Crown Reserve Acquisition Corp. I 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those financial statements included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Our actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Annual Report. Overview We are a blank check company incorporated as a Cayman Islands exempted company on April 29, 2025, formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of our IPO and the sale of the Private Placement Units, our shares, debt or a combination of cash, shares and debt. We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful. Results of Operations We have neither engaged in any principal operations nor generated any revenues to date. Our only activities from April 29, 2025 (inception) through December 31, 2025 were organizational activities, those necessary to prepare for the IPO, and, after the IPO, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest earned on investments held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination. For the period from April 29, 2025 (inception) through December 31, 2025, we had net income of $1,129,754, which consists of interest earned on investments held in the Trust Account of $903,838, change in fair value of warrant liability of $352,368, and change in fair value of rights of $0 (rights are classified as permanent equity), partially offset by formation and operating costs of $126,601. Liquidity and Capital Resources On November 10, 2025, we consummated the IPO of 17,250,000 Units at $10.00 per Unit, which included the full exercise of the underwriters’ over-allotment option of 2,250,000 Units, generating gross proceeds of $172,500,000. Simultaneously with the closing of the IPO, we consummated the sale of an aggregate of 375,000 Private Placement Units at a price of $8.00 per Private Placement Unit to the Sponsor (175,000 units) and Polaris Advisory Partners (200,000 units), generating gross proceeds of $3,000,000. Following the IPO, a total of $172,500,000 was placed in the Trust Account. Transaction costs deducted from IPO proceeds at closing amounted to $2,079,000, consisting of $1,725,000 of upfront underwriting commissions paid to Polaris Advisory Partners and $354,000 of other offering costs ($150,000 underwriter expense reimbursement, $144,500 issuer counsel, $30,000 Cayman counsel, $21,000 Edgar Agent, and $8,500 trustee). An additional $473,133 of offering costs were paid by the Sponsor after closing and allocated to Class A temporary equity, for total offering costs charged to equity of $2,552,133. The deferred underwriting commission of $300,000 is payable to Polaris upon completion of a Business Combination only, and is recorded as a liability on the balance sheet. As of December 31, 2025, we held no cash outside the Trust Account and had a working capital deficit funded entirely by the Sponsor. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination. For the period from April 29, 2025 (inception) through December 31, 2025, net cash from operating activities was $0. Our net income of $1,129,754 was fully offset by non-cash adjustments, including the gain on change in fair value of warrant liability of $352,368, dividends earned on investments held in Trust Account of $903,838, and $126,601 of formation and operating costs paid directly by the Sponsor on the Company’s behalf, all of which resulted in no net cash movement from operating activities. As of December 31, 2025, we had investments held in the Trust Account of $173,403,838. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable, if any), to complete our Business Combination. 36 In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. Going Concern In connection with our assessment of going concern considerations in accordance with ASC 205-40, “Presentation of Financial Statements — Going Concern,” management has determined that the mandatory liquidation date and subsequent dissolution, should a Business Combination not occur, and potential for insufficient liquidity raise substantial doubt about our ability to continue as a going concern through November 10, 2026 (or February 10, 2027 if the Combination Period is automatically extended). No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after the Combination Period. Our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the period ended December 31, 2025 expressing substantial doubt about our ability to continue as a going concern. Off-Balance Sheet Financing Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2025. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets. Contractual Obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay our Sponsor a monthly fee of $10,000 for general and administrative services, including office space. We began incurring these fees on November 10, 2025 (the date of our IPO). We will continue to incur these fees monthly until the earlier of the completion of a Business Combination or our liquidation. The underwriting agreement provides that Polaris Advisory Partners is entitled to a deferred underwriting fee of $300,000. The deferred underwriting fee will become payable to Polaris Advisory Partners from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires the use of estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. Class A Ordinary Shares Subject to Possible Redemption We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480, “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as stockholders’ equity. All 17,250,000 Class A ordinary shares sold in the IPO feature certain redemption rights that are considered to be outside of our control, and therefore are classified as temporary equity at the redemption value. 37 Warrant Liabilities We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The Public Warrants and Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in our statement of operations. Rights Our Share Rights (each convertible into one-fifth (1/5) of one Class A ordinary share upon consummation of a Business Combination) are classified as equity instruments. The fair value of the rights was determined using a Probability Weighted Expected Return Method (PWERM), with an assumed 25% probability of completing a de-SPAC transaction and a per-right value of $0.4778, resulting in aggregate fair value of $8,242,050 charged against additional paid-in capital. Net Income Per Ordinary Share We apply the two-class method in calculating earnings per share. Net income is allocated proportionally between Class A and Class B ordinary shares. The 17,250,000 redeemable Class A ordinary shares are allocated net income based on their proportionate interest. The weighted average shares outstanding for Class A redeemable shares for the period was 3,576,220, reflecting the time-weighted shares from IPO date. Basic and diluted net income per share for both classes was $0.14. Recent Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting pronouncements would have a material effect on the Company’s financial statements.