Note 2 – Liquidity, Financial Condition, 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 consolidated financial statements, the Company had an accumulated deficit of approximately $88.0 million and negative working capital of approximately $3.3 million at December 31, 2022, a net loss of approximately $14.3 million, approximately $11.1 million of net cash used in operating activities, and $0.8 million of net cash used in investing activities for the year ended December 31, 2022. The Company expects to continue to incur ongoing administrative and other expenses, including public company expenses.

The accompanying 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 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 will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations including through it’s existing At-The-Market, $10 million Standing Letter of Credit, and $100 million Line of Credit facilities; 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 financial statements.

Standby Letter of Credit

On March 23^rd, 2022, the Company entered into an Irrevocable $10 million Standby Letter of Credit (“SLOC”). The SLOC accrues interest at a rate of 12% per annum and matures 2 years from the issuance date of the SLOC. Interest is payable quarterly. In connection with the SLOC, the Company will issue 50,000 shares of its restricted common stock with each cash draw of $1.0 million. Drawdowns are capped at a maximum of $5 million in the first six months. The Company did not drawdown any SLOC funds during the year ended December 31, 2022, and intends to drawdown on the available funds only as necessary in 2023.

Series D Preferred Stock

The Company settled $1.0 million of shares liability, by issuing 1,058 shares of Series D preferred stock in July 2022 (See Note 10).

Senior Convertible Notes and Warrants

On October 19, 2022, the Company issued senior secured convertible notes (the “Notes”) with a principal balance of approximately $5.4 million, and warrants to purchase 21,749,402 shares of the Company’s common stock for net proceeds of $3.5 million (See Note 9).

At-the-Market Offerings

The Company entered into a Sales Agreement with A.G.P./Alliance Global Partners (the “Sales Agents”) dated March 30, 2022 (the “Sales Agreement”), pursuant to which the Company may, from time to time, sell up to $5 million in shares (the “Placement Shares”) of the Company’s common stock through the Sales Agents, acting as the Company’s sales agent and/or principal, in a continuous at-the-market offering (the “ATM Offering”). The Company will pay the Sales Agents a commission of up to 3.0% of the aggregate gross proceeds the Company receives from all sales of the Company’s common stock under the Sales Agreement. The Placement Shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333- 262122) and the related base prospectus included in the registration statement, as supplemented by the prospectus supplement dated March 30, 2022.

On October 5, 2022, the Company and the Sales Agents filed the first amendment to the Sales Agreement (the “First Amendment to the Sales Agreement”). Pursuant to the First Amendment to the Sales Agreement, the Company may from time to time, sell up to $3.5 million in Placement Shares of the Company’s common stock through the Sales Agents in a continuous At-the-Market Offering (the Amended ATM Offering”). According to the First Amendment to the Sales Agreement, the Company will pay the Sales Agents a commission of up to 3.0% of the aggregate gross proceeds the Company receives from all sales of its common stock in the Amended ATM Offering.

As of December 31, 2022, the Company has received net proceeds on sales of 3,368,146 shares of common stock under the Sales Agreement of approximately $1.25 million (after deducting $0.05 million in commissions and expenses) at a weighted average price of $0.385 per share.

2023 Line of Credit

On February 2, 2023, the Company entered into a line of credit (the “Line of Credit”) securing a line of credit up to $100.0 million. The Line of Credit will be used to fund expenses related to the fulfillment of contracts with customers of the Company’s wholly-owned subsidiary, Crown Fiber Optics Corporation. The Line of Credit expires February 2, 2024, unless the Line of Credit is extended for one or two additional years in accordance with its terms. On February 2, 2023, the Company withdrew $2.0 million under the Line of Credit.

Although it is difficult to predict the Company’s liquidity requirements as of December 31, 2022, based upon the Company’s current operating plan, cash on hand, the proceeds from the issuance of its senior secured convertible notes payable and warrants, and its SLOC and Letter of Credit funding, management believes that the Company will have sufficient cash to meet its projected operating requirements for at least the next 12 months following the issuance of these financial statements.

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. 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.