エドガーで原本を確認する
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, 2024
OR
☐ 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.) |
555 Forge River Road, Webster, Texas |
|
77598 |
(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 12, 2024, there were 214,227,808 shares outstanding.
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
|
|
Page |
|
|
|||
|
|
|
|
|
3 |
||
|
|
|
|
|
Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 |
3 |
|
|
|
|
|
|
4 |
||
|
|
|
|
|
5 |
||
|
|
|
|
|
|
6 |
|
|
|
|
|
|
7 |
||
|
|
|
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
9 |
|
|
|
|
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
29 |
|
|
|
|
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk. |
39 |
|
|
|
|
|
|
39 |
||
|
|
|
|
|
|||
|
|
|
|
|
40 |
||
|
|
|
|
|
40 |
||
|
|
|
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. |
40 |
|
|
|
|
|
|
40 |
||
|
|
|
|
|
40 |
||
|
|
|
|
|
40 |
||
|
|
|
|
|
41 |
||
|
|
|
|
|
42 |
||
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
September 30, |
|
December 31, |
||
|
|
2024 |
|
2023 |
||
|
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash |
|
$ |
912,417 |
|
$ |
1,194,764 |
Accounts receivable, current portion |
|
|
2,682,940 |
|
|
901,672 |
Inventory |
|
|
606,255 |
|
|
1,149,047 |
Inventory deposits |
|
|
20,925 |
|
|
27,500 |
Prepaid expenses and other current assets |
|
|
603,528 |
|
|
631,361 |
Total Current Assets |
|
|
4,826,065 |
|
|
3,904,344 |
Accounts receivable, non-current portion |
|
|
366,274 |
|
|
— |
Property and equipment, net |
|
|
3,538,126 |
|
|
4,698,144 |
Equipment deposits |
|
|
1,355,174 |
|
|
1,332,436 |
Security deposits |
|
|
98,371 |
|
|
10,228 |
Intangible assets, net |
|
|
612,673 |
|
|
719,395 |
Operating lease right-of-use asset |
|
|
1,332,941 |
|
|
129,202 |
Finance lease right-of-use asset, net |
|
|
6,992 |
|
|
— |
Deferred financing costs |
|
|
218,196 |
|
|
70,607 |
Total Assets |
|
$ |
12,354,812 |
|
$ |
10,864,356 |
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity (Deficit) |
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
1,154,740 |
|
$ |
2,769,544 |
Accrued expenses and other current liabilities |
|
|
3,220,431 |
|
|
3,463,344 |
Accrued issuable equity |
|
|
76,641 |
|
|
13,002 |
Operating lease liabilities, current portion |
|
|
505,516 |
|
|
102,186 |
Finance lease liability, current portion |
|
|
2,443 |
|
|
— |
Notes payable, net of discount, current portion |
|
|
991,281 |
|
|
— |
Deferred revenue |
|
|
32,768 |
|
|
551,021 |
Total Current Liabilities |
|
|
5,983,820 |
|
|
6,899,097 |
Operating lease liabilities, non-current portion |
|
|
925,886 |
|
|
— |
Finance lease liability, non-current portion |
|
|
4,475 |
|
|
— |
Notes payable, non-current portion |
|
|
266,604 |
|
|
250,000 |
Prepaid advance liability, net of discount |
|
|
— |
|
|
5,892,056 |
Accrued interest |
|
|
— |
|
|
5,899 |
Total Liabilities |
|
|
7,180,785 |
|
|
13,047,052 |
|
|
|
|
|
|
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit) |
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 20,000,000 shares authorized |
|
|
|
|
|
|
Series A Preferred Stock, 1,000,000 shares designated; 730,000 and 0 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively; |
|
|
73 |
|
|
— |
Series B Convertible Preferred Stock, 31,000 shares designated; none issued and outstanding at September 30, 2024 and December 31, 2023 |
|
|
— |
|
|
— |
Series C Preferred Stock, 400 shares designated; none issued and outstanding at September 30, 2024 and December 31, 2023 |
|
|
— |
|
|
— |
Series D Preferred Stock, 650 shares designated; none issued and outstanding at September 30, 2024 and December 31, 2023 |
|
|
— |
|
|
— |
Common stock, $0.0001 par value, 500,000,000 shares authorized; 201,313,770 and 201,182,608 shares issued and outstanding at September 30, 2024, respectively; 134,031,669 and 133,900,507 shares issued and outstanding at December 31, 2023, respectively |
|
|
20,131 |
|
|
13,403 |
Additional paid-in capital |
|
|
84,640,807 |
|
|
64,387,717 |
Treasury stock, at cost; 131,162 shares held at September 30, 2024 and December 31, 2023 |
|
|
(296,222) |
|
|
(296,222) |
Accumulated deficit |
|
|
(79,190,762) |
|
|
(66,287,594) |
Total Stockholders’ Equity (Deficit) |
|
|
5,174,027 |
|
|
(2,182,696) |
Total Liabilities and Stockholders’ Equity (Deficit) |
|
$ |
12,354,812 |
|
$ |
10,864,356 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
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, |
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Revenue |
|
$ |
3,185,778 |
|
$ |
3,041,007 |
|
$ |
7,366,887 |
|
$ |
7,496,315 |
Cost of revenue |
|
|
928,326 |
|
|
1,703,553 |
|
|
4,026,018 |
|
|
4,513,285 |
Gross Profit |
|
|
2,257,452 |
|
|
1,337,454 |
|
|
3,340,869 |
|
|
2,983,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
1,232,333 |
|
|
1,821,658 |
|
|
3,492,144 |
|
|
5,842,611 |
Selling, general, and administrative |
|
|
2,735,419 |
|
|
4,612,824 |
|
|
11,542,820 |
|
|
14,578,145 |
Total Operating Expenses |
|
|
3,967,752 |
|
|
6,434,482 |
|
|
15,034,964 |
|
|
20,420,756 |
Loss From Operations |
|
|
(1,710,300) |
|
|
(5,097,028) |
|
|
(11,694,095) |
|
|
(17,437,726) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Expense) Income |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(28,888) |
|
|
(187,574) |
|
|
(195,124) |
|
|
(544,615) |
Amortization of debt discount |
|
|
(278,013) |
|
|
(234,899) |
|
|
(980,289) |
|
|
(695,773) |
Loss on debt extinguishment |
|
|
— |
|
|
— |
|
|
(31,358) |
|
|
— |
Change in fair value of accrued issuable equity |
|
|
13,437 |
|
|
(42,773) |
|
|
(2,302) |
|
|
177,987 |
Total Other Expense, net |
|
|
(293,464) |
|
|
(465,246) |
|
|
(1,209,073) |
|
|
(1,062,401) |
Net Loss |
|
$ |
(2,003,764) |
|
$ |
(5,562,274) |
|
$ |
(12,903,168) |
|
$ |
(18,500,127) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and Diluted |
|
$ |
(0.01) |
|
$ |
(0.05) |
|
$ |
(0.07) |
|
$ |
(0.16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and Diluted |
|
|
194,499,997 |
|
|
117,144,452 |
|
|
173,353,879 |
|
|
115,149,761 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(unaudited)
|
|
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 |
||||||||||||||||||||||
|
|
Series A |
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
Total |
|||||
|
|
Preferred Stock |
|
Common Stock |
|
Paid-In |
|
Treasury Stock |
|
Accumulated |
|
Stockholders’ |
||||||||||||
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Shares |
|
Amount |
|
Deficit |
|
Equity (Deficit) |
||||||
Balance - January 1, 2024 |
|
— |
|
$ |
— |
|
134,031,669 |
|
$ |
13,403 |
|
$ |
64,387,717 |
|
131,162 |
|
$ |
(296,222) |
|
$ |
(66,287,594) |
|
$ |
(2,182,696) |
Preferred stock issued for no consideration |
|
730,000 |
|
|
73 |
|
— |
|
|
— |
|
|
(73) |
|
— |
|
|
— |
|
|
— |
|
|
— |
Common stock issued for the repayment of prepaid advance liability and related interest accrual pursuant to Advance Notices (1) |
|
— |
|
|
— |
|
21,798,830 |
|
|
2,180 |
|
|
6,052,650 |
|
— |
|
|
— |
|
|
— |
|
|
6,054,830 |
Common stock issued for cash pursuant to Advance Notices (2) |
|
— |
|
|
— |
|
19,228,351 |
|
|
1,923 |
|
|
2,904,490 |
|
— |
|
|
— |
|
|
— |
|
|
2,906,413 |
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards exchanged for restricted stock units |
|
— |
|
|
— |
|
(2,168,508) |
|
|
(217) |
|
|
217 |
|
— |
|
|
— |
|
|
— |
|
|
— |
Restricted stock units vested |
|
— |
|
|
— |
|
384,627 |
|
|
38 |
|
|
(38) |
|
— |
|
|
— |
|
|
— |
|
|
— |
Common stock issued for services |
|
— |
|
|
— |
|
35,500 |
|
|
4 |
|
|
6,386 |
|
— |
|
|
— |
|
|
— |
|
|
6,390 |
Amortization of restricted common stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
781,496 |
|
— |
|
|
— |
|
|
— |
|
|
781,496 |
Amortization of stock options |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
32,041 |
|
— |
|
|
— |
|
|
— |
|
|
32,041 |
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(5,008,876) |
|
|
(5,008,876) |
Balance - March 31, 2024 |
|
730,000 |
|
|
73 |
|
173,310,469 |
|
|
17,331 |
|
|
74,164,886 |
|
131,162 |
|
|
(296,222) |
|
|
(71,296,470) |
|
|
2,589,598 |
Warrants isued for consulting services in connection with issuance of notes payable |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
112,863 |
|
— |
|
|
— |
|
|
— |
|
|
112,863 |
Common stock issued for cash pursuant to Advance Notices (3) |
|
— |
|
|
— |
|
14,632,295 |
|
|
1,464 |
|
|
6,140,043 |
|
— |
|
|
— |
|
|
— |
|
|
6,141,507 |
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units vested |
|
— |
|
|
— |
|
70,000 |
|
|
7 |
|
|
(7) |
|
— |
|
|
— |
|
|
— |
|
|
— |
Common stock issued for services |
|
— |
|
|
— |
|
74,150 |
|
|
7 |
|
|
38,143 |
|
— |
|
|
— |
|
|
— |
|
|
38,150 |
Amortization of restricted common stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
814,338 |
|
— |
|
|
— |
|
|
— |
|
|
814,338 |
Amortization of stock options |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
29,165 |
|
— |
|
|
— |
|
|
— |
|
|
29,165 |
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(5,890,528) |
|
|
(5,890,528) |
Balance - June 30, 2024 |
|
730,000 |
|
|
73 |
|
188,086,914 |
|
|
18,809 |
|
|
81,299,431 |
|
131,162 |
|
|
(296,222) |
|
|
(77,186,998) |
|
|
3,835,093 |
Common stock issued for cash pursuant to ATM offering(4) |
|
— |
|
|
— |
|
12,822,356 |
|
|
1,282 |
|
|
3,293,177 |
|
— |
|
|
— |
|
|
— |
|
|
3,294,459 |
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units vested |
|
— |
|
|
— |
|
162,500 |
|
|
16 |
|
|
(16) |
|
— |
|
|
— |
|
|
— |
|
|
— |
Common stock issued for services |
|
— |
|
|
— |
|
242,000 |
|
|
24 |
|
|
60,396 |
|
— |
|
|
— |
|
|
— |
|
|
60,420 |
Amortization of restricted common stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(21,592) |
|
— |
|
|
— |
|
|
— |
|
|
(21,592) |
Amortization of stock options |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
9,411 |
|
— |
|
|
— |
|
|
— |
|
|
9,411 |
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(2,003,764) |
|
|
(2,003,764) |
Balance - September 30, 2024 |
|
730,000 |
|
$ |
73 |
|
201,313,770 |
|
$ |
20,131 |
|
$ |
84,640,807 |
|
131,162 |
|
$ |
(296,222) |
|
$ |
(79,190,762) |
|
$ |
5,174,027 |
(1) Represents gross proceeds of $6,068,407, less issuance costs of $13,577.
(2) Represents gross proceeds of $2,910,651, less issuance costs of $4,238.
(3) Represents gross proceeds of $6,194,299, less issuance costs of $52,792.
(4) Represents gross proceeds of $3,431,090, less issuance costs $136,631.
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY, continued
(unaudited)
|
|
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 |
|||||||||||||||||
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
Total |
||
|
|
Common Stock |
|
Paid-In |
|
Treasury Stock |
|
Accumulated |
|
Stockholders’ |
|||||||||
|
|
Shares |
|
Amount |
|
Capital |
|
Shares |
|
Amount |
|
Deficit |
|
Equity |
|||||
Balance - January 1, 2023 |
|
113,202,749 |
|
$ |
11,320 |
|
$ |
53,372,673 |
|
131,162 |
|
$ |
(296,222) |
|
$ |
(42,594,038) |
|
$ |
10,493,733 |
Common stock issued for the repayment of prepaid advance liability and related interest accrual |
|
3,153,036 |
|
|
315 |
|
|
3,750,653 |
|
— |
|
|
— |
|
|
— |
|
|
3,750,968 |
Shares repurchased for payroll taxes and canceled |
|
(175,000) |
|
|
(17) |
|
|
(229,232) |
|
— |
|
|
— |
|
|
— |
|
|
(229,249) |
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards granted |
|
1,848,508 |
|
|
185 |
|
|
(185) |
|
— |
|
|
— |
|
|
— |
|
|
— |
Unvested restricted stock awards canceled |
|
(75,000) |
|
|
(8) |
|
|
8 |
|
— |
|
|
— |
|
|
— |
|
|
— |
Common stock issued for services |
|
5,500 |
|
|
1 |
|
|
6,819 |
|
— |
|
|
— |
|
|
— |
|
|
6,820 |
Amortization of restricted common stock |
|
— |
|
|
— |
|
|
765,100 |
|
— |
|
|
— |
|
|
— |
|
|
765,100 |
Amortization of stock options |
|
— |
|
|
— |
|
|
40,605 |
|
— |
|
|
— |
|
|
— |
|
|
40,605 |
Net loss |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(6,602,861) |
|
|
(6,602,861) |
Balance - March 31, 2023 |
|
117,959,793 |
|
|
11,796 |
|
|
57,706,441 |
|
131,162 |
|
|
(296,222) |
|
|
(49,196,899) |
|
|
8,225,116 |
Common stock issued for the repayment of prepaid advance liability and related interest accrual |
|
925,935 |
|
|
93 |
|
|
715,565 |
|
— |
|
|
— |
|
|
— |
|
|
715,658 |
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of restricted common stock |
|
— |
|
|
— |
|
|
823,540 |
|
— |
|
|
— |
|
|
— |
|
|
823,540 |
Amortization of stock options |
|
— |
|
|
— |
|
|
44,311 |
|
— |
|
|
— |
|
|
— |
|
|
44,311 |
Net loss |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(6,334,992) |
|
|
(6,334,992) |
Balance - June 30, 2023 |
|
118,885,728 |
|
|
11,889 |
|
|
59,289,857 |
|
131,162 |
|
|
(296,222) |
|
|
(55,531,891) |
|
|
3,473,633 |
Common stock issued pursuant to the equity financing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For cash, net of issuance costs (1) |
|
8,214,285 |
|
|
821 |
|
|
2,285,949 |
|
— |
|
|
— |
|
|
— |
|
|
2,286,770 |
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards granted |
|
370,000 |
|
|
37 |
|
|
(37) |
|
— |
|
|
— |
|
|
— |
|
|
— |
Common stock issued for services |
|
227,100 |
|
|
23 |
|
|
137,637 |
|
— |
|
|
— |
|
|
— |
|
|
137,660 |
Amortization of restricted common stock |
|
— |
|
|
— |
|
|
808,316 |
|
— |
|
|
— |
|
|
— |
|
|
808,316 |
Amortization of stock options |
|
— |
|
|
— |
|
|
56,067 |
|
— |
|
|
— |
|
|
— |
|
|
56,067 |
Net loss |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(5,562,274) |
|
|
(5,562,274) |
Balance - September 30, 2023 |
|
127,697,113 |
|
$ |
12,770 |
|
$ |
62,577,789 |
|
131,162 |
|
$ |
(296,222) |
|
$ |
(61,094,165) |
|
$ |
1,200,172 |
(1) Equity financing gross proceeds of $2,875,000 less issuance costs of $588,230.
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
For the Nine Months Ended |
||||
|
|
September 30, |
||||
|
|
2024 |
|
2023 |
||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(12,903,168) |
|
$ |
(18,500,127) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Amortization of debt discount |
|
|
980,289 |
|
|
695,773 |
Non-cash operating lease expense |
|
|
331,551 |
|
|
186,885 |
Loss on debt extinguishment |
|
|
31,358 |
|
|
— |
Depreciation and amortization expense |
|
|
1,538,698 |
|
|
1,532,796 |
Change in fair value of accrued issuable equity |
|
|
2,302 |
|
|
(177,987) |
Stock-based compensation |
|
|
1,811,156 |
|
|
2,730,989 |
Loss on disposal of property and equipment |
|
|
26,490 |
|
|
— |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
(2,147,542) |
|
|
245,307 |
Inventory |
|
|
542,792 |
|
|
410,636 |
Inventory deposits |
|
|
6,575 |
|
|
194,227 |
Prepaid expenses and other current assets |
|
|
27,833 |
|
|
667,705 |
Security deposits |
|
|
(88,143) |
|
|
50,213 |
Accounts payable |
|
|
(1,748,580) |
|
|
(103,457) |
Accrued expenses and other current liabilities |
|
|
(155,969) |
|
|
1,003,244 |
Operating lease liabilities |
|
|
(236,207) |
|
|
(200,188) |
Deferred revenue |
|
|
(518,253) |
|
|
370,934 |
Total Adjustments |
|
|
404,350 |
|
|
7,607,077 |
Net Cash Used In Operating Activities |
|
|
(12,498,818) |
|
|
(10,893,050) |
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
Equipment deposits |
|
|
(22,738) |
|
|
(621,107) |
Purchases of property and equipment |
|
|
(188,267) |
|
|
(237,592) |
Acquisition of intangible assets |
|
|
— |
|
|
(135,000) |
Net Cash Used In Investing Activities |
|
|
(211,005) |
|
|
(993,699) |
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
Proceeds from equity financing |
|
|
— |
|
|
2,875,000 |
Issuance costs on equity financing |
|
|
— |
|
|
(320,250) |
Proceeds from ATM equity financing |
|
|
3,431,090 |
|
|
— |
Issuance costs on ATM equity financing |
|
|
(103,718) |
|
|
— |
Proceeds from the SEPA |
|
|
9,104,950 |
|
|
— |
Proceeds from prepaid advance liability |
|
|
— |
|
|
2,000,000 |
Issuance costs on prepaid advance liability |
|
|
— |
|
|
(30,000) |
Repayments of prepaid advance liability |
|
|
— |
|
|
(1,575,000) |
Proceeds from notes payable (1) |
|
|
2,730,000 |
|
|
— |
Issuance costs on notes payable |
|
|
(166,100) |
|
|
— |
Repayments of notes payable |
|
|
(2,439,855) |
|
|
— |
Repurchase of common stock |
|
|
— |
|
|
(229,249) |
Payments for deferred financing costs |
|
|
(128,041) |
|
|
— |
Repayment of finance lease liabilty |
|
|
(850) |
|
|
— |
Net Cash Provided By Financing Activities |
|
|
12,427,476 |
|
|
2,720,501 |
Net Decrease In Cash |
|
|
(282,347) |
|
|
(9,166,248) |
Cash - Beginning of Period |
|
|
1,194,764 |
|
|
10,333,563 |
Cash - End of Period |
|
$ |
912,417 |
|
$ |
1,167,315 |
(1) Face value of $3,659,200, less $929,200 original issue discount.
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(unaudited)
|
|
For the Nine Months Ended |
||||
|
|
September 30, |
||||
|
|
2024 |
|
2023 |
||
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest |
|
$ |
17,505 |
|
$ |
264,731 |
Taxes |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
Common stock issued in satisfaction of prepaid advance liability and interest |
|
$ |
6,054,830 |
|
$ |
4,466,626 |
Right-of-use asset for operating lease liability |
|
$ |
1,534,902 |
|
$ |
51,154 |
Original issue discount on indebtedness |
|
$ |
929,200 |
|
$ |
105,263 |
Deferred financing costs included in accounts payable |
|
$ |
123,068 |
|
$ |
— |
Value of warrants issued in connection with notes payable |
|
$ |
112,863 |
|
$ |
— |
Deferred financing costs charged to additional paid-in capital |
|
$ |
89,943 |
|
$ |
— |
Additions to property and equipment included in note payable |
|
$ |
42,788 |
|
$ |
— |
Additions to property and equipment included in accounts payable and accrued expenses |
|
$ |
36,483 |
|
$ |
195,072 |
Common stock issued in satisfaction of accrued issuable equity |
|
$ |
26,400 |
|
$ |
96,560 |
Right-of-use asset for finance lease liability |
|
$ |
7,768 |
|
$ |
— |
Restricted stock awards converted to restricted stock units |
|
$ |
217 |
|
$ |
— |
Preferred shares issued for no consideration |
|
$ |
73 |
|
$ |
— |
Common shares issued for restricted stock units vested |
|
$ |
61 |
|
$ |
— |
Deposits applied to purchases of property and equipment |
|
$ |
— |
|
$ |
2,716,057 |
Equipment deposits included in accounts payable |
|
$ |
— |
|
$ |
195,299 |
Accrual of equity financing issuance costs |
|
$ |
— |
|
$ |
267,980 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
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 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, fifth generation (“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, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the operating results for the full year ending December 31, 2024, 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, 2023 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on April 12, 2024. The accompanying condensed consolidated balance sheet as of December 31, 2023, has been derived from the audited financial statements included in the Form 10-K.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Since the date of the Annual Report on Form 10-K for the year ended December 31, 2023, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.
Going Concern and Management’s Liquidity Plans
As of September 30, 2024, the Company had cash of $912,417 and a working capital deficit of $1,157,755. For the nine months ended September 30, 2024, the Company incurred a net loss of $12,903,168 and used cash in operating activities of $12,498,818.
The Company’s primary source of liquidity has historically been cash generated from equity and debt offerings along with cash flows from revenue. 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 these financial statements are issued. The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. However, since the Company’s inception, it has had a history of recurring net losses from operations, recurring use of cash in operating activities and working capital deficits.
Future cash requirements for our current liabilities include $4,375,171 for accounts payable and accrued expenses, $1,145,529 for secured promissory notes (see Note 9 – Notes Payable), $507,959 for future payments under financing and operating leases and $100,000 for unsecured promissory notes. Future cash requirements for long-term liabilities include $930,361 for future payments under financing and operating leases and $266,604 for unsecured promissory notes.
9
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On December 20, 2023, the Company received a notice of noncompliance from NYSE Regulation (“NYSE”) stating that it is not in compliance with Section 1003(a)(iii) in the NYSE American Company Guide (the “Company Guide”) since the Company reported stockholders’ equity of $1,200,172 at September 30, 2023, and losses from continuing operations and/or net losses in its five most recent fiscal years. On February 12, 2024, the Company received a second notice letter from NYSE stating it is not in compliance with Section 1003 (f)(v) of the Company guide since the Company’s securities were trading at an average of less than $0.20 per share for 30 days.
On March 5, 2024, the Company received a notification from the NYSE that the Company’s plan to regain compliance with Section 1003 (a)(iii) of the Company Guide was accepted and so long as the Company meets its interim objectives, the Company will have until June 20, 2025, to regain compliance with the minimum stockholders’ equity requirement. On May 1, 2024, the Company received a notification from the NYSE stating that the Company had regained compliance with Section 1003 (f)(v) of the Company Guide, given the increase in the trading price of the Company’s securities.
The factors above raise substantial doubt about the Company’s ability to meet its obligations as they become due within the twelve months from the date these condensed consolidated financial statements are issued.
Management’s plans to mitigate the factors which raise substantial doubt include (i) revenue growth, (ii) reducing operating expenses through careful cost management, and (iii) raising additional funds through future financings.
On July 3, 2024, the Company entered into an At the Market Offering agreement (the “Sales Agreement”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock having an aggregate offering price of up to $20,000,000 in “at the market” offerings through or to the Agent (the “ATM”). Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of the sale, or as otherwise agreed with the Agent. The Agent receives a commission from the Company of 3% of the gross proceeds of any shares of common stock sold under the Sales Agreement. During the period from July 3, 2024, through September 30, 2024, the Company issued a total of 12,822,356 shares of common stock pursuant to the Sales Agreement for aggregate gross proceeds of $3,431,090. Furthermore, the Company received aggregate gross proceeds of $4,319,699 for 13,045,200 shares issued during the period from October 1, 2024 through November 12, 2024. See Note 10 – Stockholders’ Equity (Deficit) – At the Market Offering for additional information.
The Company’s ability to continue as a going concern is dependent upon its ability to successfully execute the aforementioned initiatives. There is no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations. The aforementioned factors indicate that management’s plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.
These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
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 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.
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 include concentrations from key customers and vendors.
10
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 $487,367 and $694,764 as of September 30, 2024 and December 31, 2023, 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:
|
|
Revenue |
|
Accounts Receivable |
|
||||||||
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
As of |
|
As of |
|
||||
|
|
September 30, |
|
September 30, |
|
September 30, |
|
December 31, |
|
||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Customer A |
|
* |
|
56 |
% |
* |
|
59 |
% |
* |
|
* |
|
Customer B |
|
32 |
% |
* |
|
14 |
% |
* |
|
34 |
% |
* |
|
Customer C |
|
21 |
% |
* |
|
* |
|
* |
|
* |
|
* |
|
Customer D |
|
* |
|
15 |
% |
13 |
% |
10 |
% |
* |
|
* |
|
Customer E |
|
* |
|
14 |
% |
* |
|
* |
|
* |
|
* |
|
Customer F |
|
* |
|
* |
|
10 |
% |
* |
|
27 |
% |
* |
|
Customer G |
|
* |
|
* |
|
* |
|
* |
|
10 |
% |
* |
|
Customer H |
|
* |
|
* |
|
* |
|
* |
|
* |
|
52 |
% |
Customer I |
|
* |
|
* |
|
* |
|
* |
|
* |
|
20 |
% |
Customer J |
|
* |
|
* |
|
* |
|
* |
|
* |
|
14 |
% |
Total |
|
53 |
% |
85 |
% |
37 |
% |
69 |
% |
71 |
% |
86 |
% |
* |
Less than 10% |
There is no assurance the Company will continue to receive significant revenue 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
The Company had vendors whose purchases of inventory individually represented 10% or more of the Company’s total purchases of inventory, for the three and nine months ended September 30, 2024 and 2023, as follows:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
||||
|
|
September 30, |
|
September 30, |
|
||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Vendor A |
|
* |
|
25 |
% |
* |
|
11 |
% |
Vendor B |
|
* |
|
* |
|
* |
|
11 |
% |
Vendor C |
|
* |
|
* |
|
12 |
% |
* |
|
|
|
0 |
% |
25 |
% |
12 |
% |
22 |
% |
* |
Less than 10% |
11
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Accounts Receivable
Accounts receivable are carried at their contractual amounts, less an estimate for credit losses. As of September 30, 2024 and December 31, 2023, no allowances for credit losses were determined to be necessary. Management estimates the allowance for credit losses 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 credit losses only after all collection attempts have been exhausted.
Inventory
The Company capitalizes inventory costs associated with products when future commercialization is considered probable, and a future economic benefit is expected to be realized. These costs consist of finished goods, raw materials, manufacturing-related costs, transportation and freight, and other indirect overhead costs.
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. Safe cases provide a safe and cost-effective solution to commercially store and transport lithium batteries and mitigate the impacts of cell-to-cell thermal runway propagation. 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 revenue 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 condensed consolidated balance sheets. As of September 30, 2024 and December 31, 2023, the Company had inventory deposits of $20,925 and $27,500, respectively. Finished goods inventory is held on-site at the San Diego, California and Webster, Texas locations. Certain raw materials are held off-site with certain contract manufacturers.
Inventory at September 30, 2024 and December 31, 2023 was comprised of the following:
|
|
September 30, |
|
December 31, |
||
|
|
2024 |
|
2023 |
||
Raw materials |
|
$ |
436,538 |
|
$ |
322,111 |
Finished goods |
|
|
169,717 |
|
|
826,936 |
Total inventory |
|
$ |
606,255 |
|
$ |
1,149,047 |
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 |
12
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| ● | 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 pursuant to the terms of each individual contract when the Company satisfies the respective performance obligations, which could be recognized at a point in time or over the term of the contract. Contract services revenue that is recognized over time may be recognized using the input method, based on labor hours expended, or using the output method based on milestones achieved, depending on the contract. |
| ● | IP license – Revenue is recognized pursuant to the type of intellectual property (“IP”) being licensed for each individual contract when the company satisfies the respective performance obligations, which could be recognized at a point in time or over the term of the contract. IP license revenue for the right to access symbolic IP is recognized over time and the right to use functional IP is recognized at a point in time. |
a) |
License fees – revenue from the right to use IP is recognized immediately at a point in time. |
b) |
Minimum royalty fees – revenue is recognized immediately at a point in time. |
c) |
Royalty fees above the minimum – revenue is recognized when and if amounts become probable and estimable. |
d) |
Software maintenance fees – revenue is recognized over time over the term of the agreement. |
The following table summarizes the Company’s revenue recognized by type of contract in its condensed consolidated statements of operations:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
||||||||
|
|
September 30, |
|
September 30, |
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Revenue Recognized at a Point in Time: |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
765,201 |
|
$ |
1,896,470 |
|
$ |
2,515,063 |
|
$ |
5,483,098 |
Contract services |
|
|
1,149,667 |
|
|
692,566 |
|
|
2,851,374 |
|
|
1,093,586 |
IP license |
|
|
1,028,767 |
|
|
— |
|
|
1,028,767 |
|
|
— |
Total |
|
|
2,943,635 |
|
|
2,589,036 |
|
|
6,395,204 |
|
|
6,576,684 |
Revenue Recognized Over Time: |
|
|
|
|
|
|
|
|
|
|
|
|
Contract services |
|
|
242,143 |
|
|
451,971 |
|
|
971,683 |
|
|
919,631 |
Total Revenue |
|
$ |
3,185,778 |
|
$ |
3,041,007 |
|
$ |
7,366,887 |
|
$ |
7,496,315 |
13
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
License Agreement
On September 29, 2024, the Company entered into a three-year licensing agreement (the “Agreement”) with a customer located in Japan to use its KULR VIBE software to measure and reduce fan vibration levels. The Agreement gives the customer the exclusive license to use the software in Japan (for Japanese customers) for the sole purpose of operating the Balancer. The Balancer is a hardware device used to measure vibration levels. Pursuant to this Agreement, the Company received a one-time, non-refundable license fee for the right to use the IP of $500,000 for which revenue was recognized immediately. The customer will pay royalty fees to the Company of $0.20 per unit of any rotational system balanced by a Balancer, and 3% of gross sales of all Balancers the customer manufactures and sells to a third party. The customer will make quarterly royalty payments to the company which may vary from period to period, but the minimum payment of $50,000 per quarter ($600,000 over the three-year life of the Agreement) is guaranteed. Since the payment of the minimum royalty occurs significantly after performance, this indicates a significant financing component. Therefore, the Company immediately recognized revenue in an amount equal to the present value ($528,767) of the $600,000 to be received, using the prevailing interest rate in the relevant market (prime rate) of 8.0%. Royalty fees above the minimum amount will be recognized when and if amounts become probable and estimable.
While the Agreement contains a software maintenance provision, the Company expects the resources that will be dedicated to the software maintenance services to be negligible and determined an amount to be allocated to this software maintenance performance obligation to be de minimis.
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.
The following table presents the computation of basic and diluted net loss per common share:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
||||||||
|
|
September 30, |
|
September 30, |
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,003,764) |
|
$ |
(5,562,274) |
|
$ |
(12,903,168) |
|
$ |
(18,500,127) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator (weighted average quantities): |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued |
|
|
194,103,040 |
|
|
120,704,579 |
|
|
173,326,462 |
|
|
118,146,547 |
Less: Treasury shares purchased |
|
|
(131,162) |
|
|
(131,162) |
|
|
(131,162) |
|
|
(131,162) |
Less: Unvested restricted shares |
|
|
(427,174) |
|
|
(3,433,400) |
|
|
(728,533) |
|
|
(2,952,892) |
Add: Accrued issuable equity |
|
|
205,293 |
|
|
4,435 |
|
|
137,112 |
|
|
87,268 |
Add: Vested unissued restricted stock units |
|
|
750,000 |
|
|
— |
|
|
750,000 |
|
|
— |
Denominator for basic and diluted net loss per share |
|
|
194,499,997 |
|
|
117,144,452 |
|
|
173,353,879 |
|
|
115,149,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share |
|
$ |
(0.01) |
|
$ |
(0.05) |
|
$ |
(0.07) |
|
$ |
(0.16) |
14
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:
|
|
September 30, |
||
|
|
2024 |
|
2023 |
Prepaid advance liability(1) |
|
— |
|
20,866,741 |
Unvested restricted stock awards |
|
150,000 |
|
3,471,008 |
Unvested restricted stock units |
|
3,537,611 |
|
3,000,000 |
Options |
|
538,341 |
|
955,216 |
Warrants |
|
2,714,587 |
|
2,524,410 |
Total |
|
6,940,539 |
|
30,817,375 |
(1) Shares issuable estimated using the floor price of $0.75 per share pursuant to the supplemental agreement to the SEPA (see Note 6 – Prepaid Advance Liability).
Operating and Finance Leases
The Company determines if an arrangement is a lease or contains a lease at inception. 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 either (1) the rate implicit in the lease, if available, or (2) 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.
Classification criteria in Topic 842 is applied in order to determine whether the lease is a finance lease or an operating lease. Operating lease expense is recorded on a straight-line basis over the life of the lease and is included in research and development and general and administrative expenses on the accompanying statements of operations. Finance lease right-of-use assets are depreciated on a straight-line base over the estimated useful life of the asset; the depreciation expense is included in research and development expense on the accompanying statements of operations. Finance lease liabilities are subsequently remeasured by increasing the liability to reflect interest accrued during a period and decreasing the liability to reflect payments made during the period. Interest expense incurred on finance leases is included in interest expense on the statements of operations.
Reclassifications
Certain prior period balances have been reclassified 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 on which these unaudited condensed 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 condensed consolidated financial statements, except as disclosed in Note 12 – Subsequent Events.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (the “FASB”) FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” These amendments require a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Public entities with a single reporting segment are required to provide both the new disclosures and all of the existing disclosures required under ASC 280. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.
15
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material impact on its financial condition, results of operations, or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023 – 09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material impact on its financial condition, results of operations, or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023–09.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for the Company in financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company adopted this ASU on January 1, 2024, and the adoption did not have a material impact on its condensed consolidated financial statements.
NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of September 30, 2024 and December 31, 2023, prepaid expenses and other current assets consisted of the following:
|
|
September 30, |
|
December 31, |
||
|
|
2024 |
|
2023 |
||
Compensation costs |
|
$ |
250,000 |
|
$ |
375,000 |
Deferred expenses |
|
|
184,406 |
|
|
59,089 |
Dues and subscriptions |
|
|
50,244 |
|
|
50,689 |
Professional fees |
|
|
37,831 |
|
|
24,125 |
Insurance |
|
|
33,031 |
|
|
32,606 |
Vendor receivables |
|
|
7,386 |
|
|
1,995 |
Security deposits |
|
|
— |
|
|
55,308 |
Conferences and seminars |
|
|
— |
|
|
19,338 |
Investor relations |
|
|
— |
|
|
1,512 |
Other |
|
|
40,630 |
|
|
11,699 |
Total prepaid expenses and other current assets |
|
$ |
603,528 |
|
$ |
631,361 |
16
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
As of September 30, 2024 and December 31, 2023, accrued expenses and other current liabilities consisted of the following:
|
|
September 30, |
|
December 31, |
||
|
|
2024 |
|
2023 |
||
Professional fees |
|
$ |
1,935,000 |
|
$ |
1,875,000 |
Payroll and vacation |
|
|
412,637 |
|
|
504,748 |
Research and development |
|
|
341,192 |
|
|
441,192 |
Inventory purchases |
|
|
223,674 |
|
|
145,949 |
Sales tax payable |
|
|
111,297 |
|
|
46,901 |
Interest payable |
|
|
57,166 |
|
|
— |
Royalties |
|
|
46,592 |
|
|
17,505 |
Board compensation |
|
|
37,500 |
|
|
23,750 |
Refund due to customer |
|
|
— |
|
|
171,960 |
Legal fees |
|
|
— |
|
|
117,640 |
Cost of sales |
|
|
— |
|
|
28,663 |
Other |
|
|
55,373 |
|
|
90,036 |
Total accrued expenses and other current liabilities |
|
|
3,220,431 |
|
|
3,463,344 |
Add: Accrued interest, non-current |
|
|
— |
|
|
5,899 |
Total accrued expenses and other liabilities |
|
$ |
3,220,431 |
|
$ |
3,469,243 |
NOTE 5 – ACCRUED ISSUABLE EQUITY
A summary of the accrued issuable equity activity during the nine months ended September 30, 2024 is presented below:
|
|
For the Nine Months Ended |
|
|
|
September 30, 2024 |
|
Beginning balance at January 1, 2024 |
|
$ |
13,002 |
Additions |
|
|
87,737 |
Mark-to-market |
|
|
2,302 |
Shares issued in satisfaction of accrued issuable equity |
|
|
(26,400) |
Fair value at September 30, 2024 |
|
$ |
76,641 |
During the nine months ended September 30, 2024, the Company became obligated to issue a fixed number of shares of common stock of the Company as consideration for services provided by an employee pursuant to a contractual arrangement previously entered into with the employee. On the date the contract was entered into, the estimated fair value of the shares to be issued was an aggregate of $87,737 based on the quoted market prices of the shares.
During the nine months ended September 30, 2024, the Company settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 80,000 of its shares for an aggregate fair value of $26,400, measured as of the settlement date based on the quoted market prices of the shares.
The Company recorded (losses) gains in the aggregate amount of $13,437 and $(2,302) during the three and nine months ended September 30, 2024, respectively, and recorded (losses) gains in the aggregate amount of $(42,773) and $177,987 during the three and nine months ended September 30, 2023, respectively, related to changes in the fair value of accrued issuable equity (see Note 10 – Stockholders’ Equity, Stock-Based Compensation for additional details). The fair value of the accrued but unissued shares as of September 30, 2024, was $76,641, based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets.
17
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 6 – PREPAID ADVANCE LIABILITY, NET OF DISCOUNT
The Company’s prepaid advance liability, net of discount, consists of the following:
|
|
Gross Amount of |
|
Less: |
|
Prepaid Advance |
|||
|
|
Prepaid Advance |
|
Debt |
|
Liability, |
|||
|
|
Liability |
|
Discount |
|
net of discount |
|||
Balance, January 1, 2024 |
|
$ |
5,918,430 |
|
$ |
(26,374) |
|
$ |
5,892,056 |
Repayments pursuant to Advance Notices |
|
|
(5,918,430) |
|
|
— |
|
|
(5,918,430) |
Amortization of debt discount |
|
|
— |
|
|
26,374 |
|
|
26,374 |
Balance, September 30, 2024 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
On January 9, 2024, the Company entered into a letter agreement with Yorkville to defer the Company’s December 31, 2023 (the “December Payment”) payment of $2,000,000 plus accrued interest and a 5% cash payment premium until February 29, 2024. On February 13, 2024, the Company and Yorkville entered into another agreement to extend all payment due dates and defer all payment obligations to December 31, 2024.
During the nine months ended September 30, 2024, the Company issued 55,659,476 shares of common stock pursuant to SEPA Advance Notices submitted by the Company to Yorkville for aggregate proceeds of $15,173,357. Of the shares issued pursuant to the SEPA Advance Notices, 21,798,830 shares valued at $6,068,407 were issued in satisfaction of $5,918,430 of principal and $118,619 of accrued interest owed in connection with the Company’s prepaid advance liability. The Company recorded $31,358 in extinguishment loss and charged $13,577 of deferred financing costs to additional paid-in capital in connection with the shares issued in satisfaction of the prepaid advance liability. As of September 30, 2024, the Prepaid Advance Liability and the related accrued interest has been repaid in full and the SEPA has been terminated. See Note 10 – Stockholders’ Equity (Deficit) - Standby Equity Purchase Agreement (“SEPA”) and Supplemental SEPA for additional information.
The remaining 33,860,646 shares issued pursuant to the SEPA Advance Notices were issued for cash proceeds of $9,104,950, which was used to fund the operations of the Company. Deferred financing costs in the amount of $57,030 were charged to additional paid-in capital in connection with the shares issued for cash.
18
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 – LEASES
Operating Leases
On January 31, 2024, the initial lease for Webster, Texas dated January 18, 2023, expired.
On January 27, 2024, the Company entered into a lease agreement for new office space in Webster, Texas. The initial lease term is 63 months. The lease contains an option to renew for an additional 36 months, which is not reasonably certain to be exercised and therefore is not included in the measurement of the ROU asset and lease liability. Monthly rental payments under the new lease are $33,086, which is comprised of $21,950 of base rent and $11,136 of common area maintenance fees. No cash payments are due for the first three months of the lease. The Company determined that the value of the lease liability and related right-of-use asset at inception was $1,085,497, using an incremental borrowing rate of 10%. The Company paid a security deposit of $37,930 in connection with the Webster lease agreement which is recorded within the security deposits section of the balance sheet as of September 30, 2024.
The Company also leases office space at 4863 Shawline Street, San Diego, CA 92111, pursuant to an operating lease which expired May 31, 2024 (the “San Diego Lease”).
On January 25, 2024, the Company entered into an amendment to the lease dated April 5, 2021, for the facility located at 4863 Shawline Street, San Diego, CA 92111 (the “First Renewal”). Pursuant to the amendment, the lease was extended for a period of eighteen months commencing June 1, 2024, and terminating November 30, 2025. Monthly rental payments under the amendment are $29,337. The Company determined that the value of the modified lease liability and related right-of-use asset to be $490,422, using an incremental borrowing rate of 10%.
During the three and nine months ended September 30, 2024, operating lease expense was $150,846 and $377,554, respectively. During the three and nine months ended September 30, 2023, operating lease expense was $67,838 and $199,584, respectively.
Finance Lease
During July 2024, the Company entered into a three - year lease agreement, (the “Equipment Lease”) for the lease of a copy machine (the “Equipment”). The lease term began on July 18, 2024. The monthly fixed lease payment is $220. The Equipment Lease includes a purchase option pursuant to which the Company can purchase the Equipment at the end of the lease term for $1.
The Company recorded an ROU asset and lease liability in the amount of $7,768 upon the commencement of the Equipment Lease. The Company recorded depreciation expense in the amount of $388 in connection with ROU assets held under the finance lease during the three and nine months ended September 30, 2024. The Company recorded interest expense of $62 during the three and nine months ended September 30, 2024, in connection with its finance lease liability.
19
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Maturities of lease liabilities as of September 30, 2024, were as follows:
Years |
|
Operating Lease |
|
Financing Lease |
|
Total |
|||
October 1, 2024 through December 31, 2024 |
|
$ |
153,862 |
|
$ |
659 |
|
$ |
154,521 |
2025 |
|
|
601,199 |
|
|
2,636 |
|
|
603,835 |
2026 |
|
|
280,228 |
|
|
2,636 |
|
|
282,864 |
2027 |
|
|
289,008 |
|
|
1,318 |
|
|
290,326 |
2028 |
|
|
297,788 |
|
|
— |
|
|
297,788 |
Thereafter |
|
|
101,702 |
|
|
— |
|
|
101,702 |
Total future minimum lease payments |
|
|
1,723,787 |
|
|
7,249 |
|
|
1,731,036 |
Less: amount representing imputed interest |
|
|
(292,385) |
|
|
(331) |
|
|
(292,716) |
Present value of lease liabilities |
|
|
1,431,402 |
|
|
6,918 |
|
|
1,438,320 |
Less: current portion |
|
|
(505,516) |
|
|
(2,443) |
|
|
(507,959) |
Lease liabilities, non current portion |
|
$ |
925,886 |
|
$ |
4,475 |
|
$ |
930,361 |
Supplemental cash flow information related to the operating and finance lease was as follows:
|
|
For the Nine Months Ended |
|
||||
|
|
September 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
Operating cash flows from operating lease |
|
$ |
236,207 |
|
$ |
200,188 |
|
Repayment of finance lease liability |
|
$ |
850 |
|
$ |
— |
|
Right-of-use assets obtained in exchange for lease obligations |
|
|
|
|
|
|
|
Operating leases |
|
$ |
1,534,902 |
|
$ |
51,154 |
|
Financing leases |
|
$ |
7,768 |
|
$ |
— |
|
Weighted Average Remaining Lease Term (Years) |
|
|
|
|
|
|
|
Operating leases |
|
|
3.64 |
years |
|
0.64 |
years |
Financing leases |
|
|
2.75 |
years |
|
— |
|
Weighted Average Discount Rate |
|
|
|
|
|
|
|
Operating leases |
|
|
10.0 |
% |
|
5.0 |
% |
Financing leases |
|
|
10.0 |
% |
|
— |
|
NOTE 8 – RELATED PARTY TRANSACTIONS
During the three and nine months ended September 30, 2023, the Company recognized expenses of $4,845 and $32,055, respectively, for consulting services provided by the father of the Company’s Chief Technology Officer, which are included within selling, general and administrative expenses on the unaudited condensed consolidated statements of operations. For the three and nine months ended September 30, 2024, there were no expenses with related parties.
As of September 30, 2024 and December 31, 2023, the Company did not have any accounts payable outstanding with related parties.
20
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 9-NOTES PAYABLE
A summary of the notes payable activity during the nine months ended September 30, 2024 is presented below:
|
|
Notes |
|
Debt |
|
|
|
||
|
|
Payable |
|
Discount |
|
Total |
|||
Outstanding, January 1, 2024 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Proceeds from merchant cash advances |
|
|
2,959,200 |
|
|
(879,200) |
|
|
2,080,000 |
Proceeds from promissory notes |
|
|
700,000 |
|
|
(50,000) |
|
|
650,000 |
Equipment received for note payable |
|
|
26,184 |
|
|
— |
|
|
26,184 |
Issuance costs paid in cash |
|
|
— |
|
|
(53,200) |
|
|
(53,200) |
Issuance costs paid in equity |
|
|
— |
|
|
(112,863) |
|
|
(112,863) |
Underwriting fees |
|
|
— |
|
|
(112,900) |
|
|
(112,900) |
Repayments in cash |
|
|
(2,439,855) |
|
|
— |
|
|
(2,439,855) |
Amortization of debt discount |
|
|
— |
|
|
953,915 |
|
|
953,915 |
Notes payable, current-portion |
|
|
1,245,529 |
|
|
(254,248) |
|
|
991,281 |
Add: Notes payable, non-current portion |
|
|
266,604 |
|
|
— |
|
|
266,604 |
Total notes payable as of September 30, 2024 |
|
$ |
1,512,133 |
|
$ |
(254,248) |
|
$ |
1,257,885 |
On January 22, 2024, the Company entered into a merchant cash advance agreement (the “Cash Advance Agreement”) whereby the Company received $504,900 of cash (net of underwriting fees of $35,100), and paid finder’s fees in cash of $21,600 and additional finder’s fees to be issued in equity, with the obligation to repay a total of $804,600 over thirty-two weekly payments of $25,144, beginning January 30, 2024. The difference between the total repayment amount and the net proceeds received was accounted for as debt discount, and along with the finder’s fees, were being amortized over thirty-two weeks using the effective interest rate method and an annualized effective interest rate of 217%. The Cash Advance Agreement was secured by the Company’s accounts receivable and related cash receipts. On February 26, 2024, the parties added an addendum to the agreement for an early payoff discount whereby the Company will owe $756,000 if paid by March 22, 2024, or $783,000 if paid by April 22, 2024. The Company did not take advantage of the early payoff discount and continued making weekly payments over the original thirty-two week term. On July 11, 2024, the Company used proceeds from the Third Cash Advance Agreement to repay this cash advance in full.
On February 26, 2024, the Company entered into a merchant cash advance agreement (the “Second Cash Advance Agreement”) with the same lender mentioned above whereby the Company received $502,200 of cash (net of underwriting fees of $37,800), and paid finder’s fees in cash of $21,600 and additional finder’s fees to be issued in equity, with the obligation to repay a total of $804,600 over thirty weekly payments of $26,820, beginning February 29, 2024. The difference between the total repayment amount and the net proceeds received was accounted for as debt discount, and along with the finder’s fees, is being amortized over thirty weeks using the effective interest rate method and an annualized effective interest rate ranging from 240% to 249%. The Second Cash Advance is secured by the Company’s accounts receivable and related cash receipts. On July 11, 2024, the terms of this agreement were revised whereby the weekly repayment amounts were reduced from $26,820 to $15,620 and the repayment period was extended from September 27, 2024, to November 15, 2024.
On April 2, 2024, the Company entered into an agreement (the “Promissory Note”), with a lender (the “Lender”), pursuant to which the Lender purchased an unsecured promissory note with an initial principal amount of $500,000, for cash proceeds of $440,000. The Company recorded a debt discount of $60,000, which consists of an original issue discount of $50,000 and cash issuance costs of $10,000. The debt discount was amortized using the effective interest rate method and an annualized effective interest rate of 26%. The Promissory Note carries an annual interest rate of 0%, which shall increase to 15% in the event of default, and has a maturity date of October 2, 2024, after which all outstanding principal and accrued interest will become immediately due. On May 28, 2024, the Company repaid the Promissory Note in full, and recognized $60,000 of amortization expense related to the debt discount.
21
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On April 4, 2024, the Company and the finder of the First and Second Cash Advance Agreements determined that the equity compensation would be by issuance of warrants to purchase up to 81,788 shares (the “First Warrant”) and up to 108,389 shares (the “Second Warrant”), respectively, of the Company’s common stock at an exercise price of $0.1852 per share and $0.139 per share, respectively. The First Warrant and the Second Warrant (collectively the “Warrants”) were exercisable immediately and expire on January 22, 2027 and February 26, 2027, respectively. The Warrants had a grant date fair value of $112,863. The value of the Warrants was recognized as additional debt discount, which will be amortized over the repayment period.
The Warrants contain a cashless exercise provision in the form of a net share settlement, whereby, if, at the time the holder exercises the Warrants, there is no effective registration statement registering the common stock subject to the Warrants, the holder may elect to receive the number of shares of the Company’s common stock determined according to a formula set forth in the warrant agreements.
The following assumptions were used in the Black-Scholes Model to measure the fair value of the warrants:
Market price at measurement date |
|
$ |
0.70 |
|
Exercise price |
|
$ |
0.14 - $0.19 |
|
Risk free interest rate |
|
|
4.52 |
% |
Expected term (years) |
|
|
2.8 - 2.9 |
|
Expected volatility |
|
|
93 |
% |
On April 9, 2024, the Company entered into a note purchase agreement pursuant to which the Company issued an unsecured promissory note with an initial principal amount of $200,000 and which matures on the first anniversary of its issuance. The Company received cash proceeds of $200,000. The promissory note carries an annual interest rate of 16%. In the event the promissory note is prepaid within 9 months of its issuance, the holder is entitled to the repayment of principal and cash payment of interest equal to 12% of the prepayment amount instead of 16%. As of September 30, 2024, the principal balance of this promissory note was $100,000.
On April 9, 2024, the Company entered into a Conditional Sale Agreement (the “Agreement”) to purchase a Haas Vertical Machining Center (the “Equipment”), pursuant to which the Company issued a promissory note with an initial principal amount of $42,788. The promissory note carries an imputed interest rate of 10%. The Company will make twenty four consecutive monthly installments of $2,003, beginnning thirty days after the delivery of the Equipment. The Equipment was received on June 17, 2024.
On July 11, 2024, the Company entered into a merchant cash advance agreement (the “Third Cash Advance Agreement”) whereby the Company received $758,850 of cash (net of underwriting fees of $40,000 and $201,150 used to pay the remaining balance of the first merchant cash advance), with the obligation to repay a total of $1,350,000 over forty - three weekly payments of $31,395, beginning July 18, 2024. The difference between the total repayment amount and the net proceeds received was accounted for as debt discount and is being amortized over forty - three weeks using the effective interest rate method and an annualized effective interest rate of 86%. The Third Cash Advance Agreement is secured by the Company’s accounts receivable and related cash receipts. The agreement contains an early payoff discount whereby the Company will owe $1,230,000 if paid by August 11, 2024, or $1,310,000 if paid by September 11, 2024. The Company did not take advantage of the early payoff discount and continued making weekly payments over the original forty - three week term. In addition, the Third Cash Advance Agreement amended the Second Cash Advance Agreement to revise the repayment terms, whereby the weekly repayment amounts were reduced from $26,820 to $15,620 and the repayment period was extended from September 27, 2024, to November 15, 2024.
See Note 12 - Subesequent Events, for details related to notes payable.
NOTE 10 - STOCKHOLDERS’ EQUITY (DEFICIT)
Standby Equity Purchase Agreement (“SEPA”) and Supplemental SEPA
On May 13, 2022, the Company entered into the SEPA with Yorkville. Pursuant to the SEPA, the Company had the right, but not the obligation, to sell to Yorkville up to an aggregate of $50,000,000 of its shares of common stock, at the Company’s request any time during the commitment period commencing on May 13, 2022, and terminating on June 1, 2024.
22
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 volume-weighted average price (“VWAP”) 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 number of shares registered under the registration statement in effect at the time of the Advance.
During the nine months ended September 30, 2024, the Company issued 55,659,476 shares of common stock pursuant to SEPA Advance Notices submitted by the Company to Yorkville for aggregate gross proceeds of $15,173,357. Of the gross proceeds, $9,104,950 was retained by the Company to fund operations. The remaining proceeds were applied against the principal and interest owed in connection with the Prepaid Advance Liability. As of March 27, 2024, the Prepaid Advance Liability and the related accrued interest has been repaid in full and the SEPA terminated on June 1, 2024. See Note 6 – Prepaid Advance Liability, for details related to a supplemental agreement to the SEPA.
At the Market Offering
On July 3, 2024, the Company entered into an At the Market Offering agreement (the “ATM”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock for aggregate gross proceeds of up to $20,000,000 in “at the market” offerings through or to the Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of the sale, or as otherwise agreed with the Agent. The Agent will receive a commission from the Company of 3% of the gross proceeds of any shares of common stock sold pursuant to the ATM. During the nine months ended September 30, 2024, the Company issued a total of 12,822,356 shares of common stock pursuant to the ATM for aggregate gross proceeds of $3,431,090.
Common Stock
During the nine months ended September 30, 2024, the Company issued an aggregate of 241,650 shares of immediately vested common stock with a grant date value of $61,161 for legal services.
During the nine months ended September 30, 2024, the Company issued 30,000 shares of immediately vested common stock with a grant date value of $17,400 as equity compensation to its independent members of the Board of Directors.
During the nine months ended September 30, 2024, the Company issued an aggregate of 80,000 shares of immediately vested common stock with a grant date value of $26,400 for consulting services.
During the nine months ended September 30, 2024, the Company issued 617,127 shares of common stock upon the vesting of restricted stock units previously granted.
See Restricted Stock Awards, for details related to restricted equity grants and Note 6 - Prepaid Advance Liability for details related to additional share issuances.
Preferred Stock
On January 26, 2024, the Board of Directors (“Board”), approved, authorized, and ratified the issuance of 730,000 shares of previously designated Non-Convertible Series A Voting Preferred Stock to the Chairman and Chief Executive Officer of the Company, Michael Mo, for no consideration, subject to the Board reserving the full and unequivocal right to revoke, rescind, transfer or otherwise cancel the issued Non-convertible Series A Voting Preferred Stock in the event Michael Mo is removed from any position with the Company or resigns from all positions with the Company. The issuance of up to 1,000,000 shares of Non-Convertible Series A Voting Preferred Stock was previously approved and authorized by a vote of the majority stockholders of the Company.
23
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Holders of Non-Convertible Series A Voting Preferred Stock shall not be entitled to dividends, shall not convert into another series or class of stock of the Company and have no rights to distributions in the event of any liquidation. Each record holder of Non-Convertible Series A Voting Preferred Stock shall have that number of votes (identical in every other respect to the voting rights of the holders of Common Stock entitled to vote at any regular or special meeting of the shareholders or by written consent) equal to one-hundred (100) votes per share of Non-Convertible Series A Voting Preferred Stock held by such record holder.
Treasury Stock
As of September 30, 2024 and December 31, 2023, the Company has 131,162 shares held in treasury recorded at their cost of $296,222.
Warrants
A summary of warrants activity during the nine months ended September 30, 2024, is presented below:
|
|
|
|
Weighted |
|
Weighted |
|
|
|
|
|
|
|
|
Average |
|
Average |
|
|
|
|
|
|
Number of |
|
Exercise |
|
Remaining |
|
Intrinsic |
||
|
|
Warrants |
|
Price |
|
Term (Yrs) |
|
Value |
||
Outstanding, January 1, 2024 |
|
2,524,410 |
|
$ |
1.02 |
|
|
|
|
|
Issued |
|
190,177 |
|
|
0.16 |
|
|
|
|
|
Exercised |
|
— |
|
|
— |
|
|
|
|
|
Expired |
|
— |
|
|
— |
|
|
|
|
|
Forfeited |
|
— |
|
|
— |
|
|
|
|
|
Outstanding, September 30, 2024 |
|
2,714,587 |
|
$ |
0.96 |
|
1.3 |
|
$ |
23,036 |
|
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30, 2024 |
|
2,714,587 |
|
$ |
0.96 |
|
1.3 |
|
$ |
23,036 |
A summary of outstanding and exercisable warrants as of September 30, 2024, 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 |
|
1.3 |
|
177,885 |
$ 1.00 |
|
2,346,525 |
|
1.3 |
|
2,346,525 |
$ 0.19 |
|
81,788 |
|
2.3 |
|
81,788 |
$ 0.14 |
|
108,389 |
|
2.4 |
|
108,389 |
|
|
2,714,587 |
|
1.3 |
|
2,714,587 |
See Note 9 – Notes Payable for additional details related to the 2024 warrant issuances.
24
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Stock Options
A summary of stock options activity during the nine months ended September 30, 2024, is presented below:
|
|
|
|
Weighted |
|
Weighted |
|
|
|
|
|
|
|
|
Average |
|
Average |
|
|
|
|
|
|
Number of |
|
Exercise |
|
Remaining |
|
Intrinsic |
||
|
|
Options |
|
Price |
|
Term (Yrs) |
|
Value |
||
Outstanding, January 1, 2024 |
|
722,716 |
|
$ |
1.26 |
|
|
|
|
|
Granted |
|
55,000 |
|
|
0.27 |
|
|
|
|
|
Forfeited |
|
(239,375) |
|
|
0.99 |
|
|
|
|
|
Outstanding, September 30, 2024 |
|
538,341 |
|
$ |
1.27 |
|
2.3 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30, 2024 |
|
354,590 |
|
$ |
0.81 |
|
1.3 |
|
$ |
— |
The following table presents information related to stock options as of September 30, 2024:
Options Outstanding |
|
Options Exercisable |
||||
|
|
|
|
Weighted |
|
|
Range of |
|
Outstanding |
|
Average |
|
Exercisable |
Exercise |
|
Number of |
|
Remaining Term |
|
Number of |
Prices |
|
Options |
|
In Years |
|
Options |
$0.28 - $0.99 |
|
255,841 |
|
0.7 |
|
155,840 |
$1.21 - $1.50 |
|
65,000 |
|
3.3 |
|
68,750 |
$1.55 - $1.99 |
|
75,000 |
|
2.6 |
|
40,000 |
$2.05 - $2.44 |
|
142,500 |
|
2.2 |
|
90,000 |
|
|
538,341 |
|
1.3 |
|
354,590 |
For the nine months ended September 30, 2024, the weighted average grant date fair value per share of options granted was $0.20, compared to $0.30 and $0.52 for the three and nine months ended September 30, 2023, respectively. No options were granted during the three months ended September 30, 2024.
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 range of assumptions:
|
|
For The Three Months Ended |
|
For The Nine Months Ended |
|
||||
|
|
September 30, |
|
September 30, |
|
||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Risk free interest rate |
|
N/A |
|
4.77% - 5.40 |
% |
4.27% - 4.81 |
% |
3.92% - 5.40 |
% |
Expected term (years) |
|
N/A |
|
3.5 |
|
3.8 |
|
3.5 |
|
Expected volatility |
|
N/A |
|
109 |
% |
110% - 114 |
% |
105% -109 |
% |
Expected dividends |
|
N/A |
|
0 |
% |
0 |
% |
0 |
% |
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 employee option grants. The Company utilizes an expected volatility figure based on the historical volatility of its common stock over a period of time equivalent to the expected term 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 September 30, 2024, there was $146,091 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 1.89 years.
25
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Restricted Stock Awards
The following table presents information related to restricted stock awards activity during the nine months ended September 30, 2024:
|
|
Shares of |
|
Weighted Average |
|
|
|
Restricted |
|
Grant Date |
|
|
|
Common Stock |
|
Fair Value |
|
Non-vested RSAs, January 1, 2024 |
|
3,381,008 |
|
$ |
1.53 |
RSAs exchanged for RSUs |
|
(2,168,508) |
|
|
0.94 |
Granted |
|
— |
|
|
— |
Vested |
|
(1,062,500) |
|
|
2.60 |
Forfeited |
|
— |
|
|
— |
Non-vested RSAs, September 30, 2024 |
|
150,000 |
|
$ |
2.25 |
During the nine months ended September 30, 2024, the Company issued 2,168,508 restricted stock units in exchange for the same quantity of restricted stock awards. The exchange of RSAs for RSUs did not result in a modification of any other terms, such as the grant date fair value or vesting period.
As of August 20, 2024, the President and Chief Operating Officer (the “COO”) resigned from all positions held with the Company, and the Company agreed to provide the COO with certain separation benefits, which include accelerated vesting of the final tranche of his restricted stock award (“RSA”), consisting of 500,000 unvested shares, previously granted. As a result, the Company reversed $435,000 in amortization expense related to the unvested award. The fair value of the previously unvested modified award on the modification date was $110,000, which was calculated by multiplying the stock price on the modification date ($0.22) by the number of shares receiving accelerated vesting (500,000 shares). Accordingly, the Company recorded restricted stock expense related to the modification of the RSA. See Note - 11 Commitment and Contingencies - Separation and General Release Agreement.
As of September 30, 2024, there was $212,771 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 1.55 years.
Restricted Stock Units
The following table presents information related to restricted stock units (“RSUs”) activity during the nine months ended September 30, 2024:
|
|
|
|
Weighted Average |
|
|
|
Shares of Restricted |
|
Grant Date |
|
|
|
Common Stock |
|
Fair Value |
|
Non-vested RSUs, January 1, 2024 |
|
2,250,000 |
|
$ |
2.05 |
RSAs exchanged for RSUs |
|
2,168,508 |
|
|
0.94 |
Granted |
|
851,230 |
|
|
0.38 |
Vested |
|
(607,127) |
|
|
0.87 |
Forfeited |
|
(1,125,000) |
|
|
2.05 |
Non-vested RSUs, September 30, 2024 |
|
3,537,611 |
|
$ |
1.18 |
|
|
|
|
|
|
Vested RSUs undelivered September 30, 2024 |
|
750,000 |
|
$ |
2.05 |
To date, RSUs have only been granted to employees in accordance with the Company’s 2018 Equity Incentive Plan. Pursuant to the terms of the restricted stock unit agreements, the vested but undelivered units are to be settled in November 24, 2024, and January 1, 2026.
As of September 30, 2024, there was $2,737,474 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 2.60 years.
26
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Stock-Based Compensation
During the three and nine months ended September 30, 2024, the Company recognized stock-based compensation expense of $56,199 and $1,811,156, respectively, related to restricted stock awards, restricted stock units, stock options and stock issued for services, of which $25,561 and $1,704,505, respectively, is included within selling, general and administrative expenses, and $30,638 and $106,651, respectively is included within research and development expenses in the unaudited condensed consolidated statements of operations.
During the three and nine months ended September 30, 2023, the Company recognized stock-based compensation expense of $846,633 and $2,730,989, respectively, related to restricted stock awards, restricted stock units, warrants and stock options, of which $560,139 and $2,391,509, respectively, is included within selling, general and administrative expenses, and $286,494 and $339,480, respectively, are included within research and development expenses on the unaudited condensed consolidated statements of operations.
The following table presents information related to stock-based compensation for the three and nine months ended September 30, 2024 and 2023:
|
|
For The Three Months Ended |
|
For The Nine Months Ended |
||||||||
|
|
September 30, |
|
September 30, |
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Common stock for services |
|
$ |
49,220 |
|
$ |
41,100 |
|
$ |
93,760 |
|
$ |
47,920 |
Accrued issuable equity (common stock) |
|
|
19,160 |
|
|
24,635 |
|
|
72,537 |
|
|
145,130 |
True up to accrued issuable equity |
|
|
— |
|
|
(83,485) |
|
|
— |
|
|
— |
Amortization of stock options |
|
|
9,411 |
|
|
56,067 |
|
|
70,617 |
|
|
140,983 |
Amortization of restricted stock awards and units |
|
|
(21,592) |
|
|
808,316 |
|
|
1,574,242 |
|
|
2,396,956 |
Total |
|
$ |
56,199 |
|
$ |
846,633 |
|
$ |
1,811,156 |
|
$ |
2,730,989 |
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company may be involved in litigation and arbitrations from time to time in the ordinary course of business. As of September 30, 2024, the Company was not involved in any ongoing litigation. The Company records legal costs associated with loss contingencies as incurred. Settlements are accrued when, and if, they become probable and estimable.
Separation and General Release Agreement
On August 20, 2024, the Company entered into a Separation and General Release Agreement with the President and Chief Operating Officer of the Company, and resignation from all other appointments and positions held with the Company and any of its affiliated entities. The COO released the Company from any and all claims he may have against the Company, and the Company agreed to provide certain separation benefits, including (i) a one-time payment of $99,551, subject to legally required payroll withholdings/deductions, (ii) early settlement of 375,000 vested restricted stock units (“RSUs”) previously granted and (iii) accelerated vesting of the final tranche of a restricted stock award (“RSA”), consisting of 500,000 unvested shares, previously granted. The equity component of the Agreement is to be delivered on November 25, 2024. See Note 10 – Stockholders’ Equity (Deficit) – Restricted Stock Awards for additional information.
Contingent Loss
Equipment deposits at September 30, 2024, represent amounts paid to a vendor as a downpayment for the manufacture of an automated manufacturing system (the “System”). To date, the System has not been delivered and the Company and the vendor are in continuing discussions. There can be no assurance that the Company will recover the full amount of the equipment deposit. At this time a loss is not considered probable. Even if a loss were to occur, at this time the Company is not able to estimate the dollar amount of a potential loss.
27
KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 12 - SUBSEQUENT EVENTS
Independent Contractor Agreement
Effective October 1, 2024, the Company entered into an independent contractor agreement whereby the contractor will provide consulting services for economic development incentives, grant review, and state governmental affairs within the state of Texas. The Company has agreed to compensate the contractor with a one-time retainer of $10,000, plus quarterly payments of 50,000 shares of common stock and a commission payout of up to 5% of awards the contractor secures for the Company. The agreement may be cancelled by either party by giving 10 days notice.
Repayment of Note Purchase Agreement
On October 31, 2024, the Company repaid the remaining balance of a note payable pursuant to a note purchase agreement entered into on April 9, 2024. The Company paid $102,033, of which $100,000 was applied to the principal balance and $2,033 was applied to the outstanding interest.
At the Market Offering
During the period from October 1, 2024 through November 12, 2024, the Company issued 13,045,200 shares of common stock for gross proceeds of $4,319,699 pursuant to the ATM.
Repayment of Merchant Cash Advances
During the period from October 1, 2024 through November 12, 2024, the Company repaid $313,487 of the merchant cash advances. As of November 12, 2024, the outstanding balance of the merchant cash advances was $810,830.
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and financial condition of KULR Technology Group, Inc. (“KULR”) and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”) (collectively referred to as “KULR” or the “Company”) as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Quarterly Report. 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 Quarterly Report, and other factors that we may not know. There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on April 12, 2024, unless disclosed elsewhere in this Quarterly Report.
Overview
KULR Technology Group, Inc., through our wholly owned subsidiary KULR Technology Corporation, maintains expertise in three key technology domain areas: (1) energy storage systems and recycling, (2) thermal management solutions, and (3) rotary system vibration reduction. Historically, KULR, focused on thermal energy management solutions for space and Department of Defense (DoD) applications, with recent expansion into energy storage and vibration reduction markets as the logical next step. Combined, 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 to 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 2030. 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. Additionally, the domain driving the growth of KULR’s battery design and production capabilities is the private space exploration market sector, which requires highly custom, safe, and reliable energy storage systems, and is expected to reach $1,110.8B by 2030 according to CoherentMI. 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 to $24.8 billion by 2025). E-aviation growth and continued reliance on traditional aviation vehicles drives an aircraft maintenance market size that is expected to reach $127.2B by 2032, an increase from $82.7B in 2023, according to Precedence Research. KULR VIBE, the Company’s rotary system vibration reduction software, positions KULR to access this market area.
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)
KULR’s primary technical domain that is shaping the future landscape of the Company is safe, high-performance energy storage solutions. To effectively support and provide energy storage solutions, a holistic approach is necessary. Batteries are an interdisciplinary technology which require:
| (1) | Multi-disciplinary expertise to address related electrical, thermal, mechanical, and electrochemical requirements, |
| (2) | Cell supply access to top-tier OEMs, |
29
| (3) | Cell level testing capabilities to characterize performance, quality, and safety behavior at the cell level, |
| (4) | Expertise in early concept design, modeling, and analysis, |
| (5) | Rapid prototyping and production capabilities, |
| (6) | Pack and system level thermal, mechanical, electrical, and abuse testing capabilities, |
| (7) | Expertise in battery management, controls, and monitoring, |
| (8) | Ability to support beginning of life to end of life requirements for transport and recycling. |
To address the need for a holistic approach, KULR developed a battery product and service portfolio over the course of the last decade that provides products, safety testing services, modeling and analysis services, electrical testing services, transport and recycling packaging and logistics, and battery design solutions. Collectively, this is referred to as KULR ONE Design Solutions (K1-DS), which is actively leveraged by the Company to facilitate engagement with customers no matter the battery life cycle phase they are in.
30
Currently, the primary aspects of K1-DS utilized by industry are product sales of trigger cells and TRS, the safety testing methodologies, and the utilization of the K1-DS platform as a whole to develop customized energy storage solutions.
Internally, KULR has leveraged K1-DS to develop off the shelf KULR ONE architecture which represents 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. As of now, the Company is focused on the KULR ONE Space for space exploration, the KULR ONE Guardian for military applications, and the KULR ONE Max for rack-style grid energy storage systems, also referred to as Battery Energy Storage Systems (BESS). These architectures collectively 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 the modularity and consistency of the architectures. This allows for greater flexibility as customers can easily adjust the size and configuration of the battery pack to suit their specific application requirements while still also benefitting from testing previously conducted by the KULR team for their specific architecture. 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, depicted with the following picture, 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.
31
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 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 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.
In addition to working with aviation applications, we have developed KULR Xero Vibration technology to eliminate vibration for cooling fans for data center server applications with the following key benefits:
1.We are eliminating wasted energy due to vibration
2.We will make cooling of AI servers more efficient with more airflow to the chips
3.Fans will produce less noise pollution for enhanced working environment in the data center environment
4.Fans will last longer due to less wear and tear caused by vibration
According to Technavio in an updated May 2024 report, the global wind turbine monitoring systems market is forecast to increase by USD 8.72 billion at a CAGR of 19.34% between 2023 and 2028. Per the report, the market is expected to experience significant growth due to the increasing demand for optimizing energy production and ensuring the reliable operation of wind farms. In particular, the vibration monitoring segment is estimated to witness significant growth during the forecast period.
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 forecasted to reach $24.1 billion by 2032.
The Future is Energy + AI
We believe the future of KULR is Energy + AI. As the world faces shortages of both technical expertise to design batteries and raw materials to build batteries, KULR aims to address this need with KULR ONE AI (K1AI). The Company is collecting large quantities of performance and safety test datasets for the most highly used commercial lithium-ion cells and combining that data with AI techniques to drive battery design and reduce engineering touch time to market. This product is to target the following markets:
| ● | Aerospace and defense systems, such as CubeSat batteries meeting JSC 20793 safety requirements by NASA |
| ● | Power tools and industrial equipment |
| ● | High-performance electric vehicles |
| ● | Electric vertical take-off and landing (“eVOTL”) |
32
| ● | Electric micro-mobility vehicles |
| ● | Residential and commercial energy storage systems |
Recent Developments
At the Market Offering
On July 3, 2024, the Company entered into an At the Market Offering agreement (the “Sales Agreement”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock for aggregate gross proceeds of up to $20,000,000 in “at the market” offerings through or to the Agent (the “ATM”). Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of the sale, or as otherwise agreed with the Agent. The Agent will receive a commission from the Company of 3% of the gross proceeds of any shares of common stock sold pursuant to the ATM. During the period from July 3, 2024, through September 30, 2024, the Company issued a total of 12,822,356 shares of common stock pursuant to the Sales Agreement for aggregate gross proceeds of $3,431,090. During the period from October 1, 2024 through November 12, 2024, the Company issued 13,045,200 shares of common stock pursuant to the Sales Agreement for aggregate gross proceeds of $4,319,699.
Merchant Cash Advance Agreement
On January 22, 2024, the Company entered into a merchant cash advance agreement (the “Cash Advance Agreement”) with a lender, pursuant to which the Company received $504,900 of cash (net of underwriting fees of $35,100), with the obligation to repay a total of $804,600 over thirty-two weekly payments of $25,143.75, beginning January 30, 2024. The Cash Advance Agreement is secured by the Company’s accounts receivable and related cash receipts. On July 11, 2024, this merchant cash advance was repaid in full.
On February 26, 2024, the Company entered into a merchant cash advance agreement (the “Second Cash Advance Agreement”) with the lender mentioned above, pursuant to which the Company received $502,200 of cash (net of underwriting fees of $37,800), with the obligation to repay a total of $804,600 over thirty weekly payments of $26,820, beginning February 29, 2024. On July 11, 2024, the parties amended the agreement whereby the weekly repayment amount was reduced from $26,820 to $15,620 and the repayment due date was extended from September 27, 2024 to November 15, 2024. The Second Cash Advance Agreement is secured by the Company’s accounts receivable and related cash receipts. As of November 13, 2024, the Company is current with its payments and the outstanding principal balance is $13,388.
On July 11, 2024, the Company entered into a merchant cash advance agreement (the “Third Cash Advance Agreement”) whereby the Company received $758,850 of cash (net of underwriting fees of $40,000 and $201,150 used to pay the remaining balance of the first merchant cash advance), with the obligation to repay a total of $1,350,000 over forty-three weekly payments of $31,395, beginning July 18, 2024. The Third Cash Advance is secured by the Company’s accounts receivable and related cash receipts. As of November 13, 2024, the Company is current with its payments and the outstanding principal balance is $797,442.
Promissory Notes
On April 9, 2024, the Company entered into a note purchase agreement pursuant to which the Company issued an unsecured promissory note with an initial principal amount of $200,000 and which matures on the first anniversary of its issuance. The Company received cash proceeds of $200,000. The promissory note carries an annual interest rate of 16%. In the event the promissory note is prepaid within 9 months of its issuance, the holder is entitled to the repayment of principal and cash payment of interest equal to 12% of the prepayment amount. This promissory note was paid in full on October 31, 2024.
33
Resignation of COO
Effective August 20, 2024, the Company entered into a Separation and General Release Agreement (the “Separation Agreement”) with Keith Cochran, pursuant to which Mr. Cochran resigned as President and Chief Operating Officer of the Company, and all other appointments and positions held with the Company. Mr. Cochran’s resignation from the Company is a result of his decision to pursue alternative professional and personal endeavors and not a result of any disagreements with the Company or the Board of Directors of the Company on any matter relating to its operations, policies or practices. Pursuant to the terms of the Separation Agreement, on the effective date, Mr. Cochran received termination benefits of (i) a lump sum payment of $99,551, (ii) early settlement of vested grants and accelerated vesting of a portion of Mr. Cochran’s outstanding equity awards in the aggregate amount of 875,000 shares of the Company’s common stock, deliverable no earlier than November 25, 2024, and (iii) continuation of COBRA health insurance premiums for four months, in exchange for a release of claims in favor of the Company and its affiliates.
License and Opportunities for KULR VIBE Fan Balancing Applications
On September 29, 2024, we entered into a licensing agreement for our proprietary vibration reduction technology named KULR Xero Vibe (“KXV”). The $2.35M landmark deal includes a $1.1M minimum guaranteed license and royalty fee, a unique opportunity for the licensee to purchase proprietary balancing equipment directly from the Company and additional revenue upside to the Company based on volume and technology upgrades. The licensee, a leading Japanese corporation, specializing in systems integration and the distribution of advanced semiconductor solutions, intends to use the KXV technology to balance industrial-scale fan systems used in data center computer cooling, HVAC and other industrial applications. The Company is exploring additional license opportunities based on geographic regions in tangential power-consuming applications, where the Company expects substantial upside revenue potential as product sales and royalty income scales along with its customers’ growth.
Change in Address of Principal Executive Offices
In the third quarter of 2024, we moved our principal executive offices to 555 Forge River Road, Suite 100, Webster, Texas 77598.
Risks Associated with Ongoing Conflicts
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.
Additionally, we do not have operations or material net sales in Israel or Gaza and we currently do not expect the recent hostilities in that region to have a material impact on our business.
We cannot predict how the events described above will evolve. If the events continue for a significant period of time or expand to other countries, and depending on the ultimate outcomes of these conflicts, which remain uncertain, they could heighten certain risks disclosed in Item 1A in our Annual Report on Form 10-K which was filed with the SEC on April 12, 2024, including, but not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending; cyber-incidents; disruptions to our or our business partners’ global technology infrastructure, including through cyber-attack or cyber-intrusion; adverse changes in international trade policies and relations; claims, litigation and regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; reputational risk; and constraints, volatility, or disruption in the capital markets, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Compliance with NYSE American Continued Listing Requirements
On December 20, 2023, the Company received a notice of noncompliance (the “Stockholders’ Equity Notice”) from NYSE Regulation (“NYSE”) stating that it is not in compliance with Section 1003(a)(i) in the NYSE American Company Guide (the “Company Guide”) since the Company reported stockholders’ equity of $1,200,172 on September 30, 2023, and losses from continuing operations and/or net losses in its five most recent fiscal years. Section 1003(a)(iii) of the Company Guide requires a listed company to have stockholders’ equity of $6 million or more if the listed company has reported losses from continuing operations and/or net losses in its five most recent fiscal years.
34
As required by the Stockholders’ Equity Notice, on January 19, 2024, the Company submitted a plan (the “Plan”) to NYSE advising of actions it has taken or will take to regain compliance with the continued listing standards by June 20, 2025. NYSE staff will review the Company periodically for compliance with the initiatives outlined in the Plan. If the Company is not in compliance with the continued listing standards by June 20, 2025, or if the Company does not make progress consistent with the Plan during the Plan period, NYSE staff will initiate delisting proceedings as appropriate.
On March 5, 2024, the Company received a notification from the NYSE that the Company’s plan to regain compliance with Section 1003 (a)(iii) of the Company Guide was accepted and so long as the Company meets its interim objectives, the Company will have until June 20, 2025, to regain compliance with the minimum stockholders’ equity requirement.
Results of Operations
Three and Nine Months Ended September 30, 2024, Compared With Three and Nine Months Ended September 30, 2023
Revenue
Our revenues consisted of the following contract types:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
||||||||
|
|
September 30, |
|
September 30, |
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Product sales |
|
$ |
765,201 |
|
$ |
1,896,470 |
|
$ |
2,515,063 |
|
$ |
5,483,098 |
Contract services |
|
|
1,391,810 |
|
|
1,144,537 |
|
|
3,823,057 |
|
|
2,013,217 |
IP license |
|
|
1,028,767 |
|
|
— |
|
|
1,028,767 |
|
|
— |
Total Revenue |
|
$ |
3,185,778 |
|
$ |
3,041,007 |
|
$ |
7,366,887 |
|
$ |
7,496,315 |
For the three months ended September 30, 2024 and 2023, we generated $3,185,778 and $3,041,007 of revenues from 33 and 18 customers, respectively, representing an increase of $144,771, or 5%. For the nine months ended September 30, 2024 and 2023, we generated $7,366,887 and $7,496,315 of revenues from 62 and 37 customers, respectively, representing a decrease of $129,428, or 2%.
Revenue from product sales during the three months ended September 30, 2024, decreased by $1,131,269 or 60% compared to the three months ended September 30, 2023. Product sales include the sales of our component product, internal short circuit (“ISC”) battery cells and devices, and safe cases. We had 20 product sales customers in the third quarter of 2024, compared with 13 in the third quarter of 2023. The decline in product revenue can be attributed to several expected third quarter 2024 orders, which management now expects to receive in a later period. We can provide no assurance as to when we will receive the expected orders.
Revenue from product sales during the nine months ended September 30, 2024, decreased by $2,968,035 or 54% compared to the nine months ended September 30, 2023. We had 47 product sales customers in the nine months of 2024, compared with 29 in the nine months of 2023. The decline in product revenue can be attributed to several expected third quarter 2024 orders, which management now expects to receive in a later period. We can provide no assurance as to when we will receive the expected orders.
Revenue from contract services during the three months ended September 30, 2024, increased by $247,273 or 22% compared to the three months ended September 30, 2023. Service revenues include certain research and development contracts and onsite engineering services. We had 17 contract services customers in the third quarter of 2024, compared with 7 in the third quarter of 2023. Contract services customers increased in both design and testing services for new and existing customers.
Revenue from contract services during the nine months ended September 30, 2024, increased by $1,809,840 or 90% compared to the nine months ended September 30, 2023. We had 30 contract services customers in the nine months of 2024, compared with 14 in the nine months of 2023. We expect to continue expansion in number of contract service customers and total revenue contribution.
35
Revenue from IP license agreement during the three months ended September 30, 2024, was $1,028,767. License revenue consists of a contract with a customer for the right to use our patented KULR VIBE technology. This contract was executed during the three months ended September 30, 2024. There was no license revenue recognized prior to this period.
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 Revenue, Gross Profit and Gross Profit Margin
Cost of revenue consisted of the cost of our products as well as labor and production overhead expenses directly related to product sales or research contract services.
Product mix plays an important part in our reported average margins for any period. Because we are introducing new products at an early stage in our development cycle, the margins earned can vary significantly between periods, customers, products and services due to the learning process, customer negotiating strengths, and product mix, among other factors.
For the three months ended September 30, 2024 and 2023, cost of revenues was $928,326 and $1,703,553, respectively, representing a decrease of $775,227 or 46%. For the three months ended September 30, 2024 and 2023, gross profit was $2,257,452 and $1,337,454, respectively, an increase of $919,998 or 69%. Our gross profit margins were 71% and 44%, during the three months ended September 30, 2024 and 2023, respectively. The increase in the current period profit margin resulted primarily from an IP licensing agreement that generated $1,028,767 of revenue which had no corresponding cost of revenue.
For the nine months ended September 30, 2024 and 2023, cost of revenues was $4,026,018 and $4,513,285, respectively, representing an decrease of $487,267 or 11%. For the nine months ended September 30, 2024 and 2023, gross profit was $3,340,869 and $2,983,030, respectively, an increase of $357,839 or 12%. Our gross profit margins were 45% and 40%, during the nine months ended September 30, 2024 and September 30, 2023, respectively. The increase in the current period profit margin resulted primarily from an IP licensing agreement that generated $1,028,767 of revenue which had no corresponding cost of revenue.
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, and 3D engineering for a rechargeable battery. Research and development expenses are charged to operations as incurred.
For the three months ended September 30, 2024 and 2023, R&D expenses were $1,232,333 and $1,821,658, respectively, representing a decrease of $589,325 or 32%. The decrease was comprised primarily of $538,784 of labor costs allocated to cost of revenue due to the increase in service revenue, $180,075 related to a planned decrease in R&D consulting services to conserve cash and a $69,267 decrease in stock-based compensation, partially offset by an increase in building related expenses of approximately $208,399 for the facility in Texas.
For the nine months ended September 30, 2024 and 2023, R&D expenses were $3,492,144 and $5,842,611, respectively, representing a decrease of $2,350,467 or 40%. The decrease was comprised primarily of $1,437,862 of labor and other R&D costs allocated to cost of revenue due to the increase in service revenue, $779,425 related to a planned decrease in R&D consulting services to conserve cash and a $232,829 decrease in stock-based compensation, partially offset by an increase in building related expenses of approximately $273,709 for the facility in Texas.
We expect that our R&D expenses will increase as we expand our future operations and as our cash position improves.
Selling, General and Administrative
Selling, general and administrative expenses consisted primarily of stock-based compensation, marketing and advertising, salaries, payroll taxes and other benefits, Board compensation, accounting and tax, consulting fees, travel and entertainment, rent expense, office expenses, and legal and professional fees.
36
For the three months ended September 30, 2024 and 2023, selling, general and administrative expenses were $2,735,419 and $4,612,824, respectively, representing a decrease of $1,877,405 or 41%. The decrease is primarily due to a reduction in stock-based compensation due to clawing back amortization for unvested, cancelled restricted stock awards of $638,592, a decrease in advertising expense of $571,238 due to a sponsorship agreement terminating in 4Q23, and a decrease of $481,661 in depreciation expense primarily due to leasehold improvements for the San Diego facility being fully depreciated in 2Q24.
For the nine months ended September 30, 2024 and 2023, selling, general and administrative expenses were $11,542,820 and $14,578,145, respectively, representing a decrease of $3,035,325 or 21%. The decrease is primarily due to a planned decrease in advertising and marketing services of $1,345,581, a decrease in stock-based compensation of of $687,004 primarily due to clawing back amortization for unvested, cancelled restricted stock units, a planned decrease in outsourced professional services of $602,438, and a decrease in labor costs of $182,533 due to the workforce reduction in December of 2023.
Other (Expense) Income
For the three months ended September 30, 2024 and 2023, other expense, net, was a net expense of $293,464 and $465,246, respectively, representing a decrease of $171,782, or 37%. The change is primarily attributable to a decrease in interest expense of $158,686 due to the full repayment of the prepaid advance liability during 1Q24, a decrease of $56,210 due to the change in fair value of of accrued issuable equity, partially offset by an increase of $43,114 for amortization of debt discount in connection with merchant cash advances.
For the nine months ended September 30, 2024 and 2023, other expense, net, was a net expense of $1,209,073 and $1,062,401, respectively, representing an increase of $146,672, or 14%. The change is primarily attributable to an increase of $284,516 for amortization of debt discount in connection with merchant cash advances, an increase of $180,289 for the change in fair value of accrued issuable equity and $31,358 related to a 2024 loss on the extinguishment of debt related to the Prepaid Advance Liability, partially offset by a decrease of $349,491 in interest due to the full repayment of the prepaid advance liability during 1Q24.
Liquidity and Capital Resources
As of September 30, 2024 and December 2023, we had cash balances of $912,417 and $1,194,764, respectively, and a working capital deficit of $1,157,755 and $2,994,753, respectively.
For the nine months ended September 30, 2024 and 2023, net cash used in operating activities was $12,498,818 and $10,893,050, respectively. Our net cash used in operating activities for the nine months ended September 30, 2024, was primarily attributable to our net loss of $12,903,168, adjusted for non-cash expenses in the aggregate amount of $4,721,844, plus $4,317,494 of net cash used to fund changes in the levels of operating assets and liabilities. Our net cash used in operating activities for the nine months ended September 30, 2023, was primarily attributable to our net loss of $18,500,127, adjusted for non-cash expenses in the aggregate amount of $4,968,456, as well as $2,638,621 of net cash provided by changes in the levels of operating assets and liabilities.
For the nine months ended September 30, 2024 and 2023, net cash used in investing activities was $211,005 and $993,699, respectively. Net cash used in investing activities during the nine months ended September 30, 2024, was related to purchases of property and equipment of $188,267 and deposits paid for purchases of property and equipment of $22,738. Net cash used in investing activities during the nine months ended September 30, 2023, was related to deposits paid for purchases of property and equipment of $621,107, purchases of property and equipment of $237,592, and an acquisition of intangible assets of $135,000.
For the nine months ended September 30, 2024 and 2023, net cash provided by financing activities was $12,427,476 and $2,720,501, respectively. Net cash provided by financing activities during the nine months ended September 30, 2024, was primarily due to proceeds from SEPA Advance Notices totaling $9,104,950, net proceeds from ATM equity financing totaling $3,327,372, and net proceeds from notes payable totaling $2,563,900, partially offset by notes payable repayments of $2,439,855, and payments for deferred financing costs of $128,041. Net cash provided by financing activities during the nine months ended September 30, 2023 was due to the net proceeds from a public offering of $2,554,750 and net proceeds from prepaid advances of $1,970,000, partially offset by repayments of the Prepaid Advance of $1,575,000, and repurchases of common stock of $229,249.
Future cash requirements for our current liabilities as of September 30, 2024, include $4,375,171 for accounts payable and accrued expenses, $1,245,529 for secured notes payable and $507,959 for payments under operating and finance leases.
Future cash requirements for long-term liabilities as of September 30, 2024, include $930,361 for operating and finance leases, and $266,604 for notes payable.
37
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. We have a history of recurring net losses, recurring use of cash in operations and declining working capital.
On July 3, 2024, the Company entered into an At the Market Offering agreement (the “ATM”) to raise up to $20,000,000 through sales of the Company’s common stock. During the period from October 1, 2024 through November 12, 2024, the Company has sold 13,045,200 shares of common stock pursuant to this offering, with gross proceeds of $4,319,699.
As of the filing date of this Quarterly Report, our outstanding notes payable have been reduced to $1,060,831.
As of the date of the issuance of these consolidated financial statements, the Company has no additional commitments to obtain additional funding through future debt or equity financings, and there is no assurance that the Company will be able to obtain additional funds on commercially acceptable terms, if at all. Further, there is no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.
Our unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
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 Estimates
We prepare our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. 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 in the notes to our financial statements.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above.
38
ITEM 3. 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 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our management, with the participation of our principal executive officer and principal financial officer, concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the third quarter of 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over 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.
39
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on April 12, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangement
During the nine months ended September 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
40
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit |
|
Description |
|
|
|
10.1 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
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* |
|
|
|
104 |
|
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)* |
* |
Filed herewith. |
** |
Furnished herewith. |
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 13, 2024 |
By: |
/s/ Michael Mo |
|
|
Michael Mo |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
Dated: November 13, 2024 |
By: |
/s/ Shawn Canter |
|
|
Shawn Canter |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
42
Exhibit 31.1
Certification of
Principal Executive Officer
of KULR TECHNOLOGY GROUP, INC.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael Mo, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of KULR Technology Group, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and we have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: November 13, 2024 |
By: |
/s/ Michael Mo |
|
|
Michael Mo |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
Exhibit 31.2
Certification of
Principal Financial and Accounting Officer
of KULR TECHNOLOGY GROUP, INC.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Shawn Canter, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of KULR Technology Group, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and we have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: November 13, 2024 |
By: |
/s/ Shawn Canter |
|
|
Shawn Canter |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of KULR Technology Group, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
Dated: |
November 13, 2024 |
By: |
/s/ Michael Mo |
|
|
Michael Mo |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
Dated: |
November 13, 2024 |
By: |
/s/ Shawn Canter |
|
|
Shawn Canter |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial and Accounting Officer) |
|