damaged, defective or recall), recycling and prototype.

Fiber Thermal Interface Material (“FTI”): KULR thermal interface materials (“TIMs”) consist of vertically oriented carbon fiber velvets attached to a film of polymer or metal. The fiber packing density and orientation are selected to serve a wide range of applications, including hostile thermal and chemical environments, sliding interfaces, and interfaces with widely varying gaps. They can be coated for electrical isolation. They require low contact pressure and provide high thermal conductivity. Their light weight and high compliance make them uniquely suited for aerospace, industrial and high-performance commercial devices.

Phase Change Material (“PCM”) Heat Sink: KULR PCM composite heat sinks consisting of a conductive carbon fiber velvet embedded with a proprietary heat dissipation medium having high latent heat at its melting point. Such heat sinks offer passive thermal control for instruments that would otherwise overheat or under-cool during periodic operations. A typical application involves lasers that dissipate heat but need tight thermal control where active cooling is unavailable.

Internal Short Circuit (“ISC”) Device: In March 2018, KULR reached an agreement with the National Renewable Energy Laboratory (“NREL”), a national laboratory of the U.S. Department of Energy, to be the exclusive manufacturing and distribution partner for the patented ISC device, which causes predictable battery cell failures in Li-ion batteries, making them easier to study and, therefore, safer. Li-ion batteries are the industry and consumer standard for portable power; billions of individual battery cells exist and billions more are planned for production. They provide power for everything from smart phones and laptops to electric cars and space crafts. But Li-ion batteries fail, sometimes with catastrophic results. Due to the relative rarity of cell failures, scientists and researchers had been unable to reliably or accurately replicate latent defect cell failures in lab settings, impeding research into safer battery technology.

CRUX Cathode: The CRUX Cathode is composed of a carbon fiber velvet, providing a means of generating powerful electron pulses by field emission from the tops of the carbon fibers. CRUX Cathodes can be customized for different applications

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including the generation of microwaves, x-rays, and laser radiation. They can be fabricated in a wide variety of physical configurations, ranging from simple planar and cylindrical forms to more complex lobed shapes.

Competition

Currently, the battery industry uses a number of solutions to mitigate thermal runaway propagation that are offered by Aspen Aerogel, Unifrax, Lydall, LHS, 3M, Engineered Syntactic Systems, Celono, AllCell and others. Each of their solutions offer unique features and benefits for a specific application. We do not believe, however, that there is a one-size-fits-all solution across all applications. We believe our PPR design solution offers competitive light-weight and effective solutions for high energy battery cells because it is more flexible and can fit into different design configurations. For applications that require passive, light-weight solutions for high energy density battery cells, TRS offers a competitive solution.

Thermal interface material is a large and fragmented market with many large suppliers including Henkel Bergquist, Fujipoly, Laird, 3M, Honeywell and others. These solutions are typically based on silicone and thermal particles. KULR’s FTI offers high bulk thermal conductivity and low contact pressure requirements, which we believe gives us a competitive advantage over other thermal interface solutions.

Our licensed ISC device offers a reliable way to trigger battery cell thermal runaway compared to nail penetration, over-charging or over-heating the cell. ISC does not rely on mechanically damaging the battery exterior to activate the short, as do most of the other evaluation methodologies. Instead, the ISC devices trigger true internal shorts. This makes it possible to accurately pinpoint and fix problems leading to malfunctions, an ability that we believe will give us a competitive advantage over other testing solutions.

Governmental Regulation and Environmental Compliance

Certain substances we use in our manufacturing process are subject to federal governmental regulations (such as Environmental Protect Agency regulations). We believe we are in material compliance with all applicable governmental regulations, and that the cost and effect of compliance with environmental laws is not material. As a small generator of hazardous substances, we are subject to local governmental regulations relating to the storage, discharge, handling, emission, generation, manufacture and disposal of toxic or other hazardous substances, such as acetone that is used in very small quantities to manufacture our products. We are currently in compliance with these regulations. Most new materials sold in the U.S or in many other countries require regulation by government authorities. In most other countries, there are no specific regulations that require additional regulation, but some countries do have registration requirements with which we comply to the best our ability.

Employees

As of December 31, 2022, we had 62 full time employees and 16 contractors. We believe that we maintain a good working relationship with our employees, and we have not experienced any significant labor disputes. In addition, KULR leverages outsource partners for IT management, Software Development, Battery Cell R&D, and Machine Automation.

Intellectual Property

We seek to establish and maintain our proprietary rights in our technology and products through the use of patents, copyright, trademarks and trade secrets. We have, and will continue to, file applications for and/or obtain patents, copyrights and trademarks in the United States and selected foreign countries where we believe filing for such protection is appropriate. We also seek to maintain our trade secrets and confidential information by implementing organizational nondisclosure policies and through the use of appropriate confidentiality agreements. As of December 31, 2022, we held eight U.S. patents and six non-provisional pending U.S. patent applications with expiration dates ranging from 2022 to 2035. In addition, KULR has exclusive license on four patents from its partnerships. There can be no assurance, however, that the rights obtained can be successfully enforced against infringing products in every jurisdiction. While our patents, copyrights, trademarks, and trade secrets provide some advantage and protection, we believe our competitive position and future success is largely determined by such factors as the system and application knowledge, innovative skills, technological expertise and management ability and experience of our personnel; the range and success of new products being developed by us; our market brand recognition and ongoing marketing efforts; and customer service and technical support. We also have trademarks that are used in the conduct of our business to distinguish genuine KULR products; KULR has been granted trademarks for Class 9 and Class 17 applications.

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ITEM 1A. RISK FACTORS

An investment in the Company’s common stock involves a high degree of risk. In determining whether to purchase the Company’s common stock, an investor should carefully consider all of the material risks described below, together with the other information contained in this report before deciding to purchase the Company’s securities. An investor should only purchase the Company’s securities if he or she can afford to suffer the loss of his or her entire investment.

Risks Related to Our Business and Our Industry

We are a young company with a limited operating history, making it difficult for you to evaluate our business and your investment.

KULR was formed in 2015 and KTC was formed in 2013. The Company, as a whole, has limited operating history. We have not yet demonstrated sales of products at a level capable of covering our fixed expenses. Since inception, we have not demonstrated the capability to produce sufficient materials to generate the ongoing revenues necessary to sustain our operations in the long-term. Nor have we demonstrated the ability to generate sufficient sales to sustain the business. There can be no assurance that the Company will ever produce a profit.

Many of the Company’s products represent new products that have not yet been fully tested in commercial product settings and for which manufacturing operations have not yet been fully scaled. This means that investors are subject to all the risks incident to the creation and development of multiple new products and their associated manufacturing processes, and each investor should be prepared to withstand a complete loss of their investment.

Because we are subject to these uncertainties, there may be risks that management has failed to anticipate and you may have a difficult time evaluating our business and your investment in our Company. Our ability to become profitable depends primarily on our ability to successfully commercialize our products in the future. Even if we successfully develop and market our products, we may not generate sufficient or sustainable revenue to achieve or sustain profitability, which could cause us to cease operations.

We have no sustainable base of products approved for commercial use by our customers, have never generated significant product revenues and may never achieve sufficient revenues for profitable operations, which could cause us to cease operations.

KULR primarily sells bulk materials or products made with these materials to other companies for incorporation into their products. Although KULR’s technologies were previously used in numerous advanced space and industrial applications for NASA, there has been no significant incorporation of our materials or products into customer products that are released for commercial sale as of the date of this report. Because there is no demonstrated history of large-scale commercial success for our products, it is possible that such commercial success may never happen and that we will never achieve the level of revenues necessary to sustain our business.

We will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms, which could have a materially adverse effect on our business.

We anticipate that we will incur operating losses for the foreseeable future. We believe that our current cash balance plus capital available under the Company’s Standby Equity Purchase Agreement (the “SEPA”) will be adequate to fund our operations over the next; however we may require additional funds for our anticipated operations and if we are not successful in securing additional financing, we may be required to delay significantly, reduce the scope of or eliminate one or more of our research or development programs, downsize our general and administrative infrastructure, or seek alternative measures to avoid insolvency, including arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates or products.

We could experience significant disruptions in supply from our current or future sources.

We could experience significant disruptions as a result of global supply chain issues and, in the event of a disruption, we cannot make any assurances that we would be able to locate alternative suppliers of materials of comparable quality at an acceptable price, or alternative purchasers of our products. Identifying suitable supplier and purchasers is a resource-intensive process that requires us to become satisfied with quality control, responsiveness and service, financial stability and labor and other ethical practices. In addition, any indirect supply chain disruptions due to United States trade policy with China or the recent military conflict in Ukraine may further complicate existing supply chain constraints and direct or indirect customers’ demand for our products. Interruption of our supplies and in demand of our products by our purchasers, or the loss of one or more key suppliers or purchasers, could have a negative effect on the Company’s business and operating results. Any delays, interruption or increased costs or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and result in lower net sales and operating income both in the

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short and long term, which could in turn negatively impact our business, financial condition and the price of our shares. In addition, we cannot adequately predict the effects of the global supply chain disruptions on our customers or potential customers and the indirect effects such disruptions could have on our operations both in the short and long term, which could in turn negatively impact our business, financial condition and the price of our shares.

We have limited experience in higher volume manufacturing that will be required to support profitable operations, and the risks associated with scaling to larger production quantities may be substantial.

We have limited experience manufacturing our products. We have established small-scale commercial or pilot-scale production facilities for our carbon-based thermal management products, but these facilities do not have the existing production capacity to produce sufficient quantities of materials for us to reach sustainable sales levels. At present, we rely on outsourced partners to produce high volume products. In order to develop internal capacity to produce much higher volumes, it will be necessary to produce multiples of existing processes or engineer new production processes in some cases. We have begun building up the scale of our automated battery cell facilities in our new leased facility in San Diego but there is no guarantee that we will be able to economically scale-up our production processes to the levels required. If we are unable to scale-up our production processes and facilities to support sustainable sales levels, the Company may be forced to curtail or cease operations.

We have a long and complex sales cycle and have not demonstrated the ability to operate successfully in this environment.

It has been our experience since our inception that the average sales cycle for our products can range from one to five years from the time a customer begins testing our products until the time that they could be successfully used in a commercial product. We have only demonstrated a limited track record of success in completing customer development projects, which makes it difficult for you to evaluate the likelihood of our future success. The sales and development cycle for our products is subject to customer budgetary constraints, internal acceptance procedures, competitive product assessments, scientific and development resource allocations, and other factors beyond our control. If we are not able to successfully accommodate these factors to enable customer development success, we will be unable to achieve sufficient sales to reach profitability. In this case, the Company may not be able to raise additional funds and may be forced to curtail or cease operations and you could lose all or a significant part of your investment.

We are dependent on customers and partners to design and test our solution into new applications which may not be brought to market successfully.

The Company targets its thermal management solution for new applications and devices that require high performance and unique features offered by its products. Developing new applications and devices involves a lengthy and complex process, and they may not be commercialized on a timely basis, or at all. The Company’s success is directly related to the success of these new products. Furthermore, because the Company’s solutions are relatively new to mass market consumer electronics, the design and testing time is longer than traditional solutions. Moreover, in transitioning to new technologies and products, we may not achieve design wins, our customers may delay transition to these new technologies, our competitors may transition more quickly than we do, or we may experience product delays, cost overruns or performance issues that could harm our operating results and financial condition.

We could be adversely affected by our exposure to customer concentration risk.

We are subject to customer concentration risk as a result of our reliance on a relatively small number of customers for a significant portion of our revenues. During 2022, we had 3 customers whose purchases accounted for 87% of total revenues. Due to the nature of our business and the relatively large size of many of the applications our customers are developing, we anticipate that we will be dependent on a relatively small number of customers for the majority of our revenues for the next several years. It is possible that only one or two customers could place orders sufficient to utilize most or all of our existing manufacturing capacity.

In this case, there would be at risk of significant loss of future revenues if one or more of these customers were to stop ordering our materials, which could in turn have a material adverse effect on our business and on your investment.

We operate in an advanced technology arena where hypothesized properties and benefits of our products may not be achieved in practice, or in which technological change may alter the attractiveness of our products.

Because there is no sustained history of successful use of our products in commercial applications, there is no assurance that broad successful commercial applications may be technically feasible. Some of the scientific and engineering data related to our products has been generated in our own laboratories or in laboratory environments at our customers or third-parties. It is well known that laboratory data is not always representative of commercial applications.

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Likewise, we operate in a market that is subject to rapid technological change. Part of our business strategy is to monitor such change and take steps to remain technologically current, but there is no assurance that such strategy will be successful. If the Company is not able to adapt to new advances in materials sciences, or if unforeseen technologies or materials emerge that are not compatible with our products and services or that could replace our products and services, our revenues and business prospects would likely be adversely affected. Such an occurrence may have severe consequences, including the potential for our investors to lose all of their investment.

Competitors that are larger and better funded may cause the Company to be unsuccessful in selling its products.

The Company operates in a market that is expected to have significant competition in the future. Global research is being conducted by substantially larger companies who have greater financial, personnel, technical, and marketing resources. There can be no assurance that the Company’s strategy of offering better thermal management solutions based on the Company’s proprietary carbon fiber-based products will be able to compete with other companies, many of whom will have significantly greater resources, on a continuing basis. In the event that we cannot compete successfully, the Company may be forced to cease operations.

Because of our small size and limited operating history, we are dependent on key employees.

The Company’s operations and development are dependent upon the experience and knowledge of Michael Mo, our Chief Executive Officer, Simon Westbrook our Chief Financial Officer, Dr. William Walker, our Chief Technology Officer, Keith Cochran, our President and Chief Operating Officer, and Michael Carpenter, our Vice President of Engineering. If the services of any of these individuals should become unavailable, the Company’s business operations might be adversely affected. If several of these individuals became unavailable at the same time, the ability of the Company to continue normal business operations might be adversely affected to the extent that revenue or profits could be diminished, and you could lose all or a significant amount of your investment.

Our success depends in part on our ability to protect our intellectual property rights, and our inability to enforce these rights could have a material adverse effect on our competitive position.

We rely on the patent, trademark, copyright and trade-secret laws of the United States and to protect our intellectual property rights. We may be unable to prevent third parties from using our intellectual property without our authorization. The unauthorized use of our intellectual property could reduce any competitive advantage we have developed, reduce our market share or otherwise harm our business. In the event of unauthorized use of our intellectual property, litigation to protect or enforce our rights could be costly, and we may not prevail.

Many of our technologies are not covered by any patent or patent application, and our issued and pending U.S. patents may not provide us with any competitive advantage and could be challenged by third parties. Our inability to secure issuance of our pending patent applications may limit our ability to protect the intellectual property rights these pending patent applications were intended to cover. Our competitors may attempt to design around our patents to avoid liability for infringement and, if successful, our competitors could adversely affect our market share. Furthermore, the expiration of our patents may lead to increased competition.

Our pending trademark applications may not be approved by the responsible governmental authorities and, even if these trademark applications are granted, third parties may seek to oppose or otherwise challenge these trademark applications. A failure to obtain trademark registrations in the United States and in other countries could limit our ability to protect our products and their associated trademarks and impede our marketing efforts in those jurisdictions.

In addition, effective patent, trademark, copyright and trade secret protection may be unavailable or limited in some foreign countries. We also rely on unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position. Although we generally enter into confidentiality agreements with our employees and third parties to protect our intellectual property, these confidentiality agreements are limited in duration and could be breached, and may not provide meaningful protection of our trade secrets or proprietary manufacturing expertise. Adequate remedies may not be available if there is an unauthorized use or disclosure of our trade secrets and manufacturing expertise. In addition, others may obtain knowledge about our trade secrets through independent development or by legal means. The failure to protect our processes, apparatus, technology, trade secrets and proprietary manufacturing expertise, methods and compounds could have a material adverse effect on our business by jeopardizing critical intellectual property.

Where a product formulation or process is kept as a trade secret, third parties may independently develop or invent and patent products or processes identical to our trade-secret products or processes. This could have an adverse impact on our ability to make and sell products or use such processes and could potentially result in costly litigation in which we might not prevail.

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We could face intellectual property infringement claims that could result in significant legal costs and damages and impede our ability to produce key products, which could have a material adverse effect on our business, financial condition and results of operations.

If our technologies conflict with the proprietary rights of others, we may incur substantial costs as a result of litigation or other proceedings and we could face substantial monetary damages and be precluded from commercializing our products, which would materially harm our business and financial condition.

Patents in the thermal management solutions industry are numerous and may, at times, conflict with one another. As a result, it is not always clear to industry participants, including us, which patents cover the multitude of product types. Ultimately, the courts must determine the scope of coverage afforded by a patent and the courts do not always arrive at uniform conclusions.

A patent owner may claim that we are making, using, selling or offering for sale an invention covered by the owner’s patents and may go to court to stop us from engaging in such activities. Such litigation is not uncommon in our industry. Patent lawsuits can be expensive and would consume time and other resources. There is a risk that a court would decide that we are infringing a third party’s patents and would order us to stop the activities covered by the patents, including the commercialization of our products. In addition, there is a risk that we would have to pay the other party damages for having violated the other party’s patents (which damages may be increased, as well as attorneys’ fees ordered paid, if infringement is found to be willful), or that we will be required to obtain a license from the other party in order to continue to commercialize the affected products, or to design our products in a manner that does not infringe a valid patent. We may not prevail in any legal action, and a required license under the patent may not be available on acceptable terms or at all, requiring cessation of activities that were found to infringe a valid patent. We also may not be able to develop a non-infringing product design on commercially reasonable terms, or at all.

We may not obtain U.S. Government contracts to further develop our technology.

We can give no assurances that we will be successful in obtaining government contracts. The process of applying for government contracts is lengthy, and we cannot be certain that we will be successful in complying with all requirements throughout such application process. Accordingly, we cannot be certain that we will be awarded any U.S. Government contracts utilizing our carbon fiber-based solutions.

Downturns in general economic conditions could adversely affect our profitability.

Downturns in general economic conditions can cause fluctuations in demand for our products, product prices, volumes and gross margins. Future economic conditions may not be favorable to our industry. A decline in the demand for our products or a shift to lower-margin products due to deteriorating economic conditions could adversely affect sales of our products and our profitability and could also result in impairments of certain of our assets.

Furthermore, any uncertainty in economic conditions may result in a slowdown to the global economy that could affect our business by reducing the prices that our customers may be able or willing to pay for our products or by reducing the demand for our products.

An increase in the cost of raw materials or electricity might affect our profits.

Any increase in the prices of our raw materials or energy might affect the overall cost of our products. If we are not able to raise our prices to pass on increased costs to our customers, we would be unable to maintain our existing profit margins. Our major cost components include items such as production materials and electricity, which items are normally readily available industrial commodities. During our history as a business, we have not seen any material impact (as defined by GAAP) on our cost structure from fluctuations in raw material or energy costs, but this could change in the future.

Our results of operations could deteriorate if our manufacturing operations were substantially disrupted for an extended period.

Our manufacturing operations may be subject to disruption due to extreme weather conditions, floods and similar events, major industrial accidents, strikes and lockouts, adoption of new laws or regulations, changes in interpretations of existing laws or regulations or changes in governmental enforcement policies, civil disruption, riots, terrorist attacks, war, and other events. We cannot assure you that no such events will occur. If such an event occurs, it could have a material adverse effect on us.

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We may become subject to liabilities related to risks inherent in working with hazardous materials.

Our development and manufacturing processes involve the controlled use of hazardous materials, such as acetone. We are subject to federal, provincial and local laws and EPA regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources. We are not specifically insured with respect to this liability. Although we believe that we are in compliance in all material respects with applicable environmental laws and regulations and currently do not expect to make material capital expenditures for environmental control facilities in the near-term, if we fail to comply with these regulations substantial fines could be imposed on us and we could be required to suspend production, alter manufacturing processes or cease operations. In addition, there can be no assurance that we will not be required to incur significant costs to comply with environmental laws and regulations in the future, or that our operations, business or assets will not be materially adversely affected by current or future environmental laws or regulations.

Significant disruptions of information technology systems, breaches of data security and other incidents could materially adversely affect our business, results of operations and financial condition.

We maintain information in digital and other forms that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner to maintain the privacy, security, confidentiality, and integrity of such confidential information. Our internal information technology systems and infrastructure, and those of any future collaborators and our contractors, consultants, vendors and other third parties on which we rely, are vulnerable to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, denial or degradation of service attacks, ransomware, hacking, phishing schemes intended to cause an unauthorized transfer of funds and other social engineering attacks, attachments to emails, persons inside our organization or persons with access to systems inside our organization.

In December 2021, we were the subject of a phishing scheme involving a fraudulent email and wire instructions, resulting in the loss of approximately $138,000 in corporate funds. We took immediate action to contain and eradicate the security breach, including the implementation of control enhancements to prevent a similar situation from occurring again. We believe this was an isolated event and do not believe our technology systems have been compromised. While we have not experienced any material losses relating to cyber-attacks or other information security breaches such as the one that occurred in December 2021, there can be no assurance (i) that we will ever recover the funds lost, or (ii) that we will not suffer additional losses in the future.

Additionally, while we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity and other harm to our business and our competitive position. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. Any security compromise affecting us, our partners or our industry, whether real or perceived, could harm our reputation, erode confidence in the effectiveness of our security measures and lead to regulatory scrutiny, which could materially adversely affect our business, results of operations and financial condition.

The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operation and our financial condition and results of operations.

During March 2023, Silicon Valley Bank (“SVB”), Signature Bank and Silvergate Capital Corp. were each closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. A statement by the Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. The standard deposit insurance amount is up to $250,000 per depositor, per insured bank, for each account ownership category. Although we do not have any funds deposited with the aforementioned banks that failed , we regularly maintain cash balances with other financial institutions in excess of the FDIC insurance limit. A failure of a depository institution to return deposits could impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance.

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Future adverse regulations could affect the viability of the business.

As a small generator of hazardous substances, we are subject to local governmental regulations relating to the storage, discharge, handling, emission, generation, manufacture and disposal of toxic or other hazardous substances, such as acetone that is used in very small quantities to manufacture our products. We are currently in compliance with these regulations. However, there can be no assurance that future regulations might not change or raise the compliance standards, of which the Company may become in violate or for which we may incur substantial costs to comply.

In most cases, as far as we are aware, there are no current regulations elsewhere in the world that prevent or prohibit the sale of the Company’s products. However, there is no assurance that any regulations will not be enacted in the future to require the Company’s products or production materials to be subject to test for toxicity or other health effects before they can be sold or used in the production process, if such regulations are enacted in the future, the Company’s business could be adversely affected because of the requirement for expensive and time-consuming tests or other regulatory compliance. There can be no assurance that future regulations might not severely limit or even prevent the sale of the Company’s products in major markets, in which case the Company’s financial prospects might be severely limited, causing investors to lose some or all of their investment.

Our directors and officers may be exposed to liability.

We currently maintain a policy for director and officer liability insurance, also known as “D&O Insurance.” However, the maximum coverage under our D&O Insurance policy may not be sufficient to cover all such liability exposure and, as a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and will divert time and attention away from revenue generating activities.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased selling, general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities, which could have an adverse effect on our business.

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

Our management identified weaknesses in our internal controls, as described in Item 9A here within. Our internal control over financial reporting may still or could in the future have weaknesses and conditions that could require correction or remediation, the disclosure of which and continued existence of which may have an adverse impact on the price of our common stock. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner, our business could be harmed and our stock price could decline.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm. The standards that must be met for management to assess the internal controls over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards. We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will take or how costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In addition, although attestation requirements by our independent registered public accounting firm are not presently applicable to us, we could become subject to these requirements in the future and we may encounter problems or delays in completing the implementation of any resulting changes to internal controls over financial

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reporting. In the event that our Chief Executive Officer or Chief Financial Officer determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our shares will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.

Risks Relating to Our Common Stock

An active, liquid and orderly market for our common stock may not develop or be sustained, and you may not be able to sell your common stock without adversely affecting the price, or at all depending on volume offered for sale at any time.

Our common stock trades on the NYSE American LLC Exchange (“NYSE American”). We cannot assure you that an active trading market for our common stock will develop or be sustained. The lack of an active market may impair your ability to sell the common stock at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling common stock and may impair our ability to acquire other businesses or technologies using our common stock as consideration, which, in turn, could materially adversely affect our business.

We are subject to the continued listing requirements of the NYSE American. If we are unable to comply with such requirements, our common stock would be delisted from the NYSE American, which would limit investors’ ability to effect transactions in our common stock and subject us to additional trading restrictions.

Our common stock is currently listed on the NYSE American. In order to maintain our listing, we must maintain certain share prices, financial and share distribution targets, including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders. In addition to these objective standards, the NYSE American may delist the securities of any issuer if, in its opinion, the issuer’s financial condition and/or operating results appear unsatisfactory; if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American inadvisable; if the issuer sells or disposes of principal operating assets or ceases to be an operating company; if an issuer fails to comply with the NYSE American’s listing requirements; if an issuer’s common stock sells at what the NYSE American considers a “low selling price” (generally trading below $0.20 per share for an extended period of time); or if any other event occurs or any condition exists which makes continued listing on the NYSE American, in its opinion, inadvisable.

If the NYSE American delists our common stock from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our common stock would qualify to be quoted on the OTC Bulletin Board ® or on the Pink Sheets ® (a quotation medium operated by Pink Sheets LLC). If this were to occur, we could face significant material adverse consequences, including:

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a limited availability of market quotations for our securities;

●

reduced liquidity for our securities;

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a determination that our common stock are a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

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a limited amount of news and analyst coverage; and

●

a decreased ability to issue additional securities or obtain additional financing in the future.

If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. Our research coverage by industry and financial analysts is currently limited. Even if our analyst coverage increases, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

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Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), and current public information and notice requirements. Any substantial sales of our common stock pursuant to Rule 144 may have a material adverse effect on the market price of our common stock.

We could issue additional common stock, which might dilute the book value of our common stock.

Our Board of Directors has the authority, without action or vote of our shareholders, to issue all or a part of our authorized but unissued shares. Such stock issuances could be made at a price that reflects a discount or a premium from the then-current trading price of our common stock. In addition, in order to raise capital, we have and may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. These issuances would dilute the percentage ownership interest, which would have the effect of reducing your influence on matters on which our shareholders vote and might dilute the book value of our common stock. You may incur additional dilution if holders of stock options, whether currently outstanding or subsequently granted, exercise their options, or if warrant holders exercise their warrants, whether currently outstanding or subsequently granted, to purchase shares of our common stock.

Our common stock could be further diluted as a result of the issuance of convertible securities, warrants or options.

In the past, we have issued convertible securities (such as convertible debentures and notes), warrants and options in order to raise money or as compensation for services and incentive compensation for our employees and directors. We have shares of common stock reserved for issuance upon the exercise of certain of these securities and may increase the shares reserved for these purposes in the future. Our issuance of these convertible securities, options and warrants could affect the rights of our stockholders, could reduce the market price of our common stock or could result in adjustments to exercise prices of outstanding warrants (resulting in these securities becoming exercisable for, as the case may be, a greater number of shares of our common stock), or could obligate us to issue additional shares of common stock to certain of our stockholders.

The outbreak of Coronavirus has led to restrictions on travel and public meetings and has disrupted markets and shipping schedules.

The COVID-19 virus pandemic has created global restrictions on travel and meetings, temporary and permanent closures of businesses and business activities, unemployment, loss of customers and suppliers, and reluctance of business management to make critical commitments and, instead, conserve cash. For example, we have experienced delays in customer acceptance of delivered products and shipment delays from our suppliers or customers’ suppliers, which delays have disrupted ours and our customers’ product development and testing processes. At this stage, the outlook has improved as federal, state and local economies have reopened and returned to pre-pandemic levels, there is no assurance the future impact of COVID-19 will not have a material adverse effect on our operations, financial condition and prospects during 2023 and beyond.

Global economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and conflicts, such as the conflict between Russia and Ukraine, could make it more difficult for us to access financing and could adversely affect our business and operations.

Our ability to raise capital is subject to the risk of adverse changes in the market value of our stock. Periods of macroeconomic weakness or recession and heightened market volatility caused by adverse geopolitical developments could increase these risks, potentially resulting in adverse impacts on our ability to raise further capital on favorable terms. The impact of geopolitical tension, such as a deterioration in the bilateral relationship between the US and China or an escalation in conflict between Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed by the US and/or other countries against governmental or other entities in, for example, Russia, also could lead to disruption, instability and volatility in global trade patterns, which may in turn impact our ability to source necessary reagents, raw materials and other inputs for our research and development operations.

We do not intend to pay dividends.

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors,

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and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

Voting power of our shareholders is highly concentrated by insiders.

Our officers, directors and affiliates currently beneficially own approximately 34.2% of our outstanding Common Stock eligible to vote. Such concentrated control of the Company may adversely affect the value of our Common Stock. If you acquire our Common Stock, you may have no effective voice in our management. Sales by our insiders or affiliates, along with any other market transactions, could affect the value of our Common Stock.

Our articles of incorporation allow for our board to create a new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our Common Stock.

Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors have the authority to issue up to 20,000,000 shares of our preferred stock terms of which may be determined by the Board without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of Common Stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our Common Stock.

In addition, our Board of Directors could authorize the issuance of a series of preferred stock that has greater voting power than our Common Stock or that is convertible into our Common Stock, which could decrease the relative voting power of our Common Stock or result in dilution to our existing stockholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Smaller reporting companies such as us are not required to provide the information required by this item.

ITEM 2. PROPERTIES

Our principal executive office is located at 4863 Shawline Street, San Diego, CA 92111, and the telephone number at such address is 408-663-5247.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to any legal or administrative proceedings. Our current officers and directors have not been convicted in a criminal proceeding nor have they been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Equity and Related Stockholder Matters

On June 7, 2021, our common stock ceased trading on the OTCQB and commenced trading on the NYSE American LLC Exchange under the symbol “KULR.”

Securities Authorized for Issuance Under Equity Compensation Plans

On November 5, 2018, KULR adopted and ratified the KULR Technology Group 2018 Equity Incentive Plan (the “2018 Plan”). Subject to certain adjustments, the 2018 Plan, the total number of shares of common stock which may be purchased or granted directly under the plan shall not exceed fifteen million (15,000,000). The 2018 Plan is generally administered by the Board or a committee of two (2) or more independent, non-employee directors (the “Plan Committee”). The Board or the Plan Committee, as applicable, has the power to determine the participants (the “Participants”) to whom awards under the 2018 Plan (the “Plan Awards”) shall be made. The 2018 Plan allows for the award of, stock, stock options, and shares of restricted stock. Stock options granted under the Plan may be either incentive stock options (an “ISO”) qualifying under Section 422 of the Internal Revenue Codes of 1986, as amended (the “Code”) or non-qualified stock options (a “NQSO”). An ISO may only be issued to employees of KULR. ISOs may be granted to officers or directors, provided they are also employees of KULR.

The following table sets forth, as of December 31, 2022, our securities authorized for issuance under any equity compensation plans approved by our stockholders:


				Number of securities
	Number of securities			remaining available for
	to be issued upon	Weighted-average		future issuance under equity
	exercise of	exercise		compensation plans
	outstanding	price of		(excluding securities
	options,	outstanding options,		reflected in
	warrants and rights	warrants and rights		column (a))
Plan Category	(a)		(b)	(c)
Equity compensation plans approved by security holders	640,216	$	1.72	10,174,005
Equity compensation plans not approved by security holders	—		—	—
Total	640,216	$	1.72	10,174,005

Stock Transfer Agent

Our stock transfer agent of our Common Stock is VStock Transfer LLC, located at 18 Lafayette Pl, Woodmere, NY 11598.

Common Shareholders

On March 28, 2023, we had approximately 151 record and street shareholders.

Dividends

The Company has not paid any dividends to date. The Company intends to employ all available funds for the growth and development of its business, and accordingly, does not intend to declare or pay any dividends in the foreseeable future.

Recent Sales of Unregistered Securities

Pursuant to an Asset Purchase Agreement the Company executed with Vibetech and Norman Serrano on October 6, 2022, the Company will issue shares of common stock of the Company to Vibetech, valued at $1,500,000 as of October 6, 2022. The Company will issue the shares to Vibetech in four equal installments on each anniversary from October 6, 2022, including on the following dates: (i) October 6, 2023, (ii) October 6, 2024, (iii) October 6, 2025, and (iv) October 6, 2026.

All of the previously described issuances of securities were made pursuant to the exemption from registration at Section 4(a)(2) and/or Rule 506 of Regulation D under the Securities Act for either transactions not involving a public offering or for transactions with an “accredited investor” as defined under the Securities Act.

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Issuer Purchases of Equity Securities

The Company did not repurchase any of its equity securities during the fourth quarter ended December 31, 2022.

ITEM 6. [Reserved]

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

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

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

Recent Developments

COVID-19

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2023, 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. The Company continues to monitor the impact of COVID-19 on its business and operational assumptions and estimates and has determined there were no material adverse impacts on the Company’s results of operations and financial position at December 31, 2022.

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The full extent of the future impact of COVID-19 on the Company’s operations and financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during 2023 and beyond, including the demand for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules as well as the capability to meet customer demands in a timely manner. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

War in Ukraine

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 product candidates. If the price of materials used in the manufacturing of our product candidates increase, that would adversely affect our business and the results of our operations.

New Officer Hires

On November 1, 2022, Dr. William Walker was appointed as the new Chief Technology Officer.

Appointment of Lead Director

On November 1, 2022, our existing independent director, Dr. Joanna Massey, was designated Lead Director of our Board.

Exercise of Warrants

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

During April 2022, the Company issued an aggregate of 2,346,525 shares of common stock upon the exercise of warrants pursuant to which the Company received an aggregate of $2,933,156 of gross proceeds.

Consolidated Results of Operations

Year Ended December 31, 2022 Compared With Year Ended December 31, 2021

Revenue

Our revenues consisted of the following types:


	For the Years Ended
	December 31,
	2022		2021
Product sales	$	2,643,325	$	1,495,328
Contract services		1,351,309		917,540
Total revenue	$	3,994,634	$	2,412,868

For the years ended December 31, 2022 and 2021, we generated $3,994,634 and $2,412,868 of revenues from 36 and 20 customers, respectively, representing an increase of $1,581,766, or 66%.

Revenue from product sales during the year ended December 31, 2022 increased by $1,147,997 or 77% compared to the year ended December 31, 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, thermal fiber thermal interface (“FTI”) materials and heatsink technology. The increase in revenue from product sales for the year ended December 31, 2022 is primarily due to two contracts for custom TRS kits and heatsink technology which generated approximately $1,270,000 and $322,000 respectively, partially offset by a decrease attributable to contracts which generated approximately $485,000 for battery cells for the year ended December 31, 2021.

Revenue from contract services during the year ended December 31, 2022 increased by $433,769 or 47% compared to the year ended December 31, 2021. The increase in revenue for the year ended December 31, 2022 is primarily due to three large contracts which generated approximately $1,272,000, partially offset by a decrease attributable to contracts which generated approximately $862,600

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for the year ended December 31, 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 commitments. 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 consisted of the cost of our products as well as labor expenses directly related to product sales or research contract services.

Generally, we earn greater margins on revenue from products as compared to revenue from services, so product mix plays an important 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 anticipated volume production of its product mix.

For the years ended December 31, 2022 and 2021, cost of revenues was $1,630,527 and $1,102,038, respectively, representing an increase of $528,489, or 48%. The increase was primarily due to increased costs as a result of increased revenues. The gross margin percentage was 59% and 54% for the years ended December 31, 2022 and 2021, respectively.

Research and Development

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

For the years ended December 31, 2022 and 2021, R&D expenses were $3,977,563 and $1,662,183, respectively, representing an increase of $2,315,380 or 139%. The increase is primarily comprised of $1,337,351 related to planned increases in headcount in order to build future capacity, and $978,029 related to new R&D initiatives designed to build future revenue growth.

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

Selling, General and Administrative

Selling, general and administrative expenses consisted primarily of stock-based compensation, marketing and advertising, salaries, payroll taxes and other benefits, accounting and tax, consulting fees, travel and entertainment, rent expense, office expenses, and legal and professional fees.

For the years ended December 31, 2022 and 2021, selling, general and administrative expenses were $16,672,526 and $11,162,062, respectively, an increase of $5,510,464 or 49%. This increase is primarily due to an increase in employee related costs to build future capacity for planned revenue growth of $2,484,407, marketing and advertising expenses of $1,500,371, travel expenses primarily related to customer and vendor relations of $484,214, NetSuite implementation costs of $390,000, and $315,773 of SEC filing fees and professional services.

Other (Expense) Income

For the years ended December 31, 2022 and 2021, other expenses, net, were $1,150,497 and $397,736, respectively, representing an increase of $752,761 or 189%. The increase is primarily attributable to the increase in interest expense recorded in connection with notes payable and the Prepaid Advance of $932,538, an increase in the related amortization of debt discount of $383,627, and the loss on debt extinguishment of $8,508, partially offset by a $272,856 increase in the change in fair value of accrued issuable equity, $158,675 gain on forgiveness of PPP loan and interest, and a decrease of debt redemption costs of $140,000.

Liquidity and Capital Resources

As of December 31, 2022 and 2021, we had cash balances of $10,333,563 and $14,863,301, respectively, and working capital of $6,055,477 and $13,302,935, respectively.

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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 a 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, (each, a “Prepaid Advance”), 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.

On September 23, 2022, the Company received proceeds from a Prepaid Advance in the amount of $15,000,000 (“the Initial Prepaid Advance”), of which, $3,850,000 and $566,932 was withheld to repay the Promissory Note and related interest and premiums owed to Yorkville. During September through December 2022, the Company issued 5,375,269 shares of common stock, at purchase prices per share ranging from $0.99 to $1.84 pursuant to Investor Notices, in satisfaction of the Initial Prepaid Advance liability in the amount of $6,000,000. As of March 28, 2023, the remaining balance on the initial Prepaid Advance is $5,750,000. See Note 10 - Prepaid Advance Liability in the accompanying consolidated financial statements for additional information.

For the years ended December 31, 2022 and 2021, cash used in operating activities was $17,354,125 and $6,805,674, respectively. Our cash used in operations for the year ended December 31, 2022 was primarily attributable to our net loss of $19,436,479, adjusted for non-cash expenses in the aggregate amount of $5,434,100, as well as $3,351,746 of net cash used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the year ended December 31, 2021 was primarily attributable to our net loss of $11,911,151, adjusted for non-cash expenses in the aggregate amount of $4,670,955, as well as $434,522 of net cash generated from changes in the levels of operating assets and liabilities.

For the years ended December 31, 2022 and 2021, cash used in investing activities was $4,647,974 and $2,737,235, respectively. Cash used in investing activities during the year ended December 31, 2022 was related to deposits paid for equipment of $1,421,432, purchases of property and equipment of $2,682,970, and the purchase of intangible assets for $543,572. Cash used in investing activities during the year ended December 31, 2021 was related to deposits paid for equipment of $2,153,950, purchases of property and equipment of $383,285, and the purchase of an intangible asset for $200,000.

For the years ended December 31, 2022 and 2021, cash provided by financing activities was $17,472,361 and $15,526,070, respectively. Cash provided by financing activities during the year ended December 31, 2022 was due to net 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 $250,000, proceeds from the exercise of options of $53,457. These amounts were 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, 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 year ended December 31, 2021 resulted from proceeds from the exercise of warrants in the amount of $11,719,204, proceeds from the sale of Series D Convertible Preferred Stock and warrants of $6,500,000, and proceeds from the exercise of options of $121,866. These amounts were partially offset by repayments of notes payable of $2,450,000, and payment of financing costs of $365,000.

As of December 31, 2022, future cash requirements for our current liabilities include $3,550,294 for accounts payable and accrued expenses and $223,645 for future payments under operating leases. The Company has also committed to spend $1,000,000 related to the asset purchase agreement, $825,000 related to sponsorship agreements, $889,171 related to capital expenditures for automation and testing equipment, $391,842 for research and development, and $201,867 for construction related to facility enhancements. In addition, the Company committed to pay nonrefundable license fees and a minimum royalty of $67,500. Future cash commitments for long term liabilities consists of $97,958 for the long-term lease and a minimum royalty payment of $27,500. As of December 31, 2022, the Company also had $9,000,000 of principal outstanding for a prepaid advance liability pursuant to the Supplemental SEPA. Subsequent to December 31, 2022, the Company issued 2,839,217 shares of common stock in settlement of $3,000,000 of the Prepaid Advance. As of the filing date of this Form 10-K, the principal balance due on the Prepaid Advance is $6,000,000. 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.

Our primary source of liquidity has historically been cash generated from equity and debt offerings. Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations as they become due within one year after the date that the financial statements are issued. The above conditions are indicators that substantial doubt about our ability to continue as

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a going concern could exist as we have a history of recurring net losses, recurring use of cash in operations and declining working capital. Despite these conditions, we have a successful track record of raising capital as needed and continue to have a positive, ongoing relationship with a financial institution that has provided access to capital and will continue to support us.

While no assurance can be provided that we will be successful in raising additional capital from Yorkville, as they are not obligated to advance funds so long as there is an outstanding Prepaid Advance, Yorkville has represented that in most scenarios, with mutual consent, they will continue to provide financial support as evidenced by the funds provided during March 2023. On March 10, 2023, the Company and Yorkville closed on a second Prepaid Advance in the amount of $2,000,000. Upon satisfaction of the Prepaid Advance liability, the Company will utilize its ability to draw down on the remaining $33,000,000 available under the SEPA.

Based on the above, we believe we have sufficient liquidity and access to future capital to continue as a going concern for a period of at least twelve months from the date the financial statements have been issued and that our above plans alleviate any potential substantial doubt about our ability to continue as a going concern. As of March 24, 2023, our cash balance was approximately $7.3 million.

Our consolidated financial statements included elsewhere in this Annual Report on Form 10-K 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.

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 and Estimates

The preparation of financial statements and related disclosures must be in conformity with U.S. GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which these reported amounts rely are reasonable based upon information available to us at the time that we make these estimates and judgments. Significant estimates used in these financial statements include, but are not limited to, assumptions used in projecting future cash flows and liquidity, fair value calculations for intangible assets, equity securities, stock-based compensation and the valuation allowance related to deferred tax assets. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. Certain estimates could be affected by external conditions, including those unique to the Company as well as general economic conditions. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below.

The following is not intended to be a comprehensive list of all of our accounting policies or estimates. Our accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies, in our financial statements included at the end of this Annual Report.

Revenue Recognition

Revenues are recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five-step model in accordance with ASC 606, Revenue from Contracts with Customers: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

The timing of our revenue recognition may differ from the timing of payment by our customers. A receivable is recorded when revenue is recognized prior to payment, and we have an unconditional right to payment. Alternatively, we record deferred revenue when payment is received from customers for which the Company had not yet satisfied its performance obligation under the contract, or the customers have not officially accepted the goods or services provided under the contract.

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Asset Acquisition

In determining whether an acquisition should be accounted for as a business combination or asset acquisition, we first determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the single identifiable asset or the group of similar assets is not deemed to be a business and is instead deemed to be an asset. An asset acquisition is recorded at cost, which includes capitalizing transaction costs, and does not result in the recognition of goodwill.

Stock-Based Compensation

We measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award on the date of grant. The fair value amount of the shares expected to ultimately vest is then recognized over the period for which services are required to be provided in exchange for the award, usually the vesting period. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period that the estimates are revised. We account for forfeitures as they occur.

Recently Issued Accounting Pronouncements

See Note 2 – Summary of Significant Accounting Policies of our consolidated financial statements included within this Annual Report for a summary of recently issued and adopted accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See “Index to Consolidated Financial Statements” which appears on page F-1 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) (the “Exchange Act”). Based on the foregoing evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level because of the material weakness discussed below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

During the year ended December 31, 2022, we did not design or maintain effective controls to ensure that there is an appropriate review and approval of electronic payments (wires, EFT’s, ACH’s and credit card payments).

We are in the process of implementing a detailed plan for remediation of the material weakness, including developing and maintaining preventative controls around the electronic payment process to ensure proper segregation of duties. As of December 31, 2022, we have upgraded our enterprise software from QuickBooks to NetSuite which provides more documented authorizations and workflow and have implemented a control whereby approval is obtained for credit card payments prior to the purchase being made. Subsequent to December 31, 2022, we have upgraded our banking platform such that all electronic payments will require dual approval in order for funds to be transferred.

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We will continue to devote time and attention to these remedial efforts, and we believe the above actions will be effective in remediating the material weakness described above during the first half of 2023. However, as we continue to evaluate and take corrective actions to improve our internal controls over financial reporting, we may take additional actions to address control deficiencies or modify certain of the remediation measures described above. Our remediation efforts will not be considered complete until the applicable controls operate for a sufficient period and our management has concluded, through testing, that these controls are operating effectively.

Notwithstanding the material weakness in internal control over financial reporting described above, our management has concluded that our consolidated financial statements included in the Annual Report on Form 10-K are fairly stated in all material respects in accordance with accounting principles generally accepted in the United States of America.

Management’s Report on Internal Control Over Financial Reporting

Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 Framework). Based on this evaluation, our principal executive officer and principal financial officer have concluded that our internal control over financial reporting was not effective as of December 31, 2022 as a result of the material weakness described above.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over current or future financial reporting.

Inherent Limitations of the Effectiveness of Controls

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

Attestation Report of Registered Public Accounting Firm

This Annual Report does not contain an attestation report of our independent registered public accounting firm related to internal control over financial reporting because the rules for smaller reporting companies provide an exemption from the attestation requirement.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Executive Officers and Directors

Our executive officers and directors and their ages are as follows:


Name	Age	Office
Michael Mo	52	Chief Executive Officer and Chairman
Dr. Timothy Knowles	76	Director, Executive Technical Fellow and Secretary
Simon Westbrook	74	Chief Financial Officer
Dr. William Walker	33	Chief Technical Officer
Keith Cochran	57	President and Chief Operating Officer
Michael Carpenter	59	Vice President of Engineering
Dr. Joanna Massey	54	Lead Director
Morio Kurosaki	66	Director

The term of office for each director is one year, or until the next annual meeting of the stockholders.

Michael Mo was appointed CEO and Director of the Company on March 16, 2011, is a technology entrepreneur and successful investor with over 20 years of experience in technology management, product development and marketing. In 2013, he co-founded KULR and has been serving as its CEO since then. From 2007 to 2015, Mr. Mo served as Senior Director of Business Development at Amlogic, Inc., a California high-tech company. Mr. Mo received his Master of Science in Electrical Engineering from the University of California at Santa Barbara in 1995.

Timothy R. Knowles was appointed Executive Technical Fellow and Director of the Company, has over 30 Years of Thermal Management R&D and product development experience for the most challenging space and industrial applications. He conducted research and built building products for various space and industrial customers such as NASA, Boeing, Raytheon, Jet Propulsion Lab, and others. Since 1983, Dr. Knowles has been working as President at ESLI. In addition, in 2013, Dr. Knowles co-founded KULR and has been serving as its CTO since then. From 1977 to 1983, he was a postdoctoral research physicist at Hamburg University. Mr. Knowles received Ph.D. in Physics from University of California San Diego in 1977 and B.S. in Physics from University of Southern California in 1969.

In recognition of Dr. William Walker’s value to the Company and his appointment to the CTO position, Dr. Timothy Knowles changed his title from Chief Technology Officer to Executive Technical Fellow. Dr. Knowles’ change in title was not as a result of any disagreements with the Company on any matter relating to its operations, policies or practices. Dr. Timothy Knowles will also remain a director of the Board.

Simon Westbrook was appointed Chief Financial Officer on March 15, 2018. In 2009, Mr. Westbrook founded and has since served as an officer of Aargo, Inc., a company specializing in financial consulting services to corporations in various tech-related industries. Prior to Aargo, Inc., Mr. Westbrook was CFO of Amber Networks, Inc., and the Chief Financial Officer of Sage, Inc. (NASDAQ: SAGI), a Silicon Valley company specializing in flat panel displays. Before joining Sage, Mr. Westbrook held a number of senior financial positions at Creative Technology (NASDAQ: CREAF), a leading PC multimedia company, and Atari Corp (AMEX: ATC), the video game and home computer company both in the USA and overseas. At various times, he has held positions as an advisory board member of the Silicon Valley Financial Executives Institute, and various technology start-up companies where he has assisted in strategic planning, fund raising and team development. Simon is a Chartered Accountant and holds a Master’s in Economics from Trinity College, Cambridge University.

Dr. William Walker was appointed Chief Technical Officer, effective November 1, 2022. Dr. Walker who originally joined the Company in March 2022 as Director of Engineering, has significant experience in professional and research related activities focused on thermo-electrochemical testing and analysis of lithium-ion (Li-ion) battery assemblies and related thermal management products designed for space exploration applications. Prior to joining the Company, from October 2021 to March 2022, Dr. Walker was a Research Scientist at Underwriters Laboratories Inc. since October of 2021. From June 2012 to October 2021, Dr. Walker was employed by the National Aeronautics and Space Administration (NASA) Johnson Space Center (JSC) where he focused on designing battery assemblies for human spaceflight applications capable of safely mitigating the effects of thermal runaway and preventing cell-to-cell propagation. Dr. Walker was recognized with a NASA Trailblazer award and with the RNASA Stellar Award for early career contributions to Li-ion battery thermal analysis and calorimetry methods. Dr. Walker continues to be engaged in the academic and

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professional communities focused on battery safety. Dr. Walker received his B.S. in Mechanical Engineering at West Texas A&M University (WTAMU) and Ph.D. in Materials Science and Engineering at the University of Houston (UH).

Keith Cochran was appointed President and Chief Operating Officer effective March 1, 2021. Mr. Cochran spent twenty-four years in various management roles at Jabil Greenpoint (NYSE: JBL) and most recently as Senior Vice President of its Global Business Unit in Singapore, where he led a smartphone technology division responsible for $3.7 billion in revenues. Mr. Cochran is based in the United States and has vast international experience working with partners in Singapore, India, Brazil, Mexico, China, France, Hungary and other countries. Mr. Cochran has a Bachelor of Science in Business Operations from Devry Institute of Technology.

Michael G. Carpenter serves as KULR’s Vice President of Engineering. Mr. Carpenter has been employed by ESLI since December 1983, serving as Director of the PCM Heatsink Group, Quality Manager, Facility Security Officer (FSO) in the Defense Industrial Security Program from 1988 to 1995. He also has been served as Safety Officer since he joined ESLI in 1983. Mr. Carpenter received his B.S. in Applied Mechanics from the University of California, San Diego in 1983.

Non-Executive Directors

Morio Kurosaki serves as a member of the Company’s board of directors since June 7, 2021. Mr. Kurosaki founded IT-Farm Corporation (“IT-Farm”), a Japanese venture capital firm, in 1999. Mr. Kurosaki has been the President of IT-Farm since the company’s inception. Mr. Kurosaki has led early investments in notable companies such as Zoom Video Communications (Nasdaq: ZM); ContextLogic (Nasdaq: WISH); Treasure Data, acquired by ARM Holdings (Nasdaq: NVDA); Tubi, acquired by Fox Corporation (Nasdaq: FOX); Red Hot Labs, acquired by Google (Nasdaq: GOOGL); lvl5, acquired by DoorDash (NYSE: DASH); Accel Technology, acquired by Marvell Technology Group (Nasdaq: MRVL), and Extreme DA, acquired by Synopsis (Nasdaq: SNPS). Mr. Kurosaki has also served as Asia-Pacific advisory member of ARM Holdings, acquired by SoftBank Group Corporation (OTCMKTS: SFTBY). Mr. Kurosaki started his business career at Intel Japan, thereafter, joining Western Digital Corporation (Nasdaq: WDC) as one of the earliest members of WDC’s Japanese division.

Joanna Massey serves as a member of the Company’s board of directors since June 7, 2021 and was appointed Lead Director on November 1, 2022. Dr. Massey is a public company Board Director and former Fortune 500 C-level communications executive. She helps companies expand market share and appeal to institutional investors by advising them on corporate governance, managing change, and navigating risk around environmental and social issues. In her board roles for public and private companies, Dr. Massey serves as Chair of Nominations & Governance, and she sits on the Audit, Compensation and M&A Committees. Dr. Massey has a PhD in psychology and 30 years of experience advising Chairmen and CEOs. She spent her operating career in the media and digital technology industries strategizing on global brand reputation management as Head of Communications at Condé Nast Entertainment and Senior Vice President of Corporate Communications at Lions Gate Entertainment (NYSE: LGF.A; LGF.B) and at The Hub Network, a joint venture between Discovery, Inc. (Nasdaq: WBD) and Hasbro, Inc. (Nasdaq: HAS). She also held Senior Vice President positions in communications and media relations at CBS Corporation and Viacom, Inc., now Paramount Global (Nasdaq: PARA). As a corporate communications executive, Dr. Massey managed integration during major M&A transactions at Lionsgate, CBS, and Discovery; corporate turnaround as Condé Nast pivoted from print to video; and crisis communications with consumers, employees, investors, regulators, and politicians. She is based in the United States and has international experience working with partners in Europe, the UK, China and India.

Board Composition

The Company’s directors are elected at the annual meeting of shareholders to hold office until the annual meeting of shareholders for the ensuing year or until their successors have been duly elected and qualified. Officers are elected annually by the board of directors and serve at the discretion of the board.

Our board currently consists of four directors, Michael Mo, Dr. Timothy Knowles, Morio Kurosaki, and Joanna Massey. Mr. Kurosaki and Dr. Joanna Massey are “independent” as defined under the NYSE American rules (as discussed below).

Family Relationships

There are no family relationships between any director and executive officer.

Director Independence

Our board of directors has determined that Morio Kurosaki and Dr. Joanna Massey are “independent,” as defined under the NYSE American rules. For purposes of the NYSE American rules, an independent director means a person other than an executive officer or employee of our company or any other individual having a relationship which, in the opinion of our board of directors, would

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interfere with the exercise of independent judgment in carrying out the responsibilities of a director, subject to certain additional limitations.

Committees of the Board of Directors

Our board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee. The composition and responsibilities of each of the committees of our board of directors are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.

Audit Committee

The members of our Audit Committee are Morio Kurosaki and Dr. Joanna Massey, with Mr. Kurosaki serving as the Chairperson. Each of Morio Kurosaki and Dr. Joanna Massey, is independent under the rules and regulations of the SEC and the listing standards of the NYSE American applicable to audit committee members. Our board of directors has determined that each of Morio Kurosaki and Dr. Joanna Massey qualify as an audit committee financial expert within the meaning of SEC regulations and meet the financial sophistication requirements of the NYSE American.

Our Audit Committee has the responsibility for, among other things, (i) selecting, retaining and overseeing our independent registered public accounting firm, (ii) obtaining and reviewing a report by independent auditors that describe the accounting firm’s internal quality control, and any materials issues or relationships that may impact the auditors, (iii) reviewing and discussing with the independent auditors standards and responsibilities, strategy, scope and timing of audits, any significant risks, and results, (iv) ensuring the integrity of the Company’s financial statements, (v) reviewing and discussing with the Company’s independent auditors any other matters required to be discussed by PCAOB Auditing Standard No. 1301, (vi) reviewing, approving and overseeing any transaction between the Company and any related person and any other potential conflict of interest situations, (vii) overseeing the Company’s internal audit department, (viii) reviewing, approving and overseeing related party transactions, and (ix) establishing and overseeing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters.

Compensation Committee

The members of our Compensation Committee are Morio Kurosaki and Dr. Joanna Massey, with Mr. Kurosaki and Dr. Massey serving as Co-Chairpersons. Our Compensation Committee has the responsibility for, among other things, (i) reviewing and approving the chief executive officer’s compensation based on an evaluation in light of corporate goals and objectives, (ii) reviewing and recommending to the Board the compensation of all other executive officers, (iii) reviewing and recommending to the Board incentive compensation plans and equity plans, (iv) reviewing and discussing with management the Company’s Compensation Discussion and Analysis and related information to be included in the annual report on Form 10-K and proxy statements, and (v) reviewing and recommending to the Board for approval procedures relating to Say on Pay Votes.

Nominating and Corporate Governance Committee

The members of our Nominating and Corporate Governance Committee are Morio Kurosaki and Dr. Joanna Massey, with Dr. Massey serving as the Chairperson. Our Nominating and Corporate Governance Committee has the responsibility relating to assisting the Board in, among other things, (i) identifying and screening individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors, (ii) recommending to the Board the approval of nominees for director, (ii) developing and recommending to our board of directors a set of corporate governance guidelines, and (iv) overseeing the evaluation of our board of director.

Code of Ethics

Our board of directors has adopted a Code of Business Conduct and Ethics (the “Code”). The Code applies to all of our directors, officers and employees. We have made the Code available on our website https://www.kulrtechnology.com/governance-documents/. We intend to disclose future amendments to, or waivers of, our Code, as and to the extent required by SEC regulations, at the same location on our website identified above or in public filings.

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Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:

●

any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

●

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

●

being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

●

being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of the issued and outstanding shares of our common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, during the fiscal year ended December 31, 2022, our officers, directors and greater than 10% beneficial owners have complied with all applicable filing requirements of Section 16(a), except that a Form 4 for Timothy Ray Knowles was filed late, resulting in the late disclosure of one transaction in his spouse’s shares over which Mr. Knowles does not have direct voting or dispositive control.

Nomination Process

As of December 31, 2022, we did not affect any material changes to the procedures by which stockholders may recommend nominees to the Board of Directors. We do not have any defined policy or procedure requirements for stockholders to submit recommendations or nominations for directors. The Board of Directors believes that, given the current stage of our development, a specific nominating policy would be premature and of little assistance until our operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and there is no specific process or procedure for evaluating such nominees. The Board of Directors assesses all candidates, whether submitted by management or stockholders, and makes recommendations for election or appointment.

A stockholder who wishes to communicate with the Board of Directors may do so by directing a written request addressed to our Chief Executive Officer at the address appearing on the face page of this annual report.

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ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following Summary Compensation Table sets forth all compensation earned in all capacities during the fiscal years ended December 31, 2022 and 2021 by (i) our principal executive officer, (ii) our two most highly compensated executive officers, other than our principal executive officer, who were serving as executive officers as of December 31, 2022 and whose total compensation for the 2022 fiscal year, as determined by Regulation S-K, Item 402, exceeded $100,000, (iii) a person who would have been included as one of our two most highly compensated executive officers, other than our principal executive officer, but for the fact that he was not serving as one of our executive officers as of December 31, 2022 (the individuals falling within categories (i), (ii) and (iii) are collectively referred to as the “Named Executive Officers”):


						Stock		Option		Total
Name and Principal Position	Year	Salary		Bonus		Awards		Awards		Earned
Michael Mo	2022	$	306,159	$	—	$	1,443,000	$	—	$	1,749,159	(1)
Chief Executive Officer	2021	$	233,661	$	—	$	—	$	2,579,000	$	2,812,661	(2)
Keith Cochran	2022	$	268,563	$	—	$	1,337,000	$	—	$	1,605,563	(3)
President and Chief Operating Officer	2021	$	206,571	$	—	$	8,131,420	$	—	$	8,337,991	(4)
William Walker	2022	$	151,250	$	12,000	$	309,000	$	—	$	472,250	(5)
Chief Technology Officer	2021	$	—	$	—	$	—	$	—	$	—

⁽¹⁾	Includes the incremental value of an equity modification for 1,500,000 shares of the Company’s common stock previously deemed to be earned upon achieving market capitalization milestones up to $4 billion, which will now vest in four equal increments over four years.

⁽²⁾	Includes an option for the purchase of up to 1,500,000 shares of the Company’s common stock at an exercise price of $2.60 per share, to be earned based upon achieving certain market capitalization milestones up to $4 billion. (This award was modified during 2022, see Note 1 above).

⁽³⁾	Includes the incremental value of an equity modification for 1,500,000 shares of the Company’s common stock previously deemed to be earned upon achieving market capitalization milestones up to $4 billion which will now vest in four equal increments over four years.

⁽⁴⁾

Includes 1,500,000 shares of the Company’s common stock to be earned based upon achieving certain market capitalization milestones up to $4 billion. (This award was modified during 2022, see Note 3 above). Also, includes 2,000,000 shares of the Company’s common stock which vests in four equal increments over four years, beginning in March of 2022.

⁽⁵⁾	Includes 150,000 shares of the Company’s common stock which vests in four equal increments over four years.

Employment Contracts; Termination of Employment and Change-in-Control Arrangements

We have not entered into employment agreements with our officers and directors and our Board of Directors has the sole discretion to pay salaries and incentive bonuses, including merit-based cash and equity bonuses.

On November 1, 2022, the Board, at the recommendation of the Compensation Committee, approved the following compensation for each of the following officers of the Company:

●

Dr. William Walker shall receive an annual salary of $210,000. In connection with his appointment, the Board granted Dr. Walker 100,000 shares of the Company’s common stock, which shall vest in four equal annual installments.

Equity Compensation Plans

On August 15 and November 5, 2018, the Board of Directors and a majority of the Company’s shareholders, respectively, approved the 2018 Equity Incentive Plan (the “2018 Plan”). Under the 2018 Plan, 15,000,000 shares of common stock of the Company are authorized for issuance. The 2018 Plan provides for the issuance of incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, and restricted stock units to employees, directors and consultants of the Company and its affiliates. The 2018 Plan requires the exercise price of stock options to be not less than the fair value of the Company’s common stock on the date of grant.

Compensation of Directors

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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.

Outstanding Equity Awards at Fiscal Year-End

The following table discloses information regarding outstanding equity awards granted or accrued as of December 31, 2022, for our named executive officers.


Outstanding Equity Awards
Stock Awards
	Number of Shares or Units of	Market Value of Units of
	Stock that have not vested	Stock that have not vested
Name	(#)	($)
Michael Mo (Chief Executive Officer)	1,500,000	$	1,800,000
Keith Cochran (President and Chief Operating Officer)	3,000,000		3,600,000
Dr. William Walker (Chief Technology Officer)	150,000		180,000

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table provides the names and addresses of each person known to us who own more than 5% of the outstanding common stock as of the date of this annual report, and by our officers and directors. Except as otherwise indicated, all shares are owned directly. Unless otherwise indicated, the address of each of the persons shown is c/o KULR Technology Group, Inc., 4863 Shawline Street, San Diego, CA 92111.


	Amount of
	Beneficial	Percentage
Name of Beneficial Owner	Ownership	Ownership ⁽¹⁾
Michael Mo (2) - CEO and Chairman	20,651,539	18.1	%
Dr. Timothy Knowles (3) - Executive Technical Fellow and Secretary	16,370,360	14.4	%
Simon Westbrook (4) - CFO	120,000	*
Dr. William Walker (5) - CTO	—	*
Keith Cochran (6) – President and COO	773,495	*
Michael Carpenter - VP of Engineering	500,000	*
Morio Kurosaki (7) - Director	542,500	*
Dr. Joanna Massey (8) - Director	52,500	*
All directors and executive officers as a group (8 persons)	39,010,394	34.2	%

*	Less than 1%

(1)	The percent of class is based on 114,040,804 shares (of which 120,000 shares have not been issued), which excludes, as of December 31, 2022, 2,121,162 shares that do not vest within 60 days of March 28, 2023.

(2)

Consists of 19,251,539 shares held directly by Mr. Mo and 1,400,000 shares held jointly by Mr. Mo and his spouse, Linda Mo, and excludes shares held by Mr. Mo’s son Alexander Mo and shares held by Mr. Mo’s son Brandon Mo, over which shares Mr. Mo disclaims beneficial ownership, as Mr. Mo has no control over the dispositive or voting power over the shares and his sons no longer live in the same household as Mr. Mo. Does not include a restricted stock award of 1,500,000 shares of the Company’s common stock that does not vest within 60 days.

(3)

Consists of 15,600,000 shares held directly by Mr. Knowles, 770,360 shares held by Mr. Knowles’ wife, Marianne Knight who maintains all voting and dispositive control over shares she owns, and excludes 1,500,000 shares held by Mr. Knowles’ daughter, Sonja Irene Knowles, over which shares Mr. Knowles disclaims beneficial ownership, as Mr. Knowles has no control over the dispositive or voting power over the shares and his daughter no longer lives in the same household as Mr. Knowles.

(4)	Consists of 120,000 shares that have been earned but not yet issued.

(5)	Does not include 150,000 restricted stock grants that do not vest within 60 days.

(6)	Does not include a restricted stock award of 1,000,000 shares of the Company’s common stock that does not vest within 60 days.

(7)

Consists of 20,000 vested shares of common stock granted by the Company, on June 7, 2021, the effective date of Mr. Kurosaki’s appointment as a director of the Company, 22,500 vested shares of common stock granted by the Company on November 1, 2022 (but excluding 15,000 shares that do no vest within 60 days), 400,000 shares of common stock acquired prior to being appointed

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director, and 100,000 shares held by IT-Farm Corporation, a Japanese venture and capital firm, of which Mr. Kurosaki is the founder and President.

(8)

Consists of 20,000 vested shares of common stock granted by the Company, on June 7, 2021, the effective date of Dr. Massey’s appointment as a director of the Company, 22,500 vested shares granted by the Company on November 1, 2022 (but excludes 15,000 shares that do not vest within 60 days), and 10,000 shares of common stock acquired in open market purchases.

Change in Control

We are not aware of any arrangement that might result in a change in control of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Other than as set forth below and compensation arrangements, including employment, and indemnification arrangements, discussed, there have been no transactions since January 1, 2021, in which the amount involved in the transaction exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets as at the year-end for the last two completed fiscal years, and to which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.

Other Transactions

None.

Director Independence

The Board evaluates the independence of each nominee for election as a director of our Company in accordance with the NYSE American rules. Pursuant to these rules, a majority of our Board must be “independent directors” within the meaning of the NYSE American Rules, and all directors who sit on our Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee must also be independent directors.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a summary of the fees billed or expected to be billed to us for professional services rendered with respect to the fiscal years ended December 31, 2022 and 2021:


	For the Fiscal Year Ended
	December 31,
	2022		2021
Audit Fees	$	208,060	$	155,530
Tax Fees		—		—
Total	$	208,060	$	155,530

Audit Fees

Audit fees consist of fees billed for services rendered by our independent auditors during the years ended December 31, 2022 and 2021 for the audit and review of our financial statements.

Tax Fees

Tax fees consist of fees billed for services rendered by our tax preparers during the years ended December 31, 2022 and 2021 in connection with the preparation and filing of our income tax returns.

Pre-Approval Policies

Our Audit Committee, has adopted a policy governing the pre-approval by the Board of Directors of all services, audit and non-audit, to be provided to our Company by our independent auditors. Under the policy, the Audit Committee has pre-approved the provision by our independent auditors of specific audit, audit related, tax and other non-audit services as being consistent with auditor independence. Requests or applications to provide services that require the specific pre-approval of the board of directors must be submitted to the Audit Committee by the independent auditors, and the independent auditors must advise the Audit Committee as to whether, in the independent auditor’s view, the request or application is consistent with the SEC’s rules on auditor independence.

The Audit Committee has considered the nature and amount of the fees billed by Marcum and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining the independence of Marcum.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES


Exhibit No.		Description
2.1		Share Exchange Agreement, dated June 8, 2017 (1)

3.1		Articles of Incorporation of the Company (2)

3.2		Bylaws of the Company (2)

3.3		Certificate of Incorporation of KULR Technology Corporation (3)

3.4		Amended and Restated Certificate of Incorporation of KULR Technology Corporation (3)

3.5		By-laws of KULR Technology Corporation (3)

3.6		Certificate of Designation of Series A Voting Preferred Stock, filed on June 6, 2017 (1)

3.7		Certificate of Amendment to the Certificate of Incorporation, effective August 30, 2018 (8)

3.8		Certificate of Designation of Series B Convertible Preferred Stock, filed on December 6, 2018 (9)

3.9		Certificate of Amendment to the Certificate of Incorporation, effective December 31, 2018 (10)

3.10		Certificate of Designation of Series C Convertible Preferred Stock, filed on August 19, 2019 (11)

3.11		Form of Certificate of Designation for Series D Convertible Preferred Stock (20)

4.1		Description of registrant’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934*

10.1		License and Development Agreement, dated April 15, 2013 (3)

10.2		Consulting Agreement, dated April 15, 2013 (3)

10.3		Letter of Intent by and between the Company and E3 Enterprise, dated April 20, 2016 (4)

10.4		Letter of Intent by and between the Company and KULR Technology Corporation (5)

10.5		Patent Assignment Agreement, dated November 10, 2016 (3)

10.6		Promissory Note issued by KULR Technology Corporation, dated March 31, 2017 (6)

10.7		Promissory Note issued by KULR Technology Corporation, dated June 8, 2017 (1)

10.8		Consulting Agreement, dated March 15, 2018 (7)

10.9		2018 KULR Technology Group Equity Incentive Plan (12)

10.10		Securities Purchase Agreement dated April 2, 2019 (13)

10.11		Subscription Agreement, as supplemented, for Common Stock Offering (14)

10.12		Rescission and Termination Agreement dated July 5, 2019 (15)

10.13		Form of Subscription Agreement (16)

10.14		Form of Warrant (16)

10.15		Standby Equity Distribution Agreement dated February 27, 2020 (17)

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10.16		Note Purchase Agreement dated February 27, 2020 (17)

10.17		Promissory Note dated February 27, 2020 (17)

10.18		Note Purchase Agreement dated July 20, 2020 (18)

10.19		Promissory Note dated July 20, 2020 (18)

10.20		Form of Securities Purchase Agreement (19)

10.21		Form of Warrant (19)

10.22		Co-Placement Agency Agreement (19)

10.23		Form of Securities Purchase Agreement dated May 19. 2021 (20)

10.24		Form of Warrant (20)

10.25		Standby Equity Purchase Agreement, dated May 13, 2022, by and between KULR Technology Group, Inc. and YA II PN, Ltd. (21)

10.26		Note Purchase Agreement, dated May 13, 2022, by and between KULR Technology Group, Inc. and YA II PN, Ltd. (21)

10.27		Promissory Note, dated May 13, 2022 (21)

10.28		Amendment, dated June 3, 2022, to the Standby Equity Purchase Agreement by and between KULR Technology Group, Inc. and YA II PN, Ltd. (22)

10.29		Supplemental Agreement dated as of September 23, 2022 to the Standby Equity Purchase Agreement dated as of May 16, 2022 between KULR Technology Group, Inc. and YA II PN, LTD. (23)

10.30		Asset Purchase Agreement, effective as of October 6, 2022, by and among KULR Technology Group, Inc., Vibetech International, LLC, and Norman Serrano (24)

21.1		List of Subsidiaries (3)

23.1		Consent of Marcum LLP*

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		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

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

101.INS		Inline XBRL Instance*

101.SCH		Inline XBRL Taxonomy Extension Schema*

101.CAL		Inline XBRL Taxonomy Extension Calculation*

101.DEF		Inline XBRL Taxonomy Extension Definition*

101.LAB		Inline XBRL Taxonomy Extension Labels*

101.PRE		Inline XBRL Taxonomy Extension Presentation*

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

*	Filed herewith.

(1)	Previously filed as an exhibit to Form 8-K on June 12, 2017 and incorporated herein by this reference.

(2)	Previously filed as an exhibit on Form 10-12G on January 7, 2016 (File No.: 000-55564) and incorporated herein by this reference.

(3)	Previously filed as an exhibit to Form 8-K on June 19, 2017 and incorporated herein by this reference.

(4)	Previously filed on Form S-1 on June 28, 2016 (File No.: 333-212272) and incorporated herein by this reference.

(5)	Previously filed as an exhibit to Form 8-K on November 3, 2016 and incorporated herein by this reference.

(6)	Previously filed as an exhibit to Form 8-K on April 5, 2017 and incorporated herein by this reference.

(7)	Previously filed as an exhibit to Form 8-K on March 15, 2018 and incorporated herein by this reference.

(8)	Previously filed as an exhibit to Form 8-K on August 30, 2018 and incorporated herein by this reference.

(9)	Previously filed as an exhibit to Form 8-K on December 6, 2018 and incorporated herein by this reference.

(10)	Previously filed as an exhibit to Form 8-K on January 7, 2019 and incorporated herein by this reference.

(11)	Previously filed as an exhibit to Form 8-K on August 23, 2019 and incorporated herein by this reference.

(12)	Previously filed as an exhibit to Form S-8 on October 9, 2018 and incorporated herein by this reference.

(13)	Previously filed as an exhibit to Form 8-K on April 3, 2019 and incorporated herein by this reference.

(14)	Previously filed as an exhibit to Form 10-Q on May 14, 2019 and incorporated herein by this reference.

(15)	Previously filed as an exhibit to Form 8-K on July 5, 2019 and incorporated herein by this reference.

(16)	Previously filed as an exhibit to Form 8-K on December 5, 2019 and incorporated herein by this reference.

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

(18)	Previously filed as an exhibit to Form 8-K on July 21, 2020 and incorporated herein by this reference.

(19)	Previously filed as an exhibit to Form 8-K on December 31, 2020 and incorporated herein by this reference.

(20)	Previously filed as an exhibit to Form 8-K on May 20, 2021 and incorporated herein by this reference.

(21)	Previously filed as an exhibit to Form 8-K on May 16, 2022 and incorporated herein by this reference.

(22)	Previously filed as an exhibit to Form 8-K on June 3, 2022 and incorporated herein by this reference.

(23)	Previously filed as an exhibit to Form 8-K on September 23, 2022 and incorporated herein by this reference.

(24)	Previously filed as an exhibit to Form 8-K on October 6, 2022 and incorporated herein by this reference.

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


March 28, 2023	KULR Technology Group, Inc.

	By:	/s/ Michael Mo
		Michael Mo
		Chief Executive Officer and Chairman
		(Principal Executive Officer)

	By:	/s/ Simon Westbrook
		Simon Westbrook
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature		Title	Date

By:	/s/ Michael Mo	Chief Executive Officer and Chairman	March 28, 2023
	Michael Mo

By:	/s/ Timothy Knowles	Executive Technical Fellow and Director	March 28, 2023
	Timothy Knowles

By:	/s/ Simon Westbrook	Chief Financial Officer	March 28, 2023
	Simon Westbrook

By:	/s/ William Walker	Chief Technical Officer	March 28, 2023
	William Walker

By:	/s/ Keith Cochran
	Keith Cochran	President and Chief Operating Officer	March 28, 2023

By:	/s/ Joanna Massey
	Joanna Massey	Lead Director	March 28, 2023

By:	/s/ Morio Kurosaki	Director	March 28, 2023
	Morio Kurosaki

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Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)	F-2

Consolidated Balance Sheets as of December 31, 2022 and 2021	F-4

Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021	F-5

Consolidated Statement of Changes in Stockholders’ Equity for the Year Ended December 31, 2022	F-6

Consolidated Statement of Changes in Stockholders’ Equity for the Year Ended December 31, 2021	F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021	F-8

Notes to Consolidated Financial Statements	F-10

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

KULR Technology Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of KULR Technology Group, Inc. and Subsidiary (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity (deficiency) and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audits matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Description of Matter No. 1

As disclosed in Note 3 to the December 31, 2022 consolidated financial statements, on October 5, 2022 the Company entered into an agreement to purchase all of the assets, including intellectual property, of Vibetech International, LLC (“Vibetech”) for consideration of $3,500,000, of which, $2,000,000 will be paid in cash, and $1,500,000 is to be paid in common stock. The Company also entered into an employment agreement with the owner of Vibetech for which significant amounts of the consideration paid are contingent and subject to claw back provisions tied to such employment.

We identified the Company’s accounting for the acquisition to be a critical audit matter as such accounting can be complex and require judgement on the part of management.

F-2

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How We Addressed Matter No. 1 in Our Audit

Our audit procedures to address this critical audit matter included the following: (i) we examined the contractual purchase agreements between the Company and Vibetech, (ii) we evaluated the various assets acquired to ensure management’s accounting analysis was complete, (iii) we evaluated the terms and conditions of the employment agreement between the Company and the former owner of Vibetech, including the contingent consideration arrangement in which the payments are automatically forfeited if employment terminates, and (iv) we evaluated the Company’s conclusions that a single asset (the intellectual property) constituted the majority of the purchase price and should not be accounted for as a business combination. We also engaged the assistance of our firm’s internal valuation specialists in our overall testing procedures.

Description of Matter No. 2

As disclosed in Note 2 to the December 31, 2022 consolidated financial statements, the Company is required to evaluate its liquidity and ability to continue as a going concern for a period within one year after the date that the financial statements are issued. As disclosed, the Company concluded that matters existed that could indicate substantial doubt about its ability to continue as a going concern was probable as a result of its current working capital levels, history of operating and net losses, and cash used in operating and investing activities in 2022. The Company also disclosed its plans to alleviate the indicators that substantial doubt exists. We identified the Company’s evaluation of its liquidity and financial conditions to be a critical audit matter as such evaluation required significant estimates and judgment on the part of management.

How We Addressed Matter No. 2 in Our Audit

Our audit procedures to address this critical audit matter included the following: (i) we evaluated the Company’s future cash flow projections, which included examining future sources of revenue, comparing future cash outflows to historical amounts, and performing independent analytical procedures over the Company’s future cash flow projections, (ii) we reviewed and evaluated the Company’s plans for dealing with adverse conditions and events if liquidity was to become constrained in the future, (iii) we evaluated relevant transactions that transpired subsequent to December 31, 2022 that had an impact on the liquidity analysis, including recent capital raises and conversions of the prepaid advance liability, and (iv) we evaluated the Company’s contractual arrangement with the financial institution identified in Note 2, which included independently communicating with such financial institution regarding the arrangement and their ability and intent to continue to support the Company.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2018.

Los Angeles, CA

March 28, 2023

F-3

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS


	December 31,
	2022		2021
Assets
Current Assets:
Cash	$	10,333,563	$	14,863,301
Accounts receivable		1,542,118		136,326
Inventory		1,962,035		191,311
Inventory deposits		285,260		309,688
Prepaid expenses and other current assets		1,613,008		260,672
Total Current Assets		15,735,984		15,761,298
Property and equipment, net		3,193,041		374,475
Equipment deposits		3,514,937		2,153,950
Security deposits		60,441		58,941
Intangible assets, net		720,768		216,952
Right of use asset		328,941		665,687
Deferred financing costs		71,818		—
Total Assets	$	23,625,930	$	19,231,303

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	1,408,017	$	454,507
Accrued expenses and other current liabilities		2,142,277		1,163,227
Accrued issuable equity		227,956		290,721
Lease liability, current portion		223,645		262,379
Loan payable		—		155,226
Prepaid advance liability, net of discount, current portion		5,655,612		—
Deferred revenue		23,000		132,303
Total Current Liabilities		9,680,507		2,458,363
Lease liability, non-current portion		97,958		407,898
Prepaid advance liability, net of discount, non-current portion		3,196,678		—
Accrued interest, non-current		157,054		—
Total Liabilities		13,132,197		2,866,261
Commitments and contingencies (Note 16)

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 December 31, 2022 and 2021		—		—
Series B Convertible Preferred Stock, 31,000 shares designated; none issued and outstanding at December 31, 2022 and 2021		—		—
Series C Preferred Stock, 400 shares designated; none issued and outstanding at December 31, 2022 and 2021		—		—
Series D Preferred Stock, 650 shares designated; none issued and outstanding at December 31, 2022 and 2021		—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized; 113,202,749 and 113,071,587 shares issued and outstanding at December 31, 2022, respectively; 104,792,072 shares issued and outstanding at December 31, 2021		11,320		10,479
Treasury stock, at cost; 131,162 and 0 shares held at December 31, 2022 and December 31, 2021, respectively		(296,222)		—
Additional paid-in capital		53,372,673		39,512,122
Accumulated deficit		(42,594,038)		(23,157,559)
Total Stockholders' Equity		10,493,733		16,365,042
Total Liabilities and Stockholders' Equity	$	23,625,930	$	19,231,303

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

F-4

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Years Ended
	December 31,
	2022		2021
Revenue	$	3,994,634	$	2,412,868
Cost of revenue		1,630,527		1,102,038
Gross Profit		2,364,107		1,310,830

Operating Expenses
Research and development		3,977,563		1,662,183
Selling, general, and administrative		16,672,526		11,162,062
Total Operating Expenses		20,650,089		12,824,245
Loss From Operations		(18,285,982)		(11,513,415)

Other (Expense) Income
Interest expense		(935,874)		(3,336)
Gain on forgiveness of PPP loan and interest		158,675		—
Debt redemption costs		—		(140,000)
Amortization of debt discount		(511,825)		(128,198)
Loss on debt extinguishment		(8,508)		—
Change in fair value of accrued issuable equity		147,035		(125,821)
Loss on foreign currency transactions		—		(381)
Total Other Expense, net		(1,150,497)		(397,736)
Net Loss		(19,436,479)		(11,911,151)

Deemed dividend to Series D preferred stockholders		—		(2,624,326)
Net Loss Attributable to Common Stockholders	$	(19,436,479)	$	(14,535,477)

Net Loss Per Share - Basic and Diluted	$	(0.18)	$	(0.15)

Weighted Average Number of Common Shares Outstanding - Basic and Diluted		105,655,773		95,749,620

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

F-5

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2022


				Additional							Total
	Common Stock			Paid-In		Treasury Stock			Accumulated		Stockholders'
	Shares	Amount		Capital		Shares	Amount		Deficit		Equity
Balance - January 1, 2022	104,792,072	$	10,479	$	39,512,122	—	$	—	$	(23,157,559)	$	16,365,042
Treasury stock held upon the vesting of restricted common stock	—		—		—	194,704		(439,728)		—		(439,728)
Treasury stock issued upon the exercise of options	—		—		(95,124)	(63,542)		143,506		—		48,382
Common stock issued upon the exercise of options	2,500		—		5,075	—		—		—		5,075
Common stock issued upon the exercise of warrants	2,416,668		242		3,020,594	—		—		—		3,020,836
Common stock issued pursuant to the SEPA and Supplemental SEPA agreements:
For cash, net of issuance costs (1)	160,782		16		249,002	—		—		—		249,018
In satisfaction of notes payable	94,458		9		149,991	—		—		—		150,000
For the repayment of prepaid advance liability	5,375,269		538		6,440,305	—		—		—		6,440,843
Stock-based compensation:
Restricted stock awards	310,000		31		(31)	—		—		—		—
Common stock issued for services	51,000		5		109,845	—		—		—		109,850
Amortization of restricted stock units	—		—		1,945,272	—		—		—		1,945,272
Amortization of stock options	—		—		103,220	—		—		—		103,220
Amortization of market-based award	—		—		1,932,402	—		—		—		1,932,402
Net loss	—		—		—	—		—		(19,436,479)		(19,436,479)
Balance - December 31, 2022	113,202,749	$	11,320	$	53,372,673	131,162	$	(296,222)	$	(42,594,038)	$	10,493,733

⁽¹⁾Represents gross proceeds of $250,000 less $982 for amortization of deferred issuance costs.

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

F-6

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2021


	Series B Convertible			Series D Convertible						Additional							Total
	Preferred Stock			Preferred Stock			Common Stock			Paid-In		Treasury Stock			Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Shares	Amount		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 the conversion of Series B Convertible Preferred Stock	(13,972)		(1)	—		—	698,600		70		(69)	—		—		—		—
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	—		—	—		—	6,793,358		679		11,718,525	—		—		—		11,719,204
Common stock issued upon the exercise of options	—		—	—		—	184,784		18		121,848	—		—		—		121,866
Common stock issued as partial consideration for intangible asset	—		—	—		—	6,000		1		17,999	—		—		—		18,000
Stock-based compensation:
Common stock issued for services	—		—	—		—	170,000		17		376,892	—		—		—		376,909
Restricted common stock issued	—		—	—		—	2,677,744		268		(268)	—		—		—		—
Restricted common stock cancelled	—		—	—		—	(117,744)		(12)		12	—		—		—		—
Amortization of restricted common stock	—		—	—		—	—		—		1,606,578	—		—		—		1,606,578
Amortization of stock options	—		—	—		—	—		—		68,239	—		—		—		68,239
Amortization of market-based award	—		—	—		—	—		—		2,111,845	—		—		—		2,111,845
Net loss	—		—	—		—	—		—		—	—		—		(11,911,151)		(11,911,151)
Balance - December 31, 2021	—	$	—	—	$	—	104,792,072	$	10,479	$	39,512,122	—	$	—	$	(23,157,559)	$	16,365,042

⁽¹⁾	Represents $6,500,000 of relative fair value of preferred stock issued, net of cash issuance costs of $365,000.

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Years Ended
	December 31,
	2022		2021
Cash Flows From Operating Activities:
Net loss	$	(19,436,479)	$	(11,911,151)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		511,825		128,198
Non-cash lease expense		193,106		149,130
Depreciation and amortization expense		259,399		67,715
Non-cash interest expense		576,932		—
Gain on forgiveness of PPP loan and interest		(158,675)		—
Change in fair value of accrued issuable equity		(147,035)		125,821
Stock-based compensation		4,175,014		4,200,091
Bad debt expense		15,026		—
Loss on extinguishment of note payable		8,508		—
Changes in operating assets and liabilities:
Accounts receivable		(1,420,818)		(80,834)
Inventory		(1,770,724)		(135,859)
Prepaid expenses and other current assets		(1,324,836)		(110,204)
Inventory deposits		(3,072)		(309,688)
Security deposits		(1,500)		(50,213)
Accounts payable		658,715		385,342
Accrued expenses and other current liabilities		824,826		768,215
Lease liability		(205,034)		(144,540)
Deferred revenue		(109,303)		112,303
Total Adjustments		2,082,354		5,105,477
Net Cash Used In Operating Activities		(17,354,125)		(6,805,674)

Cash Flows From Investing Activities:
Deposits for purchase of property and equipment		(1,421,432)		(2,153,950)
Purchases of property and equipment		(2,682,970)		(383,285)
Acquisition of intangible assets		(543,572)		(200,000)
Net Cash Used In Investing Activities		(4,647,974)		(2,737,235)

Cash Flows from Financing Activities:
Proceeds from note payable ⁽¹⁾		4,750,000		—
Net proceeds from the SEPA		250,000		—
Net proceeds from the prepaid advance liability ⁽²⁾		10,573,068		—
Issuance costs on prepaid advance liability		(85,000)		—
Payment of financing costs incurred in connection with the SEPA		(72,800)		—
Notes payable issuance costs		(17,200)		—
Payment of financing costs		—		(365,000)
Repayments of notes payable		(1,000,000)		(2,450,000)
Proceeds from the exercise of options		53,457		121,866
Proceeds from the exercise of warrants		3,020,836		11,719,204
Proceeds from sale of Series D Convertible Preferred Stock, common stock and warrants		—		6,500,000
Net Cash Provided By Financing Activities		17,472,361		15,526,070

Net (Decrease) Increase In Cash		(4,529,738)		5,983,161
Cash - Beginning of Year		14,863,301		8,880,140
Cash - End of Year	$	10,333,563	$	14,863,301

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

(2)	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.

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS, continued


	For the Years Ended
	December 31,
	2022		2021
Supplemental Disclosures of Cash Flow Information:

Cash paid during the year for:
Interest	$	86,062	$	1,635
Taxes	$	—	$	—

Non-cash investing and financing activities:
Right of use asset for lease liability	$	—	$	814,817
Additions to property and equipment included in accounts payable	$	294,794	$	—
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	$	—
Original issue discount on prepaid advance liability	$	789,474	$	—
Common stock issued in satisfaction of note payable	$	150,000	$	—
Common stock issued in satisfaction of prepaid advance liability and interest	$	6,440,843	$	—
Deposits applied to purchase of property and equipment	$	60,445	$	—
Deferred financing costs charged to additional paid in capital	$	982	$	—
Common shares issued as partial consideration for intangible asset	$	—	$	18,000

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTANTIES

Organization and Operations

KULR Technology Group, Inc. was incorporated on December 11, 2015 under the laws of the State of Delaware as KT High-Tech Marketing, Inc. Effective August 30, 2018, KT High-Tech Marketing, Inc. changed its name to KULR Technology Group, Inc.

KULR Technology Group, Inc., through its wholly-owned subsidiary, KULR Technology Corporation (collectively referred to as “KULR” or the “Company”), develops and commercializes high-performance thermal management technologies for electronics, batteries, and other components across a range of applications. Currently, the Company is focused on targeting both high performance aerospace and Department of Defense (“DOD”) applications, such as space exploration, satellite communications, and underwater vehicles, and applying them to mass market commercial applications, such as lithium-ion battery energy storage, electric vehicles, 5G communication, cloud computer infrastructure, consumer and industrial devices.

Risks and Uncertainties

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. 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.

On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. A statement by the Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. The standard deposit insurance amount is up to $250,000 per depositor, per insured bank, for each account ownership category. Although we do not have any funds deposited with the aforementioned banks that failed, we regularly maintain cash balances with other financial institutions in excess of the FDIC insurance limit. A failure of a depository institution to return deposits could impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The consolidated financial statements of the Company include the accounts of KULR Technology Group, Inc. and its wholly-owned subsidiary, KULR Technology Corporation. All significant intercompany transactions have been eliminated in the consolidation. The

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Liquidity

During the year ended December 31, 2022, the Company incurred a net loss in the amount of $19,436,479 and used cash in operations of $17,354,125. As of December 31, 2022, the Company had cash of $10,333,563 and working capital of $6,055,477. During the year ended December 31, 2022, the Company generated net cash from financing activities of $17,472,361, mainly from proceeds received from Prepaid Advances, the issuance of a note payable, shares of common stock, and from the exercise of options and warrants to purchase common stock.

The Company’s primary source of liquidity has historically been cash generated from equity and debt offerings. Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet future financial obligations as they become due within one year after the date that the financial statements are issued. The above conditions are indicators that substantial doubt about the Company’s ability to continue as a going concern could exist as the Company has a history of recurring net losses, recurring use of cash in operations and declining working capital. Despite these conditions, the Company has a successful track record of raising capital as needed and continues to have a positive, ongoing relationship with a financial institution that has provided access to capital and will continue to support KULR.

On May 13, 2022, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”), which gives the Company the right, but not the obligation, to sell up to $50,000,000 of its shares of common stock to YA II PN, Ltd. (“Yorkville”) 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 year ended December 31, 2022, the Company received aggregate gross proceeds of $4,750,000 from a Promissory Note payable and received gross proceeds of $400,000 and $15,000,000 under the SEPA and the Supplemental SEPA, respectively (of which $150,000 and $3,850,000, respectively, was used to repay the Promissory Note; see Note 12 – Notes Payable). The Company is not permitted to initiate additional sales of its common stock under the SEPA until the Prepaid Advance liability ($8,852,290 at December 31, 2022) is settled. Subsequent to December 31, 2022, the Company issued 3,153,036 shares of common stock, at purchase price per share ranging from $0.90 to $1.20, in satisfaction of the Prepaid Advance Liability in the amount of $3,579,932. See Note 10 – Prepaid Advance Liability and Note 15 – Stockholders’ Equity for additional information.

While no assurance can be provided that the Company will be successful in raising additional capital from Yorkville, as they are not obligated to advance funds to the Company so long as there is an outstanding Prepaid Advance, Yorkville has represented that in most scenarios, with mutual consent, they will continue to provide financial support as evidenced by the funds provided during March 2023. On March 10, 2023, the Company and Yorkville closed on a second Prepaid Advance in the amount of $2,000,000. Upon satisfaction of the Prepaid Advance liability, the Company will utilize its ability to draw down on the remaining $33,000,000 available under the SEPA.

Based on the above, the Company believes it has sufficient liquidity and access to future capital to continue as a going concern for a period of at least twelve months from the date the financial statements have been issued and that its above plans alleviate any potential substantial doubt about the entity’s ability to continue as a going concern. As of March 24, 2023, the Company’s cash balance was approximately $7.3 million.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED 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 financial statements include, but are not limited to, fair value calculations for intangible assets, equity securities, stock-based compensation and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

See Note 2 – Summary of Significant Accounting Policies, Stock-Based Compensation for additional discussion of the use of estimates in estimating the fair value of the Company’s common stock.

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. Gains resulting from differences between the cost of treasury stock and the re-issuance proceeds are credited to additional paid in capital. Losses resulting from differences between the cost of treasury stock and the re-issuance proceeds are debited to additional paid-in capital.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consisted primarily of cash and accounts receivable. The Company’s concentrations of credit risk also includes concentrations from key customers and vendors.

Cash Concentrations

A significant portion of the Company’s cash is held at one major financial institution. The Company has not experienced any losses in such accounts. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. There were uninsured balances of $9,833,541 and $14,363,301 as of December 31, 2022 and 2021, respectively.

Customer and Revenue Concentrations

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				Account Receivables
	For the Years Ended
	December 31,				As of December 31,
	2022		2021		2022		2021
Customer A	13	%	29	%	34	%	*
Customer B	*		*		*		34	%
Customer C	42	%	25	%	*		*
Customer D	*		30	%	*		42	%
Customer E	*		*		*		21	%
Customer F	32	%	*		61	%	*
Total	87	%	84	%	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

F-12

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 years ended December 31, 2022 and 2021:


	For the Years Ended
	December 31,
	2022		2021
Vendor A	*		*
Vendor B	*		14	%
	0	%	14	%

*	Less than 10%

Accounts Receivable

Accounts receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. As of December 31, 2022 and 2021, no allowances for uncollectible amounts were determined to be necessary. Management estimates the allowance for bad debts based on existing economic conditions, the financial conditions of the customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted.

Inventory

Inventory is comprised of carbon fiber velvet (“CFV”) thermal interface solutions and internal short circuit batteries, which are available for sale, as well as raw materials and work in process related primarily to the manufacture of safe cases. Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. The cost of inventory that is sold to third parties is included within cost of sales and the cost of inventory that is given as samples is included within operating expenses. The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down to net realizable value. On occasion, the Company pays for inventory prior to receiving the goods. These payments are recorded as inventory deposits until the goods are received and these costs are included in the current asset section of the balance sheet. As of December 31, 2022 and 2021, inventory deposits were $285,260 and $309,688, respectively. Finished goods inventory is held on-site at the San Diego, California location. Raw materials are held off-site with certain suppliers.

Inventory at December 31, 2022 and 2021 consisted of the following:


	December 31,		December 31,
	2022		2021
Raw materials	$	1,075,310	$	—
Work-in-process		2,977		—
Finished goods		883,748		191,311
Total inventory	$	1,962,035	$	191,311

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation which is recorded commencing at the in-service date using the straight-line method at rates sufficient to charge the cost of depreciable assets to operations over their estimated useful lives, which range from 3 to 7 years (see Note 5 – Property and Equipment for additional details). Leasehold improvements are amortized over the shorter of (a) the useful life of the asset; or (b) the remaining lease term. Maintenance and repairs are charged to operations as incurred. The Company capitalizes cost attributable to the betterment of property and equipment when such betterment extends the useful life of the assets. Vendor deposits toward the purchase of property and equipment are reflected as equipment deposits on the accompanying balance sheets.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company reviews for the impairment of long-lived assets annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying value.

Intangibles

Intangible assets are stated at fair value as of the date acquired, less accumulated amortization. Amortization is calculated based on the estimated useful lives of the assets, using the straight-line method or another method that more fairly represents the utilization of the assets, as follows:


		Estimated Useful Life
Patent		17.3 years
Intellectual property		5.0 years

The Company periodically evaluates the remaining useful lives of our intangible assets to determine whether events or circumstances warrant a revision to the remaining periods of amortization. In the event that the estimate of an intangible asset’s remaining useful life has changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. If it is determined that an intangible asset has an indefinite useful life, that intangible asset would be subject to impairment testing annually or whenever events or circumstances indicate that its carrying value may not, based on future undiscounted cash flows or market factors, be recoverable. An impairment loss, the recorded amount of which would be based on the fair value of the intangible asset at the measurement date, would be recorded in the period in which the impairment determination was made.

Fair Value of Financial Instruments

The Company measures the fair value of financial assets and liabilities based on the guidance of Accounting Standards Codification (“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, accrued expenses and other current liabilities, notes payable and loans payable approximate fair values due to the short-term nature of these instruments.

Preferred Stock

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. The Company’s preferred shares are classified as stockholders’ equity because they are not subject to mandatory redemption, which would result in liability classified instruments measured at fair value, and because they are not conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) which would result in temporary equity classified instruments.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

If the instrument is determined not to be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the market price of the Company’s common stock as of the commitment date to the effective conversion price of the instrument.

Accrued Issuable Equity

The Company records accrued issuable equity when it is contractually obligated to issue shares and there has been a delay in the issuance of such shares. Accrued issuable equity is recorded and carried at fair value with changes in its fair value recognized in the Company’s consolidated statements of operations. Once the underlying shares of common stock are issued, the accrued issuable equity is reclassified to equity as of the share issuance date at the then current fair market value of the common stock.

Deferred Financing Costs

Deferred financing costs, which primarily consist of direct, incremental professional fees incurred in connection with a debt or equity financing, are capitalized as deferred financing costs (a non-current asset) on the balance sheet. Once the financing closes, the Company reclassifies such costs as either discounts to notes payable or as a reduction of proceeds received from equity transactions so that such costs are recorded as a reduction of additional paid-in capital. If the completion of a contemplated financing was deemed to be no longer probable, the related deferred offering costs would be charged to general and administrative expense in the consolidated financial statements.

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:

●

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 recognizes revenue primarily from the following different types of contracts:

●

Product sales – Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies its performance obligation, which is generally at the time it ships the product to the customer.

●

Contract services – Revenue is recognized at the point in time that the Company satisfies its performance obligation under the contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the Company’s revenue recognized in its consolidated statements of operations:


	For the Years Ended
	December 31,
	2022		2021
Product sales	$	2,643,325	$	1,495,328
Contract services		1,351,309		917,540
Total revenue	$	3,994,634	$	2,412,868

As of December 31, 2022 and 2021, the Company had $23,000 and $132,303 of deferred revenue, respectively, from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract, or the customers have not officially accepted the goods or services provided under the contract.

Deferred Labor Costs

As of December 31, 2022 and 2021, the Company had $34,402 and $84,324, respectively, of deferred labor costs, which is included in prepaid expenses and other current assets in the Company’s consolidated balance sheets. Deferred labor costs represent costs incurred to fulfill the Company’s contract service revenue. The Company will recognize the deferred labor costs as cost of revenues at the point in time that the Company satisfies its performance obligation under the respective contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

Shipping and Handling Costs

Amounts billed to a customer in a sales transaction related to shipping and handling are recorded as revenue. Costs incurred for shipping and handling are included as cost of revenues on the accompanying consolidated statements of operations.

Research and Development

Research and development include expenses incurred in connection with the research and development of our CFV thermal management solution, high-areal-capacity battery electrodes, 3D engineering for a rechargeable battery and non-cash stock-based compensation expenses. Research and development expenses are charged to operations as incurred.

Advertising Costs

Advertising costs are expensed in the period incurred. Advertising costs charged to operations for the years ended December 31, 2022 and 2021 were $874,398 and $145,025, respectively, and are included in selling, general and administrative in the consolidated statements of operations.

Stock-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award since the fair value of the award is more readily determinable than the value of the services. The fair value of the award is measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Upon the exercise of an award, the Company generally issues new shares of common stock out of its authorized shares, but may issue treasury stock, when available.

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.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	For the Twelve Months Ended
	December 31,
	2022		2021
Numerator:
Net loss	$	(19,436,479)	$	(11,911,151)
Deemed dividend to Series D preferred stockholders		—		(2,624,326)
Net loss attributable to common stockholders	$	(19,436,479)	$	(14,535,477)

Denominator (weighted average quantities):
Common shares issued		107,683,574		97,708,080
Less: Treasury shares purchased		(125,015)		—
Less: Unvested restricted shares		(2,005,109)		(2,037,897)
Add: Accrued issuable equity		102,323		79,437
Denominator for basic and diluted net loss per share		105,655,773		95,749,620

Basic and diluted net loss per common share	$	(0.18)	$	(0.15)

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


	December 31,
	2022	2021
Unvested restricted stock	5,042,500	2,590,000
Unvested market -based equity awards	—	3,000,000
Options	640,216	405,216
Warrants	2,524,410	2,594,553
Total	8,207,126	8,589,769

The table above does not include shares to be issued in satisfaction of the remaining prepaid advance liability (see Note 10 – Prepaid Advance Liability).

Operating Leases

The Company leases properties under operating leases. For leases in effect upon adoption of Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” at January 1, 2020 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 prepaid 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.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse.

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements as of December 31, 2022 and 2021. 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 selling, general and administrative expenses in the consolidated statements of operations.

Reclassifications

Certain prior period balances have been reclassified in order to conform to the current period presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

Subsequent Events

The Company has evaluated subsequent events through the date which the consolidated financial statements were issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements, except as disclosed.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2020-02 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. The Company will be required to adopt the provisions of this ASU on January 1, 2023, with early adoption permitted for certain amendments. Topic 326 must be adopted by applying a cumulative effect adjustment to retained earnings. The Company does not expect the adoption of this standard to have a material effect on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260, Earnings per Share, relating to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. The guidance becomes effective for the Company on January 1, 2024, with early adoption permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 effective January 1, 2021 and its adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In October 2020, the 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 various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company adopted ASU 2020-10 effective January 1, 2022 and its adoption did not have a material impact on its condensed consolidated financial statements.

On May 3, 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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company adopted ASU 2021-04 effective January 1, 2022 and its adoption did not have a material impact on its condensed consolidated financial statements.

NOTE 3 – ASSET PURCHASE

On October 6, 2022 (the “Asset Purchase Date”), KULR Technology Group, Inc. (the “Company”) entered into an agreement (the “Asset 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 (the “Total Consideration”), of which, $2,000,000 (the “Cash Consideration”) will be paid in cash, and the Company will issue shares of common stock with an aggregate fair value of $1,500,000, valued as of the Asset Purchase Date (the “Equity Consideration”).

The Asset 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 paid $1,000,000 of the Cash Consideration on October 6, 2022. The remaining Cash Consideration will be paid in two equal installments of $500,000 on each of April 5, 2023 and October 5, 2023. In addition to total consideration, the seller has been employed by the Company and will receive an annual salary of $216,000. If the Seller terminates his employment with the Company less than four years after the Asset Purchase Date for reasons other than severe health problems or other extenuating circumstances that would render the Seller unable to perform his employment obligations, the Seller is required to pay back to the Company a pro rata portion of the Cash Consideration (the “Clawback”), based upon the length of the Seller’s employment as percentage of the four year employment requirement. A partial year is considered a full year for purposes of calculating the Clawback amount.

The Company will issue the Equity Consideration in four equal installments of 279,852 common shares, valued as of the Asset Purchase Date at $1.34 per share, on the following dates: (i) October 5, 2023, (ii) October 5, 2024, (iii) October 5, 2025, and (iv) October 5, 2026, provided that the Seller has not terminated his employment with the Company as of the date of payment.

All of the Equity Consideration is contingent upon the continued employment of the Seller; further, 75% of the Cash Consideration is subject to Clawback, based on the term of the Seller’s employment by the Company. As such, an aggregate of $3,000,000 of the Total Consideration is accounted for as compensation, which will be recognized on a pro rata basis over the employment term requirement. The remaining $500,000 of Total Consideration is accounted for as consideration for the Acquired Assets.

Management determined that the remaining $500,000 of consideration attributable to fair value of the Acquired Assets was concentrated into a single identifiable asset, namely, intellectual property. As a result, this transaction was accounted for as an asset acquisition.

The Company incurred legal costs in connection with the execution of the Asset Purchase Agreement, in the aggregate amount of $43,572. The total cost of the intellectual property acquired of $543,572 is included in intangible assets on the accompanying consolidated balance sheet and is being amortized over its estimated useful life of 5 years (see Note 6 – Intangible Assets for additional details).

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

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


	As of December 31,
	2022		2021
Vendor receivables	$	368,069	$	—
Deferred labor costs		34,402		84,324
Insurance		12,776		69,925
Professional fees		25,787		65,118
Other		84,120		31,074
Research and development		62,329		—
Dues and subscriptions		75,889		—
Compensation costs		375,000		—
Marketing and sponsorships		574,636		10,231
Total prepaid expenses	$	1,613,008	$	260,672

NOTE 5 - PROPERTY AND EQUIPMENT

As of December 31, 2022 and 2021, property and equipment consisted of the following:


	December 31,
	2022		2021		Estimated Useful Life
Construction in progress (1)	$	1,428,217	$	—
Machinery & equipment		1,374,293		72,392	5 - 7 years
Leasehold improvements		345,709		339,422	Lesser of the useful life of the asset or remaining life of the lease
Computer equipment		152,699		47,503	3 years
Software		127,193		18,714	3 years
Research and development equipment		100,939		12,810	3 years
Furniture and fixtures		6,968		6,968	5 years
		3,536,018		497,809
Less: accumulated depreciation		(342,977)		(123,334)
Property and equipment, net	$	3,193,041	$	374,475

(1)

Consists primarily of $1,198,733 for the construction of an automation facility and $184,484 for the construction of the mezzanine.

Depreciation expense amounted to $219,643 and $66,667, respectively, for the years ended December 31, 2022 and 2021, respectively, which is included in selling, general and administrative and research and development expenses in the consolidated statements of operations.

NOTE 6 - INTANGIBLE ASSETS

The Company’s intangible assets consist of the following:


	December 31,
	2022		2021
Patent	$	218,000	$	218,000
Intellectual property		543,572		—
		761,572		218,000
Less: accumulated amortization		(40,804)		(1,048)
Intangible assets, net	$	720,768	$	216,952

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2021, the Company acquired a patent for consideration of $218,000. This long-lived intangible asset has a useful life of approximately 17.3 years and is being amortized on a straight-line basis and tested for impairment on an annual basis.

On October 5, 2022 the Company acquired intellectual property with an aggregate cost of $543,572 (see Note 3 - Asset Purchase). This long-lived intangible asset has a useful life of 5 years and is being amortized on a straight-line basis and tested for impairment on an annual basis.

During the years ended December 31, 2022 and 2021, the Company recognized amortization expense related to intangible assets of $39,756 and $1,048, respectively. As of December 31, 2022, the Company had no impairments of its intangible assets.

The weighted average remaining amortization period of the Company’s intangible assets is 8.0 years. Future amortization of intangible asset is as follows:


For the Years Ended December 31, 2022
2023	$	121,293
2024		121,293
2025		121,293
2026		121,293
2027		94,114
Thereafter		141,482
	$	720,768

NOTE 7 - EQUIPMENT DEPOSITS

The Company entered into agreements with third party contractors for the design and build of a battery packaging and inspection automation system, and automated robotic tending system. As of December 31, 2022 and 2021, the Company had outstanding deposits of $3,514,937 and $2,153,950, respectively, in connection with these agreements.

NOTE 8 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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


	As of December 31,
	2022		2021
Professional fees	$	1,180,000	$	418,154
Payroll and vacation		464,453		302,101
Research and development		196,409		146,158
Subscriptions		65,000		—
Inventory		58,804		—
Accrued cost of sales		—		128,500
Board compensation		122,500		45,680
Marketing and advertising fees		3,999		37,810
Legal fees		2,000		—
Other		49,112		84,824
Total accrued expenses and other current liabilities		2,142,277		1,163,227
Add: Accrued interest, non-current		157,054		—
Total accrued expenses and other current liabilities	$	2,299,331	$	1,163,227

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the year ended December 31, 2022, is presented below:


	As of December 31,
	2022		2021
Beginning balance	$	290,721	$	128,380
Grant date value of share obligations		176,270		245,720
Cancellation of accrued issuable equity		(92,000)		—
Shares issued in satisfaction of accrued issuable equity		—		(209,200)
Mark-to-market		(147,035)		125,821
Ending balance	$	227,956	$	290,721

During the years ended December 31, 2022 and 2021, the Company entered into certain contractual arrangements for consulting services in exchange for a fixed number of shares of common stock of the Company. On the respective dates the contracts were entered into, the estimated fair value of the shares to be issued was an aggregate of $176,270 and $245,720, respectively.

On October 5, 2022, the Company entered into an Asset Purchase Agreement (See Note 3, Asset Purchase), pursuant to which the Company agreed to issue 279,851 shares of common stock on each of the four anniversaries following the Asset Purchase Date, provided that the Seller has not terminated his employment with the Company as of the date of payment. Since all of the Equity Consideration is contingent upon the employment of the Seller, the grant date value of the accrued issuable shares will be accounted for as compensation expense, and will be recognized on a pro rata basis over the four-year employment requirement. As of December 31, 2022, the Company has accrued for the issuance of 69,963 shares of common stock, with an aggregate grant date value of $93,750.

During the year ended December 31, 2021, the Company settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 100,000 of its shares with an aggregate fair value of $209,200, remeasured as of the date of settlement.

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

During the years ended December 31, 2022 and 2021, the Company recorded gains (losses) in the aggregate amount of $147,035 and ($125,821), respectively, related to the change in fair value of accrued issuable equity (see Note 13 – Stockholders’ Equity, Stock-Based Compensation for additional details). The fair value of the accrued but unissued shares as of December 31, 2022 and 2021 was $227,956 and $290,721, respectively.

NOTE 10 – PREPAID ADVANCE LIABILITY

The Company’s prepaid advance liability consists of the following:


			Original Issue
	Prepaid Advance		Discount		Debt Discount		Net
Current portion	$	5,750,000	$	302,579	$	(396,967)	$	5,655,612
Non-current portion		3,250,000		171,052		(224,374)		3,196,678
Total prepaid advance liability	$	9,000,000	$	473,631	$	(621,341)	$	8,852,290

On September 23, 2022, the Company entered into a Supplemental Agreement (the “Supplemental Agreement”) to its Standby Equity Purchase Agreement (the “SEPA”) with 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 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.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 11th 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 $15,789,474, which consisted of $15,000,000 of gross cash proceeds (the “Initial Advance”), plus an original issue discount of $789,474. Of the $15,000,000 Initial Advance amount, $3,850,000 was used to repay amounts due under a Note Purchase Agreement with Yorkville. The Company incurred $85,000 of legal and professional fees in connection with its entry into the Supplemental Agreement. The original issue discount and legal and professional fees incurred were recorded as a debt discount, which will be amortized ratably over the term of the Initial Advance.

As of December 31, 2022, the Company has issued 5,375,269 shares of common stock as partial repayment of the Initial Advance principal in the amount of $6,000,000 and premium and interest in the amount of $315,843 and $125,000, respectively. The balance of Prepaid Advance Liability as of December 31, 2022 is $8,852,290, which consists of the remaining Initial Advance balance of $9,000,000, plus $473,631 original issue discount on the remaining Initial Advance balance, net of unamortized debt discount of $621,341.

During the year ended December 31, 2022, the Company recorded interest expense in the amount of $282,054 and recorded amortization of debt discount in the amount of $253,133 in connection with the Prepaid Advance liability.

Subsequent to December 31, 2022, the Company issued 3,153,036 shares of common stock in satisfaction of the Initial Advance liability in the amount of $3,250,000 and interest accrued through March 2023 in the amount of $329,932 (see Note 17, Subsequent Events). As a result, $3,196,678 of Prepaid Advance Liability at December 31, 2022 (consisting of $3,250,000 of Initial Advance balance, plus $171,052 original issue discount, less $224,374 of unamortized debt discount) as well as $157,054 of accrued interest payable as of December 31, 2022, are classified as a non-current liability on the accompanying consolidated balance sheet.

NOTE 11 – LEASES

The Company leases office space in San Diego, California. The lease, as amended, provided for monthly rental payments of $5,127, and the lease term expired on June 30, 2021. Subsequent to the expiration of the lease term, the Company entered into a verbal agreement with the landlord to continue occupying the space on a month-to-month basis until the Company eventually moved out in October 2021. The Company evaluated this operating lease and determined that the short-term exemption available under ASC 842 applied since the lease term is less than 12 months and the lease does not include a purchase option whose exercise is reasonably certain. Since the short-term exemption applies, lease payments are recognized as an expense and no right of use asset or lease liability was recorded related to this lease.

On April 5, 2021, the Company entered into a new lease agreement for office space in San Diego, California, effective June 1, 2021. The initial lease term is three years and there is an option to renew for an additional five years. Management does not expect to exercise its option to renew. Monthly rental payments under the new lease begin at $23,787, which is comprised of $18,518 of base rent plus

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$5,268 of common area maintenance fees, with annual escalation of 3.5%. The Company paid a security deposit of $50,213 in connection with the new lease agreement.

The Company determined that the value of the lease liability and the related right-of-use asset at inception was $814,817, using an estimated incremental borrowing rate of 5% based on information available at the commencement date of the lease.

During the years ended December 31, 2022 and 2021, operating lease expense was $231,116 and $223,548 respectively. As of December 31, 2022, the Company does not have any financing leases.

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


Maturity Year	Amount
2023		234,694
2024		99,187
Total lease payments		333,881
Less: Imputed interest		(12,278)
Present value of lease liabilities		321,603
Less: current portion		(223,645)
Lease liabilities, non-current portion	$	97,958

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


	For the Years Ended
	December 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating lease	$	205,034	$	144,540
Right-of-use asset obtained in exchange for lease obligations
Operating lease	$	—	$	814,817

NOTE 12 – NOTES PAYABLE

During the year ended December 31, 2021, the Company repaid principal on notes payable (the 2021 Notes Payable) to Yorkville in the aggregate amount of $2,450,000, such that the balance on the notes payable was $0 at December 31, 2021. The Company paid debt redemption costs in the aggregate amount of $140,000, which were recognized as expense during the year ended December 31, 2021 (see Note 15 – Stockholders’ Equity for additional details).

The Company recorded amortization expense related to the debt discount on the 2021 Notes Payable of $128,198 during the year ended December 31, 2021.

On May 13, 2022, the Company entered into a note purchase agreement with Yorkville, pursuant to which Yorkville 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, which represents the difference between the principal amount of the Promissory Notes and the proceeds received. The Company also incurred a structuring fee of $10,000, and legal fees of $7,200 in connection with the Promissory Note. 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 December 31, 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 10 - Prepaid Advance Liability).

During the year ended December 31, 2022, the Company recorded (i) interest expense related to the Promissory Note in the amount $650,493, which included $165,493 of stated interest, a 10% payment premium in the amount of $385,000 and a late payment premium in the amount of $100,000, (ii) amortization of debt discount in the amount of $258,692, and (iii) a gain on the extinguishment of debt in the amount of $8,508, which represented the unamortized portion of debt discount on the date that the debt was extinguished.

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity related to the Promissory Note during the year ended December 31, 2022.


	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		—		258,692		258,692
Loss on debt extinguishment		—		8,508		8,508
Outstanding, December 31, 2022	$	—	$	—	$	—

NOTE 13 – LOAN PAYABLE

On April 27, 2020, the Company received $155,226 of cash proceeds pursuant to an unsecured loan (the “PPP” Loan) provided in connection with the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (“CARES Act”). The PPP Loan, along with interest accrued in the amount of $3,449 was forgiven on July 18, 2022, and the Company recorded a gain on the forgiveness of the loan in the aggregate amount of $158,675, which is reflected in other income on the accompanying statements of operations.

The Company recorded interest expense of $825 and $1,701 during the years ended December 31, 2022 and 2021, respectively.

NOTE 14 - INCOME TAXES

The income tax provision for the years ended December 31, 2022 and 2021 consists of the following:


	For the Years Ended
	December 31,
	2022		2021
Federal:
Current	$	—	$	—
Deferred		(3,967,600)		(2,359,473)

State and local:
Current		—		—
Deferred		(1,133,600)		(996,095)
		(5,101,200)		(3,355,568)
Change in valuation allowance		5,101,200		3,355,568
Income tax provision	$	—	$	—

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:


	For the Years Ended
	December 31,
	2022		2021

Tax benefit at federal statutory rate	(21.0)	%	(21.0)	%
State income taxes, net of federal benefit	(6.0)	%	(6.0)	%
Permanent differences	(0.1)	%	(1.0)	%
Other and prior year true-ups	0.9	%	0.0	%
Change in valuation allowance	26.2	%	28.0	%
Effective income tax rate	0.0	%	0.0	%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has determined that a valuation allowance for the entire net deferred tax asset is required. A valuation allowance is required if, based on the weight of evidence, it is more likely than not that some or the entire portion of the deferred tax asset will not be realized. After consideration of all the evidence, management has determined that a full valuation allowance is necessary to reduce the deferred tax asset to zero.

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below:


	For the Years Ended
	December 31,
	2022		2021
Deferred Tax Assets (Liabilities):
Net operating loss carryforwards	$	9,078,972	$	4,978,331
Research and development credit carryforwards		101,422		270,188
Capitalized research and development costs		953,675		—
Stock-based compensation		1,587,800		981,067
Property and equipment		(382,819)		—
Debt Discount		(16,384)		—
Accruals and other		63,580		55,460
Gross deferred tax assets		11,386,246		6,285,046
Valuation allowance		(11,386,246)		(6,285,046)
Deferred tax asset, net of valuation allowance	$	—	$	—

Changes in valuation allowance	$	5,101,200	$	3,355,568

At December 31, 2022 and 2021, the Company had federal net operating loss carry forwards of approximately $33.7 million and $18.6 million, respectively. At December 31, 2022, approximately $3.4 million of federal net operating losses will expire from 2033 to 2037, and approximately $30.3 million will have no expiration. At December 31, 2022 and 2021, the Company had state net operating loss carry forwards of approximately $33.6 and $18.1 million, respectively, which will begin to expire in 2024.

The net operating loss carryovers may be subject to annual limitations under Internal Revenue Code Section 382, and similar state provisions, should there be a greater than 50% ownership change as determined under the applicable income tax regulations. The amount of the limitation would be determined based on the value of the company immediately prior to the ownership change and subsequent ownership changes could further impact the amount of the annual limitation. An ownership change pursuant to Section 382 may have occurred in the past or could happen in the future, such that the NOLs available for utilization could be significantly limited.

The Company files federal and state (California) tax returns which are subject to audit for the years ending on or after December 31, 2019. No tax audits were commenced or were in process during the years ended December 31, 2022 and 2021.

NOTE 15 - STOCKHOLDERS’ EQUITY

Authorized Capital

The Company is authorized to issue 500,000,000 shares of common stock, par value of $0.0001 per share, and 20,000,000 shares of preferred stock, par value of $0.0001 per share. The holders of the Company’s common stock are entitled to one vote per share. The preferred stock is designated as follows: 1,000,000 shares designated as Series A Preferred Stock, 31,000 shares designated as Series B Convertible Preferred Stock, 400 shares designated as Series C Preferred Stock, and 650 shares designated as Series D Convertible Preferred Stock.

Equity Incentive Plan

On August 15 and November 5, 2018, the Board of Directors and a majority of the Company’s shareholders, respectively, approved the 2018 Equity Incentive Plan (the “2018 Plan”). Under the 2018 Plan, 15,000,000 shares of common stock of the Company are authorized for issuance. The 2018 Plan provides for the issuance of incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants of the Company and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

its affiliates. The 2018 Plan requires the exercise price of stock options to be not less than the fair value of the Company’s common stock on the date of grant. As of December 31, 2022, there were 10,174,005 shares available for issuance under the 2018 Plan.

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.

Through December 31, 2022, the Company issued Advance Notices to for the issuance of 255,240 shares of common stock valued at $399,018 pursuant to the SEPA, of which 94,458 shares valued at issuance at $150,000, were issued in satisfaction of Notes Payable to Yorkville.

On September 23, 2022, the Company entered into the Supplemental Agreement to the SEPA and received a Prepaid Advance in the amount of $15,000,000 pursuant to the Supplemental Agreement (see Note 10 – Prepaid Advance Liability). 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.

Series A Preferred Stock

Each record holder of Series A Preferred Stock shall 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 class. Each record holder of Series A Preferred Stock is entitled to one-hundred votes per share of Series A Preferred Stock held by such holder.

The Series A Preferred Stock is not convertible into any series or class of stock of the Company. In addition, holders of the Series A Preferred Stock shall not be entitled to receive dividends, nor do they have a right to distribution from the assets of the Company in the event of any liquidation, dissolution, or winding up of the Company.

On November 5, 2018, the Company received a written consent of the majority of the stockholders to issue 1,000,000 shares of the Company’s Series A Preferred Stock to Mr. Mo, if necessary, as a measure to protect the Company from an uninvited takeover. As of the date of filing, the shares of Series A Preferred Stock have not been issued.

Series B Convertible Preferred Stock

Holders of shares of Series B Convertible Preferred Stock are not entitled to voting rights or dividend rights. The Series B Convertible Preferred Stock does not contain any redemption provisions or other provisions requiring cash settlement within control of the holder. Series B Convertible Preferred Stock is senior in liquidation preference to common stock. Each share of Series B Convertible Preferred Stock, after 181 days after issuance and without the payment of additional consideration, is convertible at the option of the holder into fifty (50) fully paid and non-assessable shares of common stock. It was determined that the embedded conversion option is clearly and closely related to the equity host, therefore it is not bifurcated and not accounted for as a derivative.

During the year ended December 31, 2021, the Company issued an aggregate of 698,600 shares of common stock upon the conversion of 13,972 shares of Series B Preferred stock, after which no Series B Convertible Preferred Stock remained outstanding.

There are no Series B Convertible shares available to issue at December 31, 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Series C Convertible Preferred Stock

Series C Convertible Preferred Stock is senior in liquidation preference to the Company’s common stock for an amount equal to the stated value per share of $10,000 (“Stated Value”). Holders of shares of Series C Convertible Preferred Stock shall vote on an as-if-converted-to-common-stock basis with the common stockholders. Holders of shares of Series C Convertible Preferred Stock are entitled to receive dividends when, as and if declared by the Board of Directors, at an annual rate of twelve percent (12)% beginning one year after each share’s issuance. The Company may elect to redeem all or part of each share of Series C Convertible Preferred Stock for the Stated Value.

There are no Series C Convertible shares outstanding or available to issue at December 31, 2022.

Series D Convertible Preferred Stock

On May 19, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with an investor, pursuant to which the Company agreed to issue to the investor an aggregate of 650 shares of Series D convertible preferred stock (the “Series D Preferred”) pursuant to a new designation of preferred stock, and one-year warrants to purchase 2,600,000 shares of common stock (the “Warrants”) at a price of $2.50 per share, for aggregate gross proceeds of $6,500,000 (the “Offering”). The Company also agreed to pay the investor a commitment fee of 1,300,000 shares of common stock at the closing of the Offering. The closing of the Offering occurred on May 20, 2021. In connection with the closing of the financing, the Company repaid in full its aggregate remaining notes payable obligation of $1,400,000.

The Series D Preferred have a fixed conversion price of $2.05, are convertible into an aggregate of 3,170,730 shares of common stock and have the right to vote on an as-converted basis. Holders of the Series D Preferred shall be entitled to receive cumulative dividends annually at an annual rate equal to ten percent (10%). Dividends shall be payable in cash or, at the option of the holder of the Series D Preferred, converted into shares of common stock as provided in the certificate of designation for the Series D Preferred. Provided that the shares of common stock issuable upon conversion of the Series D Preferred is registered pursuant to an effective registration statement, the Company shall have the option, but not the obligation, to redeem, in cash, all or part of the Series D Preferred.

The Company determined that the Series D Preferred was permanent equity given that there was no redemption provision at the holder’s option and it was determined that the conversion option was clearly and closely related to the equity host, so it didn’t need to be bifurcated. The Company further determined that the $10,000 cash structuring fee, debt redemption costs of $140,000, and the remaining notes payable obligation of $1,400,000 paid to the investor, would be accounted for as a reduction of the $6,500,000 of gross proceeds. The remaining proceeds of $6,490,000 were allocated on a relative fair value basis to the Series D Preferred ($3,875,675), the commitment shares ($1,339,582) and the Warrant ($1,274,743). The Company used the Black-Scholes option pricing model to determine the fair value of the Warrant using the following assumptions: exercise price of $2.50 per share, market price of $2.05 per share, expected term of 1.0 year, volatility of 142% and a risk-free interest rate of 0.05%. Finally, the Company determined that the Series D Preferred had a beneficial conversion feature equal to $2,624,326 which is a deemed dividend and represents an adjustment to the numerator in the loss per share calculation. The cash issuance costs of $365,000 (inclusive of the $10,000 cash structuring fee) were charged to additional paid-in-capital.

On June 17, 2021, all of the outstanding shares of Series D Preferred were converted into 3,170,730 shares of common stock, after which no Series D Convertible Preferred Stock remained outstanding.

There are no Series D Convertible shares available at December 31, 2022.

Common Stock

During the year ended December 31, 2021, the Company issued an aggregate of 170,000 shares of immediately vested common stock with a grant date value of $376,909 for legal and consulting services and issued 6,000 shares with a grant date value of $18,000 related to the acquisition of an intangible asset during the year ended December 31, 2021.

During the year ended December 31, 2021, KULR issued an aggregate of 184,784 shares of common stock upon the exercise of options.

During the year ended December 31, 2021, KULR issued an aggregate of 6,793,358 shares of our common stock upon the exercise of warrants.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2022, the Company issued an aggregate of 51,000 shares of immediately vested common stock with a grant date value of $109,850 for legal and consulting services.

During the year ended December 31, 2022, the Company issued an aggregate of 2,416,668 shares of common stock upon the exercise of warrants pursuant to which the Company received an aggregate of $3,020,835 of gross proceeds.

Treasury Stock

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 December 31, 2022, the Company has 131,162 shares held in treasury valued at their cost of $296,222. During the year ended December 31, 2022, the company withheld 194,704 shares valued at $439,728 for employee income tax withholding obligations in connection with the vesting of restricted common stock during the period.

Warrants

A summary of warrants activity during the year ended December 31, 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, December 31, 2022	2,524,410	$	1.02	3.0	$	492,770
Exercisable, December 31, 2022	2,524,410	$	1.02	3.0	$	492,770

A summary of outstanding and exercisable warrants as of December 31, 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	3.0	177,885
$	1.00	2,346,525	3.0	2,346,525
		2,524,410	3.0	2,524,410

Stock-Based Compensation

During the years ended December 31, 2022 and 2021, the Company recognized stock-based compensation expense of $4,175,014 and $4,200,091, respectively, related to restricted common stock, warrants and stock options, of which $4,136,494 and $4,171,241, respectively are included within selling, general and administrative expenses, and $38,520 and $28,850, respectively are included within research and development expenses on the consolidated statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	For the Years Ended
	December 31,
	2022			2021
Common stock issued for services	$	109,850		$	167,710
Accrued issuable equity (common stock)		84,270			245,719
Amortization of stock options		103,220			68,239
Amortization of market-based awards		1,932,402			2,111,845
Amortization of restricted stock units		1,945,272	��		1,606,578
Total	$	4,175,014		$	4,200,091

Stock Options

A summary of options activity (excluding market-based option awards) during the year ended December 31, 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	330,000		1.71
Exercised	(66,042)		0.71
Expired	—		—
Forfeited	(28,958)		1.49
Outstanding, December 31, 2022	640,216	$	1.72	3.6	$	60,767

Exercisable, December 31, 2022	199,174	$	1.43	2.1	$	58,476

The following table presents information related to stock options (excluding market-based option awards) as of December 31, 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	1.0	106,320
$1.28 - $1.50	140,000	—	—
$1.55 - $1.99	90,000	3.4	5,208
$2.05 - $2.44	299,730	3.4	87,646
	640,216	2.1	199,174

For the years ended December 31, 2022 and 2021, the weighted average grant date fair value per share of options was $1.23 and $0.80, respectively.

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 Years Ended
	December 31,
	2022			2021
Risk free interest rate		1.18% - 4.54	%		0.20% - 0.85	%
Expected term (years)		3.5 - 3.9			2.5 - 3.5
Expected volatility		104% - 116	%		93% - 109	%
Expected dividends		0	%		0	%

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Option forfeitures are accounted for at the time of occurrence. The expected term used is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company does not yet have a trading history to support its historical volatility calculations. Accordingly, the Company is utilizing an expected volatility figure based on a review of the historical volatility of comparable entities over a period of time equivalent to the expected life of the instrument being valued. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

As of December 31, 2022, there was $442,199 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 3.1 years.

Market-Based Awards and Exchange for Restricted Stock Units

On March 1, 2021, in connection with the appointment of the Company’s Chief Operating Officer (the “COO”), the COO became eligible to receive of up to 1,500,000 shares of the Company’s common stock which would be earned based upon achieving certain market capitalization milestones up to $4 billion (the “Market-based RSU Award”). The grant date value of this award of $2,911,420 was determined using a Monte Carlo valuation model for market-based vesting awards, and was amortizable over each of the tranches’ prospective derived service period.

On June 10, 2021, the Chief Executive Officer (the “CEO”) received an option for the purchase of up to 1,500,000 shares of the Company’s common stock at an exercise price of $2.60 per share (the “Market-based Option Award”, and together with the Market-based RSU Award, the “Market-based Awards”), which would be earned based upon achieving certain market capitalization milestones up to $4 billion. The grant date value of this award of $2,579,000 was determined using a Monte Carlo valuation model for market-based vesting awards, and was amortizable over each of the tranches’ prospective derived service period.

On November 1, 2022 (the “Modification Date”), the Board approved the termination of the Market-Based Awards and approved the grant of 1,500,000 restricted stock units (the “RSUs”) with a grant date fair value of $3,075,000, to each of the COO and CEO (the “Grantees”). The grant date value was determined using the stock price per share immediately preceding the Board approval of the grant. The RSUs will vest in four equal installments over the course of four years in accordance with the following schedule:


		Number of
		Restricted Stock
Vesting Date		Units That Vest
November 1, 2023		750,000
November 1, 2024		750,000
November 1, 2025		750,000
November 1, 2026		750,000

The exchange of RSUs for the Market-based Awards was accounted for as a modification of stock awards; as such, the amortizable value of the RSUs was determined to be $4,226,175, which represents the unrecognized grant-date fair value of the Market-based awards of $1,446,175, plus $2,780,000 representing the incremental fair value of the RSUs over the fair value of the Market Based Awards at the modification date.

The following assumptions were used in applying the Monte Carlo valuation model to the Company’s market-based awards on each of the measurement dates described above.


	November 1,		March 1,		June 10,
	2022		2021		2021
Risk free interest rate	4.33	%	0.71	%	0.73	%
Expected volatility	100.0	%	98.9	%	98.5	%
Expected dividend yield	0	%	0	%	0	%
Expected term	3.3 years		2.1 years		2.2 years

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Common Stock

The following table presents information related to restricted stock awards and restricted stock units (excluding Market-Based RSU Awards) as of December 31, 2022:


		Weighted Average
	Shares of Restricted	Grant Date
	Common Stock	Fair Value
Non-vested balance, January 1, 2022	2,590,000	$	2.52
Granted	3,310,000		2.05
Vested	(857,500)		2.38
Canceled	—		—
Non-vested shares, December 31, 2022	5,042,500	$	2.23

During the year ended December 31, 2021, KULR issued as incentive shares to its employees, an aggregate of 2,677,744 shares of our restricted common stock, of which, 117,744 shares were subsequently cancelled.

As of December 31, 2022, there was $7,813,665 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of 3.1 years.

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Patent License Agreement

On March 21, 2018, the Company entered into an agreement with the National Renewable Energy Laboratory (“NREL”) granting the Company an exclusive license to commercialize its patented Internal Short Circuit technology. The agreement is effective for 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 payment 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. During the years ended December 31, 2022 and 2021, the Company recorded royalty expense of $6,304 and $2,558, respectively, which were included within cost of revenues.

Technology Development and Sponsorship Agreement

On March 31, 2021, the Company entered into a multi-year technology development and sponsorship agreement, pursuant to which the Company has committed to spend an aggregate of $900,000 in sponsorship fees, payable in three installments, of which $250,000 was paid on April 1, 2021, $300,000 was paid on January 31, 2022, and $350,000 is due during the first quarter of 2023. Payments under this agreement are initially recorded as a prepaid expense and are then amortized over the performance period. During the years ended December 31, 2022 and 2021, $300,000 and $250,000, respectively, of sponsorship fees expense were recognized related to this agreement.

In addition, the Company has committed to paying an aggregate of $750,000 related to technology co-development fees, which is to be paid in three equal installments. As of December 31, 2022, the co-development technologies had not been agreed to and no portion of the technology co-development fees has been paid.

On December 16, 2021, the Company entered into a one-year sponsorship agreement (the “Second Sponsorship Agreement”) which provides the Company with the right to display its name and logo during certain events during the period from January 1, 2022 through December 31, 2022. During the year ended December 31, 2022, the Company recorded $1,350,000 of sponsorship fees expense related to this agreement.

On June 15, 2022, the Company amended the Second Sponsorship Agreement 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, of which $500,000 was paid in July 2022, $475,000 was paid in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 2023, and $475,000 is payable in April 2023. As of December 31, 2022, $500,000 is included in prepaid expenses (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.

Research and Development Agreements

On April 5, 2021, the Company entered into a two-year research and development agreement to develop high-areal-capacity battery electrodes to increase the energy density of batteries. Pursuant to the terms of the agreement, the Company has committed to spend an aggregate amount of $580,375, payable in eight quarterly installments of $72,547. During the years ended December 31, 2022 and 2021, $290,188 and $217,641, respectively, of research and development expense was recognized related to this agreement.

On August 18, 2021, the Company entered into a multi-year research and development agreement for a solid-state rechargeable battery, pursuant to which the Company has committed to spend an aggregate amount of $592,196 in eight quarterly payments of $74,025. During the years ended December 31, 2022 and 2021, $296,100 and $123,375, respectively, of research and development expense was recognized related to this agreement.

Consulting Agreement

On September 30, 2020, the Company entered into a 2-year consulting agreement with a contractor to provide services as an Advisory Board Member related to government and defense acquisitions in exchange for 60,000 shares of restricted common stock. Pursuant to the consulting agreement, the shares are subject to the Company’s claw back, based upon the satisfaction of meeting general performance parameters. As of December 31, 2022, the grant date fair value of the common stock was recognized as stock-based compensation expense ratably over the vesting period.

During the years ended December 31, 2022 and 2021, $25,545 and $46,455 of expense was recognized as stock-based compensation under this agreement. See Note 15 – Stockholders’ Equity for additional details.

Election of Directors and Appointment of Certain Officers

On November 1, 2022, the Board of the Company appointed a Lead Independent Director (“Lead Director”) and a non-Lead Independent Director (“non-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.

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.

NOTE 17 - SUBSEQUENT EVENTS

Prepaid Advance Liability

Subsequent to December 31, 2022, the Company issued 3,153,036 shares of common stock, at purchase prices per share ranging from $0.90 to $1.20, pursuant to Investor Notices submitted by Yorkville for aggregate proceeds of $3,579,932. The proceeds were applied against the principal and interest due for Initial Advance in the aggregate amounts of $3,250,000 and $329,932, respectively. As of March 28, 2023, the remaining balance on the Initial Advance is $5,750,000. See Note 10 – Prepaid Advance Liability for additional information.

On March 10, 2023, the Company and Yorkville agreed and closed on a second Prepaid Advance for $2,000,000 (the “Second Advance”). Interest accrues on the outstanding balance of each Prepaid Advance at an annual rate of 10%, subject to an increase to 15% upon events of default as defined.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Lease

On January 18, 2023, the Company entered into a new lease agreement for office space in Webster, Texas. The initial lease term is twelve months and thirteen days. Monthly rental payments under the new lease are $5,047, which is comprised of $4,245 of base rent plus $802 of common area maintenance fees.

The Company determined that the value of the lease liability and the related right-of-use asset at inception was $51,154, using an estimated incremental borrowing rate of 5%.

Patent License Agreement

During February 2023, the Company entered into a licensing agreement whereby the Company obtained an exclusive license to commercialize its patented Format Fractional Thermal Runaway Calorimeter. The agreement is effective for 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 the following: (i) a cash payment of $60,000 payable upon the execution of this agreement, (ii) royalties of 5.5% on the net sales price of royalty-based products, and services for each accounting period, as defined in the agreement, with minimum annual royalty payments of $20,000 for each accounting period. In addition, the Company shall establish: (a) that a market for the licensed invention has been created, and to the extent practicable, that a market has been created in the United States; (b) that it is being utilized; (c) that its benefits are, to the extent permitted by law or Government regulations, available to the public on reasonable terms; and (d) that market demand, at least in the United States, shall be reasonably met.

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Positive
Negative
Uncertain
Constraining
Legalese
Litigous
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KULR Technology (KULR) 10-K2022 FY Annual report

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