CRAC

Business Context and Reporting Period

Crown Reserve Acquisition Corp. I (CRAC) is a Cayman Islands exempted company formed as a Special Purpose Acquisition Company (SPAC) to effect a business combination. This Form 10-Q covers the quarterly period ended March 31, 2026. The Company consummated its IPO on November 10, 2025, raising $172.5 million. On March 30, 2026, the Company entered into a Business Combination Agreement with Carvix, Inc., with an outside date of September 30, 2026.

Key Financial Metrics

Material Changes vs. Prior Period

• Warrant Liability Increase: The warrant liability increased from $1,419,066 at December 31, 2025, to $3,023,463 at March 31, 2026. This resulted in a non-cash loss of $1,604,397 due to a change in fair value, driven primarily by an increase in the expected volatility input from 12.3% to 20.3%.
• Trust Account Growth: The Trust Account balance increased by $1,524,741 to $174,928,579, reflecting dividends earned on marketable securities held in the account.
• Accumulated Deficit: The accumulated deficit grew from $(1,373,163) to $(3,161,397), driven by the net loss and the accretion of Class A ordinary shares to their redemption value.
• Related Party Receivable: The amount due from the related party (Sponsor) decreased from $448,082 to $210,670 as the Sponsor paid $183,837 in formation and operating costs on the Company's behalf.

Outlook, Risks, and Management Commentary

• Business Combination: The Company is pursuing a merger with Carvix, Inc. The transaction involves a domestication to Delaware and a merger structure. The deal includes an earnout component for Carvix stockholders based on EBITDA and revenue targets over four years.
• Liquidity and Going Concern: The Company has no cash outside the Trust Account and relies entirely on Sponsor funding for operations. Management has determined that the mandatory liquidation date raises substantial doubt about the Company's ability to continue as a going concern for one year from the issuance date if a business combination is not completed.
• Internal Controls: The Company disclosed a material weakness in internal control over financial reporting regarding the accounting for complex financial instruments (warrant liabilities and Public Rights). This weakness has not been fully remediated as of March 31, 2026, rendering disclosure controls and procedures ineffective.
• Risks: Key risks include the failure to satisfy conditions for the Carvix merger (e.g., stockholder approval, SEC effectiveness of Form S-4), potential redemptions reducing cash below the "Minimum Cash Amount," and the expiration of the Combination Period leading to liquidation.

Investor Verification Checklist

• Merger Conditions: Verify the status of stockholder approvals and the SEC's review of the Form S-4 registration statement required for the Carvix transaction.
• Redemption Risk: Assess the potential impact of public shareholder redemptions on the Company's ability to meet the "Minimum Cash Amount" condition at closing.
• Warrant Valuation Sensitivity: Review the sensitivity of the warrant liability to changes in implied volatility, noting the significant increase in the volatility input during the quarter.
• Internal Control Remediation: Monitor the progress of the remediation plan for the material weakness in internal controls over financial reporting.
• Sponsor Funding: Confirm the Sponsor's continued willingness and ability to fund working capital deficiencies and transaction costs via advances or convertible loans.