Crown(US:CRKN)2022-11-09 16:00PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited financials show a pre-revenue company with significant operating losses, declining assets, and rising liabilities funded by capital raises Condensed Balance Sheets The balance sheet reflects a decline in total assets to $6.17 million and a rise in liabilities, eroding stockholders' equity Condensed Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $342 | $6,130 | | Total current assets | $722 | $6,817 | | TOTAL ASSETS | $6,166 | $9,652 | | Liabilities & Equity | | | | Total current liabilities | $1,605 | $664 | | Total liabilities | $3,420 | $664 | | Total stockholders' equity | $2,746 | $8,988 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $6,166 | $9,652 | Condensed Statements of Operations The net loss for the nine-month period improved to $12.16 million, driven by lower operating expenses and non-recurring prior-year charges Operating Results for the Nine Months Ended September 30 (in thousands, except per share data) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Research and development | $3,523 | $2,127 | | Selling, general and administrative | $8,634 | $14,184 | | Loss from operations | ($12,157) | ($16,311) | | Net loss | ($12,163) | ($31,774) | | Net loss per share | ($0.73) | ($2.32) | Condensed Statements of Cash Flows Net cash used in operations was $8.05 million, with a significant drop in financing activities leading to a cash balance of $0.34 million Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,049) | ($8,137) | | Net cash used in investing activities | ($339) | ($2,098) | | Net cash provided by financing activities | $2,600 | $19,900 | | Net (decrease) increase in cash | ($5,788) | $9,665 | | Cash — end of period | $342 | $9,701 | Notes to the Condensed Financial Statements The notes detail a history of operating losses, an accumulated deficit of $85.9 million, and management's liquidity plans - The company has incurred substantial operating losses since inception, with an accumulated deficit of approximately $85.9 million and negative working capital of approximately $0.9 million as of September 30, 202235 - Management believes the company has sufficient cash for at least the next 12 months, based on current cash, a $10 million Standby Letter of Credit (SLOC), and an At-the-Market (ATM) facility43186 - Subsequent to the quarter end, on October 19, 2022, the company raised $3.2 million in net proceeds from a convertible note offering145148 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the commercialization of its technology, improved operating results, and financing activities to ensure liquidity - The company is commercializing its electrokinetic glass technology, with its first product being the Smart Window Insert by DynamicTint153 - In August 2022, the company received its first purchase orders, valued at $85,450, from Hudson Pacific Properties for its Smart Window Inserts, with delivery expected to begin in December 2022172 - The company has entered into Master Supply Agreements with MetroSpaces Inc., Hudson Pacific Properties L.P., and Brandywine Operating Partnerships L.P. for the installation of its Smart Window Inserts169170171 Results of Operations Net loss decreased significantly due to a $5.6 million reduction in SG&A and the non-recurrence of a prior-year $15.5 million other expense Comparison of Results for the Nine Months Ended September 30 (in thousands) | Expense Category | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $3,523 | $2,127 | +$1,400 | | Selling, general and administrative | $8,634 | $14,184 | -$5,550 | | Other (income)/expense | $6 | $15,463 | -$15,457 | | Net loss | $12,163 | $31,774 | -$19,611 | - The $5.6 million decrease in SG&A expenses for the nine months ended Sep 30, 2022, was primarily due to a $5.9 million decrease in stock-based compensation179 Liquidity and Capital Resources The company is managing its liquidity through an ATM facility, a SLOC, and a recent convertible note offering to fund operations - The company entered into a $10 million Standby Letter of Credit (SLOC) in March 2022 and an At-the-Market (ATM) offering agreement for up to $5 million in March 2022 to provide liquidity183184 - Subsequent to September 30, 2022, the company received approximately $0.5 million from its ATM offering and $3.2 million from a Convertible Notes issuance185 - Management believes that based on the current operating plan, cash on hand, SLOC funding, and ATM facility, the company has sufficient cash for at least the next 12 months186 Critical Accounting Policies and Estimates Critical estimates involve stock-based compensation and common stock fair value, using the Black-Scholes model and peer data - The company uses the Black-Scholes option-pricing model to estimate the fair value of stock option awards, requiring management to make assumptions about expected term, volatility, risk-free rate, and dividends199200 - Due to a lack of its own historical data, the company estimates expected stock volatility based on the historical volatility of a publicly traded set of peer companies202 Quantitative and Qualitative Disclosures About Market Risk As a Smaller Reporting Company, the company is not required to provide market risk disclosures - As a Smaller Reporting Company, the company is not required to provide quantitative and qualitative disclosures about market risk211 Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls during the quarter - Based on an evaluation for the quarter ended September 30, 2022, the Chief Executive Officer concluded that the company's disclosure controls and procedures are effective214 - There were no changes in internal control over financial reporting during the fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls216 PART II - OTHER INFORMATION Legal Proceedings The company faces no material legal actions but may litigate to defend its intellectual property in the future - The company is involved in various claims and legal actions from the ordinary course of business but does not expect them to have a material adverse effect219 Risk Factors As a smaller reporting company, this section is not required - The company is a smaller reporting company and is not required to provide information under Item 1A. Risk Factors221 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were made during the period beyond prior disclosures - There were no unregistered sales of equity securities during the period covered by the report, other than those previously disclosed on Form 8-K222 Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None223 Mine Safety Disclosures This item is not applicable to the company's operations - N/A224 Other Information The company reports no other material information for this period - N/A224 Exhibits This section lists all exhibits filed as part of the report