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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 June 30, 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)
| | | | | | | | |
Delaware | | 47-5423944 |
(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)
458.212.2500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.0001 par value | | CRKN | | The Nasdaq Capital Market |
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 filer | o | Accelerated filer | o |
Non-accelerated filer | x | Smaller reporting company | x |
| | Emerging growth company | x |
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 13(a) of the Exchange 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 August 13, 2024 was 4,389,658.
CROWN ELECTROKINETICS CORP.
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.
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements.
CROWN ELECTROKINETICS CORP.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
| | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 | |
| (Unaudited) | | | |
ASSETS | | | | |
Current assets: | | | | |
Cash | $ | 3,990 | | | $ | 1,059 | | |
Prepaid and other current assets | 378 | | | 728 | | |
Accounts and retention receivable, net | 3,351 | | | 83 | | |
Note receivable | 211 | | | — | | |
Contract asset | 1,244 | | | — | | |
Total current assets | 9,174 | | | 1,870 | | |
Prepaid expenses - non-current | 215 | | | — | | |
Property and equipment, net | 3,012 | | | 3,129 | | |
Intangible assets, net | 1,269 | | | 1,382 | | |
Right-of-use assets | 1,878 | | | 1,701 | | |
Deferred debt issuance costs | 292 | | | 1,306 | | |
Other assets | 160 | | | 139 | | |
TOTAL ASSETS | $ | 16,000 | | | $ | 9,527 | | |
| | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| | | | |
Current liabilities: | | | | |
Accounts payable | $ | 2,215 | | | $ | 1,500 | | |
Accrued expenses | 898 | | | 1,194 | | |
Lease liabilities - current portion | 735 | | | 655 | | |
| | | | |
Notes payable - Current | 636 | | | 429 | | |
Contract liabilities | 1,260 | | | — | | |
Total current liabilities | 5,744 | | | 3,778 | | |
Notes payable - non-current | 296 | | | — | | |
Lease liabilities - non-current portion | 1,178 | | | 1,072 | | |
Total liabilities | 7,218 | | | 4,850 | | |
| | | | |
Commitments and Contingencies (Note 12) | | | | |
| | | | |
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, no shares outstanding as of June 30, 2024 and 251 shares outstanding as of December 31, 2023, respectively; liquidation preference zero as of June 30, 2024 and $261 as of December 31, 2023 | — | | | — | | |
Series B preferred stock, par value $0.0001; 1,500 shares authorized, no shares outstanding as of June 30, 2024 and 1,443 shares outstanding as of December 31, 2023; liquidation preference zero as of June 30, 2024 and $1,501 as of December 31, 2023 | — | | | — | | |
Series C preferred stock, par value $0.0001; 600,000 shares authorized, no shares outstanding as of June 30, 2024 and 500,756 shares outstanding as of December 31, 2023; liquidation preference zero as of June 30, 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 June 30, 2024 and December 31, 2023; liquidation preference zero as of June 30, 2024 and December 31, 2023 | — | | | — | | |
Series E preferred stock, par value $0.0001; 77,000 shares authorized, no shares issued and outstanding as of June 30, 2024 and December 31, 2023. | — | | | — | | |
Series F preferred stock, par value $0.0001; 9,073 shares authorized, no shares outstanding as of June 30, 2024 and 4,448 shares outstanding as of December 31, 2023; liquidation preference zero as of June 30, 2024 and $4,753 as of December 31, 2023. | — | | | — | | |
Series F-1 preferred stock, par value $0.0001; 9,052 shares authorized, no shares outstanding as of June 30, 2024 and 653 shares outstanding as of December 31, 2023; liquidation preference zero as of June 30, 2024 and $696 as of December 31, 2023. | — | | | — | | |
Series F-2 preferred stock, par value $0.0001; 9,052 shares authorized, no shares outstanding as of June 30, 2024 and 1,153 shares outstanding as of December 31, 2023; liquidation preference zero as of June 30, 2024 and $1,371 as of December 31, 2023. | — | | | — | | |
Common stock, par value $0.0001; 800,000,000 shares authorized; 3,307,872 and 171,677 shares outstanding as of June 30, 2024 and December 31, 2023, respectively | — | | | 7 | | |
Additional paid-in capital | 135,418 | | | 121,665 | | |
Accumulated deficit | (126,636) | | | (116,995) | | |
Total stockholders’ equity | 8,782 | | | 4,677 | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 16,000 | | | $ | 9,527 | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
CROWN ELECTROKINETICS CORP.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | | |
| 2024 | | 2023 | | 2024 | | 2023 | | | | |
Revenue | $ | 4,648 | | | $ | 37 | | | $ | 5,330 | | | $ | 59 | | | | | |
| | | | | | | | | | | |
Cost of revenue, excluding depreciation and amortization | (4,039) | | | (23) | | | (5,819) | | | (54) | | | | | |
Depreciation and amortization | (219) | | | (81) | | | (286) | | | (263) | | | | | |
Research and development | (1,111) | | | (490) | | | (1,867) | | | (1,031) | | | | | |
General and administrative | (4,187) | | | (4,328) | | | (5,970) | | | (7,722) | | | | | |
Loss from operations | (4,908) | | | (4,885) | | | (8,612) | | | (9,011) | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other income (expense): | | | | | | | | | | | |
Interest expense | (145) | | | (2,508) | | | (1,005) | | | (4,525) | | | | | |
Loss on extinguishment of warrant liability | — | | | — | | | — | | | (504) | | | | | |
Loss on extinguishment of debt | — | | | (2,345) | | | — | | | (2,345) | | | | | |
Gain on issuance of convertible notes | — | | | — | | | — | | | 64 | | | | | |
Change in fair value of warrants | 23 | | | 2,130 | | | — | | | 7,736 | | | | | |
Change in fair value of notes | — | | | (6,883) | | | — | | | (7,000) | | | | | |
| | | | | | | | | | | |
Other income (expense), net | 1 | | | (28) | | | (24) | | | (1,234) | | | | | |
Total other income (expense) | (121) | | | (9,634) | | | (1,029) | | | (7,808) | | | | | |
| | | | | | | | | | | |
Loss before income taxes | (5,029) | | | (14,519) | | | (9,641) | | | (16,819) | | | | | |
| | | | | | | | | | | |
Income tax expense | — | | | — | | | — | | | — | | | | | |
| | | | | | | | | | | |
Net loss | (5,029) | | | (14,519) | | | (9,641) | | | (16,819) | | | | | |
Deemed dividend on Series D preferred stock | — | | | — | | | — | | | (6) | | | | | |
Cumulative dividends on Series A preferred stock | — | | | (5) | | | — | | | (9) | | | | | |
Cumulative dividends on Series B preferred stock | — | | | (29) | | | — | | | (49) | | | | | |
Cumulative dividends on Series C preferred stock | — | | | (10) | | | — | | | (10) | | | | | |
Cumulative dividends on Series D preferred stock | — | | | (53) | | | — | | | (84) | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Deemed dividend in connection with conversion of Series A, Series B, and Series C preferred stock | (1,350) | | | — | | | (1,350) | | | — | | | | | |
Deemed dividend in connection with conversion of Series F, F-1, and F-2 | (3,874) | | | — | | | (3,874) | | | — | | | | | |
Net loss attributable to common stockholders | $ | (10,253) | | | $ | (14,616) | | | $ | (14,865) | | | $ | (16,977) | | | | | |
| | | | | | | | | | | |
Net loss per share attributable to common stockholders | $ | (5.89) | | | $ | (2,720.27) | | | $ | (14.98) | | | $ | (3,951.82) | | | | | |
| | | | | | | | | | | |
Weighted average shares outstanding, basic and diluted: | 1,739,995 | | 5,373 | | 992,278 | | 4,296 | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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 Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Total Stockholders’ Equity | |
| Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | | | |
Balance as of December 31, 2023 | 251 | | $ | — | | | 1,443 | | $ | — | | | 500,756 | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | 4,448 | | $ | — | | | 653 | | $ | — | | | 1,153 | | $ | — | | | 171,677 | | | $ | 7 | | | $ | 121,665 | | | $ | (116,995) | | | $ | 4,677 | | |
Issuance of common stock in connection with equity line of credit | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 140,904 | | 3 | | | 1,388 | | | — | | | 1,391 | | |
Issuance of common stock/at-the-market offering, net of offering costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 32,163 | | — | | | 588 | | | — | | | 588 | | |
Stock-based compensation | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | 274 | | | — | | | 274 | | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,612) | | | (4,612) | | |
Balance at March 31, 2024 (unaudited) | 251 | | $ | — | | | 1,443 | | $ | — | | | 500,756 | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | 4,448 | | $ | — | | | 653 | | $ | — | | | 1,153 | | $ | — | | | 344,744 | | $ | 10 | | | $ | 123,915 | | | $ | (121,607) | | | $ | 2,318 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of common stock in connection with equity line of credit | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,599,123 | | | — | | | 9,343 | | | — | | | 9,343 | | |
Issuance of common stock upon the conversion of Series A preferred stock | (251) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 36,220 | | | — | | | — | | | — | | | — | | |
Issuance of common stock upon the conversion of Series B preferred stock | — | | | — | | | (1,443) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 220,782 | | | — | | | — | | | — | | | — | | |
Issuance of common stock upon the conversion of Series C preferred stock | — | | | — | | | — | | | — | | | (500,756) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 78,056 | | | — | | | — | | | — | | | — | | |
Issuance of common stock upon the conversion of Series F preferred stock | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,448) | | | — | | | — | | | — | | | — | | | — | | | 648,441 | | | — | | | — | | | — | | | — | | |
Issuance of common stock upon the conversion of Series F-1 preferred stock | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (653) | | | — | | | — | | | — | | | 113,576 | | | — | | | — | | | — | | | — | | |
Issuance of common stock upon the conversion of Series F-2 preferred stock | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,153) | | | — | | | 140,264 | | | — | | | — | | | — | | | — | | |
Vesting of restricted stock units | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 126,666 | | | — | | | — | | | — | | | — | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reclassification of common stock to additional paid-in capital to reflect no change in par value in connection with reverse stock split | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (10) | | | 10 | | | — | | | — | | |
Stock-based compensation | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 2,150 | | | — | | | 2,150 | | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,029) | | | (5,029) | | |
Balance at June 30, 2024 (unaudited) | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | 3,307,872 | | | $ | — | | | $ | 135,418 | | | $ | (126,636) | | | $ | 8,782 | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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 | | Series F Preferred Stock | | Series F-1 Preferred Stock | | Series F-2 Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Total Stockholders’ Equity | |
| Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | Number | | Amount | | | | |
Balance as of December 31, 2022 | 251 | | $ | — | | | 1,443 | | $ | — | | | 500,756 | | $ | — | | | 1,058 | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | 2,257 | | $ | 2 | | | $ | 88,533 | | | $ | (88,005) | | | $ | 530 | | |
Exercise of common stock warrants | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | 729 | | 1 | | | 2,061 | | | — | | | 2,062 | | |
Issuance of common stock in connection with conversion of notes | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | 210 | | — | | | 516 | | | — | | | 516 | | |
Issuance of common stock/At-the-market offering, net of offering costs | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | 1,412 | | 1 | | | 2,106 | | | — | | | 2,107 | | |
Issuance of Series E preferred stock in connection with LOC | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | 5,000 | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | 4,350 | | | — | | | 4,350 | | |
Deemed dividend for repricing of Series D preferred stock | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | 6 | | | (6) | | | — | | |
Commitment to issue shares of common stock in connection with March waiver agreement | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | 298 | | | — | | | 298 | | |
Stock-based compensation | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | 265 | | — | | | 181 | | | — | | | 181 | | |
Net loss | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | (2,300) | | | (2,300) | | |
Balance at March 31, 2023 (Unaudited) | 251 | | $ | — | | | 1443 | | $ | — | | | 500,756 | | $ | — | | | 1,058 | | $ | — | | | 5,000 | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | 4,873 | | $ | 4 | | | $ | 98,051 | | | $ | (90,311) | | | $ | 7,744 | | |
Issuance of common stock in connection with Series A and Series B Dividends | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | | — | | — | | — | | — | | — | | — | | — | | | 50 | | — | | | — | | | — | | | — | | |
Issuance of common stock upon the conversion of Series E preferred stock | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | 556 | | 1 | | | — | | | — | | | 1 | | |
Issuance of common stock in connection with conversion of October Notes | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | 1,660 | | 1 | | | 2,165 | | | — | | | 2,166 | | |
Dividends paid in shares of Series D preferred stock | — | | | — | | — | | — | | — | | — | | — | | — | | | — | | | 139 | | — | | | — | | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | — | | |
Series D preferred stock exchanged for Series F preferred stock in connection with Exchange Agreements | — | | | — | | | — | | | — | | | — | | | — | | | (1,197) | | | — | | | — | | | — | | | 1,847 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (450) | | | — | | | (450) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Conversion of Demand Notes and October Notes into Series F preferred stock in connection with Exchange Agreements | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,198 | | — | | | 3,583 | | — | | | — | | | — | | | — | | | — | | | 1,276 | | | — | | | 1,276 | | |
Conversion of January Notes into Series F preferred stock in connection with Exchange Agreements | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 206 | | — | | | — | | | — | | | 1,153 | | — | | | — | | | — | | | 82 | | | — | | | 82 | | |
Issuance of Series F-1 preferred stock | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,372 | | | — | | | 1,372 | | |
Issuance of Series F-2 preferred stock | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 464 | | | — | | | 464 | | |
Commitment to issue shares of common stock in connection with January Notes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,410 | | | — | | | 2,410 | | |
Commitment to issue shares of common stock in connection with LOC Notes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 230 | | | — | | | 230 | | |
Commitment to issue shares of Series E preferred stock in connection with LOC Notes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,000) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,363 | | | — | | | 3,363 | | |
Commitment to issue shares of common stock in connection with Demand Notes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 286 | | | — | | | 286 | | |
Stock-based compensation | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 132 | | | — | | | 132 | | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (14,519) | | | (14,519) | | |
Balance as of June 30, 2023 (unaudited) | 251 | | $ | — | | | 1,443 | | $ | — | | | 500,756 | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | 5,251 | | $ | — | | | 3,583 | | $ | — | | | 1,153 | | $ | — | | | 7,139 | | $ | 6 | | | $ | 109,381 | | | $ | (104,830) | | | $ | 4,557 | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
CROWN ELECTROKINETICS CORP.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| | | | | | | | | | | | | | |
| Six months ended June 30, | |
| 2024 | | 2023 | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | |
Net loss | (9,641) | | | (16,819) | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | |
Stock-based compensation | 2,424 | | | 313 | | |
Depreciation and amortization | 286 | | | 372 | | |
Loss on extinguishment of warrant liability | — | | | 504 | | |
Change in fair value of warrant liability | — | | | (7,736) | | |
| | | | |
| | | | |
Loss on extinguishment of debt | — | | | 2,345 | | |
| | | | |
Change in fair value of notes | — | | | 7,000 | | |
Amortization of deferred debt issuance costs | 1,014 | | | 4,049 | | |
Amortization of right-of-use assets | 383 | | | 1,045 | | |
Amortization of notes payable | (15) | | | — | | |
Loss on disposal of equipment | — | | | 235 | | |
Other expenses | — | | | 1,275 | | |
Changes in operating assets and liabilities: | | | | |
Prepaid and other assets | 114 | | | (14) | | |
Accounts receivable | (3,268) | | | — | | |
Contract asset | (1,244) | | | — | | |
Note receivables | (211) | | | — | | |
Contract liabilities | 1,260 | | | — | | |
Accounts payable | 715 | | | 886 | | |
Accrued expenses | (296) | | | (742) | | |
Lease liabilities | (374) | | | (1,101) | | |
Net cash used in operating activities | (8,853) | | | (8,388) | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | |
Cash paid for acquisition of Amerigen 7 | — | | | (644) | | |
Purchase of equipment | (56) | | | (707) | | |
Net cash used in investing activities | (56) | | | (1,351) | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | |
Proceeds from the exercise of warrants | — | | | 2,061 | | |
| | | | |
Proceeds from the issuance of common stock / at-the-market offering, net of offering costs | 588 | | | 2,107 | | |
Proceeds from the issuance of notes in connection with line of credit | — | | | 2,350 | | |
| | | | |
| | | | |
| | | | |
| | | | |
Proceeds from issuance of Series F-1 preferred stock | — | | | 2,328 | | |
Proceeds from issuance of Series F-2 preferred stock | — | | | 748 | | |
Proceeds from issuance of Senior Secured Notes, net of fees paid | — | | | 1,357 | | |
Borrowing of notes payable | 1,164 | | | — | | |
Repayment of notes payable | (646) | | | (1,997) | | |
Proceeds from the issuance of common stock in connection with equity line of credit, net of offering costs | 10,734 | | | — | | |
Net cash provided by financing activities | 11,840 | | | 8,954 | | |
| | | | |
Net increase / decrease in cash | 2,931 | | | (785) | | |
Cash — beginning of period | 1,059 | | | 821 | | |
Cash — end of period | $ | 3,990 | | | $ | 36 | | |
SUPPLEMENTAL CASH FLOW INFORMATION | | | | |
Cash paid for interest | $ | 90 | | | $ | 8 | | |
Cash paid for taxes | $ | 2 | | | $ | — | | |
Right-of-use assets in exchange of operating lease liabilities | $ | 560 | | | $ | — | | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | |
Conversion of Series A preferred stock into common stock | $ | 251 | | | $ | — | | |
Conversion of Series B preferred stock into common stock | $ | 1,530 | | | $ | — | | |
Conversion of Series C preferred stock into common stock | $ | 501 | | | $ | — | | |
Conversion of Series F preferred stock into common stock | $ | 4,438 | | | $ | — | | |
Conversion of Series F-1 preferred stock into common stock | $ | 653 | | | $ | — | | |
Conversion of Series F-2 preferred stock into common stock | $ | 1,163 | | | $ | — | | |
Deemed dividend in connection with conversion of Series A, Series B, and Series C preferred stock | $ | 1,350 | | | $ | — | | |
Deemed dividend in connection with conversion of Series F-1, F-2, and F-3 preferred stock | $ | 3,874 | | | $ | — | | |
Net impact of reclassification of common stock to APIC in connection with reverse stock split | $ | 7 | | | $ | — | | |
Issuance of Series E preferred stock in connection with line of credit | $ | — | | | $ | 9,943 | | |
| | | | |
| | | | |
Issuance of Series F preferred stock in connection with exchange of Series D preferred stock | $ | — | | | $ | 450 | | |
Issuance of common stock in connection with conversion of notes | $ | — | | | $ | 516 | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Deemed dividend for repricing of series D preferred stock | $ | — | | | $ | 6 | | |
Commitment to issue shares of common stock in connection with Demand Notes | $ | — | | | $ | 286 | | |
Unpaid equipment included in accounts payable | $ | — | | | $ | 92 | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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.
Reverse Stock Split
On June 14, 2024, the Company’s board of directors authorized a reverse stock split (“June 2024 Reverse Stock Split”) at an exchange ratio of one-for-150 basis. The June 2024 Reverse Stock Split was effective on June 25, 2024, such that every 150 shares of common stock were automatically converted into one share of common stock. The Company did not issue fractional certificates for post-reverse split common stock shares in connection with the June 2024 Reverse Stock Split. Rather, all shares of common stock that were held by a common stockholder were aggregated and each common stockholder was entitled to receive the number of whole common stock shares resulting from the combination of the aggregated common stock shares. Any fractions resulting from the reverse split computation were rounded up to the next whole common stock share amount.
The number of authorized shares and the par value of the common stock was not adjusted. In connection with the June 2024 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. 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 June 2024 Reverse Stock Split.
On August 11, 2023, the Company’s board of directors authorized and effected a reverse stock split (“August 2023 Reverse Stock Split”) at an exchange ratio of one-for-60 basis.
Liquidity and Going Concern
The Company has incurred substantial operating losses and negative cash flows from operations 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 cash of approximately $4.0 million and an accumulated deficit of approximately $126.6 million as of June 30, 2024, a net loss of approximately $9.6 million for the six months ended June 30, 2024, and approximately $8.9 million of net cash used in operating activities for the six months ended June 30, 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 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 condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions among consolidated entities were eliminated upon consolidation. The unaudited condensed consolidated financial statements were prepared in accordance with U.S. GAAP for financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial reporting. As permitted under those rules, certain footnotes or other financial information can be condensed or omitted. These condensed consolidated financial statements and related disclosures have been prepared with the assumption that users of the interim financial information have read or have access to the audited consolidated financial statements for the preceding fiscal year. Accordingly, these statements should be read in conjunction with the audited consolidated financial statements and related notes 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.
These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal and recurring adjustments that are necessary for a fair statement of the Company’s consolidated financial information. The interim results of operations are not necessarily indicative of the results that may be expected for the full year, or for any other future annual or interim period.
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, cost-to-cost (input) revenue recognition method, estimated fair value of warrant liability, 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.
Revenue Recognition
The Company generates revenue primarily through construction and installation of fiber network infrastructure systems for its customers, and sales of smart glass products, which, together, represents two operating segments, the fiber optics group and film group. Revenues consistent of a combination of the following:
Fiber optics group services:
•Specialty Services performed for communications providers in connection with the deployment of underground fiber optic transmission lines.
•Specialty Services that involve the upfront procurement of specialized equipment that will be used to provide the services.
Film group products:
•Smart Window Inserts, which uses DynamicTint electrokinetic technology that allows windows to tint and transition from clear to true black.
The Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company applies the following five-step revenue recognition model in accounting for its revenue arrangements:
•Identification of the contract with the customer;
•Identification of the performance obligations in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligations in the contract; and
•Recognition of revenue when, or as, 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.
Fiber optics group revenue recognition
The nature of the Company’s fiber optics group performance in its agreements is to customize output by constructing infrastructure that is customer specific. The Company is required to adhere to the rules and regulations that are outlined in an agreement between the Company and the Customer. As a result, the fiber optic contracts prevent the Company from directing the use of such output to any other entity except the specific customer. The customer is the only party that can benefit from the output that results from the Company’s performance of Specialty Services under the contract. As such, the Company’s performance does not create an asset with an alternative use and the Company has concluded that the Specialty Services are recognized over time.
To measure the progress of completion, the Company uses a cost-to-cost (input) method, by comparing costs incurred to date relative to the total expected costs to satisfy the performance obligation. The Company notes that when applying this method, it excludes the effects of any costs that do not depict its performance in transferring control of goods or services to the customer.
Film group revenue recognition
The Company’s film group has not entered into any material revenue contracts with its customers and no revenue is recognized for this operating segment for the three and six months ended June 30, 2024 and 2023.
Retainage
The Company’s customers have a contractual right to withhold payment of a retainage amount that typically ranges between 5% to 10% of the total contract consideration. 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 expected to be collected upon the project's completion and acceptance by the customer. As of June 30, 2024 and December 31, 2023, the Company has recorded a retainage receivable of $0.3 million and zero, respectively, which is a component of the accounts receivable balance in the condensed consolidated balance sheet.
Accounts Receivable and Provision for Credit Losses
The provision for credit losses is based on the Company’s assessment of the collectability of its customer accounts. As of June 30, 2024, the Company had accounts receivable of $3.4 million, compared to $83,000 as of December 31, 2023.
The Company reviews the provision for credit losses by considering certain factors such as historical experience, industry data, credit quality, age of balances and current economic conditions that may affect a customer’s ability to pay. Uncollectible receivables are written off when all efforts to collect have been exhausted and recoveries are recognized when they are recovered. The Company’s provision for credit losses were zero as of June 30, 2024 and December 31, 2023.
Concentrations of risk and significant customers
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and accounts receivable. The Company maintains its cash accounts with financial institutions where deposits, at times, exceed the Federal Deposit Insurance Corporation (“FDIC”) limits. The Company has not experienced any losses in such accounts through June 30, 2024.
The Company’s customers are generally large public or private companies with good credit and payment practices and a positive reputation in the industry at the time that the contracts are entered into. Furthermore, because it has the ability to stop transferring promised goods and services if payment is not received, the Company has concluded that collection risk is minimal.
One single customer accounted for 82% of accounts receivable as of June 30, 2024.
The Company’s revenue is primarily generated from its Fiber Optics segment. Two customers accounted for approximately 84% of the total revenue generated as of June 30, 2024.
As of June 30, 2024, the Company’s accounts payable primarily included costs associated with professional fees, subcontractor labor, equipment, and other supplies and materials.
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 June 30, 2024, which includes film group and fiber optics group. Revenue recognized during the three and six months ended June 30, 2024 relates to the fiber optics group.
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, upon a draw down, a portion of the deferred asset balance will be amortized and recognized as other income (expense) in the condensed consolidated statements of operations.
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.
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.
As the Company was in a net loss position for the three and six months ended June 30, 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 as of June 30, 2024 and 2023 are as follows:
| | | | | | | | | | | | | | |
| June 30, | |
| 2024 | | 2023 | |
| | | | |
Series A preferred stock | — | | | 3,146 | |
Series B preferred stock | — | | | — | | |
Series C preferred stock | — | | | 9,346 | |
| | | | |
| | | | |
Convertible notes | — | | | — | | |
Series F preferred stock | — | | | 501,579 | |
Series F-1 preferred stock | — | | | 72,631 | |
Series F-2 preferred stock | — | | | 124,946 | |
Warrants to purchase common stock (excluding penny warrants) | 16,523 | | 11,801 | |
Warrants to purchase Series E preferred stock | 5,000 | | 5,000 | |
Options to purchase common stock | 4,245 | | 1,078 | |
Unvested restricted stock units | 231,206 | | 52 | |
Commitment shares | 1,420 | | 2,893 | |
Total | 258,394 | | 732,472 | |
Note 3 - Revenue
For the three months ended June 30, 2024, the Company generated revenue of $4.6 million, compared to $37,000 for the three months ended June 30, 2023. For the six months ended June 30, 2024, the Company's revenue was $5.3 million, compared to $0.1 million for the six months ended June 30, 2023. All revenues were derived from operations within the United States.
Contract balances
As of June 30, 2024, the Company's contract assets included unbilled receivables totaling $1.2 million, compared to zero as of December 31, 2023. There was no allowance for credit losses associated with contract assets as of June 30, 2024 and December 31, 2023. As of June 30, 2024, the contract liability balance was $1.3 million.
As of June 30, 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 Company did not record any deferred revenue as of December 31, 2023.
Remaining Performance Obligations
Remaining performance obligations represent non-cancellable contracted revenues that have not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenues in future periods.
The Company's remaining performance obligations for contracts were $6.0 million as of June 30, 2024, of which, the Company expects to recognize approximately 100% as revenue over the next twelve months and the remainder thereafter.
Note 4 – Balance Sheet Components
Prepaid and Other Current Assets
Prepaid and other current assets consisted of the following (in thousands):
| | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 | |
| | | | |
License fees | $ | 48 | | | $ | 158 | | |
| | | | |
Professional fees | 133 | | | 53 | | |
General liability insurance | 52 | | | 26 | | |
Hudson warrant | 53 | | | 86 | | |
Prepaid rent | 62 | | | 277 | | |
Other | 30 | | | 128 | | |
Total | $ | 378 | | | $ | 728 | | |
Notes receivable
On March 30, 2024, the Company entered into a Senior Secured Promissory Note agreement (the “March Note”) with RamPro Construction and HDD, LLC, and Vero HDD, LLC (collectively, the "Borrowers"). Under this agreement, the Company holds a note receivable with a principal amount of $0.6 million. The note bears interest at a rate of 5% per annum, calculated on a 360-day year basis, with interest payable upon maturity. The principal and accrued interest are due on December 30, 2024.
On May 10, 2024, the Company and Borrowers executed a Senior Secured Promissory Note (the “May Note”). The May Note replaced the obligations from the Borrowers to Crown under the March Note and it was in substance an amendment of the March Note. The Company promised to lend $0.3 million to the Borrowers. The May Note bears interest at a rate of 5% per annum, calculated on a 360-day year basis, with interest payable upon maturity. The principal and accrued interest are due on May 25, 2025. As of June 30, 2024, the March Note was extinguished and there were no unamortized net fees or costs from the March Note.
The note is secured by all personal property and assets of the Borrowers and their subsidiaries, granting the Company a first priority security interest in these assets. In the event of default, the Company has the right to declare the unpaid balance immediately due and payable and pursue remedies available to a secured party under the Uniform Commercial Code. Events of default include non-payment of principal or interest, and the bankruptcy or insolvency of the Borrowers. The Company evaluates the collectability of the note receivable regularly and maintains an allowance for credit losses based on historical experience, current conditions, and reasonable forecasts. As of June 30, 2024, no allowance for credit losses had been deemed necessary for the May Note receivable.
Property and equipment, net
Property and equipment, net, consisted of the following (in thousands):
| | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 | |
| | | | |
Equipment | $ | 3 |