FiEE, Inc.: Form 10-Q for the period ended Sep 30, 2024

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in “Risk Factors” in Part II, Item 1A and elsewhere in this Quarterly Report on Form 10-Q, contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend that these forward-looking statements be subject to the safe harbor created by those provisions. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “forecast,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” “future,” “potential,” “target,” “seek,” “continue,” “if” or other similar words. Forward-looking statements include statements regarding our strategies as well as (1) our ability to predict revenue and reduce costs related to our products or service offerings, (2) our ability to effectively manage our sales channel inventory and product mix to reduce excess inventory and lost sales, (3) our ability to forecast product sales volumes and accordingly manufacture and manage inventory, (4) our ability to generate sales of Motorola brand products sufficient to make that portion of our business profitable, and retain the Motorola brand license for the Motorola brand product we produce, (5) fluctuations in the level or quality of inventory, (6) the sufficiency of our capital resources and the availability of debt and equity financing, (7) the continuing impact of uncertain global economic conditions on the demand for our products, (8) our ability to maintain and scale adequate and secure software platform infrastructure, (9) the impact of competition on demand for our products and services and (10) our competitive position.

The following discussion should be read in conjunction with the attached Unaudited Condensed Consolidated Financial Statements and notes thereto, and with our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2023, found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 12, 2024. Although we believe that the assumptions underlying the forward-looking statements contained in this Quarterly Report are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements will be accurate. The risks, uncertainties and assumptions referred to above, that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors” in Part II, Item 1A hereto and the risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements. All forward-looking statements included in this document are based on information available to us as of the date hereof. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise that may arise after the date of this Quarterly Report on Form 10-Q.

Overview

We historically delivered comprehensive WiFi as a Service platform to make everyone’s connected home safe and supportive for life and work.

Generally, our gross margin for a given product depends on a number of factors, including the type of customer to whom we were selling. The gross margin for products sold to retailers tended to be higher than for some of our other customers; but the sales, support, returns, and overhead costs associated with products sold to retailers also tended to be higher.

Our cash and cash equivalents balance on September 30, 2024 was $0.2 million compared to $0.7 million on December 31, 2023. On September 30, 2024, we had no outstanding borrowings and working capital of negative $0.8 million.

The Company’s ability to maintain adequate levels of liquidity depends in part on our ability to sell inventory on hand and collect related receivables. The Company is evaluating options related to its liquidity. The Company will continue to monitor its costs in relation to its sales and adjust its cost structure accordingly.

The Company continues to experience losses, which in part is due to declining revenues. In the three and nine months ended September 30, 2024 and 2023, we generated net sales of $0 million and $6.7 million, respectively, and $0.6 million and $24.6 million, respectively.

Our most recent Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 12, 2024, provides additional information about our business and operations.

Recent Accounting Standards

See Note 2 Summary of Significant Accounting Policies, in Notes to Unaudited Consolidated Financial Statements in Item 1 of Part 1 of this Report on 10-Q, for a full description of recent accounting standards, including the expected dates of adoption and estimated effects on the financial condition and results of operations, which are hereby incorporated by reference.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Management bases its estimates, assumptions and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. To the extent there are material differences between these estimates and actual results, our financial statements may be affected. Our management evaluates its estimates, assumptions and judgments on an ongoing basis.

Our critical accounting policies and estimates, which are revenue recognition, product returns, inventory valuation and costs of goods sold, warrants, valuation of deferred tax assets are described under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023. For the nine months ended September 30, 2024, there have been no significant changes in our critical accounting policies and estimates.

Results of Operations

The following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023, presented in absolute dollars and as a percentage of net sales, with dollars and percentage change period over period:

(In thousands, except percentage data)

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Comparison of the three and nine months ended September 30, 2024 to the three and nine months ended September 30, 2023

The following table sets forth our revenues by product and the changes in revenues for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023:

(In thousands, except percentage data)

The majority of the Company’s revenues by geographic area are earned in North America for the three and nine months ended September 30, 2023.

Net Sales

Our total net sales decreased year-over-year by $6.7 million or 100% in the three months ended September 30, 2024 and by $24.0 million or 97.4% in the nine months ended September 30, 2024. The decrease in net sales is directly attributable to decreased sales of Motorola branded cable modems and gateways. In 2023, we primarily generated our sales by selling cable modems and gateways. Sales related to SaaS offerings were $0 thousand and $3 thousand in the three months ended September 30, 2024 and 2023, respectively, and $0 thousand and $164 thousand in the nine months ended September 30, 2024 and 2023, respectively. The decrease in other category of $244 thousand in the three months ended September 30, 2024 compared to the three months ended in September 30, 2023 and the decrease of $567 thousand in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 is primarily due to a reduction in DSL and MoCA products. Generally, our lower sales outside North America reflect the fact that cable modems are sold successfully through retailers in the U.S. but not in most countries outside the U.S., due primarily to variations in government regulations.

Cost of Goods Sold and Gross Margin

Cost of goods sold consists primarily of the following: the cost of finished products from our third-party manufacturers; overhead costs, including purchasing, product planning, inventory control, warehousing and distribution logistics; third-party software licensing fees; inbound freight; import duties/tariffs; warranty costs associated with returned goods; write-downs for excess and obsolete inventory; amortization of certain acquired intangibles and software development costs; and costs attributable to the provision of service offerings.

The decrease in gross profit was attributable to less sales, largely resulting from the Motorola license termination. Our gross margin can be affected by a number of factors, including fluctuation in foreign exchange rates, sales returns, changes in average selling prices, end-user customer rebates and other channel sales incentives, changes in our cost of goods sold due to fluctuations and increases in prices paid for components, overhead costs, inbound freight and duty/tariffs, conversion costs, and charges for excess or obsolete inventory.

The following table presents net sales and gross margin, for the periods indicated:

(In thousands, except percentage data)

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Gross profit decreased in the three months ended September 30, 2024, compared to the three months ended in the prior fiscal year period, primarily due to insufficient sales levels necessary to cover fixed costs and certain variable costs. Gross profit decreased in the nine months ended September 30, 2024, compared to the nine months ended in the prior fiscal year period, primarily due decreased sales of Motorola branded cable modems and gateways.

For the remainder of fiscal 2024, we expect gross margin to decrease in sales of Motorola branded cable modems and gateways. Our cost of goods sold, as a percentage of net sales, can vary significantly based upon factors such as: uncertainties surrounding revenue volumes, including the timing of sales.

Selling and Marketing

Selling and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product marketing expenses, outbound freight costs, amortization of certain intangibles, personnel expenses for sales and marketing staff, technical support expenses, and facility allocations. The following table presents sales and marketing expenses, for the periods indicated:

(In thousands, except percentage data)

Selling and marketing expenses decreased in the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to reductions in personnel expenses by $0.3 million, Motorola royalty fees of $1.7 million, and other sales support costs of $0.1 million. Selling and marketing expenses decreased in the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to reductions in personnel expenses by $1.4 million, marketing campaigns by $2.2 million, Motorola royalty fees of $5.1 million, and other sales support costs of $0.6 million.

For the remainder of the fiscal year 2024, we expect our selling and marketing expenses to decrease compared to the first three quarters of 2024. Expenses may fluctuate depending on sales levels achieved as certain expenses, and are determined based upon the net sales achieved. Forecasting both selling and marketing expenses is highly dependent on expected net sales levels and could vary significantly depending on actual net sales achieved in any given quarter. Marketing expenses may also fluctuate depending upon the timing, extent and nature of marketing programs.

General and Administrative

General and administrative expenses consist of salaries and related expenses for executives, finance and accounting, human resources, information technology, professional fees, including legal costs associated with defending claims against us, allowance for doubtful accounts, facility allocations, and other general corporate expenses. The following table presents general and administrative expenses, for the periods indicated:

(In thousands, except percentage data)

General and administrative expenses decreased $0.3 million in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily due to a decrease in professional fees of $0.3 million and software subscriptions of $0.1 million. General and administrative expenses decreased $1.2 million in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 primarily due to a decrease in personnel expenses of $0.8 million and professional fees of $0.4 million.

Future general and administrative expense increases or decreases in absolute dollars are difficult to predict due to the lack of visibility of certain costs, including legal costs associated with defending claims against us, and other factors.

Research and Development

Research and development expenses consist primarily of personnel expenses, payments to suppliers for design services, safety and regulatory testing, product certification expenditures to qualify our products for sale into specific markets, prototypes, IT, and other consulting fees. Research and development expenses are recognized as they are incurred. Our research and development organization is focused on enhancing our ability to introduce innovative and easy-to-use products and services. The following table presents research and development expenses, for the periods indicated:

(In thousands, except percentage data)

The decrease of $0.7 million in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was primarily due to decreases in personnel expenses of $0.5 million, professional fees of $0.1 million, and other support costs of $0.1 million. The decrease of $3.2 million in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was primarily due to decreases in personnel expenses of $2.3 million, contract labor of $0.2 million, professional fees of $0.2 million, and certification and other costs of $0.5 million.

For the remainder of the fiscal year 2024, we expect research and development expenses to decrease compared to the first three quarters of 2024. Research and development expenses may fluctuate depending on the timing and number of development activities and could vary significantly as a percentage of net sales, depending on actual net sales achieved in any given year.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents. As of September 30, 2024, we had cash and cash equivalents of $0.2 million as compared to $0.7 million on December 31, 2023. On September 30, 2024, we had no borrowings outstanding and working capital of negative $0.8 million. We have funded our operations and financing activities primarily through sale of preferred stock.

Our historical cash outflows have primarily been associated with: (1) cash used for operating activities such as the purchase and growth of inventory, expansion of our sales and marketing and research and development infrastructure and other working capital needs; (2) expenditures related to increasing our manufacturing capacity and improving our manufacturing efficiency; (3) capital expenditures related to the acquisition of equipment; (4) cash used to repay our debt obligations and related interest expense; and (5) cash used for acquisitions. Fluctuations in our working capital due to timing differences of our cash receipts and cash disbursements also impact our cash inflows and outflows.

Our consolidated financial statements, as of September 30, 2024, were prepared under the assumption that we will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt exists about our ability to continue as a going concern, and we will require additional liquidity to continue operations beyond the next 12 months.

Our consolidated financial statements as of September 30, 2024, do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or part of their investment.

Cash Flows

The following table presents our cash flows for the periods presented:

Cash Flows from Operating Activities. Cash used from operating activities of $3.8 million during the nine months ended September 30, 2024 reflected our net loss of $4.4 million, adjusted for non-cash expenses, consisting primarily of $432 thousand of stock-based compensation expense, $290 thousand in depreciation and amortization expense, and $2.2 million in vendor forgiveness, net of asset transfers. Uses of cash included a decrease in accounts payable of $3.1 million and accrued expenses of $394 thousand. Sources of cash included primarily a decrease of accounts receivable of $731 thousand and inventories of $404 thousand.

Cash provided by operating activities of $3.7 million during the nine months ended September 30, 2023 reflected our net loss of $16.5 million, adjusted for non-cash expenses, consisting primarily of $0.3 million of stock-based compensation expense and $0.4 million in depreciation and amortization expense. Uses of cash included a decrease in accounts receivable of $0.1 million and accrued expenses of $3.0 million. Sources of cash included primarily a decrease of inventories of $14.9 million, increase in accounts payable of $7.4 million, increase in prepaid expenses of $0.2 million, and increase in deferred revenue of $0.2 million.

Cash Flows from Investing Activities. During the nine months ended September 30, 2024, the Company had no cash flows generated or used by investing activities.

During the nine months ended September 30, 2023, $162 thousand was used to purchase equipment and $220 thousand was used for certification costs.

Cash Flows from Financing Activities. Cash provided from financing activities during the nine months ended September 30, 2024 consisted of proceeds from issuance of preferred stock of $2.8 million and issuance of common stock of $0.5 million.

Cash used in financing activities during the nine months ended September 30, 2023 consisted of repayment of $3.9 million on the borrowings under our SVB line-of-credit.

Future Liquidity Needs

Our primary short-term needs for capital, which are subject to change, include expenditures related to:

• the acquisition of equipment and other fixed assets for use in our current and future manufacturing and research and development facilities;
• upgrades to our information technology infrastructure to enhance our capabilities and improve overall productivity;
• support of our commercialization efforts related to our current and future products, including expansion of our direct sales force and field support resources;
• the continued advancement of research and development activities.

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Our capital expenditures are largely discretionary and within our control. We expect that our product sales and the resulting operating loss, as well as the status of each of our product development programs, will significantly impact our cash management decisions.

At September 30, 2024, we believe our current cash and cash equivalents may not be sufficient to fund working capital requirements, capital expenditures and operations during the next twelve months. Our ability to continue as a going concern will depend on our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce or contain expenditures and increase revenues. Based on these factors, management determined that there is substantial doubt regarding our ability to continue as a going concern. The Company will continue to monitor its costs in relation to its sales and adjust accordingly.

Our future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of any future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital required to support our sales growth, funds required to service our debt, the receipt of and time required to obtain regulatory clearances and approvals, our sales and marketing programs, our need for infrastructure to support our sales growth, the continuing acceptance of our products in the marketplace, competing technologies and changes in the market and regulatory environment.

Our ability to fund our longer-term cash needs is subject to various risks, many of which are beyond our control—See “Risk Factors—We may require significant additional capital to pursue our growth strategy, and our failure to raise capital when needed could prevent us from executing our growth strategy.” Should we require additional funding, such as additional capital investments, we may need to raise the required additional funds through bank borrowings or public or private sales of debt or equity securities. We cannot guarantee that such funding will be available in needed quantities or on terms favorable to us, if at all.

At September 30, 2024, we have Federal and state net operating loss carry forwards of approximately $79.4 million and $48.0 million, respectively, available to reduce future taxable income. A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more-likely than-not that the benefits from such assets will not realize the benefits of our deferred tax assets. As a result, as of September 30, 2024 and December 31, 2023, we recorded a full valuation allowance against our net deferred tax assets.

Commitments and Contractual Obligations

During the nine months ended September 30, 2024, except as otherwise disclosed in this Form 10-Q, there were no material changes to our capital commitments and contractual obligations from those disclosed in our Form 10-K for the year ended December 31, 2023.

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of September 30, 2024. See Note 7 to the accompanying consolidated financial statements for additional disclosure.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this Item.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer of the Company, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In connection with the preparation of this Quarterly Report on the Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer of the Company, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of September 30, 2024. Based upon that evaluation and other than as disclosed herein, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There were no changes in our internal control over financial reporting during the three months ended September 30, 2024 that have affected, or are reasonably likely to affect, our internal control over financial reporting.

Other than as set forth below, there have been no material changes to the risk factors set forth in our 2023 Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 12, 2024, which includes a detailed discussion of our risk factors in Part I, “Item 1A. Risk Factors”, which discussion is hereby incorporated by reference into this Part II, Item 1A. Our Risk Factors could materially affect our business, financial position, or future results of operations. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and the additional ones described below, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations.

We cannot assure you that we will be able to continue to close the Purchase Agreement with the Investors for $2,600,000 which we entered into on November 13, 2024 and regain our listing on the Nasdaq Capital Market. If we are unable to regain our listing on the Nasdaq Capital Market, we will not be able to close the Purchase Agreement and we could be subject to final delisting or other adverse action, which could negatively impact the trading of our common stock.

As disclosed previously and in Item 1 above in Part II of this Current Report on Form 10-Q, on June 26, 2024, the Company received a letter from the listing staff of The Nasdaq Stock Market LLC (“Nasdaq”) that the Company was no longer in compliance with the minimum stockholders’ equity requirement for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Rule”). The Stockholders’ Equity Rule requires companies listed on the Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000 or to meet alternatives of market value of listed securities or net income from continuing operations, which the Company does not currently meet. In response to the letter, we submitted a request to submit our appeal and plan to regain compliance with the Stockholders’ Equity Rule to the Nasdaq Hearings Panel (the “Panel”). On July 22, 2024, we received a letter (the “Letter”) from the Nasdaq Office of General Counsel, stating that the Company’s appeal to the Nasdaq Hearings Panel (“Panel”) of the Nasdaq Listings Qualification staff’s (the “Staff”) delist determination dated June 26, 2024, for the Company’s failure to maintain compliance with the equity requirement in Listing Rule 5550(b)(1) had been abandoned. However, the Company has not abandoned its request for a hearing. Due to a clerical error, the Company was unaware of the passage of the time required to provide a written submission prior to the oral hearing in front of the Panel, until July 23, 2024. On July 23rd, we immediately filed a submission in support of an appeal to the Nasdaq Listing and Hearing Review Council regarding the hearing abandonment determination and the future delisting of the Company’s securities from Nasdaq, and on July 24, 2024 we remitted an additional $15,000 for this appeal to the Listing Council the following day.

We strongly believe that such appeal should be granted, and that the delisting action referenced in the Staff’s determination letter, dated June 26, 2024, should continue to remain stayed, pending a final written decision by the Panel, due to the Company’s particular circumstances. Following such appeal, and in anticipation of being granted an oral hearing in front of the Panel, the Company put in place a plan (the “Plan”) to regain compliance with the terms of the minimum stockholders’ equity requirement of at least $2,500,000 for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1) and delivered such Plan to the Panel. Nevertheless on July 24, 2024, the Company’s securities trading was suspended on The Nasdaq Stock Market LLC (“Nasdaq”) effective with the open of business on July 24, 2024, at which point the Company’s common stock was eligible to trade on the OTC Market’s Pink Current Information. Our securities trading has merely been suspended on Nasdaq at this time, not delisted. It will not be delisted unless and until Nasdaq files a Form 25 Notification of Delisting with the U.S. Securities and Exchange Commission after all internal procedural periods have run.

The NASDAQ Office of General Counsel did not respond to our notice of intent to appeal to the Nasdaq Listing and Hearing Review Council regarding the hearing abandonment determination and the future delisting of the Company’s securities from Nasdaq until August 1, 2024, the date originally scheduled for the Panel hearing, when we received a message which stated that the NASDAQ is unable to consider an appeal to the Nasdaq Listing and Hearing Review Council in this matter. The NASDAQ’s position is that pursuant to Nasdaq Rule 5820, companies may appeal Panel Decisions to the Listing Council. However, in our matter, there was no Hearing and there is no Panel Decision to appeal. The NASDAQ further indicated that the information regarding our right to appeal to the Listing Council which was included in the letter confirming abandonment of the appeal appears to have been included in error, and that it would issue a refund for the appeal fee, thus informing us that this matter was not appealable to the Listing Council.

Following some discussions and correspondence with the Nasdaq Office of General Counsel, on August 12, 2024 we delivered a letter to the Nasdaq stating that the Company is of the view that the NASDAQ has acted arbitrarily and capriciously in making its determinations concerning our continued listing, has acted inconsistent with prior precedent, as well as inconsistent with Nasdaq’s own Listing Rules, including, inter alia, Rule 5840(f) governing the delivery of documents which requires that the NASDAQ in these circumstances utilize all methods of communications; Rules 5814(a)(4) and (5) governing the scheduling of a hearing and the timing for submission of Written Submissions and Written Updates; Rule 5820 as presently in effect which provides the Listing Council broad discretion to review this matter, a review for which the Company had duly applied and paid for; as well as a number of additional Rules. We requested the Nasdaq Office of the General Counsel allow us to present its case to the Nasdaq Hearings Panel, as soon thereafter as possible, or alternatively to be allowed to appeal to the Nasdaq Listing and Hearing Review Council the determination of “deemed” abandonment of the Hearing Request. We also requested that the suspension in the trading of our shares be lifted pending final resolution of the above matters and a final decision to delist having been made following the Company’s exhaustion of all available administrative relief.

On August 13, 2024 we were notified by the Vice President and Deputy General Counsel of the Nasdaq that its position remains unchanged. On the same day, Company counsel responded to the Nasdaq that we intend to immediately seek injunctive and equitable relief against the NASDAQ at a court of competent authority, and that we would expect the Nasdaq will not take any further steps to affect the status quo.

We believe the delisting decision, and specifically the “deemed abandonment” of our appeal to the Panel constituted, inter alia: (i) a breach of contract by Nasdaq, (ii) an abuse of NASDAQ’s discretionary authority, (iii) breach of NASDAQ’s listing rules as approved by the SEC, and (iv) material procedural unfairness. NASDAQ’s staff subjectively determined that we were deemed to have abandoned our appeal to the Panel without any basis whatsoever in NASDAQ’s listing rules as approved by the SEC for making such a determination. NASDAQ’s decision, and the subsequent suspension of the trading in our shares, caused, and continues to cause, irreparable harm to our operations, our reputation and our shareholders. It has also severely negatively impacted our ability to execute on already announced and signed contracts.

In light of the above, we filed for, and on August 20, 2024, were granted a temporary restraining order (“TRO”) by the Supreme Court of the State of New York, Kings County (the “State Court”). The application for the TRO was filed by the Company in order to prohibit The Nasdaq Stock Market (“Nasdaq”) from delisting the Company’s common stock from Nasdaq. The TRO was effective until September 5, 2024. On August 20, 2024, following the State Court’s grant of the TRO, Nasdaq removed the case to federal court. On September 4, 2024, the U.S. District Court for the Eastern District of New York remanded the case to the State Court. On September 5, 2024, the parties entered into a stipulation which was ordered by the State Court on September 6, 2024, to extend the TRO until September 30, 2024, at which point oral arguments were to be heard by the State Court.

That TRO continued until, on October 18, 2024, the Court denied the request by the Company for a preliminary injunction enjoining the Nasdaq from taking further action to delist the Company. We subsequently, on October 22, 2024 discontinued our case against the Nasdaq, without prejudice. On October 23, 2024, the Nasdaq issued a press release announcing that it will delist our common stock and file a Form 25 with the Securities and Exchange Commission (“SEC”). On October 24, 2024, the Nasdaq filed a Form 25 with the SEC, announcing its determination to remove from listing the securities of the Company, effective at the opening of the trading session on November 4, 2024, stating, inter alia, that Nasdaq filed the Form 25 pursuant to Nasdaq Rule 5830 because all available review and appeal procedures and periods available to us under Nasdaq Rules have expired.

On October 25, 2024, we filed with the SEC an Application for Review, pursuant to 15 U.S.C.S. § 78s(d), the October 24, 2024 decision of Nasdaq to delist the Company’s securities and to deny us the right to a hearing on such delisting, by incorrectly deeming our appeal abandoned, and then denying us the right to appeal Nasdaq’s decision deeming our right to a hearing as abandoned requests. In conjunction with the submission of this appeal, we also submitted to the SEC a motion for an emergency stay of the delisting, pursuant to the SEC’s Rule of Practice 401. On November 1, 2024, the SEC granted us an administrative stay of the delisting pending further order of the SEC, to give the SEC an opportunity to consider the Company’s motion for a stay. The SEC noted in its order that the administrative stay should not be construed in any way as a ruling on the merits of our motion for a preliminary stay.

As disclosed on our Form 8-K filed with the Commission on November 18, 2024, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Cao Yu, an individual (“Cao”), Hu Bin, an individual, and Youxin Consulting Limited, a Hong Kong company (the “Investors”), whereby, at the closing of the transactions contemplated by the Purchase Agreement (the “Closing”), subject to satisfaction of certain closing conditions, including our stockholders voting in favor of the transaction at a Special Meeting, we will sell and the Investors will purchase 1,984,733 shares of the Company’s newly formed Series preferred stock, $0.001 par value per share (the “Preferred Stock”), at a price per share of $1.31, for an aggregate purchase price of $2,600,000, subject to the conditions described below, pursuant to the exemptions afforded by the Securities Act of 1933, as amended, and Regulation S thereunder.

The Purchase Agreement contains customary representations, warranties and agreements of the Company and the Investors, limitations and conditions regarding sales of the Purchased Securities or underlying Common Stock, indemnification rights and other obligations of the parties. Furthermore, the Purchase Agreement contains certain conditions to closing, including: (i) a resolution appointing three (3) individuals identified in writing by the Investors to fill the vacancies on the Board of Directors caused by the resignations of all of the members of the Board of Directors as of the Closing Date, (ii) satisfactory evidence that all reasonably required waivers and/or settlement agreements with the Company’s creditors, vendors and employees have been received, (iii) the Certificate of Designation of the rights and privileges of the Series B Preferred Stock, (iv) satisfactory evidence that all third-party and governmental consents have been received or sent and not revoked, (v) satisfactory evidence that all holders of equity of the Company with redemption rights or rights to participate in the issuance of Series B Preferred Stock and the shares of Common Stock issuable upon conversion of such shares, if any, have been waived, (vi) satisfactory evidence that all persons with the right to receive severance, retention bonuses, “stay” bonuses, change in control bonuses, transaction bonuses or other similar payments or arrangements have waived any and all rights to receive such bonuses, (vii) satisfactory evidence that identified all related party transactions have been terminated, (viii) satisfactory evidence that all employment agreements have been terminated, (ix) satisfactory evidence that a satisfactory written opinion of the Company’s counsel that all of the Series B Preferred Stock and the securities to be purchased pursuant to the Securities Purchase Agreement, dated on even date of the Purchase Agreement, by and among David Elliot Lazar and the Investors are, and the shares of Common Stock underlying the Series B Preferred Stock will be, duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such shares was or would be issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities, (x) the Company’s shares be listed on the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or any successors to any of the foregoing by no later than December 31, 2024, and (xi) the approval from the stockholders of the Company of the transactions contemplated by the Purchase Agreement.

We continue to vigorously dispute the certifications included by Nasdaq in its Form 25 regarding Minim’s delisting, as we believe we were not allowed any review and appeal procedures available under the Nasdaq Rules. We also believe that upon closing of the Purchase Agreement we would be in compliance with the Stockholders’ Equity Rule. However, the closing of the investment pursuant to the Purchase Agreement is subject to, inter alia, the Company confirming its continued listing on the Nasdaq by no later than December 31, 2024.

While we intend to comply with the Nasdaq rules, there can be no assurance that the Company will be able to regain or remain in compliance with the Stockholders’ Equity Rule or other applicable Nasdaq listing requirements on an ongoing and long-term basis, nor that the Nasdaq staff will permit us to present the Purchase Agreement to either the Hearing Panel or the Nasdaq Listing and Hearing Review Council, nor that such bodies will grant the Company additional time to achieve compliance by confirming our continued listing on the Nasdaq subject to closing of the Purchase Agreement, nor that we will be successful with our appeal to the SEC.

If we are unable to satisfy these Nasdaq requirements or standards, and we are not able to close the transactions contemplated by the Purchase Agreement, or otherwise successfully petition the SEC to allow us to present to the applicable Nasdaq reviewing body a plan for regaining compliance with the Stockholders’ Equity Rule or other applicable Nasdaq listing requirements, we could be subject to final delisting from the Nasdaq, which could have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.