Q4 2022 Crown Electrokinetics Corp. Earnings Call

Good morning, everyone and welcome to the Crown Electrokinetics Corporation earnings call for the fourth quarter and year end 2022.

At this time participants are in a listen only mode.

A question and answer session will follow management's remarks.

This conference call is being recorded a replay of today's call will be available on the Investor Relations section of crowds website.

I will now hand over the call to Jason Assad for introductions and the reading of the Safe Harbor statement. Please go ahead.

Thank you operator, good morning, everyone and welcome to Brown Ground's earnings call for the fourth quarter and year end 2022 with US today on the call are Doug Crocs, All Chief Executive Chief Executive Officer, and Chairman and John <unk>, Chief Financial Officer before.

Before we begin I would like to remind you that today's call contains certain forward looking statements from our management made within that section that made within the meaning of section 27 of the Securities Act of 1933 as amended and section 21 E of the Securities and Exchange Act of 934 as amended words, such as May should project.

<unk> expects intends plans believes anticipates hopes estimates and variations of such words and similar expressions are intended to identify forward looking statements. These statements are subject to numerous conditions many of which are beyond the control of the company, including those set forth in the risk factors section of the Companys quarterly report.

On Form 10-Q for the quarter ended.

Third quarter 2020 to first quarter 2022 filed with the SEC copies of these documents are available on the SEC's website at Www Dot FCC Dot Gov. Actual results may differ materially from those expressed or implied by such forward looking statements. The company undertakes no obligation to update these.

<unk> for revisions or changes after the date of this call except as required by law now at this time, it's my pleasure to introduce Doug <unk> CEO and chairman of Brown, Doug. Please go ahead.

Thanks, Jason.

I'd like to thank everyone for joining us this morning for our fourth quarter and year end 2022 earnings conference call I'm.

I'm going to talk about four primary topics today first will be our listing on Nasdaq.

It will be the capitalization of the company.

Third we will discuss the business of our new fiber optics Division and finally, I will give an update on our electrokinetic film business.

After my prepared remarks, Joel is going to give some financial highlights and at the end, we will open up to questions.

Alright, let's start with the.

And we get phone calls E mails from our investors on a daily basis obviously.

Two of the primary concerns that we hear about or do you have enough capital and are we going to stay on NASDAQ. So let me address the let me address the NASDAQ issue first.

Process going through the de listing and so we knew back in September when we failed to meet the what's called the bid rule.

In which we had to keep our share price above $1 for 30 consecutive days. So we received a letter saying we were not in compliance we got 180 day.

<unk> in which we could regain compliance got close a couple of times, but not quite and we're in the process with Nasdaq.

To present a plan the meeting is scheduled for late April .

We've retained a professional services firm.

Is comprised of former NASDAQ.

Executives to help us navigate these waters and we've been working with this group of professionals for couple of years now everything we do with NASDAQ We work with this group and they are obviously very skilled very knowledgeable and we have a ton of confidence they were going to get through this process and maintain our listing at the very least.

We believe that we're going to have another six months with which to regain compliance, but we also are a very different company today than we were back in September when we got the initial notice and Bob will talk about some of those reasons here later in our in our discussion.

Yes.

Moving to the capitalization.

So.

Know that this is really our Q4 and our fiscal year 2022, but we've had a lot of things that have happened in Q1, and we've actually been able to generate over $7 million of new capital through either debt or equity offerings. So while we wish we had more capital we are stable and we have a plan to continue to grab.

Julie add capital.

As we move forward.

We clearly announced that we had signed $100 million letter of credit that letter of credit will help us expand our fiber optics division.

Both in buying new equipment, and hiring new personnel to take advantage of some of the new customers and I'm going to get to those details here in a.

Minute.

So we are confident with what we've with what we've acquired.

With what we've raised we know that we will have to raise more money in the future to take advantage of our growth and we've got.

We have some options that are available to us. So she was a primary concerns that we hear from shareholders or do you have enough money and will you stay on NASDAQ.

We do have capital and we have a plan to raise more if we need it.

And number two we have a great plan to regain and stay compliant on NASDAQ and a lot of that has to do with frankly the business that we bought in January .

That business is generating revenue today that revenue number will grow throughout this calendar year and by the end of the year. We think we will have positive earnings. So we're in a very good position. We're in a very different position than what we were when our bid price fell below a dollar to.

Speaking of the fiber optics for those of you who are new to this company.

In early January we announced that we had entered into an asset purchase agreement with a private company called the marriage of <unk> seven.

They are a leader in the fields of distributed antenna systems, or what's called Das DHS and the construction of fiber optics.

It doesn't it's not obvious as to why a company who makes electrokinetic film technology would acquire a fiber optics construction company. Let me give you the story as to how this happened.

So we're in constant conversation with the customers of our Ek film and those customers are U S office Reits.

One of the customers we were in discussions with mid last year.

Asked us the question.

If our inserts could deliver a sell signal from the outside of the building to the inside of a building.

And it's not designed obviously to do that and we asked well why would why would we do that.

And the key this executive of this read and this manager. This building had explained to us that one of the biggest concerns. They had was to allow a five <unk> cell signal to be distributed within their building if for those of you who are familiar.

<unk> signals true <unk>.

Cannot penetrate glass walls floors, very well, which means if you are in the building and you have a <unk> cell phone youre not going to get a signal or not a very strong signal. So one of the things that buildings are doing if they haven't already they will need to do is to develop technology or implement technology that allows for that sell <unk>.

No to be delivered internally.

The most common solution in the market is what's called a digital I'm sorry, a distributed antenna system or das that is the exact products and the exact capabilities that emerge in seven had so through a lot of.

Introductions and searching we finally got to a company that could help us deliver and sell a distributed antenna system into our existing smart window in certain customer base as.

As Joel and I went through the diligence with the marriage and seven it became obvious that not only do they have capabilities in building das systems, but they are already have a contract with a very large company called charter communications, which deliver spectrum to your home and.

We started looking into that part of their business very very interesting revenue growth opportunity very interesting margins and a massive opportunity in the United States that in which not only the federal government, but also state governments are providing capital for cable companies Isps and telcos.

To build and deliver fiber to businesses in the home and so we went as we went through our diligence. It became obvious that this was a great opportunity for crown, we could add immediate revenue.

Eventually have profitability, which we were planning for by the end of this year.

And have skill sets to offer distributed antenna system, which will be necessary in all of the same customers that we're talking to about buying our smart window insert so on the outside when you see these two businesses it doesn't appear that they fit together, but our customer of our smart window Windsor.

Is the reason that we started down this path and we believe we will be buying not only our smart window insert, but implementing a distributed antenna system within their building as well so hopefully that clears up any confusion in the market.

Continuing with the fiber optics business. So we bought the business. We knew we had this great contract with charter, which we continue to work on in the Great Lakes region immediately what I wanted to do.

Got you.

Not be reliant upon a single customer that being charter. So in the last two months, we have announced two new customers one in the northwest one in the southwest.

And one of those customers, we believe will help generate $30 million of revenue.

Try to get that done in this calendar year. It may bleed into 2024, and we're going to continue to expand our customer base. We have a very robust pipeline. There are a lot of Isps are a lot of telcos and a lot of cable companies that are looking for fiber construction services. So we're going to continue to grow that business.

Not only within the regions that we're currently <unk>.

We have customers, but into new regions as well.

The effort to deploy high cap high capacity fiber networks.

<unk> to be meaningful it broadens the set of opportunities for our industry as major industry participants are constructing or upgrading significant wireline networks across broad sections of the country.

High capacity fiber networks are increasingly viewed as the most efficient and effective technology, enabling multiple revenue streams from a single investment fiber optic deployment opportunities are increasing in rural America through federal and state programs and for the construction of communication network.

In under served and Unserved areas across the country.

There is significant public investment plan for community Communications, excuse me infrastructure, including the bipartisan infrastructure law, which provide 65 billion in funding 65 billion in funding to expand high speed Internet access that's just a federal funding that's not state funding.

Thats not funding from the actual companies the balance sheet of the companies themselves. So we have a huge market demand and there is a lack of suppliers in this market presents a great opportunity for our fiber optics division.

Okay, So I'm going to I want to turn the call back to.

While we're all invested in this company in the first place, which is our electro kinetic film technology. So obviously, we talk a lot about fiber and you've seen a lot of updates and press releases around our fiber optics division, that's because they've been very active but we clearly are still very focused on our electrokinetic technology.

The question that we hear often is why haven't you delivered any inserts great question believe me I wish we could there is a component of our production line. Its a tooling component that is being built by two different vendors overseas. They have struggled to finalize this component to the to the <unk>.

Polity level that we need in order to deliver our first inserts.

We have been working with them we've made great progress in the last couple of months.

Earlier. This week received we received a version of that tooling component, we installed it on Wednesday night, and we ran film all day yesterday in the film looks pretty darn. Good it's not there it's not 100%, but we've definitely moved the ball closer to the goal line in April I'm going to send the shareholder letter that will.

Among other updates, we'll give an update as to the progress on the film side, but we're looking good we're not quite there customers clearly are being very patient.

We're in constant communication with them and we do believe that.

When we have this final tooling component fixed that will we will be up and running and producing film for our for our first product smart window is there.

For our first customers use office buildings, we expect that to happen still within this calendar year.

Okay, So I'm going to turn it over to Joel and then I'll cut then it will come back to me for final comments Joel.

Thanks, Doug.

Hey, good morning, everyone today.

Today ill walk through crowds year end 2022 financials.

Firstly, just a note to our investors and the public that the audited financial statements will compare full year of 2022 with.

For the nine months stub period of 2021, which followed our change in fiscal year last year.

Today's call, though and consistent with the MD&A section of our 10-K I'll be comparing our full year of 2022 results to a like for like but unaudited full year of 2021.

For the year ended December 31, 2022 crowds net loss was approximately $14 $3 million. This included noncash compensation expenses of $2 $4 million.

Compared to 2021 $37 $2 million net loss.

This was $22 $8 million lower driven by stock based compensation, reducing $9 8 million in other income expenses down year on year by $15 8 million, which stemmed from the balance treatment balance sheet restructure the effect in early 2021.

These noncash elements the underlying net loss increased $2 7 million due to higher operating expenses.

Total operating expenses for the year ended 2022 were $15 1 million, which consisted of $2 4 million of non cash stock based comp $7 million of payroll and related expense $2 6 million in consulting and professional fees and $3 1 million of operating out of the heads.

Excluding stock comp expense operating expenses were higher by $2 7 million due to increased payroll cost $1 5 million rent utilities, and <unk> 6 million and other other heads of <unk> 6 million.

For the year ended December 31, 2022 net cash decreased.

$3 million with the company deploying $11 1 million of cash for operations and <unk> 8 million two investments crown.

Crown raised $6 6 million from financing activities in 2022 three.

$3 1 million equity issuance and $3 5 million of debt notes that we issued in Q4.

As of December 31, cash and cash equivalents.

8 million.

As Doug mentioned subsequent to December 31, there've been a number of Q1 liquidity events with highlighting.

Most notably Crown raising $7 1 million of fresh capital and securing a $100 million line of credit, which will support the customer expansion and our new fiber optics business.

The capital raised withdrawn 2 million down from the line of credit and then we raised another $1 billion of debt from our new Nunn.

Further with $4 1 million was raised through equity with 2 million coming from cash exercise of warrants and $2 1 million from ATM activity.

As we're continuing to see strong volume and crown.

Crown trading.

That concludes our prepared remarks.

Now I'd like to open the call for questions operator.

Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.

If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

One moment, while we poll for questions.

There are no questions in the queue at this time I'd like to hand, the call back to Doug Cross sell for closing remarks.

Alright, Thank you operator.

Just want to point out where we were a year ago.

This day.

We have this company has been through a lot.

Had we not made the pivot that we did in January quite honestly I'm not sure how we would.

I'm not sure how we would get our film to the finish line.

So while.

The stock price, it's frustrating to everybody, including myself management team and the board of directors, we do feel that we put this company in a position to grow.

Not just with revenue, but with earnings and while we grow on the fiber side, we will continue to develop the film on the electric electrokinetic side I.

I do know that we will have product in the market. This year I have confidence that we will I have confidence that we will also get through the Nasdaq.

<unk> or re listing process as I like to call it and I know that we won't have the proper capitalization to build this business going forward.

Thank you for your support and we look forward to talking to you in mid May on our Q1 earnings call.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.

Okay.