Crown Electrokinetics Corp.

Good day, everyone, and welcome to Crown Electrokinetics Corporation earnings conference call for the stub period, nine months ended, December 31st, 2021. At this time, participants are in a listen-only mode. A question and answer session will follow the management's remarks. This conference call is being recorded. A replay of today's call will be available on the investor relations section of Crown's website and will remain posted there for the next 30 days. I will now hand the call over to Henrik Dabrowski for introductions. and the reading of the Safe Harbor Statement. Please go ahead.

Thank you, Brayer. Good morning, everyone, and welcome to Crown's earning call for the nine-month stop period ended December 31, 2021. With us today's call are Doug Croxall, Crown's Chief Executive Officer and Chairman, and Joel Crox, Chief Financial Officer. Before we begin, I would like to remind you that today's call contains certain forward-looking statements former management made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, and variations of such words and similar expressions are intended to identify forward-looking statements. The statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the risk factor section of the company's annual report on foreign 10-K or 10-KT for the fiscal year and stop period, including the nine months under December 31st, 2021, filed with the SEC. Copies of these documents are available on the SEC's website at www.sec.gov. Actual results may differ materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update these statements for revisions or changes after the date of this call, except as required by law. Now, at this time, it is my pleasure to introduce Doug Trussell, CEO and Chairman of Crown. Mr. Kratso, please go ahead.

All right. Thank you, Henrik. So thanks, everyone, for joining us today. I've got about five pages of prepared remarks. I hate reading from a script, so I'm going to do my best to not do that. I want to start off by just reviewing Crown's mission, which is to provide an affordable smart glass solution that will enable its customers to reduce energy and in turn lower carbon emissions. Our first product, as many of you know, is called the Smart Window Insert powered by Dynamic Tint. It's an affordable solar-powered insert which does not require hard wiring and can be easily installed into the interior side of existing windows in commercial office buildings. Our tint, which we call Dynamic Tint, is a pigment-based thin film. It was originally developed by HP. And it's based on our proprietary and patent-protected electrokinetic technology. So at Crown, we recognize that commercial buildings are inefficient. They're inefficient insulators because glass is an inefficient material in which to insulate. So Crown is solving a big problem for a very large addressable market. Our smart window insert easily installs into a building's existing window frame, leaving the existing window intact. We do not touch the existing window. This transforms a building's single pane window into an energy efficient dual pane smart window. Once installed, the insert is powered by a solar strip. We do not hardwire to the building's electrical system. This is a big deal. There are no other inserts that have smart glass technology associated with them. if they did they would be hardwired into the building our insert absorbs sunlight thereby reducing the amount of HVAC usage leading to lower electricity costs and a smaller carbon footprint our insert also provides an insulative benefit by effectively adding a second pane to the building's existing single pane allowing heat and air conditioning to stay in the building more efficiently and than the existing single pane window. Also a big deal, which means our product is not only important in warm weather climates, but in climates like New York City, where they actually experience. The commercial building sector is under increasing pressure from shareholders, tenants, and regulators to reduce their HVAC energy consumption, and more importantly, reduce their carbon emissions. We're hitting the market at a really interesting time. Luck is a good thing to have on your side. We're the only smart glass retrofit product in the market. Crown's smart window insert is priced comparatively with high-end window blinds. We're not expensive electrochromic windows. We're priced slightly above a solar shade, which is pretty prevalent in most office buildings. Okay, so what I'd like to do now is review our product development and our product release schedule. This summer, we'll be manufacturing and delivering our first-generation smart window insert. That smart window insert will be comprised of 12-inch strips of our dynamic tint film. Today, we cannot make film wide enough to cover the entire insert. So we can make, however, 12-inch strips of our film, and we're making it defect-free today. So those 12-inch strips will be placed across a single piece of glass. Our frame will will encompass that piece of glass. Our solar strip that faces exterior in the building, capturing the sunlight to charge a lithium ion battery. The lithium ion power source for allowing the user to transition the film from clear to dark on demand. Each office that has our inserts will have a handheld controller that allows the occupant of that office to easily control the insert. Each insert will be gathering performance and usage data. We will effectively be creating an epidural layer to the building, and that layer will be gathering data. That data will be important to help not only Crown monitor the performance of our insert, but help the building manage their HVAC. Our inserts are easily installed and will not require any fasteners for installation, and each insert is powered by the sun's energy through the solar strip. Our product is highly sustainable and, again, does not require any hard wiring to the building's electrical system. We'll have a limited run of the first-generation insert to be sold and distributed to three customers, Metro Spaces, Hudson Pacific, and recently announced Brandywine Realty Trust. Those customers have a total of 281 buildings. We will strategically place those inserts in a handful of buildings owned by our customers. We'll get feedback and performance. We'll look at the design and the usage, and we'll use that iterative approach with our customer to help develop our second-generation smart window insert with their feedback. The second-generation product, again, first-generation product is coming out this summer. Second-generation product will be a single piece of dynamic tint replacing the 12-inch strips. We expect that there will be new features that will be incorporated into the second-generation product. including the following potential upgrades. Increased data gathering, including external weather information, amount of sunlight, internal temperatures, placement of the sun in the sky during the day, whether someone is in or not in their office. The second generation insert can be controlled by either the same handheld device or through an app downloaded to a smart device like a phone or an iPad. we expect it will be able to produce significantly more second-generation inserts as compared to the limited run of the first generation. And I may get into that next. So for a manufacturing update, one year ago at this time, for those of you who were shareholders and a part of our IPO, one year ago at this time, we actually had a very different strategy. Our plan was to produce our film in our R&D lab in Corvallis on our proto-production tool, and then to teach our contract manufacturing partners, we had three at the time, to develop and build our film in their facility. Obviously, that's not happening today. COVID and business disruption and delayed product launches by our products, our manufacturing partners, I should say, on their own products, caused us to start down a path to vertically previously planned outsourced manufacturing. I'm thrilled to tell you that today Crown is able to manufacture our own film and will do so in our Corvallis and Salem, Oregon facilities. I cannot understate the importance of what we've achieved in less than one year. We will increase our margins and protect our intellectual property by manufacturing our own film. We now control our own destiny. We're currently producing our film at a six-inch width and defect-free in our Corvallis R&D lab. We're working towards producing our film at 12-inch defect-free, which will be the basis of our first-generation smart window insert this summer. We've also developed a technique that will allow us to produce our film up to 72-inch width, which is wide enough to satisfy the commercial building market. Let me read that again. we've also developed a technique internally owned by us it will allow us to produce our film up to 72 inch width which is plenty wide to satisfy the commercial building market we call this technique stitching and if filed and will continue to file the proper protections on this invention our team of engineers and one in particular is given Crown the opportunity to significantly advance our time to market with wide-width film, allowing us to approach the commercial market with a product that can have an immediate impact on a building's cost savings and carbon footprint. Last summer, we embarked upon a process to design a purpose-built line, a single line performing all the necessary steps in making our electrokinetic films. The conclusion of that process has provided us with a partner that will build our first purpose-built, roll-to-roll manufacturing of our film in any width from 12 inches up to 72 inches. This new production line, once up and running, at capacity, we believe, will produce annualized revenues of between $110 and $120 million and has the potential to generate EBITDA of approximately $20 million. So one line in one facility with assembly should be able to produce between $110 and $120 million annually and the ability to produce about $20 million of EBITDA annually. We're in active discussions with a number of funding sources that we believe can provide non-dilutive funding for our capital expenditures. These are hard assets that we're purchasing annually. There's a lot of equipment financing out there. We've been in discussions and will continue discussions. As soon as we have something to report, we will report. Environmental, social, and governance, ESG, it's a big trend to talk about these days. We obviously are actively pursuing ESG. Our participation is a key ESG supplier to US-based office buildings. The retrofitting that we do for these buildings allow them to start checking the boxes and providing meaningful response to the ESG requirements that they all have. Our goal is to help building owners reduce their energy use and reduce their carbon footprint. Crown Smart Window Insert can do that immediately for all existing buildings. Let's talk about customers briefly. As previously stated, we have a new customer that we added to our growing list. Brandywine is our largest customer to date with over 170 buildings. Their buildings are primarily in Philadelphia, where they're headquartered. They're also in D.C. and Austin, Texas. We'll be delivering our first-generation insert to all three customers this summer to specific locations as determined by Crown and our customers. We'll continue to work with other prospective customers in our sales pipeline and hope to have further announcements in the coming quarters. It should be noted that we are experiencing interest not only from U.S.-based building owners, but also from commercial property owners in Europe, Middle East, and Asia. Additionally, other markets such as residential and transportation also continue to show interest. In due course, we will address those market opportunities But for the near term, we're very focused on providing our product to our current target customer, the US office building market. All right, intellectual property. You know, intellectual property and specifically patents are really difficult asset class for public markets to properly value. We believe the value of our intangible assets were not fully understood by the public market. For that purpose, We engaged an independent organization to provide us with an updated assessment of our U.S. patents and trade secrets. We're pleased with these results, which we will announce after this earnings call. The estimated new value should favorably impact our valuation and provide additional assurances as we look to finance Crown's expansion. All right, those are my prepared remarks. I look forward to taking some questions from everyone afterwards. Right now, I'm going to hand the call over to Joel.