10-Q

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, 2021

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant 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 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 definition 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 7(a)(2)(B) of the Securities Act.  ☐

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

As of November 12, 2021, there were 104,700,707 shares of Common Stock, $0.0001 par value, issued and outstanding.

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
	Item 1. Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	3
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	4
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) for the Three and Nine Months Ended September 30, 2021	5
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) for the Three and Nine Months Ended September 30, 2020	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4. Controls and Procedures	26
PART II - OTHER INFORMATION
	Item 1. Legal Proceedings	28
	Item 1A. Risk Factors	28
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 3. Defaults Upon Senior Securities	28
	Item 4. Mine Safety Disclosures	28
	Item 5. Other Information	28
	Item 6. Exhibits	29
	SIGNATURES	30

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2021		2020
	(unaudited)
Assets
Current Assets:
Cash	$	10,990,056	$	8,880,140
Accounts receivable		550,379		55,492
Inventory		190,766		55,452
Prepaid expenses and other current assets		450,756		150,468
Total Current Assets		12,181,957		9,141,552
Property and equipment, net		385,750		57,857
Equipment deposits		1,029,805		—
Security deposits		58,941		8,728
Right of use asset		730,115		—
Total Assets	$	14,386,568	$	9,208,137
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	67,359	$	66,537
Accounts payable - related party		—		2,628
Accrued expenses and other current liabilities		689,346		395,012
Notes payable, net of debt discount of $0 and $128,198 at September 30, 2021 and December 31, 2020, respectively		—		2,321,802
Accrued issuable equity		194,134		128,380
Loan payable, current portion		155,226		12,936
Lease liability, current portion		257,198		—
Deferred revenue		158,816		20,000
Total Current Liabilities		1,522,079		2,947,295
Lease liability, non-current portion		475,540		—
Loan payable, non-current portion		—		142,290
Total Liabilities		1,997,619		3,089,585
Commitments and contingencies (Note 11)
Stockholders' Equity
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; Series A Preferred Stock, 1,000,000 shares designated; none issued and outstanding at September 30, 2021 and December 31, 2020		—		—
Series B Convertible Preferred Stock, 31,000 shares designated; 0 and 13,972 shares issued and outstanding and liquidation preference of $0 and $13,972 at September 30, 2021 and December 31, 2020, respectively		—		1
Series C Preferred Stock, 400 shares designated; none issued and outstanding at September 30, 2021 and December 31, 2020		—		—
Series D Preferred Stock, 650 shares designated; none issued and outstanding at September 30, 2021 and December 31, 2020		—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized; 101,992,963 and 89,908,600 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		10,200		8,991
Additional paid-in capital		31,462,955		17,355,968
Accumulated deficit		(19,084,206)		(11,246,408)
Total Stockholders' Equity		12,388,949		6,118,552
Total Liabilities and Stockholders' Equity	$	14,386,568	$	9,208,137

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,
	2021		2020		2021		2020
Revenue	$	600,921	$	136,849	$	1,647,070	$	415,477
Cost of revenue		155,138		63,403		869,612		138,180
Gross Profit		445,783		73,446		777,458		277,297
Operating Expenses:
Research and development		481,855		51,820		957,579		221,524
Selling, general, and administrative		3,104,410		832,146		7,320,524		1,719,100
Total Operating Expenses		3,586,265		883,966		8,278,103		1,940,624
Loss From Operations		(3,140,482)		(810,520)		(7,500,645)		(1,663,327)
Other (Expense) Income
Interest expense, net		(758)		(1,284)		(2,389)		(5,004)
Debt redemption costs		—		—		(140,000)		—
Amortization of debt discount		—		(210,402)		(128,198)		(307,313)
Change in fair value of accrued issuable equity		45,600		9,947		(66,274)		(15,853)
Loss on foreign currency transactions		(292)		—		(292)		—
Total Other Expenses, net		44,550		(201,739)		(337,153)		(328,170)
Net Loss		(3,095,932)		(1,012,259)		(7,837,798)		(1,991,497)
Deemed dividend to Series D preferred stockholders		—		—		(2,624,326)		—
Net Loss Attributable to Common Stockholders	$	(3,095,932)	$	(1,012,259)	$	(10,462,124)	$	(1,991,497)
Net Loss Per Share
- Basic and Diluted	$	(0.03)	$	(0.01)	$	(0.11)	$	(0.02)
Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		99,018,630		82,466,734		93,816,203		82,042,241

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 (DEFICIENCY)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

(unaudited)

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

[1]    Represents gross proceeds of $6,500,000, net of cash issuance costs of $365,000.

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

5

	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
	Series B Convertible			Series C Convertible			Series D Convertible						Shares		Additional					Total
	Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			to be		Paid-In		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Issued		Capital		Deficit		Deficiency
Balance - January 1, 2020	14,487	$	1	24.01	$	—	—	$	—	81,071,831	$	8,107	$	—	$	7,591,239	$	(8,396,312)	$	(796,965)
Common stock issued as a commitment fee for the Standby Equity Distribution Agreement	—		—	—		—	—		—	95,847		10		—		63,249		—		63,259
Stock-based compensation:
Amortization of stock options	—		—	—		—	—		—	—		—		—		10,528		—		10,528
Net loss	—		—	—		—	—		—	—		—		—		—		(550,253)		(550,253)
Balance - March 31, 2020	14,487		1	24.01		—	—		—	81,167,678		8,117		—		7,665,016		(8,946,565)		(1,273,431)
Common stock issued as a commitment fee for the Standby Equity Distribution Agreement [1]	—		—	—		—	—		—	561,564		56		—		679,381		—		679,437
Stock-based compensation:
Common Stock	—		—	—		—	—		—	30,000		3		—		29,997		—		30,000
Amortization of stock options	—		—	—		—	—		—	—		—		—		9,588		—		9,588
Net loss	—		—	—		—	—		—	—		—		—		—		(428,985)		(428,985)
Balance - June 30, 2020	14,487		1	24.01		—	—		—	81,759,242		8,176		—		8,383,982		(9,375,550)		(983,391)
Common stock issued pursuant to the SEDA agreement	—		—	—		—	—		—	1,159,449		116		—		1,394,884		—		1,395,000
Common stock to be issued pursuant to the SEDA agreement	—		—	—		—	—		—	—		—		40,000		—		—		40,000
Stock-based compensation:
Common Stock	—		—	—		—	—		—	35,000		3		—		24,997		—		25,000
Amortization of stock options	—		—	—		—	—		—	—		—		—		10,038		—		10,038
Common stock issued upon conversion of Series B Convertible Preferred Stock	(515)									25,758		3		—		(3)		—		—
Common stock issued upon conversion of Series C Convertible Preferred Stock	—			(5.11)		—				56,777		6		—		(6)		—		—
Net loss	—		—	—		—	—		—	—		—		—		—		(1,012,259)		(1,012,259)
Balance - September 30, 2020	13,972	$	1	18.90	$	—	—	$	—	83,036,226	$	8,304	$	40,000	$	9,813,892	$	(10,387,809)	$	(525,612)

[1]    Represents gross proceeds of $757,695 less $78,258 of amortized deferred offering costs.

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,
	2021		2020
Cash Flows From Operating Activities:
Net loss	$	(7,837,798)	$	(1,991,497)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		128,198		307,313
Depreciation and amortization expense		29,166		10,573
Bad debt expense		—		933
Change in fair value of accrued issuable equity		66,274		15,853
Stock-based compensation		2,765,959		252,831
Changes in operating assets and liabilities:
Accounts receivable		(494,887)		(40,915)
Inventory		(135,314)		(21,070)
Prepaid expenses and other current assets		(300,288)		(97,267)
Security deposits		(50,213)		—
Right of use asset		84,702		—
Accounts payable		(1,806)		(254,260)
Accrued expenses and other current liabilities		294,334		(280,129)
Lease liability		(82,079)		—
Deferred revenue		138,816		21,600
Total Adjustments		2,442,862		(84,538)
Net Cash Used In Operating Activities		(5,394,936)		(2,076,035)
Cash Flows From Investing Activities:
Deposits for equipment purchases		(1,029,805)		—
Purchase of property and equipment		(357,059)		(46,087)
Net Cash Used In Investing Activities		(1,386,864)		(46,087)
Cash Flows from Financing Activities:
Proceeds from sale of Series D Convertible Preferred Stock, common stock and warrants		6,500,000		—
Proceeds from sale of common stock [1]		—		1,461,695
Repayments of notes payable		(2,450,000)		(159,000)
Proceeds from the exercise of warrants		5,206,716		—
Proceeds from Paycheck Protection Program loan		—		155,226
Proceeds from note payable		—		3,710,000
Payment of debt issuance costs		—		(330,000)
Payment of financing costs		(365,000)		(15,000)
Net Cash Provided By Financing Activities		8,891,716		4,822,921
Net Increase In Cash		2,109,916		2,700,799
Cash - Beginning of Period		8,880,140		108,857
Cash - End of Period	$	10,990,056	$	2,809,656

[1] For the nine months ended September 30, 2020, the amount represents gross proceeds of $2,152,695 less $691,000 withheld by the investor to pay down a portion of the note payable held by the same investor.

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,
		2021		2020
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	735	$	3,890
Income taxes	$	—	$	—
Non-cash investing and financing activities:
Right of use asset for lease liability	$	814,817	$	—
Beneficial conversion feature on Series D Convertible Preferred Stock	$	2,624,326	$	—
Common stock issued as a commitment fee for the SEDA agreement	$	—	$	63,259
Deferred offering costs reclassified to equity	$	—	$	13,042
Common stock issued upon conversion of Series B Convertible Preferred Stock	$	70	$	3
Common stock issued upon the conversion of Series C Convertible Preferred Stock	$	—	$	6
Common stock issued upon the conversion of Series D Convertible Preferred Stock	$	317	$	—
Common stock issued in satisfaction of accrued issuable equity	$	209,200	$	—
Original issuance discount on note payable	$	—	$	290,000
Common stock issued for repayment of note payable	$	—	$	691,000
Subscriptions receivable for accrued issuable equity	$	—	$	40,000

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 high performance aerospace and Department of Defense ("DOD") applications, such as satellite communications, directed energy systems and hypersonic vehicles, and applying them to mass market commercial applications, such as lithium-ion battery energy storage, electrical vehicles, 5G communication, cloud computer infrastructure, and 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, 2021 and for the three and nine months ended September 30, 2021 and 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 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, 2020 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 19, 2021.

Risks and Uncertainties

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. The Company continues to monitor the impact of COVID-19 on its business and operational assumptions and estimates and has determined there were no material adverse impacts on the Company’s results of operations and financial position at September 30, 2021.

The full extent of the future impact of COVID-19 on the Company’s operations and financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during 2021 and beyond, including the demand for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules as well as the capability to meet customer demands in a timely manner. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Since the date of the Annual Report on Form 10-K for the year ended December 31, 2020, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.

9

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Liquidity

During the nine months ended September 30, 2021, the Company raised gross proceeds of $6,500,000 in connection with the sale of preferred stock, common stock and warrants, and raised proceeds of $5,206,716 in connection with the exercise of warrants to purchase common stock. During the nine months ended September 30, 2021, the Company repaid outstanding notes payable in the amount of $2,450,000. Subsequent to September 30, 2021, the Company received an aggregate of $6,500,000 in connection with the exercise of warrants. See Note 12 – Subsequent Events for additional details.

As of September 30, 2021, the Company had cash of $10,990,056 and working capital of $10,659,878. While the Company anticipates it will continue to incur operating losses and use cash in operating activities for the foreseeable future, the Company believes that its current working capital is sufficient in comparison to its anticipated cash usage for a period of at least twelve months subsequent to the filing date of these financial statements.

Concentrations of Credit Risk

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

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 was an uninsured balance of $10,489,922 and $8,513,010 as of September 30, 2021 and December 31, 2020, respectively.

Customer and Revenue Concentrations

The Company had certain customers whose revenue individually represented 10% or more of the Company's total revenue, or whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as follows:

	Revenues								Accounts Receivable
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				As of		As of
	2021		2020		2021		2020		September 30, 2021		December 31, 2020
Customer A	88	%	*		41	%	*		96	%	*
Customer B	*		26	%	*		*		*		70	%
Customer C	*		*		*		12	%	*		*
Customer D	*		*		40	%	*		*		*
Customer E	*		35	%	*		44	%	*		*
Customer F	*		12	%	*		*		*		*
Customer G	*		*		*		*		*		19	%
Customer H	*		*		*		*		*		10	%
Total	88	%	73	%	81	%	56	%	96	%	99	%

* Less than 10%

There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and

10

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers.

Vendor Concentrations

Vendor concentrations are as follows for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Vendor A	*		29	%	*		17	%
Vendor B	*		13	%	*		*
Vendor C	*		*		*		11	%
Vendor D	*		*		*		13	%
Vendor E	*		11	%	*		*
Vendor F	*		*		11	%	*
Vendor G	26	%	*		11	%	*
Vendor H	10	%	*		*		*
Vendor I	12	%	*		*		*
	48	%	53	%	22	%	41	%

* Less than 10%

Inventory

Inventory is comprised of carbon fiber velvet ("CFV") thermal interface solutions and internal short circuit batteries, which are available for sale. Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. The cost of inventory that is sold to third parties is included within cost of sales and the cost of inventory that is given as samples is included within operating expenses. The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down to net realizable value. As of September 30, 2021 and December 31, 2020, the Company's inventory was comprised solely of finished goods.

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 the core principle of ASC 606:

● Step 1: Identify the contract with the customer;

● Step 2: Identify the performance obligations in the contract;

● Step 3: Determine the transaction price;

● Step 4: Allocate the transaction price to the performance obligations in the contract; and

● Step 5: Recognize revenue when the company satisfies a performance obligation.

11

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

● Product sales – Revenue is recognized at the point in time that the product is transferred to the customer, which is generally at the time products leave the Company’s distribution center.

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

The following table summarizes the Company's revenue recognized during the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Product sales	$	600,921	$	136,849	$	1,356,530	$	235,979
Contract services		—		—		290,540		179,498
Total revenue	$	600,921	$	136,849	$	1,647,070	$	415,477

As of September 30, 2021 and December 31, 2020, the Company had $158,816 and $20,000 of deferred revenue, respectively, from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract, or the customers have not officially accepted the goods or services provided under the contract. During the three and nine months ended September 30, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of September 30, 2021 and December 31, 2020, the Company had $62,908 and $31,212, respectively, of deferred labor costs, which is included in prepaid expenses and other current assets in the Company's condensed consolidated balance sheets. Deferred labor costs represent costs to fulfill the Company's contract service revenue. The Company will recognize the deferred labor costs as cost of revenues at the point in time that the Company satisfies its performance obligation under the respective contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

Shipping and Handling Costs

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

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, less unvested issued restricted stock. 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, if not antidilutive.

12

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,
	2021	2020
Series B Convertible Preferred Stock	—	698,600
Series C Convertible Preferred Stock	—	189,000
Unvested restricted stock	2,615,000	—
Market-based equity awards	3,000,000	—
Options	590,000	395,000
Warrants	5,202,878	210,025
Total	11,407,878	1,492,625

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated net loss.

Recently Adopted Accounting Pronouncements

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

Recently Issued Accounting Pronouncements

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

On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company does not expect this new standard to have a material impact on its financial statements.

13

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are 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.

NOTE 3    PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of September 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:

	September 30,		December 31,
	2021		2020
Deferred labor costs	$	62,908	$	31,212
Filing		2,729		9,944
Insurance		66,572		16,035
Marketing		115,794		58,103
Other		11,662		25,820
Professional fees		63,582		9,354
Subscriptions		30,009		—
Vendor deposits		97,500		—
Total prepaid expenses	$	450,756	$	150,468

NOTE 4    EQUIPMENT DEPOSITS

The Company entered into agreements with third party contractors for the design and build of a battery packaging and inspection automation system and a cell testing system. On July 22, 2021 and September 27, 2021, the Company paid deposits of $330,000 and $699,805 in connection with these agreements.

NOTE 5    ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of September 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following:

	September 30,		December 31,
	2021		2020
Board compensation	$	60,808	$	—
Payroll and vacation		219,547		278,854
Legal and professional fees		232,200		81,902
Research and development		97,222		—
Other		79,569		34,256
Total accrued expenses and other current liabilities	$	689,346	$	395,012

14

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 6    ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the nine months ended September 30, 2021 is presented below.

Balance, January 1, 2021	$	128,380
Additions		208,680
Reclassifications to equity upon issuance		(209,200)
Mark-to market		66,274
Balance, September 30, 2021	$	194,134

During the nine months ended September 30, 2021, the Company entered into certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company, having an aggregate grant date value of $208,680, and settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 100,000 shares with an aggregate fair value of $209,200.

During the three and nine months ended September 30, 2021, the Company recorded income of $45,600 and a charge of $66,274, respectively, related to the change in fair value of accrued issuable equity.

NOTE 7    LEASES

On April 5, 2021, the Company entered into a new lease agreement for office space in San Diego, California, effective June 1, 2021. The initial lease term is three years and there is an option to renew for an additional five years. Management does not expect to exercise its option to renew. Monthly rental payments under the new lease begin at $23,787, which is comprised of $18,518 of base rent plus $5,268 of common area maintenance fees, with annual escalation of 3.5%. The Company paid a security deposit of $50,213 in connection with the new lease agreement.

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

The Company also rents office space in San Diego, California on a month-to-month basis, at monthly rent of $5,127, which is comprised of $4,572 of base rent plus $555 of association fees.

During the three and nine months ended September 30, 2021, aggregate operating lease expense was $89,305 and $144,765, respectively. For the three and nine months ended September 30, 2020, operating lease expense was $15,616 and $42,832, respectively. As of September 30, 2021, the Company did not have any financing leases.

Maturities of lease liabilities as of September 30, 2021 were as follows:

Maturity Date
Remaining three months ending December 31, 2021	$	71,361
2022		289,981
2023		297,917
2024		125,530
Total lease payments		784,789
Less: Imputed interest		(52,051)
Present value of lease liabilities		732,738
Less: current portion		(257,198)
Lease liabilities, non-current portion	$	475,540

15

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

	For the Nine Months Ended September 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating lease	$	82,079	$	—
Right-of-use asset obtained in exchange for lease obligations
Operating lease	$	814,817	$	—

NOTE 8    NOTES PAYABLE

A summary of notes payable activity during the nine months ended September 30, 2021 is presented below:

	Notes		Debt
	Payable		Discount		Total
Balance, January 1, 2021	$	2,450,000	$	(128,198)	$	2,321,802
Repayments in cash		(2,450,000)		—		(2,450,000)
Amortization of debt discount		—		128,198		128,198
Outstanding, September 30, 2021	$	—	$	—	$	—

NOTE 9    RELATED PARTY TRANSACTIONS

During the three and nine months ended September 30, 2021, the Company had no material related party transactions.

Accounts Payable – Related Party

Accounts payable – related party consisted of a liability of $0 and $2,628, as of September 30, 2021 and December 31, 2020, respectively, to Energy Science Laboratories, Inc. (“ESLI”), a company controlled by the Company’s Chief Technology Officer (“CTO”), in connection with consulting services provided to the Company associated with the development of the Company’s CFV thermal management solutions in prior periods.

NOTE 10    STOCKHOLDERS’ EQUITY

Series D Preferred Stock

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

The Series D Preferred have a fixed conversion price of $2.05, are convertible into an aggregate of 3,170,732 shares of common stock and have the right to vote on an as-converted basis.  Holders of the Series D Preferred shall be entitled to receive cumulative dividends annually at an annual rate equal to ten percent (10%). Dividends shall be payable in cash or, at the option of the holder of the Series D Preferred, converted into shares of common stock as provided in the certificate of designation for the Series D Preferred. Provided that the shares of common stock issuable upon conversion of the Series

16

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

D Preferred is registered pursuant to an effective registration statement, the Company shall have the option, but not the obligation, to redeem, in cash, all or part of the Series D Preferred.

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

On June 17, 2021, all of the outstanding shares of Series D Preferred were converted into common stock.  See “Common Stock”, below.

Common Stock

On May 20, 2021, the Company issued 1,300,000 shares of common stock with an issuance date value of $2,665,000 as a commitment fee to the investor, for the purchase of Series D Preferred. The value of the shares of common stock issued was accounted for as a reduction of the proceeds from the sale of the Series D Preferred.

On June 17, 2021, the Company issued 3,170,730 shares of common stock upon the conversion of 650 shares of Series D Preferred, after which no Series D Preferred shares remained outstanding.

Stock-Based Compensation

During the three month and nine months ended September 30, 2021, the Company recognized stock-based compensation expense of $1,292,096 and $2,765,959, respectively of which $0 and $15,190, respectively, is included in research and development expenses, and $1,292,096 and $2,750,770, respectively, is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.  During the three and nine months ended September 30, 2020, the Company recognized stock-based compensation expense of $158,014 and $252,831, respectively, of which $7,424 and $22,961, respectively was charged to research and development expense and $150,590 and $229,870, respectively is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

The following table presents information related to stock-based compensation for the three months and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Common stock for services	$	77,040	$	147,976	$	345,679	$	222,676
Amortization of restricted common stock		440,333		—		1,000,647		—
Amortization of market-based awards		754,207		—		1,374,226		—
Stock options		20,516		10,038		45,407		30,155
Total	$	1,292,096	$	158,014	$	2,765,959	$	252,831

17

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Common Stock Issued for Services

For the three and nine months ended September 30, 2021, the Company issued 85,000 and 160,000 shares of immediately vested common stock, respectively, having an aggregate grant date value of $186,399 and $346,199, respectively.

Warrants

During the three and nine months ended September 30, 2021, the Company issued an aggregate of 1,185,033 and 4,185,033 shares of common stock, respectively, in connection with exercises of outstanding warrants pursuant to which we received gross proceeds in the aggregate amount of $1,494,216 and $5,206,716, respectively.

A summary of warrants activity during the nine months ended September 30, 2021 is presented below:

		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Warrants	Price		Term (Yrs)	Value
Outstanding, January 1, 2021	6,787,911	$	1.25
Issued	2,600,000		2.50
Exercised	(4,185,033)		(1.24)
Expired	—		—
Forfeited	—		—
Outstanding, September 30, 2021	5,202,878	$	1.88	4.4	$	2,158,307
Exercisable, September 30, 2021	5,202,878	$	1.88	4.4	$	2,158,307

The following table presents information related to warrants as of September 30, 2021:

Warrants Outstanding			Warrants Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants
$	1.25	2,594,553	4.3	2,594,553
$	1.50	8,325	0.2	8,325
$	2.50	2,600,000	4.6	2,600,000
		5,202,878	4.4	5,202,878

Restricted Common Stock

The following table presents information related to restricted common stock (excluding Market-Based Awards) as of September 30, 2021:

		Weighted Average
	Shares of Restricted	Grant Date
	Common Stock	Fair Value
Non-vested balance, January 1, 2021	72,500	$	1.24
Granted	2,570,000		2.55
Vested	(27,500)		2.06
Forfeited	—		—
Non-vested shares, September 30, 2021	2,615,000	$	2.52

18

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As of September 30, 2021, there was $5,560,259 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of 3.2 years.

Stock Options

A summary of options activity (excluding Market-Based Awards) during the nine months ended September 30, 2021 is presented below:

		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Options	Price		Term (Yrs)	Value
Outstanding, January 1, 2021	370,000	$	0.66
Granted	220,000		2.30
Exercised	—		—
Expired	—		—
Forfeited	—		—
Outstanding, September 30, 2021	590,000	$	1.27	3.2	$	527,600
Exercisable,September 30, 2021	324,167	$	0.66	2.3	$	460,317

The following table presents information related to stock options (excluding Market-Based Awards) as of September 30, 2021:

Options Outstanding			Options Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Options	In Years	Options
$	0.66	370,000	2.3	324,167
$	1.99	10,000	—	—
$	2.03	20,000	—	—
$	2.05	10,000	—	—
$	2.08	10,000	—	—
$	2.13	20,000	—	—
$	2.27	30,000	—	—
$	2.43	20,000	—	—
$	2.44	100,000	—	—
		590,000	2.3	324,167

As of September 30, 2021, there was $175,780 of unrecognized stock-based compensation expense related to stock options, which will be recognized over the weighted average remaining vesting period of 2.9 years.

19

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model. In applying the Black-Scholes option pricing model, the Company used the following assumptions:

	For the Three Months Ended			For the Nine Months Ended
	September 30,			September 30,
	2021		2020	2021			2020
Risk free interest rate	0.20% - 0.23	%	N/A		0.20% - 0.85	%		1.58	%
Expected term (years)	3.50		N/A		2.5 - 3.5			2.50
Expected volatility	109.00	%	N/A		93% - 109	%		93.00	%
Expected dividends	0	%	N/A		0	%		0	%

For the three and nine months ended September 30, 2021, the stock options had a weighted average grant date value of $1.55 and $0.80 per option share, respectively. For the nine months ended September 30, 2020, the stock options had a weighted average grant date value of $0.36 per option share. There were no stock options granted during the three months ended September 30, 2020.

See Market-Based Awards below for additional information.

Market-Based Awards

The following table presents information related to market-based awards as of September 30, 2021:

	Number of	Grant Date
Award	Shares	Fair Value
Restricted stock units	1,500,000	$	1.94
Stock options	1,500,000	$	1.72
Total	3,000,000	$	3.66

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

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

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

	March 1,			June 10,
	2021			2021
Risk free interest rate		0.71	%		0.73	%
Expected volatility		98.9	%		98.5	%
Expected dividend yield		0	%		0	%
Expected life of market-based awards		2.1	years		2.2	years
Fair value of common stock on date of grant	$	2.61		$	2.62

20

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As of September 30, 2021, there was $4,116,195 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.86 years.

NOTE 11    COMMITMENTS AND CONTINGENCIES

Technology Development and Sponsorship Agreement

On March 31, 2021, the Company entered into a multi-year technology development and sponsorship agreement, pursuant to which the Company has committed to spend an aggregate of $900,000 in sponsorship fees, payable in three installments, of which $250,000 was paid on April 1, 2021, $300,000 is payable on January 1, 2022, and $350,000 is payable on January 1, 2023. The April 1, 2021 payment of $250,000 was recorded as a prepaid expense and is being amortized over the performance period.  During the nine months ended September 30, 2021, $166,667 of sponsorship fees expense was recognized related to the agreement.

In addition, the Company has committed to paying an aggregate of $750,000 related to technology development fees, which is to be paid in three equal installments during 2021, 2022 and 2023. As of September 30, 2021, no portion of the technology fees has been paid.

Research and Development Agreements

On April 5, 2021, the Company entered into a research and development agreement to develop high-areal-capacity battery electrodes to increase the energy density of batteries. Pursuant to the terms of the agreement, the Company has committed to spend an aggregate amount of $580,375, payable in eight quarterly installments of $72,547. During the nine months ended September 30, 2021, $145,094 of expense was recognized related to this agreement.

On August 18, 2021, the Company entered into a multi-year research and development agreement for a solid-state rechargeable battery, pursuant to which the Company has committed to spend an aggregate amount of $592,196 in eight quarterly payments of $74,025. During the nine months ended September 30, 2021, $24,675 of expense was recognized related to the agreement.

NOTE 12    SUBSEQUENT EVENTS

Common Stock

During October 2021, the Company issued an aggregate of 1,600,000 shares of common stock upon the exercise of outstanding warrants pursuant to which the Company received an aggregate of $4,000,000 of gross proceeds.

During November 2021, the Company issued 107,744 unregistered shares of common stock as an equity incentive grant, which shares are subject to a four-year vesting schedule.

During November 2021, the Company issued an aggregate of 1,000,000 shares of common stock upon the exercise of outstanding warrants pursuant to which the Company received an aggregate of $2,500,000 of gross proceeds.

21

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

The following discussion and analysis of the results of operations and financial condition of KULR Technology Group, Inc. (the “Company”) as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 should be read in conjunction with our condensed consolidated financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2020 and for the year then ended, which are included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 19, 2021. 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, in our other reports filed with the SEC, and other factors that we may not know.

Overview

KULR Technology Group, Inc., through our wholly-owned subsidiary KULR Technology Corporation, develops and commercializes high-performance thermal management technologies for batteries, electronics, and other components across an array of battery-powered applications. For aerospace and DOD applications, our solutions target high performance applications in direct energy, hypersonic vehicles and satellite communications. For commercial applications, our main focus is a total solution to battery safety by which we aim to mitigate the effects of thermal runaway propagation. This total battery safety solution can be used for electric vehicles, energy storage, battery recycling transportation, cloud computing and 5G communication devices. Our proprietary core technology is a carbon fiber material that provides what we believe to be superior thermal conductivity and heat dissipation for an ultra-lightweight and pliable material. By leveraging our proprietary cooling solutions that have been developed through longstanding partnerships with NASA, the Jet Propulsion Lab and others, our products and services make commercial battery powered products safer and electronics systems cooler and lighter.

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

Recent Developments

COVID-19

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. The Company continues to monitor the impact of COVID-19 on its business and operational assumptions; however, given the uncertainty around the extent and timing of the potential future spread or mitigation of the Coronavirus and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows, or financial condition.

22

New Officer Hires

During 2021, the Company hired the following officers:

● On March 8, 2021, Keith Cochran joined KULR as President and Chief Operating Officer.

● On April 19, 2021, Antonio Martinez joined the Company as its new Vice President of Operations.

● On June 10, 2021, Greg Provenzano joined the Company as its new Vice President of Sales and Marketing.

Appointment of Members to the Board of Directors

On June 7, 2021, the following new independent director appointments became effective:

● Morio Kurosaki (Chair of Audit Committee)

● Stayce Harris (Chair of Compensation Committee)

● Joanna Massey (Chair of Nominating and Governance Committee)

Operating Lease

On April 5, 2021, we entered into an agreement to lease office space for a thirty-six-month period, commencing June 1, 2021 with the option to renew for an additional 5 years. Monthly rental payments under the new lease total $23,787, which are comprised of $18,518 of base rent plus $5,269 for common area costs, with annual escalation of 3.5%.

Series D Preferred Stock

On May 20, 2021, we sold an aggregate of 650 shares of Series D Preferred pursuant to a new designation of preferred stock, and one-year warrants to purchase 2,600,000 shares of common stock at a price of $2.50 per share, for aggregate gross proceeds of $6,500,000. The Series D Preferred shares were convertible into an aggregate of 3,170,732 shares of common stock at a fixed conversion price of $2.05 and had the right to vote on an as-converted basis. We also paid the investor a commitment fee of 1,300,000 shares of common stock in connection with the sale of the Series D Preferred. Notes payable obligations in the aggregate amount of $1,540,000, were paid in full upon the closing of the sale of the Series D Preferred.

On June 17, 2021, we issued an aggregate of 3,170,730 shares of our common stock upon conversion of 650 shares of our Series D Preferred Stock, after which no Series D Preferred shares remained outstanding.

Exercise of Warrants

During the nine months ended September 30, 2021, we issued 4,185,033 shares of common stock upon the exercise of warrants for proceeds of $5,206,716.

NYSE American Exchange Listing

On June 7, 2021, the Company’s common stock was up listed and now trades on the NYSE American Exchange.

23

Results of Operations

Three and Nine Months Ended September 30, 2021 Compared With the Three and Nine Months Ended September 30, 2020

Revenues

Our revenues consisted of the following during the three months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Product sales	$	600,921	$	136,849	$	1,356,530	$	235,979
Contract services		—		—		290,540		179,498
Total revenue	$	600,921	$	136,849	$	1,647,070	$	415,477

For the three months ended September 30, 2021 and 2020, we generated $600,921 and $136,849 of revenues, respectively, representing an increase of $464,072, or 339%. For the nine months ended September 30, 2021 and 2020, we generated $1,647,070 and $415,477 of revenues, respectively, representing an increase of $1,231,593, or 296%, primarily resulting from three new contracts received during the first three quarters of 2021. Revenue from product sales during the three and nine months ended September 30, 2021 increased by 339% and 475%, respectively, compared to the three and nine months ended September 30, 2020, primarily resulting from two large contracts received during the first three quarters of 2021. Product sales during these periods included sales of our component product, carbon fiber velvet (“CFV”) thermal management solution, ISC battery cells and devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials. Our service revenues, which include certain research and development contracts and onsite engineering services, have not been hampered by restrictions arising from working under COVID-19 shelter-in-place regulations.

Our customers and prospective customers are large organizations with multiple levels of management, controls/procedures, and contract evaluation/authorization. Furthermore, our solutions are new and do not necessarily fit into pre-existing patterns of purchase commitment. Accordingly, the business activity cycle between expression of initial customer interest to shipping, acceptance and billing can be lengthy, unpredictable, and lumpy, which can influence the timing, consistency and reporting of sales growth.

Cost of Revenues

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

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

For the three months ended September 30, 2021 and 2020, cost of revenues was $155,138 and $63,403, respectively, an increase of $91,735 or 145%. The increase was primarily due to higher revenues earned during the three months ended September 30, 2021. The gross margin percentage was 74% and 54% for the three months ended September 30, 2021 and 2020, respectively. The increase in margins during the third quarter of 2021 is primarily the result of changes in product mix sold during the third quarter.

For the nine months ended September 30, 2021 and 2020, cost of revenues was $869,612 and $138,180, respectively, an increase of $731,432 or 529%. The increase was primarily due to higher revenues earned during the nine months ended September 30, 2021. The gross margin percentage was 47% and 67% for the nine months ended September 30, 2021 and 2020, respectively. The decrease in margins realized during the nine months ended September 30, 2021 is primarily attributable to an individual contract that resulted in a gross margin of 13% during the second quarter of 2021.

24

Research and Development

Research and development expenses (“R&D”) include expenses incurred in connection with the R&D of our CFV thermal management solution and solid-state rechargeable batteries. R&D expenses are expensed as they are incurred.

For the three months ended September 30, 2021 and 2020, R&D expenses were $481,855 and $51,820, respectively, representing an increase of $430,035 or 830%. For the nine months ended September 30, 2021 and 2020, R&D expenses were $957,579 and $221,524, respectively, representing an increase of $736,055 or 332%. The increase is primarily due to thermal energy management report fees and energy storage development services provided during the period. We expect that our R&D expenses will increase as we expand our future operations.

Selling, General and Administrative

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

For the three months ended September 30, 2021 and 2020, selling, general and administrative expenses were $3,104,410 and $832,146, respectively, an increase of $2,272,264 or 273%. The increase is primarily attributable to an increase of approximately $1,116,000 of stock-based compensation, an increase of approximately $252,000 of marketing and advertising expense, an increase of approximately $210,000 for professional fees resulting from engagements for financial services, quality and automation services, as well as an increase of approximately $342,000 in labor costs as the result of sixteen new hires, an increase of approximately $193,000 of miscellaneous expenses, and an increase of approximately $92,000 of travel and entertainment expenses due to the lifting of COVID-19 dining and traveling restrictions.

For the nine months ended September 30, 2021 and 2020, selling, general and administrative expenses were $7,320,524 and $1,719,100, respectively, an increase of $5,601,424 or 326%. The increase is primarily attributable to an increase of approximately $2,511,000 of stock-based compensation, an increase of approximately $1,389,000 of marketing and advertising expense, an increase of approximately $648,000 in labor costs as the result of eight new hires, an increase of approximately $433,000 for professional fees resulting from engagements for financial services, quality and automation services, and an increase of approximately $451,000 of miscellaneous expenses, and an increase of approximately $163,000 of travel and entertainment expenses due to the lifting of COVID-19 dining and traveling restrictions.

Other Expenses

For the three months ended September 30, 2021 and 2020, other income (expenses) were $44,550 and $(201,739), respectively, representing an increase of $246,289. The increase in other income is primarily due to no 2021 charges for amortization of debt discount and the increased income from the change in fair value of accrued issuable equity of $45,600.

For the nine months ended September 30, 2021 and 2020, other expenses were $337,153 and $328,170, respectively, representing an increase of $8,983 or 3%. The increase in other expense is primarily due to the 2021 debt redemptions costs of $140,000 associated with the repayment of notes payable, and an increase of $50,000 of expenses related to the change in fair value of accrued issuable equity, partially offset by a decrease of amortization of debt discount of $179,000 during the nine months ended September 30, 2021.

Liquidity and Capital Resources

As of September 30, 2021, we had a cash balance of $10,990,056 and working capital of $10,659,878. We incurred a net loss of $7,837,798 during the nine months ended September 30, 2021 and had an accumulated deficit totaling $19,084,206 as of September 30, 2021. While the Company anticipates it will continue to incur operating losses and use cash in operating activities for the near future, the Company believes that its current working capital is sufficient in comparison to its anticipated cash usage for a period of at least twelve months subsequent to the filing date of these financial statements.

For the nine months ended September 30, 2021 and 2020, cash used in operating activities was $5,394,935 and $2,076,035, respectively. Our cash used in operations for the nine months ended September 30, 2021 was primarily

25

attributable to our net loss of $7,837,798, adjusted for non-cash expenses in the aggregate amount of $2,989,598, and $546,735 of net cash used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the nine months ended September 30, 2020 was primarily attributable to our net loss of $1,991,497, adjusted for non-cash expenses in the aggregate amount of $587,503, and $672,041 of net cash used to fund changes in the levels of operating assets and liabilities.

For the nine months ended September 30, 2021 and 2020, cash used in investing activities was $1,386,864 and $46,087, respectively, related to equipment purchases and improvements to the new executive offices.

For the nine months ended September 30, 2021 and 2020, cash provided by financing activities was $8,891,716 and $4,822,921, respectively. Cash provided by financing activities during the nine months ended September 30, 2021 represents $6,500,000 of proceeds from the sale of preferred stock and $5,206,716 received in connection with the exercise of warrants, partially offset by the $2,450,000 principal repayments on notes payable and $365,000 of financing costs paid during the period. Cash provided by financing activities during the nine months ended September 30, 2020 consisted of $3,710,000 of net proceeds from the issuance of notes payable, $155,226 of proceeds from the Paycheck Protection Program loan, and $1,461,695 of net proceeds from the sale of common stock. These amounts were partially offset by $330,000 for the payment of debt issuance costs, $159,000 for the repayments on notes payable and $15,000 of cash paid for financing costs.

Subsequent to September 30, 2021, the Company received an aggregate of $6,500,000 in connection with the exercise of warrants.

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. The Company continues to monitor the impact of COVID-19 on its business and operational assumptions; however, given the uncertainty around the extent and timing of the potential future spread or mitigation of the Coronavirus and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows, or financial condition.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

For a description of our critical accounting policies, see Note 2 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

26

concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective at the reasonable assurance level.

During the year ended December 31, 2020, our management identified a material weakness in our internal control over financial reporting whereas we did not design or maintain effective controls to ensure that there is an independent review and approval of electronic payments (wires, EFT’s, ACH’s and credit card payments) as our policy of providing timely support to ensure completeness and accuracy of the payment was not followed. We are currently implementing a detailed plan for remediation of the material weakness, including developing and maintaining preventative controls around the electronic payment process to ensure proper segregation of duties.

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 2021 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.

27

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on March 19, 2021.

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

During the three months ended September 30, 2021, we issued 51,700 unregistered shares of common stock upon the exercise of warrants.

During the three months ended September 30, 2021, the Company issued 155,000 unregistered shares of common stock for services, which shares are subject to a 6-month vesting schedule.

Each of the foregoing transactions was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof. In the alternative, the common stock issued upon the exercise of conversion rights is an exempt security pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

28

Item 6. Exhibits

Exhibit  No.	Description
31.1	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*
101.SCH	Inline XBRL Taxonomy Extension Schema Document*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104	Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

*Filed herewith

**Furnished herewith

29

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.

Date: November 15, 2021	By	/s/ Michael Mo
		Michael Mo
		Chief Executive Officer
		(Principal Executive Officer)

Date: November 15, 2021	By	/s/ Simon Westbrook
		Simon Westbrook
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

30

EX-31.1

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 quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements and other financial information included in this quarterly 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 quarterly report;

4. The registrant’s other certifying officer 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 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 quarterly 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 quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d. Disclosed in this quarterly report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably 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 registrant’s board of directors (or persons performing the equivalent functions):

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.

Date: November 15, 2021
	/s/ Michael Mo
	Michael Mo
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of

Principal Financial Officer

of KULR TECHNOLOGY GROUP, INC.

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Simon Westbrook, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KULR Technology Group, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements and other financial information included in this quarterly 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 quarterly report;

4. The registrant’s other certifying officer 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 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 quarterly 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 quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d. Disclosed in this quarterly report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably 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 registrant’s board of directors (or persons performing the equivalent functions):

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.

Date: November 15, 2021
	/s/ Simon Westbrook
	Simon Westbrook
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

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, 2021, 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; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 15, 2021	By	/s/ Michael Mo
		Michael Mo
		Chief Executive Officer
		(Principal Executive Officer)
Date: November 15, 2021	By	/s/ Simon Westbrook
		Simon Westbrook
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2021	Nov. 12, 2021
Document and Entity Information
Document Type	10-Q
Document Period End Date	Sep. 30, 2021
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-40454
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	81-1004273
Entity Address, Postal Zip Code	92111
City Area Code	408
Local Phone Number	663-5247
Entity Address, Address Line One	4863 Shawline Street,
Entity Address, City or Town	San Diego,
Entity Address, State or Province	CA
Entity Registrant Name	KULR TECHNOLOGY GROUP, INC.
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		104,700,707
Title of 12(b) Security	Common Stock
Trading Symbol	KULR
Security Exchange Name	NYSE
Entity Central Index Key	0001662684
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2021	Dec. 31, 2020
Current Assets:
Cash	$ 10,990,056	$ 8,880,140
Accounts receivable	550,379	55,492
Inventory	190,766	55,452
Prepaid expenses and other current assets	450,756	150,468
Total Current Assets	12,181,957	9,141,552
Property and equipment, net	385,750	57,857
Equipment deposits	1,029,805	0
Security deposits	58,941	8,728
Right of use asset	730,115	0
Total Assets	14,386,568	9,208,137
Current Liabilities:
Accounts payable	67,359	66,537
Accounts payable - related party	0	2,628
Accrued expenses and other current liabilities	689,346	395,012
Notes payable, net of debt discount of $0 and $128,198 at September 30, 2021 and December 31, 2020, respectively	0	2,321,802
Accrued issuable equity	194,134	128,380
Loan payable, current portion	155,226	12,936
Lease liability, current portion	257,198	0
Deferred revenue	158,816	20,000
Total Current Liabilities	1,522,079	2,947,295
Lease liability, non-current portion	475,540	0
Loan payable, non-current portion	0	142,290
Total Liabilities	1,997,619	3,089,585
Commitments and contingencies (Note 11)
Stockholders' Equity:
Common stock, $0.0001 par value, 500,000,000 shares authorized; 100,992,963 and 89,908,600 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	10,200	8,991
Additional paid-in capital	31,462,955	17,355,968
Accumulated deficit	(19,084,206)	(11,246,408)
Total Stockholders' Equity	12,388,949	6,118,552
Total Liabilities and Stockholders' Equity	14,386,568	9,208,137
Series A Preferred Stock
Stockholders' Equity:
Preferred stock
Series B Convertible Preferred Stock
Stockholders' Equity:
Preferred stock	0	1
Series C Preferred Stock
Stockholders' Equity:
Preferred stock	0	0
Series D Preferred Stock [Member]
Stockholders' Equity:
Preferred stock	$ 0	$ 0

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
Debt discount, Current	$ 0	$ 128,198
Preferred Stock, Par Value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Par Value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	500,000,000	500,000,000
Common Stock, Shares Issued	101,992,963	89,908,600
Common Stock, Shares Outstanding	101,992,963	89,908,600
Series A Preferred Stock
Preferred Stock, Shares Authorized	1,000,000	1,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Series B Convertible Preferred Stock
Preferred Stock, Shares Authorized	31,000	31,000
Preferred Stock, Shares Issued	0	13,972
Preferred Stock, Shares Outstanding	0	13,972
Preferred Stock Shares Liquidated Preference	$ 0	$ 13,972
Series C Preferred Stock
Preferred Stock, Shares Authorized	400	400
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Series D Preferred Stock [Member]
Preferred Stock, Shares Authorized	650	650
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue	$ 600,921	$ 136,849	$ 1,647,070	$ 415,477
Cost of revenue	155,138	63,403	869,612	138,180
Gross Profit	445,783	73,446	777,458	277,297
Operating Expenses:
Research and development	481,855	51,820	957,579	221,524
Selling, general, and administrative	3,104,410	832,146	7,320,524	1,719,100
Total Operating Expenses	3,586,265	883,966	8,278,103	1,940,624
Loss From Operations	(3,140,482)	(810,520)	(7,500,645)	(1,663,327)
Other (Expense) Income
Interest expense, net	(758)	(1,284)	(2,389)	(5,004)
Debt redemption costs	0	0	(140,000)
Amortization of debt discount	0	(210,402)	(128,198)	(307,313)
Change in fair value of accrued issuable equity	45,600	9,947	(66,274)	(15,853)
Loss on foreign currency transactions	(292)	0	(292)
Total Other Expenses, net	44,550	(201,739)	(337,153)	(328,170)
Net Loss	(3,095,932)	(1,012,259)	(7,837,798)	(1,991,497)
Deemed dividend to Series D preferred stockholders	0	0	(2,624,326)
Net Loss Attributable to Common Stockholders	$ (3,095,932)	$ (1,012,259)	$ (10,462,124)	$ (1,991,497)
Net Loss Per Share - Basic and Diluted (In dollars per share)	$ (0.03)	$ (0.01)	$ (0.11)	$ (0.02)
Weighted Average Number of Shares Outstanding, Basic and Diluted	99,018,630	82,466,734	93,816,203	82,042,241

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) - USD ($)		Series B Convertible Preferred Stock Convertible Preferred Stock	Series B Convertible Preferred Stock Common stock	Series B Convertible Preferred Stock Additional Paid-in Capital	Series C Convertible Preferred Stock Convertible Preferred Stock	Series C Convertible Preferred Stock Common stock	Series C Convertible Preferred Stock Additional Paid-in Capital	Series D Convertible Preferred Stock Convertible Preferred Stock	Common stock Common stock	Common stock Stock options.	Common stock Market-Based Awards	Common stock	Shares to be Issued	Additional Paid-in Capital Common stock	Additional Paid-in Capital Stock options.	Additional Paid-in Capital Market-Based Awards	Additional Paid-in Capital	Accumulated Deficit [Member] Common stock	Accumulated Deficit [Member] Stock options.	Accumulated Deficit [Member] Market-Based Awards	Accumulated Deficit [Member]	Common stock	Stock options.	Market-Based Awards	Total
Balance at Dec. 31, 2019		$ 1										$ 8,107					$ 7,591,239				$ (8,396,312)				$ (796,965)
Balance (shares) at Dec. 31, 2019		14,487			24.01							81,071,831
Common stock issued for the commitment fee pursuant to the SEDA agreement												$ 10					63,249								63,259
Common stock issued for the commitment fee pursuant to the SEDA agreement (in shares)												95,847
Additional Paid in Capital, Amortization of Equity Options And Awards																	10,528								10,528
Net loss																					(550,253)				(550,253)
Balance at Mar. 31, 2020		$ 1										$ 8,117					7,665,016				(8,946,565)				(1,273,431)
Balance (shares) at Mar. 31, 2020		14,487			24.01							81,167,678
Balance at Dec. 31, 2019		$ 1										$ 8,107					7,591,239				(8,396,312)				(796,965)
Balance (shares) at Dec. 31, 2019		14,487			24.01							81,071,831
Net loss																									(1,991,497)
Balance at Sep. 30, 2020		$ 1										$ 8,304	$ 40,000				9,813,892				(10,387,809)				(525,612)
Balance (shares) at Sep. 30, 2020		13,972			18.90							83,036,226
Balance at Mar. 31, 2020		$ 1										$ 8,117					7,665,016				(8,946,565)				(1,273,431)
Balance (shares) at Mar. 31, 2020		14,487			24.01							81,167,678
Common stock issued for the commitment fee pursuant to the SEDA agreement												$ 56					679,381								679,437
Common stock issued for the commitment fee pursuant to the SEDA agreement (in shares)												561,564
Stock-based compensation												$ 3					29,997								30,000
Stock-based compensation (in shares)												30,000
Additional Paid in Capital, Amortization of Equity Options And Awards																	9,588								9,588
Net loss																					(428,985)				(428,985)
Balance at Jun. 30, 2020		$ 1										$ 8,176					8,383,982				(9,375,550)				(983,391)
Balance (shares) at Jun. 30, 2020		14,487			24.01							81,759,242
Common stock to be issued pursuant to the SEDA agreement													40,000												40,000
Stock-based compensation												$ 3					24,997								25,000
Stock-based compensation (in shares)												35,000
Common stock issued upon conversion of Convertible Preferred Stock			$ 3	$ (3)		$ 6	$ (6)
Common stock issued upon conversion of Convertible Preferred Stock (in shares)		(515)	25,758		(5.11)	56,777
Additional Paid in Capital, Amortization of Equity Options And Awards																	10,038								10,038
Common stock issued pursuant to the SEDA agreement for cash, net of issuance costs												$ 116					1,394,884								1,395,000
Common stock issued pursuant to the SEDA agreement for cash, net of issuance costs (in shares)												1,159,449
Net loss																					(1,012,259)				(1,012,259)
Balance at Sep. 30, 2020		$ 1										$ 8,304	$ 40,000				9,813,892				(10,387,809)				(525,612)
Balance (shares) at Sep. 30, 2020		13,972			18.90							83,036,226
Balance at Dec. 31, 2020		$ 1										$ 8,991					17,355,968				(11,246,408)				6,118,552
Balance (shares) at Dec. 31, 2020		13,972										89,908,600
Common stock issued upon conversion of Convertible Preferred Stock		$ (1)										$ 70					(69)				0				0
Common stock issued upon conversion of Convertible Preferred Stock (in shares)		(13,972)										698,600
Common stock issued for services												$ 2					49,798				0				49,800
Common stock issued for services (in shares)												20,000
Restricted common stock issued												$ 200					(200)				0				0
Restricted common stock issued (in shares)												2,000,000
Additional Paid in Capital, Amortization of Equity Options And Awards									$ 0	$ 0	$ 0			$ 126,625	$ 9,112	$ 130,245		$ 0	$ 0	$ 0		$ 126,625	$ 9,112	$ 130,245
Net loss												$ 0					0				(1,714,723)				(1,714,723)
Balance at Mar. 31, 2021												$ 9,263					17,671,479				(12,961,131)				4,719,611
Balance (shares) at Mar. 31, 2021												92,627,200
Balance at Dec. 31, 2020		$ 1										$ 8,991					17,355,968				(11,246,408)				$ 6,118,552
Balance (shares) at Dec. 31, 2020		13,972										89,908,600
Common stock issued for services (in shares)																									160,000
Net loss																									$ (7,837,798)
Balance at Sep. 30, 2021												$ 10,200					31,462,955				(19,084,206)				12,388,949
Balance (shares) at Sep. 30, 2021												101,992,963
Balance at Mar. 31, 2021												$ 9,263					17,671,479				(12,961,131)				4,719,611
Balance (shares) at Mar. 31, 2021												92,627,200
Issuance of Series D Convertible Preferred Stock, Common Stock and warrants for cash	[1]											$ 130					6,134,870				0				6,135,000
Issuance of Series D Convertible Preferred Stock, Common Stock and warrants for cash (in shares)	[1]							650				1,300,000
Common stock issued upon conversion of Series D Convertible Preferred Stock												$ 317					(317)				0				0
Common stock issued upon conversion of Series D Convertible Preferred Stock (in shares)								(650)				3,170,730
Common stock issued upon the exercise of warrants												$ 300					3,712,200				0				3,712,500
Common stock issued upon the exercise of warrants (in shares)												3,000,000
Common stock issued for services												$ 6					109,994				0				110,000
Common stock issued for services (in shares)												55,000
Restricted common stock issued												$ 42					(42)				0				0
Restricted common stock issued (in shares)												415,000
Additional Paid in Capital, Amortization of Equity Options And Awards									0	0	0			433,689	15,779	489,774		0	0	0		433,689	15,779	489,774
Net loss												$ 0					0				(3,027,143)				(3,027,143)
Balance at Jun. 30, 2021												$ 10,058					28,567,426				(15,988,274)				12,589,210
Balance (shares) at Jun. 30, 2021												100,567,930
Common stock issued upon the exercise of warrants												$ 119					1,494,097				0				1,494,216
Common stock issued upon the exercise of warrants (in shares)												1,185,033
Common stock issued for services												$ 9					186,391				0				$ 186,399
Common stock issued for services (in shares)												85,000													85,000
Restricted common stock issued												$ 15					(15)				0				$ 0
Restricted common stock issued (in shares)												155,000
Additional Paid in Capital, Amortization of Equity Options And Awards									$ 0	$ 0	$ 0			$ 440,333	$ 20,516	$ 754,207		$ 0	$ 0	$ 0		$ 440,333	$ 20,516	$ 754,207
Net loss												$ 0					0				(3,095,932)				(3,095,932)
Balance at Sep. 30, 2021												$ 10,200					$ 31,462,955				$ (19,084,206)				$ 12,388,949
Balance (shares) at Sep. 30, 2021												101,992,963

[1] Represents gross proceeds of $6,500,000, net of cash issuance costs of $365,000.

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) (Parenthetical)	3 Months Ended
	Sep. 30, 2020 USD ($)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
Proceeds from Issuance of Common Stock	$ 757,695
Amortized deferred offering costs	$ 78,258

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)		9 Months Ended
		Sep. 30, 2021	Sep. 30, 2020
Cash Flows From Operating Activities:
Net loss		$ (7,837,798)	$ (1,991,497)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		128,198	307,313
Depreciation and amortization expense		29,166	10,573
Bad debt expense		0	933
Change in fair value of accrued issuable equity		66,274	15,853
Stock-based compensation		2,765,959	252,831
Changes in operating assets and liabilities:
Accounts receivable		(494,887)	(40,915)
Inventory		(135,314)	(21,070)
Prepaid expenses and other current assets		(300,288)	(97,267)
Security deposits		(50,213)	0
Right of use asset		84,702	0
Accounts payable		(1,806)	(254,260)
Accrued expenses and other current liabilities		294,334	(280,129)
Lease liability		(82,079)	0
Deferred revenue		138,816	21,600
Total Adjustments		2,442,862	(84,538)
Net Cash Used In Operating Activities		(5,394,936)	(2,076,035)
Cash Flows From Investing Activities:
Deposits for equipment purchases		(1,029,805)	0
Purchase of property and equipment		(357,059)	(46,087)
Net Cash Used In Investing Activities		(1,386,864)	(46,087)
Cash Flows from Financing Activities:
Proceeds from sale of Series D convertible preferred stock, common stock and warrants		6,500,000	0
Proceeds from sale of common stock	[1]	0	1,461,695
Repayments of notes payable		(2,450,000)	(159,000)
Proceeds from the exercise of warrants		5,206,716	0
Proceeds from Paycheck Protection Program loan		0	155,226
Proceeds from note payable		0	3,710,000
Payment of debt issuance costs		0	(330,000)
Payment of financing costs		(365,000)	(15,000)
Net Cash Provided By Financing Activities		8,891,716	4,822,921
Net Increase In Cash		2,109,916	2,700,799
Cash - Beginning of Period		8,880,140	108,857
Cash - End of Period		10,990,056	2,809,656
Cash paid during the period for:
Interest		735	3,890
Income taxes			0
Non-cash investing and financing activities:
Right of use asset for lease liability		814,817	0
Beneficial conversion feature on Series D convertible preferred stock		2,624,326
Common stock issued as a commitment fee for the SEDA agreement			63,259
Deferred offering costs reclassified to equity			13,042
Original issuance discount on note payable			290,000
Common stock issued in satisfaction of accrued issuable equity		209,200	0
Common stock issued for repayment of note payable			691,000
Subscriptions receivable for accrued issuable equity			40,000
Series B Convertible Preferred Stock
Non-cash investing and financing activities:
Common stock issued upon conversion		70	3
Series C Convertible Preferred Stock
Non-cash investing and financing activities:
Common stock issued upon conversion		0	6
Series D Convertible Preferred Stock
Non-cash investing and financing activities:
Beneficial conversion feature on Series D convertible preferred stock		2,624,326	0
Common stock issued upon conversion		$ 317	$ 0

[1] For the nine months ended September 30, 2020, the amount represents gross proceeds of $2,152,695 less $691,000 withheld by the investor to pay down a portion of the note payable held by the same investor.

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical)	9 Months Ended
	Sep. 30, 2020 USD ($)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Proceeds from sale of common stock	$ 2,152,695
Proceeds from issuance withheld by investors	$ 691,000

XML

ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2021

ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

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 high performance aerospace and Department of Defense ("DOD") applications, such as satellite communications, directed energy systems and hypersonic vehicles, and applying them to mass market commercial applications, such as lithium-ion battery energy storage, electrical vehicles, 5G communication, cloud computer infrastructure, and 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, 2021 and for the three and nine months ended September 30, 2021 and 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 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, 2020 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 19, 2021.

Risks and Uncertainties

In March 2020, the World Health Organization declared COVID-19, a novel strain coronavirus, a pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. While the Company continues to see signs of economic recovery as certain governments begin to gradually ease restrictions, provide economic stimulus and accelerate vaccine distribution, the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions. The Company continues to monitor the impact of COVID-19 on its business and operational assumptions and estimates and has determined there were no material adverse impacts on the Company’s results of operations and financial position at September 30, 2021.

The full extent of the future impact of COVID-19 on the Company’s operations and financial condition is uncertain. Accordingly, COVID-19 could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects during 2021 and beyond, including the demand for its products, interruptions to supply chains, ability to maintain regular research and development and manufacturing schedules as well as the capability to meet customer demands in a timely manner. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Since the date of the Annual Report on Form 10-K for the year ended December 31, 2020, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.

Liquidity

During the nine months ended September 30, 2021, the Company raised gross proceeds of $6,500,000 in connection with the sale of preferred stock, common stock and warrants, and raised proceeds of $5,206,716 in connection with the exercise of warrants to purchase common stock. During the nine months ended September 30, 2021, the Company repaid outstanding notes payable in the amount of $2,450,000. Subsequent to September 30, 2021, the Company received an aggregate of $6,500,000 in connection with the exercise of warrants. See Note 12 – Subsequent Events for additional details.

As of September 30, 2021, the Company had cash of $10,990,056 and working capital of $10,659,878. While the Company anticipates it will continue to incur operating losses and use cash in operating activities for the foreseeable future, the Company believes that its current working capital is sufficient in comparison to its anticipated cash usage for a period of at least twelve months subsequent to the filing date of these financial statements.

Concentrations of Credit Risk

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

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 was an uninsured balance of $10,489,922 and $8,513,010 as of September 30, 2021 and December 31, 2020, respectively.

Customer and Revenue Concentrations

The Company had certain customers whose revenue individually represented 10% or more of the Company's total revenue, or whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as follows:

	Revenues								Accounts Receivable
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				As of		As of
	2021		2020		2021		2020		September 30, 2021		December 31, 2020
Customer A	88	%	*		41	%	*		96	%	*
Customer B	*		26	%	*		*		*		70	%
Customer C	*		*		*		12	%	*		*
Customer D	*		*		40	%	*		*		*
Customer E	*		35	%	*		44	%	*		*
Customer F	*		12	%	*		*		*		*
Customer G	*		*		*		*		*		19	%
Customer H	*		*		*		*		*		10	%
Total	88	%	73	%	81	%	56	%	96	%	99	%

* Less than 10%

There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and

results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers.

Vendor Concentrations

Vendor concentrations are as follows for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Vendor A	*		29	%	*		17	%
Vendor B	*		13	%	*		*
Vendor C	*		*		*		11	%
Vendor D	*		*		*		13	%
Vendor E	*		11	%	*		*
Vendor F	*		*		11	%	*
Vendor G	26	%	*		11	%	*
Vendor H	10	%	*		*		*
Vendor I	12	%	*		*		*
	48	%	53	%	22	%	41	%

* Less than 10%

Inventory

Inventory is comprised of carbon fiber velvet ("CFV") thermal interface solutions and internal short circuit batteries, which are available for sale. Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. The cost of inventory that is sold to third parties is included within cost of sales and the cost of inventory that is given as samples is included within operating expenses. The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down to net realizable value. As of September 30, 2021 and December 31, 2020, the Company's inventory was comprised solely of finished goods.

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 the core principle of ASC 606:

● Step 1: Identify the contract with the customer;

● Step 2: Identify the performance obligations in the contract;

● Step 3: Determine the transaction price;

● Step 4: Allocate the transaction price to the performance obligations in the contract; and

● Step 5: Recognize revenue when the company satisfies a performance obligation.

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

● Product sales – Revenue is recognized at the point in time that the product is transferred to the customer, which is generally at the time products leave the Company’s distribution center.

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

The following table summarizes the Company's revenue recognized during the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Product sales	$	600,921	$	136,849	$	1,356,530	$	235,979
Contract services		—		—		290,540		179,498
Total revenue	$	600,921	$	136,849	$	1,647,070	$	415,477

As of September 30, 2021 and December 31, 2020, the Company had $158,816 and $20,000 of deferred revenue, respectively, from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract, or the customers have not officially accepted the goods or services provided under the contract. During the three and nine months ended September 30, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of September 30, 2021 and December 31, 2020, the Company had $62,908 and $31,212, respectively, of deferred labor costs, which is included in prepaid expenses and other current assets in the Company's condensed consolidated balance sheets. Deferred labor costs represent costs to fulfill the Company's contract service revenue. The Company will recognize the deferred labor costs as cost of revenues at the point in time that the Company satisfies its performance obligation under the respective contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

Shipping and Handling Costs

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

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, less unvested issued restricted stock. 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, if not antidilutive.

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

	September 30,
	2021	2020
Series B Convertible Preferred Stock	—	698,600
Series C Convertible Preferred Stock	—	189,000
Unvested restricted stock	2,615,000	—
Market-based equity awards	3,000,000	—
Options	590,000	395,000
Warrants	5,202,878	210,025
Total	11,407,878	1,492,625

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated net loss.

Recently Adopted Accounting Pronouncements

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

Recently Issued Accounting Pronouncements

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

On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company does not expect this new standard to have a material impact on its financial statements.

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are 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.

XML

PREPAID EXPENSES AND OTHER CURRENT ASSETS

9 Months Ended

Sep. 30, 2021

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

NOTE 3    PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of September 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:

	September 30,		December 31,
	2021		2020
Deferred labor costs	$	62,908	$	31,212
Filing		2,729		9,944
Insurance		66,572		16,035
Marketing		115,794		58,103
Other		11,662		25,820
Professional fees		63,582		9,354
Subscriptions		30,009		—
Vendor deposits		97,500		—
Total prepaid expenses	$	450,756	$	150,468

XML

EQUIPMENT DEPOSITS

9 Months Ended

Sep. 30, 2020

EQUIPMENT DEPOSITS

EQUIPMENT DEPOSITS

NOTE 4    EQUIPMENT DEPOSITS

The Company entered into agreements with third party contractors for the design and build of a battery packaging and inspection automation system and a cell testing system. On July 22, 2021 and September 27, 2021, the Company paid deposits of $330,000 and $699,805 in connection with these agreements.

XML

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2021

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 5    ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of September 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following:

	September 30,		December 31,
	2021		2020
Board compensation	$	60,808	$	—
Payroll and vacation		219,547		278,854
Legal and professional fees		232,200		81,902
Research and development		97,222		—
Other		79,569		34,256
Total accrued expenses and other current liabilities	$	689,346	$	395,012

XML

ACCRUED ISSUABLE EQUITY

9 Months Ended

Sep. 30, 2021

ACCRUED ISSUABLE EQUITY.

ACCRUED ISSUABLE EQUITY

NOTE 6    ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the nine months ended September 30, 2021 is presented below.

Balance, January 1, 2021	$	128,380
Additions		208,680
Reclassifications to equity upon issuance		(209,200)
Mark-to market		66,274
Balance, September 30, 2021	$	194,134

During the nine months ended September 30, 2021, the Company entered into certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company, having an aggregate grant date value of $208,680, and settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 100,000 shares with an aggregate fair value of $209,200.

During the three and nine months ended September 30, 2021, the Company recorded income of $45,600 and a charge of $66,274, respectively, related to the change in fair value of accrued issuable equity.

XML

LEASES

9 Months Ended

Sep. 30, 2021

LEASES

LEASES

NOTE 7    LEASES

On April 5, 2021, the Company entered into a new lease agreement for office space in San Diego, California, effective June 1, 2021. The initial lease term is three years and there is an option to renew for an additional five years. Management does not expect to exercise its option to renew. Monthly rental payments under the new lease begin at $23,787, which is comprised of $18,518 of base rent plus $5,268 of common area maintenance fees, with annual escalation of 3.5%. The Company paid a security deposit of $50,213 in connection with the new lease agreement.

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

The Company also rents office space in San Diego, California on a month-to-month basis, at monthly rent of $5,127, which is comprised of $4,572 of base rent plus $555 of association fees.

During the three and nine months ended September 30, 2021, aggregate operating lease expense was $89,305 and $144,765, respectively. For the three and nine months ended September 30, 2020, operating lease expense was $15,616 and $42,832, respectively. As of September 30, 2021, the Company did not have any financing leases.

Maturities of lease liabilities as of September 30, 2021 were as follows:

Maturity Date
Remaining three months ending December 31, 2021	$	71,361
2022		289,981
2023		297,917
2024		125,530
Total lease payments		784,789
Less: Imputed interest		(52,051)
Present value of lease liabilities		732,738
Less: current portion		(257,198)
Lease liabilities, non-current portion	$	475,540

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

	For the Nine Months Ended September 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating lease	$	82,079	$	—
Right-of-use asset obtained in exchange for lease obligations
Operating lease	$	814,817	$	—

XML

NOTES PAYABLE

9 Months Ended

Sep. 30, 2021

NOTES PAYABLE

NOTES PAYABLE

NOTE 8    NOTES PAYABLE

A summary of notes payable activity during the nine months ended September 30, 2021 is presented below:

	Notes		Debt
	Payable		Discount		Total
Balance, January 1, 2021	$	2,450,000	$	(128,198)	$	2,321,802
Repayments in cash		(2,450,000)		—		(2,450,000)
Amortization of debt discount		—		128,198		128,198
Outstanding, September 30, 2021	$	—	$	—	$	—

XML

RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2021

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 9    RELATED PARTY TRANSACTIONS

During the three and nine months ended September 30, 2021, the Company had no material related party transactions.

Accounts Payable – Related Party

Accounts payable – related party consisted of a liability of $0 and $2,628, as of September 30, 2021 and December 31, 2020, respectively, to Energy Science Laboratories, Inc. (“ESLI”), a company controlled by the Company’s Chief Technology Officer (“CTO”), in connection with consulting services provided to the Company associated with the development of the Company’s CFV thermal management solutions in prior periods.

XML

STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2021

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 10    STOCKHOLDERS’ EQUITY

Series D Preferred Stock

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

The Series D Preferred have a fixed conversion price of $2.05, are convertible into an aggregate of 3,170,732 shares of common stock and have the right to vote on an as-converted basis.  Holders of the Series D Preferred shall be entitled to receive cumulative dividends annually at an annual rate equal to ten percent (10%). Dividends shall be payable in cash or, at the option of the holder of the Series D Preferred, converted into shares of common stock as provided in the certificate of designation for the Series D Preferred. Provided that the shares of common stock issuable upon conversion of the Series

D Preferred is registered pursuant to an effective registration statement, the Company shall have the option, but not the obligation, to redeem, in cash, all or part of the Series D Preferred.

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

On June 17, 2021, all of the outstanding shares of Series D Preferred were converted into common stock.  See “Common Stock”, below.

Common Stock

On May 20, 2021, the Company issued 1,300,000 shares of common stock with an issuance date value of $2,665,000 as a commitment fee to the investor, for the purchase of Series D Preferred. The value of the shares of common stock issued was accounted for as a reduction of the proceeds from the sale of the Series D Preferred.

On June 17, 2021, the Company issued 3,170,730 shares of common stock upon the conversion of 650 shares of Series D Preferred, after which no Series D Preferred shares remained outstanding.

Stock-Based Compensation

During the three month and nine months ended September 30, 2021, the Company recognized stock-based compensation expense of $1,292,096 and $2,765,959, respectively of which $0 and $15,190, respectively, is included in research and development expenses, and $1,292,096 and $2,750,770, respectively, is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.  During the three and nine months ended September 30, 2020, the Company recognized stock-based compensation expense of $158,014 and $252,831, respectively, of which $7,424 and $22,961, respectively was charged to research and development expense and $150,590 and $229,870, respectively is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

The following table presents information related to stock-based compensation for the three months and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Common stock for services	$	77,040	$	147,976	$	345,679	$	222,676
Amortization of restricted common stock		440,333		—		1,000,647		—
Amortization of market-based awards		754,207		—		1,374,226		—
Stock options		20,516		10,038		45,407		30,155
Total	$	1,292,096	$	158,014	$	2,765,959	$	252,831

Common Stock Issued for Services

For the three and nine months ended September 30, 2021, the Company issued 85,000 and 160,000 shares of immediately vested common stock, respectively, having an aggregate grant date value of $186,399 and $346,199, respectively.

Warrants

During the three and nine months ended September 30, 2021, the Company issued an aggregate of 1,185,033 and 4,185,033 shares of common stock, respectively, in connection with exercises of outstanding warrants pursuant to which we received gross proceeds in the aggregate amount of $1,494,216 and $5,206,716, respectively.

A summary of warrants activity during the nine months ended September 30, 2021 is presented below:

		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Warrants	Price		Term (Yrs)	Value
Outstanding, January 1, 2021	6,787,911	$	1.25
Issued	2,600,000		2.50
Exercised	(4,185,033)		(1.24)
Expired	—		—
Forfeited	—		—
Outstanding, September 30, 2021	5,202,878	$	1.88	4.4	$	2,158,307
Exercisable, September 30, 2021	5,202,878	$	1.88	4.4	$	2,158,307

The following table presents information related to warrants as of September 30, 2021:

Warrants Outstanding			Warrants Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants
$	1.25	2,594,553	4.3	2,594,553
$	1.50	8,325	0.2	8,325
$	2.50	2,600,000	4.6	2,600,000
		5,202,878	4.4	5,202,878

Restricted Common Stock

The following table presents information related to restricted common stock (excluding Market-Based Awards) as of September 30, 2021:

		Weighted Average
	Shares of Restricted	Grant Date
	Common Stock	Fair Value
Non-vested balance, January 1, 2021	72,500	$	1.24
Granted	2,570,000		2.55
Vested	(27,500)		2.06
Forfeited	—		—
Non-vested shares, September 30, 2021	2,615,000	$	2.52

As of September 30, 2021, there was $5,560,259 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of 3.2 years.

Stock Options

A summary of options activity (excluding Market-Based Awards) during the nine months ended September 30, 2021 is presented below:

		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Options	Price		Term (Yrs)	Value
Outstanding, January 1, 2021	370,000	$	0.66
Granted	220,000		2.30
Exercised	—		—
Expired	—		—
Forfeited	—		—
Outstanding, September 30, 2021	590,000	$	1.27	3.2	$	527,600
Exercisable,September 30, 2021	324,167	$	0.66	2.3	$	460,317

The following table presents information related to stock options (excluding Market-Based Awards) as of September 30, 2021:

Options Outstanding			Options Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Options	In Years	Options
$	0.66	370,000	2.3	324,167
$	1.99	10,000	—	—
$	2.03	20,000	—	—
$	2.05	10,000	—	—
$	2.08	10,000	—	—
$	2.13	20,000	—	—
$	2.27	30,000	—	—
$	2.43	20,000	—	—
$	2.44	100,000	—	—
		590,000	2.3	324,167

As of September 30, 2021, there was $175,780 of unrecognized stock-based compensation expense related to stock options, which will be recognized over the weighted average remaining vesting period of 2.9 years.

The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model. In applying the Black-Scholes option pricing model, the Company used the following assumptions:

	For the Three Months Ended			For the Nine Months Ended
	September 30,			September 30,
	2021		2020	2021			2020
Risk free interest rate	0.20% - 0.23	%	N/A		0.20% - 0.85	%		1.58	%
Expected term (years)	3.50		N/A		2.5 - 3.5			2.50
Expected volatility	109.00	%	N/A		93% - 109	%		93.00	%
Expected dividends	0	%	N/A		0	%		0	%

For the three and nine months ended September 30, 2021, the stock options had a weighted average grant date value of $1.55 and $0.80 per option share, respectively. For the nine months ended September 30, 2020, the stock options had a weighted average grant date value of $0.36 per option share. There were no stock options granted during the three months ended September 30, 2020.

See Market-Based Awards below for additional information.

Market-Based Awards

The following table presents information related to market-based awards as of September 30, 2021:

	Number of	Grant Date
Award	Shares	Fair Value
Restricted stock units	1,500,000	$	1.94
Stock options	1,500,000	$	1.72
Total	3,000,000	$	3.66

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

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

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

	March 1,			June 10,
	2021			2021
Risk free interest rate		0.71	%		0.73	%
Expected volatility		98.9	%		98.5	%
Expected dividend yield		0	%		0	%
Expected life of market-based awards		2.1	years		2.2	years
Fair value of common stock on date of grant	$	2.61		$	2.62

As of September 30, 2021, there was $4,116,195 of unrecognized stock-based compensation expense related to market-based awards which will be amortized over the remaining weighted average vesting period of 1.86 years.

XML

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2021

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

NOTE 11    COMMITMENTS AND CONTINGENCIES

Technology Development and Sponsorship Agreement

On March 31, 2021, the Company entered into a multi-year technology development and sponsorship agreement, pursuant to which the Company has committed to spend an aggregate of $900,000 in sponsorship fees, payable in three installments, of which $250,000 was paid on April 1, 2021, $300,000 is payable on January 1, 2022, and $350,000 is payable on January 1, 2023. The April 1, 2021 payment of $250,000 was recorded as a prepaid expense and is being amortized over the performance period.  During the nine months ended September 30, 2021, $166,667 of sponsorship fees expense was recognized related to the agreement.

In addition, the Company has committed to paying an aggregate of $750,000 related to technology development fees, which is to be paid in three equal installments during 2021, 2022 and 2023. As of September 30, 2021, no portion of the technology fees has been paid.

Research and Development Agreements

On April 5, 2021, the Company entered into a research and development agreement to develop high-areal-capacity battery electrodes to increase the energy density of batteries. Pursuant to the terms of the agreement, the Company has committed to spend an aggregate amount of $580,375, payable in eight quarterly installments of $72,547. During the nine months ended September 30, 2021, $145,094 of expense was recognized related to this agreement.

On August 18, 2021, the Company entered into a multi-year research and development agreement for a solid-state rechargeable battery, pursuant to which the Company has committed to spend an aggregate amount of $592,196 in eight quarterly payments of $74,025. During the nine months ended September 30, 2021, $24,675 of expense was recognized related to the agreement.

XML

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2021

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 12    SUBSEQUENT EVENTS

Common Stock

During October 2021, the Company issued an aggregate of 1,600,000 shares of common stock upon the exercise of outstanding warrants pursuant to which the Company received an aggregate of $4,000,000 of gross proceeds.

During November 2021, the Company issued 107,744 unregistered shares of common stock as an equity incentive grant, which shares are subject to a four-year vesting schedule.

During November 2021, the Company issued an aggregate of 1,000,000 shares of common stock upon the exercise of outstanding warrants pursuant to which the Company received an aggregate of $2,500,000 of gross proceeds.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Liquidity

Liquidity

During the nine months ended September 30, 2021, the Company raised gross proceeds of $6,500,000 in connection with the sale of preferred stock, common stock and warrants, and raised proceeds of $5,206,716 in connection with the exercise of warrants to purchase common stock. During the nine months ended September 30, 2021, the Company repaid outstanding notes payable in the amount of $2,450,000. Subsequent to September 30, 2021, the Company received an aggregate of $6,500,000 in connection with the exercise of warrants. See Note 12 – Subsequent Events for additional details.

As of September 30, 2021, the Company had cash of $10,990,056 and working capital of $10,659,878. While the Company anticipates it will continue to incur operating losses and use cash in operating activities for the foreseeable future, the Company believes that its current working capital is sufficient in comparison to its anticipated cash usage for a period of at least twelve months subsequent to the filing date of these financial statements.

Concentrations of Credit Risk

Concentrations of Credit Risk

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

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 was an uninsured balance of $10,489,922 and $8,513,010 as of September 30, 2021 and December 31, 2020, respectively.

Customer and Revenue Concentrations

The Company had certain customers whose revenue individually represented 10% or more of the Company's total revenue, or whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as follows:

	Revenues								Accounts Receivable
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				As of		As of
	2021		2020		2021		2020		September 30, 2021		December 31, 2020
Customer A	88	%	*		41	%	*		96	%	*
Customer B	*		26	%	*		*		*		70	%
Customer C	*		*		*		12	%	*		*
Customer D	*		*		40	%	*		*		*
Customer E	*		35	%	*		44	%	*		*
Customer F	*		12	%	*		*		*		*
Customer G	*		*		*		*		*		19	%
Customer H	*		*		*		*		*		10	%
Total	88	%	73	%	81	%	56	%	96	%	99	%

* Less than 10%

There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and

results from operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers.

Vendor Concentrations

Vendor concentrations are as follows for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Vendor A	*		29	%	*		17	%
Vendor B	*		13	%	*		*
Vendor C	*		*		*		11	%
Vendor D	*		*		*		13	%
Vendor E	*		11	%	*		*
Vendor F	*		*		11	%	*
Vendor G	26	%	*		11	%	*
Vendor H	10	%	*		*		*
Vendor I	12	%	*		*		*
	48	%	53	%	22	%	41	%

* Less than 10%

Inventory

Inventory

Inventory is comprised of carbon fiber velvet ("CFV") thermal interface solutions and internal short circuit batteries, which are available for sale. Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. The cost of inventory that is sold to third parties is included within cost of sales and the cost of inventory that is given as samples is included within operating expenses. The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down to net realizable value. As of September 30, 2021 and December 31, 2020, the Company's inventory was comprised solely of finished goods.

Revenue Recognition

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 the core principle of ASC 606:

● Step 1: Identify the contract with the customer;

● Step 2: Identify the performance obligations in the contract;

● Step 3: Determine the transaction price;

● Step 4: Allocate the transaction price to the performance obligations in the contract; and

● Step 5: Recognize revenue when the company satisfies a performance obligation.

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

● Product sales – Revenue is recognized at the point in time that the product is transferred to the customer, which is generally at the time products leave the Company’s distribution center.

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

The following table summarizes the Company's revenue recognized during the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Product sales	$	600,921	$	136,849	$	1,356,530	$	235,979
Contract services		—		—		290,540		179,498
Total revenue	$	600,921	$	136,849	$	1,647,070	$	415,477

As of September 30, 2021 and December 31, 2020, the Company had $158,816 and $20,000 of deferred revenue, respectively, from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract, or the customers have not officially accepted the goods or services provided under the contract. During the three and nine months ended September 30, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

As of September 30, 2021 and December 31, 2020, the Company had $62,908 and $31,212, respectively, of deferred labor costs, which is included in prepaid expenses and other current assets in the Company's condensed consolidated balance sheets. Deferred labor costs represent costs to fulfill the Company's contract service revenue. The Company will recognize the deferred labor costs as cost of revenues at the point in time that the Company satisfies its performance obligation under the respective contract, which is generally at the time the services are fulfilled and/or accepted by the customer.

Shipping and Handling Costs

Shipping and Handling Costs

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

Net Loss Per Common Share

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, less unvested issued restricted stock. 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, if not antidilutive.

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

	September 30,
	2021	2020
Series B Convertible Preferred Stock	—	698,600
Series C Convertible Preferred Stock	—	189,000
Unvested restricted stock	2,615,000	—
Market-based equity awards	3,000,000	—
Options	590,000	395,000
Warrants	5,202,878	210,025
Total	11,407,878	1,492,625

Reclassifications

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated net loss.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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

Recently Issued Accounting Pronouncements

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

On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company does not expect this new standard to have a material impact on its financial statements.

Subsequent Events

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are 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.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of concentrations of credit risk

	Revenues								Accounts Receivable
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				As of		As of
	2021		2020		2021		2020		September 30, 2021		December 31, 2020
Customer A	88	%	*		41	%	*		96	%	*
Customer B	*		26	%	*		*		*		70	%
Customer C	*		*		*		12	%	*		*
Customer D	*		*		40	%	*		*		*
Customer E	*		35	%	*		44	%	*		*
Customer F	*		12	%	*		*		*		*
Customer G	*		*		*		*		*		19	%
Customer H	*		*		*		*		*		10	%
Total	88	%	73	%	81	%	56	%	96	%	99	%

* Less than 10%

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Vendor A	*		29	%	*		17	%
Vendor B	*		13	%	*		*
Vendor C	*		*		*		11	%
Vendor D	*		*		*		13	%
Vendor E	*		11	%	*		*
Vendor F	*		*		11	%	*
Vendor G	26	%	*		11	%	*
Vendor H	10	%	*		*		*
Vendor I	12	%	*		*		*
	48	%	53	%	22	%	41	%

* Less than 10%

Schedule of revenue recognized

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Product sales	$	600,921	$	136,849	$	1,356,530	$	235,979
Contract services		—		—		290,540		179,498
Total revenue	$	600,921	$	136,849	$	1,647,070	$	415,477

Schedule of weighted average dilutive common shares because their inclusion would have been anti-dilutive

	September 30,
	2021	2020
Series B Convertible Preferred Stock	—	698,600
Series C Convertible Preferred Stock	—	189,000
Unvested restricted stock	2,615,000	—
Market-based equity awards	3,000,000	—
Options	590,000	395,000
Warrants	5,202,878	210,025
Total	11,407,878	1,492,625

XML

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

9 Months Ended

Sep. 30, 2021

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Schedule of prepaid expenses and other current assets

	September 30,		December 31,
	2021		2020
Deferred labor costs	$	62,908	$	31,212
Filing		2,729		9,944
Insurance		66,572		16,035
Marketing		115,794		58,103
Other		11,662		25,820
Professional fees		63,582		9,354
Subscriptions		30,009		—
Vendor deposits		97,500		—
Total prepaid expenses	$	450,756	$	150,468

XML

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2021

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Schedule of accrued expenses and other current liabilities

	September 30,		December 31,
	2021		2020
Board compensation	$	60,808	$	—
Payroll and vacation		219,547		278,854
Legal and professional fees		232,200		81,902
Research and development		97,222		—
Other		79,569		34,256
Total accrued expenses and other current liabilities	$	689,346	$	395,012

XML

ACCRUED ISSUABLE EQUITY (Tables)

9 Months Ended

Sep. 30, 2021

ACCRUED ISSUABLE EQUITY.

Schedule of accrued issuable equity

Balance, January 1, 2021	$	128,380
Additions		208,680
Reclassifications to equity upon issuance		(209,200)
Mark-to market		66,274
Balance, September 30, 2021	$	194,134

XML

LEASES (Tables)

9 Months Ended

Sep. 30, 2021

LEASES

Schedule of maturities of lease liabilities

Maturity Date
Remaining three months ending December 31, 2021	$	71,361
2022		289,981
2023		297,917
2024		125,530
Total lease payments		784,789
Less: Imputed interest		(52,051)
Present value of lease liabilities		732,738
Less: current portion		(257,198)
Lease liabilities, non-current portion	$	475,540

Supplemental cash flow information related to the lease

	For the Nine Months Ended September 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating lease	$	82,079	$	—
Right-of-use asset obtained in exchange for lease obligations
Operating lease	$	814,817	$	—

XML

NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2021

NOTES PAYABLE

Summary of notes payable activity

	Notes		Debt
	Payable		Discount		Total
Balance, January 1, 2021	$	2,450,000	$	(128,198)	$	2,321,802
Repayments in cash		(2,450,000)		—		(2,450,000)
Amortization of debt discount		—		128,198		128,198
Outstanding, September 30, 2021	$	—	$	—	$	—

XML

STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2021

Schedule of Information relating to stock based compensation

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Common stock for services	$	77,040	$	147,976	$	345,679	$	222,676
Amortization of restricted common stock		440,333		—		1,000,647		—
Amortization of market-based awards		754,207		—		1,374,226		—
Stock options		20,516		10,038		45,407		30,155
Total	$	1,292,096	$	158,014	$	2,765,959	$	252,831

Schedule of stock option activity outstanding and exercisable

		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Options	Price		Term (Yrs)	Value
Outstanding, January 1, 2021	370,000	$	0.66
Granted	220,000		2.30
Exercised	—		—
Expired	—		—
Forfeited	—		—
Outstanding, September 30, 2021	590,000	$	1.27	3.2	$	527,600
Exercisable,September 30, 2021	324,167	$	0.66	2.3	$	460,317

The following table presents information related to stock options (excluding Market-Based Awards) as of September 30, 2021:

Options Outstanding			Options Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Options	In Years	Options
$	0.66	370,000	2.3	324,167
$	1.99	10,000	—	—
$	2.03	20,000	—	—
$	2.05	10,000	—	—
$	2.08	10,000	—	—
$	2.13	20,000	—	—
$	2.27	30,000	—	—
$	2.43	20,000	—	—
$	2.44	100,000	—	—
		590,000	2.3	324,167

Schedule of warrants activity

The following table presents information related to warrants as of September 30, 2021:

Warrants Outstanding			Warrants Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants
$	1.25	2,594,553	4.3	2,594,553
$	1.50	8,325	0.2	8,325
$	2.50	2,600,000	4.6	2,600,000
		5,202,878	4.4	5,202,878

Schedule of outstanding and exercisable warrants

		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining	Intrinsic
	Warrants	Price		Term (Yrs)	Value
Outstanding, January 1, 2021	6,787,911	$	1.25
Issued	2,600,000		2.50
Exercised	(4,185,033)		(1.24)
Expired	—		—
Forfeited	—		—
Outstanding, September 30, 2021	5,202,878	$	1.88	4.4	$	2,158,307
Exercisable, September 30, 2021	5,202,878	$	1.88	4.4	$	2,158,307

Summary of restricted common stock

The following table presents information related to market-based awards as of September 30, 2021:

	Number of	Grant Date
Award	Shares	Fair Value
Restricted stock units	1,500,000	$	1.94
Stock options	1,500,000	$	1.72
Total	3,000,000	$	3.66

Stock options.

Schedule of stock options granted

	For the Three Months Ended			For the Nine Months Ended
	September 30,			September 30,
	2021		2020	2021			2020
Risk free interest rate	0.20% - 0.23	%	N/A		0.20% - 0.85	%		1.58	%
Expected term (years)	3.50		N/A		2.5 - 3.5			2.50
Expected volatility	109.00	%	N/A		93% - 109	%		93.00	%
Expected dividends	0	%	N/A		0	%		0	%

Market-Based Awards

Schedule of stock options granted

	March 1,			June 10,
	2021			2021
Risk free interest rate		0.71	%		0.73	%
Expected volatility		98.9	%		98.5	%
Expected dividend yield		0	%		0	%
Expected life of market-based awards		2.1	years		2.2	years
Fair value of common stock on date of grant	$	2.61		$	2.62

Summary of restricted common stock

		Weighted Average
	Shares of Restricted	Grant Date
	Common Stock	Fair Value
Non-vested balance, January 1, 2021	72,500	$	1.24
Granted	2,570,000		2.55
Vested	(27,500)		2.06
Forfeited	—		—
Non-vested shares, September 30, 2021	2,615,000	$	2.52

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Customer concentrations (Details) - Customer Concentration Risk [Member]		3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Revenues [Member] | Customer [Member]
Concentration Risk, Percentage		88.00%	73.00%	81.00%	56.00%
Revenues [Member] | Customer A [Member]
Concentration Risk, Percentage		88.00%		41.00%
Revenues [Member] | Customer B [Member]
Concentration Risk, Percentage			26.00%
Revenues [Member] | Customer C [Member]
Concentration Risk, Percentage					12.00%
Revenues [Member] | Customer D [Member]
Concentration Risk, Percentage				40.00%
Revenues [Member] | Customer E [Member]
Concentration Risk, Percentage			35.00%		44.00%
Revenues [Member] | Customer F [Member]
Concentration Risk, Percentage			12.00%
Accounts Receivable [Member] | Customer [Member]
Concentration Risk, Percentage	96.00%					99.00%
Accounts Receivable [Member] | Customer A [Member]
Concentration Risk, Percentage	96.00%
Accounts Receivable [Member] | Customer B [Member]
Concentration Risk, Percentage						70.00%
Accounts Receivable [Member] | Customer G [Member]
Concentration Risk, Percentage						19.00%
Accounts Receivable [Member] | Customer H [Member]
Concentration Risk, Percentage						10.00%
Accounts Payable [Member] | Vendor [Member]
Concentration Risk, Percentage		48.00%	53.00%	22.00%	41.00%
Accounts Payable [Member] | Vendor A [Member]
Concentration Risk, Percentage			29.00%		17.00%
Accounts Payable [Member] | Vendor B [Member]
Concentration Risk, Percentage			13.00%
Accounts Payable [Member] | Vendor C [Member]
Concentration Risk, Percentage					11.00%
Accounts Payable [Member] | Vendor D [Member]
Concentration Risk, Percentage					13.00%
Accounts Payable [Member] | Vendor E [Member]
Concentration Risk, Percentage			11.00%
Accounts Payable [Member] | Vendor F [Member]
Concentration Risk, Percentage				11.00%
Accounts Payable [Member] | Vendor G [Member]
Concentration Risk, Percentage		26.00%		11.00%
Accounts Payable [Member] | Vendor H [Member]
Concentration Risk, Percentage		10.00%
Accounts Payable [Member] | Vendor I [Member]
Concentration Risk, Percentage		12.00%

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - consolidated statements of operations: (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 600,921	$ 136,849	$ 1,647,070	$ 415,477
Product sales [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 600,921	$ 136,849	1,356,530	235,979
Contract services [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax			$ 290,540	$ 179,498

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - weighted average dilutive common shares (Details) - shares	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	11,407,878	1,492,625
Series B Convertible Preferred Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		698,600
Series C Convertible Preferred Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		189,000
Unvested Restricted Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,615,000
Market-based equity award
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,000,000
Stock options.
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	590,000	395,000
Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	5,202,878	210,025

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
	Nov. 30, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Gross proceeds				$ 6,500,000
Amount raised on convertible preferred financing agreement	$ 6,500,000			5,206,716
Repayments of note payable				2,450,000	$ 159,000
Cash		$ 10,990,056		10,990,056		$ 8,880,140
Working capital		10,659,878		10,659,878
Cash, FDIC Insured Amount		250,000		250,000
Uninsured cash		10,489,922		10,489,922		8,513,010
Deferred revenue		158,816		158,816		20,000
Revenue Recognized		0	$ 0	0	$ 0
Deferred labor costs		$ 62,908		62,908		$ 31,212
Aggregate gross proceeds	$ 6,500,000			$ 5,206,716

XML

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Deferred labor costs	$ 62,908	$ 31,212
Filing	2,729	9,944
Insurance	66,572	16,035
Marketing	115,794	58,103
Other	11,662	25,820
Professional fees	63,582	9,354
Subscriptions	30,009	0
Vendor deposits	97,500	0
Total prepaid expenses and other current assets	$ 450,756	$ 150,468

XML

EQUIPMENT DEPOSITS (Details) - USD ($)			9 Months Ended
	Sep. 27, 2021	Jul. 22, 2021	Sep. 30, 2021	Sep. 30, 2020
EQUIPMENT DEPOSITS
Payments of equipment deposits	$ 699,805	$ 330,000	$ 1,029,805	$ 0

XML

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Board compensation	$ 60,808	$ 0
Payroll and vacation	219,547	278,854
Legal and professional fees	232,200	81,902
Research and development	97,222	0
Other	79,569	34,256
Total accrued expenses and other current liabilities	$ 689,346	$ 395,012

XML

ACCRUED ISSUABLE EQUITY (Details)	9 Months Ended
	Sep. 30, 2021 USD ($)
Movements In Accrued Issuable Equity For Services, Current [Roll Forward]
Beginning balance	$ 128,380
Additions	208,680
Reclassifications to equity upon issuance	(209,200)
Mark-to market	66,274
Ending balance	$ 194,134

XML

ACCRUED ISSUABLE EQUITY - Additional information (Details) - USD ($)		3 Months Ended	9 Months Ended
	Apr. 07, 2021	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020
ACCRUED ISSUABLE EQUITY.
Value of services			$ 208,680
Shares issued in exchange for services, number	85,000	85,000	160,000
Shares issued in exchange for certain services, number			100,000
Shares issued in exchange for services, aggregate fair value			$ 209,200
Gains (losses) related to the change in fair value		$ 45,600		$ 66,274

XML

LEASES - Maturity (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
LEASES
Remaining three months ending December 31, 2021	$ 71,361
2022	289,981
2023	297,917
2024	125,530
Total lease payments	784,789
Less: Imputed interest	(52,051)
Present value of lease liabilities	732,738
Less: current portion	(257,198)	$ 0
Lease liability, non-current portion	$ 475,540	$ 0

XML

LEASES - Additional Information (Details) - USD ($)		3 Months Ended		9 Months Ended
	Jun. 01, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Lessee, Lease, Description [Line Items]
Right of use asset for lease liability				$ 814,817	$ 0
Estimated incremental borrowing rate		5.00%		5.00%
Operating lease expense		$ 89,305	$ 15,616	$ 144,765	$ 42,832
New lease agreement for office space in San Diego, California
Lessee, Lease, Description [Line Items]
Lease term (in years)	3 years
Option to extend	true
Renewal Term	5 years
Monthly lease rental	$ 23,787
Lease base rent	18,518
Common area maintenance fees included in monthly lease rental	$ 5,268
Lease annual escalation rate	3.50%
Security deposit	$ 50,213
Monthly rent	5,127
Monthly rent base	4,572
Association fees included in monthly lease rental	$ 555

XML

LEASES - Supplemental Cash Flow Information Related to Lease (Details) - USD ($)	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating lease	$ 82,079	$ 0
Right-of-use asset obtained in exchange for lease obligations
Operating lease	$ 814,817	$ 0

XML

NOTES PAYABLE (Details)	9 Months Ended
	Sep. 30, 2021 USD ($)
Movements In Notes Payable Current, Gross [Roll Forward]
Beginning balance	$ 2,450,000
Repayments in cash	(2,450,000)
Movements In Debt Instrument, Unamortized Discount, Current [Roll Forward]
Beginning balance	(128,198)
Amortization of debt discount	128,198
Ending balance	0
Movements In Notes Payable Current [Roll Forward]
Beginning balance	2,321,802
Repayments in cash	(2,450,000)
Amortization of debt discount	128,198
Ending balance	$ 0

XML

RELATED PARTY TRANSACTIONS (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
Related Party Transaction [Line Items]
Accounts payable - related party	$ 0	$ 2,628
Chief Technology Officer CTO [Member]
Related Party Transaction [Line Items]
Accounts payable - related party	$ 0	$ 2,628

XML

STOCKHOLDERS' EQUITY - Additional Information (Details)						1 Months Ended	3 Months Ended				9 Months Ended
	Jun. 10, 2021 USD ($) $ / shares shares	May 20, 2021 USD ($) shares	May 19, 2021 USD ($) $ / shares shares	Apr. 07, 2021 shares	Mar. 01, 2021 USD ($) shares	Nov. 30, 2021 USD ($)	Sep. 30, 2021 USD ($) Rate item Y $ / shares shares	Jun. 30, 2021 USD ($) shares	Mar. 31, 2021 USD ($) shares	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) Rate item Y $ / shares shares		Sep. 30, 2020 USD ($)		Jun. 17, 2021 shares	Dec. 31, 2020 shares
Common stock, shares issued | shares		1,300,000					101,992,963				101,992,963				3,170,730	89,908,600
Structuring fee paid to investor											$ 10,000
Gross proceeds											6,500,000
Remaining proceeds											6,490,000
Relative fair value of Series D Preferred Stock							$ 3,875,675				3,875,675
Commitment shares issued in connection with sale of Series D Preferred Stock		$ 2,665,000									1,339,582
Relative fair value of warrants							1,274,743				1,274,743
Deemed dividend							$ 0			$ 0	2,624,326
Beneficial conversion feature on Series D convertible preferred stock											2,624,326
Cash issuance costs								$ 365,000			$ 365,000
Warrants to purchase common shares issued | shares							5,202,878				5,202,878					6,787,911
Outstanding at the end (in years)							4 years 4 months 24 days				4 years 4 months 24 days
Aggregate gross proceeds						$ 6,500,000					$ 5,206,716
Repayments of remaining note payable											$ 2,450,000		$ 159,000
Common stock authorized | shares							500,000,000				500,000,000					500,000,000
Allocated Share-based Compensation Expense							$ 1,292,096			158,014	$ 2,765,959		252,831
Stock-based compensation											2,765,959		252,831
Aggregate proceeds										757,695	0	[1]	1,461,695	[1]
Unrecognized stock-based compensation expense							$ 5,560,259				$ 5,560,259
Weighted average remaining vesting period											3 years 2 months 12 days
Shares of common stock issued related to consulting services provided | shares				85,000			85,000				160,000
Grant date value of common stock issued related to consulting services provided							$ 186,399	$ 110,000	$ 49,800
Options Outstanding, Exercise Price | $ / shares							$ 0.66				$ 0.66
Exercise price
Warrant measurement input | item							2.50				2.50
Market price per share
Warrant measurement input | item							2.05				2.05
Expected term
Warrant measurement input | Y							1.0				1.0
Volatility
Warrant measurement input | item							142				142
Risk-free interest rate
Warrant measurement input | Rate							0.05				0.05
Research and development expenses
Allocated Share-based Compensation Expense							$ 0			7,424	$ 15,190		22,961
Selling, general and administrative expenses
Allocated Share-based Compensation Expense							1,292,096			$ 150,590	2,750,770		229,870
Stock options.
Unrecognized stock-based compensation expense							175,780				$ 175,780
Weighted average remaining vesting period											2 years 10 months 24 days
Market-Based Awards
Common stock authorized | shares	1,500,000				1,500,000
Grant date value of stock	$ 2,579,000				$ 2,911,420
Market Cap	$ 4,000,000,000				$ 4,000,000,000
Unrecognized stock-based compensation expense							4,116,195				$ 4,116,195
Weighted average remaining vesting period											1 year 10 months 9 days
Options Outstanding, Exercise Price | $ / shares	$ 2.60
Common stock
Allocated Share-based Compensation Expense							$ 440,333				$ 1,000,647
Restricted common stock issued (in shares) | shares							155,000	415,000	2,000,000
Aggregate proceeds							$ 186,399				$ 346,199
Stock Issued During Period, Shares, Conversion of Convertible Securities | shares								3,170,730
Shares of common stock issued related to consulting services provided | shares							85,000	55,000	20,000
Grant date value of common stock issued related to consulting services provided							$ 9	$ 6	$ 2
Warrants
Stock Issued During Period, Shares, Conversion of Convertible Securities | shares							1,185,033				4,185,033
Warrants | Common stock
Stock-based compensation							$ 1,494,216				$ 5,206,716
Series D Convertible Preferred Stock
Beneficial conversion feature on Series D convertible preferred stock											$ 2,624,326		$ 0
Convertible Preferred Stock, Shares Issued upon Conversion | shares															650
Convertible Preferred Stock, Shares Issued upon Conversion | shares															650
Series D Convertible Preferred Stock | Securities Purchase Agreement
Common stock issued for cash, net of issuance costs (in shares) | shares			650
Warrants to purchase common shares issued | shares			2,600,000
Outstanding at the end (in years)			1 year
Shares issued price (in dollars per share) | $ / shares			$ 2.50
Aggregate gross proceeds			$ 6,500,000
Commitment fee shares of common stock | shares			1,300,000
Repayments of remaining note payable			$ 1,400,000
Fixed conversion price | $ / shares			$ 2.05
Convertible Preferred Stock, Shares Issued upon Conversion | shares			3,170,732
Cumulative dividends annual rate percentage			10.00%
Convertible Preferred Stock, Shares Issued upon Conversion | shares			3,170,732

[1] For the nine months ended September 30, 2020, the amount represents gross proceeds of $2,152,695 less $691,000 withheld by the investor to pay down a portion of the note payable held by the same investor.

XML

STOCKHOLDERS' EQUITY - Stock-Based Compensation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Allocated Share-based Compensation Expense	$ 1,292,096	$ 158,014	$ 2,765,959	$ 252,831
Common Stock Issued For Services
Allocated Share-based Compensation Expense	77,040	147,976	345,679	222,676
Common stock
Allocated Share-based Compensation Expense	440,333		1,000,647
Market-Based Awards
Allocated Share-based Compensation Expense	754,207		1,374,226
Stock options
Allocated Share-based Compensation Expense	$ 20,516	$ 10,038	$ 45,407	$ 30,155

XML

STOCKHOLDERS' EQUITY - Stock options (Details) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Weighted Average Grant Date Fair Value
Stock options granted			220,000
Restricted common stock
Shares of Restricted Common Stock
Non-vested balance, January 1, 2021			72,500
Granted			2,570,000
Vested			27,500
Non-vested balance, September 30, 2021	2,615,000		2,615,000
Weighted Average Grant Date Fair Value
Non-vested balance, January 1, 2021 (in dollars per share)			$ 1.24
Granted (in dollars per share)			2.55
Vested (in dollars per share)			2.06
Non-vested balance, September 30, 2021 (in dollars per share)	$ 2.52		2.52
Stock options.
Weighted Average Grant Date Fair Value
Weighted average grant date value	$ 1.55		$ 0.80	$ 0.36
Stock options granted		0

XML

STOCKHOLDERS EQUITY - Summary of warrants activity (Details)	9 Months Ended
	Sep. 30, 2021 USD ($) $ / shares shares
STOCKHOLDERS' EQUITY
Outstanding at the beginning	6,787,911
Issued	2,600,000
Exercised	(4,185,033)
Outstanding at the end	5,202,878
Exercisable at the end	5,202,878
Outstanding at the beginning (in dollars per share) | $ / shares	$ 1.25
Issued (in dollars per share) | $ / shares	2.50
Exercised (in dollars per share) | $ / shares	(1.24)
Outstanding at the end (in dollars per share) | $ / shares	$ 1.88
Exercisable at the end (in dollars per share)	1.88
Outstanding at the end (in years)	4 years 4 months 24 days
Exercisable at the end (in years)	4 years 4 months 24 days
Outstanding at the end (in dollars) | $	$ 2,158,307
Exercisable at the end (in dollars) | $	$ 2,158,307

XML

STOCKHOLDERS EQUITY - Information related to warrants (Details) - $ / shares	Sep. 30, 2021	Dec. 31, 2020
Exercise price of warrants	$ 1.88	$ 1.25
Warrants Outstanding	5,202,878	6,787,911
Weighted average remaining life (in years)	4 years 4 months 24 days
Exercisable, Number of Warrants	5,202,878
Exercise price, 1.25
Exercise price of warrants	$ 1.25
Warrants Outstanding	2,594,553
Weighted average remaining life (in years)	4 years 3 months 18 days
Exercisable, Number of Warrants	2,594,553
Exercise price, 1.50
Exercise price of warrants	$ 1.50
Warrants Outstanding	8,325
Weighted average remaining life (in years)	2 months 12 days
Exercisable, Number of Warrants	8,325
Exercise price, 2.50
Exercise price of warrants	$ 2.50
Warrants Outstanding	2,600,000
Weighted average remaining life (in years)	4 years 7 months 6 days
Exercisable, Number of Warrants	2,600,000

XML

STOCKHOLDERS' EQUITY - Stock activity (Details)	9 Months Ended
	Sep. 30, 2021 USD ($) $ / shares shares
STOCKHOLDERS' EQUITY
Number of Options, Outstanding | shares	370,000
Number of Options, Granted | shares	220,000
Number of Options, Outstanding | shares	590,000
Number of Options, Exercisable | shares	324,167
Weighted Average Exercise Price, Outstanding | $ / shares	$ 0.66
Weighted Average Exercise Price, Granted | $ / shares	2.30
Weighted Average Exercise Price Outstanding | $ / shares	1.27
Weighted Average Exercise Price Exercisable | $ / shares	$ 0.66
Weighted Average Remaining Term, Outstanding	3 years 2 months 12 days
Weighted Average Remaining Term, Exercisable	2 years 3 months 18 days
Number of Options Intrinsic Value, Outstanding | $	$ 527,600
Number of Options Intrinsic Value, Exercisable | $	$ 460,317

XML

STOCKHOLDERS' EQUITY - Stock options (Details) - $ / shares	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Options Outstanding, Exercise Price	$ 0.66
Options Outstanding, Number of Options	590,000	370,000
Options Exercisable, Weighted Average Remaining Life	2 years 3 months 18 days
Options Exercisable Number of Options	324,167
0.66 Exercise Price
Options Outstanding, Exercise Price	$ 0.66
Options Outstanding, Number of Options	370,000
Options Exercisable, Weighted Average Remaining Life	2 years 3 months 18 days
Options Exercisable Number of Options	324,167
1.99 Exercise Price
Options Outstanding, Exercise Price	$ 1.99
Options Outstanding, Number of Options	10,000
2.03 Exercise Price
Options Outstanding, Exercise Price	$ 2.03
Options Outstanding, Number of Options	20,000
2.05 exercise price
Options Outstanding, Exercise Price	$ 2.05
Options Outstanding, Number of Options	10,000
2.08 Exercise Price
Options Outstanding, Exercise Price	$ 2.08
Options Outstanding, Number of Options	10,000
2.13 Exercise Price
Options Outstanding, Exercise Price	$ 2.13
Options Outstanding, Number of Options	20,000
2.27 Exercise Price
Options Outstanding, Exercise Price	$ 2.27
Options Outstanding, Number of Options	30,000
2.43 Exercise Price
Options Outstanding, Exercise Price	$ 2.43
Options Outstanding, Number of Options	20,000
2.44 Exercise Price
Options Outstanding, Exercise Price	$ 2.44
Options Outstanding, Number of Options	100,000

XML

STOCKHOLDERS' EQUITY - Stock-based compensation (Details) - Market-Based Awards	9 Months Ended
	Sep. 30, 2021 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares | shares	3,000,000
Grant Date Fair Value | $ / shares	$ 3.66
Stock options.
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares | shares	1,500,000
Grant Date Fair Value | $ / shares	$ 1.72
Restricted common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares | shares	1,500,000
Grant Date Fair Value | $ / shares	$ 1.94

XML

STOCKHOLDERS' EQUITY - Option pricing model (Details) - $ / shares			3 Months Ended	9 Months Ended
	Jun. 10, 2021	Mar. 01, 2020	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020
Risk free interest rate (as a percent)					1.58%
Expected volatility (as a percent)			109.00%		93.00%
Expected dividends (as a percent)			0.00%	0.00%	0.00%
Expected term (years)			3 years 6 months		2 years 6 months
Minimum
Risk free interest rate (as a percent)			0.20%	0.20%
Expected volatility (as a percent)				93.00%
Expected term (years)				2 years 6 months
Maximum
Risk free interest rate (as a percent)			0.23%	0.85%
Expected volatility (as a percent)				109.00%
Expected term (years)				3 years 6 months
Market-Based Awards
Risk free interest rate (as a percent)	0.73%	0.71%
Expected volatility (as a percent)	98.50%	98.90%
Expected dividends (as a percent)	0.00%	0.00%
Expected term (years)	2 years 2 months 12 days	2 years 1 month 6 days
Fair value of common stock on date of grant	2.62	2.61

XML

COMMITMENTS AND CONTINGENCIES (Details)						9 Months Ended
	Jan. 01, 2023 USD ($)	Jan. 01, 2022 USD ($)	Aug. 18, 2021 USD ($) installment	Apr. 05, 2021 USD ($) installment	Apr. 01, 2021 USD ($)	Sep. 30, 2021 USD ($) installment	Mar. 31, 2021 USD ($) installment
Technology Development and Sponsorship Agreement
Aggregate amount spend on agreement						$ 750,000	$ 900,000
Number of installments | installment						3	3
Installment payments					$ 250,000	$ 0
Expense recognized					$ 250,000	166,667
Research and Development Agreements
Aggregate amount spend on agreement				$ 580,375
Number of installments | installment				8
Installment payments				$ 72,547
Expense recognized						145,094
Multi-year research and development agreement
Aggregate amount spend on agreement			$ 592,196
Number of installments | installment			8
Installment payments			$ 74,025
Expense recognized						$ 24,675
Subsequent Event | Technology Development and Sponsorship Agreement
Installment payments	$ 350,000	$ 300,000

XML

SUBSEQUENT EVENTS (Details) - USD ($)			1 Months Ended		3 Months Ended	9 Months Ended
	May 19, 2021	Apr. 07, 2021	Nov. 30, 2021	Oct. 31, 2021	Sep. 30, 2021	Sep. 30, 2021
Subsequent Event [Line Items]
Shares issued in exchange for services, number		85,000			85,000	160,000
Aggregate gross proceeds			$ 6,500,000			$ 5,206,716
Securities Purchase Agreement | Series D Convertible Preferred Stock
Subsequent Event [Line Items]
Aggregate gross proceeds	$ 6,500,000
Subsequent Event
Subsequent Event [Line Items]
Shares issued in exchange for services, number			1,000,000	1,600,000
Aggregate gross proceeds			$ 2,500,000	$ 4,000,000
Four year vesting period | Equity Incentive Grant
Subsequent Event [Line Items]
Shares issued in exchange for services, number			107,744