KULR Technology Group, Inc. — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021, and was filed March 28, 2022. It does not provide separate fourth-quarter results. KULR develops thermal-management and battery-safety technologies for aerospace and defense, energy storage, electric mobility, battery recycling, and computing applications.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $2.413 million | $624,000 |
| Gross profit / margin | $1.311 million / 54% | $436,000 / 70% |
| Research and development | $1.662 million | $290,000 |
| Selling, general and administrative | $11.162 million | $2.487 million |
| Operating loss | $(11.513) million | $(2.340) million |
| Net loss | $(11.911) million | $(2.850) million |
| Net loss attributable to common stockholders | $(14.535) million; $(0.15) per share | $(2.852) million; $(0.03) per share |
| Cash used in operating activities | $(6.806) million | $(2.730) million |
| Cash used in investing activities | $(2.737) million | $(46,000) |
Revenue increased 287%, with product sales of $1.495 million and contract services of $918,000. Three customers accounted for 84% of annual revenue. The $2.624 million deemed dividend on Series D preferred stock increased the loss attributable to common stockholders but did not increase reported net loss.
At year-end, cash was $14.863 million, working capital $13.303 million, total assets $19.231 million, and stockholders’ equity $16.365 million. Total liabilities were $2.866 million. Notes payable were fully repaid; the balance sheet still included a $155,226 PPP loan payable and $670,277 in operating lease liabilities. Financing activities provided $15.526 million, principally from warrant exercises ($11.719 million) and the Series D financing ($6.5 million). Cash at one financial institution exceeded FDIC insurance limits by $14.363 million.
Material changes and unusual items
- Gross margin declined from 70% to 54%, primarily because two 2021 service contracts had margins of 15% and 13%.
- Operating expenses rose substantially, including $4.2 million of stock-based compensation. SG&A growth also reflected hiring, marketing, professional services, and facility costs.
- The company issued 6.793 million shares through warrant exercises and received $11.719 million. Series D preferred shares issued for $6.5 million were converted into common shares; the financing also included a commitment-fee issuance of 1.3 million shares and warrants.
- A December 2021 phishing and fraudulent-wire incident resulted in an approximately $138,000 loss. The company reported that it had not recovered the funds as of the filing.
Outlook, risks, and contingencies
Management stated that KULR had not achieved profitability and expected continued operating losses and cash outflows. It believed available working capital would fund anticipated cash use for at least 12 months after the financial statements’ issuance, while acknowledging that future financing might be needed. No quantified revenue, earnings, or cash-flow guidance was provided.
Management is pursuing a shift from component sales toward design, testing, and system-level battery-safety solutions, and reported investments in a larger facility and automated testing equipment. The company expected its battery-cell testing system to be installed and validated in the third quarter of 2022. Commercialization remains uncertain: the filing cites limited scaled-manufacturing experience, customer sales cycles of one to five years, and reliance on a small number of customers. COVID-19, supply-chain disruption, competition, financing needs, and geopolitical developments are also identified risks.
Disclosure controls and internal control over financial reporting were deemed ineffective at December 31, 2021 because of a material weakness in review and approval controls for electronic payments. Management described remediation plans, including improved payment workflows and an enterprise-software upgrade. The independent auditor issued an unqualified opinion on the financial statements but did not audit internal-control effectiveness. The company reported no current material legal proceedings.
Important facts for investors to verify
- Whether revenue growth continues and customer concentration declines; three customers generated 84% of 2021 revenue.
- Whether the company can improve gross margins and scale production without further sharp increases in expenses.
- Cash burn, remaining PPP obligations, committed spending, and the timing or terms of any additional financing.
- Whether payment-control remediation is implemented and the approximately $138,000 fraud loss is recovered or otherwise resolved.
- Progress and commercial adoption of the automated testing platform and other products; the filing provides no separate Q4 results or quantified forward guidance.