Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition of KULR Technology Group, Inc. ("KULR") and its wholly-owned subsidiary, KULR Technology Corporation ("KTC") (collectively referred to as "KULR" or the "Company") as of September 30, 2026 and for the three and nine months ended September 30, 2026 and 2025 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Quarterly Report. References in this Management's Discussion and Analysis of Financial Condition and Results of Operations to "us", "we", "our" and similar terms refer to the Company. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking, including statements in connection with KULR's discussions related to its October 23, 2026 petition filed in the Court of Chancery of the State of Delaware and its November 2026 workforce reduction. 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 Part II, Item 1A. Risk Factors of this Quarterly Report and in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 and other factors that we may not know. Except as described in Part II, Item 1A of this Quarterly Report, 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 31, 2026, unless disclosed elsewhere in this Quarterly Report.

Overview

KULR designs and builds advanced battery systems for autonomous platforms, digital infrastructure, e-mobility and space - sold as a product or delivered as a service subscription. The Company addresses two primary constraints in electrification: thermal management and safety. As energy and power density increase across aerospace, autonomous machines, digital infrastructure and industrial applications, managing heat generation, current density, and propagation risk becomes essential to system reliability and survivability.

KULR is establishing a fully integrated battery energy storage system design and production infrastructure in Houston, Texas. KULR brings battery pack design, prototyping, testing, certification, and manufacturing, as well as battery management system software and electronics design capabilities together under one roof. This full-stack approach enables faster development cycles and rapid transition from prototype to cost-effective volume production. The facility is designed to build high-power and high-energy battery packs that require advanced thermal, mechanical, and safety engineering. With domestic supply chain alignment and scalable production capacity, KULR is positioning itself as a leading manufacturer of advanced battery packs for mission-critical and high-performance applications in the United States.

KULR VIBE is a vibration-reduction technology designed to improve performance and reliability in high-speed and rotor-driven systems. Derived from vibration management solutions used in defense helicopters for over 20 years, it addresses excess vibration that reduces efficiency, increases mechanical wear, and shortens vehicle lifespan. KULR VIBE enables motors, rotating assemblies, and sensitive electronics to operate more smoothly and efficiently across a range of applications, including helicopters, drones, performance vehicles, wind turbines, and other electric and autonomous systems.

The Company strives to position itself as an energy-systems platform for "physical AI," prioritizing product revenue growth, gross margin improvement, and cost discipline across its target markets, which include space and defense, the low-altitude drone economy, AI data center backup power, Energy-as-a-Service for critical infrastructure, and robotics.

Recent Developments

Bitcoin Sales

During the three months ended September 30, 2026, we sold all of our Bitcoin ("BTC"). We sold an aggregate of 1,099.09 BTC for net proceeds of approximately $80.1 million. We used approximately $20.0 million of the proceeds to repay the outstanding principal balance under our Master Loan Agreement with Coinbase Credit, Inc., dated as of July 1, 2025, which resulted in the automatic release of the 565 BTC previously held as collateral. We expect to use the remaining proceeds to fund our planned operations and growth initiatives. As of September 30, 2026, we held no digital assets, no BTC was pledged as collateral, and no amounts remained outstanding under the Master Loan Agreement. See the section "Discontinued Bitcoin Treasury Strategy" below for further information regarding the discontinuation of our digital asset treasury strategy and the section "Exit from Bitcoin Mining" below for further information regarding the exit from our BTC mining operations.

Exit from Bitcoin Mining

Effective July 2026, we exited our BTC mining business. Our machine lease agreement with Pow.re expired by its terms on July 30, 2026 and was not renewed, and on August 4, 2026, we entered into an agreement with Soluna SW, LLC to terminate our remaining machine lease agreement, effective July 31, 2026, in exchange for an early termination fee of $0.15 million. We no longer operate under any machine lease or mining services agreements. The exit represents a strategic shift that has a major effect on our operations and financial results. Accordingly, the results of our former BTC mining business are presented as discontinued operations for all periods presented, and prior-period amounts have been recast to conform to the current-period presentation. We now operate as a single reportable segment, the Energy Management Platform. See Note 3 - Discontinued Operations to the condensed consolidated financial statements for further information.

At the Market Offering

The Company has an at-the-market offering program ("ATM") pursuant to an ATM arrangement with Cantor Fitzgerald and Craig-Hallum, under which the Company previously announced it had decided to pause transactions through September 30, 2026. During the three and nine months ended September 30, 2026, the Company did not issue any shares of common stock pursuant to the ATM, and on September 30, 2026, the Company announced that it had extended the pause of ATM transactions through December 31, 2026.

Workforce Reduction

In November 2026, as part of its effort to simplify its engineering design process and adopt an AI-first operating model, the Company is conducting a reduction in force of its personnel. The Company expects to generate approximately $4 million in annualized cost savings upon full implementation. The restructuring is expected to be substantially completed by the end of 2026, with the anticipated savings supporting a lower operating expense base entering 2027. The Company expects to incur severance and related costs ranging from $0.35 million to $0.65 million in connection with the reduction, substantially all of which will be recognized in the fourth quarter of 2026. Actual savings, costs and timing may differ from current estimates.

Strategic Initiatives

KULR ONE

Through our KULR ONE battery platform, we design and manufacture high-power battery systems, and in 2027 we intend to focus our product development and commercial resources on two markets: autonomous systems and power infrastructure.

In autonomous systems, our KULR ONE Air products address uncrewed aerial vehicles (drones), while additional KULR ONE architectures serve uncrewed underwater vehicles and our KULR ONE Guardian platform supports directed energy systems, including direct-emit lasers. Each of these applications requires high power density, thermal management and safety engineering under demanding operating conditions.

In power infrastructure, our KULR ONE Max battery energy storage system ("BESS") units are designed for distributed energy storage, including power-as-a-service energy storage deployments, where we recorded our first KULR ONE Max module revenue during the three months ended September 30, 2026. We will continue to serve select existing space and defense customers with our KULR ONE Space products and custom battery assemblies, while concentrating new program activity on the autonomous systems and power infrastructure markets described above.

A central element of this strategy is building a complete battery supply chain intended to comply with the domestic-sourcing requirements of the National Defense Authorization Act ("NDAA") that apply to U.S. defense drone and other defense programs, including restrictions on battery cells and components from covered foreign entities of concern (FEOC). To that end, we have established partnerships with battery cell manufacturers to source cells intended to meet these requirements, we have invested in the development of our own battery management systems ("BMS") and battery chargers so that the electronics in a KULR ONE battery system are designed and sourced under our control, and we perform final assembly, testing and certification. We believe that a compliant cell supply, proprietary BMS and charger electronics and domestic production together position us to supply NDAA-compliant battery solutions to autonomous systems customers as their programs ramp in 2027. These investments are reflected in our research and development expenses, our inventory and inventory deposits and our vendor concentration for the three months ended September 30, 2026, and their success depends on, among other things, continued cell supply, customer qualification of our products and the timing of customer programs.

KULR ONE Studio Designer Pro

Designer Pro is an internally developed, AI-driven computer-aided design and engineering platform that forms part of KULR ONE Studio, the Company's internal engineering software suite. The platform comprises two environments operating on a single design model. Designer Pro Mechanical provides parametric solid modeling, a battery design engine that generates cell arrangement, busbars and interconnects, sense harness, enclosure, shrink-wrap and rating labels from a stated requirement, and integrated thermal, structural, vibration, shock, computational fluid dynamics and thermal-runaway analysis. Designer Pro Electrical provides printed circuit board layout with design-rule checking against the board manufacturer's capabilities, battery management system boards with generated firmware, electrical and thermal board studies, and fabrication packages. Every design is held as a record in a Design Library containing its model, deliverables and revision history. In use, a KULR engineer states the requirement and reviews and signs each release, while an AI agent operates the platform to produce the design and its build package, which typically includes the three-dimensional model, assembly and component drawings, flat-pattern cutting files, a work instruction, a rating label, a bill of materials and a specification document. A total battery design, from scratch and fully released can now be condensed to as little as 4 hours depending on complexity.

The Company will use Designer Pro to shorten the design cycle for battery packs and associated electronics from weeks to hours, to maintain a library of configured pack designs that can be matched to customer requirements, and to generate complete and internally consistent manufacturing documentation. Applicable standards, including UN 38.3, IEC 62133 and UL 2580, are encoded as design rules that are checked on every build; these rules support, but do not replace, physical testing, customer qualification and first-article builds, and the Company's engineering release and quality processes will be unchanged. In October 2026, the Company began shipping battery packs designed with Designer Pro to customers within its KULR ONE AIR product line. The Company believes the platform reduces engineering cost per design and increases the speed and completeness of its responses to customer requests, although realized benefits will depend on order volume, product mix and the results of ongoing validation of the platform's electrical and pouch-cell capabilities.

KULR Intelligent Operating Systems (KIOS)

During the quarter, we continued to develop and deploy KIOS (KULR Intelligent Operating System), a proprietary enterprise grade software platform designed and built internally by the Company. KIOS began as an engineering part-numbering tool and has grown into the central system through which we run our day-to-day operations. Hosted on sovereign Company-controlled infrastructure with a single database, KIOS brings together functions that companies of our size typically spread across separate licensed applications: new product introduction (NPI), program management and scheduling; product lifecycle management (including part numbering, engineering and manufacturing bills of materials, design-file vaulting and controlled document release); quality management aligned to the AS9100 aerospace standard, including document control, change management, calibration, audits and certificates of conformance; manufacturing work orders, electronic travelers and shop-floor stations; purchasing, supplier management and shipping; sales pipeline and customer management; budgeting; and human resources administration. Employees use KIOS through a web browser or a desktop application, and the system records approvals, signatures, and revision history electronically. Because these areas share common data, a part, document, or purchase is recorded once and can be traced from design through procurement, production, inspection and shipment. We believe this supports the traceability our commercial, aerospace, defense, and government customers require.

KIOS also includes a governed artificial intelligence (AI) layer. AI agents built on commercially available large language models operate within KIOS as service users. They are subject to the same role-based permissions, approval workflows, and audit logging as employees. Within those limits, agents can draft and proofread documents, review engineering drawings, answer questions using Company records, prepare reports, and respond to internal requests submitted by email or chat. The platform includes tiered role-based access controls, multi-factor and step-up authentication for sensitive areas, encrypted storage for legal and personnel records, export-control (ITAR) designations for restricted content, and IT general controls evidence reporting. We believe that owning this platform, rather than licensing multiple third-party systems, gives us greater control over our data, lets us adapt workflows quickly as the business changes, and may reduce software licensing and integration costs over time. Internally developed systems also carry risks. These include reliance on a limited number of personnel with knowledge of the platform, the need for continued investment in maintenance and cybersecurity, and the possibility that the system does not perform as expected. We continue to evaluate extending KIOS to additional processes, including financial reporting, subject to SOX, SOC 2, and our evaluation of internal control over financial reporting.

Results of Operations

Three and Nine Months Ended September 30, 2026, Compared With Three and Nine Months Ended September 30, 2025

Unless otherwise noted, the following discussion of our results of operations relates to our continuing operations. The results of our former BTC mining business are presented as discontinued operations, and amounts for the three and nine months ended September 30, 2025 have been recast to exclude them. The results of discontinued operations are discussed separately below under "Discontinued Operations."

Revenue

​

​

For the three months ended September 30, 2026 and 2025, we generated $7.4 million and $2.5 million, respectively, of revenues from continuing operations from 26 and 25 customers in each period. For the nine months ended September 30, 2026 and 2025, we generated $12.2 million and $7.2 million, respectively, of revenues from continuing operations from 49 and 50 customers in each period.

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

Product Revenue

Product sales consist of battery systems delivered through our KULR ONE platform - including space, defense and aviation battery assemblies ("KULR ONE products"), battery modules for battery energy storage system BESS applications, battery management system hardware and lithium iron phosphate ("LFP") battery packs - together with fiber thermal interface ("FTI") products, thermal runaway shields ("TRS"), internal short circuit ("ISC") and screened cells and devices, and battery storage and transport products, including cases, sleeves and kits ("Safe Cases").

We had 22 product sales customers during the three months ended September 30, 2026, compared with 18 during the three months ended September 30, 2025. Product sales for the period were driven principally by two large orders from new customers based in Japan, which together accounted for approximately $5.7 million, or 88%, of product sales for the period. Each order consisted of KULR ONE K1M battery modules for BESS programs, with the orders totaling approximately $3.4 million and $2.3 million. The increase in product sales compared to the prior year period was primarily due to these two orders, partially offset by lower sales to certain existing aerospace and defense customers and the non-recurrence of prior year sales of atmospheric water generators and exoskeleton products, which we no longer sell.

We had 41 product sales customers during the nine months ended September 30, 2026, compared with 36 during the nine months ended September 30, 2025. Product sales for the period were driven principally by the two K1M BESS orders from new customers based in Japan, which accounted for approximately $5.7 million, or 61%, of product sales, together with an FTI program of approximately $1.1 million delivered to a new defense customer, LFP battery packs sold to a new customer and increased sales of custom lithium-ion battery assemblies to an existing defense customer. The increase compared to the prior year period was primarily due to these orders, partially offset by lower sales to our largest space customer of approximately $1.2 million, the non-recurrence of prior year sales of atmospheric water generators and exoskeleton products, which we no longer sell, and lower sales of phase change material ("PCM") heatsinks, Safe Cases and other components.

Service Revenue

Contract services consist of battery engineering and design services, including non-recurring engineering ("NRE"), battery pack and battery management system development, and engineering consulting; cell screening and characterization; pack-level qualification and abuse testing, including calorimetry, propagation resistance testing and impingement zone mapping; and KULR VIBE vibration services.

We had 6 contract services customers during the three months ended September 30, 2026, compared with 13 during the three months ended September 30, 2025. Contract services revenue for the 2026 period was driven principally by battery management system development services, recognized over time, for our largest services customer and calorimetry testing services for our second largest services customer, which together accounted for approximately $0.2 million, or 76%, of contract services revenue. The decrease compared to the prior year period was primarily attributable to approximately $0.3 million of calorimetry, cell testing and propagation resistance testing services performed in the 2025 period that did not recur and lower KULR VIBE services volume, partially offset by the battery management system development services and services performed for other new customers.

We had 16 contract services customers during the nine months ended September 30, 2026, compared with 30 during the nine months ended September 30, 2025. Contract services revenue for the 2026 period was driven principally by battery management system development services, including NRE, recognized over time for our largest services customer and engineering services for our second largest services customer, which together accounted for approximately $0.6 million, or 49%, of contract services revenue. The decrease compared to the prior year period was primarily attributable to the completion of a large government-funded engineering program and three other significant engineering services contracts in progress during 2025, partially offset by services performed for new customers and increased calorimetry testing services for an existing customer.

Grant Revenue

Grant revenue during the three and nine months ended September 30, 2026 was $681,623 and $1,618,811, respectively, compared with $501,032 for each of the three and nine months ended September 30, 2025, related to the reimbursement of qualifying costs. Grant revenue consists of an award from the Texas Space Commission to perform research and development of cold-temperature lithium-ion battery solutions for the next generation of Lunar and Martian missions which is part of our ongoing major or central activities. The contract award was executed on September 23, 2025. Revenue is earned on the award once specific grant conditions have been met, which is generally when the costs relevant to the condition have been incurred by the Company. The increase in grant revenue for both the three and nine months ended September 30, 2026 reflects a full period of activity under the award, which was executed near the end of the three months ended September 30, 2025. Grant revenue for the 2026 periods consisted of reimbursable costs incurred under the award for work performed on the program.

​

Cost of Revenue, Gross Profit and Gross Profit Margin

Cost of revenue consists of the cost of our products as well as labor expenses directly related to product sales or contract services. The following tables present the gross profit and gross profit margin by revenue type for the periods presented.

​

​

​

​

Revenue mix plays an important part in our reported margins for any period. Because we are introducing new revenue streams at an early stage in our development cycle, the margins earned can vary significantly between periods, customers, products and services due to the learning process, customer negotiating strengths, and product mix.

Product Revenue Margins

For the three months ended September 30, 2026, the gross profit margin on product sales decreased compared to the prior year period, driven primarily by the low margin on the two initial K1M BESS module orders and gross losses on several custom battery assembly programs where direct labor and other production costs exceeded contract value. The prior year period benefited from high-margin sales of KULR ONE Space battery assemblies, partially offset by approximately $0.4 million of exoskeleton product costs for which no revenue was recognized because collectability from the customer was not probable.

For the nine months ended September 30, 2026, the gross profit margin on product sales decreased compared to the prior year period, driven primarily by the low margin on the two initial K1M BESS module orders, gross losses on several custom battery assembly programs, including custom lithium-ion battery assemblies for an existing defense customer, where direct labor and other production costs exceeded contract value, low margins on LFP battery packs, and approximately $0.2 million of Caban-related transition services and facility costs. These decreases were partially offset by the higher-margin FTI program delivered during the nine months ended September 30, 2026. The prior year period benefited from high-margin sales of KULR ONE Space battery assemblies and Safe Cases.

Service Revenue Margins

For the three months ended September 30, 2026, the gross loss margin on contract services increased compared to the prior year period, driven primarily by lower contract services revenue, a gross loss on the battery management system development program for our largest contract services customer due to excess labor and material costs, and labor costs for rework and follow-on support provided to customers on completed projects, partially offset by lower outsourced labor and depreciation costs. Substantially all other contract services projects generated positive gross margins in both periods.

For the nine months ended September 30, 2026, the gross loss margin on contract services decreased compared to the prior year period, driven primarily by lower outsourced labor costs and fewer hours incurred on service contracts, partially offset by a gross loss of approximately $0.5 million on the battery management system development program for our largest contract services customer due to excess labor and material costs.

Grant Revenue Margins

Grant revenue, which represents a reimbursement of costs, reflected a full gross margin contribution. The related costs include $0.7 million and $1.6 million, respectively, for the three and nine months ended September 30, 2026 and are classified within research and development expenses. The reimbursable costs related to the $0.5 million of grant revenue for the three and nine months ended September 30, 2025 consisted of equipment purchases totaling $0.2 million, and R&D expenses totaling $0.3 million.

​

Research and Development

Research and development ("R&D") includes expenses incurred in connection with the design and development of battery systems for our KULR ONE platform, including battery management systems and chargers, which include costs of internal engineers, contract engineers and third-party engineering firms. R&D expenses consist of reimbursable and non-reimbursable expenses. Reimbursable R&D expenses are costs incurred pursuant to the Texas Space Commission award, which are reimbursed through grant revenue. Non-reimbursable R&D expenses consist of all other R&D costs not eligible for reimbursement under the Texas Space Commission award. R&D expenses are charged to operations as incurred. The following table presents the dollar and percentage variances in R&D expenses for the periods presented.

​

​

The increase in reimbursable R&D expenses for the three and nine months ended September 30, 2026, was primarily attributable to having three and nine months' worth of reimbursable expenses in 2026 versus one month of reimbursable expenses in 2025 due to the effective date of the grant in September 2025.

The increase in non-reimbursable R&D expenses for the three and nine months ended September 30, 2026 was primarily attributable to significant investment in three areas during the third quarter. First, we developed new battery programs and battery designs for autonomous platforms, including uncrewed aerial, uncrewed underwater and directed energy applications, which required additional internal and contract engineering resources to carry new configurations through design, build and qualification. Second, we continued our development program for our own battery charger and battery management system BMS products, which are designed to meet the sourcing requirements of the National Defense Authorization Act NDAA, including increased third-party engineering costs. Third, we incurred costs associated with bringing up our battery production lines in Texas for new KULR ONE battery configurations, including process development, first-article builds and qualification runs, which were charged to research and development as incurred.

We expect that our non-reimbursable R&D expenses will decrease beginning in the fourth quarter of 2026 and further in 2027. The production line bring-up activities and the new battery pack development programs that contributed to the increase in the third quarter are expected to be substantially completed during the fourth quarter of 2026, after which the related engineering, first-article and qualification costs will not recur at the same level. Our BMS and charger development programs are expected to be completed in early 2027, after which the related third-party engineering costs will not recur. We have also deployed KULR ONE Studio Designer Pro, an AI-based engineering design tool trained on our proprietary intellectual property, including more than 900 battery pack designs on file ranging from 1S to 72S configurations and characterization data for 34 cell types from nine cell vendors; we expect the tool, which is an all in one AI driven CAE and CAD platform, to reduce the engineering hours and outside services required to design and verify each new KULR ONE battery configuration. In addition, during the fourth quarter of 2026 we implemented a reduction in force intended to streamline our development process, lower our cost structure, shorten turnaround time on customer programs and concentrate our engineering resources on our strategic customer accounts. Although we expect to incur severance and related costs ranging from $0.35 million to $0.65 million in connection with the reduction, we expect to generate approximately $4 million in annualized cost savings upon full implementation. Reimbursable costs under the Texas Space Commission award will continue to be incurred and recognized as grant revenue as qualifying work is performed. The amount and timing of any decrease will depend on the number and complexity of R&D programs, the pace of qualification activities and the extent to which our design tools deliver the expected productivity improvements.

Selling, General, and Administrative

Selling, general and administrative expenses consisted primarily of stock-based compensation, marketing and advertising, salaries, payroll taxes and other benefits, Board member compensation, accounting and tax, consulting fees, travel and entertainment, rent expense, office expenses, and legal and professional fees. The following table presents the dollar and percentage variances in selling, general and administrative expenses for the periods presented.

​

​

The decrease in selling, general and administrative expenses for the three and nine months ended September 30, 2026 was primarily attributable to the conclusion of strategic investment and corporate development activities that drove costs higher during 2025, including a minority investment in an external company that did not recur during the three and nine months ended September 30, 2026. Accounting, legal, consulting, and other professional fees decreased as these activities wound down. Marketing, travel, insurance, and personnel-related expenses similarly reflect lower activity levels in the current period compared to the elevated investment and expansion efforts undertaken throughout 2025, partially offset by higher personnel costs associated with new hires and costs associated with our new facility.

Impairment Expense

There were no impairment expenses for the three and nine months ended September 30, 2026. For the three and nine months ended September 30, 2025, impairment expenses were $0 and $1.4 million, respectively, due to the write-off of equipment deposits.

Credit Losses

During the nine months ended September 30, 2026, we recorded a credit loss of $0.5 million on Auto-Vibe assets. There was no comparable charge for Auto-Vibe assets in the prior year period.

For the three months ended September 30, 2026, credit losses on accounts receivable were approximately $0.3 million, which related to a single customer and was determined based on a specific assessment of that customer's ability to pay. For the nine months ended September 30, 2026, credit losses on accounts receivable were approximately $1.6 million, which related to two customers and were determined based on specific assessments of each customer's ability to pay. For the three and nine months ended September 30, 2025, credit losses on accounts receivable were approximately $0.8 million, which related to a single customer and was determined based on a specific assessment of that customer's ability to pay.

Other Income (Expense)

The following table presents the dollar and percentage variances in other income (expense) for the periods presented.

​

​

The three and nine month aggregate variances primarily relate to the variance associated with the change in the fair value of digital assets, partially offset by the change in the impairment and credit loss charges.

​

Discontinued Operations

The following tables present the dollar and percentage variances in the results of discontinued operations for the three and nine months ended September 30, 2026 and 2025.

​

​

Loss from discontinued operations, net of tax, was $220,103 and $1,344,950 for the three and nine months ended September 30, 2026, respectively, compared with income from discontinued operations, net of tax, of $5,886 and a loss from discontinued operations, net of tax, of $169,351 for the three and nine months ended September 30, 2025, respectively. Discontinued operations consist entirely of our former BTC mining business, which we exited in July 2026.

Revenue from mining of digital assets was $0.2 million and $1.5 million for the three and nine months ended September 30, 2026, respectively, compared with $4.1 million and $5.5 million for the three and nine months ended September 30, 2025, respectively. The decrease was primarily due to fewer BTC earned, reflecting the expiration and termination of our machine lease agreements in July 2026, and a lower average fair value of BTC on the dates earned. We earned 3.12 and 35.73 BTC during the three months ended September 30, 2026 and 2025, respectively, and 20.35 and 49.95 BTC during the nine months ended September 30, 2026 and 2025, respectively, at an average fair value of approximately $64,003 and $114,357 per BTC for the three months ended September 30, 2026 and 2025, respectively, and $72,137 and $109,195 per BTC for the nine months ended September 30, 2026 and 2025, respectively. We earned no BTC from mining operations after July 2026.

Cost of revenue of discontinued operations, which consists of lease and non-lease costs incurred under our machine lease agreements, was $0.3 million and $2.4 million for the three and nine months ended September 30, 2026, respectively, compared with $3.9 million and $5.3 million for the three and nine months ended September 30, 2025, respectively. Mining revenue excludes BTC received from the lessors as compensation for machine downtime, which we record as a reduction of mining and lease costs. The aggregate fair value of BTC received as downtime compensation was $321,089 and $310,634 for the three months ended September 30, 2026 and 2025, respectively, and $339,790 and $631,160 for the nine months ended September 30, 2026 and 2025, respectively. The three months ended September 30, 2026 includes only one month of lease and hosting costs.

Selling, general and administrative expenses of discontinued operations were $0.15 million and $0.4 million for the three and nine months ended September 30, 2026, respectively. The three months ended September 30, 2026 consisted of the $0.15 million early termination fee paid under the Soluna termination agreement, and the nine months ended September 30, 2026 also included consultant costs incurred earlier in the year. Selling, general and administrative expenses of discontinued operations were $0.2 million and $0.3 million for the three and nine months ended September 30, 2025, respectively, and consisted of consultant costs.

No income tax benefit was recognized on the loss from discontinued operations due to the full valuation allowance on our deferred tax assets. We do not expect to incur further costs related to our former Bitcoin mining business.

Discontinued Bitcoin Treasury Strategy

In December 2024, we adopted BTC as our primary treasury reserve asset. Our strategy included acquiring and holding BTC using cash that exceeded our working capital requirements, and from time to time, subject to market conditions, issuing equity or debt securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase BTC. During the three months ended September 30, 2026, we discontinued our digital asset treasury strategy and exited our BTC mining operations in order to prioritize scaling our operating business, including KULR ONE and related products and services. We do not intend to acquire or hold BTC or other digital assets as treasury reserve assets in the future.

On May 7, 2026, our Board of Directors authorized management to sell digital assets as deemed necessary to fund operations and key business priorities in lieu of issuing equity. For the three and nine months ended September 30, 2026, we earned 3.12 and 20.35 BTC, respectively, from mining operations prior to the exit from those operations. During the three months ended September 30, 2026, we sold all of our BTC holdings. As of September 30, 2026, we held no BTC or other digital assets, no BTC was pledged as collateral, and we were no longer a party to any machine lease or mining services agreements.

The following table presents BTC activity during the nine months ended September 30, 2026:

​

Liquidity and Capital Resources

As of November 6, 2026 and September 30, 2026, we had unrestricted cash balances of $50.8 million and $54.5 million, respectively. As of September 30, 2026, we had working capital of $64.4 million. As of September 30, 2026, we held no BTC.

For the nine months ended September 30, 2026 and 2025, net cash used in operating activities from continuing operations was $32.3 million and $22.6 million, respectively. Our net cash used in operations for the nine months ended September 30, 2026, was primarily attributable to our loss from continuing operations of $45.2 million, adjusted for non-cash expenses in the aggregate amount of $22.6 million, plus $9.7 million of net cash used to fund changes in the levels of operating assets and liabilities. Our net cash used in operations for the nine months ended September 30, 2025, was primarily attributable to our loss from continuing operations of $17.5 million, adjusted for non-cash gains in the aggregate amount of $1.7 million, plus $3.4 million of net cash used to fund changes in the levels of operating assets and liabilities.

For the nine months ended September 30, 2026, net cash provided by investing activities was $77.0 million, compared to net cash used in investing activities of $85.5 million for the nine months ended September 30, 2025. Net cash provided by investing activities during the nine months ended September 30, 2026, was primarily related to proceeds from the sale of digital assets, net, of $80.1 million, partially offset by equipment deposits of $1.6 million, purchases of property and equipment of $1.0 million, and the payment of a holdback amount related to an asset acquisition of $0.6 million. Net cash used in investing activities during the nine months ended September 30, 2025, was primarily related to investments in digital assets of $79.7 million, investment in preferred stock of $3.3 million, issuance of a loan receivable of $1.8 million, purchases of property and equipment of $0.6 million, and deposits paid for purchases of property and equipment of $0.1 million.

For the nine months ended September 30, 2026, net cash used in financing activities was $0.4 million, compared to net cash provided by financing activities of $107.0 million for the nine months ended September 30, 2025. Net cash used in financing activities during the nine months ended September 30, 2026, was due to payment of employee tax withholding on stock-based compensation of $0.4 million, as proceeds from our loan payable of $20.0 million were fully offset by repayments of our loan payable of $20.0 million. Net cash provided by financing activities during the nine months ended September 30, 2025, was primarily due to proceeds from ATM equity financings totaling $107.3 million and proceeds from our loan payable of $8.0 million, partially offset by loan payable repayments of $4.2 million, issuance costs on ATM equity financing of $2.7 million, repayments of notes payable of $0.6 million, payments for deferred financing costs of $0.6 million, and payment of employee tax withholding on stock-based compensation of $0.3 million.

Cash flows from discontinued operations are presented separately in the condensed consolidated statements of cash flows. Net cash used in operating activities of discontinued operations was $2.8 million and $8.1 million for the nine months ended September 30, 2026 and 2025, respectively, which primarily reflects cash costs related to the BTC mining leases and BTC consulting services, including amounts that were required to be prepaid in connection with those leases, which were higher in the 2025 nine-month period. Because all revenue related to BTC mining is received in the form of BTC, which is non-cash, the BTC revenue has no impact on cash flows from discontinued operations.

Future cash requirements for our September 30, 2026 current liabilities include approximately $5.0 million for accounts payable and accrued expenses, and $0.6 million for future payments under our operating leases to be made within the next year. Future cash requirements for our long-term liabilities include $2.3 million for future payments under operating leases. Effective July 31, 2026, we terminated our digital asset mining services agreement and we were relieved of future commitments of $2.0 million in exchange for an early termination fee of $0.15 million.

Because borrowings under the Coinbase Master Loan Agreement were collateralized by our BTC, we have no borrowing availability under the facility following the sale of all of our BTC. Our ATM transactions remain paused through December 31, 2026.

Our primary source of liquidity has historically been cash generated from equity and debt offerings and, most recently, proceeds from the sale of our BTC. Because we no longer hold digital assets, BTC is no longer available to us as a source of liquidity. We have a history of recurring net losses and recurring use of cash in operations. Under ASC Subtopic 205-40, Presentation of Financial Statements-Going Concern, we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations as they become due within one year after the date that the financial statements are issued. As of September 30, 2026, we believe that our cash on hand and working capital balances will be sufficient to meet our obligations as they become due over the next twelve months from the date these condensed consolidated financial statements were issued. The Company is exploring its capital raising options, including the possible resumption of ATM transactions.

Off-Balance Sheet Arrangements

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

Critical Accounting Estimates

We prepare our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our condensed consolidated financial statements that require estimation but are not deemed critical, as defined above. There have been no material changes to our critical accounting estimates from those described in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 31, 2026.

​