Minim unloads DOCSIS inventory to Motorola, strikes change-of-control stock deal

Minim's days as a supplier of Motorola-branded cable modems and gateways and home network management software are nearing the end as the company moves to sell inventory to help settle its mounting debts. It's also pushing ahead with a stock deal that will shift control of the publicly traded company to a member of its board.

Facing a pile of debt, dwindling income and a software business that never gained much steam, Manchester, New Hampshire-based Minim laid off 78% of its staff last fall and is now down to less than a skeleton crew. According to an SEC document filed today, Minim CEO and CFO Jeremy Hitchcock was the company's sole executive officer as of December 31, 2023.

The company's website, Minim.com, has been offline for weeks, but was recently put back into operation. However, Minim's website appears to be a shell of its former self. At last check, links to a website (motorolanetwork.com), where consumers could supposedly shop for Minim's products, including DOCSIS 3.1 modems and gateways directly, appears to be out of commission.

Execs at the company, including Hitchcock, have not responded to multiple inquiries about Minim's situation and plans in recent weeks.

But the company's moves to cut down its debt and the proposed execution of a change-of-control stock deal with board member David Lazar could keep Minim out of bankruptcy.

Still, the result of those actions means Minim is out of the cable modem game for good. Minim's removal will also take yet another DOCSIS modem player off the board, following Vantiva's recent acquisition of CommScope's Home Networks business. Vantiva is still evaluating whether it will retain the retail side of CommScope's cable modem and gateway business.

Minim entered the cable tech fray in 2020 when Hitchcock led Minim's 2020 merger with Zoom Telephonics, a company that specialized in selling DOCSIS modems and gateways at retail and originally obtained the license to sell products under the Motorola brand (via Motorola Mobility/Lenovo) in 2015. In the wake of that deal, Minim began to invest heavily in a Wi-Fi home network management software platform, called Motosync, to pair with its hardware products and open up a fresh, recurring revenue stream for the company.

Minim's financial situation turned dire as revenues declined and the company fell behind on its Motorola licensing payments.

Transferring inventory to Motorola to settle debt

According to SEC filings, Minim had been on the hook to pay $7.1 million annually in guaranteed minimum royalties to Motorola, and had about $7.8 million outstanding in royalty payments as of September 30, 2023. Those documents also show that, as of last fall, Minim had about $15.91 million left on that contract, which originally was set to run through the end of 2025.

Minim and Motorola agreed that the license agreements were terminated effectively as of July 18, 2023, according to a Minim SEC filing. A Lenovo spokesperson confirmed that Minim is no longer licensed to use the Motorola brand and that Lenovo is in "ongoing confidential discussion with a number of licensees to replace Minim." An industry source said Lenovo has held licensing talks with at least two suppliers of DOCSIS customer premises equipment (CPE) about licensing the Motorola brand.

Minim SEC documents filed last week also show that the company struck a deal on January 22 to sell inventory back to Motorola Mobility as part of a debt settlement agreement, "while agreeing to continue to provide certain customer and technical support." 

Tied in, Minim agreed to transfer an initial portion of its inventory (tens of thousands of DOCSIS 3.1 modems, Wi-Fi routers and Wi-Fi mesh systems and other consumer premises equipment) to Motorola at Minim's "manufactured cost," and agreed to transfer the remainder of its inventory (another, similar tranche of tens of thousands of devices) to Motorola.

Minim also agreed to transfer ownership of and access to certain customer support platforms and the Motosync and MotoManage applications to Motorola "to allow Motorola to mitigate potential damage," an SEC filing about the agreement states.

It's not clear what Motorola/Lenovo intends to do with the inventory it obtained from Minim for the long-term. However, Minim also agreed to transfer to Motorola all e-commerce platform accounts used by Minim to sell any products under the license agreements that remain active, including those with Amazon. Several Motorola-branded DOCSIS devices, including its MB8600 DOCSIS 3.1 gateway, are still for sale on Amazon.

As part of the debt settlement, Minim also agreed to a covenant not to sue Motorola and its various affiliates and entities.

Keeping software up to snuff

One potential issue is ensuring that software and firmware in Minim/Motorola cable modems and gateways remain up to date and in compliance with cable operator security requirements. Operators may need to consider remedies – including device swap-outs – if those Motorola-branded retail devices eventually fall out of compliance.

Charter Communications confirmed that it doesn't have the ability to push new software or security updates to customer-owned devices and encourages customers to use Charter-supplied equipment that is updated with the latest firmware. Charter offers its modems for no additional charge (Wi-Fi is an additional $7 per month).

An industry source estimates that there are at least 100,000 modems from Zoom Telephonics and Minim still operating on cable networks. "Some are pretty old and will need software updates," the person added.

Change-of-control stock deal

Minim once held acquisition talks with Hitron, another maker of DOCSIS cable modems and gateways, but ultimately did not go anywhere, multiple sources said. Hitron's interest, they said, was largely focused on obtaining the Motorola brand.

Minim has since gone in a much different direction. The company is now in the process of shifting control of the company, which trades on the Nasdaq, to board member (and activist investor) David Lazar via a stock deal.

Pending a February 16 shareholder vote, Lazar has agreed to purchase 2 million shares of Minim at $1.40 each, for an aggregate purchase price of $2.8 million. Minim has also issued Lazar warrants to purchase up to an additional 2.8 million shares of Minim common stock at $1 per share. The moves will make Lazar Minim's largest stockholder and make Minim a "controlled company" under the Nasdaq rules.

Minim is also attempting to execute a 3:1 reverse stock split – a move designed to help the company keep its stock price in compliance with Nasdaq rules, which require a $1 per share minimum bid price for continued listing. Minim executed a 25:1 reverse stock split in April 2023. Minim shares were down 15 cents (-7.14%) to $2.06 each in mid-day trading Monday.

It's not clear what Lazar intends to do with Minim and its Nasdaq listing. Lazar declined to comment on his plans, telling Light Reading in an exchange on LinkedIn that he'll be disclosing more detail in a 13D filing with the SEC.

Lazar to 'explore potential strategic options'

Update: Lazar filed a 13D on January 30 announcing his acquisition of 2 million shares of series A convertible preferred stock of Minim that are convertible into 1.4 shares of Minim's common stock. The filing also referenced the aforementioned warrants for Lazar to purchase an additional 2.8 million shares of Minim common stock, equal to $1 per share.

A press release about the filing did not add many specifics about Lazar's plans for Minim going forward.  

"I am pleased to announce my significant investment in Minim given the meaningful opportunity I believe the Company represents and am eager to begin working with the Board of Directors and management to actively explore potential strategic options to drive shareholder value," Lazar said in a statement.

Lazar is involved in several companies. He's CEO of Activist Investing and Custodian Ventures, Dubai-based entities that specialize in "turnaround situations" and "distressed public companies," according to his LinkedIn profile. He is also CEO of Lazar Realty, another Dubai-based company, and is interim CEO of Titan Pharmaceuticals, a San Francisco-based company focused on a "long-term, continuous drug delivery technology" for chronic conditions.

What went wrong?

Multiple industry sources familiar with Minim's business tell Light Reading that Minim had the right idea by developing a software business that could help drive a recurring revenue model, versus relying almost solely on the sale of devices.

But they said the company grew too fast, spent too heavily chasing that software business model and ended up with a software platform that greatly underperformed. Minim's retail business "also took a beating during the pandemic," an industry source familiar with Minim said.

"Minim was trying to make it as a software company," a person familiar with Minim's situation said, noting that it proved difficult for the company to hire the required talent to make the software end of the business successful. "They just never got there and, unfortunately, ran out of money."

Another person with links to Minim said the company "went on a three-year spending spree" after the Zoom merger, allowing the company's ranks to balloon from about 40 employees to nearly 100 employees at one point.

But the software plan, which was funded by the company's core hardware business, never generated enough revenues to justify the growth, and never achieved the desired quality, the person added.

"Their software was not good from day one," the source said.

The reviews of the Motosync app tell the tale. Motosync currently has a rating of 1.5 stars (out of five) on Google Play, and a rating of 1.6 (out of five) on the Apple app store. Several users have posted a wide range of complaints, including reports that the app would fail to recognize devices on the network.

Several customers reported problems retrieving and resetting passwords for the app, rendering the app unusable. Another user said he had lost access to control the Wi-Fi network through the app for days, and that he received no customer support to help remedy the problem. Yet another Minim customer said the hardware was "okay," but the app was "bad," causing the person to consider swapping out the Motorola gateway bought at retail with one from Netgear.

A person familiar with the situation said the Motosync app was turned off, at least for a time, because cloud access had been terminated. That cloud switch-off, the person said, would prevent customers from accessing app features such as parental controls or to change the device's Wi-Fi SSID (Service Set Identifier), but would not impact the gateway's ability to function as a Wi-Fi access point.

Q3 results reflect Minim's financial woes

Minim's Q3 2023 results, filed with the SEC on January 8, 2024, following a lengthy delay, illustrate the company's bleak financial picture.

Sales in Q3 were $6.69 million, down from $13.83 million in the year-ago quarter. The bulk of those revenues – about $6.44 million – were for modems and gateways, $243,528 were tied to "other networking products" and just $3,682 were derived from Minim's software-as-a-service (SaaS) business.

Minim posted a Q3 net loss of $6.82 million, widened from a year-ago loss of $4.06 million. Minim ended the quarter with $14.39 million in liabilities and $14.08 million in assets – $10.49 million in inventories, $2.99 million in accounts receivable and $446,124 in cash and cash equivalents.