Crown Electrokinetics Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

Notes Payable	3 Months Ended
Mar. 31, 2023
Notes Payable [Abstract]
Notes Payable	Note 11 - Notes Payable Convertible Notes 2022 Notes On October 19, 2022, the Company issued its 2022 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. The 2022 Notes were issued with a conversion price at a 54% premium to the most recent closing price, an original issue discount (“OID”) of 35%, do not bear interest, and mature upon the earlier of twelve months from the date of issuance or the closing of a change of control transaction (as defined in the 2022 Notes). The 2022 Notes are convertible into shares of the Company’s common stock at a conversion price of $0.49 per share, subject to adjustment under certain circumstances described in the notes. The 2022 Notes are secured by all of the Company’s assets (subject to exceptions for certain strategic transactions).The warrants have an exercise price of $0.32 per share and expire five years from the issuance date (subject to adjustment under certain circumstances described in the warrants). During the three months ended March 31, 2023, in connection with its 2022 Notes, the Company entered into a warrant inducement and exercise agreement with certain holders of the 2022 Notes (See Notes 7 and 13). On February 28, 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 5,813,414 warrants to purchase shares of the Company’s common stock (See Note 7 and 13). On March 24, 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 5% OID on their October note principal or ii) pending shareholder approval, to be issued shares of common stock with a value equal to the 5% OID, and to issue total shares of 1,903,429 as converted using the Nasdaq minimum price of $0.157. During the three months ended March 31, 2023, six of the note holders elected option i), and the Company increased the respective principal balance of the notes by approximately $0.15 million. The remaining noteholders elected option ii), and as of the date of this report, no shares of common stock have been issued. During the three months ended March 31, 2023, two noteholders converted a portion of their 2022 Notes into 1,887,919 shares of the Company’s commons stock (See Note 12). 2023 Note On February 3, 2023, upon drawing down on the Line of Credit, the Company issued its 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 issued with the initial $2.0 million drawdown is convertible into shares of the Company’s common stock, at a conversion price per share of $0.50 per share, subject to adjustment under certain circumstances described in the 2023 Note. Notes evidencing future withdrawals, if any, will be convertible into common stock only upon the declaration of an event of default under such promissory note. As of the date of this report, the Company has entered into agreements extending maturity of the 2023 Note out to May 31^st, 2023. As consideration the Company has agreed to issue the note holder with 4 thousand Series E preferred stock and 2 million shares of common stock. Both of these issuances are pending shareholder approval. As of March 31, 2023, the fair value of the 2022 Notes and the 2023 Notes was approximately $3.2 million. During the three months ended March 31, 2023, the Company recorded a change in fair value of the 2022 Notes and the 2023 Notes totaling $0.1 million. Senior Secured Notes On January 3, 2023, the Company issued senior secured notes with a principal balance of approximately $1.2 million and warrants to purchase 2,500,000 shares of the Company’s common stock for net proceeds of $1.0 million. The senior secured notes were issued with an original issue discount of 16.7%, do not bear interest, and mature three months from the date of issuance (unless extended pursuant to the terms of the notes). The warrants are exercisable for five years at an exercise price of $0.322, subject to adjustment under certain circumstances described in the warrants. As of the date of this report, the Company has entered into agreements extending maturity of the Senior Secured Notes out to May 23^rd, 2023 in return for the issuance of 4,710,000 shares of common stock split pro-rata across the holders. This issuance is pending shareholder approval. The senior secured notes and warrants were not registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any state and were offered and sold in reliance upon the exemption from registration afforded by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The Investors are “accredited investors” as such term is defined in Regulation D promulgated under the Securities Act.

Notes Payable

3 Months Ended

Mar. 31, 2023

Notes Payable [Abstract]

Notes Payable

Note 11 - Notes Payable

Convertible Notes

2022 Notes

On October 19, 2022, the Company issued its 2022 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. The 2022 Notes were issued with a conversion price at a 54% premium to the most recent closing price, an original issue discount (“OID”) of 35%, do not bear interest, and mature upon the earlier of twelve months from the date of issuance or the closing of a change of control transaction (as defined in the 2022 Notes). The 2022 Notes are convertible into shares of the Company’s common stock at a conversion price of $0.49 per share, subject to adjustment under certain circumstances described in the notes. The 2022 Notes are secured by all of the Company’s assets (subject to exceptions for certain strategic transactions).The warrants have an exercise price of $0.32 per share and expire five years from the issuance date (subject to adjustment under certain circumstances described in the warrants).

During the three months ended March 31, 2023, in connection with its 2022 Notes, the Company entered into a warrant inducement and exercise agreement with certain holders of the 2022 Notes (See Notes 7 and 13).

On February 28, 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 5,813,414 warrants to purchase shares of the Company’s common stock (See Note 7 and 13).

On March 24, 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 5% OID on their October note principal or ii) pending shareholder approval, to be issued shares of common stock with a value equal to the 5% OID, and to issue total shares of 1,903,429 as converted using the Nasdaq minimum price of $0.157. During the three months ended March 31, 2023, six of the note holders elected option i), and the Company increased the respective principal balance of the notes by approximately $0.15 million. The remaining noteholders elected option ii), and as of the date of this report, no shares of common stock have been issued.

During the three months ended March 31, 2023, two noteholders converted a portion of their 2022 Notes into 1,887,919 shares of the Company’s commons stock (See Note 12).

2023 Note

On February 3, 2023, upon drawing down on the Line of Credit, the Company issued its 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 issued with the initial $2.0 million drawdown is convertible into shares of the Company’s common stock, at a conversion price per share of $0.50 per share, subject to adjustment under certain circumstances described in the 2023 Note. Notes evidencing future withdrawals, if any, will be convertible into common stock only upon the declaration of an event of default under such promissory note. As of the date of this report, the Company has entered into agreements extending maturity of the 2023 Note out to May 31^st, 2023. As consideration the Company has agreed to issue the note holder with 4 thousand Series E preferred stock and 2 million shares of common stock. Both of these issuances are pending shareholder approval.

As of March 31, 2023, the fair value of the 2022 Notes and the 2023 Notes was approximately $3.2 million. During the three months ended March 31, 2023, the Company recorded a change in fair value of the 2022 Notes and the 2023 Notes totaling $0.1 million.

Senior Secured Notes

On January 3, 2023, the Company issued senior secured notes with a principal balance of approximately $1.2 million and warrants to purchase 2,500,000 shares of the Company’s common stock for net proceeds of $1.0 million. The senior secured notes were issued with an original issue discount of 16.7%, do not bear interest, and mature three months from the date of issuance (unless extended pursuant to the terms of the notes). The warrants are exercisable for five years at an exercise price of $0.322, subject to adjustment under certain circumstances described in the warrants. As of the date of this report, the Company has entered into agreements extending maturity of the Senior Secured Notes out to May 23^rd, 2023 in return for the issuance of 4,710,000 shares of common stock split pro-rata across the holders. This issuance is pending shareholder approval.

The senior secured notes and warrants were not registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any state and were offered and sold in reliance upon the exemption from registration afforded by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The Investors are “accredited investors” as such term is defined in Regulation D promulgated under the Securities Act.