Quarterly Report (10-q)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2022

☐ TRANSITION REPORT PURSUANT TO 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.

(Exact name of registrant as specified in its charter)


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


4863 Shawline Street, San Diego, California		92111
(Address of principal executive offices)		(Zip Code)

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

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

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 11, 2022, there were 112,746,587 shares outstanding.

Table of Contents

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

	Item 1. Financial Statements.	3

	Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	3

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

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

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

	Notes to Unaudited Condensed Consolidated Financial Statements	9

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

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

	Item 4. Controls and Procedures.	35

PART II - OTHER INFORMATION

	Item 1. Legal Proceedings.	36

	Item 1A. Risk Factors.	36

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

	Item 3. Defaults Upon Senior Securities.	36

	Item 4. Mine Safety Disclosures	36

	Item 5. Other Information.	36

	Item 6. Exhibits.	37

	SIGNATURES	38

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS


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

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

Commitments and contingencies (Note 12)

Stockholders' Equity
Preferred stock, $0.0001 par value, 20,000,000 shares authorized;
Series A Preferred Stock, 1,000,000 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Series B Convertible Preferred Stock, 31,000 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Series C Preferred Stock, 400 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Series D Preferred Stock, 650 shares designated; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized; 107,700,085 shares issued and 107,568,923 outstanding at September 30, 2022, respectively, and 104,792,072 shares issued and outstanding at December 31, 2021		10,770		10,479
Additional paid-in capital		46,448,408		39,512,122
Treasury stock, at cost; 131,162 and 0 shares held at September 30, 2022 and December 31, 2021		(296,222)		—
Accumulated deficit		(38,230,508)		(23,157,559)
Total Stockholders' Equity		7,932,448		16,365,042
Total Liabilities and Stockholders' Equity	$	25,928,357	$	19,231,303

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenue	$	1,393,185	$	600,921	$	2,181,230	$	1,647,070
Cost of revenue		932,364		155,138		1,478,954		869,612
Gross Profit		460,821		445,783		702,276		777,458

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

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

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

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

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

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)


	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
				Additional							Total
	Common Stock			Paid-In		Treasury Stock			Accumulated		Stockholders'
	Shares	Amount		Capital		Shares	Amount		Deficit		Equity
Balance - January 1, 2022	104,792,072	$	10,479	$	39,512,122	—	$	—	$	(23,157,559)	$	16,365,042
Treasury stock held upon the vesting of restricted common stock	—		—		—	194,704		(439,728)		—		(439,728)
Common stock issued upon the exercise of warrants	70,143		7		87,672	—		—		—		87,679
Common stock issued upon the exercise of options	2,500		—		5,075	—		—		—		5,075
Stock-based compensation:
Common stock issued for services	6,000		1		43,159	—		—		—		43,160
Amortization of restricted common stock	—		—		519,231	—		—		—		519,231
Amortization of stock options	—		—		15,883	—		—		—		15,883
Amortization of market-based awards	—		—		730,048	—		—		—		730,048
Net loss	—		—		—	—		—		(4,136,555)		(4,136,555)
Balance - March 31, 2022	104,870,715		10,487		40,913,190	194,704		(439,728)		(27,294,114)		13,189,835
Treasury stock issued upon the exercise of options	—		—		—	(33,000)		74,529		(46,305)		28,224
Common stock issued upon the exercise of warrants	2,346,525		234		2,932,922	—		—		—		2,933,156
Stock-based compensation:
Common stock issued for services	6,000		1		10,260	—		—		—		10,261
Amortization of restricted common stock	—		—		422,128	—		—		—		422,128
Amortization of stock options	—		—		26,535	—		—		—		26,535
Amortization of market-based awards	—		—		565,421	—		—		—		565,421
Net loss	—		—		—	—		—		(5,254,685)		(5,254,685)
Balance - June 30, 2022	107,223,240		10,722		44,870,456	161,704		(365,199)		(32,595,104)		11,920,875
Treasury stock issued upon the exercise of options	—		—		—	(30,542)		68,977		(48,819)		20,158
Common stock issued pursuant to the SEPA agreement:
For cash, net of issuance costs ⁽¹⁾	160,782		16		247,855	—		—		—		247,871
In satisfaction of notes payable	94,458		9		149,991	—		—		—		150,000
For the repayment of prepaid advances	221,605		22		274,635	—		—		—		274,658
Stock-based compensation:
Amortization of restricted common stock	—		—		403,812	—		—		—		403,812
Amortization of stock options	—		—		23,959	—		—		—		23,959
Amortization of market-based awards	—		—		477,700	—		—		—		477,700
Net loss	—		—		—	—		—		(5,586,585)		(5,586,585)
Balance - September 30, 2022	107,700,085	$	10,770	$	46,448,408	131,162	$	(296,222)	$	(38,230,508)	$	7,932,448

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)


	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
	Series B Convertible			Series D Convertible						Additional					Total
	Preferred Stock			Preferred Stock			Common Stock			Paid-In		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity
Balance - January 1, 2021	13,972	$	1	—	$	—	89,908,600	$	8,991	$	17,355,968	$	(11,246,408)	$	6,118,552
Common stock issued upon conversion of Series B Convertible Preferred Stock	(13,972)		(1)	—		—	698,600		70		(69)		—		—
Stock-based compensation:
Common stock issued for services	—		—	—		—	20,000		2		49,798		—		49,800
Restricted common stock issued	—		—	—		—	2,000,000		200		(200)		—		—
Amortization of restricted common stock	—		—	—		—	—		—		126,625		—		126,625
Amortization of stock options	—		—	—		—	—		—		9,112		—		9,112
Amortization of market-based awards	—		—	—		—	—		—		130,245		—		130,245
Net loss	—		—	—		—	—		—		—		(1,714,723)		(1,714,723)
Balance - March 31, 2021	—		—	—		—	92,627,200		9,263		17,671,479		(12,961,131)		4,719,611
Issuance of Series D Convertible Preferred Stock, Common Stock, and warrants for cash ⁽¹⁾	—		—	650		—	1,300,000		130		6,134,870		—		6,135,000
Common stock issued upon the conversion of Series D Convertible Preferred Stock	—		—	(650)		—	3,170,730		317		(317)		—		—
Common stock issued upon the exercise of warrants	—		—	—		—	3,000,000		300		3,712,200		—		3,712,500
Stock-based compensation:
Common stock issued for services	—		—	—		—	55,000		6		109,994		—		110,000
Restricted common stock issued	—		—	—		—	415,000		42		(42)		—		—
Amortization of restricted common stock	—		—	—		—	—		—		433,689		—		433,689
Amortization of stock options	—		—	—		—	—		—		15,779		—		15,779
Amortization of market-based awards	—		—	—		—	—		—		489,774		—		489,774
Net loss	—		—	—		—	—		—		—		(3,027,143)		(3,027,143)
Balance - June 30, 2021	—		—	—		—	100,567,930		10,058		28,567,426		(15,988,274)		12,589,210
Common stock issued upon the exercise of warrants	—		—	—		—	1,185,033		119		1,494,097		—		1,494,216
Stock-based compensation:
Common stock issued for services	—		—	—		—	85,000		9		186,391		—		186,399
Restricted common stock issued	—		—	—		—	155,000		15		(15)		—		—
Amortization of restricted common stock	—		—	—		—	—		—		440,333		—		440,333
Amortization of stock options	—		—	—		—	—		—		20,516		—		20,516
Amortization of market-based awards	—		—	—		—	—		—		754,207		—		754,207
Net loss	—		—	—		—	—		—		—		(3,095,932)		(3,095,932)
Balance - September 30, 2021	—	$	—	—	$	—	101,992,963	$	10,201	$	31,462,955	$	(19,084,206)	$	12,388,949

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

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


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

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

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

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(unaudited)


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

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

Non-cash investing and financing activities:
Right of use asset for lease liability	$	143,640	$	814,817
Additions to property and equipment included in accounts payable	$	125,451	$	—
Beneficial conversion feature on Series D convertible preferred stock	$	—	$	2,624,326
Common stock issued upon the conversion of Series D convertible preferred stock	$	—	$	317
Common stock held in treasury upon the vesting of restricted common stock	$	(439,728)	$	—
Common stock issued upon the conversion of Series B Convertible Preferred Stock	$	—	$	70
Common stock issued in satisfaction of accrued issuable equity	$	—	$	209,200
Prepaid advance for repayment of note payable	$	3,850,000	$	—
Shares issued in satisfaction of note payable	$	150,000	$	—
Shares issued in satisfaction of prepaid advance liability and accrued interest	$	274,658	$	—
Treasury stock issued upon the exercise of stock options	$	143,506	$	—

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTANTIES

Organization and Operations

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 energy 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 mobility, 5G communication, cloud computer infrastructure, consumer and industrial devices.

Basis of Presentation

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

Reclassifications

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

Risks and Uncertainties

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

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Liquidity

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

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

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

Use of Estimates

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these unaudited condensed consolidated financial statements include, but are not limited to, fair value calculations for prepaid advance liability, equity securities, stock-based compensation 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.

Treasury Stock

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

Concentrations of Credit Risk

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

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KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Cash Concentrations

A significant portion of the Company’s cash is held at one major financial institution. The Company 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 $15,668,863 and $14,363,301 as of September 30, 2022 and December 31, 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								Accounts Receivable
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				As of		As of
	2022		2021		2022		2021		September 30, 2022		December 31, 2021
Customer A	*		88	%	*		41	%	*		42	%
Customer B	67	%	*		58	%	*		70	%	*
Customer C	24	%	*		23	%	*		25	%	*
Customer D	*		*		*		40	%	*		*
Customer E	*		*		*		*		*		21	%
Customer F	*		*		*		*		*		34	%
Total	91	%	88	%	81	%	81	%	95	%	97	%

*	Less than 10%

There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers.

Vendor Concentrations

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


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

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