Minim, Inc. — Form 10-Q summary
Period: Three months ended March 31, 2023, compared with the three months ended March 31, 2022. The filing identifies the registrant as Minim, Inc., not “Fiee, Inc.” The report was signed November 13, 2023.
Business and results
Minim sells Motorola-branded cable modems and gateways and other networking products, and offers related networking software and SaaS. Net sales are concentrated in North America and heavily weighted toward hardware.
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Net sales | $10.75 million | $13.30 million | Down 19.2% |
| Gross profit / margin | $2.61 million / 24.3% | $4.19 million / 31.5% | Margin down 7.2 percentage points |
| Operating expenses | $6.53 million | $6.65 million | Down 1.7% |
| Operating loss | $3.93 million | $2.45 million | Loss widened |
| Net loss | $4.07 million | $2.54 million | Loss widened |
| Basic and diluted loss per share | $2.16 | $1.38 | Loss per share widened |
| Cash from operating activities | $1.35 million provided | $4.31 million used | Improved, substantially affected by working capital |
Revenue fell primarily because of lower cable modem and gateway sales. SaaS revenue was $86,000, down from $144,000. The company attributed lower gross margin mainly to sales levels insufficient to cover fixed and variable costs. Selling and marketing expense was broadly flat; general and administrative and research and development expenses declined modestly.
Financial position and liquidity
At March 31, 2023, cash and cash equivalents were $802,000, with a further $500,000 of restricted cash. Working capital was reported as $12.1 million, but current assets included $22.8 million of inventory. The company had $3.83 million outstanding on its asset-based credit line and only $395,000 available under the facility. It also had $1.0 million outstanding under a bridge loan, classified as a current maturity. Total liabilities were $16.55 million; accumulated deficit was $78.91 million.
Operating cash flow was positive mainly due to a $2.65 million reduction in inventory and a $2.50 million increase in accounts payable, despite the $4.07 million net loss. Investing activities used $128,000. The cash flow statement reports $945,000 of financing cash provided from the credit line. The SVB facility was transferred first to Silicon Valley Bridge Bank and then to First-Citizens in March; the company reported no interruption in service or funding.
Management concluded that substantial doubt exists about the company’s ability to continue as a going concern. It stated that available cash, working capital and borrowings would not fund operations for the next 12 months and that additional liquidity is required. Cost reductions were underway; continued operations depend on financing, further efficiencies, expense control and increased revenue.
Changes, outlook and material risks
- Outlook: No quantified revenue or earnings guidance was provided. Management expected gross-margin variability to continue during the remainder of 2023 and said margin improvement could lag lower freight and component costs while higher-cost inventory is worked through. It expected selling and marketing expense as a percentage of sales to be similar to 2022, and R&D expense as a percentage of sales to be in line with or slightly above 2022.
- Debt and contractual exposure: The $1.0 million bridge loan bears 14% interest after February 28, 2023, matures January 15, 2024, and is owed to Slingshot Capital, an entity owned by the company’s executive chair and a director. The Motorola license runs through December 31, 2025; minimum royalties are $6.85 million for the remainder of 2023 and $7.1 million for each of 2024 and 2025.
- Concentration: Two customers accounted for 88% of Q1 2023 sales, and two customers represented 84% of receivables. One supplier provided 90% of inventory purchases during the quarter. Customers generally have no long-term purchase commitments.
- Operations and governance: The filing describes supply and manufacturing disruption related to the company’s inability to pay past expenses, materially affecting revenue and cash position; it also refers to subsequent liquidity pressures and workforce reductions. The CEO resigned April 7, 2023, and Executive Chairman Jeremy Hitchcock became acting principal executive officer. A 1-for-25 reverse stock split took effect April 17, 2023.
- Potential transaction: A September 29, 2023 non-binding letter of intent proposed a $2.4 million investment in convertible preferred stock and warrants that could give the investor a majority stake, with proceeds intended to settle liabilities. Definitive documents and completion were not assured.
- Controls and contingencies: The filing says disclosure controls were effective at March 31, 2023, but also describes a material weakness in financial reporting controls identified during preparation of the 2023 Form 10-K, involving timely account analyses, reconciliations and independent review. Remediation was expected before year-end 2023. Management said no pending legal proceeding was expected to have a material adverse effect, while noting outcomes cannot be predicted.
Important facts for investors to verify
- Confirm the registrant identity: the supplied metadata says Fiee, Inc., while the filing names Minim, Inc.
- Reconcile MD&A figures with the financial statements: the MD&A table gives different operating expenses, operating loss and net loss from the statements of operations.
- Reconcile cash-flow disclosures: the cash flow statement reports $945,441 provided by financing activities, while MD&A describes cash used and a repayment of that amount.
- Assess the company’s near-term funding, going-concern risk, borrowing availability, debt maturities and ability to meet Motorola royalty commitments.
- Track customer and supplier concentration, inventory realizability, manufacturing continuity, and progress on the proposed transaction and internal-control remediation.