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Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Research from Water Tower Research

Equity Research Firm

Equity Bottom-Up

<h2>KEY POINTS</h2>
<div></div>
<ul>
<li>On August 1, 2022, Crown Electrokinetics provided an&nbsp;update&nbsp;on the recently announced equity funding, debt financing, and transition to customer acquisition.</li>
<li>On July 20, 2022, the company announced the pricing of an underwritten public offering of shares of its common stock at $0.80 per share, yielding $1 million in gross proceeds.</li>
<li>The offering is supplemental to the Series D preferred stock round, convertible into common stock at an above-market price, from which $1.1 million was raised.</li>
<li>On May 31, 2022, Crown Electrokinetics&nbsp;announced&nbsp;the execution of a non-binding definitive term sheet for debt financing.</li>
<li>The equity and debt funds will be used to finance two purpose-built roll-to-roll lines to produce Crown’s DynamicTint film and to support working capital until the end of the calendar year 2023.</li>
<li>The new roll-to-roll lines will enable Crown to produce the film at any length and width from 12 to 72 inches, largely satisfying the commercial building market’s requirements.</li>
<li>Once the new lines are producing at capacity, Crown expects annualized revenues of ~$220 million and EBITDA of ~$40 million from smart window inserts. The company expects to receive both lines by the summer of 2023.</li>
<li>Crown’s intellectual property value contributed significantly to the debt financing. Independent appraisal of its IP revealed a combined patent and trade secret fair market value of $94.4 million.</li>
<li>Crown’s initial target market is US office buildings, and the company will actively acquire new US customers once the new production lines are up and running.</li>
<li>Our prior content on CRKN can be accessed&nbsp;here.</li>
</ul>
<div>OUR INSIGHTS</div>
<h2>The Opportunities</h2>
<p>Crown stands at an inflection point of the smart glass industry and has an attractive position. It can target retrofit opportunities with an easy-to-install, highly cost-competitive solution and a demonstrated ROI. Furthermore, increasing legislative reforms for green buildings surrounding LEED certification and customer preferences in favor of carbon reduction create a growing market for Crown’s smart glass solutions. Tenants may become the driving force behind demand creation as they become more conscious of the benefits of using these technologies. In addition, many corporations will be after cost-effective solutions that improve their overall profitability while reducing emissions as they face higher regulatory burdens and strive to meet aggressive ESG and net-zero targets.</p>
<h2>The Obstacles</h2>
<p>The company is still in the initial stages of commercial deployment and needs a completed commercial installation to showcase the technology and expand the customer base. Additionally, Crown will need to significantly expand production capacity to meet anticipated demand, creating execution risk and capital needs.</p>
<h2>COMPANY OVERVIEW</h2>
<p>Crown Electrokinetics (CRKN) provides energy-efficient solutions through its electrokinetic technology, DynamicTint, which allows any glass surface to transition between clear and dark in seconds. CRKN is a smart glass technology company that directly reduces energy needs and carbon reduction in buildings by blocking sunlight. Critically, the technology can be used in retrofit applications, generating a compelling market opportunity. Initially, the focus is on commercial buildings and REITs, but it can potentially be applied to residential applications and transportation. DynamicTint provides an alternative to cumbersome solutions such as window shades, which are inefficient and less effective at curbing energy usage. It is important to note that Crown’s technology can be implemented for only a modest premium over traditional shades. Retrofit existing glass gives the company a competitive position by adding to building owners’ ways to manage energy and meet carbon reduction goals. The company is targeting REITs as its primary customers, and, in June 2020, Hudson Pacific Properties(HPP), a leading REIT, became a strategic investor. Crown has also signed a Master Supply Agreement (MSA) with HPP and Brandywine Operating Partnership, delineating terms and conditions for future purchase orders, solidifying the partnership, and helping Crown to focus on its commercialization journey. The company is transitioning from the research and development phase to commercializing electrokinetic technology in the $3.6 billion smart glass market.</p>
<h2>The Technology</h2>
<p>The core of CRKN’s business is the trademark DynamicTint. This thin film is powered by electrically charged pigment, replacing standard window tints, and is a more sustainable alternative to traditional window treatments. Traditional windows in commercial buildings are inefficient insulators, causing HVAC systems to use excessive amounts of energy and increasing energy spending and unnecessary carbon emissions. Crown’s Smart Window Insert absorbs sunlight and reduces HVAC usage, fostering energy savings and reducing the amount of carbon released into the environment. DynamicTint turns an existing window into a “smart” window upon installation. The client can control the tint manually via a device such as a phone or through a program that automatically changes the tint based on time of day and weather patterns. It could even change the color of the glass. The technology was initially designed to control the light passing through plastic, but the Crown team saw significant opportunities in the emerging smart glass industry. Most importantly, it could be retrofitted to existing glass, unlike most competing offerings requiring glass to be replaced entirely. Company management believes that the technology’s fast transition time (which is not area-dependent), low-power requirements, high stability, and easy installation should position it to compete effectively against other smart glass technologies, including Electrochromic (EC), Suspended Particles in Polymer (SPD), and Polymer Dispersed Liquid Crystal (PDLC).</p>
<h2>The Market</h2>
<p>Retrofit Opportunities in Commercial Buildings.&nbsp;One only needs to take a quick look around to appreciate the massive installed base of commercial buildings in the US. Crown’s initial focus is to target these buildings and the REITs that own them through commercial building window retrofits. This is an excellent backdrop for Crown’s window solutions—specifically for office buildings. Most existing buildings use incumbent solutions like shades to block sunlight, which are far less effective than Crown’s solution. Specifically, the company believes that the cost of DynamicTint is highly competitive with standard office blinds, making blind replacement cycles an excellent opportunity for Crown to engage with building owners. It is generally an ROI sale to the customer, promising to reduce energy consumption by up to 26%. The company believes DynamicTint can lower HVAC expenses associated with less need for ambient heating of building spaces and provide a reasonable payback period. On average, building owners change their window coverings every seven to eight years, and typically the replacement cost of blinds is $450-$700. Crown prices its 5x5 Smart Window Insert between $650 and $750. This price point is very competitive, only slightly above the cost of blinds, and significantly cheaper than replacing the entire window with alternative smart glass solutions. When installed, the insert can easily manage the impact of solar heat and improve the working environment for the building's tenants. Furthermore, it should eliminate replacing blinds or shades every few years.</p>
<h2>DISCLOSURES</h2>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Shawn Severson, who is the writer of this report, covers the BioEconomy, ClimateTech &amp; Sustainable Investing, and Emerging Growth &amp; Special Situations sectors for WTR. Mr. Severson and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.<br><br>WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY POINTS


On August 1, 2022, Crown Electrokinetics provided an&nbsp;update&nbsp;on the recently announced equity funding, debt financing, and transition to customer acquisition.
On July 20, 2022, the company announced the pricing of an underwritten public offering of shares of its common stock at $0.80 per share, yielding $1 million in gross proceeds.
The offering is supplemental to the Series D preferred stock round, convertible into common stock at an above-market price, from which $1.1 million was raised.
On May 31, 2022, Crown Electrokinetics&nbsp;announced&nbsp;the execution of a non-binding definitive term sheet for debt financing.
The equity and debt funds will be used to finance two purpose-built roll-to-roll lines to produce Crown’s DynamicTint film and to support working capital until the end of the calendar year 2023.
The new roll-to-roll lines will enable Crown to produce the film at any length and width from 12 to 72 inches, largely satisfying the commercial building market’s requirements.
Once the new lines are producing at capacity, Crown expects annualized revenues of ~$220 million and EBITDA of ~$40 million from smart window inserts. The company expects to receive both lines by the summer of 2023.
Crown’s intellectual property value contributed significantly to the debt financing. Independent appraisal of its IP revealed a combined patent and trade secret fair market value of $94.4 million.
Crown’s initial target market is US office buildings, and the company will actively acquire new US customers once the new production lines are up and running.
Our prior content on CRKN can be accessed&nbsp;here.

OUR INSIGHTS
The Opportunities
Crown stands at an inflection point of the smart glass industry and has an attractive position. It can target retrofit opportunities with an easy-to-install, highly cost-competitive solution and a demonstrated ROI. Furthermore, increasing legislative reforms for green buildings surrounding LEED certification and customer preferences in favor of carbon reduction create a growing market for Crown’s smart glass solutions. Tenants may become the driving force behind demand creation as they become more conscious of the benefits of using these technologies. In addition, many corporations will be after cost-effective solutions that improve their overall profitability while reducing emissions as they face higher regulatory burdens and strive to meet aggressive ESG and net-zero targets.
The Obstacles
The company is still in the initial stages of commercial deployment and needs a completed commercial installation to showcase the technology and expand the customer base. Additionally, Crown will need to significantly expand production capacity to meet anticipated demand, creating execution risk and capital needs.
COMPANY OVERVIEW
Crown Electrokinetics (CRKN) provides energy-efficient solutions through its electrokinetic technology, DynamicTint, which allows any glass surface to transition between clear and dark in seconds. CRKN is a smart glass technology company that directly reduces energy needs and carbon reduction in buildings by blocking sunlight. Critically, the technology can be used in retrofit applications, generating a compelling market opportunity. Initially, the focus is on commercial buildings and REITs, but it can potentially be applied to residential applications and transportation. DynamicTint provides an alternative to cumbersome solutions such as window shades, which are inefficient and less effective at curbing energy usage. It is important to note that Crown’s technology can be implemented for only a modest premium over traditional shades. Retrofit existing glass gives the company a competitive position by adding to building owners’ ways to manage energy and meet carbon reduction goals. The company is targeting REITs as its primary customers, and, in June 2020, Hudson Pacific Properties(HPP), a leading REIT, became a strategic investor. Crown has also signed a Master Supply Agreement (MSA) with HPP and Brandywine Operating Partnership, delineating terms and conditions for future purchase orders, solidifying the partnership, and helping Crown to focus on its commercialization journey. The company is transitioning from the research and development phase to commercializing electrokinetic technology in the $3.6 billion smart glass market.
The Technology
The core of CRKN’s business is the trademark DynamicTint. This thin film is powered by electrically charged pigment, replacing standard window tints, and is a more sustainable alternative to traditional window treatments. Traditional windows in commercial buildings are inefficient insulators, causing HVAC systems to use excessive amounts of energy and increasing energy spending and unnecessary carbon emissions. Crown’s Smart Window Insert absorbs sunlight and reduces HVAC usage, fostering energy savings and reducing the amount of carbon released into the environment. DynamicTint turns an existing window into a “smart” window upon installation. The client can control the tint manually via a device such as a phone or through a program that automatically changes the tint based on time of day and weather patterns. It could even change the color of the glass. The technology was initially designed to control the light passing through plastic, but the Crown team saw significant opportunities in the emerging smart glass industry. Most importantly, it could be retrofitted to existing glass, unlike most competing offerings requiring glass to be replaced entirely. Company management believes that the technology’s fast transition time (which is not area-dependent), low-power requirements, high stability, and easy installation should position it to compete effectively against other smart glass technologies, including Electrochromic (EC), Suspended Particles in Polymer (SPD), and Polymer Dispersed Liquid Crystal (PDLC).
The Market
Retrofit Opportunities in Commercial Buildings.&nbsp;One only needs to take a quick look around to appreciate the massive installed base of commercial buildings in the US. Crown’s initial focus is to target these buildings and the REITs that own them through commercial building window retrofits. This is an excellent backdrop for Crown’s window solutions—specifically for office buildings. Most existing buildings use incumbent solutions like shades to block sunlight, which are far less effective than Crown’s solution. Specifically, the company believes that the cost of DynamicTint is highly competitive with standard office blinds, making blind replacement cycles an excellent opportunity for Crown to engage with building owners. It is generally an ROI sale to the customer, promising to reduce energy consumption by up to 26%. The company believes DynamicTint can lower HVAC expenses associated with less need for ambient heating of building spaces and provide a reasonable payback period. On average, building owners change their window coverings every seven to eight years, and typically the replacement cost of blinds is $450-$700. Crown prices its 5x5 Smart Window Insert between $650 and $750. This price point is very competitive, only slightly above the cost of blinds, and significantly cheaper than replacing the entire window with alternative smart glass solutions. When installed, the insert can easily manage the impact of solar heat and improve the working environment for the building's tenants. Furthermore, it should eliminate replacing blinds or shades every few years.
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Shawn Severson, who is the writer of this report, covers the BioEconomy, ClimateTech &amp; Sustainable Investing, and Emerging Growth &amp; Special Situations sectors for WTR. Mr. Severson and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.  WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.  The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Shareholder Letter: Update on Recently Announced Public Offering, Debt Financing, and Transition to Customer Acquisition