Crown(CRKN) - 2025 Q1 - Quarterly Report

Part I - Financial Information Condensed Consolidated Financial Statements (Unaudited) Q1 2025 revenue $2.8 million, net loss $9.7 million; assets $43.5 million, going concern doubt disclosed Condensed Consolidated Balance Sheets Total assets increased to $43.5 million from financing; liabilities decreased, equity rose to $35.9 million Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash | $22,450 | $13,699 | | Total current assets | $31,313 | $23,586 | | Total Assets | $43,486 | $34,983 | | Liabilities & Equity | | | | Total current liabilities | $6,125 | $11,076 | | Total Liabilities | $7,610 | $12,739 | | Total Stockholders' Equity | $35,876 | $22,244 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q1 2025 revenue $2.8 million, net loss $9.7 million due to higher SG&A, loss per share $(5.79) Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share data) | (in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $2,772 | $682 | | Gross margin | $(1,017) | $(1,023) | | Loss from operations | $(9,900) | $(3,705) | | Net loss | $(9,684) | $(4,612) | | Net loss per share | $(5.79) | $(2,881.11) | | Weighted average shares outstanding | 1,672,581 | 1,699 | Condensed Consolidated Statements of Cash Flows Q1 2025: $11.0 million operating cash outflow, $1.7 million investing, $21.4 million financing, cash $22.5 million Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,014) | $(2,677) | | Net cash used in investing activities | $(1,657) | $(63) | | Net cash provided by financing activities | $21,422 | $1,971 | | Net increase (decrease) in cash | $8,751 | $(769) | | Cash — end of the period | $22,450 | $290 | Notes to the Condensed Consolidated Financial Statements Notes detail business structure, two 1-for-150 reverse stock splits, Nasdaq delisting, and substantial doubt about going concern - The company's business is organized into four main divisions: Smart Windows, Fiber Optics, Slant Wells, and Element 82[28][29][146] - The company executed two 1-for-150 reverse stock splits, effective June 25, 2024, and January 30, 2025, with all share and per-share data retroactively adjusted[33][34] - On March 3, 2025, the company received a Nasdaq delisting determination, with trading suspended March 5, 2025, and now trades on the OTC market[39] - Management concluded substantial doubt about the company's ability to continue as a going concern for the next twelve months due to recurring losses, negative cash flow, and capital raising uncertainties post-Nasdaq delisting[40][44] - In Q1 2025, two customers accounted for 91% of consolidated revenue; as of March 31, 2025, three customers accounted for 87% of accounts receivable[58][59] - A related party, Horizon HDD, accounted for 38% of accounts payable as of March 31, 2025, and 26% of the total cost of revenue for Q1 2025[60][61][157] Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2025 revenue $2.8 million, higher costs and SG&A led to increased operating loss; going concern doubt persists post-Nasdaq delisting Results of Operations Q1 2025 revenue increased by $2.1 million to $2.8 million; SG&A surged by $5.9 million, leading to $9.9 million operating loss Results of Operations (in thousands) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $2,772 | $682 | $2,090 | | Gross margin | $(1,017) | $(1,023) | $6 | | Research and development | $1,219 | $898 | $321 | | Selling, general and administrative | $7,664 | $1,784 | $5,880 | | Loss from operations | $(9,900) | $(3,705) | $(6,195) | | Net loss | $(9,684) | $(4,612) | $(5,072) | - The $2.1 million revenue increase was primarily due to new contracts with clients from Fortune 500 telecoms to local municipalities[178] - The $5.9 million increase in SG&A expenses was driven by higher professional fees ($3.0 million), salaries and benefits ($1.8 million), and other expenses[184] Liquidity and Capital Resources Q1 2025 ended with $22.5 million cash, boosted by $21.4 million from financing; going concern doubt persists due to losses and Nasdaq delisting - Management believes there is substantial doubt regarding the company's ability to continue as a going concern for the next twelve months[193] - The Nasdaq suspension negatively impacted capital raising, preventing use of its at-the-market offering program or equity line-of-credit[192][200] - In January 2025, the company sold 947,128 shares through its ATM offering for approximately $21.2 million in net proceeds[199] Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,014) | $(2,677) | | Net cash used in investing activities | $(1,657) | $(63) | | Net cash provided by financing activities | $21,422 | $1,971) | Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of March 31, 2025, due to material weaknesses, with remediation targeting Q2 2025 - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025[216][221] - Identified material weaknesses include: * Lack of documentation of processes and controls * Inadequate design of IT general and application controls * Lack of segregation of duties in accounting * Ineffective risk assessment controls[227] - The company initiated a remediation plan, including redesigning control procedures and engaging outside technology leaders, targeting remediation by the second quarter of 2025[222][223][224] Part II - Other Information Legal Proceedings The company is not currently a party to any material litigation and expects ordinary course claims to not be materially adverse - There is currently no litigation pending against the company, its directors, or officers that could materially affect the company[233] Other Information (Items 1A, 2, 3, 4, 5) As a smaller reporting company, Crown is exempt from Item 1A (Risk Factors) and Item 3 (Market Risk) disclosures, reporting no unregistered equity sales or senior security defaults - The company is a smaller reporting company, exempt from providing information for Item 1A (Risk Factors) and Item 3 (Quantitative and Qualitative Disclosures About Market Risk)[234][213] - There were no unregistered sales of equity securities during the period not previously disclosed on Form 8-K[235] - The company reports no defaults upon senior securities[236]