Minim, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The filing identifies the registrant as Minim, Inc.; the request metadata says “Fiee, Inc.” Minim sells Motorola-branded networking hardware and provides network-management and security software and services.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net sales | $13.30 million | $15.02 million |
| Gross profit / margin | $4.19 million / 31.5% | $5.10 million / 34.0% |
| Operating loss | $2.45 million | $0.54 million |
| Net loss | $2.54 million | $0.55 million |
| Basic and diluted loss per share | $0.06 | $0.02 |
| Cash used in operating activities | $4.31 million | $4.97 million |
- Sales fell 11.4%, primarily because of lower cable modem and gateway sales. SaaS revenue increased 15.2% to approximately $144,000 but remained a small share of total sales.
- Gross margin declined 2.5 percentage points. Management attributed the decline primarily to higher component costs, partly offset by higher selling prices.
- Operating expenses rose 17.8% to $6.65 million, with increases in selling and marketing, general and administrative, and research and development expenses.
- Operating cash use improved year over year, but the company still reported a net loss and negative operating cash flow. Q1 investing cash use was $271,000; financing provided $2.06 million, mainly from credit-line borrowings.
Financial position and liquidity
- At March 31, 2022, cash and cash equivalents were $10.05 million, restricted cash was $0.50 million, and working capital was $25.8 million. Cash and cash equivalents were $12.57 million at December 31, 2021.
- Inventory was $29.96 million, down from $32.50 million at year-end. Accounts payable was $8.21 million, and total liabilities were $21.07 million.
- Borrowings under the SVB asset-based credit facility were $7.1 million, with reported availability of $1.1 million. The facility has a stated maximum of $25 million, is subject to a borrowing-base formula, is secured by substantially all assets except intellectual property, and matures November 1, 2023. The reported interest rate was 4.5%.
- Management said cash, working capital, and available SVB borrowings were expected to support operations for at least one year from issuance of the financial statements. The filing also notes historical losses and negative operating cash flows.
Outlook, risks, and notable disclosures
- Management expects elevated freight, materials, and component costs to continue for the foreseeable future, with supply-chain disruptions potentially delaying production and transportation and affecting the ability to meet demand. It expected 2022 gross margins to remain subject to similar variability as in 2021.
- For the remainder of 2022, management expected selling and marketing expense as a percentage of sales to be similar to 2021, and research and development expense as a percentage of sales to be in line with or slightly above 2021. The filing provides no specific revenue or earnings guidance.
- Customer and supplier concentration is significant: two customers represented 90% of Q1 2022 sales, and two suppliers provided 99% of purchased inventory. Management warns that lost or delayed customer orders, supplier disruption, competition, pricing, inventory management, and changing demand could materially affect results.
- The Motorola license runs through December 31, 2025. Minimum annual royalties disclosed for the remaining portion of 2022 through 2025 total $26.0 million; Q1 royalty expense was $1.6 million.
- Management reported a material weakness in inventory-related financial reporting identified during preparation of the 2021 Form 10-K. Remediation steps were underway, with completion expected before year-end 2022; management said the weakness would not be considered remediated until controls had operated and been tested effectively.
- After quarter-end, Nasdaq notified the company that its share price had been below the $1.00 minimum bid for 30 consecutive business days. The company had until October 24, 2022 to regain compliance, with a possible additional compliance period subject to conditions.
- Management reported no legal proceedings expected to have a material adverse effect, while noting that litigation outcomes cannot be predicted. The company recorded a full valuation allowance against deferred tax assets.
Important facts for investors to verify
- Whether the SVB borrowing-base availability remains adequate and whether operating cash burn can be reduced.
- Whether sales concentration, component supply dependence, and elevated input and freight costs persist or worsen.
- Progress on inventory-control remediation and the reliability of inventory balances and reserves.
- Ability to meet Motorola royalty commitments and improve hardware margins while growing SaaS revenue.
- Nasdaq bid-price compliance status and any resulting listing actions.