Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

Commitments and Contingencies
3 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies 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
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,
2024 2023
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,
2024 2023
Operating cash flows - operating leases $ 484  $ 192 
Right-of-use assets obtained in exchange for operating lease liabilities $ 1,146  $ — 
The present value assumptions used in calculating the present value of the lease payments were as follows:
March 31,
2024 2023
Weighted-average remaining lease term (years) 2.7 3.0
Weighted-average discount rate 12.0  % 12.0  %
As of March 31, 2024, future minimum payments are as follows (in thousands):
Nine months ended December 31, 2024 $ 606 
Year ended December 31, 2025 578 
Year ended December 31, 2026 478 
Year ended December 31, 2027 240 
Total 1,902 
Less present value discount (346)
Operating lease liabilities $ 1,556 
From time to time, the Company is also involved in various other claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe that the ultimate resolution of these actions will have a material adverse effect on its financial position, results of operations, liquidity or capital resources.
Future litigation may be necessary to defend ourselves and our partners by determining the scope, enforceability and validity of third party proprietary rights or to establish the Company’s proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.