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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 333-232426
Crown Electrokinetics Corp.
(Exact name of registrant as specified in its charter)
Delaware47-5423944
(State or other jurisdiction of
 incorporation or organization)
(I.R.S. Employer
 Identification No.)
1110 NE Circle Blvd., Corvallis, Oregon 97330
(Address of principal executive offices) (Zip Code)
213.660.4250
(Registrant’s telephone number, including area code)
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 o
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyx
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. o
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of common stock, $0.0001 par value per share, outstanding as of May 15, 2024 was 281,930,398.
Common Stock, $0.0001 par valueCRKN
The Nasdaq Capital Market



CROWN ELECTROKINETICS CORP.
Page
i


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties.
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
ii


PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements.
CROWN ELECTROKINETICS CORP.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
March 31,
2024
December 31,
2023
(Unaudited)
ASSETS
Current assets:
Cash$290 $1,059 
Prepaid and other current assets813 728 
Accounts receivable, net776 83 
Note receivable576  
Total current assets2,455 1,870 
Property and equipment, net3,036 3,129 
Intangible assets, net1,326 1,382 
Right-of-use assets1,533 1,701 
Deferred debt issuance costs362 1,306 
Other assets165 139 
TOTAL ASSETS$8,877 $9,527 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$2,297 $1,500 
Accrued expenses962 1,190 
Lease liabilities - current portion606 655 
Warrant liability23  
Notes payable - Current93 429 
Deferred revenue1,260  
Warranty customer liability20 2 
Total current liabilities5,261 3,776 
Notes payable - non-current328  
Lease liabilities - non-current portion950 1,072 
Warranty customer liability long term20 2 
Total liabilities6,559 4,850 
Commitments and Contingencies (Note 14)
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.0001; 50,000,000 shares authorized, no shares outstanding
- - 
Series A preferred stock, par value $0.0001; 300 shares authorized, 251 shares outstanding as of March 31, 2024 and December 31, 2023; liquidation preference $266 as of March 31, 2024 and $261 as of December 31, 2023
- - 
Series B preferred stock, par value $0.0001; 1,500 shares authorized, 1,443 shares outstanding as of March 31, 2024 and December 31, 2023; liquidation preference $1,530 as of March 31, 2024 and $1,501 as of December 31, 2023
- - 
Series C preferred stock, par value $0.0001; 600,000 shares authorized, 500,756 shares outstanding as of March 31, 2024 and December 31, 2023; liquidation preference $541 as of March 31, 2024 and $531 as of December 31, 2023
- - 
Series D preferred stock, par value $0.0001; $7,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023; liquidation preference zero as of March 31, 2024 and December 31, 2023
- - 
Series E preferred stock, par value $0.0001; 77,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023.
- - 
Series F preferred stock, par value $0.0001; 9,073 shares authorized, 4,448 shares outstanding as of March 31, 2024 and 4,448 shares outstanding as of December 31, 2023; liquidation preference $4,931 as of March 31, 2024 and $4,753 as of December 31, 2023.
- - 
Series F-1 preferred stock, par value $0.0001; 9,052 shares authorized, 653 shares outstanding as of March 31, 2024 and 653 shares outstanding as of December 31, 2023; liquidation preference $722 as of March 31, 2024 and $696 as of December 31, 2023.
- - 
Series F-2 preferred stock, par value $0.0001; 9,052 shares authorized, 1,153 shares outstanding as of March 31, 2024 and 1,153 shares outstanding as of December 31, 2023; liquidation preference $1,267 as of March 31, 2024 and $1,371 as of December 31, 2023.
- - 
Common stock, par value $0.0001; 800,000,000 shares authorized; 51,702,229 and 25,744,158 shares outstanding as of March 31, 2024 and December 31, 2023, respectively
10 7 
Additional paid-in capital123,915 121,665 
Accumulated deficit(121,607)(116,995)
Total stockholders’ equity2,318 4,677 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$8,877 $9,527 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1


CROWN ELECTROKINETICS CORP.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended
March 31,
20242023
Revenue$682 $22 
Cost of revenue, excluding depreciation and amortization(1,636)(31)
Depreciation and amortization(212)(182)
Research and development(756)(541)
General and administrative(1,783)(3,394)
Loss from operations(3,705)(4,126)
Other income (expense):
Interest expense(860)(2,017)
Loss on extinguishment of warrant liability- (504)
Gain on issuance of convertible notes- 64 
Change in fair value of warrants(23)5,606 
Change in fair value of notes- (117)
Other expense(24)(1,206)
Total other income (expense)(907)1,826 
Loss before income taxes(4,612)(2,300)
Income tax expense- - 
Net loss(4,612)(2,300)
Deemed dividend on Series D preferred stock- (6)
Cumulative dividends on Series A preferred stock(5)(4)
Cumulative dividends on Series B preferred stock(29)(20)
Cumulative dividends on Series C preferred stock(10)- 
Cumulative dividends on Series D preferred stock- (86)
Cumulative dividends on Series F preferred stock(178)- 
Cumulative dividends on Series F-1 preferred stock(26)- 
Cumulative dividends on Series F-2 preferred stock(35)
Net loss attributable to common stockholders$(4,895)$(2,416)
Net loss per share attributable to common stockholders$(0.13)$(4.88)
Weighted average shares outstanding, basic and diluted:36,675,540494,918
The accompanying notes are an integral part of these condensed consolidated financial statements.
2


CROWN ELECTROKINETICS CORP.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share and per share amounts)
Series A
 Preferred Stock
Series B
 Preferred Stock
Series C
 Preferred Stock
Series D
 Preferred Stock
Series E
 Preferred Stock
Series F
 Preferred Stock
Series F-1
 Preferred Stock
Series F-2
 Preferred Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
NumberAmountNumberAmountNumberAmountNumber AmountNumber AmountNumber AmountNumber AmountNumberAmountNumberAmount
Balance as of December 31, 2023251$- 1,443$- 500,756$- 0$- -$- 4,448$- 653$- 1,153$- 25,744,158$7 $121,665 $(116,995)$4,677 
Issuance of common stock in connection with equity line of credit--------21,133,6893 1,388 1,391 
Issuance of common stock/at-the-market offering, net of offering costs--------4,824,382588 588 
Stock-based compensation--------274 274 
Net loss---------(4,612)(4,612)
Balance as of March 31, 2024 (unaudited)251$- 1,443$- 500,756$- -$- -$- 4,448$- 653$- 1,153$- 51,702,229$10 $123,915 $(121,607)$2,318 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


CROWN ELECTROKINETICS CORP.
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
(Unaudited)
(in thousands, except share and per share amounts)
Series A
Preferred Stock
Series B
Preferred Stock
Series C
Preferred Stock
Series D
Preferred Stock
Series E
Preferred Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
(Deficit)
NumberAmountNumberAmountNumberAmountNumberAmountNumberAmountNumberAmount
Balance as of December 31, 2022251$- 1,443$- 500,756$- 1,058$- -$- 338,033$2 $88,533 $(88,005)$530 
Exercise of common stock warrants-----109,2571 2,061 2,062 
Issuance of common stock in connection with conversion of notes-----31,466516 516 
Commitment to issue shares of common stock in connection with March waiver agreement------298 298 
Deemed dividend for repricing of Series D preferred stock------6 (6)
Issuance of common stock/at-the-market offering, net of offering costs-----211,6671 2,106 2,107 
Issuance of Series E preferred stock in connection with LOC----5,0004,350 4,350 
Stock-based compensation-----38,335181 181 
Net loss------(2,300)(2,300)
Balance as of March 31, 2023 (Unaudited)251$- 1,443$- 500,756$- 1,058$- 5,000$- 728,758$4 $98,051 $(90,311)$7,744 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


CROWN ELECTROKINETICS CORP.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three months ended
March 31,
20242023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(4,612)$(2,300)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation274 181 
Depreciation and amortization212 182 
Loss on extinguishment of warrant liability- 504 
Change in fair value of warrant liability23 (5,606)
Gain on issuance of convertible note- (64)
Amortization of debt discount- 374 
Change in fair value of notes- 117 
Amortization of deferred debt issuance costs944 1,635 
Amortization of right-of-use assets168 133 
Other expenses- 1,206 
Changes in operating assets and liabilities:  
Prepaid and other assets(111)(161)
Accounts receivable(693) 
Note receivables(576) 
Deferred revenue1,260  
Accounts payable797 125 
Accrued expenses(228)(920)
Lease liabilities(171)(134)
Warranty customer liability36  
Net cash used in operating activities(2,677)(4,728)
CASH FLOWS FROM INVESTING ACTIVITIES  
Cash paid for acquisition of Amerigen 7- (645)
Purchase of equipment(63)(435)
Net cash used in investing activities(63)(1,080)
CASH FLOWS FROM FINANCING ACTIVITIES  
Proceeds from the exercise of warrants- 2,062 
Proceeds from the issuance of common stock and warrants, net of fees- - 
Proceeds from the issuance of common stock / at-the-market offering, net of offering costs588 2,107 
Proceeds from issuance of notes in connection with Line of Credit- 2,000 
Proceeds from issuance of January promissory notes, net of fees paid- 970 
Repayment of notes payable(8)(14)
Proceeds from the issuance of common stock in connection with equity line of credit, net of offering costs1,391 - 
Net cash provided by financing activities1,971 7,125 
   
Net increase / decrease in cash(769)1,317 
Cash — beginning of period1,059 821 
Cash — end of period$290 $2,138 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:  
Issuance of Series E preferred stock in connection with line of credit$- $4,350 
Issuance of common stock in connection with conversion of notes$- $516 
Commitment to issue shares of common stock in connection with March Waiver agreement$- $298 
Deemed dividend for repricing of series D preferred stock$- $6 
Unpaid equipment included in accounts payable$- $156 
SUPPLEMENTAL CASH FLOW INFORMATION  
Cash paid for interest$- $8 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Nature of Business and Liquidity
Organization
Crown Electrokinetics Corp. (the “Company”) was incorporated in the State of Delaware on April 20, 2015. Effective October 6, 2017, the Company’s name was changed to Crown Electrokinetics Corp. from 3D Nanocolor Corp. (“3D Nanocolor”).
The Company is commercializing technology for smart or dynamic glass. The Company’s electrokinetic glass technology is an advancement on microfluidic technology that was originally developed by HP Inc.
On December 20, 2022, the Company incorporated Crown Fiber Optics Corp., a Delaware based entity, to own and operate its acquired business from the acquisition of Amerigen 7, LLC (“Amerigen 7”) in January 2023. Crown Fiber Optics Corp. is accounted for as a wholly-owned subsidiary of Crown Electrokinetics, Corp.
Initial Public Offering
On January 26, 2021, the Company completed its public offering, and its common stock began trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol CRKN.
Reverse Stock Split
On August 11, 2023, the Company’s board of directors authorized a reverse stock split (‘Reverse Stock Split”) at an exchange ratio of one-for-60 basis. The Reverse Stock Split was effective on August 15, 2023, such that every 60 shares of common stock have been automatically converted into one share of common stock. The Company did not issue fractional certificates for post-reverse split shares in connection with the Reverse Stock Split. Rather, all shares of common stock that were held by a stockholder were aggregated and each stockholder was entitled to receive the number of whole shares resulting from the combination of the shares so aggregated. Any fractions resulting from the Reverse Stock Split computation were rounded up to the next whole share.
The number of authorized shares and the par value of the common stock was not adjusted as a result of the Reverse Stock Split. In connection with the Reverse Stock Split, the conversion ratio for the Company’s outstanding convertible preferred stock was proportionately adjusted such that the common stock issuable upon conversion of such preferred stock was decreased in proportion to the Reverse Stock Split. All references to common stock and options to purchase common stock share data, per share data and related information contained in the condensed consolidated financial statements have been adjusted to reflect the effect of the Reverse Stock Split.
Liquidity and Going Concern
The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $121.6 million and cash of approximately $0.3 million as of March 31, 2024, a net loss of approximately $4.6 million, and approximately $2.7 million of net cash used in operating activities for the three months ended March 31, 2024.
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
The Company has obtained additional capital through the sale of debt or equity financings or other arrangements to fund operations including through its existing at-the-market offering, and $50.0 million equity line of credit; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit the Company’s ability to pay dividends or make other distributions to stockholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the
6


Company’s ability to raise capital, management believes that there is substantial doubt in the Company’s ability to continue as a going concern for twelve months from the issuance of these condensed consolidated financial statements.
Note 2 – Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.
The condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations, stockholders’ equity for the three months ended March 31, 2024 and 2023 and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the interim period presented. The financial data and the other financial information contained in these notes to the condensed consolidated financial statements related to the three month periods are also unaudited. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024.
Use of Estimates
The preparation of condensed financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expenses during the reporting periods. Accounting estimates and assumptions are inherently uncertain. Management bases its estimates and assumptions on current facts, historical experience and various other factors believed to be reasonable under the circumstances. Actual results could differ materially and adversely from these estimates. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but not limited to, valuation of its business combination, estimated fair value of convertible notes, estimated fair value of warrant liability, Series F/F-1/F-2 preferred stock, stock option awards for stock-based compensation and operating lease right-of-use assets and liabilities.
Risks and Uncertainties
The Company is currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine, as well as Israel and Hamas. The Company’s financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.
The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Summary of Significant Accounting Policies
Reference is made to Note 3 Basis of Presentation and Significant Accounting Policies in our 2023 Form 10-K filed on April 1, 2024 for a detailed description of significant accounting policies. There have been no significant changes to our accounting policies as disclosed in our 2023 Form 10-K.
7


Revenue Recognition
The Company recognizes revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process:
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
Step 5: Recognize revenue when the company satisfies a performance obligation
The Company has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component when the time between the goods or service being transferred to the customer and the customer pays is one year or less,
The Company generates revenue from providing fiber splicing services as required based on short-term work orders assigned by customers. The Company is required to complete the description of work described in the work order and test the service provided prior to any recognition of revenue and invoicing. The short-term work orders are generally completed within two weeks. The Company is required to adhere to the rules and regulations that are outlined in the Agreement between the Company and the Customer.
Cost of revenue is based on individual work orders and detailed description of work to be performed. All of the revenue is recognized immediately upon completion of each work order. A 5% retainage will be withheld by the Customer upon payment of invoices and will be paid to the Company within one year after termination of the contract. The retainage can be utilized by Customer for any claims that may arise after work is completed up through one year after completion.
Revenue recognized during the three months ended March 31, 2024 was generated by the Company’s wholly-owned subsidiary, Crown Fiber Optics Corporation, and was $0.7 million. During the three months ended March 31, 2023, revenue generated was approximately $22,000.
Segment and Reporting Unit Information
Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is determined to be the CODM. The Company has two operating segments and two reportable segments as of March 31, 2024, which includes film group and fiber optics group. Revenue recognized during the three months ended March 31, 2024 relates to the fiber optics group.
Business Combinations
The Company accounts for business combinations using the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts.
Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets. Although the Company believes the assumptions and estimates made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain intangible assets we have acquired include future expected cash flows from customer contracts. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results. The initial purchase price may be adjusted as needed per the terms of the arrangement agreement. The allocation of purchase price, including any fair value of the assets acquired and liabilities assumed as of the acquisition date has not been completed.
Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
8


Deferred Debt Issuance Costs
The Company accounts for debt issuance costs related to its line of credit and equity line of credit as a deferred asset on the condensed consolidated balance sheets, which is amortized over the life of the line of credit and equity line of credit. Since the Company has elected the fair value option for its convertible notes (see Note 10), upon a draw down, a portion of the deferred asset balance will be amortized and recognized as other income (expense) on the condensed consolidated statements of operations. On the issuance date of the Company’s line of credit, the cost related to issuance of the Series E preferred shares and the warrant to purchase Series E preferred shares was recorded as a deferred asset. On the issuance date of the Company’s equity line of credit, the cost related to issuance of common stock was recorded as a deferred asset.
Notes Payable at Fair Value
The Company has elected the fair value option for the recognition of its convertible notes and notes payable, with changes in fair value recognized in the statements of operations. As a result of applying the fair value option, direct costs and fees related to the convertible notes and notes payable are recognized in other income (expense) in the condensed consolidated statements of operations. The Company includes the interest expense as a component of the notes fair value.
Warrants
The Company accounts for certain common stock warrants outstanding as a liability at fair value and adjusts the fair value of the instruments at each reporting period. The liability is subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statements of operations. The fair value of the warrants issued by the Company was estimated using the Black-Scholes model.
SLOC
The Company accounts for its warrants related to the SLOC as stockholders’ equity, and therefore, the warrants are not revalued after issuance. The Company uses the Black-Scholes model to value the warrants at issuance.
As of March 31, 2024, since no loan amounts were drawn down, the SLOC warrant is recorded as a deferred asset on the condensed consolidated balance sheets at fair value and will be amortized over the life of the SLOC. Upon a draw down, the remaining balance of the deferred asset would be reclassified to debt discount and amortized under the effective interest method over the one-year term of the loan.
Purchase Order Warrants
On August 12, 2022, the Company entered into two Purchase Orders (PO’s) with Hudson Pacific Properties, L.P. (“Hudson”) for the purchase of the Company’s Smart Window Inserts™ (“Inserts”). The PO’s have a value of $0.1 million and represent the first orders the Company has received prior to the launch of its Inserts. As additional consideration for the PO’s, the Company issued a warrant to Hudson to purchase 5,000 shares of the Company’s common stock at $45.00 per share. The warrant has a five-year life and expires on August 12, 2027.

Because Hudson is a customer, the Company accounts for the PO’s and warrants under ASC 606. As the performance obligations have not yet been satisfied, the Company has not recognized any revenue in connection with Hudson during the year ended March 31, 2024.

The Company measured the fair value of the warrant using the Black-Scholes valuation model on the issuance date, with the value being recognized as a prepaid asset up to the recoverable value represented by the value of the contract.
The fair value of the warrant on the issuance date totaled $0.2 million, and as of March 31, 2024, the Company recorded a prepaid asset of $0.1 million, representing the recoverable value from the PO’s, which is included in prepaid and other current assets on the consolidated balance sheet.
Net Loss per Share Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to common stockholders is computed using the sum of the weighted-average number of shares of common stock outstanding during the period and the effect of dilutive securities.
9


As the Company was in a net loss position for the three months ended March 31, 2024 and 2023, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders because the effects of potentially dilutive securities are antidilutive.
Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at March 31, 2024 and 2023 are as follows:
March 31,
20242023
Series A preferred stock3,146190,994
Series B preferred stock33,8832,047,359
Series C preferred stock9,346560,757
Series D preferred stock-2,289,247
Series E preferred stock-5,000,000
Convertible notes-216,530
Series F preferred stock501,579-
Series F-1 preferred stock72,631-
Series F-2 preferred stock124,946-
Warrants to purchase common stock (excluding penny warrants)2,470,078599,576
Warrants to purchase Series E preferred stock750,000750,000
Options to purchase common stock632,779157,058
Unvested restricted stock units1,124,5278,299
Commitment shares212,89031,724
Total5,935,80511,851,544

Warranty Customer Liability

The Company provides warranties depending on the terms of the arrangement with the customer. This warranty covers defects in materials and workmanship under normal use and conditions. It is applicable to projects completed by Crown's fiber optics segment, which includes services provided by Crown Fiber Optics Corporation, a wholly-owned subsidiary of Crown. The standard warranty period ranges for up to two years from the project completion date. The Company accrues for warranty costs as part of the cost of revenues at the time the revenue is recognized based on historical experience and any current known trends that might affect future costs. Total warranty expense recognized during the period ended March 31, 2024 and 2023 was $36,000 and $nil, respectively.

Retainage

The Company’s customers have a contractual right to withhold payment of a retainage amount, typically 5%. The retainage can be utilized by customers for any claims that may arise after work is completed through one year after project completion. The retainage amount is recorded as an accounts receivable in the balance sheet and is expected to be collected upon the project's completion and acceptance by the customer. As of March 31, 2024 and December 31, 2023, the Company has recorded a retainage receivable of $0.1 million and zero, respectively, which is included in the accounts receivable balance in the condensed consolidated balance sheet

Note 3 – Acquisitions
On January 3, 2023, the Company acquired certain assets and assumed liabilities from Amerigen 7, which was accounted for as a business combination as the Company concluded that the transferred set of activities and assets related to the acquisition constituted a business. The Company paid cash consideration of approximately $0.7 million which included approximately 12 employees, customer contracts, and certain operating liabilities.
10


The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed for the Amerigen 7 acquisition (in thousands):
Property and equipment$655 
Intangible assets200 
Security deposits5 
Accrued expenses(529)
Notes payable(338)
Total identifiable assets and liabilities acquired(7)
Goodwill652 
Total purchase consideration$645 
The Company engaged an independent valuation specialist to conduct a valuation analysis of the identifiable intangible assets acquired by the Company with the objective of estimating the fair value of such assets as of January 3, 2023. The valuation specialist utilized the income approach, specifically the multi-period excess earnings method, to value the existing customer relationship.

During the year ended December 31, 2023, all the acquired assets and assumed liabilities that relate to the original Amerigen7 acquisition were written off and all the key employees terminated. Due to these key qualitative changes to the Fiber Optics Group after the acquisition, the Company concluded that the goodwill balance associated with the Amerigen7 acquisition was fully impaired as there were no future expected cash flows from the acquired Amerigen7 business. The Company has no goodwill balance as of March 31, 2024.
Note 4 – Prepaid and Other Current Assets
Prepaid and other current assets consist of the following (in thousands):
March 31,
2024
December 31,
2023
License fees$114 $158 
Professional fees142 53 
General liability insurance60 26 
Hudson warrant *86 86 
Prepaid rent
60 277 
Other351 128 
Total$813 $728 
*Fair value of warrant issued to Hudson Pacific Properties, L.P. (See Note 14)
11


Note 5 – Property & Equipment, Net
Property and equipment, net, consists of the following (in thousands):
March 31,
2024
December 31,
2023
Equipment$3,280 $3,155 
Leasehold improvements362 362 
Vehicles410 395 
Computers56 56 
Furniture and Fixtures3 3 
Construction-in-progress- 77 
Total4,111 4,048 
Less: accumulated depreciation(1,075)(919)
Property and equipment, net$3,036 $3,129 
Depreciation expense for the three months ended March 31, 2024 and 2023 was $0.1 million and $0.1 million, respectively.
Note 6 – Intangible Assets, Net
Intangible assets, net, consists of the following (in thousands):
March 31,
2024
December 31,
2023
Patents$1,800 $1,800 
Research license375 375 
Customer relationships4 4 
Total2,179 2,179 
Less: accumulated amortization(853)(797)
Intangible assets, net$1,326 $1,382 
The following table represents the total estimated amortization of intangible assets for the five succeeding years and thereafter as of March 31, 2024 (in thousands):
Estimated
 Amortization
 Expense
Nine months ended December 31, 2024$179 
Year ended December 31, 2025234 
Year ended December 31, 2026197 
Year ended December 31, 2027194 
Year ended December 31, 2028195 
Thereafter327 
Total$1,326 
For the three months ended March 31, 2024 and 2023, amortization expense was approximately $0.1 million and $0.1 million, respectively.
12


Note 7 – Deferred Debt Issuance Costs
Deferred debt issuance costs consist of the following (in thousands):
March 31,
2024
December 31,
2023
Standing letter of credit$150 $150 
Equity letter of credit554 554 
Line of credit$9,943 9,943 
Total10,647 10,647 
Accumulated amortization(10,285)(9,341)
Deferred debt issuance costs$362 $1,306 
SLOC
For the three months ended March 31, 2024 and 2023, the Company recognized amortization expense of approximately $0.8 million and $41,000, respectively.
Equity line of credit
In July 2023, the Company entered into the equity line of credit (“ELOC”) for the right to sell common stock shares to an investor and recorded deferred debt issuance costs of approximately $0.6 million. For the three months ended March 31, 2024, the Company recognized amortization expense of approximately $0.1 million.
Line of Credit
During the three months ended March 31, 2024, in connection with the $2.4 million draw down and issuance of the convertible promissory notes, the Company recognized amortization expense of approximately $0.9 million. During the three months ended March 31, 2023, the Company recognized amortization expense of approximately $1.8 million.
Note 8 – Accrued Expenses
Accrued expenses consisted of the following (in thousands):
March 31,
2024
December 31,
2023
Payroll and related expenses$118 $112 
Bonus700 1,000 
Taxes96 51 
Other expenses48 27 
Total$962 $1,190 
Note 9 - Contracts with Customers and Revenue Concentration

Concentration of Credit Risk and Accounts Receivable

Crown Electrokinetics Corp. assesses and monitors the creditworthiness of its customers continually and maintains an allowance for estimated credit losses based on historical experience, current conditions, and reasonable and supportable forecasts. As of March 31, 2024, the Company had accounts receivable of $776,000, net of an allowance for doubtful accounts, compared to $83,000 as of December 31, 2023. The significant increase in receivables is primarily due to increased activity in fiber splicing services and extended payment terms offered to certain customers.

No single customer accounted for 10% or more of the net accounts receivable balance as of March 31, 2024, and no significant concentrations of credit risk were noted.

Deferred Revenue and Transaction Price Allocated to Remaining Performance Obligations

13


As of March 31, 2024, Crown Electrokinetics Corp. has recorded deferred revenue totaling $1.3 million. This amount represents the advance payments received under the Fixed Price Construction Agreement with Vista Serena, S. de R.L. de C.V., dated March 1, 2024. The contract stipulates the construction of two slant wells at Santa Maria Bay, with Crown Fiber Optics Corp. serving as the contractor.

The total contract price is $3.6 million, of which an advance payment of $1.3 million collected as of March 31, 2024. The revenue associated with this project is expected to be recognized as Crown Fiber Optics Corp. fulfills its performance obligations under the contract, specifically as construction milestones are completed in accordance with the agreed project schedule.

Approximately $2.3 million of the contract price is anticipated to be recognized within the next 12 months as construction progresses. This projection includes considerations for potential adjustments such as material changes or force majeure events that could alter the timing of revenue recognition. The remaining balance will be recognized as the final stages of the project are completed, with the entire project expected to be finalized by the date specified in the project schedule, unless modifications are necessitated by unforeseen circumstances as outlined in the agreement. Revenue is expected to be recognized based on the costs incurred relative to the total estimated costs at completion, following the percentage of completion method.


Note 10 – Notes Payable
Convertible Notes
2022 Notes
In October 2022, the Company issued convertible notes (the “2022 Notes”) with a principal balance of approximately $5.4 million and warrants to purchase 362,657 shares of the Company’s common stock for net proceeds of $3.5 million. The 2022 Notes is non-interest bearing and secured by the Company’s assets. The maturity date is the earlier of (i) twelve months from the date of issuance or (ii) the closing of a change of control transaction. The 2022 Notes are convertible into shares of the Company’s common stock at a conversion price of $29.70 per share. The warrants have an exercise price of $19.32 per share and expire five years from the issuance date.
In February 2023, the Company entered into waiver agreements with holders of the 2022 Notes which extended the maturity date of the 2022 Notes from October 19, 2023 to April 18, 2024. As consideration for this agreement, the Company issued 96,890 warrants to purchase shares of the Company’s common stock (See Note 11).
In March 2023, the Company entered into the waiver agreements with holders of the 2022 Notes to eliminate the minimum pricing covenant as it relates to Company’s at-the-market facility. As consideration for this agreement, the Company provided the holders with two options to choose from (i) to take an additional five percent original issue discount (“OID”) on their 2022 Note principal or (ii) to be issued shares of common stock with a value equal to the five percent OID, and to issue total shares of 31,724 as converted using the Nasdaq minimum price of $9.42. During 2023, six of the note holders elected option (i), and the Company increased the respective principal balance of the notes by approximately $0.2 million. The remaining noteholders elected option (ii), and as of March 31, 2024, no shares of common stock have been issued. The Company recorded expense of $0.3 million associated with the commitment to issue shares of the Company’s common stock.
In May 2023, the Company entered into an inducement agreements with the investors to reduce the conversion price of the 2022 Notes in an aggregate principal amount equal to $1.5 million, convertible into 161,603 shares of the Company’s common stock at $9.28 per share. The remaining investors agreed to reduce the conversion price of the 2022 Notes in an aggregate principal amount equal to $1.4 million, convertible into 127,393 shares of the Company’s common stock at $10.93 per share.
The Company elected to account for the 2022 Notes under the fair value option. For the inducement agreements that were entered into as described above, the Company accounted for the change in the terms through the fair value adjustment of $2.7 million, which is included in the change in fair value of notes on the condensed consolidated statements of operations, upon the settlement of $0.2 million principal balance of the 2022 Notes as part of the exchange agreements, and $1.0 million principal balance of the 2022 Notes in June 2023 based on the issuance of 248,981 shares of the Company’s common stock. As of March 31, 2024, there was no outstanding balance related to the 2022 Notes.
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Senior Secured Notes
In January 2023, the Company issued senior secured notes (“Senior Secured Notes”) with a principal balance of approximately $1.2 million and warrants to purchase 41,667 shares of the Company’s common stock for net proceeds of $1.0 million. The Senior Secured Notes do not bear interest, and mature three months from the date of issuance. Pursuant to these terms, the Senior Secured Notes were subsequently extended to May 3, 2023, incurring an additional 10% on principal. The warrants are exercisable for five years at an exercise price of $19.32 per share.
In May 2023, the Company entered into several amendments to extend the Senior Secured Notes maturity date with the investors. In exchange, the Company issued a total of 203,500 shares of common stock to the investors.
The Company concluded that a troubled debt restructuring did not occur, but an extinguishment of the outstanding senior secured notes occurred. Subsequent to the extinguishment, the Company concluded to account for the Senior Secured Notes using the fair value option. The Company recorded an extinguishment loss of $2.2 million.
On June 4, 2023, $0.2 million of the outstanding Senior Secured Notes was settled. The Company accounted for the settlement as an extinguishment that resulted in a $0.1 million gain and resulted in $0.1 million being recorded as Series F convertible preferred stock and $0.1 million being recorded as part of the warrant liability.
On June 30, 2023, the Company and the remaining investors agreed to extend the maturity date of the 2023 Notes until July 31, 2023, in exchange for 41,667 shares of common stock. The Company recorded a change in fair value adjustment of $0.3 million based on the fair value of the 41,667 shares of common stock.
On July 10, 2023, the Company and the remaining investors entered into a forbearance agreement, which was subsequently amended on July 14, 2023. The forbearance agreement provides that the investor shall forbear the exercise of its rights and remedies due to certain events of defaults under the Senior Secured Notes, including payment, until December 31, 2024, in exchange for a non-refundable and indefeasible payment of $0.1 million in the form of a promissory note due December 31, 2024 (the “December 2024 Note). The December 2024 Note was never executed and the Senior Secured Notes investors fully settled the outstanding balance for a total of 189,602 shares of common stock during July and August 2023. The Company recorded a change in fair value adjustment of $0.04 million at settlement of the Senior Secured Notes. As of March 31, 2024, there was no outstanding balance related to the Senior Secured Notes.
2023 Note
In February 2023, upon drawing down on the line of credit, the Company issued a Secured Promissory Note (the “2023 Note”) totaling $2.0 million, which is due and payable 60 days from the issuance date. The 2023 Note is non-interest bearing and secured by the Company’s assets. The 2023 Note is convertible into shares of the Company’s common stock at $30.00 per share.
In April 2023, the Company entered into a first amendment to the 2023 Note with the lender, pursuant to which the lender agreed to extend the maturity date of the 2023 Note balance until May 1, 2023 in exchange for 33,333 shares of the Company’s common stock. The 2023 Note was further amended to accrue interest at the 15% per annum from the original funding date of the 2023 Note. The Company recorded a change in fair value adjustment of $0.2 million related to the commitment to issue 33,333 shares of the Company’s common stock.
On May 1, 2023, the Company entered into a second amendment to the 2023 Note with the lender, pursuant to which the lender agreed to extend the maturity date of the 2023 Note balance until May 15, 2023
On May 15, 2023, the Company entered into a third amendment to the 2023 Note with the lender, pursuant to which the lender agreed to extend the maturity date of the 2023 Note until June 7, 2023 in exchange for 4,000 shares of the Company’s Series E preferred stock, which are convertible into 66,667 shares of the Company’s common stock. The Company recorded a change in fair value adjustment of $0.7 million related to the commitment to issue 4,000 shares of the Company’s Series E preferred stock.
On May 16, 2023, the Company made a second draw of $0.2 million under the line of credit. Upon drawing down on the line of credit, the Company issued a second Secured Promissory Note (the “2nd 2023 Note”) which is due and payable on July 16, 2023. The 2nd 2023 Note shall accrue interest at the 15% per annum from the original funding date of the 2nd 2023 Note.
15


On May 26, 2023, the Company made a third draw of $0.2 million under the line of credit. Upon drawing down on the line of credit, the Company issued a third Secured Promissory Note (the “3rd 2023 Note”) which is due and payable on June 2, 2023. The 3rd 2023 Note included a $0.2 million commitment fee and does not bear interest. With the 3rd 2023 Note, the Company recorded a change in fair value adjustment of $0.2 million related to the commitment fee.
On May 26, 2023, the Company entered into a fourth amendment to the 2023 Note, pursuant to which the Company will issue to the holder a convertible promissory note in the principal amount of $0.2 million due June 2, 2023 in exchange for 4,000 shares of the Company’s Series E preferred stock, which are convertible into 66,667 shares of the Company’s common stock. The Company recorded a change in fair value adjustment of $0.6 million related to the commitment to issue 4,000 shares of the Company’s Series E preferred stock.
On June 13, 2023, the Company partially redeemed the principal of the 2023 Note. In addition to the accrued interest and commitment fees, the total redeemed balance was approximately $2.1 million. With the settlement of the 2nd 2023 and the 3rd 2023 Note, the Company recorded a change in fair value adjustment of $0.1 million.
On June 30, 2023, the Company and the line of credit lender agreed to amend the 2nd 2023 Note and the 3rd 2023 Note to extend the maturity dates of each until July 16, 2023. In connection with the amendments, the Company agreed to issue to the line of credit lender 5,000 shares of the Company’s Series E preferred stock, which is convertible into 83,333 shares of the Company’s common stock. Additionally, the Company agreed to issue an additional 8,000 shares of the Company’s Series E preferred stock, which is convertible into 133,333 shares of the Company’s common stock, to the line of credit lender for failure to comply with a covenant in the line of credit, as amended. The Company recorded a change in fair value adjustment of $2.0 million related to the commitment to issue 13,000 shares of the Company’s Series E preferred stock.
During July 2023, the Company repaid the outstanding balance of the 2nd 2023 Note and 3rd 2023 Note for cash of $0.4 million. As of March 31, 2024, there was no outstanding balance related to the 1st 2023 Note, 2nd 2023 Note and 3rd 2023 Note.
Demand Note
Between May 17 and May 18, 2023, the Company issued secured demand promissory notes (the “Demand Notes”) in an aggregate principal amount equal to $0.2 million. The Demand Notes are due and payable at any time upon demand by the noteholders after the earlier of (i) the consummation of the Company’s first securities offering after the issuance of the Demand Notes or (ii) July 16, 2023. The Demand Notes do not bear interest. In connection with the issuance of the Demand Notes, the Company agreed to issue an aggregate of 76,626 shares of the Company’s common stock to the Demand Note holders. The Company recorded expense of $0.2 million associated with the commitment to issue shares of the Company’s common stock.
On May 30, 2023, the Company issued secured demand promissory notes (the “2nd Demand Notes”) in an aggregate principal amount equal to $0.1 million. The 2nd Demand Notes are due and payable at any time upon demand by the noteholder after the earlier of (i) the consummation of the Company’s first securities offering after the issuance of the 2nd Demand Notes or (ii) July 16, 2023. The 2nd Demand Notes do not bear interest. In connection with the issuance of the 2nd Demand Notes, the Company agreed to issue an aggregate of 46,935 shares of the Company’s common stock to the 2nd Demand Notes holders. The Company recorded expense of $0.1 million associated with the commitment to issue shares of the Company’s common stock.
On July 25, 2023, the Company entered into the Demand Secured Promissory Note Agreement (“Q3 Demand Notes”) with two investors for a purchase price of $20,000 each and with an original issue discount of $12,000. Upon settlement, the Company is obligated to pay a total of $0.1 million in principal for the issuance of both notes. The Q3 Demand Notes are due and payable at any time upon demand by the holder after the earlier of (i) the consummation of the Company’s first securities offering after the issuance of the Q3 Demand Notes and (ii) August 25, 2024.
As of March 31, 2024, the Company had approximately $0.1 million of outstanding balance related to the 2023 Notes.

On December 28, 2023, the Company entered into a secured notes payable agreement with Cemen Tech Capital, LLC bearing an interest rate of 8.75% per year. In Q1, 2023, the Company entered into a secured notes payable agreement with Ford Motor Credit bearing an interest rate of 6.96% per year. Both notes are secured by the vehicles financed. Monthly principal and interest payments are to be made commencing from the issuance date through January, 2030 and April, 2026 respectively.

16


As of March 31, 2024, the expected future minimum principal payments under the Company’s notes payable is as follows (in thousands):
Amount
2024, remainder$93 
202565 
202660 
202760 
2028, and thereafter143 
Total 421 

Note 11 - Fair Value Measurements
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2024:
Fair value measured at March 31, 2024
Total
carrying
value
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Liabilities:
Warrant liability$23 $- $- $23 

The Company did not have any assets or liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2023.
For the three months ended March 31, 2024 there was a increase of approximately $23,000 in Level 3 liabilities measured at fair value.

The Company uses significant unobservable inputs to value its Level 3 liabilities, which include warrants to purchase shares of common stock. The fair value of these warrants is estimated using the Black-Scholes valuation model. The key factors considered in this model are:

Dividend Yield: The expected dividend yield is based on the Company's historical dividend payments and future expectations. As of March 31, 2024, the dividend yield used was 0.0%.

Expected Price Volatility: The expected volatility is based on the historical volatility of the Company’s stock over a period equivalent to the expected term of the warrants. As of March 31, 2024, the expected price volatility was 70.0%.

Risk-Free Interest Rate: The risk-free interest rate is based on the yield of U.S. Treasury securities with a maturity similar to the expected term of the warrants. As of March 31, 2024, the risk-free interest rate was 4.33%.

Expected Term: The expected term of the warrants is based on the remaining contractual life of the warrants. As of March 31, 2024, the expected term was 3.8 years.

2022 Convertible Notes at Fair Value
The fair value of the 2022 Notes on the issuance dates, and as of March 31, 2024 were estimated using a Monte Carlo simulation to capture the path dependencies intrinsic to their terms. The significant unobservable inputs used in the fair value measurement of the Company’s convertible notes are the common stock price, volatility, and risk-free interest rates.
17


The Company elected the fair value option when recording its 2022 Notes and the 2022 Notes were classified as liabilities and measured at fair value on the issuance date, with changes in fair value recognized as other income (expense) on the statements of operations and disclosed in the condensed consolidated financial statements.
In February 2023, the Company entered into waiver agreements with holders of the 2022 Notes (See Note 10). In connection with the waiver agreement, the 2022 Notes were revalued as of the amendment date.
In March 2023, the Company entered into the second waiver agreements with holders of the 2022 Notes (See Note 10). A number of holders elected to increase the principal balance of their notes. The Company revalued the respective notes on the date prior to the amendment date and again on the amendment date. The change in fair value related to the amendment of these 2022 Notes was approximately $0.4 million.
In June 2023, the Company entered into an exchange agreement and $0.2 million fair value of the 2022 Notes was exchanged for 206 shares of Series F Preferred stock. As of March 31, 2024, there was no outstanding balance related to the 2022 Notes.
Line of Credit
In February 2023, the Company drew down $2.0 million from the line of credit and issued the 2023 Notes of $2.0 million. The 2023 Note had fair value at issuance of $1.9 million and the Company recorded a gain on issuance of approximately $0.1 million, which is included in other income (expense) on the condensed consolidated statement of operations.
In May 2023, the Company drew down $0.4 million from the line of credit and in accordance with the terms of the agreement issued the 2nd 2023 Notes and 3rd 2023 Notes. During July 2023, the Company repaid the outstanding balance of $0.4 million in cash.
As of March 31, 2024, there are no outstanding balances pertaining to the 2023 Notes, following the full termination of the associated line of credit.
The following table provides the change in fair value of the warrant liability (in thousands):
 Warrant
Liability
Balance at December 31, 2023$- 
Change in fair value23 
Balance at March 31, 2024$23 
Warrants
During the three months ended March 31, 2024, the Company executed a warrant agreement with two consultants, issuing warrants for 750,000 shares. These five-year warrants are exchangeable for the Company's common stock and carry an exercise price of $0.094 per share.
Series F Preferred Stock Exchange Agreements
In connection with the Series F preferred stock exchange agreements, the Company issued 592,137 warrants to purchase shares of the Company’s common stock. The Company concluded that the exchange warrants are liability classified with a fair value of $1.3 million as of the issuance date. As of March 31, 2024, the exchange warrants had a nominal fair value.
Senior Secured Notes
In connection with the issuance of the Senior Secured Notes in January 2023 (See Note 10), the Company issued 41,667 warrants to purchase shares of the Company’s common stock. The Company estimated the aggregate fair value of the warrants on the issuance date to be approximately $0.2 million, and nominal value as of March 31, 2024.
Line of Credit
In February 2023, in connection with the issuance of its line of credit, the Company issued 45,000 warrants to purchase shares of its Series E preferred stock (See Note 12). The Company estimated the aggregate fair value of the warrants on the issuance date to be approximately $5.6 million, and nominal value as of March 31, 2024.
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Series F-1 and F-2 Issuances
As part of the Series F-1 and F-2 preferred stock issuances, the Company issued 523,323 warrants to purchase shares of the Company’s common stock. The Company concluded that the Series F-1 and Series F-2 warrants are liability classified with a fair value of $1.2 million as of the issuance date. As of March 31, 2024, the fair value of the Series F-1 and Series F-2 warrants were nominal.
The warrants were classified as liabilities and measured at fair value on the grant date, with changes in fair value recognized as other income (expense) on the condensed consolidated statements of operations.
A summary of significant unobservable inputs (Level 3 inputs) used in measuring warrants on the issuance dates and as of March 31, 2024 is as follows:
 Series F / F-1 / F-22022 NotesWarrants -
Senior Secured
Note
Warrants -
Series E -
Line of Credit
Warrants - March 1, 2024
Date3/31/20243/31/20243/31/20243/31/20243/31/2024
Dividend yield0.0%0.0%0.0%0.0%0.0%
Expected price volatility70.0%65.0%70.0%70.0%70.0%
Risk free interest rate4.29%4.35%4.33%4.32%4.22%
Expected term (in years)4.23.63.83.84.9
Note 12 – Stockholders’ Equity
Preferred Stock
As of March 31, 2024, there were 50,000,000 authorized shares of the Company’s preferred stock with par value of $0.0001.
Series A Preferred Sock
As of March 31, 2024 and December 31, 2023, 251 shares of Series A preferred stock are issued and outstanding, respectively.
Series B Preferred Stock
As of March 31, 2024 and December 31, 2023, 1,443 shares of Series B preferred stock are issued and outstanding, respectively.
Series C Preferred Stock
As of March 31, 2024 and December 31, 2023, 500,756 shares of Series C preferred stock are issued and outstanding, respectively.
Series D Preferred Stock
As of March 31, 2024 and December 31, 2023, no shares of Series D preferred stock are issued and outstanding, respectively.
Series E Preferred Stock
On February 1, 2023, the Company’s Board of Directors authorized 77,000 shares of Series E preferred stock with a par value of $0.0001 per share, in connection with its line of credit. Each share of Series E preferred stock is convertible into 1,000 shares of the Company’s common stock at the option of the holders. The holders of the Series E preferred stock shall receive dividends on an as converted basis together with the holders of the Company’ common stock. The Series E preferred stock has no voting rights and does not have a preference upon any liquidation, dissolution or winding-up of the Company.
19


On February 2, 2023, in connection with its line of credit, the Company issued 5,000 shares of Series E preferred stock as a commitment fee with a fair value of $1.5 million. In addition, the Company agreed to issue an additional 5,000 shares of Series E preferred stock on both the first and second anniversary date of the line of credit, or 10,000 shares on the first anniversary, if the Company does not elect to extend the maturity date of the line of credit. The fair value of the additional 10,000 shares of Series E preferred stock on the issuance date totaled $2.9 million. The Company recorded the total fair value of $4.4 million as additional paid-in capital with the offsetting increase to deferred debt issuance costs.
As of March 31, 2024, following Series E preferred stock conversions, zero shares of Series E preferred stock are issued and outstanding. There were no shares of Series E preferred stock issued and outstanding as of December 31, 2023.
Series F Preferred Stock
On June 4, 2023, the Company entered into exchange agreements with (i) the 2022 Notes investors for the exchange of 2022 Notes in the aggregate principal amount of $2.6 million for 2,622 shares of the Company’s Series F convertible preferred stock (“Series F preferred stock”), (ii) with the Senior Secured Notes investors for the exchange of Senior Secured Notes in the aggregate principal amount of $0.2 million for 206 shares of Series F Preferred Stock; (iii) with the Demand Noteholders for the exchange of Demand Notes in the principal amount of $0.6 million for 576 shares of Series F Preferred Stock, and (iv) with the purchasers of the Company’s Series D Preferred Stock for the exchange of 1,197 shares of Series D Preferred Stock for 1,847 shares of Series F Preferred Stock.
In addition, the Company issued new five-year warrants to purchase an aggregate of 592,137 shares of common stock (the “Exchange Warrants”) to the 2022 Note holders, the Senior Secured Note holders, and the purchasers of the Company’s Series D preferred stock. The Exchange Warrants are exercisable at an exercise price of $8.868 per share of common stock. The holders may exercise the Exchange Warrants on a cashless basis if the shares of the Company’s common stock underlying the Exchange Warrants are not then registered pursuant to an effective registration statement. The Company concluded that the Exchange Warrants are liability classified.
For the 2022 Note holders, the total fair value of Series F preferred stock and warrant liability issued were $1.1 million and $0.6 million, respectively. For the Senior Secured Note holders, the total fair value of Series F preferred stock and warrant liability issued were $0.1 million and $30,000, respectively. For the Demand Note holders, the total fair value of Series F Preferred Stock and Warrant Liability issued were $0.2 million and $0.2 million, respectively. For the purchasers of the Company’s Series D preferred stock, the Company accounted for the exchange as an extinguishment of the Series D preferred stock and recorded the total fair value of Series F preferred Stock and warrant liability of $0.7 million and $0.5 million, respectively. The difference of $0.5 million with the $0.7 million carrying value of the Series D preferred stock as a deemed dividend and reduction to additional-paid-in-capital.
In July 2023, the Company converted 803 shares of Series F preferred stock for 103,234 shares of common stock. As of March 31, 2024 and December 31, 2023, 4,448 shares of Series F preferred stock are issued and outstanding, respectively.
Series F-1 Preferred Stock
On June 13, 2023, the Company issued 3,583 shares of Series F-1 preferred stock for an aggregate purchase price of $2.3 million. In connection with the issuance of the Series F-1 preferred stock, the holders will receive five-year warrants to purchase an aggregate of 398,377 shares of common stock (the “Series F-1 Warrants”). The Series F-1 Warrants will be exercisable at an exercise price of $8.994 per share of the Company’s common stock, subject to certain adjustments as set forth in the Series F-1 Warrants. The holders may exercise the Series F-1 Warrants on a cashless basis if the shares of our Common Stock underlying the Series F-1 Warrants are not then registered pursuant to an effective registration statement. The obligations of the Company and the Purchasers to consummate the transactions contemplated by the Purchase Agreement are subject to the satisfaction on or prior to the Closing of customary closing conditions..
The Company allocated the proceeds of $2.3 million to the liability classified warrants with a fair value of $0.9 million and the remaining proceeds of $1.4 million to the Series F-1 preferred stock.
In July 2023, the Company converted 2,930 shares of Series F-1 preferred stock for 325,737 shares of common stock. As of March 31, 2024 and December 31, 2023, 653 shares of Series F-1 preferred stock are issued and outstanding, respectively.
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Series F-2 Preferred Stock Offering
On June 14, 2023, the Company issued 1,153 shares of its Series F-2 preferred stock for an aggregate purchase price of approximately $0.7 million. In connection with the issuance of the Series F-2 preferred stock, the holders will receive five-year warrants to purchase an aggregate of 124,946 shares of common stock (the “F-2 Warrants”). The F-2 Warrants will be exercisable at an exercise price of $9.228 per share of common stock.
The Company allocated the proceeds of $0.7 million to the liability classified warrants with a fair value of $0.3 million and the remaining proceeds of $0.4 million to the Series F-2 preferred stock.
As of March 31, 2024 and December 31, 2023, 1,153 shares of Series F-2 preferred stock are issued and outstanding, respectively.
Common Stock
Authorized Shares
As of March 31, 2024, there were 800,000,000 shares of the Company’s authorized shares of common stock.
Warrant Exercises
During the three months ended March 31, 2024, the Company executed a warrant agreement with two consultants, issuing warrants for 750,000 shares. These five-year warrants are exchangeable for the Company's common stock and carry an exercise price of $0.094 per share. No warrants have been exercised as of March 31, 2024.
At-the-Market Offering
As of March 31, 2024, the Company has received net proceeds on sales of 4,824,382 shares of common stock under the at-the-market offering of approximately $0.6 million after deducting $28,000 in commissions and expenses. The weighted-average price of the common stock was $0.13 per share.
Equity Line of Credit
On July 20, 2023 (“Closing Date”), the Company entered into the ELOC with a purchaser (“ELOC Purchaser”) whereby the Company has the right to sell up to an aggregate of $50.0 million of newly issued shares (the “ELOC Shares”) of the Company’s common stock. The aggregate number of shares that the Company can sell under the ELOC Purchase Agreement may not exceed 4.99% of the outstanding common stock, subject to certain exceptions set forth in the ELOC Purchase Agreement.
The purchase price of the shares of common stock that the Company elects to sell to the pursuant to the ELOC Purchase Agreement will be equal to 97.0% of the lower of (i) the lowest intraday sale price of the common stock on the Company’s current trading market on the applicable purchase date or (ii) the arithmetic average of the three lowest closing sale prices during the ten trading days immediately preceding the applicable purchase date. There is no upper limit on the price per share that ELOC Purchase could be obligated to pay for the common stock under the ELOC Purchase Agreement.
As of March 31, 2024, the Company received net proceeds on sales of 21,133,689 shares of common stock of approximately $1.4 million, after deducting commissions and expenses, at a weighted average price of $0.13 per share.
Note 13 – Stock-Based Compensation
Stock Options
The Company grants equity-based compensation under its 2020 Long-Term Incentive Plan (the “2020 Plan”) and its 2016 Equity Incentive Plan (the “2016 Plan”). The 2020 Plan and 2016 Plan allows the Company to grant incentive and nonqualified stock options, and shares of restricted stock to its employees, directors and consultants. On June 14, 2019, the Board of Directors of the Company approved increasing the number of shares allocated to the Company’s 2016 Equity Incentive Plan from 91,667 to 122,222.
On December 16, 2020, the Company adopted its 2020 Plan. Under the 2020 Plan, there are 88,889 shares of the Company’s common stock available for issuance and the 2020 Plan has a term of 10 years.
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Under the 2016 Plan and the 2020 Plan, upon the exercise of stock options and issuance of fully vested restricted common stock, shares of common stock may be withheld to satisfy tax withholdings. The Company intends to net settle certain employee options to ensure adequate authorized shares under the Incentive Plan.
On December 22, 2022, the Company adopted its 2022 Long-Term Incentive Plan (the “2022 Plan”). Under the 2022 Plan, there are 70,000 shares of the Company’s common stock available for issuance and the 2022 Plan has a termination date of October 31, 2032.
A summary of activity under the Plans for the three months ended March 31, 2024 is as follows:
Shares
Underlying
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
Outstanding at December 31, 2023382,779$65.04 8.1$ 
Granted250,000$0.09 9.9
Forfeited0$ 0
Outstanding at March 31, 2024632,779$39.38 8.7$- 
Exercisable at March 31, 2024176,728$138.32 5.8$- 
During the three months ended March 31, 2024, the Company recognized stock-based compensation of approximately $38,000 related to stock options. The unrecognized compensation cost totaled approximately $0.1 million which is expected to be recognized over a weighted-average period of 1.1 years.
During the three months ended March 31, 2024, the Company issued 250,000 stock options, which were valued using the Black-Scholes option pricing model.

The following table presents the inputs used for the valuation of options granted, as per the Black-Scholes fair value model:
Three months ended March 31,
20242023
Dividend yield % 
Expected price volatility95.7 % 
Risk free interest rate4.9 % 
Expected term (years)0.8— 
Stock-Based Compensation
The total stock-based compensation expense recognized was as follows (in thousands):
Three months ended
March 31,
20242023
Research and development expenses$30 $59 
Selling, general and administrative expenses244 122 
Total stock-based compensation$274 $181 
As of March 31, 2024, the total unrecognized stock-based compensation cost related to outstanding unvested stock options that are expected to vest was $0.1 million, which the Company expects to recognize over an estimated weighted-average period of 1.1 years.
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Restricted Stock Units
A summary of the Company’s restricted stock activity and related information is as follows:
Number of
Shares
Weighted
Average
Grant-Date
Fair Value
Unvested at December 31, 20231,696,904$0.38 
Granted750,000$0.09 
Vested(1,322,374)$0.27 
Unvested at March 31, 20241,124,530$0.32 
During the three months ended March 31, 2024, the Company granted 750,000 restricted stock units and recognized stock-based compensation of approximately $0.2 million related to restricted stock units. The unrecognized compensation cost totaled approximately $0.1 million which is expected to be recognized over a weighted-average period of 0.6 years.
Note 14 – Warrants
A summary of the Company’s warrant (excluding penny warrants) activity and related information is as follows:
 Shares
Underlying
Warrants
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
Outstanding at December 31, 20231,760,095$18.96 4.4$ 
Issued750,000$0.09 4.9$ 
Exercised $ — $ 
Outstanding at March 31, 20242,510,095$14.01 4.2$ 
Liability Classified Warrants
During the three months ended March 31, 2024, the Company issued a total of 750,000 warrants to purchase shares of the Company’s common stock with an exercise price of $0.09 per share. The warrants were distributed as follows: 250,000 to Ascent Art Ventures, LLC and 500,000 to Five Oceans Capital, LLC. The warrants are set to expire 5 years from the issuance date.
2022 Notes
In connection with the 2022 Notes, the Company issued 362,657 warrants to purchase shares of the Company’s common stock. The warrants have an exercise price of $19.30 per share and expire five years from the issuance date.
During 2023, the Company entered into a warrant inducement and exercise agreement with certain holders. Under the terms of the agreement, the holders exercised 106,764 warrants, and the Company issued 106,764 new warrants to purchase shares of its common stock with an exercise price of $19.30 per share. The warrants expire 5 years from the issuance date.
On February 28, 2023, the Company entered into waiver agreements with holders of the 2022 Notes and issued 96,894 warrants to purchase shares of the Company’s common stock with an exercise price of $19.30 per share.
Exchange Warrants, F-1 Warrants, and F-2 Warrants
In connection with the exchange agreement, the Company issued new five-year warrants to purchase an aggregate of 592,137 shares of common stock to the noteholders and the purchasers of the Company’s Series D preferred stock. The Exchange Warrants are exercisable at an exercise price of $8.868 per share of common stock. The holders may exercise the
23


warrants on a cashless basis if the shares of the common stock underlying the warrants are not then registered pursuant to an effective registration statement. The Company concluded that the Exchange Warrants are liability classified.
In connection with the issuance of the Series F-1 preferred stock, the noteholders will receive five-year warrants to purchase an aggregate of 398,379 shares of common stock. The warrants will be exercisable at an exercise price of $8.994 per share of the Company’s common stock. The noteholders may exercise the warrants on a cashless basis if the shares of the common stock underlying the warrants are not then registered pursuant to an effective registration statement.
In connection with the issuance of the Series F-2 preferred stock, the noteholders will receive five-year warrants to purchase an aggregate of 124,948 shares of common stock. The F-2 warrants will be exercisable at an exercise price of $9.228 per share of common stock. The noteholders may exercise the F-2 warrants on a cashless basis if the shares of the common stock underlying the F-2 warrants are not then registered pursuant to an effective registration statement.
Note 15 – Commitments and Contingencies
Leases Under Crown Electrokinetics Division

Oregon State University

Since March 8, 2016, the Company has entered into a lease agreement with Oregon State University, to lease 1,700 square feet of office and laboratory space located at HP Campus Building 11, 1110 NE Circle Blvd, Corvallis, Oregon. On January 20, 2023, the Company entered into the ninth amendment which reduces the amount of cubicle space from 768 square feet to 288 square feet. Effective January 20, 2023 the quarterly operating expense will be $41,323 covering all utility and facility tooling costs. The sublease expires June 30, 2025.

Hudson 11601 Wilshire, LLC

Since March 4, 2021, the Company has entered into a lease agreement with Hudson 11601 Wilshire, LLC, to lease 3,500 square feet of office space located in Los Angeles, California. The lease term is 39 months and expires on June 30, 2024.

HP Inc.

Since May 4, 2021, the Company has entered into a lease agreement with HP Inc., to lease 3,694 square feet of office and laboratory space at HP Campus Building 10, located at 1110 NE Circle Blvd, Corvallis, Oregon. On January 26, 2022, the Company amended the lease commencement date to January 26, 2022. The lease term is 60 months and expires on January 31, 2027. The Company may extend for one additional 60 months period, which is not reasonably certain of being exercised.

Pacific N.W. Properties, LLC

Since October 5, 2021, the Company has entered into a lease agreement with Pacific N.W. Properties, LLC to lease 26,963 square feet of warehouse, manufacturing, production, and office space located in Salem Oregon. The lease commencement date is December 9, 2021 and expires on February 28, 2027.

During the second quarter of 2023, the Company determined that it no longer desired to occupy the premises. The Company and the Lessor entered into the Lease Termination Agreement on April 7, 2023.

The Lease Termination Agreement set forth a termination fee of $0.1 million as well as required the forfeiture of the security deposit of $0.2 million from the original lease agreement. The Company was required to vacate by April 30, 2023 as well as cover all utilities through that day. In the second quarter of 2023, the Company recorded a gain of $0.1 million for the difference between lease liability and right-of-use asset, loss of $0.1 million in payment of termination penalty, and a loss of $0.2 million of the original security deposit related to the termination agreement.

Leases Under Crown Fiber Optics Division

Burnham 182, LLC

On October 16, 2023, the Company entered into a lease agreement with Burnham 182, LLC, to lease 40,524 square feet of vacant land, including a 1,225 square foot Quonset hut and mobile office, located in Mesa, Arizona. This lease provides
24


yard space with which to store equipment for the Fiber business in Phoenix. The lease term is 36 months and expires on October 31, 2026. The monthly lease expense is as follows:
Months 1-12
-$9,321
Months 13-24
-$9,726
Months 25-36
-$10,131
The Company paid a security deposit totaling $31,450 at lease inception date.

NFS Leasing, Inc.

On October 31, 2023, we entered into a lease agreement with NFS Leasing, Inc. to lease certain equipment. The equipment will be physically located at a property which is owned and operated by Burnham 182, LLC located in Mesa, AZ. The lease term is 48 months, and the lease commencement date is November 30, 2023. The monthly lease expense is $23,060. We will pay a security deposit totaling $23,060. We have the option to purchase the equipment at fair market value, not to exceed 25% of the total sale price or extend the monthly payments on a month-to-month basis or for a fixed term at a mutually agreed to price and term, upon the expiration of the lease.
The components of the consolidated operating lease expense were as follows:
Three Months Ended
March 31,
20242023
Operating leases:
Operating lease cost$471 $190 
Variable lease cost 58 
Operating lease expense$471 $248 
The following information represents supplemental disclosure for the condensed consolidated statement of cash flows related to operating leases (in thousands):
Three months Ended
March 31,
20242023
Operating cash flows - operating leases$