Note 54    Accrued Expenses and Other Current Liabilities

As of March 31, 20182019 and December 31, 2017,2018, accrued expenses and other current liabilities consisted of the following:

The Company has agreed to issue an aggregate of 25,000 shares of common stock for legal and consulting fees. See Note 6 – Stockholders’ Deficiency – Stock-Based Compensation for details of related expense recognized. As of March 31, 2019, the shares had not been issued and, as a result, $15,840 of accrued issuable equity at fair value is included within accrued expenses and other current liabilities.

Note 65    Related Party Transactions

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities – related parties consist of: (i)of a liability of $225,844$68,919 and $254,344$83,919 as of March 31, 20182019 and December 31, 2017,2018, 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; and (ii) a liability of $18,563 and $28,253 as of March 31, 2018 and December 31, 2017, respectively, to the Company’s Chief Executive Officer (“CEO”)solutions in connection with Company-related travel and entertain expenses incurred by the CEO.prior periods.

Note 6    Stockholders' Deficiency

Consulting AgreementsCommon Stock

During the three months ended March 31, 2018 and 2017,2019, the Company recordedsold an aggregate expense of $0 and $39,000 (of which, $19,500 and $19,500 was included within research and development expenses and selling, general and administrative expenses, respectively), respectively, related234,849 shares of common stock at $0.66 per share to consulting agreements with its CEO and CTO, which were terminated in connection with the closingaccredited investors for aggregate gross proceeds of the Share Exchange Agreement on June 19, 2017.

During the periods ended March 31, 2018 and 2017, the Company recorded research and development expense of $0 and $111,615 related to consulting services provided to the Company by ESLI associated with the development of the Company’s CFV thermal management solutions. ESLI is controlled by the Company’s CTO.

Note 7 Stockholders' Equity

Reverse Recapitalization

See Note 1 - Business Organization, Nature of Operations and Basis of Presentation – Reverse Recapitalization for details of the Share Exchange.$155,000.

Stock-Based Compensation

During the three months ended March 31, 20182019 and 2017,2018, the Company recognized stock-based compensation expense of $182,957$47,940 (which includes the issuance of 25,000 shares of immediately-vested common stock for legal fees) and $12,011,$182,957, respectively, related to restricted common stock awardsand stock options which isare included within general and administrative expenses on the condensed consolidated statements of operations. As of March 31, 2018,2019, there was $94,867$83,095 of unrecognized stock-based compensation expense of which, $94,867 was subject to re-measurement, that will be recognized over the weighted average remaining vesting period of 0.12.75 years.

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 months ended March 31, 2019 and 2018, operating lease expense was $40,385 and $15,161, respectively. As of March 31, 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. As of the date of filing, there had been no sales of the licensed products, such that no royalties had been earned.

Note 9    Subsequent Events

ThereCommon Stock

On April 12, 2019, the Company sold an aggregate of 717,120 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $473,300.

On April 30, 2019, the Company conducted a closing for the sale of an aggregate of 409,090 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $270,000, which represented the final closing of its private placement offering of its common stock.

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”). Although no assurances can be made that the Acquisition will be completed, upon such Acquisition, TECHTOM would become a wholly-owned subsidiary of the Company.

Pursuant to the Purchase Agreement, the Company agreed to pay the Sellers, against delivery of all Ownership and Claims, the following aggregate acquisition price: (i) $1,700,000 cash consideration (the “Cash Consideration”); and (ii) one hundred (100) shares of the Company’s Series C Convertible Preferred Stock (“Series C Preferred”), which class of Series C Preferred is to be designated prior to the closing of the Acquisition. It is contemplated that the Series C Preferred will have, beenamong others, the following rights, preferences and limitation: (i) a stated value of $10,000 per share; (ii) no events that have occurred subsequentright to receive dividends; (iii) the right to convert each share into twenty thousand shares of the Company’s common stock, which right is subject to a 4.99% beneficial ownership limitation; and (iv) the right to vote with the Company’s shareholders on an as-converted basis. The rights and preferences of the Series C Preferred are set forth in further detail in the form of Certificate of Designation attached as an exhibit to the Purchase Agreement and which description is qualified in its entirety to such exhibit, which is incorporated herein by reference.

Note 10  Revision of Financial Statements for the Quarter Ended March 31, 2018 that require disclosure

During the course of preparing the quarterly report on Form 10-Q for the quarter ended June 30, 2018, the Company identified certain errors related to cost of revenue not being recorded in connection with a product sale to a customer, which resulted in the understatement of its net loss for the three months ended March 31, 2018. The reason for the error was related to certain information not being provided to the Company’s accounting staff as a result of the Company’s transition of certain accounting duties from its then-Interim Chief Financial Officer, who left the Company in the first quarter of 2018.

The following tables reconcile the prior period as reported balances to the as revised balances:

In accordance with SEC Staff Accounting Bulletin No 108, the Company has evaluated this error, based on an analysis of quantitative and qualitative factors, as to whether it was material to the condensed consolidated statement of operations for the three months ended March 31, 2018 and if amendments of previously filed financial statements.statements with the SEC are required. The Company has determined that quantitatively and qualitatively, the error has no material impact to the condensed consolidated statement of operations for the three months ended March 31, 2018 or other prior periods.

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 KT High-Tech Marketing, Inc. ("KT High-Tech" and, including its subsidiary, KULR Technology Corporation (“KULR”), theGroup, Inc. (the “Company”) as of March 31, 20182019 and for the three months ended March 31, 20182019 and 20172018 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, 20172018 and for the year then ended, which are included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 17, 2018.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 Annual Report, and other factors that we may not know.

Overview

The Company ownsKULR 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 based (Carbon Fiber Velvetmaterial, 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 and that have been developed through longstanding partnerships with NASA, the Jet Propulsion Lab and others, our products and services make E-Mobility products and other 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 “CFV”) thermal management solutions that it believes are more effective at conducting, dissipatingscooter, or call an app-based car service instead of owning a vehicle; and storing heat generated by an electronic system’s internal components (i.e. semiconductor, integrated circuits “chips”)leverage the Cloud to perform tasks traditionally done in comparison to traditional materials,person, such as coppershopping for lunch, clothes, electronics and aluminum. KULR’s technologiesother 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 be applied insidehandle 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 development inlithium 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 arrayrange of electronic applications where heat is often a problem, such as mobile devices, cloud computing, virtual reality platforms, satellites, internet of things, drones,consumer products and connected cars.

Three key vectorsIoT. We have driven advancements in semiconductors and electronics systems – performance, power, and size. These vectors, however, often counteract one another. Asfound thatas 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. Electronicperformance, 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. KULR resolves many of the tradeoffs associated with other thermalAfter strenuous testing, we believe we have developed heat management materials. KULR’s productssolutions that significantly improve upon traditional heat storage and dissipation solutions and that improve upon their rigidity problems and durability. ItsWe 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 are lightweight and reduce manufacturing complexity associated withand provide a lighter weight solution than traditional thermal management materials.materials and, we believe, can meet the heat management demands of components and batteries being designed into the newest mobile technologies and applications.

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. 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.

In additionWe have not yet achieved profitability and expect to thermal management of electronic systems, KULR has developed, in partnership with NASA Johnson Space Center (“NASA JSC”), a highly effective, lightweightcontinue to incur cash outflows from operations. It is expected that our research and passive thermal protection technology. Thermal Runaway Shield (“TRS”) for lithium-ion batteries. KULR’s lithium-ion battery (“Li-B”) TRS product prevents a potentially dangerous combustible condition known as thermal runaway propagation from occurring in neighboring Li-B cells by actingdevelopment and general and administrative expenses will continue to increase and, as a shield or barrier in between individual Li-B cells in a battery pack. Although rare, incidents of thermal runaway propagation occurring spontaneously in Li-B cargo shipments and inside electronics, including hoverboards, smartphones, and electric vehicles, are a cause of public concern.

As of March 31, 2018,result, we had cash, working capital and an accumulated deficit of $425,391, $137,547 and $5,105,564, respectively. During the three months ended March 31, 2018 and 2017, we incurred net losses of $747,244 and $227,824, respectively.will eventually need to generate significant product revenues to achieve profitability. These factors raiseconditions indicate that there is substantial doubt about our ability to continue as a going concern as expressed inwithin one year after the notes to our condensed consolidated financial statements.statement issuance date. Historically, we have been able to raise funds to support our business operations, although there can be no assurance, we will be successful.successful in raising additional funds in the future.

Recent Developments

In January 2018,Common Stock

During the three months ended March 31, 2019, we sold an aggregate of 234,849 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $155,000.

On April 12, 2019, we sold an aggregate of 717,120 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $473,300.

On April 30, 2019, we conducted a final closing for the sale of an aggregate of 409,090 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $270,000, which represented the final closing of our private placement offering of our common stock.

Securities Purchase Agreement

On April 2, 2019, the Company entered into a Product DevelopmentSecurities Purchase Agreement (the “Purchase Agreement”) with the stockholders (the “Sellers”) holding 100% of the ownership interest in TECHTOM Co., Ltd. (“TECHTOM”), a top automotive manufacturerJapanese limited liability company, pursuant to developwhich 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”). Although no assurances can be made that the Acquisition will be completed, upon such Acquisition, TECHTOM would become a TRS-based solution for their electrical vehicle battery packs. The agreement is milestone-based and while there is no guarantee that KULR TRS products will ever be integrated into our strategic partner’s vehicles, we continue to advancewholly-owned subsidiary of the milestones.Company.

In March 2018, we entered

Pursuant to the Purchase Agreement, the Company agreed to pay the Sellers, against delivery of all Ownership and Claims, the following aggregate acquisition price: (i) $1,700,000 cash consideration (the “Cash Consideration”); and (ii) one hundred (100) shares of the Company’s Series C Convertible Preferred Stock (“Series C Preferred”), which class of Series C Preferred is to be designated prior to the closing of the Acquisition. It is contemplated that the Series C Preferred will have, among others, the following rights, preferences and limitation: (i) a stated value of $10,000 per share; (ii) no right to receive dividends; (iii) the right to convert each share into an agreementtwenty thousand shares of the Company’s common stock, which right is subject to a 4.99% beneficial ownership limitation; and (iv) the right to vote with the National Renewable Energy Laboratory (“NREL”) granting usCompany’s shareholders on an exclusive licenseas-converted basis. The rights and preferences of the Series C Preferred are set forth in further detail in the form of Certificate of Designation attached as an exhibit to commercializethe Purchase Agreement and which description is qualified in its patented Internal Short Circuit technology. This technology was jointly developedentirety to such exhibit, which is incorporated herein by NREL and NASA to provide a reliable testing method for lithium-ion battery safety.reference.

Results of Operations

Three Months Ended March 31, 20182019 Compared With Three Months Ended March 31, 20172018

The closing of the Share Exchange Agreement with KULR on June 19, 2017 was accounted for as a reverse recapitalization under the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 805-40. The condensed consolidated statements of operations herein reflect the historical results of KULR prior to the completion of the reverse recapitalization since it was determined to be the accounting acquirer, and do not include the historical results of operations for KT High-Tech prior to the completion of the reverse recapitalization.

Revenues

RevenuesOur revenues consisted of the following types:

For the three months ended March 31, 2019 and 2018, we generated $194,952 and $228,040 of revenues, a decrease of $33,088, or 15%. The decrease was primarily due to a decrease in service contract completions during the first quarter of 2019.

Our revenues during the three months ended March 31, 2019 consisted of sales of our component product, CFV thermal management solution, ISC battery cell product as well as certain research and development contract services.

For Our revenues during the three months ended March 31, 2018 and 2017, we generated $228,040 and $0 of revenues, an increase of $228,040. The increase was primarily due to new contracts entered into during 2018. Our revenues consisted of the following types:

Cost of Revenues

Cost of revenues consists of the costsales of our CFV thermal management solution and PCM heat sinks as well as labor and othercertain research and development contract services.

Our revenue for the three months ended March 31, 2019 and 2018 was generated from 10 and 4 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 at an early stage in our development cycle and the margins earned can vary significantly between period, customers and products due to the learning process, customer negotiating strengths, and product mix.

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 March 31, 2019 and 2018, cost of revenues was $49,346. There$61,517 and $149,947, respectively. The decrease was no costprimarily due to lower sales of revenueshigher margin products.

We generated a gross profit of $133,435 for the three months ended March 31, 2017.2019 as compared to a gross profit of $78,093 for the three months ended March 31, 2018, representing an improvement in gross profit of $55,342, or 71%. The gross margin percentage was 68% and 34% for the three months ended March 31, 2019 and 2018, respectively. The increase wasduring the 2019 period resulted primarily duefrom a more favorable product mix being sold as compared to increased labor costs.the previous period.

Research and Development

Research and development (“R&D”) includes expenses incurred in connection with the R&D of our CFV thermal management solution. R&D expenses are expensed as they are incurred, until such time as management reasonably determines that a commercially viable product is feasible. At this time, future R&D costs will be capitalized until the resulting product is launched, at which time capitalized R&D expenses will be amortized in cost of sales over the expected life of the product or products.incurred.

For the three months ended March 31, 2018,2019, R&D expenses increaseddecreased by $106,504$6,492 to $119,684$113,192 from $13,180$119,684 for the three months ended March 31, 2017.2018. The increasedecrease is primarily attributable to an increasea decrease in salaries and other benefits due to an increase in headcount.the purchase of R&D consumable supplies.

We expect that our R&D expenses will continue to increase.increase as we expand our future operations.

Research and Development – Related Parties

R&D – related parties include expenses associated with the development of our CFV thermal management solutions provided by Energy Science Laboratories, Inc. (“ESLI”), a R&D company owned by our Chief Technology Officer (“CTO”), as well as services provided by our CTO. R&D – related parties expenses are expensed as they are incurred.

For the three months ended March 31, 2018, R&D – related parties decreased by $131,115 to $0 from $131,115 for the three months ended March 31, 2017. The decrease is due to reduction in R&D services provided by ESLI during the current period.

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 March 31, 2018,2019, selling, general and administrative expenses increaseddecreased by $724,096$198,749 to $805,840$585,491 from $81,744$784,240 for the three months ended March 31, 2017.2018. The increasedecrease is primarily due to increaseddecreased non-cash stock-based compensation expense of approximately $135,000 due to certain awards becoming fully vested in the second quarter of 2018, decreased salaries and other benefits of approximately $221,000$35,000 from the hiringallocation of new employees in the third quarteremployers payroll taxes to cost of 2017, non-cash stock-based compensation expense of approximately $183,000 as well as increasedgoods sold and R&D, decreased professional fees of approximately $125,000 related$34,000, decreased travel expenses of approximately $20,000, partially offset by an increase in rent expense of approximately $25,000 due to beingentering into a public company.new lease agreement.

Other Expense

For the three months ended March 31, 2018,2019, other expense decreasedincreased by $1,571$431 to $14$445 from $1,585$14 for the three months ended March 31, 2017.2018. The decreaseincrease in other expense is primarily due to interest expense related to a KT High-Tech promissory notes purchased by KULR in 2017. Since the KT High-Tech and KULR reverse recapitalization in June 2017, allincreased interest expense related to the promissory note has been eliminated in consolidation.financing of the D&O insurance policy acquired during the fourth quarter of 2018.

Liquidity and Capital Resources

For the three months ended March 31, 20182019 and 2017,2018, cash used in operating activities was $470,370$286,420 and $158,913,$470,370, respectively. Our cash used in operations for the three months ended March 31, 20182019 was primarily attributable to our net loss of $747,244,$565,693, adjusted for non-cash expenses in the aggregate amount of $188,578,$51,030, partially offset by $88,296$228,243 of net cash provided by changes in the levels of operating assets and liabilities. Our cash used in operations for the three months ended March 31, 20172018 was primarily attributable to our net loss of $227,824$825,845, adjusted for non-cash expenses in the aggregate amount of $12,164,$188,578, partially offset by $56,747$166,897 of net cash provided by changes in the levels of operating assets and liabilities.

For the three months ended March 31, 2018 and 2017,There were no cash provided by investing activities was $0 and $200,000, respectively. Our cash provided byflows from investing activities for the three months ended March 31, 2017 was related to a promissory note in2019 and 2018.

For the principal amount of $300,000, of which, $200,000 had been received as ofthree months ended March 31, 2017.

There were no2019 and 2018, cash flows fromprovided by financing activities was $155,000 and $0, respectively. Our cash provided by financing activities for the three months ended March 31, 2018 and 2017.2019 was due to the net proceeds of our common stock offering.

As of March 31, 2018,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 had cash, workingwill eventually need to generate significant product revenues and/or raise additional capital and an accumulated deficit of $425,391, $137,547 and $5,105,564, respectively. During the three months ended March 31, 2018 and 2017, we incurred net losses of $747,244 and $227,824, respectively.to fund our operations. These conditions raiseindicate that there is substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued.statement issuance date.

We are currently have available will fundfunding our operations into the fourth quarter of 2018 while we continue to apply efforts to raise additional capital. Thereafter, we will require external funding to sustain operations and to follow through on the execution ofa month-to-month basis. Although our business plan. Although 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 condensed 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.

Critical Accounting Policies

There are no material changes from the critical accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K which was filed with the SEC on April 17, 2018. Please refer to that document for disclosures regarding the critical accounting policies related to our business.

Off BalanceOff-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.Act. Based on this evaluation, ourour management, with the participation of our principal executive officer and principal financial officer,, concluded that, as of the end of the period covered inby this report, our disclosure controls and procedures were effective to provideat the reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our principal executive officer, as appropriate, to allow timely decisions regarding required disclosure.level.

Changes in Internal Control over Financial Reporting

Effective January 1, 2018,2019, we adopted Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”842, “Leases” (“ASC 842”). The new revenue standard will requireASC 842 requires management to make significant judgments and estimates. As a result, we implemented changes to our internal controls related to revenue recognitionlease evaluation for the quarterthree months ended March 31, 2018.2019. These changes include updated accounting policies affected by ASC 606,842 as well as redesigned internal controls over financial reporting related to ASC 606,842 implementation. Additionally, management has expanded data gathering procedures to comply with the additional disclosure requirements, and ongoing contract review requirements.

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

PART II.II – OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on April 17, 2018.March 29, 2019.

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

None.During the three months ended March 31, 2019, we sold an aggregate of 234,849 shares of common stock at $0.66 per share to certain accredited investors in aggregate gross proceeds of $155,000, which proceeds will be used for general corporate expenses and other research and development expenses. The issuances of securities were made pursuant to the exemption from registration under Section 4(a)(2), Regulation S and Rule 506 of Regulation D under the Securities Act for transactions not involving a public offering and transactions with “accredited investors” as defined under the Securities Act.

On April 12, 2019, we sold an aggregate of 717,120 shares of common stock at $0.66 per share to accredited investors for aggregate gross proceeds of $473,300. The issuances of securities were made pursuant to the exemption from registration under Section 4(a)(2), Regulation S and Rule 506 of Regulation D under the Securities Act for transactions not involving a public offering and transactions with “accredited investors” as defined under the Securities Act.

On April 30, 2019, the Company conducted a final closing of a private placement offering of its common stock at $0.66 per share. In connection with the final closing, the Company received gross proceeds of $270,000, for which it issued 409,090 shares of common stock to accredited investors. The aggregate proceeds received by the Company in connection with the offering was an aggregate of $1,612,300, against which the Company issued an aggregate of 2,442,879 shares of common stock. In connection with this offering, the Company and the accredited investors entered into a Subscription Agreement, as supplemented, which Subscription Agreement is filed as Exhibit 10.1 hereto and incorporated herein by reference. The offering was conducted and the issuance of securities were made pursuant to the exemption from registration under Section 4(a)(2), Regulation S and Rule 506 of Regulation D under the Securities Act for transactions not involving a public offering and transactions with “accredited investors” as defined under the Securities Act.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety DisclosuresDisclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

*Filed herewith

**Furnished herewith

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.