10-Q

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2019

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:

000-55564

KULR TECHNOLOGY GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	81-1004273 (I.R.S. Employer Identification No.)
1999 S. Bascom Ave. Suite 700. Campbell, CA. (Address of principal executive offices)	95008 (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
None	N/A	N/A

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 x 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 x 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	x	Smaller reporting company	x
		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 x

As of October 29, 2019, there were 81,071,831 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, 2019

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
	Condensed Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018	1
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018	2
	Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficiency) for the Nine Months Ended September 30, 2019 and 2018	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018	4
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.		12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		16
Item 4. Controls and Procedures.		16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.		17
Item 1A. Risk Factors.		17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		17
Item 3. Defaults Upon Senior Securities.		17
Item 4. Mine Safety Disclosures.		17
Item 5. Other Information.		17
Item 6. Exhibits.		17
SIGNATURES		18

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2019			2018
	(unaudited)
Assets
Current Assets:
Cash	$	76,061		$	229,896
Accounts receivable		395,706			112,224
Inventory		43,645			9,594
Prepaid expenses		35,344			27,033
Other current assets		37,389			27,569
Total Current Assets		588,145			406,316
Property and equipment, net		35,347			44,791
Total Assets	$	623,492		$	451,107
Liabilities and Stockholders' Deficiency
Current Liabilities:
Accounts payable	$	332,749		$	117,995
Accrued expenses and other current liabilities		547,553			374,330
Accrued expenses and other current liabilities - related party		18,919			83,919
Total Current Liabilities		899,221			576,244
Commitments and contingencies (See Note 8)
Stockholders' Deficiency:
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, 2019 and December 31, 2018		-			-
Series B Preferred Stock, 31,000 shares designated; 14,487 and 30,858 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		1			3
Series C Preferred Stock, 400 shares designated; 20.68 and 0 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		-			-
Common stock, $0.0001 par value, 500,000,000 shares authorized; 81,071,831 and 78,706,256 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		8,107			7,871
Additional paid-in capital		7,587,365			6,283,548
Accumulated deficit		(7,871,202	)		(6,416,559	)
Total Stockholders' Deficiency		(275,729	)		(125,137	)
Total Liabilities and Stockholders' Deficiency	$	623,492		$	451,107

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

1

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,
	2019			2018			2019			2018
Revenue	$	526,722		$	482,798		$	777,984		$	881,929
Cost of revenue		109,051			75,384			199,118			258,801
Gross Profit		417,671			407,414			578,866			623,128
Operating Expenses:
Research and development		137,970			161,194			365,709			399,884
Selling, general and administrative		546,982			461,377			1,666,735			1,908,635
Total Operating Expenses		684,952			622,571			2,032,444			2,308,519
Loss From Operations		(267,281	)		(215,157	)		(1,453,578	)		(1,685,391	)
Other (Expense) Income:
Interest expense, net		(503	)		(269	)		(1,315	)		(502	)
Other income		250			-			250			-
Change in fair value of accrued issuable equity		-			24,175			-			24,175
Total Other (Expense) Income		(253	)		23,906			(1,065	)		23,673
Net Loss	$	(267,534	)	$	(191,251	)	$	(1,454,643	)	$	(1,661,718	)
Net Loss Per Share - Basic and Diluted	$	(0.00	)	$	(0.00	)	$	(0.02	)	$	(0.02	)
Weighted Average Number of Common Shares Outstanding - Basic and Diluted		80,380,640			77,785,191			79,803,396			77,513,560

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

2

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

(unaudited)

	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
	Series B Convertible						Series C Convertible								Additional						Total
	Preferred Stock						Preferred Stock				Common Stock				Paid-In			Accumulated			Stockholders'
	Shares			Amount			Shares		Amount		Shares		Amount		Capital			Deficit			Deficiency
Balance - January 1, 2019		30,858		$	3			-	$	-		78,706,256	$	7,871	$	6,283,548		$	(6,416,559	)	$	(125,137	)
Stock-based compensation		-			-			-		-		25,000		3		36,057			-			36,060
Common stock issued for cash		-			-			-		-		234,849		23		154,977			-			155,000
Net loss		-			-			-		-		-		-		-			(565,693	)		(565,693	)
Balance - March 31, 2019		30,858			3			-		-		78,966,105		7,897		6,474,582			(6,982,252	)		(499,770	)
Stock-based compensation		-			-			-		-		-		-		7,593			-			7,593
Common stock issued for cash		-			-			-		-		1,126,210		112		743,188			-			743,300
Net loss		-			-			-		-		-		-		-			(621,416	)		(621,416	)
Balance - June 30, 2019		30,858			3			-		-		80,092,315		8,009		7,225,363			(7,603,668	)		(370,293	)
Stock-based compensation		-			-			-		-		160,966		16		188,082			-			188,098
Common stock issued upon conversion of Series B Convertible Preferred Stock		(16,371	)		(2	)		-		-		818,550		82		(80	)		-			-
Series C Convertible Preferred Stock and warrants issued for cash, net of issuance costs [1]		-			-			20.68		-		-		-		139,000			-			139,000
Forgiveness of accrued expenses by related party		-			-			-		-		-		-		35,000			-			35,000
Net loss		-			-			-		-		-		-		-			(267,534	)		(267,534	)
Balance - September 30, 2019		14,487		$	1			20.68	$	-		81,071,831	$	8,107	$	7,587,365		$	(7,871,202	)	$	(275,729	)

[1] Includes gross proceeds of $186,000, less cash issuance costs of $47,000.

	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
										Total
					Additional					Stockholders'
	Common Stock				Paid-In		Accumulated			Equity
	Shares		Amount		Capital		Deficit			(Deficiency)
Balance - January 1, 2018		77,440,000	$	7,744	$	5,090,282	$	(4,358,320	)	$	739,706
Stock-based compensation		-		-		182,957		-			182,957
Net loss		-		-		-		(825,845	)		(825,845	)
Balance - March 31, 2018		77,440,000		7,744		5,273,239		(5,184,165	)		96,818
Stock-based compensation		-		-		124,835		-			124,835
Net loss		-		-		-		(644,622	)		(644,622	)
Balance - June 30, 2018		77,440,000		7,744		5,398,074		(5,828,787	)		(422,969	)
Common stock issued for cash, net of issuance costs [2]		581,819		58		352,342		-			352,400
Net loss		-		-		-		(191,251	)		(191,251	)
Balance - September 30, 2018		78,021,819	$	7,802	$	5,750,416	$	(6,020,038	)	$	(261,820	)

[2] Includes gross proceeds of $384,000, less issuance costs of $31,600 ($25,000 of cash and $6,600 of non-cash).

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

3

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Nine Months Ended
	September 30,
	2019			2018
Cash Flows From Operating Activities:
Net loss	$	(1,454,643	)	$	(1,661,718	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		9,444			11,824
Change in fair value of accrued issuable equity		-			(24,175	)
Write-down of inventory		90			-
Stock-based compensation		231,751			402,656
Changes in operating assets and liabilities:
Accounts receivable		(283,482	)		(3,638	)
Inventory		(34,141	)		-
Prepaid expenses		(8,311	)		23,733
Other current assets		(9,820	)		(2,362	)
Accounts payable		214,754			-
Accrued expenses and other current liabilities		158,223			216,267
Accrued expenses and other current liabilities - related party		(30,000	)		(78,680	)
Deferred revenue		-			51,158
Total Adjustments		248,508			596,783
Net Cash Used In Operating Activities		(1,206,135	)		(1,064,935	)
Cash Flows From Investing Activities:
Purchases of property and equipment		-			(15,476	)
Net Cash Used In Investing Activities		-			(15,476	)
Cash Flows From Financing Activities:
Proceeds from sale of Series C Convertible Preferred Stock and warrants [1]		169,000			-
Proceeds from sale of common stock [2]		898,300			359,000
Payment of offering costs		(15,000	)		-
Net Cash Provided By Financing Activities		1,052,300			359,000
Net Decrease In Cash		(153,835	)		(721,411	)
Cash - Beginning of Period		229,896			895,761
Cash - End of Period	$	76,061		$	174,350

[1] Includes gross proceeds of $186,000, less cash issuance costs of $17,000.

[2] Includes gross proceeds of $384,000, less withheld issuance costs of $25,000 for the nine months ended September 30, 2018. There were no issuance costs for the nine months ended September 30, 2019.

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

4

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(unaudited)

	For the Nine Months Ended
	September 30,
	2019		2018
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	446	$	646
Income taxes	$	-	$	2,400
Non-cash investing and financing activities:
Common stock equity offering issuance costs	$	-	$	6,600
Accrual of offering costs	$	15,000	$	-
Common stock issued upon conversion of Series B Convertible Preferred Stock	$	82	$	-
Forgiveness of accrued expenses by related party	$	35,000	$	-

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

5

KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 Business 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 the following applications: electric vehicles and autonomous driving systems (collectively referred to herein as “E-Mobility”); artificial intelligence and Cloud computing; energy storage; and 5G communication technologies. KULR provides heat management solutions to enhance the performance and safety of battery packs used in electric vehicles, communication devices, and aerospace and defense applications.

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 condensed consolidated financial statements of the Company as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the operating results for the full year ending December 31, 2019 or any other period. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2018 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 29, 2019.

Note 2 Going Concern and Management’s Plans

The Company has not yet achieved profitability and expects to continue to incur cash outflows from operations. It is expected that its research and development and general and administrative expenses will continue to increase and, as a result, the Company will eventually need to generate significant product revenues to achieve profitability. These raise substantial doubt about the Company’s ability to continue as a going concern within one year after the financial statement issuance date.

The Company is currently funding its operations on a month-to-month basis by means of private placements. Although the Company’s management believes that it has access to capital resources, there are currently no commitments in place for new financing at this time and there is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. If the Company is unable to obtain adequate funds on reasonable terms, it may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustment that might become necessary should the Company be unable to continue as a going concern.

6

Note 3 Summary of Significant Accounting Policies

Since the date of the Annual Report on Form 10-K for the year ended December 31, 2018, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note. 

Concentrations

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. A significant portion of the Company’s cash is held at one major financial institution. The Company has not experienced any losses in such accounts. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. There were no uninsured cash balances as of September 30, 2019 and December 31, 2018.

Customer concentrations are as follows:

	Revenues												Accounts Receivable
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						As of September 30,			As of December 31,
	2019			2018			2019			2018			2019			2018
Customer A		67	%		92	%		46	%		64	%		90	%		63	%
Customer B		14	%		*			10	%		*			*			*
Customer C		*			*			15	%		*			*			*
Customer D		*			*			*			17	%		*			*
Customer E		*			*			*			12	%		*			*
Customer F		*			*			*			*			*			37	%
Total		82	%		92	%		71	%		93	%		90	%		100	%

* 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.

Revenue Recognition

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

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

· Step 1: Identify the contract with the customer;

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

· Step 3: Determine the transaction price;

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

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

7

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

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

· Contract services – Revenue is recognized at the point in time that the Company satisfies its performance obligation under the contract, which is generally at the time it delivers a report to the customer.

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

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Product sales	$	464,772	$	482,798	$	686,522	$	735,941
Contract services		61,950		-		91,462		145,988
Total revenue	$	526,722	$	482,798	$	777,984	$	881,929

As of September 30, 2019 and December 31, 2018, the Company did not have any contract assets or contract liabilities from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract. During the three and nine months ended September 30, 2019 and 2018, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares of non-vested restricted stock, if not anti-dilutive.

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

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Series B Convertible Preferred Stock		724,350		-		724,350		-
Series C Convertible Preferred Stock		206,800		-		206,800		-
Options		400,000		-		400,000		-
Warrants		201,700		-		201,700		-
Total		1,532,850		-		1,532,850		-

Operating Leases

The Company leases properties under operating leases. For leases in effect upon adoption of Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” at January 1, 2019 and for any leases commencing thereafter, the Company recognizes a liability to make lease payments, the “lease liability”, and an asset representing the right to use the underlying asset during the lease term, the “right-of-use asset”. The lease liability is measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate. The right-of-use asset is measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset. Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset.

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

8

Recently Issued Accounting Pronouncements

In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections — Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update)” (“ASU 2019-07”). ASU 2019-07 aligns the guidance in various SEC sections of the Codification with the requirements of certain SEC final rules. ASU 2019-07 is effective immediately. The adoption of ASU 2019-07 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Note 4 Accrued Expenses and Other Current Liabilities

As of September 30, 2019 and December 31, 2018, accrued expenses and other current liabilities consisted of the following:

	September 30, 2019		December 31, 2018
	(unaudited)
Payroll and vacation	$	459,259	$	252,043
Legal and professional fees		45,500		47,502
Travel expenses		20,812		48,248
Payroll and income tax payable		7,818		12,678
Research and development expenses		-		2,850
Credit card payable		4,835		4,586
Accrued issuable equity		-		3,960
Rent		176		176
Other		9,153		2,287
Total accrued expenses and other current liabilities	$	547,553	$	374,330

Note 5 Related Party Transactions

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities – related parties consist of a liability of $18,919 and $83,919 as of September 30, 2019 and December 31, 2018, 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.

On September 30, 2019, ESLI agreed to forgive $35,000 of previously accrued consulting fees. As a result, the Company accounted for the forgiveness as a capital contribution by reducing accrued expenses and other current liabilities by $35,000 with a corresponding credit to additional paid-in capital.

Note 6 Stockholders' Deficiency

Common Stock

During the nine months ended September 30, 2019, the Company sold an aggregate of 1,361,059 shares of common stock at $0.66 per share to accredited investors for aggregate cash proceeds of $898,300.

Series B Convertible Preferred Stock

During the nine months ended September 30, 2019, holders of Series B Convertible Preferred Stock elected to convert an aggregate of 16,371 shares of Series B Convertible Preferred Stock into an aggregate of 818,550 shares of common stock.

9

Series C Convertible Preferred Stock

On August 19, 2019, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series C Convertible Preferred Stock (the “Certificate of Designation”), which became effective upon filing. Pursuant to the Certificate of Designation, the Company designated 400 shares as Series C Convertible Preferred Stock out of the authorized and unissued preferred stock of the Company, par value $0.0001 per share.

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

Each share of Series C Convertible Preferred Stock, if converted within 180 days of such share’s initial issuance, is convertible into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) $1.00 per share. Each share of Series C Convertible Preferred Stock, if converted on or after the 181st day of its initial issuance, is convertible into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) 75% of the average of the trading prices five days prior to conversion but in no case less than $0.90 per share. In addition, all outstanding shares of Series C Convertible Preferred Stock may be automatically converted upon the occurrence of a qualified offering of at least $5 million of gross proceeds (“Qualified Offering”) or an approved listing of common stock on a national stock exchange (“Uplisting”). In the event of a Qualified Offering, each share of Series C Convertible Preferred Stock would be converted into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) 85% of the price of the securities sold in the Qualified Offering. In the event of an Uplisting, each share of Series C Convertible Preferred Stock would be converted into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) if converted within 180 days of such share’s initial issuance, $1.00 per share, and if converted on or after the 181st day of its initial issuance, 75% of the average of the trading prices five days prior to conversion but in no case less than $0.90 per share.

During the three months ended September 30, 2019, the Company sold to certain investors an aggregate of 20.68 shares of Series C Convertible Preferred Stock and two-year immediately vested warrants to purchase an aggregate of 51,700 shares of the Company’s common stock at an exercise price of $1.50 per share for aggregate gross proceeds of $186,000, less cash issuance costs of $47,000, for aggregate net proceeds of $139,000. The warrants, which were determined to be classified within stockholders’ deficiency, had an aggregate issuance date fair value of $10,779. The Company has computed the fair value of warrants using the Black-Scholes pricing model with the following assumptions: risk free interest rate – 1.53% - 1.74%; expected term – 2 years, expected volatility – 97%, expected dividends – 0%.

The Series C Convertible Preferred Stock is redeemable at the Company’s option, therefore it has been classified within stockholders’ deficiency on the condensed consolidated balance sheet. An overall analysis of its features performed by the Company determined that the Series C Convertible Preferred Stock was more akin to equity. As a result, while the embedded conversion option (“ECO”) contained certain anti-dilution price protection mechanisms, since the ECO was clearly and closely related to the equity host, it was not required to be bifurcated and accounted for as a derivative liability under ASC 815. The Company determined that the Series C Convertible Preferred Stock did not contain a beneficial conversion feature, since the conversion price exceeded the estimated fair value of the Company’s common stock as of the commitment date, except upon a conversion in the event of a Qualified Offering, which was determined to be a contingent beneficial conversion feature, which will be measured when the contingency is resolved and, if determined to be beneficial at such time, will be recognized.

Stock-Based Compensation

During the three and nine months ended September 30, 2019, the Company recognized stock-based compensation expense of $138,640 and $231,751 (which includes the issuance of 185,966 shares common stock for $133,660 of services provided), respectively, and during the three and nine months ended September 30, 2018, the Company recognized stock-based compensation expense of $94,864 and $402,656, respectively, related to restricted common stock, stock options and warrants, which are included within general and administrative expenses on the condensed consolidated statements of operations. As of September 30, 2019, there was $152,794 of unrecognized stock-based compensation expense that will be recognized over the weighted average remaining vesting period of 1.98 years.

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Note 7 Leases

The Company has two operating leases for real estate which have remaining terms that are less than one year. The Company elected not to recognize short-term leases on the balance sheet and all costs were recognized as selling, general and administrative expenses on the condensed consolidated statements of operations. For the three and nine months ended September 30, 2019, operating lease expense was $41,281 and $121,769, respectively. For the three and nine months ended September 30, 2018, operating lease expense was $40,373 and $87,039, respectively. As of September 30, 2019, the Company does not have any financing leases.

Note 8 Commitments and Contingencies

Patent License Agreement

On March 21, 2018, the Company entered into an agreement with the National Renewable Energy Laboratory (“NREL”) granting the Company an exclusive license to commercialize its patented Internal Short Circuit technology. The agreement shall be effective for as long as the licensed patents are enforceable, subject to certain early termination provisions specified in the agreement. In consideration, the Company agreed to pay to NREL the following: (i) a cash payment of $12,000 payable over one year, (ii) royalties ranging from 1.5% to 3.75% on the net sales price of the licensed products, as defined in the agreement, with minimum annual royalty payments ranging from $0 to $7,500. In addition, the Company shall use commercially reasonable efforts to bring the licensed products to market through a commercialization program that requires that certain milestones be met, as specified in the agreement. For the three and nine months ended September 30, 2019, the Company recorded royalties of $450 and $1,140, respectively, that were included within cost of revenues. There were no royalties earned during the three and nine months ended September 30, 2018. 

Securities Purchase Agreement

On April 2, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the stockholders (the “Sellers”) holding 100% of the ownership interest in TECHTOM Co., Ltd. (“TECHTOM”), a Japanese limited liability company, pursuant to which the Company agreed to purchase from the Sellers, subject to the satisfaction of certain closing conditions, all ownership interests in TECHTOM and any and all claims, notes and other liabilities owed by TECHTOM to the Sellers (the “Acquisition”).

On July 5, 2019, the Company entered into a Rescission and Termination Agreement (the “Termination Agreement”) with the Sellers (each Seller, individually, and the Company, a “Party” or collectively, the “Parties”) holding 100% of the ownership interest in TECHTOM to terminate the Purchase Agreement.

Pursuant to the Termination Agreement, each of the Parties mutually agreed (i) to rescind and terminate the Purchase Agreement, relieving each Party of their respective duties and obligations arising under the Purchase Agreement; and (ii) to a general release of all other respective Parties from all claims arising out of the Purchase Agreement or the Termination Agreement. Each Party is responsible for all costs and expenses incurred by such Party in connection with the Purchase Agreement or the Termination Agreement.

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

The following discussion and analysis of the results of operations and financial condition of KULR Technology Group, Inc. ("KULR" and, including its subsidiary, KULR Technology Corporation (“KULR”), the “Company”) as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2018 and for the year then ended, which are included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2019. 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 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 electronics, batteries, and other components across an array of applications. Currently, we are focused on targeting the following applications: electric vehicles and autonomous driving systems (collectively referred to herein as “E-Mobility”); artificial intelligence and Cloud computing; energy storage; and 5G communication technologies. Our proprietary core technology is a carbon fiber material, with roots in aerospace and defense, that provides what we believe to be superior thermal conductivity and heat dissipation in 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 E-Mobility battery powered products safer and more stable.

Our management believes that the E-Mobility industry has created and will create significant new opportunities for the application of our technology and know-how. We believe these new opportunities will be further driven by certain changing preferences that we’ve observed in younger generations that must increasingly cope with higher population density, global warming, and the rapidly evolving communications and computing needs of their personal devices and the surrounding infrastructure. As a result, we predict that the younger generations will increasingly prefer to attend meetings by video conference; rent a car, bike, or scooter, or call an app-based car service instead of owning a vehicle; and leverage the Cloud to perform tasks traditionally done in person, such as shopping for lunch, clothes, electronics and other consumer goods that also leverages an expanding E-Mobility delivery network.

In addition to evolving demands led by consumer-preferences, we have observed trending manufacturer-led opportunities in industries that have become increasingly more reliant on the Cloud, on portability and on high-demand processing power. For example, car manufacturers are increasingly providing options that take over the responsibility for driving, diagnosing its own service requirements and analyzing on-board systems data and efficiency. The communications and entertainment industries are leveraging increasingly more powerful and portable devices to deliver live and high-definition content and experiences. These innovations will require high bandwidth communication devices that can handle the power drain and computational requirements to keep up with the sophisticated security and software tools that will power these advanced product offerings. As a result of these manufacturer and consumer trends, we believe that the new generations of high-powered, small form-factor semiconductors are out-pacing the ability to control unwanted heat generation in lithium ion batteries.

The above-described advances in micro technology, portable power, and compact energy efficient devices linked to an ever-widening Internet of Things (“IoT”) via the Cloud are driving opportunities that forms the focus of the Company’s business development plan. We believe that our core technology and historical development focus on improving lithium-ion battery performance and safety, positions us in a competitively advantageous position to enhance key components to the evolving mobile applications for a wide range of consumer products and IoT. We have found that as chip performance increases, power consumption increases, and more heat is generated as a byproduct. When chip size reduces, there is an increased potential for a hot spot on the chip, which can degrade system performance, or even cause spontaneous combustion. However, electronic system components must operate within a specific temperature range on both the high and low end to operate properly. After strenuous testing, we believe we have developed heat management solutions that significantly improve upon traditional heat storage and dissipation solutions and improve upon their rigidity and durability. We also believe that the traditional solutions are not equipped to handle the evolving marketplace. However, through a combination of custom design services and provision of proprietary hardware solutions, our products reduce manufacturing complexity and provide a lighter weight solution than traditional thermal management materials and, we believe, can meet the heat management demands of components and batteries being designed into the newest mobile technologies and applications.

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

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

Recent Developments

Series C Convertible Preferred Stock

During the three months ended September 30, 2019, the Company sold to certain investors an aggregate of 20.68 shares of Series C Convertible Preferred Stock and two-year immediately vested warrants to purchase an aggregate of 51,700 shares of the Company’s common stock at an exercise price of $1.50 per share for aggregate gross proceeds of $186,000, less cash issuance costs of $47,000, for aggregate net proceeds of $139,000. The warrants, which were determined to be classified within stockholders’ deficiency, had an aggregate issuance date fair value of $10,779.

On August 19, 2019, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series C Convertible Preferred Stock (the “Certificate of Designation”), which became effective upon filing. Pursuant to the Certificate of Designation, the Company designated 400 shares as Series C Convertible Preferred Stock out of the authorized and unissued preferred stock of the Company, par value $0.0001 per share.

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

Each share of Series C Convertible Preferred Stock, if converted within 180 days of such share’s initial issuance, is convertible into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) $1.00 per share. Each share of Series C Convertible Preferred Stock, if converted on or after the 181st day of its initial issuance, is convertible into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) 75% of the average of the trading prices five days prior to conversion but in no case less than $0.90 per share. In addition, all outstanding shares of Series C Convertible Preferred Stock may be automatically converted upon the occurrence of a qualified offering of at least $5 million of gross proceeds (“Qualified Offering”) or an approved listing of common stock on a national stock exchange (“Uplisting”). In the event of a Qualified Offering, each share of Series C Convertible Preferred Stock would be converted into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) 85% of the price of the securities sold in the Qualified Offering. In the event of an Uplisting, each share of Series C Convertible Preferred Stock would be converted into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) if converted within 180 days of such share’s initial issuance, $1.00 per share, and if converted on or after the 181st day of its initial issuance, 75% of the average of the trading prices five days prior to conversion but in no case less than $0.90 per share.

Customer Engagements

During the current fiscal year, we have successfully added to our list of active customers and continue to expand our relationships with prospective customers. Typically, a new customer engagement starts out with initial service projects that include the analysis of customer heat management challenges, evaluation of potential solutions and designs, and selection of solutions that may be addressed by our existing product or that require new designs and features, leading to new general or custom products. The process of designing next generation products for prospective customers is lengthy. However, we believe we have made significant progress working with existing and prospective customers on developing product solutions. Once customer solutions are identified and developed, we would expect the customer to submit product purchase orders. Although no assurances can be made that such purchase orders would be placed, such orders could not only lead to higher-volume production sales but could (i) generate significantly higher gross margins as compared to the earlier engagement stage service projects, and (ii) provide greater prospects for scaling.

Active Development Projects

As we continue to advance our new customer engagements and submit our solutions against competitor solutions in various independent and customer testing, we believe our carbon-fiber based electronics and battery cooling technologies are superior to traditionally used heat sinks (such as aluminum and copper heat sinks) and thermal interface materials (such as thermal gels and pads). We believe that our solutions are not only generally more thermally conductive, but also lighter in weight and in many cases offer product design flexibility. For instance, our HYDRA TRS products have been independently tested to show that they have outperformed our competitors’ solutions in preventing cell-to-cell thermal runaway propagation and requiring higher trigger temperatures at which the thermal runaway event occurs. Our TRS battery storage bags were selected by the U.S. government’s NASA to transport and store laptop batteries aboard the International Space Station. Additionally, we are currently working with top tier companies in the medical device, electric aircraft, and global automaker industries on designing safer, more effective battery heat sink solutions. No assurances can be made, however, that any of our active development projects will result in continued or future sales revenues.

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Results of Operations

Three and Nine Months Ended September 30, 2019 Compared With Three and Nine Months Ended September 30, 2018

Revenues

Our revenues consisted of the following types:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Product sales	$	464,772	$	482,798	$	686,522	$	735,941
Contract services		61,950		-		91,462		145,988
Total revenue	$	526,722	$	482,798	$	777,984	$	881,929

For the three months ended September 30, 2019 and 2018, we generated $526,722 and $482,798 of revenues, an increase of $43,924, or 9%. The increase was primarily due to contract services provided during the 2019 period.

Our revenues during the three months ended September 30, 2019 primarily consisted of sales of our component product, Carbon Fiber Velvet (“CFV”) thermal management solution, Internal Short Circuit (“ISC”) battery cell products, as well as certain research and development contract and onsite engineering services. Our revenues during the three months ended September 30, 2018 consisted of sales of our component product and CFV thermal management solution.

Our revenue for the three months ended September 30, 2019 and 2018 was generated from 11 and 6 different customers, respectively.

For the nine months ended September 30, 2019 and 2018, we generated $777,984 and $881,929 of revenues, a decrease of $103,946, or 12%. The decrease was primarily due to the lumpy nature of conversion of project-based services into orders of products during the 2019 period.

Our revenues during the nine months ended September 30, 2019 consisted of our component product, CFV thermal management solution, ISC battery cell products as well as certain research and development contract and onsite engineering services. Our revenues during the nine months ended September 30, 2018 consisted of sales of our component product, CFV thermal management solution, sales of an Original Equipment Manufacturer (“OEM”) product as well as certain research and development contract services.

Our revenue for the nine months ended September 30, 2019 and 2018 was generated from 21 and 11 different customers, respectively.

Cost of Revenues

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

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

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

For the three months ended September 30, 2019 and 2018, cost of revenues was $109,051 and $75,384, respectively, an increase of $33,667, or 45%. The increase was primarily due to the manufacturing of ISC battery cells related to the sales during the three months ended September 30, 2019. The gross margin percentage was 79% and 84% for the three months ended September 30, 2019 and 2018, respectively. The decrease in margins during the 2019 period was primarily due to a reduction in sales of higher margin products as compared to the 2018 period as well as a result of a difference in product mix in the 2019 period as compared to the 2018 period.

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For the nine months ended September 30, 2019 and 2018, cost of revenues was $199,118 and $258,801, respectively, a decrease of $59,683, or 23%. The decrease was primarily due to an increased volume of contracts in the 2018 period, which required additional labor and materials. The gross margin percentage was 74% and 71% for the nine months ended September 30, 2019 and 2018, respectively. The increase during the 2019 period resulted primarily from a more favorable product mix being sold as compared to the 2018 period.

Research and Development

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

For the three months ended September 30, 2019, R&D expenses decreased by $23,224, or 14%, to $137,970 from $161,194 for the three months ended September 30, 2018, related to a reduction of R&D supplies in the 2019 period. Having completed our early R&D foundation work, we reallocated certain resources from R&D to production which resulted in lower R&D spending in 2019 than in the prior year.

For the nine months ended September 30, 2019, R&D expenses decreased by $34,175, or 9%, to $365,709 from $399,884 for the nine months ended September 30, 2018, related to a reduction of R&D supplies in the 2019 period.

We expect that our R&D expenses will increase as we receive further performance feedback from current customers and identify new target features and product opportunities.

Selling, General and Administrative

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

For the three months ended September 30, 2019, selling, general and administrative expenses increased by $85,605, or 19%, to $546,982 from $461,377 for the three months ended September 30, 2018. The increase is primarily due to increases in the 2019 period of approximately $76,000 of professional fees incurred in connection with our Form S-3 filing as well as new consulting agreements initiated in 2019 and $9,000 of non-cash stock-based compensation expense.

For the nine months ended September 30, 2019, selling, general and administrative expenses decreased by $241,900, or 13%, to $1,666,735 from $1,908,635 for the nine months ended September 30, 2018. The decrease is primarily due to decreases in the 2019 period of approximately $66,000 of payroll and benefit expenses, $251,000 of non-cash stock-based compensation expense, partially offset by increases in the 2019 period of approximately $35,000 of rent expense and $46,000 of professional fees.

Liquidity and Capital Resources

For the nine months ended September 30, 2019 and 2018, cash used in operating activities was $1,206,135 and $1,064,953, respectively. Our cash used in operations for the nine months ended September 30, 2019 was primarily attributable to our net loss of $1,454,643, adjusted for non-cash expenses in the aggregate amount of $237,325, partially offset by $11,183 of net cash provided by changes in the levels of operating assets and liabilities. Our cash used in operations for the nine months ended September 30, 2018 was primarily attributable to our net loss of $1,661,718, adjusted for non-cash expenses in the aggregate amount of $390,305, partially offset by $206,478 of net cash provided by changes in the levels of operating assets and liabilities.

For the nine months ended September 30, 2019 and 2018, cash used in investing activities was $0 and $15,476, respectively. Cash used in investing activities during the nine months ended September 30, 2018 was due to purchases of property and equipment.

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For the nine months ended September 30, 2019, and 2018, cash provided by financing activities was $1,052,300 and $359,000, respectively. Cash provided by financing activities during the nine months ended September 30, 2019 was due to $898,300 of proceeds from sale of common stock and $169,000 of proceeds from the sale of Series C Convertible Preferred stock and warrants, partially offset by the payment of $15,000 of offering costs. Cash provided by financing activities during the nine months ended September 30, 2018 was due to the sale of common stock in our private placement.

We have not yet achieved profitability and expect to continue to incur cash outflows from operations. It is expected that our research and development and general and administrative expenses will continue to increase and, as a result, we will eventually need to generate significant product revenues and/or raise additional capital to fund our operations. These conditions indicate that there is substantial doubt about our ability to continue as a going concern within one year after the financial statement issuance date.

We are currently funding our operations on a month-to-month basis. Although our management believes that we have access to capital resources, there are currently no commitments in place for new financing at this time and there is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures.

Our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate our continuation as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The unaudited condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Off Balance Sheet Arrangements

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

Critical Accounting Policies

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the third quarter of 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except as noted above.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

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

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

During the three months ended September 30, 2019, we issued 45,966 shares of restricted common stock for consulting services. The issuances of securities were exempt from the registrations requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.

During the three months ended September 30, 2019, certain holders of Series B Convertible Preferred Stock elected to convert an aggregate of 16,371 shares of Series B Convertible Preferred Stock pursuant to which the Company issued an aggregate of 818,550 shares of restricted common stock. Shares of common stock issued upon the exercise of conversion rights are exempt securities 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.

Item 6. Exhibits.

4.1 Certificate of Designation of Series C Convertible Preferred Stock (previously filed as an exhibit to Form 8-K on August 23, 2019 and incorporated herein by this reference)

10.1 Rescission and Termination Agreement dated July 5, 2019 (previously filed as an exhibit to Form 8-K on July 5, 2019 and incorporated herein by this reference)

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*

101.SCH XBRL Taxonomy Extension Schema*

101.CAL XBRL Taxonomy Extension Calculation*

101.DEF XBRL Taxonomy Extension Definition*

101.LAB XBRL Taxonomy Extension Labels*

101.PRE XBRL Taxonomy Extension Presentation*

*Filed herewith

**Furnished herewith

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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.

November 1, 2019	By	/s/ Michael Mo
		Michael Mo Chief Executive Officer and Chairman (Principle Executive Officer)

November 1, 2019	By	/s/ Simon Westbrook
		Simon Westbrook Chief Financial Officer
		(Principle Financial and Accounting Officer)

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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 1, 2019	/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 1, 2019	/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 ending September 30, 2019, 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 1, 2019	By	/s/ Michael Mo
		Michael Mo
		Chief Executive Officer
		(Principal Executive Officer)

Date: November 1, 2019	By	/s/ Simon Westbrook
		Simon Westbrook
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue	$ 526,722	$ 482,798	$ 777,984	$ 881,929
Cost of revenue	109,051	75,384	199,118	258,801
Gross Profit	417,671	407,414	578,866	623,128
Operating Expenses:
Research and development	137,970	161,194	365,709	399,884
Selling, general and administrative	546,982	461,377	1,666,735	1,908,635
Total Operating Expenses	684,952	622,571	2,032,444	2,308,519
Loss From Operations	(267,281)	(215,157)	(1,453,578)	(1,685,391)
Other (Expense) Income:
Interest expense, net	(503)	(269)	(1,315)	(502)
Other Income	250	0	250
Change in fair value of accrued issuable equity	0	24,175	0	24,175
Total Other (Expense) Income	(253)	23,906	(1,065)	23,673
Net Loss	$ (267,534)	$ (191,251)	$ (1,454,643)	$ (1,661,718)
Net Loss Per Share - Basic and Diluted (In dollars per share)	$ 0.00	$ 0.00	$ (0.02)	$ (0.02)
Weighted Average Number of Common Shares Outstanding - Basic and Diluted (In Shares)	80,380,640	77,785,191	79,803,396	77,513,560

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Related Party Transactions (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Related Party Transaction [Line Items]
Due to Other Related Parties, Current	$ 18,919	$ 83,919
Adjustments to Additional Paid in Capital, Other	35,000
Chief Technology Officer CTO [Member]
Related Party Transaction [Line Items]
Due to Other Related Parties, Current	18,919	$ 83,919
Energy Science Laboratories, Inc ESLI [Member]
Related Party Transaction [Line Items]
Adjustments to Additional Paid in Capital, Other	$ 35,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Payments of Stock Issuance Costs		$ 15,000	$ 0
Common Stock [Member]
Gross Proceeds From Issuance Of Common Stock		898,300	384,000
Payments of Stock Issuance Costs		0	31,600
Common Stock [Member] | Series C Convertible Preferred Stock
Gross Proceeds From Issuance Of Common Stock	$ 186,000	186,000
Cash [Member] | Common Stock [Member]
Payments of Stock Issuance Costs			$ 25,000
Cash [Member] | Common Stock [Member] | Series C Convertible Preferred Stock
Payments of Stock Issuance Costs	$ 17,000	$ 17,000

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Summary of Significant Accounting Policies - Customer concentrations (Details)				3 Months Ended				9 Months Ended
		Dec. 31, 2018		Sep. 30, 2019		Sep. 30, 2018		Sep. 30, 2019		Sep. 30, 2018
Revenues [Member]
Concentration Risk, Percentage				82.00%		92.00%		71.00%		93.00%
Accounts Receivable [Member]
Concentration Risk, Percentage		100.00%						90.00%
Customer A [Member] | Revenues [Member]
Concentration Risk, Percentage				67.00%		92.00%	[1]	46.00%		64.00%
Customer A [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage		63.00%						90.00%	[1]
Customer B [Member] | Revenues [Member]
Concentration Risk, Percentage				14.00%			[1]	10.00%
Customer B [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage			[1]
Customer C [Member] | Revenues [Member]
Concentration Risk, Percentage					[1]			15.00%
Customer C [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage	[1]
Customer D [Member] | Revenues [Member]
Concentration Risk, Percentage					[1]		[1]			17.00%
Customer D [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage									[1]
Customer E [Member] | Revenues [Member]
Concentration Risk, Percentage					[1]					12.00%
Customer E [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage	[1]
Customer F [Member] | Revenues [Member]
Concentration Risk, Percentage	[1]
Customer F [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage		37.00%	[1]

[1] Less than 10%

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Summary of Significant Accounting Policies.

Concentrations

Concentrations

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. A significant portion of the Company’s cash is held at one major financial institution. The Company has not experienced any losses in such accounts. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. There were no uninsured cash balances as of September 30, 2019 and December 31, 2018.

Customer concentrations are as follows:

	Revenues								Accounts Receivable
	For the Three Months Ended				For the Nine Months Ended				As of		As of
	September 30,				September 30,				September 30, 2019		December 31, 2018
	2019		2018		2019		2018
Customer A	67	%	92	%	46	%	64	%	90	%	63	%
Customer B	14	%	*		10	%	*		*		*
Customer C	*		*		15	%	*		*		*
Customer D	*		*		*		17	%	*		*
Customer E	*		*		*		12	%	*		*
Customer F	*		*		*		*		*		37	%
Total	82	%	92	%	71	%	93	%	90	%	100	%

*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.

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 that core principle:

· Step 1: Identify the contract with the customer;

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

· Step 3: Determine the transaction price;

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

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

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

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

· Contract services – Revenue is recognized at the point in time that the Company satisfies its performance obligation under the contract, which is generally at the time it delivers a report to the customer.

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

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Product sales	$	464,772	$	482,798	$	686,522	$	735,941
Contract services		61,950		—		91,462		145,988
Total revenue	$	526,722	$	482,798	$	777,984	$	881,929

As of September 30, 2019 and December 31, 2018, the Company did not have any contract assets or contract liabilities from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract. During the three and nine months ended September 30, 2019 and 2018, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

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 vested common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares of non-vested restricted stock, if not anti-dilutive.

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

	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
Series B Convertible Preferred Stock	724,350	—	724,350	—
Series C Convertible Preferred Stock	206,800	—	206,800	—
Options	400,000	—	400,000	—
Warrants	201,700	—	201,700	—
Total	1,532,850	—	1,532,850	—

Operating Leases

Operating Leases

The Company leases properties under operating leases. For leases in effect upon adoption of Accounting Standards Update (“ASU”) 2016‑02, “Leases (Topic 842)” at January 1, 2019 and for any leases commencing thereafter, the Company recognizes a liability to make lease payments, the “lease liability”, and an asset representing the right to use the underlying asset during the lease term, the “right-of-use asset”. The lease liability is measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate. The right-of-use asset is measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset. Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset.

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

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update)" ("ASU 2019-07"). ASU 2019-07 aligns the guidance in various SEC sections of the Codification with the requirements of certain SEC final rules. ASU 2019-07 is effective immediately. The adoption of ASU 2019-07 did not have a material impact on the Company's unaudited condensed consolidated financial statements.

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Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions

Related Party Transactions

Note 5    Related Party Transactions

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities – related parties consist of a liability of $18,919 and $83,919 as of September 30, 2019 and December 31, 2018, 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.

On September 30, 2019, ESLI agreed to forgive $35,000 of previously accrued consulting fees. As a result, the Company accounted for the forgiveness as a capital contribution by reducing accrued expenses and other current liabilities by $35,000 with a corresponding credit to additional paid-in capital.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies.

Commitments and Contingencies

Note 8     Commitments and Contingencies

Patent License Agreement

On March 21, 2018, the Company entered into an agreement with the National Renewable Energy Laboratory (“NREL”) granting the Company an exclusive license to commercialize its patented Internal Short Circuit technology. The agreement shall be effective for as long as the licensed patents are enforceable, subject to certain early termination provisions specified in the agreement. In consideration, the Company agreed to pay to NREL the following: (i) a cash payment of $12,000 payable over one year, (ii) royalties ranging from 1.5% to 3.75% on the net sales price of the licensed products, as defined in the agreement, with minimum annual royalty payments ranging from $0 to $7,500. In addition, the Company shall use commercially reasonable efforts to bring the licensed products to market through a commercialization program that requires that certain milestones be met, as specified in the agreement. For the three and nine months ended September 30, 2019, the Company recorded royalties of $450 and $1,140, respectively, that were included within cost of revenues. There were no royalties earned during the three and nine months ended September 30, 2018.

Securities Purchase Agreement

On April 2, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the stockholders (the “Sellers”) holding 100% of the ownership interest in TECHTOM Co., Ltd. (“TECHTOM”), a Japanese limited liability company, pursuant to which the Company agreed to purchase from the Sellers, subject to the satisfaction of certain closing conditions, all ownership interests in TECHTOM and any and all claims, notes and other liabilities owed by TECHTOM to the Sellers (the “Acquisition”).

On July 5, 2019, the Company entered into a Rescission and Termination Agreement (the “Termination Agreement”) with the Sellers (each Seller, individually, and the Company, a “Party” or collectively, the “Parties”) holding 100% of the ownership interest in TECHTOM to terminate the Purchase Agreement.

Pursuant to the Termination Agreement, each of the Parties mutually agreed (i) to rescind and terminate the Purchase Agreement, relieving each Party of their respective duties and obligations arising under the Purchase Agreement; and (ii) to a general release of all other respective Parties from all claims arising out of the Purchase Agreement or the Termination Agreement. Each Party is responsible for all costs and expenses incurred by such Party in connection with the Purchase Agreement or the Termination Agreement.

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Accrued Expenses and Other Current Liabilities

9 Months Ended

Sep. 30, 2019

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

Note 4    Accrued Expenses and Other Current Liabilities

As of September 30, 2019 and December 31, 2018, accrued expenses and other current liabilities consisted of the following:

	September 30,		December 31,
	2019		2018
	(unaudited)
Payroll and vacation	$	459,259	$	252,043
Legal and professional fees		45,500		47,502
Travel expenses		20,812		48,248
Payroll and income tax payable		7,818		12,678
Research and development expenses		—		2,850
Credit card payable		4,835		4,586
Accrued issuable equity		—		3,960
Rent		176		176
Other		9,153		2,287
Total accrued expenses and other current liabilities	$	547,553	$	374,330

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Accrued Expenses and Other Current Liabilities (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Accrued Expenses and Other Current Liabilities
Payroll and vacation	$ 459,259	$ 252,043
Legal and professional fees	45,500	47,502
Travel expenses	20,812	48,248
Payroll and income tax payable	7,818	12,678
Research and development expenses	0	2,850
Credit card payable	4,835	4,586
Accrued issuable equity	0	3,960
Rent	176	176
Other	9,153	2,287
Total accrued expenses and other current liabilities	$ 547,553	$ 374,330

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Business Organization, Nature of Operations and Basis of Presentation

9 Months Ended

Sep. 30, 2019

Business Organization, Nature of Operations and Basis of Presentation

Business Organization, Nature of Operations and Basis of Presentation

Note 1    Business 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 the following applications: electric vehicles and autonomous driving systems (collectively referred to herein as “E-Mobility”); artificial intelligence and Cloud computing; energy storage; and 5G communication technologies. KULR provides heat management solutions to enhance the performance and safety of battery packs used in electric vehicles, communication devices, and aerospace and defense applications.

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 condensed consolidated financial statements of the Company as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the operating results for the full year ending December 31, 2019 or any other period. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2018 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10‑K on March 29, 2019.

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Summary of Significant Accounting Policies.
Cash, FDIC Insured Amount	$ 250,000		$ 250,000
Revenue Recognized	$ 0	$ 0	$ 0	$ 0	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) - USD ($)	Series B Convertible Preferred Stock	Series C Convertible Preferred Stock	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2017			$ 7,744	$ 5,090,282	$ (4,358,320)	$ 739,706
Balance (shares) at Dec. 31, 2017			77,440,000
Stock-based compensation			$ 0	182,957	0	182,957
Stock-based compensation (in shares)			0
Net loss			$ 0	0	(825,845)	(825,845)
Balance at Mar. 31, 2018			$ 7,744	5,273,239	(5,184,165)	96,818
Balance (shares) at Mar. 31, 2018			77,440,000
Balance at Dec. 31, 2017			$ 7,744	5,090,282	(4,358,320)	739,706
Balance (shares) at Dec. 31, 2017			77,440,000
Net loss						(1,661,718)
Balance at Sep. 30, 2018			$ 7,802	5,750,416	(6,020,038)	(261,820)
Balance (shares) at Sep. 30, 2018			78,021,819
Balance at Mar. 31, 2018			$ 7,744	5,273,239	(5,184,165)	96,818
Balance (shares) at Mar. 31, 2018			77,440,000
Stock-based compensation			$ 0	124,835	0	124,835
Stock-based compensation (in shares)			0
Net loss			$ 0	0	(644,622)	(644,622)
Balance at Jun. 30, 2018			$ 7,744	5,398,074	(5,828,787)	(422,969)
Balance (shares) at Jun. 30, 2018			77,440,000
Common stock issued for cash			$ 58	352,342	0	352,400
Common stock issued for cash (in shares)			581,819
Net loss			$ 0	0	(191,251)	(191,251)
Balance at Sep. 30, 2018			$ 7,802	5,750,416	(6,020,038)	(261,820)
Balance (shares) at Sep. 30, 2018			78,021,819
Balance at Dec. 31, 2018	$ 3	$ 0	$ 7,871	6,283,548	(6,416,559)	(125,137)
Balance (shares) at Dec. 31, 2018	30,858	0	78,706,256
Stock-based compensation	$ 0	$ 0	$ 3	36,057	0	36,060
Stock-based compensation (in shares)	0	0	25,000
Common stock issued for cash	$ 0	$ 0	$ 23	154,977	0	155,000
Common stock issued for cash (in shares)	0	0	234,849
Net loss	$ 0	$ 0	$ 0	0	(565,693)	(565,693)
Balance at Mar. 31, 2019	$ 3	$ 0	$ 7,897	6,474,582	(6,982,252)	(499,770)
Balance (shares) at Mar. 31, 2019	30,858	0	78,966,105
Balance at Dec. 31, 2018	$ 3	$ 0	$ 7,871	6,283,548	(6,416,559)	(125,137)
Balance (shares) at Dec. 31, 2018	30,858	0	78,706,256
Net loss						(1,454,643)
Balance at Sep. 30, 2019	$ 1	$ 0	$ 8,107	7,587,365	(7,871,202)	(275,729)
Balance (shares) at Sep. 30, 2019	14,487	20.68	81,071,831
Balance at Mar. 31, 2019	$ 3	$ 0	$ 7,897	6,474,582	(6,982,252)	(499,770)
Balance (shares) at Mar. 31, 2019	30,858	0	78,966,105
Stock-based compensation	$ 0	$ 0	$ 0	7,593	0	7,593
Common stock issued for cash	0	0	$ 112	743,188	0	743,300
Common stock issued for cash (in shares)			1,126,210
Net loss	0	0	$ 0	0	(621,416)	(621,416)
Balance at Jun. 30, 2019	$ 3	$ 0	$ 8,009	7,225,363	(7,603,668)	(370,293)
Balance (shares) at Jun. 30, 2019	30,858	0	80,092,315
Stock-based compensation	$ 0	$ 0	$ 16	188,082	0	188,098
Stock-based compensation (in shares)	0	0	160,966
Series B Convertible Preferred Stock issued to common stockholders	$ (2)	$ 0	$ 82	(80)	0	0
Series B Convertible Preferred Stock issued to common stockholders (in shares)	(16,371)	0	818,550
Series C Convertible Preferred Stock and warrants issued for cash, net of issuance costs [1] (In Shares)	0	20.68	0
Series C Convertible Preferred Stock and warrants issued for cash, net of issuance costs [1]	$ 0	$ 0	$ 0	139,000	0	139,000
Forgiveness of accrued expenses by related party	0	0	0	35,000	0	35,000
Net loss	0	0	0	0	(267,534)	(267,534)
Balance at Sep. 30, 2019	$ 1	$ 0	$ 8,107	$ 7,587,365	$ (7,871,202)	$ (275,729)
Balance (shares) at Sep. 30, 2019	14,487	20.68	81,071,831

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Commitments and Contingencies (Details) - USD ($)		1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 05, 2019	Mar. 21, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Apr. 02, 2019
Royalty Expense			$ 450	$ 0	$ 1,140	$ 0
License [Member]
Consideration Cash Payment		$ 12,000
Minimum [Member]
Royalty Rate		1.50%
Payments for Royalties		$ 0
Maximum [Member]
Royalty Rate		3.75%
Payments for Royalties		$ 7,500
TECHTOM
Ownership interest (as a percent)							100.00%
Ownership interest terminated	100.00%

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 29, 2019
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Registrant Name	KULR Technology Group, Inc.
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Central Index Key	0001662684
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		81,071,831

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Summary of Significant Accounting Policies.

Schedules of concentrations of credit risk

Customer concentrations are as follows:

	Revenues								Accounts Receivable
	For the Three Months Ended				For the Nine Months Ended				As of		As of
	September 30,				September 30,				September 30, 2019		December 31, 2018
	2019		2018		2019		2018
Customer A	67	%	92	%	46	%	64	%	90	%	63	%
Customer B	14	%	*		10	%	*		*		*
Customer C	*		*		15	%	*		*		*
Customer D	*		*		*		17	%	*		*
Customer E	*		*		*		12	%	*		*
Customer F	*		*		*		*		*		37	%
Total	82	%	92	%	71	%	93	%	90	%	100	%

*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.

Schedule of revenue from external customers by products and services

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

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Product sales	$	464,772	$	482,798	$	686,522	$	735,941
Contract services		61,950		—		91,462		145,988
Total revenue	$	526,722	$	482,798	$	777,984	$	881,929

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

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

	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
Series B Convertible Preferred Stock	724,350	—	724,350	—
Series C Convertible Preferred Stock	206,800	—	206,800	—
Options	400,000	—	400,000	—
Warrants	201,700	—	201,700	—
Total	1,532,850	—	1,532,850	—

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Stockholders' Deficiency

9 Months Ended

Sep. 30, 2019

Stockholders' Deficiency

Stockholders' Deficiency

Note 6    Stockholders’ Deficiency

Common Stock

During the nine months ended September 30, 2019, the Company sold an aggregate of 1,361,059 shares of common stock at $0.66 per share to accredited investors for aggregate cash proceeds of $898,300.

Series B Convertible Preferred Stock

During the nine months ended September 30, 2019, holders of Series B Convertible Preferred Stock elected to convert an aggregate of 16,371 shares of Series B Convertible Preferred Stock into an aggregate of 818,550 shares of common stock.

Series C Convertible Preferred Stock

On August 19, 2019, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series C Convertible Preferred Stock (the "Certificate of Designation"), which became effective upon filing. Pursuant to the Certificate of Designation, the Company designated 400 shares as Series C Convertible Preferred Stock out of the authorized and unissued preferred stock of the Company, par value $0.0001 per share.

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

Each share of Series C Convertible Preferred Stock, if converted within 180 days of such share's initial issuance, is convertible into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) $1.00 per share. Each share of Series C Convertible Preferred Stock, if converted on or after the 181st day of its initial issuance, is convertible into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) 75% of the average of the trading prices five days prior to conversion but in no case less than $0.90 per share. In addition, all outstanding shares of Series C Convertible Preferred Stock may be automatically converted upon the occurrence of a qualified offering of at least $5 million of gross proceeds ("Qualified Offering") or an approved listing of common stock on a national stock exchange ("Uplisting"). In the event of a Qualified Offering, each share of Series C Convertible Preferred Stock would be converted into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) 85% of the price of the securities sold in the Qualified Offering. In the event of an Uplisting, each share of Series C Convertible Preferred Stock would be converted into a number of shares of common stock equal to the product determined by dividing (i) the Stated Value of the number of shares of Series C Convertible Preferred Stock being converted and any accrued dividends thereon and (ii) if converted within 180 days of such share's initial issuance, $1.00 per share, and if converted on or after the 181st day of its initial issuance, 75% of the average of the trading prices five days prior to conversion but in no case less than $0.90 per share.

During the three months ended September 30, 2019, the Company sold to certain investors an aggregate of 20.68 shares of Series C Convertible Preferred Stock and two-year immediately vested warrants to purchase an aggregate of 51,700 shares of the Company's common stock at an exercise price of $1.50 per share for aggregate gross proceeds of $186,000, less cash issuance costs of $47,000, for aggregate net proceeds of $139,000. The warrants, which were determined to be classified within stockholders' deficiency, had an aggregate issuance date fair value of $10,779. The Company has computed the fair value of warrants using the Black-Scholes pricing model with the following assumptions: risk free interest rate – 1.53% – 1.74%; expected term – 2 years, expected volatility – 97%, expected dividends – 0%.

The Series C Convertible Preferred Stock is redeemable at the Company's option, therefore it has been classified within stockholders' deficiency on the condensed consolidated balance sheet. An overall analysis of its features performed by the Company determined that the Series C Convertible Preferred Stock was more akin to equity. As a result, while the embedded conversion option ("ECO") contained certain anti-dilution price protection mechanisms, since the ECO was clearly and closely related to the equity host, it was not required to be bifurcated and accounted for as a derivative liability under ASC 815. The Company determined that the Series C Convertible Preferred Stock did not contain a beneficial conversion feature, since the conversion price exceeded the estimated fair value of the Company's common stock as of the commitment date, except upon a conversion in the event of a Qualified Offering, which was determined to be a contingent beneficial conversion feature, which will be measured when the contingency is resolved and, if determined to be beneficial at such time, will be recognized.

Stock-Based Compensation

During the three and nine months ended September 30, 2019, the Company recognized stock-based compensation expense of $138,640 and $231,751 (which includes the issuance of 185,966 shares common stock for $133,660 of services provided), respectively, and during the three and nine months ended September 30, 2018, the Company recognized stock-based compensation expense of $94,864 and $402,656, respectively, related to restricted common stock, stock options and warrants, which are included within general and administrative expenses on the condensed consolidated statements of operations. As of September 30, 2019, there was $152,794 of unrecognized stock-based compensation expense that will be recognized over the weighted average remaining vesting period of 1.98 years.

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Going Concern and Management's Plans

9 Months Ended

Sep. 30, 2019

Going Concern and Management's Plans

Going Concern and Management's Plans

Note 2    Going Concern and Management’s Plans

The Company has not yet achieved profitability and expects to continue to incur cash outflows from operations. It is expected that its research and development and general and administrative expenses will continue to increase and, as a result, the Company will eventually need to generate significant product revenues to achieve profitability. These raise substantial doubt about the Company’s ability to continue as a going concern within one year after the financial statement issuance date.

The Company is currently funding its operations on a month-to-month basis by means of private placements. Although the Company’s management believes that it has access to capital resources, there are currently no commitments in place for new financing at this time and there is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. If the Company is unable to obtain adequate funds on reasonable terms, it may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustment that might become necessary should the Company be unable to continue as a going concern.

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Stockholders' Deficiency (Details) - USD ($)			3 Months Ended		9 Months Ended
		Aug. 19, 2019	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Preferred Stock, Par or Stated Value Per Share			$ 0.0001		$ 0.0001		$ 0.0001
Proceeds from Issuance of Preferred Stock and Preference Stock	[1]				$ 169,000	$ 0
Payments of Stock Issuance Costs					15,000	0
Proceeds from Issuance of Common Stock	[2]				898,300	359,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized			$ 152,794		$ 152,794
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period					1 year 11 months 23 days
Series B Convertible Preferred Stock
Conversion of Stock, Shares Converted					16,371
Convertible Preferred Stock, Shares Issued upon Conversion			818,550		818,550
Series C Convertible Preferred Stock
Convertible Preferred Stock, Shares Reserved for Future Issuance		400
Preferred Stock, Par or Stated Value Per Share		$ 0.0001
Preferred Stock, Liquidation Preference Per Share		$ 10,000
Preferred Stock, Dividend Rate, Percentage		12.00%
Proceeds from Issuance of Preferred Stock and Preference Stock		$ 5,000,000
Preferred Stock, Convertible, Conversion, Percentage of Securities Price		85.00%
Preferred Stock, Shares Issued			20.68		20.68
Series C Convertible Preferred Stock | Less than 180 Days [Member]
Preferred Stock, Convertible, Conversion Price Per Share		$ 1.00
Series C Convertible Preferred Stock | More than 180 Days [Member]
Preferred Stock, Convertible, Conversion Price Per Share		$ 0.90
Preferred Stock, Convertible, Conversion, Average of Trading Prices		75.00%
Preferred Stock, Convertible, Conversion, Threshold Days		5 days
Warrant
Warrants Not Settleable in Cash, Fair Value Disclosure			$ 10,779		$ 10,779
Expected term			2 years
Expected volatility			97.00%
Expected dividends			0.00%
Warrant | Minimum [Member]
Risk free interest rate			1.53%
Warrant | Maximum [Member]
Risk free interest rate			1.74%
General and Administrative Expense [Member]
Allocated Share-based Compensation Expense			$ 138,640	$ 94,864	$ 231,751	402,656
Common Stock [Member]
Sale of Stock, Number of Shares Issued in Transaction					1,361,059
Sale of Stock, Price Per Share			$ 0.66		$ 0.66
Gross cash proceeds from common stock					$ 898,300	384,000
Payments of Stock Issuance Costs					$ 0	31,600
Stock Issued During Period, Shares, Issued for Services					185,966
Stock Issued During Period, Value, Issued for Services					$ 133,660
Common Stock [Member] | Cash [Member]
Payments of Stock Issuance Costs						$ 25,000
Common Stock [Member] | Series C Convertible Preferred Stock
Gross cash proceeds from common stock			$ 186,000		$ 186,000
Shares, Issued			51,700		51,700
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price			$ 1.50
Proceeds from Issuance of Common Stock			$ 139,000
Common Stock [Member] | Series C Convertible Preferred Stock | Cash [Member]
Payments of Stock Issuance Costs			$ 17,000		$ 17,000

[1] Includes gross proceeds of $186,000, less cash issuance costs of $17,000.

[2] Includes gross proceeds of $384,000, less withheld issuance costs of $25,000 for the nine months ended September 30, 2018. There were no issuance costs for the nine months ended September 30, 2019.

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Summary of Significant Accounting Policies- condensed consolidated statements of operations: (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Total revenue	$ 526,722	$ 482,798	$ 777,984	$ 881,929
Contract with Customer, Liability, Revenue Recognized	0	0	0	0	$ 0
Product sales [Member]
Total revenue	464,772	$ 482,798	686,522	735,941
Contract services [Member]
Total revenue	$ 61,950		$ 91,462	$ 145,988

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018
Cash Flows From Operating Activities:
Net loss		$ (1,454,643)	$ (1,661,718)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		9,444	11,824
Change in fair value of accrued issuable equity		0	(24,175)
Write-down of inventory		90
Stock-based compensation		231,751	402,656
Changes in operating assets and liabilities:
Accounts receivable		(283,482)	(3,638)
Inventory		(34,141)
Prepaid expenses		(8,311)	23,733
Other current assets		(9,820)	(2,362)
Accounts payable		214,754
Accrued expenses and other current liabilities		158,223	216,267
Accrued expenses and other current liabilities - related party		(30,000)	(78,680)
Deferred revenue		0	51,158
Total Adjustments		248,508	596,783
Net Cash Used In Operating Activities		(1,206,135)	(1,064,935)
Cash Flows From Investing Activities:
Purchases of property and equipment		0	(15,476)
Net Cash Used In Investing Activities		0	(15,476)
Cash Flows From Financing Activities:
Proceeds from sale of Series C Convertible Preferred Stock and warrants [1]	[1]	169,000	0
Proceeds from sale of common stock [2]	[2]	898,300	359,000
Payment of deferred offering costs		(15,000)	0
Net Cash Provided By Financing Activities		1,052,300	359,000
Net Decrease In Cash		(153,835)	(721,411)
Cash - Beginning of Period		229,896	895,761
Cash - End of Period		76,061	174,350
Cash paid during the period for:
Interest		446	646
Income taxes		0	2,400
Non-cash investing and financing activities:
Debt Issuance Costs Incurred During Noncash or Partial Noncash Transaction		0	6,600
Accrual of deferred offering costs		15,000	0
Common stock issued upon conversion of Series B Convertible Preferred Stock		82	0
Forgiveness of accrued expenses by related party		$ 35,000	$ 0

[1] Includes gross proceeds of $186,000, less cash issuance costs of $17,000.

[2] Includes gross proceeds of $384,000, less withheld issuance costs of $25,000 for the nine months ended September 30, 2018. There were no issuance costs for the nine months ended September 30, 2019.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
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	81,071,831	78,706,256
Common Stock, Shares Outstanding	81,071,831	78,706,256
Series A Preferred Stock [Member]
Preferred Stock, Shares Authorized	1,000,000	1,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Series B Preferred Stock [Member]
Preferred Stock, Shares Authorized	31,000	31,000
Preferred Stock, Shares Issued	14,487	30,858
Preferred Stock, Shares Outstanding	14,487	30,858
Series C Preferred Stock [Member]
Preferred Stock, Shares Authorized	400	400
Preferred Stock, Shares Issued	20.68	0
Preferred Stock, Shares Outstanding	20.68	0

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) (Parenthetical)	9 Months Ended
	Sep. 30, 2018 USD ($)
Payments of Stock Issuance Costs	$ 0
Common Stock [Member]
Gross Proceeds From Issuance Of Common Stock	384,000
Payments of Stock Issuance Costs	31,600
Cash [Member] | Common Stock [Member]
Payments of Stock Issuance Costs	25,000
Non Cash [Member] | Common Stock [Member]
Payments of Stock Issuance Costs	$ 6,600

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Current Assets:
Cash	$ 76,061	$ 229,896
Accounts receivable	395,706	112,224
Inventory	43,645	9,594
Prepaid expenses	35,344	27,033
Other current assets	37,389	27,569
Total Current Assets	588,145	406,316
Property and equipment, net	35,347	44,791
Total Assets	623,492	451,107
Current Liabilities:
Accounts payable	332,749	117,995
Accrued expenses and other current liabilities	547,553	374,330
Accrued expenses and other current liabilities - related party	18,919	83,919
Total Current Liabilities	899,221	576,244
Commitments and contingencies (See Note 8)
Stockholders' Deficiency:
Common stock, $0.0001 par value, 500,000,000 shares authorized; 81,071,831 and 78,706,256 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	8,107	7,871
Additional paid-in capital	7,587,365	6,283,548
Accumulated deficit	(7,871,202)	(6,416,559)
Total Stockholders' Deficiency	(275,729)	(125,137)
Total Liabilities and Stockholders' Deficiency	623,492	451,107
Series A Preferred Stock [Member]
Stockholders' Deficiency:
Preferred stock	0	0
Series B Convertible Preferred Stock
Stockholders' Deficiency:
Total Stockholders' Deficiency	1	3
Series B Preferred Stock [Member]
Stockholders' Deficiency:
Preferred stock	1	3
Series C Preferred Stock [Member]
Stockholders' Deficiency:
Preferred stock	$ 0	$ 0

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Leases (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)
Leases
Number of Operating Leases	2		2
Operating Lease, Weighted Average Remaining Lease Term	1 year		1 year
Operating Lease, Expense	$ 41,281	$ 40,373	$ 121,769	$ 87,039

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Summary of Significant Accounting Policies - weighted average dilutive common shares (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,532,850	0	1,532,850	0
Series B Convertible Preferred Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	724,350	0	724,350	0
Series C Convertible Preferred Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	206,800	0	206,800	0
Options
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	400,000	0	400,000	0
Warrant
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	201,700	0	201,700	0

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Leases

9 Months Ended

Sep. 30, 2019

Leases

Leases

Note 7    Leases

The Company has two operating leases for real estate which have remaining terms that are less than one year. The Company elected not to recognize short-term leases on the balance sheet and all costs were recognized as selling, general and administrative expenses on the condensed consolidated statements of operations. For the three and nine months ended September 30, 2019, operating lease expense was $41,281 and $121,769, respectively. For the three and nine months ended September 30, 2018, operating lease expense was $40,373 and $87,039, respectively. As of September 30, 2019, the Company does not have any financing leases.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Summary of Significant Accounting Policies.

Summary of Significant Accounting Policies

Note 3    Summary of Significant Accounting Policies

Since the date of the Annual Report on Form 10‑K for the year ended December 31, 2018, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.

Concentrations

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. A significant portion of the Company’s cash is held at one major financial institution. The Company has not experienced any losses in such accounts. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. There were no uninsured cash balances as of September 30, 2019 and December 31, 2018.

Customer concentrations are as follows:

	Revenues								Accounts Receivable
	For the Three Months Ended				For the Nine Months Ended				As of		As of
	September 30,				September 30,				September 30, 2019		December 31, 2018
	2019		2018		2019		2018
Customer A	67	%	92	%	46	%	64	%	90	%	63	%
Customer B	14	%	*		10	%	*		*		*
Customer C	*		*		15	%	*		*		*
Customer D	*		*		*		17	%	*		*
Customer E	*		*		*		12	%	*		*
Customer F	*		*		*		*		*		37	%
Total	82	%	92	%	71	%	93	%	90	%	100	%

*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.

Revenue Recognition

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

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

· Step 1: Identify the contract with the customer;

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

· Step 3: Determine the transaction price;

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

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

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

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

· Contract services – Revenue is recognized at the point in time that the Company satisfies its performance obligation under the contract, which is generally at the time it delivers a report to the customer.

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

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Product sales	$	464,772	$	482,798	$	686,522	$	735,941
Contract services		61,950		—		91,462		145,988
Total revenue	$	526,722	$	482,798	$	777,984	$	881,929

As of September 30, 2019 and December 31, 2018, the Company did not have any contract assets or contract liabilities from contracts with customers. The contract liabilities represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract. During the three and nine months ended September 30, 2019 and 2018, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares of non-vested restricted stock, if not anti-dilutive.

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

	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
Series B Convertible Preferred Stock	724,350	—	724,350	—
Series C Convertible Preferred Stock	206,800	—	206,800	—
Options	400,000	—	400,000	—
Warrants	201,700	—	201,700	—
Total	1,532,850	—	1,532,850	—

Operating Leases

The Company leases properties under operating leases. For leases in effect upon adoption of Accounting Standards Update (“ASU”) 2016‑02, “Leases (Topic 842)” at January 1, 2019 and for any leases commencing thereafter, the Company recognizes a liability to make lease payments, the “lease liability”, and an asset representing the right to use the underlying asset during the lease term, the “right-of-use asset”. The lease liability is measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate. The right-of-use asset is measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset. Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset.

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

Recently Issued Accounting Pronouncements

In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update)" ("ASU 2019-07"). ASU 2019-07 aligns the guidance in various SEC sections of the Codification with the requirements of certain SEC final rules. ASU 2019-07 is effective immediately. The adoption of ASU 2019-07 did not have a material impact on the Company's unaudited condensed consolidated financial statements.

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Accrued Expenses and Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Accrued Expenses and Other Current Liabilities

Schedule of accrued expenses and other current liabilities

As of September 30, 2019 and December 31, 2018, accrued expenses and other current liabilities consisted of the following:

	September 30,		December 31,
	2019		2018
	(unaudited)
Payroll and vacation	$	459,259	$	252,043
Legal and professional fees		45,500		47,502
Travel expenses		20,812		48,248
Payroll and income tax payable		7,818		12,678
Research and development expenses		—		2,850
Credit card payable		4,835		4,586
Accrued issuable equity		—		3,960
Rent		176		176
Other		9,153		2,287
Total accrued expenses and other current liabilities	$	547,553	$	374,330