UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2020
OR
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 333-139298
Bridgeline Digital, Inc.
(Exact name of registrant as specified in its charter)
Delaware
State or other jurisdiction of incorporation or organization
52-2263942
IRS Employer Identification No.
100 Sylvan Road, Suite G700
Woburn, Massachusetts
(Address of Principal Executive Offices)
01801
(Zip Code)
(781) 376-5555
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.001 par value per share
Trading Symbol
BLIN
Name of exchange on which registered
The NASDAQ Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant in not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit. Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer smaller reporting
company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Smaller reporting company ☒
Non-accelerated filer ☒
Accelerated filer ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately
$2,075,245 based on the closing price of $0.67 of the issuer’s common stock, par value $0.001 per share, as reported by the NASDAQ
Stock Market on March 31, 2020.
On December 22, 2020, there were 4,420,170 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Forward Looking Statement
All statements included in this Annual Report on Form 10-K, other than statements or characterizations of historical fact, are forward-
looking statements. These “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, are
based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by
us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects,"
"intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue,"
"ongoing," similar expressions, and variations or negatives of these words. . These statements appear in a number of places in this Form
10-K and include statements regarding the intent, belief or current expectations of Bridgeline Digital, Inc. These forward-looking
statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, the
impact of the COVID – 19 pandemic and related public health measures that may affect our financial results; business operations and the
business of our customers, suppliers and partners; our ability to retain and upgrade current customers, increasing our recurring revenue,
our ability to attract new customers, our revenue growth rate; our history of net loss and our ability to achieve or maintain profitability,
our liability for any unauthorized access to our data or our users’ content, including through privacy and data security breaches; any
decline in demand for our platform or products; changes in the interoperability of our platform across devices, operating systems, and
third party applications that we do no control; competition in our markets; our ability to respond to rapid technological changes, extend
our platform, develop new features or products, or gain market acceptance for such new features or products, particularly in light of
potential disruptions to the productivity of our employees resulting from remote work; our ability to manage our growth or plan for future
growth, and our acquisition of other businesses and the potential of such acquisitions to require significant management attention, disrupt
our business, or dilute stockholder value; the volatility of the market price of our common stock, the ability to maintain our listing on the
NASDAQ Capital Market, or our ability to maintain an effective system of internal controls as well as other risks described in our filings
with the Securities and Exchange Commission. Any of such risks could cause our actual results to differ materially and adversely from
those expressed in any forward-looking statement. Bridgeline Digital, Inc. assumes no obligation to, and does not currently intend to,
update any such forward-looking statements, except as required by applicable law. We urge readers to review carefully the risk factors
described herein and in the other documents that we file with the Securities and Exchange Commission. You can read these documents at
www.sec.gov.
Where we say “we,” “us,” “our,” “Company” or “Bridgeline” or “Bridgeline Digital” we mean Bridgeline Digital, Inc.
Item 1. Business.
Overview
PART I
Bridgeline Digital, The Digital Engagement Company, helps customers maximize the performance of their full digital experience from
websites and intranets to eCommerce experiences. Bridgeline’s Unbound platform is a Digital Experience Platform that deeply integrates
Web Content Management, eCommerce, eMarketing, Social Media management, and Web Analytics (Insights) with the goal of assisting
marketers to deliver exceptional digital experiences that attract, engage, nurture and convert their customers across all channels. Bridgeline
offers a core accelerator framework for rapidly implementing digital experiences on the Bridgeline Unbound platform, which provides
customers with cost-effective solutions in addition to velocity to market.
Bridgeline’s Unbound platform combined with its professional services assists customers in digital business transformation, driving lead
generation, increasing revenue, improving customer service and loyalty, enhancing employee knowledge, and reducing operational
costs. The Bridgeline Unbound platform bridges the gaps between Web Content Management, eCommerce, eMarketing, and social and
web analytics by providing all of these components in one unified and deeply integrated platform.
Our Unbound Franchise product empowers large franchises, healthcare networks, associations/chapters and other multi-unit organizations
to manage a large hierarchy of digital properties at scale. The platform provides an easy-to-use administrative console that enables corporate
marketing to provide consistency in branding and messaging while providing flexible publishing capabilities at the local-market level. The
platform empowers brand networks to unify, manage, scale and optimize a hierarchy of web properties and marketing campaigns on a
global, national and local level.
The Unbound platform is delivered through a cloud-based software as a service (“SaaS”) model, whose flexible architecture provides
customers with state-of-the-art deployment providing maintenance, daily technical operation and support; or via a traditional perpetual
licensing business model, in which the software resides on a dedicated infrastructure in either the customer’s facility or manage-hosted by
Bridgeline via a cloud-based hosted services model.
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OrchestraCMS, delivered through a cloud-based SaaS, is the only content and digital experience platform built 100% native on Salesforce
and helps customers create compelling digital experiences for their customers, partners, and employees; uniquely combining content with
business data, processes and applications across any channel or device, including Salesforce Communities, social media, portals, intranets,
websites, applications and services.
Celebros Search, delivered through a cloud-based SaaS, is a commerce-oriented site search product that provides for Natural Language
Processing with artificial intelligence to present very relevant search results based on long-tail keyword searches in seven languages.
Bridgeline Digital was incorporated under the laws of the State of Delaware on August 28, 2000.
Locations
The Company’s corporate office is located in Woburn, Massachusetts. The Company maintains regional field offices serving the following
geographical locations: Boston, MA; New York, NY; and Ontario, Canada. The Company has three wholly-owned subsidiaries: Bridgeline
Digital Pvt. Ltd. located in Bangalore, India; Bridgeline Digital Canada Inc. located in Ontario, Canada; and Stantive Technologies Pty
Ltd. located in Australia.
Products and Services
Products
Bridgeline Unbound Platform
Subscription and Perpetual Licenses
Bridgeline Unbound is available as either a SaaS or perpetual license and is reported as subscription and perpetual licenses in the
accompanying consolidated financial statements.
The Bridgeline Unbound platform provides a unified common set of shared software modules that are critical to today’s mission critical
websites, on-line stores, intranets, extranets, and portals. The Bridgeline Unbound platform empowers companies and developers to create
websites, web applications and online stores with advanced business logic, state-of-the-art graphical user interfaces, and improved quality.
The Bridgeline Unbound platform is a Digital Experience Platform (DXP) that unifies Content Management, eCommerce, eMarketing, and
Analytic capabilities deep within the websites, intranets or online stores in which they reside, enabling customers to enhance and optimize
the value of their web properties and better engage their website users. The Bridgeline Unbound platform significantly enhances WEM and
Customer Experience Management (CXM) capabilities.
The Bridgeline Unbound Franchise offering was built specifically to support the needs of multi-unit organizations and franchises.
Bridgeline's cloud-based platform allows companies to execute local marketing campaigns, follow Search Engine Optimization (SEO) best
practices, drive eCommerce initiatives, and measure results with actionable analytics.
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The Bridgeline Unbound suite of products includes:
●
Bridgeline Unbound Experience Manager is a marketing automation engine and content management system in one –
delivering the digital experiences consumers demand. Centered on robust audience segmentation and list management, the
tool allows marketers to easily create personalized customer journeys. Each Bridgeline Unbound implementation
incorporates a set of flexible templates and modules to get you started quickly in building your full digital experience with
Bridgeline Unbound Pro. From there, you can opt to further customize these templates and incorporate any necessary
custom application integrations with Bridgeline Unbound Enterprise to meet an organization’s unique business needs.
●
●
●
●
●
●
Bridgeline Unbound Content Manager allows non-technical users to create, edit, and publish content via a browser-based
interface. The advanced, easy-to-use interface allows businesses to keep content and promotions fresh - whether for a public
commercial site or a company intranet. Bridgeline Unbound Content Manager handles the presentation of content based on
a sophisticated indexing and security scheme that includes management of front-end access to online applications. The
system provides a robust library functionality to manage permissions, versions and organization of different content types,
including multimedia files and images. Administrators are able to easily configure a simple or advanced workflow. The
system can accommodate the complexity of larger companies with strict regulatory policies. Bridgeline Unbound Content
Manager is uniquely integrated and unified with Bridgeline Unbound Insights, Bridgeline Unbound Commerce, and
Bridgeline Unbound Marketing; providing our customers with precise information, accurate results, expansion options, and
stronger user adoption.
Bridgeline Unbound Commerce is an online B2B and B2C Commerce solution that allows users to maximize and manage
all aspects of their domestic and international Commerce initiatives. The customizable dashboard provides customers with
a real-time overview of the performance of their online stores, including sales trends, demographics, profit margins,
inventory levels, inventory alerts, fulfillment deficiencies, average check out times, potential production issues, and delivery
times. Bridgeline Unbound Commerce also provides backend access to payment and shipping gateways. In combining
Bridgeline Unbound Commerce with Bridgeline Unbound Insights and Bridgeline Unbound Marketing, our customers can
take their Commerce initiatives to an advanced level by personalizing their product offerings, improving their marketing
effectiveness, providing value-added services and cross selling additional products. Bridgeline Unbound Commerce is
uniquely integrated and unified with Bridgeline Unbound Insights, Bridgeline Unbound Content Manager, and Bridgeline
Unbound Marketing; providing our customers with precise information, more accurate results, expansion options, and
stronger user adoption.
Bridgeline Unbound Marketing is a powerful online marketing management solution that helps marketers drive more
qualified traffic to their sites through personalized and highly targeted marketing automation flows. Marketing's powerful
feature set includes end-to-end campaign administration - from drag-and-drop landing pages with our flexible form builder
to behavior-based drip email campaigns, add-on dynamic contact and distribution list management, event-based response
marketing, wizard-driven email campaign creation, as well as built-in goal tracking tools to measure campaign effectiveness
and ROI.
Bridgeline Unbound Insights provides the ability to manage, measure and optimize web properties by recording detailed
events and subsequently mine data within a web application for statistical analysis. Our customers have access to information
regarding where their visitors are coming from, what content and products their viewers are most interested in, and how
they navigate through a particular web application. Through user-definable web reports, Bridgeline Unbound Insights
provides deep insight into areas like visitor usage, content access, age of content, actions taken, event triggers, and reports
on both client and server-side events. Bridgeline Unbound Insight’s smart recommendation engine uses this data and
identifies actionable solutions that enable our customers to optimize site content and reach their digital campaign goals.
Bridgeline Unbound Social is a social media management solution that empowers customers to easily set up customized
watch lists tailored by social network, topic, or author to monitor relevant conversations happening on social media, popular
websites and blogs. Customers can also prioritize and engage in conversations across the web and leverage the power of
publishing content to department, dealer, franchise or other social media accounts.
Bridgeline Unbound Franchises is a web content management and eCommerce platform built specifically to support the
needs of multi-unit organizations and franchises. Bridgeline Unbound Franchise deeply integrates content management,
eCommerce, eMarketing, and web analytics and is a self-service web platform that is offered to each authorized franchise
or multi-unit organization for a monthly subscription fee. Bridgeline Unbound Franchise acts as a control center for a large
organization’s distributed websites enabling local content publishing that is managed through a workflow approval process
that gives corporate marketing control of the brand and message. Bridgeline Unbound Franchise also supports responsive
design that adapts to specific device screen sizes access a website, driving more positive user experiences and engagement.
Bridgeline Unbound Franchise is a cloud-based SaaS solution.
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In addition, Bridgeline also provides an alternative Digital Experience Platform that is 100% native on Salesforce called
OrchestraCMS. This software is available as a SaaS license and is reported as subscription licenses in the accompanying
consolidated financial statements.
●
OrchestraCMS by Bridgeline is the only content and digital experience platform built 100% native on Salesforce.
OrchestraCMS helps Salesforce customers create compelling digital experiences for their customers, partners, and
employees; uniquely combining content with business data, processes and applications across any channel or device,
including Salesforce Communities, social media, portals, intranets, websites, applications and services.
OrchestraCMS also has a rich set of APIs to enable development of custom solutions, third-party integrations and delivery
of digital transformation initiatives on the Salesforce platform helping customers drive deeper engagement and
collaboration, increase efficiency and minimize risk.
Finally, Bridgeline supports an enterprise site search solution with its Celebros Search product. This software is available as a SaaS
license and is reported as subscription licenses in the accompanying consolidated financial statements.
●
Celebros Search by Bridgeline is a commerce-oriented, site search product that provides for Natural Language Processing
and incorporates with artificial intelligence to present very relevant search results based on long-tail keyword searches.
Celebros Search understands which word in the search query is a product, an attribute or an expression that is related to a
price or product. With the use of natural language and intent algorithms, Celebros Search ensures that customers receive the
best results every time, no matter the length or complexity of the search query. Celebros Search is a leading semantic search
and conversion technology that is available in seven languages. Celebros Search has plug-ins into the Bridgeline Unbound
Commerce offering in addition to many other third-party Commerce platforms such as Magento, Shopify, Hybris and more.
Celebros Search customers include many e-Commerce retailers and merchants in eleven countries, including the United
States, Europe and Asia. A number of these are among Internet Retailer’s Top 100/500 companies and represent a broad
range of industry segments, revenue and catalog sizes.
Services
Revenue from Digital Engagement Services
Revenue from all digital engagement services is reported as digital engagement services in the accompanying consolidated financial
statements.
Digital Engagement Services
Digital engagement services address specific customer needs such as digital strategy, web design and web development, usability
engineering, information architecture, and SEO for their mission critical web site, intranet or online store. Application development
engagements are often sold as part of a multiple element arrangement that includes our software products, hosting arrangements (i.e.
Managed Service Hosting) that provide for the use of certain hardware and infrastructure through our partnership with Amazon Web
Services or retained professional services subsequent to completion of the application development.
Digital Strategy Services
Bridgeline helps customers maximize the effectiveness of their online marketing activities to ensure that their web applications can be
exposed to the potential customers that use search engines to locate products and services. Bridgeline’s SEO services include competitive
analysis, website review, keyword generation, proprietary leading page technology, ongoing registration, monthly reports, and monitoring.
Bridgeline’s web analytics experts offer consulting and assistance in implementing Bridgeline Unbound Insights or any other type of web
analytics package.
Usability Design
By integrating usability into traditional development life cycles, we believe our usability experts can significantly enhance a user’s
experience. Our usability professionals provide the following services: usability audits, information architecture, process analysis and
optimization, interface design and user testing. Our systematic and user-centered approach to application development focuses on
developing applications that are intuitive, accessible, engaging, and effective. Our goal is to produce a net effect of increased traffic,
improved visitor retention, increased user productivity, reduced user error, lower support cost, and reduced long-term development cost.
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Information Architecture
Information Architecture is a design methodology focused on structuring information to ensure that users can find the appropriate data and
can complete their desired transactions within a website or application. Understanding users and the context in which users will be initiating
with a web application is central to information architecture. Information architects try to put themselves in the position of a typical user
of an application to better understand a user’s characteristics, behaviors, intentions and motivations. At the same time, the information
architect develops an understanding of a web application’s functionality and data structures. The understanding of these components enables
the architect to make customer-centric decisions about the end user and then translate those decisions into site maps, wire frames and
clickable prototypes.
Information architecture forms the foundation of a web application’s usability. The extent to which a web application is user-friendly and
is widely adopted by a user base is primarily dependent on the success of the information architecture. Information architecture defines
how well users can navigate through a website or application and how easily they can find the desired information or function. As digital
engagement becomes more standard and commoditized, information architecture will increase as a differentiator for application developers.
Sales and Marketing
Overview
Bridgeline employs a direct sales force to sell enterprise Bridgeline Unbound engagements. Our direct sales force focuses its efforts selling
to mid-sized and large companies. These companies are generally categorized in the following vertical markets: financial services, retail
brand names, health services and life sciences, technology (software and hardware), credit unions and regional banks, as well as associations
and foundations.
We also pursue strategic alliances and partnerships that will enhance the sales and distribution opportunities of Bridgeline Unbound- related
intellectual property.
Engagement Methodology
We use an accountable, strategic engagement process developed specifically for target companies that require a technology-based
professional approach. We believe it is critical to qualify each opportunity and to assure our skill set and tools match up well with each
customer’s needs. As an essential part of every engagement, we believe our engagement methodology streamlines our customer
qualification process, strengthens our customer relationships, ensures our skill set and tools match the customer’s needs, and results in the
submission of targeted proposals.
Organic Growth from Existing Customer Base
Our business development professionals seek ongoing business opportunities within our existing customer base and within other operating
divisions or subsidiaries of our existing customer base.
New Customer Acquisition
We identify customers within our vertical expertise (financial services, franchise/dealer networks, retail brand names, health services and
life sciences, high technology, credit unions and regional banks, as well as associations and foundations). Our business development
professionals create an annual territory plan identifying various strategies to engage our target customers.
Customer Retention Programs
We use digital marketing capabilities when marketing to our customer base. We make available via email and on our website Bridgeline-
authored Whitepapers, featured case studies, and/or Company-related announcements to our customers on a bimonthly basis. We also host
educational on-line webinars, face-to-face seminars and training.
New Lead Generation Programs
We generate targeted leads and new business opportunities by leveraging on-line marketing strategies. We receive leads by maximizing
the SEO capabilities of our own website. Through our website, we provide various educational Whitepapers and promote upcoming on-
line seminars. In addition, we utilize banner advertisements on various independent newsletters and paid search advertisements that are
linked to our website. We also participate and exhibit at targeted events.
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Social Media Programs
We market Bridgeline’s upcoming events, Whitepapers, blogs, case studies, digital product tutorials, announcements, and related articles
frequently on leading social media platforms such as Twitter, LinkedIn, YouTube and Facebook.
Acquisitions
On February 13, 2019, the Company entered into an Asset Purchase Agreement with Seevolution Inc., a Delaware corporation, Celebros,
Inc., a Delaware corporation, and Elisha Gilboa, an individual and shareholder of Seevolution (the “Seevolution Asset Purchase
Agreement”). The Seevolution Asset Purchase Agreement sets forth the terms and conditions pursuant to which the Company acquired
certain assets in exchange for consideration paid consisting of (1) $418 in cash at the time of purchase, (ii) the payment of $100 of additional
cash to be paid out $10 per month for ten months starting April 30, 2019, and (iii) 40,000 shares of Bridgeline Digital common stock. Costs
to complete the transaction were approximately $18 thousand.
On March 13, 2019, the Company entered into an Asset Purchase Agreement with Stantive Technologies Group Inc. (“Stantive”), a
corporation organized under the laws of Ontario, Canada, to purchase substantially all of the assets of Stantive and assume certain liabilities.
The Company also acquired all of the outstanding stock of Stantive Technologies Group, Pty, a company incorporated in Australia, which
was a subsidiary of Stantive. The total purchase price, including cure costs, for Stantive and its Australian subsidiary was approximately
$5.2 million in cash.
There were no acquisitions during the fiscal year ended September 30, 2020.
Research and Development
We have research and development activities focusing on creating new products and innovations, product enhancements, and funding
future market opportunities. Research and development expenses were approximately $1.6 million or 15% of revenues and $2.2 million or
22% of revenues during fiscal 2020 and 2019, respectively.
Employees
We had 39 employees worldwide as of September 30, 2020. All of these employees were full-time employees.
Customers
We primarily serve the following vertical markets that we believe have a history of investing in information technology enhancements and
initiatives:
Franchises/Multi-unit Organizations
●
● Health Services and Life Sciences
● Technology (software and hardware)
● Credit Unions and Regional Banks
● Consumer Retail and Apparel
● Associations and Foundations
For the year ended September 30, 2020, one customer generated approximately 12% of our revenue. For the year ended September 30,
2019, two customers each generated approximately 11% and 15% of our revenue.
Competition
The markets for our products and services, including software for web content management, eCommerce platform software, eMarketing
software, web analytics software and digital engagement services are highly competitive, fragmented, and rapidly changing. Barriers to
entry in such markets remain relatively low. The markets are significantly affected by new product introductions and other market activities
of industry participants. With the introduction of new technologies and market entrants, we expect competition to persist and intensify in
the future.
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We believe we compete adequately with others and we distinguish ourselves from our competitors in a number of ways, including:
● We believe our competitors generally offer their web application software typically as a single point of entry type product (such
as content management only, or commerce only) as compared to the deeply integrated approach provided by the Bridgeline
Unbound platform.
● We believe our competitors can generally only deploy their solutions in either a Cloud/SaaS environment or in a dedicated server
environment. The Bridgeline Unbound platform’s architecture is flexible and is capable of being deployed in either a Cloud/SaaS
or dedicated server environment.
● We believe the majority of our competitors do not provide interactive technology development services that complement their
software products. Our ability to develop mission critical web sites and online stores on our own deeply integrated Bridgeline
Unbound platform provides a quality end-to-end solution that distinguishes us from our competitors.
● We believe the interface of the Bridgeline Unbound platform has been designed for ease of use without substantial technical
skills.
●
Finally, we believe the Bridgeline Unbound platform offers a competitive price-to-functionality ratio when compared to our
competitors.
Patents, Trademarks, and Trade Secrets
We own a number of trade secrets, licenses and trademarks related to Bridgeline products and services and their loss could have a material
adverse effect on the Company. We do not own any patents. For additional information see Risk Factor – If we are unable to protect our
proprietary technology and other intellectual property rights, our ability to compete in the marketplace may be substantially reduced.
Available Information
This Annual Report on Form 10-K, as well as our quarterly reports on Form 10-Q and current reports on Form 8-K, along with any
amendments to those reports, are made available upon request, on our website www.bridgeline.com as soon as reasonably practicable after
such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Copies of the following are
also available through our website on the “About Us - Investor Information” page and are available in print to any shareholder who requests
it:
● Code of Business Ethics
● Committee Charters for the following Board Committees:
o Nominating and Corporate Governance Committee
o Audit Committee
o Compensation Committee
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information regarding the SEC’s Public Reference Room can be obtained by calling the SEC at 1-800-SEC-
0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information and can be
found at http://www.sec.gov.
Item 1A. Risk Factors
This report contains forward-looking statements that involve risks and uncertainties, such as statements of our objectives, expectations and
intentions. The cautionary statements made in this report are applicable to all forward-looking statements wherever they appear in this
report. Our actual results could differ materially from those discussed herein. In addition to the risks discussed in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” our business is subject to the risks set forth below.
We operate in a rapidly changing environment that involves certain risks and uncertainties, some of which are beyond our control. The
risks 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 may also materially adversely affect our business, financial condition and/or operating results.
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Risk Factors
We have incurred significant net losses since inception and expect to continue to incur operating losses for the foreseeable future. We
may never achieve or sustain profitability, which would depress the market price of our common stock and could cause you to lose all
or a part of your investment.
We have net income of $326 thousand for the year ended September 30, 2020, which includes government grant income of $960 thousand.
Since our inception in 2000 through fiscal 2019, we have incurred net losses. During fiscal 2019, net losses were $9.5 million, inclusive of
goodwill impairment charge of $3.7 million. As of September 30, 2020, we had an accumulated deficit of approximately $73.6 million.
We do not know whether or when we will become profitable. Our prior losses, combined with expected future losses, have had and will
continue to have an adverse effect on our stockholders’ equity and working capital. Because of the numerous risks and uncertainties
associated with our business, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if
we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.
We may require additional financing to execute our business plan and further expand our operations.
We may require additional funding to further expand our operations. We depend on financing sources, either debt or equity, or a
combination thereof, which may not be available to us in a timely basis if at all, or on terms acceptable to us. Further, our ability to obtain
financing may be limited by rules of the NASDAQ Capital Market.
On August 17, 2020, the Company entered into an arrangement with an investment banking firm (the “Manager”) to sell up to $4,796,090
of shares of the Company’s common stock, $0.001 par value (the “ATM Offering”). The ATM Offering shall remain in effect until the
earlier of August 17, 2021, or upon written notice of termination by either the Company or the Manager. The Company currently intends
to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes. As of
September 30, 2020, there have been no shares of common stock sold under the ATM offering. If we fail to obtain acceptable funding
when needed, we may not have sufficient resources to fund our operations, and this would have a material adverse effect on our business.
A reduction in our license renewal rate could reduce our revenue.
Our customers have no obligation to renew their subscription licenses, and some customers have elected not to do so. Our license renewal
rates may decline or fluctuate as a result of a number of factors, including customer dissatisfaction with our products and services, our
failure to update our products to maintain their attractiveness in the market, or constraints or changes in budget priorities faced by our
customers. A decline in license renewal rates could cause our revenue to decline, which would have a material adverse effect on our
operations.
We are dependent upon a small number of major customers, and a failure to renew our licenses with such customers could reduce
our revenue.
During fiscal 2020, one of our customers accounted for approximately 12% of total sales. Our customers have no obligation to renew their
subscription licenses, and some customers have elected not to do so, including a number of our large customers in the recent two fiscal
years. Our license renewal rates may decline or fluctuate as a result of a number of factors, including customer dissatisfaction with our
products and services, our failure to update our products to maintain their attractiveness in the market, or constraints or changes in budget
priorities faced by our customers. A decline in license renewal rates could cause our revenue to decline, which would have a material
adverse effect on our operations.
The length of our sales cycle can fluctuate significantly, which could result in significant fluctuations in license revenues being
recognized from quarter to quarter.
The decision by a customer to purchase our products often involves the development of a complex implementation plan across a customer’s
business. This process often requires a significant commitment of resources both by prospective customers and us. Given the significant
investment and commitment of resources required in order to implement our software, it may take several months, or even several quarters,
for marketing opportunities to materialize. If a customer’s decision to purchase our products is delayed or if the installation of our products
takes longer than originally anticipated, the date on which we may recognize revenue from these sales would be delayed. Such delays and
fluctuations could cause our revenue to be lower than expected in a particular period, and we may not be able to adjust our costs quickly
enough to offset such lower revenue, potentially negatively impacting our results of operations.
We depend on a third-party cloud platform provider to host our Bridgeline Unbound SaaS environment and managed services
business and if we were to experience a disruption in service, our business and reputation could suffer.
We host our SaaS and managed hosting customers via a third-party, Amazon Web Services. If upon renewal date our third-party provider
does not provide commercially reasonable terms, we may be required to transfer our services to a new provider, such as a data center
facility, and we may incur significant equipment costs and possible service interruption in connection with doing so. Interruptions in our
services might reduce our revenue, cause us to issue credits or refunds to customers, subject us to potential liability, or harm our renewal
rates.
10
If our security measures or those of our third-party cloud computing platform provider are breached and unauthorized access is
obtained to a customer’s data, our services may be perceived as not being secure, and we may incur significant legal and financial
exposure and liabilities.
Security breaches could expose us to a risk of loss of our customers’ information, litigation and possible liability. While we have security
measures in place, they may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee
error, malfeasance or otherwise and result in someone obtaining unauthorized access to our IT systems, our customers’ data or our data,
including our intellectual property and other confidential business information. Because the techniques used to obtain unauthorized access,
or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to implement
adequate preventative measures. In addition, our customers may authorize third-party technology providers to access their customer data,
and some of our customers may not have adequate security measures in place to protect their data that is stored on our services. Because
we do not control our customers or third-party technology providers, or the processing of such data by third-party technology providers,
we cannot ensure the integrity or security of such transmissions or processing. Malicious third parties may also conduct attacks designed
to temporarily deny customers access to our services. Any security breach could result in a loss of confidence in the security of our services,
damage our reputation, negatively impact our future sales, disrupt our business and lead to legal liability.
We rely on encryption and authentication technology from third parties to provide the security and authentication to effectively secure
transmission of confidential information, including consumer payment card numbers. Such technology may not be sufficient to protect the
transmission of such confidential information or these technologies may have material defects that may compromise the confidentiality or
integrity of the transmitted data. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance
coverage, could harm our reputation, business and operating results. We might be required to expend significant capital and other resources
to protect further against security breaches or to rectify problems caused by any security breach, which, in turn could divert funds available
for corporate growth and expansion or future acquisitions.
Our operating lease commitments may adversely affect our financial condition and cash flows from operations.
We have contractual commitments in operating lease arrangements. Our ability to meet our expenses and contractual commitments will
depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors. We will not be
able to control many of these factors, such as economic conditions and governmental regulations. Further, our operations may not generate
sufficient cash to enable us to service our working capital needs or contractual obligations resulting from our leases. If we are at any time
unable to generate sufficient cash flows from operations, we may be required to obtain additional sources of financing. There can be no
assurance that we would be able to successfully renegotiate such terms, that additional financing could be obtained on terms that are
favorable or acceptable to us. Refer to the Risk Factor - We may require additional financing to execute our business plan and further
expand our operations, for a description of capital raising activities.
We face intense and growing competition, which could result in price reductions, reduced operating margins and loss of market share.
We operate in a highly competitive marketplace and generally encounter intense competition to create and maintain demand for our services
and to obtain service contracts. If we are unable to successfully compete for new business and license renewals, our revenue growth and
operating margins may decline. The market for our Bridgeline Unbound platform (Content Manager, Insights, Commerce, Marketer, Social)
and web development services are competitive and rapidly changing. Barriers to entry in such markets are relatively low. With the
introduction of new technologies and market entrants, we expect competition to intensify in the future. Some of our principal competitors
offer their products at a lower price, which may result in pricing pressures. Such pricing pressures and increased competition generally
could result in reduced sales, reduced margins or the failure of our product and service offerings to achieve or maintain more widespread
market acceptance.
The web development/services market is highly fragmented with a large number of competitors and potential competitors. Our prominent
public company competitors are Big Commerce, Salesforce (Commerce Cloud), Episerver, Hubspot, Sitecore, and Adobe (Experience
Manager). We face competition from customers and potential customers who develop their own applications internally. We also face
competition from potential competitors that are substantially larger than we are and who have significantly greater financial, technical and
marketing resources, and established direct and indirect channels of distribution. As a result, they are able to devote greater resources to
the development, promotion and sale of their products than we can.
11
If our products fail to perform properly due to undetected errors or similar problems, our business could suffer, and we could face
product liability exposure.
We develop and sell complex web engagement software which may contain undetected errors or bugs. Such errors can be detected at any
point in a product’s life cycle but are frequently found after introduction of new software or enhancements to existing software. We
continually introduce new products and new versions of our products. Despite internal testing and testing by current and potential
customers, our current and future products may contain serious defects. If we detect any errors before we ship a product, we might have to
delay product shipment for an extended period of time while we address the problem. We might not discover software errors that affect our
new or current products or enhancements until after they are deployed, and we may need to provide enhancements to correct such errors.
Therefore, it is possible that, despite our testing, errors may occur in our software. These errors could result in the following:
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harm to our reputation;
lost sales;
delays in commercial release;
product liability claims;
contractual disputes;
negative publicity;
delays in or loss of market acceptance of our products;
license terminations or renegotiations; or
unexpected expenses and diversion of resources to remedy errors.
Furthermore, our customers may use our software together with products from other companies. As a result, when problems occur, it might
be difficult to identify the source of the problem. Even when our software does not cause these problems, the existence of these errors
might cause us to incur significant costs, divert the attention of our technical personnel from our product development efforts, impact our
reputation, or cause significant customer relations problems.
Technology and customer requirements evolve rapidly in our industry, and if we do not continue to develop new products and enhance
our existing products in response to these changes, our business could suffer.
We will need to continue to enhance our products in order to maintain our competitive position. We may not be successful in developing
and marketing enhancements to our products on a timely basis, and any enhancements we develop may not adequately address the changing
needs of the marketplace. Overlaying the risks associated with our existing products and enhancements are ongoing technological
developments and rapid changes in customer requirements. Our future success will depend upon our ability to develop and introduce, in a
timely manner, new products that take advantage of technological advances and respond to new customer requirements. The development
of new products is increasingly complex and uncertain, which increases the risk of delays. We may not be successful in developing new
products and incorporating new technology on a timely basis, and any new products may not adequately address the changing needs of the
marketplace. Failure to develop new products and product enhancements that meet market needs in a timely manner could have a material
adverse effect on our business, financial condition and operating results.
If we are unable to protect our proprietary technology and other intellectual property rights, our ability to compete in the marketplace
may be substantially reduced.
If we are unable to protect our intellectual property, our competitors could use our intellectual property to market products similar to our
products, which could decrease demand for such products, thus decreasing our revenue. We rely on a combination of copyright, trademark
and trade secret laws, as well as licensing agreements, third-party non-disclosure agreements and other contractual measures to protect our
intellectual property rights. These protections may not be adequate to prevent our competitors from copying or reverse-engineering our
products. Our competitors may independently develop technologies that are substantially similar or superior to our technology. To protect
our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into
confidentiality agreements. These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary
information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary
information. The protective mechanisms we include in our products may not be sufficient to prevent unauthorized copying. Existing
copyright laws afford only limited protection for our intellectual property rights and may not protect such rights in the event competitors
independently develop similar products. In addition, the laws of some countries in which our products are or may be licensed do not protect
our products and intellectual property rights to the same extent as do the laws of the United States.
Policing unauthorized use of our products is difficult and litigation could become necessary in the future to enforce our intellectual property
rights. Any litigation could be time consuming and expensive to prosecute or resolve, result in substantial diversion of management
attention and resources, and materially harm our business or financial condition.
12
If a third party asserts that we infringe upon its proprietary rights, we could be required to redesign our products, pay significant
royalties or enter into license agreements.
Claims of infringement are becoming increasingly common as the software industry develops and as related legal protections, including
but not limited to patents, are applied to software products. Although we do not believe that our products infringe on the rights of third
parties, a third party may assert that our technology or technologies of entities we acquire violates its intellectual property rights. As the
number of software products in our markets increases and the functionality of these products further overlap, we believe that infringement
claims will become more common. Any claims against us, regardless of their merit, could:
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be expensive and time consuming to defend;
result in negative publicity;
force us to stop licensing our products that incorporate the challenged intellectual property;
require us to redesign our products;
divert management’s attention and our other resources; and/or
require us to enter into royalty or licensing agreements in order to obtain the right to use necessary technologies, which may not
be available on terms acceptable to us, if at all.
We believe that any successful challenge to our use of a trademark or domain name could substantially diminish our ability to conduct
business in a particular market or jurisdiction and thus decrease our revenue and result in possible losses to our business.
Increasing government regulation could affect our business and may adversely affect our financial condition.
We are subject not only to regulations applicable to businesses generally, but also to laws and regulations directly applicable to electronic
commerce. In addition, an inability to satisfy the standards of certain voluntary third-party certification bodies that our customers may
expect, such as an attestation of compliance with the Payment Card Industry (“PCI”) Data Security Standards, may have an adverse impact
on our business and results. Further, there are various statutes, regulations, and rulings relevant to the direct email marketing and text-
messaging industries, including the Telephone Consumer Protection Act (“TCPA”), the CAN-SPAM Act and related Federal
Communication Commission (“FCC”) orders. The interpretation of many of these statutes, regulations, and rulings is evolving in the courts
and administrative agencies and an inability to comply may have an adverse impact on our business and results. If in the future we are
unable to achieve or maintain industry-specific certifications or other requirements or standards relevant to our customers, it may harm our
business and adversely affect our results.
We may also expand our business in countries that have more stringent data protection laws than those in the United States, and such laws
may be inconsistent across jurisdictions and are subject to evolving and differing interpretations. In particular, the European Union has
passed the General Data Protection Regulation (“GDPR”), which came into force on May 25, 2018. The GDPR includes more stringent
operational requirements for entities that receive or process personal data (as compared to U.S. privacy laws and previous EU laws), along
with significant penalties for non-compliance, more robust obligations on data processors and data controllers, greater rights for data
subjects, and heavier documentation requirements for data protection compliance programs. Additionally, both laws regulating privacy and
third-party products purporting to address privacy concerns could negatively affect the functionality of, and demand for, our products and
services, thereby reducing our revenue.
General Risk Factors
Our revenue and quarterly results may fluctuate, which could adversely affect our stock price.
We have experienced, and may in the future experience, significant fluctuations in our quarterly operating results that may be caused by
many factors. These factors include, among others:
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changes in demand for our products;
introduction, enhancement or announcement of products by us or our competitors;
market acceptance of our new products;
the growth rates of certain market segments in which we compete;
size and timing of significant orders;
budgeting cycles of customers;
mix of products and services sold;
changes in the level of operating expenses;
completion or announcement of acquisitions; and
general economic conditions in regions in which we conduct business.
If we are unable to manage our future growth efficiently, our business, liquidity, revenues and profitability may suffer.
We anticipate that continued expansion of our core business will require us to address potential market opportunities. For example, we may
need to expand the size of our research and development, sales, corporate finance or operations staff. There can be no assurance that our
infrastructure will be sufficiently flexible and adaptable to manage our projected growth or that we will have sufficient resources, human
or otherwise, to sustain such growth. If we are unable to adequately address these additional demands on our resources, our profitability
and growth might suffer. Also, if we continue to expand our operations, management might not be effective in expanding our physical
13
facilities and our systems, and our procedures or controls might not be adequate to support such expansion. Our inability to manage our
growth could harm our business and decrease our revenues.
There may be a limited market for our common stock, which may make it more difficult for you to sell your stock and which may
reduce the market price of our common stock.
The average shares traded per day in fiscal 2020 was approximately 484,000 shares per day compared to approximately 264,000 shares for
fiscal 2019, 406,000 for fiscal 2018 and 26,000 for fiscal 2017. Our average trading volume of our common stock can be very sporadic and
may impair the ability of holders of our common stock to sell their shares at the time they wish to sell them or at a price that they consider
reasonable. A low trading volume may also reduce the fair market value of the shares of our common stock. Accordingly, there can be no
assurance that the price of our common stock will reflect our actual value. There can be no assurance that the daily trading volume of our
common stock will increase or improve either now or in the future.
The market price of our common stock is volatile, which could adversely affect your investment in our common stock.
The market price of our common stock is volatile and could fluctuate significantly for many reasons, including, without limitation: as a
result of the risk factors listed in this annual report on Form 10-K; actual or anticipated fluctuations in our operating results; and general
economic and industry conditions. During fiscal 2020, the closing price of our common stock as reported by NASDAQ fluctuated between
$0.53 and $3.62. We are required to meet certain financial criteria in order to maintain our listing on the NASDAQ Capital Market. One
such requirement is that we maintain a minimum closing bid price of at least $1.00 per share for our common stock. If we fail this
requirement then NASDAQ will issue a notice that we are not in compliance and we will need to take corrective actions in order to not be
delisted. Such corrective actions could be a reverse stock split.
We are dependent upon our management team and the loss of any of these individuals could harm our business.
We are dependent on the efforts of our key management personnel. The loss of any of our key management personnel, or our inability to
recruit and train additional key management and other personnel in a timely manner, could materially and adversely affect our business,
operations and future prospects. We maintain a key man insurance policy covering our Chief Executive Officer.
Because competition for highly qualified personnel is intense, we might not be able to attract and retain the employees we need to
support our planned growth.
We will need to increase the size and maintain the quality of our sales force, software development staff and professional services
organization to execute our growth plans. To meet our objectives, we must attract and retain highly qualified personnel with specialized
skill sets. Competition for qualified personnel can be intense, and we might not be successful in attracting and retaining them. Our ability
to maintain and expand our sales, product development and professional services teams will depend on our ability to recruit, train and retain
top quality people with advanced skills who understand sales to, and the specific needs of, our target customers. For these reasons, we have
experienced, and we expect to again experience in the future, challenges in hiring and retaining highly skilled employees with appropriate
qualifications for our business. In addition to hiring services personnel to meet our needs, we may also engage additional third-party
consultants as contractors, which could have a negative impact on our financial results. If we are unable to hire or retain qualified personnel,
or if newly hired personnel fail to develop the necessary skills or reach productivity slower than anticipated, it would be more difficult for
us to sell our products and services, and we could experience a shortfall in revenue and fail to achieve our planned growth.
Future acquisitions may be difficult to integrate into our existing operations, may disrupt our business, dilute stockholder value, divert
management’s attention, or negatively affect our operating results.
We have acquired multiple businesses since our inception in 2000. Future acquisitions could involve substantial investment of funds or
financings by issuance of debt or equity securities and could result in one-time charges and expenses and have the potential to either dilute
the interests of existing shareholders or result in the issuance or assumption of debt. Any such acquisition may not be successful in
generating revenues, income or other returns to us, and the resources committed to such activities will not be available to us for other
purposes. Moreover, if we are unable to access capital markets on acceptable terms or at all, we may not be able to consummate acquisitions,
or may have to do so based upon less than optimal capital structure. Our inability to take advantage of growth opportunities for our business
or to address risks associated with acquisitions or investments in businesses may negatively affect our operating results. Additionally, any
impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges to earnings associated with any
acquisition or investment activity, may materially reduce our earnings which, in turn, may have an adverse material effect on the price of
our common stock.
We have issued preferred stock with rights senior to our common stock, and may issue additional preferred stock in the future, in order
to consummate a merger or other transaction necessary to continue as a going concern.
Our Certificate of Incorporation authorizes the issuance of up to 1.0 million shares of preferred stock, par value $0.001 per share, without
shareholder approval and on terms established by our board of directors, of which 264,000 shares have been designated as Series A
Preferred, 5,000 shares have been designated as Series B Preferred and 11,000 shares have been designated as Series C Preferred. We may
issue additional shares of preferred stock in order to consummate a financing or other transaction, in lieu of the issuance of common
stock. The rights and preferences of any such class or series of preferred stock would be established by our board of directors in its sole
discretion and may have dividend, voting, liquidation and other rights and preferences that are senior to the rights of our common stock.
14
We have never paid dividends on our common stock and we do not anticipate paying dividends in the future.
We have never paid cash dividends and do not believe that we will pay any cash dividends on our common stock in the future. Since we
have no plan to pay cash dividends, an investor would only realize income from his investment in our shares if there is a rise in the market
price of our common stock, which is uncertain and unpredictable.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these
provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment
of a premium over prevailing market prices for our securities. Provisions in our amended and restated bylaws and Delaware law may
have the effect of discouraging lawsuits against our directors and officers.
Our amended and restated bylaws require that derivative actions brought in our name, actions against our directors, officers, other
employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State
of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have
notice of and consented to the forum provisions in our amended and restated bylaws.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with
us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims.
Alternatively, if a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or
unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm
our business, operating results and financial condition.
The COVID-19 pandemic could have a material adverse effect our ability to operate, results of operations, financial condition, liquidity,
and capital investments.
The World Health Organization has declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we
operate and sell our services. The COVID-19 pandemic and similar issues in the future could have a material adverse effect on our ability
to operate, results of operations, financial condition, liquidity, and capital investments. Several public health organizations have
recommended, and some governments have implemented, certain measures to slow and limit the transmission of the virus, including shelter
in place, social distancing ordinances, and business shutdowns. There is considerable uncertainty regarding the extent to which the COVID-
19 outbreak will continue to spread, and the extent and duration of governmental and other measures implemented to try to slow the spread
of the virus.
The pandemic and such preventive measures, or others required or that we may voluntarily put in place, may have a material adverse effect
on our business for an indefinite period of time, such as the potential shut down of certain locations; decreased employee availability;
increased claims or other expenses; potential border closures; and others. These disruptions and challenges may continue for an indefinite
period of time and may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations,
financial condition, capitalization, and capital investments. Additionally, the effects of COVID-19 on the global economy could adversely
affect our ability to access the capital and other financial markets, and if so, we may need to consider alternative sources of funding for
some of our operations and for working capital, which may increase our cost of, as well as adversely impact our access to, capital. These
uncertain economic conditions may also result in the inability of our customers to make payments to us, on a timely basis or at all.
Although these disruptions may continue to occur, the long-term economic impact and near-term financial impacts of the COVID-19
pandemic, including but not limited to, possible impairment, restructuring, and other charges, cannot be reliably quantified or estimated at
this time due to the uncertainty of future developments.
Item 1B. Unresolved Staff Comments
Not required.
15
Item 2. Properties.
The following table lists our offices, all of which are leased:
Geographic Location
Woburn, Massachusetts
Woodbury, New York
Kingston, Ontario
Item 3. Legal Proceedings.
Address
100 Sylvan Rd Suite G-700
Woburn, MA 01801
150 Woodbury Road
Woodbury, NY 11797
61 Hyperion Court
Kingston, ON, K7K 7K7
Size
775 square feet,
professional office space
1,605 square feet,
professional office space
9,654 square feet,
professional office space
From time to time, we are subject to ordinary routine litigation and claims incidental to our business. We are not currently involved in any
legal proceedings that we believe are material.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities.
The following tables set forth, for the periods indicated, the range of high and low sale prices for our common stock. Our common stock
trades on the NASDAQ Capital Market under the symbol BLIN.
Year Ended September 30, 2020
High
Low
Fourth Quarter .............................................................................................
Third Quarter ...............................................................................................
Second Quarter ............................................................................................
First Quarter ................................................................................................
Year Ended September 30, 2019
Fourth Quarter .............................................................................................
Third Quarter ...............................................................................................
Second Quarter ............................................................................................
First Quarter ................................................................................................
$
$
$
$
$
$
$
$
3.62 $
2.95 $
1.85 $
2.24 $
High
Low
3.11 $
16.00 $
15.50 $
59.00 $
1.59
0.63
0.53
1.33
1.76
2.25
7.70
11.00
We have not declared or paid cash dividends on our common stock and do not plan to pay cash dividends to our common shareholders in
the near future. As of December 17, 2020, our common stock was held of record by approximately 2,440 shareholders. Most of the
Company’s shares of common stock are held in street name through one or more nominees.
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Recent Sales of Unregistered Securities; Use of Proceeds From Registered Securities
The following summarizes all sales of our unregistered securities during the year ended September 30, 2020 for which more information
is disclosed on our Form 8-Ks. The securities in the below-referenced transactions were (i) issued without registration and (ii) were subject
to restrictions under the Securities Act and the securities laws of certain states, in reliance on the private offering exemptions contained in
Sections 4(a)(2), 4(a)(6) and/or 3(b) of the Securities Act and on Regulation D promulgated there under, and in reliance on similar
exemptions under applicable state laws as transactions not involving a public offering. Unless stated otherwise, no placement or
underwriting fees were paid in connection with these transactions.
(1) On February 13, 2019, the Company entered into an Asset Purchase Agreement with Seevolution, Inc., a Delaware corporation,
and Elisha Gilboa, an individual and shareholder of Seevolution, (the “Asset Purchase”). The Company issued 40,000 shares of
Bridgeline Digital common stock as partial consideration for the Asset Purchase.
Item 6. Selected Financial Data.
Not required.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of a variety of factors and risks including the impact of the weakness in the U.S.
and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue
and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited
market for our common stock, the ability to maintain our listing on the NASDAQ Capital Market, the volatility of the market price of our
common stock, the ability to raise capital, the performance of our products, our ability to respond to rapidly evolving technology and
customer requirements, our ability to protect our proprietary technology, the security of our software and response to cyber security risks,
our ability to meet our financial obligations and commitments, our dependence on our management team and key personnel, our ability to
hire and retain future key personnel, our ability to maintain an effective system of internal controls, or our ability to respond to government
regulations. These and other risks are more fully described herein and in our other filings with the Securities and Exchange Commission.
This section should be read in combination with the accompanying audited consolidated financial statements and related notes prepared
in accordance with United States generally accepted accounting principles.
Overview
Bridgeline Digital, The Digital Engagement Company, helps customers maximize the performance of their full digital experience from
websites and intranets to eCommerce experiences. Bridgeline’s Unbound platform integrates Web Content Management, eCommerce,
eMarketing, Social Media management, and Web Analytics (Insights) with the goal of assisting marketers to deliver digital experiences
that attract, engage, nurture, and convert their customers across all channels. Bridgeline offers a core accelerator framework for rapidly
implementing digital experiences on the Bridgeline Unbound platform, which provides customers with cost-effective solutions in addition
to velocity to market.
Bridgeline’s Unbound platform combined with its professional services assists customers in digital business transformation, driving lead
generation, increasing revenue, improving customer service and loyalty, enhancing employee knowledge, and reducing operational
costs. The Bridgeline Unbound platform bridges the gaps between Web Content Management, eCommerce, eMarketing, and social and
web analytics by providing all of these components in one unified and deeply integrated platform.
Our Unbound Franchise product empowers large franchises, healthcare networks, associations/chapters and other multi-unit organizations
to manage a large hierarchy of digital properties at scale. The platform provides an easy-to-use administrative console that enables corporate
marketing to provide consistency in branding and messaging while providing flexible publishing capabilities at the local-market level. The
platform empowers brand networks to unify, manage, scale and optimize a hierarchy of web properties and marketing campaigns on a
global, national and local level.
The Unbound platform is delivered through a cloud-based software as a service (“SaaS”) multi-tenant business model, whose flexible
architecture provides customers with state of the art deployment providing maintenance, daily technical operation and support; or via a
traditional perpetual licensing business model, in which the software resides on a dedicated server in either the customer’s facility or hosted
by Bridgeline via a cloud-based hosted services model.
OrchestraCMS, delivered through a cloud-based SaaS, is the only content and digital experience platform built 100% native on Salesforce
and helps customers create compelling digital experiences for their customers, partners, and employees; uniquely combining content with
business data, processes and applications across any channel or device, including Salesforce Communities, social media, portals, intranets,
websites, applications and services.
Celebros Search, delivered through a cloud-based SaaS, is a commerce-oriented site search product that provides for Natural Language
Processing with artificial intelligence to present very relevant search results based on long-tail keyword searches in seven languages.
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Bridgeline Digital was incorporated under the laws of the State of Delaware on August 28, 2000.
Locations
The Company’s corporate office is located in Woburn, Massachusetts. The Company maintains regional field offices serving the following
geographical locations: Boston, MA; and New York, NY. The Company has three wholly-owned subsidiaries: Bridgeline Digital Pvt. Ltd.
located in Bangalore, India; Bridgeline Digital Canada, Inc. located in Ontario, Canada; and Stantive Technologies Group Pty, Ltd. located
in Australia.
Sales and Marketing
Bridgeline employs a direct sales force and each sale takes on average three to six months to complete. Each franchise/multi-unit
organization sale takes on average one year to complete. Our direct sales force focuses its efforts selling to medium-sized and large
companies. These companies are generally categorized in the following vertical markets: (i) financial services; (ii) franchises/multi-unit
organizations; (iii) retail brand names; (iv) health services and life sciences; (v) technology (software and hardware); (vi) credit unions and
regional banks, and (vii) associations and foundations. We have five sales geographic locations in the United States.
Acquisitions
Bridgeline will continue to evaluate expanding its distribution of Bridgeline Unbound and its interactive development capabilities through
acquisitions. We may make additional acquisitions in the foreseeable future. These potential acquisitions will be consistent with our growth
strategy by providing Bridgeline with new geographical distribution opportunities, an expanded customer base, an expanded sales force
and an expanded developer force. In addition, integrating acquired companies into our existing operations allows us to consolidate the
finance, human resources, legal, marketing, and research and development of the acquired businesses with our own internal resources,
hence reducing the aggregate of these expenses for the combined businesses and resulting in improved operating results.
Customer Information
We currently have over 200 active customers. For the year ended September 30, 2020, one customer represented approximately 12% of
the Company’s total revenue. For the year ended September 30, 2019, two customers each represented approximately 11% and 15% of the
Company’s total revenue.
Summary of Results of Operations
Total revenue for the fiscal year ended September 30, 2020 (“fiscal 2020”) increased to $10.9 million from $10.0 million for the fiscal year
ended September 30, 2019 (“fiscal 2019”). Loss from operations for fiscal 2020 was $1.6 million, compared with loss from operations of
$11.1 million, which included a goodwill impairment charge of $3.7 million, for fiscal 2019. We had net income for fiscal 2020 of $326
thousand including government grant income related to the Paycheck Protection Program (“PPP”) loan of $960 thousand, compared with
a net loss of ($9.5) million, including a goodwill impairment charge of $3.7 million and a net gain of $2.1 million due to warrant related
charges, for fiscal 2019. Basic net loss per share attributable to common shareholders for fiscal 2020 was $(0.59) compared with the
equivalent basic net loss per share attributable to common shareholders of $(8.16) for fiscal 2019.
18
(in thousands)
Net Revenue
Years Ended
September 30,
2020
2019
Change
Change
$
%
Digital engagement services ............................................................... $
% of total net revenue.....................................................................
Subscription and perpetual licenses....................................................
% of total net revenue.....................................................................
Total net revenue ..........................................................................
3,409 $
31%
7,498
69%
10,907
Cost of revenue
Digital engagement services ...............................................................
% of digital engagement services revenue .....................................
Subscription and perpetual licenses....................................................
% of subscription and perpetual revenue ........................................
Total cost of revenue ....................................................................
Gross profit ...........................................................................................
Gross profit margin .............................................................................
Operating expenses
Sales and marketing ...........................................................................
% of total revenue ..........................................................................
General and administrative .................................................................
% of total revenue% .......................................................................
Research and development .................................................................
% of total revenue ..........................................................................
Depreciation and amortization ...........................................................
% of total revenue ..........................................................................
Goodwill impairment .........................................................................
% of total revenue ..........................................................................
Restructuring and acquisition related expenses ..................................
% of total revenue ..........................................................................
Total operating expenses .............................................................
1,831
54%
2,676
36%
4,507
6,400
59%
2,614
24%
2,455
23%
1,641
15%
968
9%
-
0%
366
3%
8,044
4,117 $
41%
5,835
59%
9,952
2,070
50%
3,290
56%
5,360
4,592
46%
4,824
48%
3,246
33%
2,185
22%
620
6%
3,732
38%
1,053
11%
15,660
(708)
(17%)
1,663
955
29%
10%
(239)
(12)%
(614)
(19)%
(853)
1,808
(16)%
39%
(2,210)
(46)%
(791)
(24)%
(544)
(25)%
348
56%
(3,732)
(100)%
(687)
(65)%
(7,616)
(49)%
Loss from operations............................................................................
Interest expense and other, net ...........................................................
Government grant income ..................................................................
Amortization of debt discount ............................................................
Warranty liability expense .................................................................
Change in fair value of warrant liabilities ..........................................
Income (loss) before income taxes .......................................................
Provision for income taxes ...............................................................
(1,644)
(7)
960
-
-
1,028
337
11
(11,068)
(303)
-
(231)
(11,272)
13,404
(9,470)
4
9,424
296
960
231
11,272
(12,376)
9,807
7
(85)%
(98)%
100%
(100)%
(100)%
(92)%
(104)%
175%
Net income/(loss) .................................................................................. $
326 $
(9,474) $
9,800
(103)%
Non-GAAP Measure:
Adjusted EBITDA ............................................................................ $
(116) $
(5,385) $
5,269
(98)%
Revenue
Our revenue is derived from two sources: (i) digital engagement services and (ii) subscription and perpetual licenses.
19
Digital Engagement Services
Digital engagement services revenue is comprised of Bridgeline Unbound implementation and retainer-related services. Total revenue from
digital engagement services decreased $708 thousand, or 17%, to $3.4 million in fiscal 2020 from $4.1 million in fiscal 2019. Digital
engagement services revenue as a percentage of total revenue decreased to 31% in fiscal 2020 from 41% in fiscal 2019. The decrease
compared to the prior period is primarily due to a decrease in new service engagements.
Subscription and Perpetual Licenses
Revenue from subscription (SaaS) and perpetual licenses increased $1.7 million, or 29%, to $7.5 million in fiscal 2020 from $5.8 million
in fiscal 2019. The increase compared to the prior period is primarily due to license revenues of $3.7 million realized from our two
acquisitions completed in the fiscal 2019 second quarter, partially offset by cancelled SaaS subscriptions for legacy customers. Subscription
and perpetual license revenue as a percentage of total revenue increased to 69% in fiscal 2020 from 59% in fiscal 2019. The increase as a
percentage of total revenue is attributable to the two acquisitions completed in fiscal 2019 second quarter, which resulted in the Company
acquiring a larger proportion of subscription and perpetual licenses over digital engagement service contracts.
Cost of Revenue
Total cost of revenue for fiscal 2020 decreased $853 thousand, or 16%, to $4.5 million from $5.4 million in fiscal 2019. The gross profit
margin increased to 59% for fiscal 2020 compared to 46% for fiscal 2019. The increase in the gross profit margin for fiscal 2020 compared
to fiscal 2019 is primarily attributable to decreases in headcount, and the use of third-party consultants and an increase in the proportion of
license revenue, which is generally associated with higher margins, to digital engagement service revenue.
Cost of Digital Engagement Services
Cost of digital engagement services decreased $239 thousand, or 12%, to $1.8 million in fiscal 2020 from $2.1 million in fiscal 2019. The
decrease in cost of digital engagement services in fiscal 2020 compared to fiscal 2019 is primarily due to the allocation of support team
and third-party subcontractor costs. The cost of total digital engagement services as a percentage of total digital engagement services
revenue increased to 54% in fiscal 2020 from 50% in fiscal 2019. The increase as a percentage of revenues in fiscal 2020 compared to
fiscal 2019 is primarily due to the overall decrease in digital engagement services revenue.
Cost of Subscription and Perpetual License
Cost of subscription and perpetual licenses decreased $614 thousand, or 19%, to $2.7 million in fiscal 2020 compared to $3.3 million in
fiscal 2019. The cost of subscription and perpetual licenses as a percentage of subscription and perpetual license revenue decreased to 36%
in fiscal 2020 from 56% in fiscal 2019. This is primarily due to a reduction of the workforce and less allocated time by the delivery team
and third-party subcontractors on platform support projects.
Gross Profit
Gross profit increased $1.8 million, or 39%, in fiscal 2020 to $6.4 million compared to $4.6 million in fiscal 2019. The increase in fiscal
2020 compared to fiscal 2019 is primarily attributable to the increase in revenue and overall cost decrease, both as more fully described
above.
Operating Expenses
Sales and Marketing Expenses
Sales and marketing expenses decreased $2.2 million, or 46%, to $2.6 million in fiscal 2020 from $4.8 million in fiscal 2019. Sales and
marketing expense as a percentage of total revenue decreased to 24% in fiscal 2020 compared to 48% in fiscal 2019. These decreases
compared to the prior period are primarily attributable to the decrease in headcount and personnel from acquisitions as well as decreased
commission expenses incurred.
General and Administrative Expenses
General and administrative expenses decreased $791 thousand, or 24%, to $2.5 million in fiscal 2020 from $3.2 million in fiscal 2019.
General and administrative expense as a percentage of revenue decreased to 23% in fiscal 2020 compared to 33% in fiscal 2019. These
decreases compared to the prior period are primarily attributable to a decrease in overall support headcount and personnel expenses.
Research and Development
Research and development expense decreased $544 thousand, or 25%, to $1.6 million in fiscal 2020 from $2.2 million in fiscal 2019.
Research and development expense as a percentage of total revenue decreased to 15% in fiscal 2020 compared to 22% for fiscal 2019.
These decreases compared to the prior period are primarily attributable to decreases in headcount.
20
Depreciation and Amortization
Depreciation and amortization expense increased by $348 thousand, or 56%, to $968 thousand in fiscal 2020 from $620 thousand in fiscal
2019. Depreciation and amortization as a percentage of total revenue increased to 9% in fiscal 2020 from 6% in fiscal 2019. These increases
compared to the prior period are primarily due to a full year of amortization of intangible assets resulting from acquisitions completed
during the prior comparable period.
Goodwill Impairment
The carrying value of goodwill is not amortized, but it is typically tested for impairment annually as of September 30th, as well as on an
interim basis whenever events or changes in circumstances indicate that the carrying amount of a reporting unit may not be recoverable.
An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. Goodwill is
assessed at the consolidated level as one reporting unit. During fiscal 2020 and 2019, the Company performed impairment tests which
resulted in no impairment charge assessed for fiscal 2020 and an aggregated impairment charge of $3.7 million recognized during fiscal
2019.
Restructuring and Acquisition Related Expenses
During fiscal 2020, the Company recognized $366 thousand related to a reduction in the workforce in its U.S. and Canada operations aimed
at improving efficiencies by combining functions, certain responsibilities and eliminating redundancies, which resulted in a reduction of
15 positions.
Commencing in fiscal 2015 and through fiscal 2019, the Company’s management approved, committed to and initiated plans to restructure
and further improve efficiencies by implementing cost reductions in line with expected decreases in revenue. The Company renegotiated
several office leases and relocated to smaller space, while also negotiating sub-leases for the original space. In addition, the Company
executed a general workforce reduction and recognized costs for severance and termination benefits. These restructuring charges and
accruals require estimates and assumptions, including contractual rental commitments or lease buy-outs for vacated office space and related
costs, and estimated sub-lease income. The Company’s sub-lease assumptions include the rates to be charged to a sub-tenant and the timing
of the sub-lease arrangement. All of the vacated lease space is currently contractually occupied by a new sub-tenant for the remaining life
of the lease.
In total, restructuring expenses related to this activity commencing in prior periods was $625 thousand in fiscal 2019. These charges consist
of the total lease expenses less sub-lease rental income, other miscellaneous lease termination costs, and loss on disposal of fixed assets.
Acquisition related expenses related to the acquisition of Stantive Technologies Group Inc. consummated in March 2019 were $428
thousand. There were no acquisition related expenses incurred during fiscal 2020.
Loss from Operations
The loss from operations was $1.6 million for fiscal 2020 compared to a loss from operations of $11.1 million for fiscal 2019, a decrease
of $9.4 million or 85%. The loss from operations for fiscal 2019 included a goodwill impairment charge of $3.7 million.
Other income (expense), net
The Company recognized a gain related to the change in fair value of warrant liabilities of $1.0 million and $13.4 million for the years
ended September 30, 2020 and 2019, respectively. During the year ended September 30, 2019, we also recognized a warrant liability
expense of $11.3 million related to the excess of fair value allocated to warrants over the proceeds received from the issuance of Series C
Preferred Convertible Stock and associated warrants.
During the year ended September 30, 2020, the Company recognized government grant income of $960 thousand associated with proceeds
received under the Paycheck Protection Program deemed probable to be forgiven based on the actual expenditures from the date proceeds
were received by the Company through September 30, 2020. The remaining unexpended proceeds are expected to be expended in the first
quarter of fiscal 2021. The Company plans to submit the PPP loan forgiveness application in the near term. Although the Company believes
it is probable that the PPP loan will be forgiven, the Company cannot provide any objective assurance that it will obtain forgiveness in
whole or in part.
21
During the years ended September 30, 2020 and 2019, interest expense, net, inclusive of amortization of debt discounts, was $7 thousand
and $534 thousand, respectively.
Provision for Income Taxes
We recorded an income tax expense of $11 thousand and $4 thousand for fiscal 2020 and 2019, respectively. The Company has net
operating loss (“NOL”) carryforwards and other deferred tax benefits, subject to the limitations discussed below, that are available to offset
future taxable income. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will
not be realized. The Company established a valuation allowance against its net deferred tax assets.
The Federal NOL carryforward of approximately $37 million as of September 30, 2020 expires on various dates through 2039. Net
operating losses incurred after December 31, 2017 carry forward indefinitely. Internal Revenue Code Section 382 places certain limitations
on the amount of taxable income that can be offset by NOL carryforwards after a change in control of a loss corporation. Generally, after
a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 limitation. Due to these “change of
ownership” provisions, utilization of NOL carryforwards may be subject to an annual limitation on utilization against taxable income in
future periods. The Company has not performed a Section 382 analysis. However, if performed, Section 382 may be found to limit potential
future utilization of our NOL carryforwards. The Company also has approximately $28 million in state NOLs which expire on various
dates through 2039.
Adjusted EBITDA
We also measure our performance based on a non GAAP (“Generally Accepted Accounting Principles”) measurement of earnings before
interest, taxes, depreciation, amortization, stock-based compensation expense, impairment of goodwill and intangible assets, non-cash
warrant related expenses, change in fair value of derivative instruments, and restructuring and acquisition related charges (“Adjusted
EBITDA”).
We believe this non GAAP financial measure of Adjusted EBITDA is useful to management and investors in evaluating our operating
performance for the periods presented and provides a tool for evaluating our ongoing operations.
Adjusted EBITDA, however, is not a measure of operating performance under accounting principles generally accepted in the United States
of America (“U.S. GAAP”) and should not be considered as an alternative or substitute for U.S. GAAP profitability measures such as (i)
income from operations and net income, or (ii) cash flows from operating, investing and financing activities, both as determined in
accordance with U.S. GAAP. Adjusted EBITDA as an operating performance measure has material limitations because it excludes the
financial statement impact of income taxes, net interest expense, amortization of intangibles, depreciation, goodwill impairment,
restructuring charges, loss on disposal of assets, other amortization, changes in fair value of warrant liabilities and stock-based
compensation, and therefore does not represent an accurate measure of profitability. As a result, Adjusted EBITDA should be evaluated in
conjunction with net income (loss) for a complete analysis of our profitability, as net income (loss) includes the financial statement impact
of these items and is the most directly comparable U.S. GAAP operating performance measure to Adjusted EBITDA. Our definition of
Adjusted EBITDA may also differ from and therefore may not be comparable with similarly titled measures used by other companies,
thereby limiting its usefulness as a comparative measure. Because of the limitations that Adjusted EBITDA has as an analytical tool,
investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under U.S. GAAP.
22
The following table reconciles net income (loss) (which is the most directly comparable U.S. GAAP operating performance measure) to
Adjusted EBITDA:
Net income (loss) .......................................................................................................... $
Provision for income tax ...............................................................................................
Interest expense and other, net ......................................................................................
Government grant income .............................................................................................
Amortization of debt discount .......................................................................................
Warrant liability expense ..............................................................................................
Change in fair value of warrants ...................................................................................
Amortization of intangible assets ..................................................................................
Depreciation ..................................................................................................................
Goodwill impairment ....................................................................................................
Restructuring and acquisition related charges ...............................................................
Other amortization ........................................................................................................
Stock-based compensation ............................................................................................
Adjusted EBITDA ................................................................................................. $
Years Ended
September 30,
2020
2019
326 $
11
7
(960 )
-
-
(1,028 )
891
61
-
366
16
194
(116 ) $
(9,474)
4
303
-
231
11,272
(13,404)
544
66
3,732
1,053
39
249
(5,385)
Adjusted EBITDA increased year over year, which is primarily attributable to increases in revenues and cost control measures.
Liquidity and Capital Resources
Cash Flows
Operating Activities
Cash used in operating activities was $498 thousand during fiscal 2020 compared to cash used in operating activities of $4.2 million
during fiscal 2019. The change in cash used in operating activities compared to the prior period was primarily due to a decrease in loss
from operations partially offset by decreases in non-cash items of $3.6 million and accounts payables.
Investing Activities
We did not have any cash flows from investing activities during fiscal 2020 compared to cash used in investing activities of $5.7 million
during fiscal 2019. Cash used in investing activities during the prior fiscal year was primarily related to the acquisition of the assets of
Stantive and Seevolution.
Financing Activities
Cash provided by financing activities was $1.0 million during fiscal 2020 compared with $9.5 million during fiscal 2019. Cash provided
by financing activities was attributable to the proceeds received under the Payroll Protection Program during fiscal 2020 and to the public
offering in October 2018 and a private offering in March 2019, partially offset by repayments of term and promissory notes during fiscal
2019.
Capital Resources and Liquidity Outlook
In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic, and we
expect our operations in all locations to be affected as the virus continues to proliferate. We have adjusted certain aspects of our operations
to protect employees and customers while still meeting customers’ needs for vital technology. We will continue to monitor the situation
closely and it is possible that we will implement further measures. In light of the uncertainty as to the severity and duration of the pandemic,
the impact on our revenues, profitability and financial position is uncertain at this time.
23
On April 17, 2020, the Company entered into a loan with an aggregate principal amount of $1,047,500, pursuant to the PPP. The Company
has performed initial calculations for PPP loan forgiveness according to the terms and conditions of the U.S. Small Business
Administration’s (the “SBA”) Loan Forgiveness Application (Revised June 16, 2020) and, based on such calculations, expects that the PPP
loan will be forgiven in full based on usage of related proceeds over a period less than 24 weeks. In addition, the Company determined it
is probable the Company will meet all the conditions of the PPP loan forgiveness. However, there can be no assurances that the Company
will ultimately meet the conditions for forgiveness of the loan or that the Company will not take actions that could cause the Company to
be ineligible for forgiveness of the loan, in whole or in part. As of September 20, 2020, the remaining unexpended PPP loan proceeds are
$88 thousand, which are currently expected to be expended in the first quarter of fiscal 2021. The Company plans to submit the PPP loan
forgiveness application in the near term.
On August 17, 2020, the Company entered into an arrangement with an investment banking firm (the “Manager”) to sell up to $4,796,090
of shares of the Company’s common stock, $0.001 par value (the “ATM Offering”). Pursuant to the ATM Offering, shares may be sold on
a daily basis, commencing no earlier than August 17, 2020, at a gross sales price equal to the market price for shares of the Company’s
common stock on the NASDAQ Capital Market at the time of sale of such shares. The Manager has no obligation to purchase shares of the
Company’s common stock and is only obligated to use its commercially reasonable efforts consistent with its normal trading and sales
practices to sell shares of the Company’s common stock. Accordingly, there can be no assurances that the Manager will be successful in
selling any portion of the shares available for sale under the ATM Offering. The Company shall pay to the Manager a placement fee of
2.5% of the gross sales price of shares sold. The ATM Offering shall remain in effect until the earlier of August 17, 2021, or upon written
notice of termination by either the Company or the Manager. As of September 30, 2020, there have been no shares of common stock sold
under the ATM offering.
The Company currently intends to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and
general corporate purposes.
The Company believes that future revenues and cash flows will supplement its working capital and it has an appropriate cost structure to
support future revenue growth. Based upon its current working capital and projected cash flows in the next twelve months, the Company
may need additional sources of financing in place in order to ensure its operations are adequately funded. On August 17, 2020, the Company
entered into an arrangement with an investment banking firm to sell up to $4,796,090 of shares of the Company’s common stock, $0.001
par value. Refer to Note 12 under the caption, At the Market Offering, for a detailed description of this capital raise activity. There are no
obligations for the sale or purchase of the Company’s common stock pursuant to this offering. Accordingly, there can be no assurances
that the Company or investment banking firm will be successful in selling any portion of the shares available for sale pursuant to this
offering. No definitive agreements for additional financing are in place as of the date of this Form 10-K and there can be no assurances
that additional sources of financing could be obtained on terms that are favorable or acceptable to us and that revenue growth and
improvement in cash flows can be achieved. Accordingly, these factors raise doubt about the Company’s ability to continue as a going
concern for at least twelve months following the issuance of this Form 10-K. No adjustments have been made to the accompanying
consolidated financial statements as a result of this uncertainty.
Inflation
Inflationary increases can cause pressure on wages and the cost of benefits offered to employees. We believe that the relatively moderate
rates of inflation in recent years have not had a significant impact on our operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons, other
than our operating leases and contingent acquisition payments.
We currently do not have any variable interest entities. We do not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Therefore, we are not materially
exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
Contractual Obligations
We lease our facilities in the United States and Canada. We currently have no future commitments that extend past fiscal 2025.
The following summarizes our future contractual obligations:
(in thousands)
Payment obligations by year
Operating leases .................................. $
FY21
FY22
FY23
FY24
FY25
Total
210 $
170 $
173 $
120 $
88 $
761
24
Critical Accounting Policies
These critical accounting policies and estimates by our management should be read in conjunction with Note 2 Summary of Significant
Accounting Policies to the Consolidated Financial Statements that were prepared in accordance with U.S. GAAP.
The preparation of consolidated financial statements in accordance U.S. GAAP requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in
the reporting periods. We regularly make estimates and assumptions that affect the reported amounts of assets and liabilities. The most
significant estimates included in our consolidated financial statements are the valuation of accounts receivable and long-term assets,
including intangibles, goodwill and deferred tax assets, stock-based compensation, amounts of revenue to be recognized on service contracts
in progress, unbilled receivables, and deferred revenue. We base our estimates and assumptions on current facts, historical experience and
various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences
between our estimates and the actual results, our future results of operations will be affected.
We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that
require the most subjective judgment:
● Revenue recognition;
● Allowance for doubtful accounts;
● Accounting for cost of computer software to be sold, leased or otherwise marketed;
● Accounting for goodwill and other intangible assets;
● Accounting for Payroll Protection Program; and
● Accounting for stock-based compensation.
Revenue Recognition
Overview
The Company derives its revenue from two sources: (i) Software Licenses, which are comprised of subscription fees (“SaaS”), perpetual
software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses and (ii) Digital Engagement Services, which
are professional services to implement our products such as web development, digital strategy, information architecture and usability
engineering search. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or
“SaaS”, do not take possession of the software.
Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those services. If the consideration promised in a contract includes a variable amount,
for example, overage fees, contingent fees or service level penalties, the Company includes an estimate of the amount it expects to receive
for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur. The Company’s
subscription service arrangements are non-cancelable and do not contain refund-type provisions. Revenue is reported net of applicable
sales and use tax.
The Company recognizes revenue from contracts with customers using a five-step model, which is described below:
●
●
Identify the customer contract;
Identify performance obligations that are distinct;
● Determine the transaction price;
● Allocate the transaction price to the distinct performance obligations; and
● Recognize revenue as the performance obligations are satisfied.
Identify the customer contract
A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights
have been identified, payment terms are identified, the contract has commercial substance and collectability and consideration is probable.
25
Identify performance obligations that are distinct
A performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. A good or service that
is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources
that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable
from other promises in the contract.
Determine the transaction price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or
services to a customer, excluding sales taxes that are collected on behalf of government agencies.
Allocate the transaction price to distinct performance obligations
The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or
services being provided to the customer. The Company determines the SSP of its goods and services based upon the historical average
sales prices for each type of software license and professional services sold.
Recognize revenue as the performance obligations are satisfied
Revenue is recognized when or as control of the promised goods or services is transferred to customers. Revenue from SaaS licenses is
recognized ratably over the subscription period beginning on the date the license is made available to customers. Most subscription contracts
are three-year terms. Customers who license the software on a perpetual basis receive rights to use the software for an indefinite time period
and an option to purchase post-customer support (“PCS”). PCS revenue is recognized ratably on a straight-line basis over the period of
performance and the perpetual license is recognized upon delivery. The Company also offers hosting services for those customers who
purchase a perpetual license and do not want to run the software in their environment. Revenue from hosting is recognized ratably over the
service period, ranging from one to three-year terms. The Company recognizes revenue from professional services as the services are
provided.
Customer Payment Terms
Payment terms with customers typically require payment 30 days from invoice date. Payment terms may vary by customer but generally
do not exceed 45 days from invoice date. Invoicing for digital engagement services are either monthly or upon achievement of milestones
and payment terms for such billings are within the standard terms described above. Invoices for subscriptions and hosting are typically
issued monthly and are generally due in the month of service. The Company’s subscription and hosting agreements provide for refunds
when service is interrupted for an extended period of time and are reserved for in the month in which they occur, if necessary.
Our digital engagement services agreements with customers do not provide for any refunds for services or products and therefore no specific
reserve for such is maintained. In the infrequent instances where customers raise a concern over delivered products or services, we have
endeavored to remedy the concern and all costs related to such matters have been insignificant in all periods presented.
Warranty
Certain arrangements include a warranty period, which is generally 30 days from the completion of work. In hosting arrangements, we
provide warranties of up-time reliability. We continue to monitor the conditions that are subject to the warranties to identify if a warranty
claim may arise. If we determine that a warranty claim is probable, then any related cost to satisfy the warranty obligation is estimated and
accrued. Warranty claims to date have been immaterial.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts which represents estimated losses resulting from the inability, failure or refusal of our
clients to make required payments.
We analyze historical percentages of uncollectible accounts and changes in payment history when evaluating the adequacy of the allowance
for doubtful accounts. We use an internal collection effort, which may include our sales and services groups as we deem appropriate.
Although we believe that our allowances are adequate, if the financial condition of our clients deteriorates, resulting in an impairment of
their ability to make payments, or if we underestimate the allowances required, additional allowances may be necessary, resulting in
increased expense in the period in which such determination is made.
26
Accounting for Cost of Computer Software to be Sold, Leased or Otherwise Marketed
We charge research and development expenditures for technology development to operations as incurred. However, in accordance with
Accounting Standards Codification (“ASC”) 985-20 Costs of Software to be Sold Leased or Otherwise Marketed, we capitalize certain
software development costs subsequent to the establishment of technological feasibility. Based on our product development process,
technological feasibility is established upon completion of a working model. Certain costs incurred between completion of a working model
and the point at which the product is ready for general release is capitalized if significant. Once the product is available for general release,
the capitalized costs are amortized in cost of sales over the estimated useful life of the asset.
Accounting for Goodwill and Intangible Assets
Goodwill is tested for impairment annually during the fourth quarter of every year and more frequently if events and circumstances indicate
that the asset might be impaired. The purpose of an impairment test is to identify any potential impairment by comparing the carrying value
of a reporting unit including goodwill to its fair value. An impairment charge is recognized for the amount by which the carrying amount
exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that
reporting unit.
Factors that could lead to a future impairment include material uncertainties such as operational, economic and competitive factors specific
to the key assumptions underlying the fair value estimate we use in our impairment testing that have reasonable possibility of changing.
This could include a significant reduction in projected revenues, a deterioration of projected financial performance, future acquisitions
and/or mergers, and a decline in our market value as a result of a significant decline in our stock price.
Accounting for Stock-Based Compensation
At September 30, 2020, we maintained two stock-based compensation plans, one of which has expired but still contains vested and unvested
stock options. The two plans are more fully described in Note 12 of these consolidated financial statements.
The Company accounts for stock-based compensation awards in accordance with ASC 718, Compensation-Stock Topic of the
Codification. Share-based payments (to the extent they are compensatory) are recognized in our consolidated statements of operations
based on their fair values.
We recognize stock-based compensation expense for share-based payments issued or assumed after October 1, 2006 that are expected to
vest on a straight-line basis over the service period of the award, which is generally three years. We recognize the fair value of the unvested
portion of share-based payments granted prior to October 1, 2006 over the remaining service period, net of estimated forfeitures. In
determining whether an award is expected to vest, we use an estimated, forward-looking forfeiture rate based upon our historical forfeiture
rate and reduce the expense over the recognition period. Estimated forfeiture rates are updated for actual forfeitures quarterly. We also
consider, each quarter, whether there have been any significant changes in facts and circumstances that would affect our forfeiture
rate. Although we estimate forfeitures based on historical experience, actual forfeitures in the future may differ. In addition, to the extent
our actual forfeitures are different than our estimates, we record a true-up for the difference in the period that the awards vest, and such
true-ups could materially affect our operating results.
We estimate the fair value of employee stock options using the Black-Scholes-Merton option valuation model. The fair value of an award
is affected by our stock price on the date of grant as well as other assumptions, including the estimated volatility of our stock price over
the term of the awards and the estimated period of time that we expect employees to hold their stock options. The risk-free interest rate
assumption we use is based upon United States treasury interest rates appropriate for the expected life of the awards. We use the historical
volatility of our publicly traded options in order to estimate future stock price trends. In order to determine the estimated period of time
that we expect employees to hold their stock options, we use historical trends of employee turnovers. Our expected dividend rate is zero
since we do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The
aforementioned inputs entered into the option valuation model we use to fair value our stock awards are subjective estimates and changes
to these estimates will cause the fair value of our stock awards and related stock-based compensation expense we record to vary.
We record current tax expense for incentive stock-based awards that result in deductions on our income tax returns, based on the amount
of stock-based compensation recognized and the statutory tax rate in the jurisdiction in which we will receive a tax deduction.
27
Accounting for Payroll Protection Program
U.S. GAAP does not contain authoritative accounting standards for forgivable loans provided by governmental entities to a for-profit entity.
Absent authoritative accounting standards, interpretative guidance issued and commonly applied by financial statement preparers allows
for the selection of accounting policies amongst acceptable alternatives. Based on the facts and circumstances, the Company determined it
most appropriate to account for the PPP Loan proceeds as an in-substance government grant by analogy to International Accounting
Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance. Under the provisions of IAS 20,
“a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms
for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”; however, based on certain interpretations, it is analogous to
“probable” as defined in Financial Accounting Standards Board (“FASB”) ASC 450-20-20 under U.S. GAAP, which is the definition the
Company has applied to its expectations of PPP loan forgiveness. Under IAS 20, government grants are recognized in earnings on a
systematic basis over the periods in which the Company recognizes costs for which the grant is intended to compensate (i.e. qualified
expenses). Further, IAS 20 permits for the recognition in earnings either separately under a general heading such as other income, or as a
reduction of the related expenses. The Company has elected to recognize government grant income separately within other income to
present a clearer distinction in its consolidated financial statements between its operating income and the amount of net income resulting
from the PPP loan and subsequent expected forgiveness. The Company believes this presentation method promotes greater comparability
amongst all periods presented.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not required.
28
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Bridgeline Digital, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Bridgeline Digital, Inc. (the “Company”) as of September 30, 2020 and
2019, the related consolidated statements of operations, comprehensive income/(loss), stockholders’ equity and cash flows for each of the
two years in the period ended September 30, 2020, and the related notes (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020
and 2019, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2020, in conformity
with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As
more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise
additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Marcum LLP
We have served as the Company’s auditor since 2006, such date takes into account the acquisition of a portion of UHY LLP by Marcum
LLP in April 2010.
Boston, MA
December 23, 2020
29
BRIDGELINE DIGITAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents .......................................................................................................... $
Accounts receivable, net ............................................................................................................
Prepaid expenses ........................................................................................................................
Other current assets ....................................................................................................................
Total current assets .................................................................................................................
Property and equipment, net...........................................................................................................
Operating lease assets ....................................................................................................................
Intangible assets, net ......................................................................................................................
Goodwill ........................................................................................................................................
Other assets ....................................................................................................................................
Total assets ............................................................................................................................. $
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of operating lease liabilities .............................................................................. $
Accounts payable .......................................................................................................................
Accrued liabilities ......................................................................................................................
Paycheck Protection Program Liability (Note 10) ......................................................................
Deferred revenue ........................................................................................................................
Total current liabilities ...........................................................................................................
Operating lease liabilities, net of current portion ...........................................................................
Warrant liabilities ...........................................................................................................................
Other long-term liabilities ..............................................................................................................
Total liabilities .......................................................................................................................
Commitments and contingencies
Stockholders’ equity:
Preferred stock - $0.001 par value; 1,000,000 shares authorized;
Series C Convertible Preferred stock: 11,000 shares authorized; 350 shares issued and
outstanding at September 30, 2020 and 441 shares at September 30, 2019, issued and
outstanding .........................................................................................................................
Series A Convertible Preferred stock: 264,000 shares authorized; no shares outstanding
at September 30, 2020 and 262,310 shares at September 30, 2019, issued and
outstanding .........................................................................................................................
Common stock - $0.001 par value; 50,000,000 shares authorized; 4,420,170 shares at
September 30, 2020 and 2,798,475 shares at September 30, 2019, issued and outstanding ...
Additional paid-in capital ...............................................................................................................
Accumulated deficit .......................................................................................................................
Accumulated other comprehensive loss .........................................................................................
Total stockholders’ equity ......................................................................................................
Total liabilities and stockholders’ equity ................................................................................ $
As of September 30,
2020
2019
861 $
665
268
111
1,905
238
294
2,617
5,557
49
10,660 $
96 $
1,311
599
88
1,511
3,605
198
2,486
15
6,304
296
979
351
49
1,675
299
-
3,509
5,557
115
11,155
-
1,740
835
-
1,262
3,837
-
3,514
8
7,359
-
-
4
78,316
(73,583 )
(381 )
4,356
10,660 $
-
-
3
75,620
(71,489 )
(338 )
3,796
11,155
The accompanying notes are an integral part of these consolidated financial statements.
30
BRIDGELINE DIGITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Net revenue:
Digital engagement services ................................................................................................... $
Subscription and perpetual licenses ........................................................................................
Total net revenue ................................................................................................................
Cost of revenue:
Digital engagement services ...................................................................................................
Subscription and perpetual licenses ........................................................................................
Total cost of revenue ..........................................................................................................
Gross profit ........................................................................................................................
Operating expenses:
Sales and marketing ...............................................................................................................
General and administrative .....................................................................................................
Research and development .....................................................................................................
Depreciation and amortization ...............................................................................................
Goodwill impairment .............................................................................................................
Restructuring and acquisition related expenses ......................................................................
Total operating expenses ....................................................................................................
Loss from operations ..................................................................................................................
Interest expense and other, net ...............................................................................................
Government grant income (Note 10) ......................................................................................
Amortization of debt discount ................................................................................................
Warrant liability expense .......................................................................................................
Change in fair value of warrant liabilities ..............................................................................
Income (loss) before income taxes .............................................................................................
Provision for income taxes .........................................................................................................
Net income (loss) ...........................................................................................................................
Dividends on convertible preferred stock .......................................................................................
Deemed dividend on amendment of Series A convertible preferred stock .....................................
Net loss applicable to common shareholders ................................................................................. $
Net loss per share attributable to common shareholders:
Basic ........................................................................................................................................... $
Diluted ....................................................................................................................................... $
Number of weighted average shares outstanding:
Years Ended September 30,
2020
2019
3,409 $
7,498
10,907
1,831
2,676
4,507
6,400
2,614
2,455
1,641
968
-
366
8,044
(1,644 )
(7 )
960
-
-
1,028
337
11
326
(106 )
(2,314 )
(2,094 ) $
(0.59 ) $
(0.59 ) $
4,117
5,835
9,952
2,070
3,290
5,360
4,592
4,824
3,246
2,185
620
3,732
1,053
15,660
(11,068 )
(303 )
-
(231 )
(11,272 )
13,404
(9,470 )
4
(9,474 )
(315 )
-
(9,789 )
(8.16 )
(8.16 )
Basic ...........................................................................................................................................
Diluted .......................................................................................................................................
3,555,032
3,555,032
1,199,322
1,199,322
The accompanying notes are an integral part of these consolidated financial statements.
31
BRIDGELINE DIGITAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(in thousands)
Net income (loss) ........................................................................................................................... $
Other comprehensive income (loss):
Net change in foreign currency translation adjustment ..............................................................
Comprehensive income (loss) ........................................................................................................ $
Years Ended September 30,
2020
2019
326 $
(9,474 )
(43 )
283 $
13
(9,461 )
The accompanying notes are an integral part of these consolidated financial statements.
32
BRIDGELINE DIGITAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Accumulated
Preferred Stock
Common Stock
Balance at October 1, 2018 ..................... 262,751 $
-
84,005 $
Shares
Amount
Shares
Additional
Paid-in
Amount Capital
- $
66,553 $
Other
Accumulated Comprehensive Stockholders’
Loss
Equity
Deficit
Total
(61,778 ) $
(351 ) $
4,424
Issuance of common stock, net of
issuance costs ...................................
Stock-based compensation expense ...
Preferred B stock conversion to
common ............................................
Series C Convertible Preferred and
14
1,415,507
3
8,338
249
(4 )
171,520
conversion to common .....................
(10 )
1,087,443
Common stock issued in connection
with acquisition of business .............
Dividends on Series A convertible
preferred stock .................................
Net loss ...............................................
Cumulative effect of the adoption of
ASC 606 ...........................................
Foreign currency translation ..............
40,000
480
(315 )
(9,474 )
78
Balance at September 30, 2019 ............... 262,751 $
- 2,798,475 $
3 $
75,620 $
(71,489 ) $
Dividends on Series A convertible
preferred stock .................................
Deemed dividend on amendment of
Series A convertible preferred stock
(Note 12) ..........................................
Series A convertible preferred stock
dividend liabilities settled in shares .
Series A convertible preferred stock
(106 )
2,314
(2,314 )
112,960
1
188
13
(338 ) $
conversion to common ..................... (262,310 )
1,498,623
Series C convertible preferred stock
conversion to common .....................
Stock-based compensation expense ...
Net income .........................................
Foreign currency translation ..............
Balance at September 30, 2020 ...............
(91 )
10,112
194
326
350 $
- 4,420,170 $
4 $
78,316 $
(73,583 ) $
(43 )
(381 ) $
The accompanying notes are an integral part of these consolidated financial statements.
8,341
249
-
-
480
(315 )
(9,474 )
78
13
3,796
(106 )
-
189
-
-
194
326
(43 )
4,356
33
BRIDGELINE DIGITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income (loss) ....................................................................................................................... $
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Loss on disposal of property and equipment ..........................................................................
Amortization of intangible assets ...........................................................................................
Depreciation ...........................................................................................................................
Other amortization .................................................................................................................
Goodwill impairment .............................................................................................................
Amortization of debt discount ................................................................................................
Warrant liability expense .......................................................................................................
Change in fair value of warrant liabilities ..............................................................................
Stock-based compensation .....................................................................................................
Government grant income (Note 10) ......................................................................................
Changes in operating assets and liabilities
Accounts receivable ...............................................................................................................
Prepaid expenses ....................................................................................................................
Other current assets and other assets ......................................................................................
Accounts payable and accrued liabilities ................................................................................
Deferred revenue ....................................................................................................................
Other liabilities .......................................................................................................................
Total adjustments ...............................................................................................................
Net cash used in operating activities ..................................................................................
Cash flows from investing activities:
Software development capitalization costs .............................................................................
Purchase of property and equipment ......................................................................................
Acquisition of businesses .......................................................................................................
Net cash used in investing activities ...................................................................................
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs ...........................................
Proceeds from issuance of preferred stock, net of issuance costs ...........................................
Borrowing on bank line of credit............................................................................................
Proceeds received under Paycheck Protection Program .........................................................
Payments on bank line of credit .............................................................................................
Payments on term notes from Montage Capital .....................................................................
Payments on promissory term notes .......................................................................................
Cash dividends paid on Series A convertible preferred stock ................................................
Net cash provided by financing activities ...........................................................................
Effect of exchange rate changes on cash and cash equivalents ......................................................
Net increase (decrease) in cash and cash equivalents .........................................................
Cash and cash equivalents at beginning of period ..........................................................................
Cash and cash equivalents at end of period .................................................................................... $
Supplemental disclosures of cash flow information:
Cash paid for:
Interest.................................................................................................................................... $
Income taxes .......................................................................................................................... $
Non-cash investing and financing activities:
Consideration paid in common stock in connection with acquisition of business ...................... $
Dividends accrued or settled in shares on convertible preferred stock ....................................... $
Deemed dividend on amendment of Series A convertible preferred stock ................................. $
Years Ended
September 30,
2020
2019
326 $
(9,474 )
-
891
61
16
-
-
-
(1,028 )
194
(960 )
630
89
(21 )
(585 )
(75 )
(36 )
(824 )
(498 )
-
-
-
-
-
-
-
1,048
-
-
-
-
1,048
15
565
296
861 $
- $
3 $
- $
189 $
2,314 $
9
544
66
39
3,732
231
11,272
(13,404 )
249
-
1,306
127
116
448
478
58
5,271
(4,203 )
(11 )
(20 )
(5,668 )
(5,699 )
4,757
9,049
75
-
(2,156 )
(922 )
(941 )
(315 )
9,547
7
(348 )
644
296
88
3
480
-
-
The accompanying notes are an integral part of these consolidated financial statements.
34
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
1. Description of Business
Overview
Bridgeline Digital, The Digital Engagement Company (the “Company”), helps customers maximize the performance of their full digital
experience from websites and intranets to online stores and campaigns and integrates Web Content Management, eCommerce, Marketing
Automation, Site Search, Authenticated Portals, Social Media Management, Translation and Web Analytics to help organizations deliver
digital experiences.
The Bridgeline Unbound platform is delivered through a cloud-based SaaS (“Software as a Service”) multi-tenant business model,
providing maintenance, daily technical operation and support; or via a traditional perpetual licensing business model, in which the software
resides on a dedicated server in either the customer’s facility or hosted by Bridgeline via a cloud-based hosted services model.
OrchestraCMS, delivered through a cloud-based SaaS, is the only content and digital experience platform built 100% native on Salesforce
and helps customers create compelling digital experiences for their customers, partners, and employees; uniquely combining content with
business data, processes and applications across any channel or device, including Salesforce Communities, social media, portals, intranets,
websites, applications and services.
Celebros Search, delivered through a cloud-based SaaS, is a commerce-oriented site search product that provides for Natural Language
Processing with artificial intelligence to present very relevant search results based on long-tail keyword searches in seven languages.
The Company was incorporated under the laws of the State of Delaware on August 28, 2000.
Locations
The Company’s corporate office is located in Woburn, Massachusetts. The Company maintains regional field offices serving the following
geographical locations: Boston, Massachusetts; New York, New York; and Ontario, Canada. The Company has three wholly-owned
subsidiaries: Bridgeline Digital Pvt. Ltd. located in Bangalore, India; Bridgeline Digital Canada, Inc. located in Ontario, Canada; and
Stantive Technologies Group Pty. Ltd. located in Australia.
Going Concern
The Company has incurred operating losses and used cash in its operating activities for the past several years. Cash was used to fund
operations, develop new products, and build infrastructure. During the prior fiscal years and continuing into the current fiscal year, the
Company has executed a restructuring plan that included a reduction of workforce and office space, which significantly reduced operating
expenses. In March 2020, the Company executed a reduction in workforce plan for its domestic and Canadian operations aimed at
improving efficiencies by combining functions, certain responsibilities and eliminating redundancies, which resulted in a reduction of 15
positions. The reduction in workforce was part of the Company’s continuing and ongoing efforts to maintain a lower cost structure and was
not an action taken in response to the coronavirus pandemic described below. The Company is continuing to maintain tight control over
discretionary spending for the 2021 fiscal year.
In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic. We
expect our operations in all locations to be affected as the virus continues to proliferate. We have adjusted certain aspects of our operations
to protect employees and customers while still meeting customers’ needs for vital technology. We will continue to monitor the situation
closely and it is possible that we will implement further measures. In light of the uncertainty as to the severity and duration of the pandemic,
the impact on our revenues, profitability and financial position is uncertain at this time.
On April 17, 2020, the Company entered into a loan with an aggregate principal amount of $1,047,500, pursuant to the Paycheck Protection
Program (See Note 10).
35
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
While the Company believes that future revenues and cash flows will supplement its working capital and that it has an appropriate cost
structure to support future revenue growth, based upon its current working capital and projected cash flows in the next twelve months, the
Company will need additional sources of financing in place in order to ensure its operations are adequately funded. On August 17, 2020,
the Company entered into an arrangement with an investment banking firm to sell up to $4,796,090 of shares of the Company’s common
stock, $0.001 par value. Refer to Note 12 under the caption, At the Market Offering, for a detailed description of this capital raising activity.
There are no obligations for the sale or purchase of the Company’s common stock pursuant to this offering. Accordingly, there can be no
assurances that the Company or investment banking firm will be successful in selling any portion of the shares available for sale pursuant
to this offering. No other definitive agreements for additional financing are in place as of the issuance date of this Form 10-K and there can
be no assurances that additional sources of financing could be obtained on terms that are favorable or acceptable to us and that revenue
growth and improvement in cash flows can be achieved. Accordingly, management believes that there is substantial doubt about the
Company’s ability to continue as a going concern for at least twelve months following the issuance date of this Form 10-K. No adjustments
have been made to the accompanying consolidated financial statements as a result of this uncertainty.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company’s fiscal year end is September 30th. The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America (“U.S. GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reported periods. The most significant estimates included in these financial statements are the valuation of accounts
receivable, including the adequacy of the allowance for doubtful accounts, recognition and measurement of deferred revenues and fair
value measurements related to the valuation of warrants. The complexity of the estimation process and factors relating to assumptions,
risks and uncertainties inherent with the use of the estimates affect the amount of revenue and related expenses reported in the Company’s
financial statements. Internal and external factors can affect the Company’s estimates. Actual results could differ from these estimates
under different assumptions or conditions.
Reclassifications
Certain amounts in the prior period financial statements have been reclassified to conform to the presentation in the current period financial
statements. These reclassifications had no effect on the previously reported net loss.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with original maturity of three months or less from the date of purchase to be cash
equivalents.
The Company’s cash is maintained with what management believes to be high-credit quality financial institutions. At times, deposits held
at these banks may exceed the federally insured limits. Management believes that the financial institutions that hold the Company’s
deposits are financially sound and have minimal credit risk. Risks associated with cash and cash equivalents are mitigated by the Company’s
investment policy, which limits the Company’s investing of excess cash into only money market mutual funds.
Concentration of Credit Risk, Significant Customers, and Off-Balance Sheet Risk
Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents,
and accounts receivable.
The Company extends credit to customers on an unsecured basis in the normal course of business. Management performs ongoing credit
evaluations of its customers’ financial condition and limits the amount of credit when deemed necessary. Accounts receivable are carried
at original invoice amount, less an estimate for doubtful accounts based on a review of all outstanding amounts.
The Company has no off-balance sheets risks such as foreign exchange contracts, interest rate swaps, option contracts or other foreign
hedging agreements.
36
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required
payments. For all customers, the Company recognizes allowances for doubtful accounts based on the length of time that the receivables are
past due, current business environment and its historical experience. If the financial condition of the Company’s customers were to
deteriorate, resulting in impairment of their ability to make payments, additional allowances may be required.
Revenue Recognition
The Company derives its revenue from two sources: (i) Software Licenses, which are comprised of subscription fees (“SaaS”), perpetual
software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses and (ii) Digital Engagement Services, which
are professional services to implement our products such as web development, digital strategy, information architecture and usability
engineering search. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or
“SaaS,” do not take possession of the software.
Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those services. If the consideration promised in a contract includes a variable amount,
for example, overage fees, contingent fees or service level penalties, the Company includes an estimate of the amount it expects to receive
for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur. The Company’s
subscription service arrangements are non-cancelable and do not contain refund-type provisions. Revenue is reported net of applicable
sales and use tax.
The Company recognizes revenue from contracts with customers using a five-step model, which is described below:
Identify the customer contract;
Identify performance obligations that are distinct;
●
●
● Determine the transaction price;
● Allocate the transaction price to the distinct performance obligations; and
● Recognize revenue as the performance obligations are satisfied.
Identify the customer contract
A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights
have been identified, payment terms are identified, the contract has commercial substance and collectability and consideration is probable.
Identify performance obligations that are distinct
A performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. A good or service that
is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources
that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable
from other promises in the contract.
Determine the transaction price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or
services to a customer, excluding sales taxes that are collected on behalf of government agencies.
Allocate the transaction price to distinct performance obligations
The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or
services being provided to the customer. The Company determines the SSP of its goods and services based upon the historical average
sales prices for each type of software license and professional services sold.
Recognize revenue as the performance obligations are satisfied
Revenue is recognized when or as control of the promised goods or services is transferred to customers. Revenue from SaaS licenses is
recognized ratably over the subscription period beginning on the date the license is made available to customers. Most subscription contracts
are three-year terms. Customers who license the software on a perpetual basis receive rights to use the software for an indefinite time period
and an option to purchase post-customer support (“PCS”). PCS revenue is recognized ratably on a straight-line basis over the period of
performance and the perpetual license is recognized upon delivery. The Company also offers hosting services for those customers who
purchase a perpetual license and do not want to run the software in their environment. Revenue from hosting is recognized ratably over the
37
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
service period, ranging from one to three-year terms. The Company recognizes revenue from professional services as the services are
provided.
Disaggregation of Revenue
The Company provides disaggregation of revenue based on geography and product groupings (see Note 14) as it believes this best depicts
how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Customer Payment Terms
Payment terms with customers typically require payment 30 days from invoice date. Payment terms may vary by customer but generally
do not exceed 45 days from invoice date. Invoicing for digital engagement services are either monthly or upon achievement of milestones
and payment terms for such billings are within the standard terms described above. Invoices for subscriptions and hosting are typically
issued monthly and are generally due in the month of service.
Warranty
Certain arrangements include a warranty period, which is generally 30 days from the completion of work. In hosting arrangements, the
Company provides warranties of up-time reliability. The Company continues to monitor the conditions that are subject to the warranties to
identify if a warranty claim may arise. If it is determined that a warranty claim is probable, then any related cost to satisfy the warranty
obligation is estimated and accrued. Warranty claims to date have been immaterial.
Property and Equipment
The components of property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-
line method over the estimated useful lives of the related assets (three to five years). Leasehold improvements are amortized using the
straight-line method over the lesser of the estimated useful life of the asset or the lease term. Repairs and maintenance costs are expensed
as incurred.
Internal Use Software
Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage,
internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended
use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and
enhancements when it is probable that the expenditures will result in additional functionality. Capitalized costs are recorded as part of
equipment and improvements. Training costs are expensed as incurred. Internal use software is amortized on a straight-line basis over its
estimated useful life, generally three years.
Research and Development and Software Development Costs
Costs for research and development of a software product to sell, lease or otherwise market are charged to operations as incurred until
technological feasibility has been established. Once technological feasibility has been established, certain software development costs
incurred during the application development stage are eligible for capitalization. Based on the Company’s software product development
process, technological feasibility is established upon completion of a working model.
Software development costs that are capitalized are amortized to cost of sales over the estimated useful life of the software, typically three
years. Capitalization ceases when a product is available for general release to customers. Capitalization costs are included in other assets
in the consolidated financial statements. The Company did not incur development costs during fiscal 2020 and capitalized $11 of costs in
fiscal 2019.
Intangible Assets
All intangible assets have finite lives and are stated at cost, net of amortization. Amortization is computed over the estimated useful life of
the related assets on a straight-line method as follows:
Description
Developed and core technology ..............................................................................................
Non-compete agreements .......................................................................................................
Customer relationships ...........................................................................................................
Trademarks and trade names ..................................................................................................
Estimated Useful Life (in years)
3
3 - 6
5 - 6
1 - 10
38
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
Goodwill
The carrying value of goodwill is not amortized, but is tested for impairment annually as of September 30, as well as on an interim basis
whenever events or changes in circumstances indicate that the carrying amount of a reporting unity may not be recoverable. An impairment
charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss
recognized should not exceed the total amount of goodwill allocated to that reporting unit. Goodwill is assessed at the consolidated level
as one reporting unit.
Valuation of Long-Lived Assets
The Company periodically reviews its long-lived assets, which consist primarily of property and equipment and intangible assets with finite
lives, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may exceed their fair value.
Recoverability of these assets is assessed using a number of factors, including operating results, business plans, budgets, economic
projections and undiscounted cash flows.
In addition, the Company’s evaluation considers non-financial data such as market trends, product development cycles and changes in
management’s market emphasis. For the definite-lived intangible asset impairment review, the carrying value of the intangible assets is
compared against the estimated undiscounted cash flows to be generated over the remaining life of the intangible assets. To the extent that
the undiscounted future cash flows are less than the carrying value, the fair value of the asset is determined. If such fair value is less than
the current carrying value, the asset is written down to the estimated fair value. There were no impairments of long-lived assets in fiscal
2020 or 2019.
Foreign Currency
The Company determines the appropriate method of measuring assets and liabilities as to whether the method should be based on the
functional currency of the entity in the environment in which it operates or the reporting currency of the Company, the U.S. dollar. The
Company has determined that the functional currency of its foreign subsidiaries are the local currencies of their respective
jurisdictions. Assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Equity accounts are
translated at historical rates, except for the change in retained earnings as a result of the income statement translation process. Revenue and
expense items are translated into U.S. dollars at average exchange rates for the period. The adjustments are recorded as a separate
component of stockholders’ equity and are included in accumulated other comprehensive income (loss). The Company’s foreign currency
translation net gains (losses) for fiscal 2020 and 2019 were ($43) and $13, respectively. Transaction gains and losses related to monetary
assets and liabilities denominated in a currency different from a subsidiary’s functional currency are included in the consolidated statements
of operations.
Segment Information
The Company has one reportable segment.
Stock-Based Compensation
The Company accounts for stock-based compensation in the consolidated statements of operations based on the fair values of the awards
on the date of grant on a straight-line basis over their vesting term. Compensation expense is recognized only for share-based payments
expected to vest. The Company estimates forfeitures at the date of grant based on the Company’s historical experience and future
expectations.
Valuation of Stock Options and Warrants Issued to Non-Employees
The Company measures expense for non-employee stock-based compensation and the estimated fair value of options exchanged in business
combinations and warrants issued for services using the fair value method for services received or the equity instruments issued, whichever
is more readily measured. The Company estimates the fair value of stock options issued to non-employees using the Black-Scholes
Merton option valuation model.
The Company estimated the fair value of common stock warrants issued to non-employees using the binomial options pricing model. The
Company evaluates common stock warrants as they are issued to determine whether they should be classified as an equity instrument or a
liability. Those warrants that are classified as a liability are carried at fair value at each reporting date, with changes in their fair value
recorded in other income (expense) in the consolidated statements of operation.
Advertising Costs
Advertising costs are expensed when incurred. Such costs were $149 and $425 for fiscal 2020 and 2019, respectively.
39
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
Employee Benefits
The Company sponsors a contributory 401(k) plan allowing all full-time employees who meet prescribed service requirements to
participate. The Company is not required to make matching contributions, although the plan provides for discretionary contributions by the
Company. The Company made no contributions in either fiscal 2020 or fiscal 2019.
Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act
(the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code that affected the Company’s fiscal year ended
September 30, 2018, including, but not limited to, reducing the U.S. federal corporate tax rate. For taxable years after December 31, 2017,
the Tax Act reduced the federal corporate tax rate to 21 percent. The Tax Act repealed the Corporate Alternative Minimum Tax.
On March 27, 2020 the CARES Act was signed into law to provide significant economic relief to individuals and businesses impacted by
the COVID-19 pandemic. The act provides for a five-year carryback of NOL’s arising in tax years beginning in 2018, 2019 and 2020 and
modifies the AMT credits to be 100% refundable for tax years beginning after December 31, 2018. The Company has available $23 in
AMT carryforwards which it has recorded as prepaid taxes at September 30, 2020.
The Act required the Company to pay a one-time transition tax on earnings of the Company's foreign subsidiaries that were previously tax
deferred for U.S. income taxes and created new taxes on the Company's foreign-sourced earnings. The Company determined that the
repatriation tax was zero because the foreign subsidiary had no positive retained earnings, and no current income.
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in
the Company’s consolidated financial statements and tax returns. Deferred income taxes are recognized based on temporary differences
between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the temporary
differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized.
The Company provides for reserves for potential payments of taxes to various tax authorities related to uncertain tax positions. Reserves
are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely
than not” to be realized following resolution of any uncertainty related to the tax benefit, assuming that the matter in question will be raised
by the tax authorities. Interest and penalties associated with uncertain tax positions are included in the provision for income taxes.
The Company does not provide for U.S. income taxes on the undistributed earnings of its foreign subsidiaries, which the Company
considers to be permanent investments.
Net Loss Per Share
Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common
shares outstanding. Diluted net loss per share applicable to common shareholders is computed using the weighted average number of
common shares outstanding during the period plus the dilutive effect of outstanding stock options, and warrants using the “treasury stock”
method and convertible preferred stock using the as-if-converted method. The computation of diluted earnings per share does not include
the effect of outstanding stock options, warrants and convertible preferred stock that are considered anti-dilutive.
For the years ended September 30, 2020 and 2019, diluted net loss per share was the same as basic net loss per share, as the effects of all
the Company’s potential common stock equivalents are anti-dilutive as the Company reported a net loss applicable to common shareholders
for the periods and the impact of in-the-money warrants was also anti-dilutive. Potential common stock equivalents excluded were the
Series A Convertible Preferred Stock, Series C Convertible Preferred Stock, stock options and warrants (See Note 12).
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02,
Leases: Topic 842 (“ASU 2016-02” or “ASC 842”), which outlines principles for the recognition, measurement, presentation and disclosure
of leases applicable to both lessors and lessees. The new standard requires lessees to recognize most leases on their balance sheets for the
rights and obligations created by those leases.
The Company adopted the new lease standard during the fiscal 2020 first quarter using the effective date of October 1, 2019 as the date of
initial application; therefore, the comparative prior periods presented have not been adjusted and continue to be reported under the previous
lease standard. The Company applied the new standard using certain practical expedients, including:
●
the package of practical expedients, which permits the Company not to reassess under the new standard our prior conclusions
about lease identification, lease classification and initial direct costs;
40
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
●
●
the short-term lease recognition exemption, which does not require the recognition of a right-of-use (“ROU”) asset or lease
liability for those leases that qualify;
accounting for lease components and non-lease components as a single lease component for all underlying classes of assets.
As a result of adopting the new standard, substantially all of the Company’s operating lease commitments were recognized as operating
lease assets and liabilities, initially measured as the present value of future lease payments for the remaining lease term discounted using
an incremental borrowing rate of 7.0%. At October 1, 2019, the adoption date, the Company recognized operating lease assets and liabilities
of approximately $545.
The adoption of the new standard is non-cash in nature and had no impact on net cash flows from operating, investing or financing activities.
See Note 11 for additional information regarding the Company’s lease arrangements and updated summary of significant accounting
policies related to our leases.
Recently Issued Accounting Pronouncements Not Yet Effective
Intangibles – Goodwill and Other - Internal-Use Software
In August 2018, the FASB issued No. ASU 2018-15, which addresses a customer’s accounting for implementation costs incurred in a cloud
computing arrangement that is a service contract. Under the new standard, customers will apply the same criteria for capitalizing
implementation costs as they would for an arrangement that has a software license. ASU 2018-15 is effective for annual reporting periods
beginning after December 15, 2019, including interim periods within those annual reporting periods, with early adoption permitted. As of
September 30, 2020, the Company does not have significant implementation costs incurred in a cloud computing arrangement that is a
service contract and therefore upon adoption the impact of the new standard on its consolidated financial statements and related disclosures
is not expected to be material. All future implementation costs in such arrangements will be capitalized and amortized over the life of the
arrangement, which may have a material impact in those future periods if such costs are material.
Fair Value
In August 2018, the FASB issued ASU No. 2018-13, which changes the fair value measurement disclosure requirements of ASC 820. ASU
2018-13 will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual
reporting periods, with early adoption permitted for any eliminated or modified disclosures upon issuance of this ASU. Upon adoption, the
new standard will eliminate certain disclosure requirements in the Company’s consolidated financial statements.
Financial Instruments – Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all
expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and
supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial
assets measured at amortized cost. ASU 2016-13 is effective for smaller reporting companies for annual reporting periods beginning after
December 15, 2022, including interim periods within those annual reporting periods, with early adoption permitted. The Company is
currently evaluating the impact of the new standard on its consolidated financial statements and related disclosures.
All other Accounting Standards Updates issued but not yet effective are not expected to have a material effect on the Company’s future
consolidated financial statements or related disclosures.
3. Accounts Receivable
Accounts receivable consist of the following:
Accounts receivable .......................................................................................................... $
Allowance for doubtful accounts ......................................................................................
Accounts receivable, net ................................................................................................... $
698 $
(33)
665 $
1,067
(88)
979
As of and for the year ended September 30, 2020, three customers represented approximately 15%, 14% and 10% of accounts receivable
and one customer represented approximately 12% of total revenues. As of and for the year ended September 30, 2019, three customers
represented approximately 16%, 14% and 12% of accounts receivable and two customers represented approximately 11% and 15% of total
revenues.
As of September 30,
2020
2019
41
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
4. Property and equipment
Property and equipment consist of the following:
As of September 30,
2020
2019
Furniture and fixtures ........................................................................................................ $
Purchased software ...........................................................................................................
Computer equipment .........................................................................................................
Leasehold improvements ..................................................................................................
Total cost ...................................................................................................................
Less accumulated depreciation and amortization ..............................................................
Property and equipment, net.............................................................................................. $
73 $
18
93
195
379
(141)
238 $
73
18
93
195
379
(80)
299
Depreciation and amortization on the above assets were $61 and $66 in fiscal 2020 and 2019, respectively.
5. Fair Value Measurement and Fair Value of Financial Instruments
The Company’s other financial instruments consist principally of accounts receivable, accounts payable and warrant liabilities. The
Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally,
companies are required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels
depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3
generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level
of input significant to the fair value measurement. The fair value hierarchy is defined as follows:
Level 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in
markets that are not active for which significant inputs are observable, either directly or indirectly.
Level 3—Valuations are based on prices or valuation techniques that require inputs that are both unobservable and
significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would
use in valuing the asset or liability at the measurement date.
The Company believes the recorded values for accounts receivable and accounts payable approximate current fair values as of September
30, 2020 and 2019 because of their short-term nature.
The Company’s warrant liabilities are measured at fair value at each reporting period with changes in fair value recognized in earnings
during the period. The fair value of the Company’s warrant liabilities are valued utilizing Level 3 inputs. Warrant liabilities are valued
using a Monte Carlo option-pricing model, which takes into consideration the market values of comparable public companies, considering
among other factors, the use of multiples of earnings, and adjusted to reflect the restrictions on the ability of our shares to trade in an active
market. The Monte Carlo option-pricing model uses certain assumptions, including expected life and annual volatility. The significant
inputs and assumptions utilized were as follows:
As of September 30,
As of initial
Volatility ......................................................................
Risk-free rate ................................................................
Stock price ................................................................... $
Montage
Capital
Series C
Preferred
84.1%
0.20%
1.86 $
84%
0.28%
1.86 $
Montage
Capital
Series C
Preferred
80.9%
1.59%
1.91 $
71 %
1.59 %
1.91 $
2020
2019
valuation
date
Series C
Preferred
76.8%
2.40%
12.50
The Company recognized gains of $1,028 and $13,404 for the years ended September 30, 2020 and 2019, respectively, related to the change
in fair value of warrant liabilities. The changes in fair value of warrant liabilities were due to changes in inputs, primarily a change in the
stock price and the risk-free rate, to the Monte Carlo option-pricing model.
42
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
Assets and liabilities of the Company measured at fair value on a recurring basis as of September 30, 2020 and 2019, are as follows:
As of September 30, 2020
Level 1
Level 2
Level 3
Total
Liabilities:
Warrant liability – Montage ................................................................ $
Warrant liability - Series A, B and C ..................................................
Total Liabilities ........................................................................... $
- $
-
- $
- $
-
- $
26 $
2,460
2,486 $
26
2,460
2,486
As of September 30, 2019
Level 1
Level 2
Level 3
Total
Liabilities:
Warrant liability – Montage ............................................................... $
Warrant liability - Series A, B and C .................................................
Total Liabilities .......................................................................... $
- $
-
- $
- $
-
- $
14 $
3,500
3,514 $
14
3,500
3,514
The following table provides a rollforward of the fair value, as determined by Level 3 inputs, of the warrant liabilities:
Balance at beginning of period, October 1, 2018 ................................................................................................... $
Additions ................................................................................................................................................................
Exercises ................................................................................................................................................................
Adjustment to fair value .........................................................................................................................................
Balance at end of period, September 30, 2019 ....................................................................................................... $
Additions ................................................................................................................................................................
Exercises ................................................................................................................................................................
Adjustment to fair value .........................................................................................................................................
Balance at end of period, September 30, 2020 ....................................................................................................... $
180
21,500
(4,762)
(13,404)
3,514
-
-
(1,028)
2,486
6. Goodwill
The carrying value of goodwill is not amortized, but is tested for impairment annually as of September 30th, as well as whenever events or
changes in circumstances indicate that the carrying amount of a reporting unit may not be recoverable. The purpose of an impairment test
is to identify any potential impairment by comparing the carrying value of a reporting unit including goodwill to its fair value. An
impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss
recognized should not exceed the total amount of goodwill allocated to that reporting unit.
An interim test was performed at December 31, 2018, as a decline in the stock price and other negative qualitative factors led management
to conclude that there was a potential impairment, and annual tests were performed at September 30, 2020 and 2019. The fair value was
calculated using the Company’s market price. In performing the interim impairment test, management concluded that goodwill was
impaired and recorded a charge of $3.7 million during the three-month period ended December 31, 2018. The annual impairment tests at
September 30, 2020 and 2019 did not result in any further impairment. Impairment charges are reflected as a reduction in goodwill in the
Company’s consolidated balance sheet and an expense in the Company’s consolidated statement of operations.
43
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
Changes in the carrying value of goodwill are as follows:
Balance at beginning of period ............................................................................................... $
Acquisitions ...........................................................................................................................
Impairment .............................................................................................................................
Balance at end of period ......................................................................................................... $
5,557 $
-
-
5,557 $
7,782
1,507
(3,732)
5,557
As of September 30,
2020
2019
7. Intangible Assets
The components of intangible assets, net of accumulated amortization, are as follows:
Domain and trade names ........................................................................................................ $
Customer related ....................................................................................................................
Technology ............................................................................................................................
Intangibles, net ....................................................................................................................... $
10 $
1,500
1,107
2,617 $
52
2,032
1,425
3,509
Total amortization expense related to intangible assets was $891 and $544 for the years ended September 30, 2020 and 2019, respectively,
and is reflected in Operating expenses on the consolidated statements of operations. The estimated amortization expense for fiscal years
2021, 2022, 2023, 2024, and 2025 is $861, $765, $684, $297, and $10, respectively.
As of September 30,
2020
2019
8. Accrued Liabilities
Accrued liabilities consist of the following:
Compensation and benefits .................................................................................................... $
Professional fees ....................................................................................................................
Restructuring fees ..................................................................................................................
Taxes ......................................................................................................................................
Other ......................................................................................................................................
Balance at end of period ......................................................................................................... $
As of September 30,
2020
2019
368 $
29
-
46
156
599 $
430
154
75
-
176
835
9. Restructuring and Acquisition Related Expenses
Restructuring Activities
In March 2020, the Company recognized $366 related to a reduction in workforce in its U.S. and Canada operations aimed at improving
efficiencies by combining functions, certain responsibilities and eliminating redundancies which resulted in a reduction of 15 positions.
During the year ended September 30, 2019, the Company had certain expenditures related to restructuring plans, which had commenced in
fiscal 2015, to improve efficiencies by implementing cost reductions in line with expected decreases in revenue. As part of these then on-
going restructuring plans, the Company re-negotiated several office leases and relocated to smaller space, executed a general workforce
reduction and recognized costs for severance and termination benefits. These restructuring charges and accruals required estimates and
assumptions, including contractual rental commitments or lease buy-outs for vacated office space and related costs, and estimated sub-
lease income. The Company’s sub-lease assumptions include the rates to be charged to a sub-tenant and the timing of the sub-lease
arrangement. All of the vacated lease spaces were previously contractually occupied by new sub-tenants over the remaining life of the
leases. In the fiscal 2017 second quarter, the Company initiated a plan to shut down its operations in India, which is expected to be completed
in the first half of fiscal 2021. During fiscal 2019, a charge of $625 was recorded to restructuring expenses. During the year ended September
30, 2020, expenditures related to these previous restructuring plans were minimal and the Company does not expect to incur significant
expenditures in future periods.
All of these estimates and assumptions are monitored on a quarterly basis for changes in circumstances with the corresponding adjustments
reflected in the consolidated statement of operations.
44
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
The following table summarizes the restructuring charges reserve activity:
Employee
Severance and
Benefits
Facility
Closures
and Other Costs
Total
Balance at beginning of period, October 1, 2018 ........................................... $
Charges to operations .................................................................................
Cash disbursements ....................................................................................
Changes in estimates ..................................................................................
Accretion expense ......................................................................................
Balance at end of period, September 30, 2019 ...............................................
Charges to operations .................................................................................
Cash disbursements ....................................................................................
Changes in estimates ..................................................................................
Accretion expense ......................................................................................
Balance at end of period, September 30, 2020 ............................................... $
- $
224
(165)
-
-
59
366
(425)
-
-
- $
78 $
-
(54)
(8)
-
16
-
(16)
-
-
- $
78
224
(219)
(8)
-
75
366
(441)
-
-
-
Accrued restructuring costs included in Accrued Liabilities were $0 and $75 as of September 30, 2020 and 2019, respectively.
Acquisition Related Expenses
In connection with the acquisition of Stantive, the Company incurred legal, accounting and consulting fees of $428 during the year ended
September 30, 2019, which are included in Restructuring and acquisition related expenses in the consolidated statements of operations.
There were no acquisition related expenses incurred during the year ended September 30, 2020.
10. Debt
Payroll Protection Program
On April 17, 2020, Bridgeline Digital, Inc. entered into a loan with BNB Bank as the lender in an aggregate principal amount of $1,047,500
(“PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief and Economic Security Act
(“CARES Act”). The PPP Loan is evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loan bears interest
at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, has an initial term of two years, and is unsecured
and guaranteed by the U.S. Small Business Administration (“SBA”). Payments are deferred for at least the first six months and payable in
18 equal consecutive monthly installments of principal and interest commencing upon expiration of the deferral period of the PPP Loan
Date. During the year ended September 30, 2020, interest expense was approximately $5 related to the PPP Loan. The Company may apply
to the lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent
obligations, and covered utility payments incurred by the Company during the twenty-four week period beginning on April 21, 2020,
calculated in accordance with the terms of the CARES Act. The Note provides for prepayment and customary events of default, including,
among other things, cross-defaults on any other loan with the lender. The PPP Loan may be accelerated upon the occurrence of an event of
default.
U.S. GAAP does not contain authoritative accounting standards for forgivable loans provided by governmental entities to a for-profit entity.
Absent authoritative accounting standards, interpretative guidance issued and commonly applied by financial statement preparers allows
for the selection of accounting policies amongst acceptable alternatives. Based on facts and circumstances outlined below, the Company
determined it most appropriate to account for the PPP Loan proceeds as an in-substance government grant by analogy to International
Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance. Under the provisions
of IAS 20, “a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet
the terms for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”; however, based on certain interpretations, it is
analogous to “probable” as defined in FASB ASC 450-20-20 under U.S. GAAP, which is the definition the Company has applied to its
expectations of PPP loan forgiveness. Under IAS 20, government grants are recognized in earnings on a systematic basis over the periods
in which the Company recognizes costs for which the grant is intended to compensate (i.e. qualified expenses). Further, IAS 20 permits for
the recognition in earnings either separately under a general heading such as other income, or as a reduction of the related expenses. The
Company has elected to recognize government grant income separately within other income to present a clearer distinction in its
consolidated financial statements between its operating income and the amount of net income resulting from the PPP loan and subsequent
expected forgiveness. The Company believes this presentation method promotes greater comparability amongst all periods presented.
45
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
The following provides the balance and activity related to the PPP Loan:
PPP Loan .................................................................................................................................................................. $
Qualified expenses incurred during the period eligible for forgiveness ...................................................................
Unexpended loan proceeds ...................................................................................................................................... $
1,048
(960)
88
The Company has performed initial calculations for the PPP loan forgiveness according to the terms and conditions of the SBA’s Loan
Forgiveness Application (Revised June 24, 2020) and, based on such calculations, expects that the PPP Loan will be forgiven in full, based
on usage of related proceeds, over a period less than 24 weeks. In addition, the Company has determined it is probable the Company will
meet all the conditions of the PPP loan forgiveness. However, there can be no assurances that the Company will ultimately meet the
conditions for forgiveness of the loan or that the Company will not take actions that could cause the Company to be ineligible for forgiveness
of the loan, in whole or in part.
The Company plans to submit the PPP loan forgiveness application in the near term. In accordance with the terms and conditions under the
Payroll Protection Program Flexibility Act of 2020 (the “Flexibility Act”), the lender has 60 days from receipt of the completed application
to issue a decision to the SBA. If the lender determines that the borrower is entitled to forgiveness, in whole or in part, of the amount
applied for under the statute and applicable regulations, the lender must request payment from the SBA at the time the lender issues its
decision to the SBA. The SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount
to the lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to the SBA.
The amount the Company borrowed is within the “safe-harbor” limitations of the SBA. Although the Company believes it is probable that
the PPP Loan will be forgiven, the Company cannot provide any objective assurance that it will obtain forgiveness in whole or in part.
Pursuant to the Flexibility Act, the Company’s PPP loan agreement will be amended in the event that no amount or less than all of the PPP
Loan is forgiven. In addition, starting in August 2021, the Company will be required to make principal and interest payments or an
adjustment amount based on the loan amendment over the remaining term of the PPP Loan until such time the loan is fully settled. The
Company classifies unexpended loan proceeds on the accompanying consolidated balance sheet as a current or noncurrent liability based
on the contractual maturities of the underlying loan agreement. As of September 30, 2020, all unexpended loan proceeds were classified as
a current liability.
Other Credit Facilities
During the year ended September 30, 2019, the Company had a Line of Credit with Heritage Bank of Commerce (the “Line of Credit”)
and a term loan with Montage Capital II, L.P. (the “Montage Loan”). Borrowings under the Line of Credit accrued interest at the Wall
Street Journal Prime Rate plus 1.75% and the Montage Loan bore interest at 12.75% per annum. During the year ended September 30,
2019, interest expense was approximately $136 related to the Line of Credit and Montage Loan. As of September 30, 2020, the Company
no longer maintains nor are any future borrowings available under the Line of Credit.
As more fully described in Note 12, in the fiscal 2019 second quarter, the Company concluded a private offering of Series C Convertible
Preferred Stock, par value $0.001 per share. Proceeds were used, among other things, to pay-off in full the outstanding amounts on the Line
of Credit and Montage Loan.
11. Leases
The Company leases facilities in the United States for its corporate and regional field offices. During the year ended September 30, 2020,
the Company was also a lessee/sublessor for certain office locations relating to its restructuring plans commenced in fiscal 2015.
Determination of Whether a Contract Contains a Lease
We determine if an arrangement is a lease at inception or modification of a contract and classify each lease as either an operating or finance
lease at commencement. The Company reassesses lease classification subsequent to commencement upon a change to the expected lease
term or a modification to the contract. Operating leases represent the Company’s right to use an underlying asset as lessee for the lease
term and lease obligations represent the Company’s obligation to make lease payments arising from the lease.
A contract contains a lease if the contract conveys the right to control the use of the identified property or equipment, explicitly or implicitly,
for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of
and obtain substantially all of the economic benefit from the use of the underlying asset. At commencement, contracts containing a lease
are further evaluated for classification as an operating lease or finance lease based on their terms.
46
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
ROU Model and Determination of Lease Term
The Company uses the ROU model to account for leases, which requires an entity to recognize a lease liability and ROU asset on the lease
commencement date. A lease liability is measured equal to the present value of the remaining lease payments over the lease term and is
discounted using the incremental borrowing rate, as the rates implicit in the Company’s leases are not readily determinable. The incremental
borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount
equal to the lease payments in a similar economic environment. Lease payments include payments made before the commencement date
and any residual value guarantees, if applicable. The initial ROU asset consists of the initial measurement of the lease liability, adjusted
for any payments made before the commencement date, initial direct costs and lease incentives earned. When determining the lease term,
the Company includes option periods when it is reasonably certain that those options will be exercised.
Lease Costs
For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as operating lease costs on a
straight-line basis over the applicable lease terms. Some operating lease arrangements include variable lease costs, including real estate
taxes, insurance, common area maintenance or increases in rental costs related to inflation. Such variable payments, other than those
dependent upon a market index or rate, are excluded from the measurement of the lease liability and are expensed when the obligation for
those payments is incurred.
Significant Assumptions and Judgments
Management makes certain estimates and assumptions regarding each new lease and sublease agreement, renewal and amendment,
including, but not limited to, property values, market rents, useful life of the underlying property, discount rate and probable term, all of
which can impact (1) the classification as either an operating or finance lease, (2) measurement of lease liabilities and right-of-use assets
and (3) the term over which the right-of-use asset and leasehold improvements are amortized. The amount of depreciation and amortization,
interest and rent expense would vary if different estimates and assumptions were used.
The components of net lease costs were as follows:
Condensed Consolidated Statement of Operations:
Operating lease cost .......................................................................................................................................... $
Variable lease cost ............................................................................................................................................
Less: Sublease income, net ...............................................................................................................................
Total .............................................................................................................................................................. $
273
84
(73 )
284
Cash paid for amounts included in the measurement of lease liabilities was $251 for the year ended September 30, 2020, which all represents
operating cash flows from operating leases. As of September 30, 2020, the weighted average remaining lease term was 3.1 years and the
weighted average discount rate was 7.0%.
Year ended
September
30, 2020
47
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
At September 30, 2020, future minimum rental commitments under non-cancelable leases with initial or remaining terms in excess of one
year, which have commenced, were as follows:
Fiscal year:
2021 ................................................................................................................................................................... $
2022 ...................................................................................................................................................................
2023 ...................................................................................................................................................................
2024 ...................................................................................................................................................................
Total lease commitments ........................................................................................................................................
Less: Amount representing interest ........................................................................................................................
Present value of lease liabilities .............................................................................................................................
Less: Current portion .............................................................................................................................................
Operating lease liabilities, net of current portion ................................................................................................... $
As of September 30, 2020, the Company had no lease commitments that extend past 2025.
Operating Leases
114
88
88
33
323
(29)
294
(96)
198
In January 2020, the Company entered into a new lease arrangement for its offices in Woodbury, New York. As of September 30, 2020,
the lease had not yet commenced as the new office space was currently under construction. The Company had originally expected to move
into the new office space on or about May 1, 2020; however, due to the current state of the COVID-19 pandemic, there were delays in
construction, inclusive of obtaining necessary building permits from the local municipality. In November 2020, construction was
completed, and this lease commenced. In October 2020, the Company also entered into a new lease arrangement for an office in Canada
and began to sublease its existing Canada location.
Future minimum rental commitments upon commencement of the new leases are as follows:
Payments
Operating
Leases
Receipts
Subleases
Net
Leases
Fiscal year:
2021 ....................................................................................................... $
2022 .......................................................................................................
2023 .......................................................................................................
2024 .......................................................................................................
2025 .......................................................................................................
Total lease commitments ................................................................................ $
96
82
85
87
88
438 $
101
101
101
36
-
339 $
(5)
(19)
(16)
51
88
99
At September 30, 2019, future minimum rental commitments under non-cancelable leases with initial or remaining terms in excess of one
year were as follows:
Fiscal year:
2020 ........................................................................................................... $
2021 ...........................................................................................................
Total lease commitments ................................................................................ $
152
12
164 $
73
-
73 $
79
12
91
Payments
Operating
Leases
Receipts
Subleases
Net
Leases
12. Stockholders’ Equity
Series A Convertible Preferred Stock
The Company has designated 264,000 shares of its preferred stock as Series A Convertible Preferred Stock (“Series A Preferred Stock”).
The shares of Series A Preferred Stock may be converted, at the option of the holder at any time, into such number of shares of common
stock (“Conversion Shares”) equal (i) to the number of shares of Series A Preferred Stock to be converted, multiplied by the stated value
of $10.00 (the “Stated Value”) and (ii) divided by the conversion price in effect at the time of conversion.
48
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
On December 31, 2019 (the “Amendment Date”), the Company filed a First Amended and Restated Certificate of Designations of the
Series A Convertible Preferred Stock (the “Series A Amendment”) with the Secretary of State for the State of Delaware, which amended
and restated the Series A Preferred Stock, as more particularly set forth below:
Conversion Price: Reduced the conversion price from $812.50 per share to $1.75 per share, subject to adjustment in the event of
stock splits or stock dividends.
Mandatory Conversion: The Company has the right, in its sole discretion, to require the holders to convert shares of the Series
A Preferred Stock into Conversion Shares if (i) the Company’s common stock has closed at or above $2.28 ($32.50 prior to the
Series A Amendment) for fifteen (ten prior to the Series A Amendment) consecutive trading days and (ii) the Conversion Shares
are (a) registered for resale on an effective registration statement or (b) may be resold pursuant to Rule 144.
Company’s Redemption Option: The Company may redeem all or a portion of the outstanding shares of Series A Preferred Stock,
at its option, provided that the Company provides ten business days’ prior written notice of its intent to redeem the Series A
Preferred Stock to the holder and in cash at a price per share of Series A Preferred Stock equal to 100% of the Stated Value of
such shares of Series A Preferred Stock plus all accrued and unpaid dividends. Notwithstanding, the holder may convert its Series
A Preferred Stock prior to the exercise of the Company’s redemption option.
Dividends: Each outstanding share of Series A Preferred Stock is entitled to receive cumulative dividends, payable quarterly in
arrears, at a rate of 5% per annum for the first eighteen months commencing on January 1, 2020, after which time the dividend
rate will increase to 12% per annum (the dividend rate was 12% per annum prior to the Series A Amendment). Dividends are
payable in cash or, at the election of the Company, by delivery of additional shares (“PIK Shares”) of Series A Preferred Stock,
subject to a cap of 64,000 PIK Shares, in the aggregate. Any accrued but unpaid dividends on the shares of Preferred Stock to be
converted shall also be converted into common stock at the conversion price.
In the event of any liquidation, dissolution, or winding up of the Company, the holders of shares of Series A Preferred Stock will be entitled
to receive in preference to the holders of common stock, the amount equal to the Stated Value per share of Series A Preferred Stock plus
declared and unpaid dividends, if any. After such payment has been made, the remaining assets of the Company will be distributed ratably
to the holders of common stock. The Series A Preferred Stock shall vote with the common stock on an as-converted basis.
Prior to fiscal 2019, the Company had issued 64,000 shares of Series A Preferred Stock as PIK Shares to the Series A preferred shareholders,
which is the maximum amount of cumulative PIK Shares authorized. Therefore, all future dividend payments will be cash dividends.
The Company determined that the Series A Amendment represents an extinguishment for accounting purposes. In making this
determination, the Company considered the significance of the contractual terms added and revisions to existing contractual terms,
including, but not limited to, the significant change in the conversion price and the addition of the Company’s redemption option. These
additions and revisions to existing contractual terms were considered to be qualitatively significant. The extinguishment of equity-classified
convertible preferred stock is recognized as a deemed dividend measured as the difference between (1) the fair value of the consideration
transferred; that is, the Series A Preferred Stock, as amended, and (2) the carrying value of the Series A Preferred Stock. At the Amendment
Date, the fair value of the Series A Preferred Stock, as amended, was approximately $2,629 and its carrying value was approximately $315,
resulting in a deemed dividend of $2,314 recognized as an increase to accumulated deficit and an increase to additional paid-in capital and
is included as a component of net loss applicable to common shareholders. The estimated Amendment Date fair value of the Series A
Preferred Stock was determined using the present value of probability weighted scenario analysis based on the per share publicly traded
closing stock price of the Company’s common stock.
As of September 30, 2020, all previously outstanding shares of Series A Convertible Preferred Stock were converted into common stock.
Series B Convertible Preferred Stock
On October 16, 2018, in connection with a public offering, the Company issued 4,288 Series B Convertible Preferred Stock, par value
$0.001 per share, with each share of Series B Convertible Preferred Stock convertible into 40 shares of the Company’s common stock at a
conversion price of $25.00 per share. As of September 30, 2020, and 2019, all of the shares of Series B Convertible Preferred Stock were
converted into 171,520 shares of common stock.
Series C Preferred Convertible Stock and Associated Warrants
On March 12, 2019, the Company entered into Securities Purchase Agreements with certain accredited investors (each, a “Purchaser”),
pursuant to which the Company offered and sold to the Purchasers an aggregate of 10,227.5 units (“Units”) for $1,000 per Unit, with such
Units consisting of (i) an aggregate of 10,227.5 shares of the Company’s newly designated Series C Convertible Preferred Stock, par value
$0.001 per share (“Series C Preferred stock”); (ii) warrants to purchase an aggregate of 1,136,390 shares of Company common stock, par
value $0.001 per share (“Common Stock”), subject to adjustment (as set forth below), with a term of 5.5 years (“Series A Warrants”); (iii)
warrants to purchase an aggregate of 1,136,390 shares of Common Stock, subject to adjustment (as set forth below), with a term of 24
49
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
months (“Series B Warrants”); and (iv) warrants to purchase an aggregate of 1,420,486 shares with a term of 5.5 years (“Series C Warrants,”
and together with the Series A Warrants and Series B Warrants, the “Series C Preferred Warrants”). The Company also issued warrants to
purchase an aggregate of 127,848 shares of the Company’s Common Stock to the placement agents that were also subject to the same resets
as described below.
At the time of issuance, no shares of Series C Preferred stock could be converted into Conversion Shares and no Series C Preferred Warrants
could be exercised for shares of Common Stock, unless and until such time that the Company had obtained approval from its stockholders,
at an annual or special meeting or via written consent, to (i) issue the Conversion Shares and warrants upon the conversion and exercise of
the Series C Preferred stock and associated warrants, respectively, which number of shares in the aggregate exceeds 20% of the Company’s
shares of Common Stock issued and outstanding immediately prior to the Closing Date, as required by Nasdaq Marketplace Rule 5635(d)
(the “Issuance Approval”), and (ii) amend its Amended and Restated Certificate of Incorporation, as amended (“Charter”) to increase the
number of shares of Common Stock available for issuance thereunder (or effect a reverse stock split of its issued and outstanding shares of
Common Stock so as to effectively increase the number of shares of Common Stock available for issuance) by a sufficient amount to permit
the conversion of all outstanding Series C Preferred stock into Conversion Shares and all Series C Preferred Warrants into warrant shares
(the “Authorized Share Approval,” and together with the Issuance Approval, the “Stockholder Approvals”). In addition, the Company may
not effect, and a Purchaser will not be entitled to, convert the Series C Preferred stock or exercise any Series C Preferred Warrants, which,
upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of Common Stock beneficially owned
by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of Common
Stock outstanding immediately after giving effect to the exercise. The Stockholder Approvals were obtained on April 26, 2019 and the
Company’s Charter was amended on April 29, 2019. As of September 30, 2020, a total of 9,877.5 shares of Series C Preferred stock have
been converted to 1,097,509 shares of Common Stock.
The Company determined that the Series C Preferred stock and the Series C Preferred Warrants are each separate freestanding financial
instruments issued in a single transaction (the “Private Placement”) and that the Series C Warrants have been determined to be derivative
liabilities, which are measured at fair value on a recurring basis. The net proceeds of that single transaction were allocated to each of the
freestanding financial instruments based on their fair values. The purchase price was allocated to the Series C Preferred Warrants first
leaving no value for the Series C Preferred stock, as the Series C Warrants were fair valued at $21.5 million and the total proceeds were
only $10.3 million. The final allocation of the proceeds resulted in a charge against income of $11.2 million for the excess of the fair value
over the net proceeds, which was recorded in the fiscal 2019 second quarter.
Common Stock
At the Market Offering
On August 17, 2020, the Company entered into an arrangement with an investment banking firm (the “Manager”) to sell up to $4,796,090
of shares of the Company’s common stock with a par value of $0.001 (the “ATM Offering”). Pursuant to the ATM Offering, shares may
be sold on a daily basis, commencing no earlier than August 17, 2020, at a gross sales price equal to the market price for shares of the
Company’s Common Stock on the NASDAQ Capital Market at the time of sale of such shares. The Manager has no obligation to purchase
shares of the Company’s Common Stock and is only obligated to use its commercially reasonable efforts consistent with its normal trading
and sales practices to sell shares of the Company’s Common Stock. Accordingly, there can be no assurances that the Manager will be
successful in selling any portion of the shares available for sale under the ATM Offering. The Company shall pay to the Manager a
placement fee of 2.5% of the gross sales price of shares sold. The ATM Offering shall remain in effect until the earlier of August 17, 2021,
or upon written notice of termination by either the Company or the Manager.
The Company currently intends to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and
general corporate purposes. As of September 30, 2020, there have been no shares of common stock sold under the ATM offering.
Public Offering
On October 16, 2018, the Company issued and sold in a public offering (the “Offering”) an aggregate of (i) 28,480 Class A Units (the
“Class A Units”) at a price of $25.00 per Class A Unit, consisting of (i) one share of the Company’s common stock and one five-year
warrant to purchase one share of Company common stock at an exercise price of $25.00 per share and (ii) 4,288 Class B Units, consisting
of one share of Series B Convertible Preferred Stock and a warrant to purchase one share of common stock. The net proceeds to the
Company from the Offering, after deducting the underwriter’s fees and expenses, were approximately $4.4 million.
50
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
In addition, the Company granted the underwriter of the Offering a 45-day option (the “Over-allotment Option”) to purchase up to an
additional 30,000 shares of common stock and additional warrants to purchase an additional 30,000 shares of common stock. At the time
of the Offering, the underwriter partially exercised the Over-allotment Option by electing to purchase from the Company additional
warrants to purchase 8,000 shares of common stock.
Amended and Restated Stock Incentive Plan
The Company has granted common stock, common stock warrants, and common stock option awards (the “Equity Awards”) to employees,
consultants, advisors and former debt holders of the Company and to former owners and employees of acquired companies that have
become employees of the Company. The Company’s Amended and Restated Stock Incentive Plan (the “Plan”) provided for the issuance
of up to 5,000 shares of common stock. This Plan expired in August 2016. As of September 30, 2020, there were 3,246 options outstanding
under the Plan. On April 29, 2016, the stockholders approved a new stock incentive plan, The 2016 Stock Incentive Plan (the “2016 Plan”).
The 2016 Plan authorizes the award of incentive stock options, non-statutory stock options, restricted stock, unrestricted stock, performance
shares, stock appreciation rights and any combination thereof to employees, officers, directors, consultants, independent contractors and
advisors of the Company. In November 2019, the Company increased the number of common shares available for issuance under the 2016
Plan from 10,000 shares to 800,000 shares. There were no revisions to exercise prices, terms or any other underlying provisions of existing
stock options outstanding. As of September 30, 2020, there were 609,955 options outstanding and 190,045 shares available for future
issuance under the 2016 Plan.
Compensation Expense
Compensation expense is generally recognized on a graded accelerated basis over the vesting period of grants. Compensation expense is
recorded in the consolidated statements of operations with a portion charged to Cost of revenue and a portion to Operating expenses,
depending on the employee’s department.
During the years ended September 30, 2020 and 2019, compensation expense related to share-based payments was as follows:
Years ended
September 30,
2020
2019
Cost of revenue ................................................................................................................. $
Operating expenses ...........................................................................................................
$
21 $
173
194 $
9
240
249
As of September 30, 2020, the Company had approximately $325 of unrecognized compensation costs related to unvested options, which
are expected to be recognized over a weighted-average period of 2.1 years.
Common Stock Warrants
The Company typically issues warrants to individual investors and placement agents to purchase shares of the Company’s common stock
in connection with public and private placement fund raising activities. Warrants may also be issued to individuals or companies in
exchange for services provided for the Company. The warrants are typically exercisable six months after the issue date, expire in five years,
and contain a cashless exercise provision and piggyback registration rights.
Montage Warrant - As additional consideration for the Montage Loan, the Company issued to Montage Capital an eight-year warrant (the
“Montage Warrant”) to purchase 1,326 shares of the Company’s Common Stock at a price equal to $132.50 per share. The Montage
Warrant contains an equity buy-out provision upon the earlier of (1) dissolution or liquidation of the Company, (2) any sale or distribution
of all or substantially all of the assets of the Company or (3) a “Change in Control” as defined within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934. Montage Capital has the right to receive an equity buy-out of $250. If the equity buy-out
is exercised, the Montage Warrant will be surrendered to the Company for cancellation. The fair value of the Montage warrant liability at
September 30, 2020 and 2019, was $26 and $14, respectively.
51
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
Series A, B and C Preferred Warrants - Reset Dates and Reset Price - The Series A Warrants and Series B Warrants had an initial exercise
price of $9.00 per share; provided, however, that the exercise price of the Series A Warrants and Series B Warrants could be reset up to
three times (each, a “Reset Date”), as more specifically set forth in the Series C Warrants, to a price equal to the greater of (i) 80% of the
average of the two lowest VWAP days out of the 20 consecutive trading days immediately preceding the Reset Date, and (ii) $4.00 (the
“Floor”) or (the “Reset Price”). Upon the applicable Reset Date, the number of shares of Common Stock issuable pursuant to the Series A
Warrants and Series B Warrants would also be adjusted, as more specifically set forth in the Series C Warrants. The Series C Warrants
were not exercisable until the applicable Reset Date. At the First Reset Date, which was May 29, 2019, the Reset Price was set to the Floor
price of $4.00 per share. Therefore, there will be no future Reset Dates or Reset Prices. The shares were fixed to the following at the Reset
Date: the number of shares of Common Stock issuable upon exercise of the Series A Warrants is 2,556,875 shares, Series B Warrants is
2,556,875 shares, and Series C Warrants is 1,420,486. The number of shares of Common Stock issuable upon exercise of warrants issued
to the placement agents is 127,848 shares.
As of September 30, 2020, a total of 1,351,217 shares of Series C Warrants have been exercised and no Series A, B or placement agent
warrants exercised. The fair value of the total warrant liability related to the Series A, B and C Warrants and the placement agent warrants
at September 30, 2020 and 2019, was $2,460 and $3,500, respectively.
Total warrants outstanding as September 30, 2020 were as follows:
Type
Director/Shareholder ..........
Placement Agent ................
Placement Agent ................
Placement Agent ................
Investors ............................
Director/Shareholder ..........
Financing (Montage) .........
Director/Shareholder ..........
Investors ............................
Placement Agent ................
Investors ............................
Investors ............................
Investors ............................
Investors ............................
Placement Agent ................
Total ....................................................................................
Issue Date
12/31/2015
5/17/2016
5/11/2016
7/15/2016
11/9/2016
12/31/2016
10/10/2017
12/31/2017
10/19/2018
10/16/2018
3/12/2019
3/12/2019
3/12/2019
3/12/2019
3/12/2019
Warrant Issuances
Shares
Price
120 $
1,736 $
1,067 $
880 $
4,271 $
120 $
1,327 $
120 $
3,120 $
10,000 $
159,236 $
2,556,875 $
2,556,875 $
69,295 $
127,848 $
5,492,890
1,000.00
187.50
187.50
230.00
175.00
1,000.00
132.50
1,000.00
25.00
31.25
4.00
4.00
4.00
0.05
4.00
Expiration
12/31/2020
5/17/2021
5/11/2021
7/15/2021
5/9/2022
12/31/2021
10/10/2025
12/31/2021
10/19/2023
10/16/2023
10/19/2023
9/12/2024
9/12/2021
9/12/2024
9/12/2024
Issuances
Placement agent - public offering .....................................................................................
Placement agent - series A&B ..........................................................................................
Investors - public offering .................................................................................................
Investors - series A&B ......................................................................................................
Investors - series C ............................................................................................................
Total issued in fiscal 2019 .................................................................................................
Shares
Exercise Price
10,000 $
127,848 $
208,000 $
5,318,630 $
1,420,512 $
7,084,990
31.25
4.00
25.00
4.00
0.05
During the year ended September 30, 2020, there were no warrants issued.
Summary of Option and Warrant Activity and Outstanding Shares
During the year ended September 30, 2020, the Company granted options to purchase 681,353 shares at an exercise price of $1.40, of which
(a) 70,000 shares vest on November 20, 2020 and the remainder vest ratably over a three-year period commencing November 20, 2019, (b)
1,000 shares at an exercise price of $1.61 which vest ratably over a three-year period commencing on December 2, 2019 and (c) 20,000
shares at an exercise price of $1.61 which vest ratably over a three-year period commencing on June 15, 2020. All such options granted
expire ten years from the date of grant.
52
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to
estimate these values for stock options granted during the year ended September 30, 2020, are as follows:
Weighted-average fair value per share option ....................................................................................................... $
Expected life (in years) .........................................................................................................................................
Volatility ...............................................................................................................................................................
Risk-free interest rate ............................................................................................................................................
Dividend yield .......................................................................................................................................................
0.96
6.0
76.29%
1.61%
0.0%
The expected option term is the number of years the Company estimates the options will be outstanding prior to exercise based on historical
trends of employee turnover. Expected volatility is based on historical daily price changes of the Company’s common stock for a period
equal to the expected life. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant. The expected dividend
yield is zero since the Company does not currently pay cash dividends on its common stock and does not anticipate doing so in the
foreseeable future.
A summary of combined stock option and warrant activity is as follows:
Stock Options
Stock Warrants
Weighted
Average
Exercise
Weighted
Average
Exercise
Options
Price
Warrants
Price
Outstanding, October 1, 2018 .................................................................
Granted ................................................................................................
Exercised .............................................................................................
Forfeited/Exchanged ...........................................................................
Expired ................................................................................................
Outstanding, September 30, 2019 ...........................................................
Granted ................................................................................................
Exercised .............................................................................................
Forfeited/Exchanged ...........................................................................
Expired ................................................................................................
Outstanding, September 30, 2020 ...........................................................
9,157 $
-
-
(1,128)
(181)
7,848
702,353
-
(98,000)
-
613,201 $
341.50
-
-
486.00
1,219
306.41
1.41
-
3.96
-
4.76
10,926 $
7,084,990
(1,351,217)
(250,524)
(318)
5,493,857
-
-
-
(967)
5,492,890 $
308.32
3.86
0.18
25.00
1,373.43
4.54
-
-
-
952.11
4.37
There were no options exercised during fiscal 2020 and 2019. There were 5,865 and 5,688 options vested and exercisable as of September
30, 2020 and 2019, respectively. The shares outstanding at September 30, 2020 had an aggregate intrinsic value of $275 and had no
intrinsic value at September 30, 2019.
A summary of the status of unvested shares is as follows:
Unvested at October 1, 2019 .............................................................................................
Granted ..........................................................................................................................
Vested ...........................................................................................................................
Forfeited ........................................................................................................................
Unvested at September 30, 2020 .......................................................................................
Weighted
Average
Grant-Date
Fair Value
136.21
1.41
131.48
3.96
1.42
Shares
2,160 $
702,353
(177)
(97,000)
607,336 $
53
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
Price ranges of outstanding and exercisable options as of September 30, 2020, are summarized below:
Outstanding Options
Exercisable Options
Exercise Price
$1.40
$115
$601
$901
$1,401
to $1.61*
to $600
to $900
to $1,400
to $1,975
Weighted
Average
Remaining
Contractual Life
(Years)
Number of
options
Weighted
Average
Exercise Price
Number of
Options
Exercisable
606,533
6,017
283
80
288
613,201
8.96 $
2.46
3.24
2.39
2.11
9.10 $
1.82
90.29
707.14
1,356.25
1,648.71
4.76
Weighted Average
Exercisable Price
-
66.97
192.92
203.44
398.44
310.63
- $
5,214
283
80
288
5,865 $
* There are no outstanding or exercisable options with exercise prices between $1.62 and $115.
13. Commitments and Contingencies
The Company leases certain of its buildings under noncancelable lease agreements. Refer to the Leases footnote (Note 11) of the Notes to
the Consolidated Financial Statements for additional information.
The Company frequently warrants that the technology solutions it develops for its clients will operate in accordance with the project
specifications without defects for a specified warranty period, subject to certain limitations that the Company believes are standard in the
industry. In the event that defects are discovered during the warranty period, and none of the limitations apply, the Company is obligated
to remedy the defects until the solution that the Company provided operates within the project specifications. The Company is not typically
obligated by contract to provide its clients with any refunds of the fees they have paid, although a small number of its contracts provide for
the payment of liquidated damages upon default. The Company has purchased insurance policies covering professional errors and
omissions, property damage and general liability that reduce its monetary exposure for warranty-related claims and enable it to recover a
portion of any future amounts paid.
The Company’s contracts typically provide for testing and client acceptance procedures that are designed to mitigate the likelihood of
warranty-related claims, although there can be no assurance that such procedures will be effective for each project. The Company has not
paid any material amounts related to warranties for its solutions. The Company sometimes commits unanticipated levels of effort to
projects to remedy defects covered by its warranties. The Company’s estimate of its exposure to warranties on contracts is immaterial as
of September 30, 2020.
The Company’s agreements with customers generally require the Company to indemnify the customer against claims in which the
Company’s products infringe third-party patents, copyrights, or trademarks and indemnify against product liability matters. As of
September 30, 2020 and 2019, the Company has not experienced any losses related to the indemnification obligations and no significant
claims with respect thereto were outstanding. The Company does not expect significant claims related to the indemnification obligations
and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.
Litigation
The Company is subject to ordinary routine litigation and claims incidental to its business. As of September 30, 2020, the Company was
not engaged in any material legal proceedings.
14. Revenues and Other Related Items
Disaggregated Revenues
The Company disaggregates revenue from contracts with customers by geography and product grouping, as it believes this best depicts
how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
54
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
The Company’s revenue by geography (based on customer address) is as follows:
Revenues:
United States ................................................................................................................. $
International ..................................................................................................................
$
The Company’s revenue by type is as follows:
Revenues:
Digital Engagement Services ........................................................................................ $
Subscription ..................................................................................................................
Perpetual Licenses .........................................................................................................
Maintenance ..................................................................................................................
Hosting ..........................................................................................................................
$
Deferred Revenue
Years Ended September 30,
2019
2020
9,013 $
1,894
10,907 $
Years Ended September 30,
2019
2020
3,409 $
6,185
20
349
944
10,907 $
8,881
1,071
9,952
4,117
4,287
145
405
998
9,952
Amounts that have been invoiced are recognized in accounts receivable, deferred revenue or revenue, depending on whether the revenue
recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has not yet been recognized. Deferred
revenue that will be recognized during the succeeding 12-month period is recognized as current deferred revenue and the remaining portion
is recognized as noncurrent deferred included in Other long-term liabilities.
As of September 30, 2020, approximately $15 of revenue is expected to be recognized from remaining performance obligations for contracts
with original performance obligations that exceed one year. The Company expects to recognize revenue on approximately 99% of these
remaining performance obligations over the next 12 months, with the balance recognized thereafter.
The following table summarizes the classification and net change in deferred revenue as of and for the years ended September 30, 2020
and 2019:
Balance as of October 1, 2018 ................................................................................................... $
Increase (decrease) .....................................................................................................................
Balance as of September 30, 2019 .............................................................................................
Increase ......................................................................................................................................
Balance as of September 30, 2020 ............................................................................................. $
594 $
668
1,262
249
1,511 $
20
(12)
8
7
15
Deferred Revenue
Current
Long Term
Deferred Capitalized Commissions Costs
The incremental direct costs of obtaining a contract, which primarily consist of sales commissions paid for new subscription contracts, are
deferred and amortized on a straight-line basis over a period of approximately three years. The Company evaluated both qualitative and
quantitative factors, including the estimated life cycles of its offerings, renewal rates, and its customer attrition to determine the amortization
periods for the capitalized costs. The initial amortization period will generally be the customer contract term, which is typically thirty-six
(36) months, with some exceptions. Deferred capitalized commission expense that will be recognized as expense during the succeeding
12-month period is recognized as current deferred capitalized commission costs, and the remaining portion is recognized as long-term
deferred capitalized commission costs. Total deferred capitalized commissions were $20 and $70 as of September 30, 2020 and 2019,
respectively. Current deferred capitalized commission costs are included in Other current assets in the consolidated balance sheets and
noncurrent deferred capitalized commission costs are included in Other assets in the consolidated balance sheets. Amortization expense
was $16 and $39 for the years ended September 30, 2020 and 2019, respectively.
55
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
15. Income Taxes
The components of the Company’s tax provision as of September 30, 2020 and 2019 is as follows:
Current:
Federal .......................................................................................................................... $
State ..............................................................................................................................
Foreign ..........................................................................................................................
Total current ..............................................................................................................
Deferred:
Federal ..........................................................................................................................
State ..............................................................................................................................
Total deferred ............................................................................................................
Grand total ................................................................................................................ $
Year Ended September 30,
2020
2019
- $
11
-
11
-
-
-
11 $
-
4
-
4
-
-
-
4
The Company’s income tax provision was computed using the federal statutory rate (21%) and average state statutory rates (4.3%), net of
related federal benefit. The provision differs from the amount computed by applying the statutory federal income tax rate to pretax income,
as follows:
Year Ended September 30,
2019
2020
Income tax provision/(benefit) at the federal statutory rate of 21% ........................................... $
Permanent differences, net .........................................................................................................
State income tax provision/(benefit) ..........................................................................................
Change in valuation allowance attributable to operations ..........................................................
True up to prior year NOL .........................................................................................................
AMT tax refundable under CARES act ......................................................................................
Other ..........................................................................................................................................
Total ........................................................................................................................... $
67 $
(682)
14
486
110
23
(7)
11 $
(1,905)
541
(578)
1,925
-
-
21
4
As of September 30, 2020, the Company has federal net operating loss (NOL) carryforwards of approximately $37 million that expire on
various dates through 2040. Internal Revenue Code Section 382 places a limitation on the amount of taxable income which can be offset
by NOL carryforwards after a change in control of a loss corporation. Due to these “change of ownership” provisions, utilization of NOL
carryforwards may be subject to an annual limitation in future periods. The Company has not performed a Section 382 analysis. However,
if performed, Section 382 may be found to limit potential future utilization of the Company’s NOL carryforwards. The Company also has
approximately $28 million in state NOLs which expire on various dates through 2039.
The Company has deferred tax assets that are available to offset future taxable income. A valuation allowance is established if it is more
likely than not that all or a portion of the deferred tax asset will not be realized. Management believes that it is more likely than not that all
deferred tax assets will not be realized, with the exception of the AMT carryover which has not been reserved against for September 30,
2019. Accordingly, the Company has established a valuation allowance against a portion of its deferred tax assets at September 30, 2020
and a portion of its net deferred tax asset for 2019. For the year ended September 30, 2020 and 2019, the valuation allowance for deferred
tax assets increased $484,000, and $1.9 million which was mainly due to increases in the net operating losses.
In April of 2020 the Company received a loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief and
Economic Security Act. The Company has used the funds in accordance with the requirements of the loan agreement and expects to receive
forgiveness for all loan proceeds in the following fiscal year. The Company has recorded the proceeds for which it has calculated that
forgiveness will be achieved as a government grant. The related expenses that were paid in accordance with the loan are included as
expenses on the income statement for the year ended September 30, 2020. For income tax reporting the IRS has stated that any amount of
loan forgiveness shall be excludible from income. For this reason, the Company has recorded a deferred tax asset in the amount of
$243. The IRS has also determined that the related expenses incurred and paid in accordance with the forgiveness rules of the PPP loan
agreement are not deductible. The Company has reported a deferred tax liability in the amount of $243 to account for this book vs tax
adjustment.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense. Penalties, if incurred, are recognized as
a component of tax expense.
56
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
The Company is subject to U.S. federal income tax as well as income tax of certain state jurisdictions. The Company has not been audited
by the Internal Revenue Service (IRS) or any states in connection with income taxes. The tax periods from 2016– 2020 generally remain
open to examination by the IRS and state authorities.
Significant components of the Company’s deferred tax assets and liabilities are as follows:
Deferred tax assets:
Bad debt reserve ......................................................................................................... $
Deferred revenue ........................................................................................................
Accrued expenses .......................................................................................................
AMT carryforward .....................................................................................................
Net operating loss carryforwards ................................................................................
Contribution carryforward ..........................................................................................
Right of use liability ...........................................................................................................
Debt forgiveness ................................................................................................................
Depreciation ...............................................................................................................
Intangibles ..................................................................................................................
Total deferred tax assets .........................................................................................
Valuation allowance ...............................................................................................
Net deferred tax assets ....................................................................................................
Deferred tax liabilities:
Right of use asset ...............................................................................................................
Expenses related to debt forgiveness ..................................................................................
Total deferred tax liabilities ................................................................................
Net deferred tax assets ........................................................................................ $
September 30,
2020
2019
8 $
754
37
-
9,363
1
74
243
8
408
10,896
(10,577)
319
74
243
319
- $
24
717
46
23
8,895
1
-
-
8
401
10,115
(10,093)
22
-
-
-
22
Net deferred tax assets are reflected in Other assets on the consolidated balance sheets. Undistributed earnings of the Company’s foreign
subsidiaries amounted to approximately $85 and $108 at September 30, 2020 and 2019, respectively.
The 2017 Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign
subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, provides that an entity may
make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future
years, or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Additionally, the 2017 Tax
Act provides for a tax benefit to U.S. taxpayers that sell goods or services to foreign customers under the new Foreign Derived Intangible
Income Deduction ("FDII") rules. As of September 30, 2020, the Company had net losses from all foreign derived income and therefore
reported zero GILTI tax expense for the year ended September 30, 2020. When accounting for uncertain income tax positions, the impact
of uncertain tax positions is recognized in the consolidated financial statements if they are more likely than not of being sustained upon
examination, based on the technical merits of the position. The Company’s management has determined that the Company has no uncertain
tax positions requiring recognition as of September 30, 2020 and 2019. The Company does not expect any change to this determination in
the next twelve months.
16. Acquisitions
On February 13, 2019, the Company entered into an Asset Purchase Agreement with Seevolution Inc., a Delaware corporation, Celebros,
Inc., a Delaware corporation, and Elisha Gilboa, an individual and shareholder of Seevolution (the “Seevolution Asset Purchase
Agreement”). The Seevolution Asset Purchase Agreement sets forth the terms and conditions pursuant to which the Company acquired
certain assets in exchange for consideration paid consisting of (1) $418 in cash at the time of purchase, (ii) the payment of $100 of additional
cash to be paid out $10 per month for ten months starting April 30, 2019 and (iii) 40,000 shares of Bridgeline Digital common stock. Costs
to complete the transaction were approximately $18. The Company accounted for the Seevolution transaction as an asset acquisition as
there were no substantive processes acquired. Goodwill is not recognized in an asset acquisition.
On March 13, 2019, the Company entered into an Asset Purchase Agreement with Stantive Technologies Group Inc. (“Stantive”), a
corporation organized under the laws of Ontario, Canada, to purchase substantially all of the assets of Stantive and assume certain liabilities.
The Company also acquired all of the outstanding stock of Stantive Technologies Group, Pty, a company incorporated in Australia, which
was a subsidiary of Stantive. The total purchase price, including cure costs, for Stantive and its Australian subsidiary was approximately
$5.2 million in cash.
57
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
The Company accounted for the Stantive transaction as a business combination in accordance with ASC Topic 805, Business Combinations.
The Company assessed the fair market value of the acquired assets and liabilities as of the respective purchase dates, as follows:
Net assets acquired:
Cash ............................................................................................................... $
Accounts receivable, net ................................................................................
Other assets ....................................................................................................
Fixed assets, net .............................................................................................
Intangible assets .............................................................................................
Goodwill ........................................................................................................
Total assets .................................................................................................
Current liabilities ........................................................................................
Net assets acquired ................................................................................. $
Purchase Price:
Cash Paid (including acquisition costs) .......................................................... $
Future deferred payments (present value) ......................................................
Common stock (fair value) .............................................................................
Total consideration paid ......................................................................... $
Seevolution
Stantive
Total
- $
47
-
-
1,024
-
1,071
76
995 $
418 $
97
480
995 $
8 $
844
40
272
3,007
1,507
5,678
488
5,190 $
5,190 $
-
-
5,190 $
8
891
40
272
4,031
1,507
6,749
564
6,185
5,608
97
480
6,185
As part of the Seevolution acquisition, of the $1,024 allocated to intangible assets, $602 was allocated to customer relationships, $401 was
allocated to technology with an average useful life of five years, and $21 was allocated to trademarks with an average useful life of one
year.
As part of the Stantive acquisition, of the $3,007 allocated to intangible assets, $1.7 million was allocated to customer relationships, $1.2
million was allocated to technology with an average useful life of five years, and $75 was allocated to trademarks with an average useful
life of one year.
Total revenue from the Seevolution and Stantive acquisitions totaled approximately $2,145 for fiscal 2019. Total earnings from the two
acquisitions is impracticable to disclose as the acquisitions were asset purchases and the operations were merged with existing operations
and not accounted for separately.
Pro Forma Information (Unaudited)
The following is the unaudited pro forma information assuming the Stantive acquisition occurred on October 1, 2017:
(in thousands, except per share data)
Year ended
September 30, 2019
Revenue ................................................................................................................................................................... $
15,622
Net loss applicable to common shareholders ...........................................................................................................
(9,046)
Net loss per share attributable to common shareholders:
Basic ..................................................................................................................................................................... $
Diluted ................................................................................................................................................................. $
(7.61)
(7.61)
Weighted average common shares outstanding – basic ............................................................................................
Weighted average common shares outstanding – diluted .........................................................................................
1,199,322
1,199,322
17. Related Party Transactions
In October 2013, Mr. Michael Taglich joined the Board of Directors. Michael Taglich is the Chairman and President of Taglich Brothers,
Inc. (“Taglich Brothers”), a New York based securities firm. Taglich Brothers were the Placement Agents for many of the Company’s
private offerings and debt issuances. In connection with previous private offerings and debt issuances which occurred prior to the fiscal
58
BRIDGELINE DIGITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
year ended September 30, 2018, Taglich Brothers were granted Placement Agent warrants to purchase 10,926 shares of common stock at
a weighted average price of $761.61 per share. As of September 30, 2020, Michael Taglich beneficially owns approximately 6.5% of the
Company’s stock.
In connection with the November 2016 Private Placement, the Company issued to the Investors warrants to purchase an aggregate total of
4,270 shares of common stock. Included were warrant shares issued to Roger Kahn (172 shares), the Company’s President and Chief
Executive Officer, and Michael Taglich (308 shares). Each warrant share expires five and one-half years from the date of issuance and is
exercisable for $175 per share beginning six months from the date of issuance, or May 9, 2017. The warrants expire May 9, 2022.
In consideration of previous loans made by Michael Taglich to the Company and the personal guaranty for on a former third-party credit
facility no longer maintained by the Company, Mr. Taglich has been issued warrants to purchase common stock totaling 1,080 shares at an
exercise price of $1,000 per share.
In November 2018, the Company engaged Taglich Brothers Inc, on a non-exclusive basis, to perform advisory and investment banking
services to identify possible acquisition target possibilities. Michael Taglich, a director and shareholder of the Company, is the President
and Chairman of Taglich Brothers Inc. Fees for the services were $8 per month for three months and $5 thereafter, cancellable at any time.
Taglich Brothers Inc. could also earn a success fee ranging from $200 for a revenue target acquisition of under $5 million up to $1 million
for an acquisition target over $200 million. In connection with the asset purchase of Stantive, during the second quarter of the Company’s
2019 fiscal year, Taglich Brothers Inc earned a success fee of $200.
Michael Taglich purchased 350 units in the amount of $350 of Series C Preferred Stock and associated warrants in the private transaction
consummated on March 13, 2019. Mr. Taglich’s purchase was subject to stockholder approval pursuant to Nasdaq Marketplace Rule
5635(c), for which approval by the stockholders of the Company was obtained on April 26, 2019.
18. Subsequent Events
The Company evaluated subsequent events through the date of this filing and concluded there were no material subsequent events requiring
adjustment to or disclosure in these consolidated financial statements, except as already disclosed in these consolidated financial statements
within Note 11.
59
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None
Item 9A. Controls and Procedures.
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed
under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our
management, including our President and Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal
Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating
the disclosure controls and procedures, management recognized 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.
As of September 30, 2020, the end of our fiscal year covered by this report, we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures. Based on the foregoing, we concluded that our disclosure controls and procedures
were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility estimates
and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of
internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from
unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly
to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United
States. Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2020. In making
this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in the 2013 Internal Control-Integrated Framework. Our management has concluded that as of September 30, 2020, our internal
control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our
management reviewed the results of its assessment with our Board of Directors.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to a
permanent exemption from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting has inherent limitations which include but are not limited to the use of independent professionals
for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of
organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance
and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be
circumvented by collusion or improper management override. Provided its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements on a timely basis; however, these inherent limitations are known features of the financial reporting
process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal controls over financial reporting that occurred during the fiscal year ended September
30, 2020 that have materially, or are reasonably likely to materially affect, our internal controls over financial reporting.
60
ITEM 9B. OTHER INFORMATION
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information regarding our directors and executive officers:
Name
Age
Position
Joni Kahn ....................................
65
Chairperson (1)(2)(3)(4)
Kenneth Galaznik .......................
69
Director (1)(2)(4)
Scott Landers ..............................
50
Director (1)(2)(3)(4)
Michael Taglich ..........................
55
Director
Roger Kahn .................................
51
Director, President and Chief Executive Officer
Mark G. Downey .......................
55
Chief Financial Officer (5)
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating and Governance Committee.
(4)
(5) Mr. Downey was appointed as our Chief Financial Officer and Treasurer effective July 1, 2019, following the resignation of our
Independent director.
former Chief Financial Officer, Carole Tyner.
Biographies
Joni Kahn has been a member of our Board of Directors since April 2012. In May 2015, Ms. Kahn was appointed Chairperson
of the Board of Directors. She also serves as the Chair of the Compensation Committee and is a member of the Audit and Nominating and
Governance Committees. Ms. Kahn has over thirty years of operating experience with high growth software and services companies with
specific expertise in the SaaS (Software as a Service), ERP (Enterprise Resource Planning) Applications, Business Intelligence and
Analytics and Cybersecurity segments. From 2013 to 2015, Ms. Kahn was the Senior Vice President of Global Services for Big Machines,
Inc., which was acquired by Oracle in October 2013. From 2007 to 2012, Ms. Kahn was Vice President of Services for HP’s Enterprise
Security Software group. From 2005 to 2007, Ms. Kahn was the Executive Vice President at BearingPoint where she managed a team of
over 3,000 professionals and was responsible for North American delivery of enterprise applications, systems integration and managed
services solutions. Ms. Kahn also oversaw global development centers in India, China and the U.S. From 2002 to 2005, Ms. Kahn was the
Senior Group Vice President for worldwide professional services for Business Objects, a business intelligence and analytics software maker
based in San Jose, where she led the applications and services division that supported that company's transformation from a products
company to an enterprise solutions company. Business Objects was acquired by SAP in 2007. From 2000 to 2007, Ms. Kahn was a Member
of the Board of Directors for MapInfo, a global location intelligence solutions company. She was a member of MapInfo’s Audit Committee
and the Compensation Committee. MapInfo was acquired by Pitney Bowes in 2007. From 1993 to 2000, Ms. Kahn was an Executive Vice
President and Partner of KPMG Consulting, where she helped grow the firm’s consulting business from $700 million to $2.5 billion. Ms.
Kahn received her B.B.A in Accounting from the University of Wisconsin – Madison. Ms. Kahn brings extensive leadership experience to
our Board and our Audit Committee as an experienced senior executive. Ms. Kahn has over thirty years of executive level managerial,
operational, and strategic planning experience leading world-class sales, service and support technology organizations. Her service on prior
boards also provides financial and governance experience.
Ms. Kahn brings extensive leadership experience to our Board and our Audit Committee as an experienced senior executive. Ms.
Kahn has over thirty years of executive level managerial, operational, and strategic planning experience leading world-class service and
support technology organizations. Her service on prior boards also provides financial and governance experience.
61
The Board of Directors has determined that Ms. Kahn’s vast experience in the technology industry and finance, as well as her
executive leadership, makes her qualified to continue as the Chairperson and member of our Board of Directors.
Kenneth Galaznik has been a member of our Board of Directors since 2006. Mr. Galaznik is the Chairman of the Company’s
Audit Committee and serves as a member of the Compensation Committee. From 2005 to 2016, Mr. Galaznik was the Senior Vice
President, Chief Financial Officer and Treasurer of American Science and Engineering, Inc., a publicly held supplier of X-ray inspection
and screening systems with a public market cap of over $200 million. Mr. Galaznik retired from his position at American Science and
Engineering on March 31, 2016. From August 2002 to February 2005, Mr. Galaznik was Vice President of Finance of American Science
and Engineering, Inc. From November 2001 to August 2002, Mr. Galaznik was self-employed as a consultant. From March 1999 to
September 2001, he served as Vice President of Finance at Spectro Analytical Instruments, Inc. and has more than 35 years of experience
in accounting and finance positions. Mr. Galaznik holds a B.B.A. degree in accounting from The University of Houston. Mr. Galaznik
brings extensive experience to our Board and our Audit Committee as an experienced senior executive, a financial expert, and as chief
financial officer of a publicly held company.
The Board of Directors has determined that Mr. Galaznik’s deep experience in finance and his executive leadership make him
qualified to continue as a member of our Board of Directors.
Scott Landers has been a member of our Board of Directors since 2010. Mr. Landers is the Chair of the Nominating and
Corporate Governance Committee and serves as a member of the Audit and Compensation Committees. Mr. Landers was named President
and Chief Executive Officer of Monotype Imaging Holdings, Inc. on January 1, 2016 after serving as the company’s Chief Operating
Officer since early 2015 and its Chief Financial Officer, Treasurer and Assistant Secretary since joining Monotype in July 2008. Effective
October 11, 2019, Monotype was acquired by HGGC and is now a privately-owned company and is a leading provider of typefaces,
technology and expertise that enable the best user experiences and sure brand integrity. Prior to joining Monotype, from September 2007
until July 2008, Mr. Landers was the Vice President of Global Finance at Pitney Bowes Software, a $450 million division of Pitney Bowes,
a leading global provider of location intelligence solutions. From 1997 until September 2007, Mr. Landers held several senior finance
positions, including Vice President of Finance and Administration, at MapInfo, a publicly held company which was acquired by Pitney
Bowes in April 2007. Earlier in his career, Mr. Landers was a Business Assurance Manager with Coopers & Lybrand. Mr. Landers holds
a bachelor's degree in accounting from Le Moyne College in Syracuse, N.Y. and a master’s degree in business administration from The
College of Saint Rose in Albany, N.Y. Mr. Landers brings extensive experience to our Board and our Audit Committee as an experienced
senior executive, a financial expert, and as chief executive officer and a chief financial officer of a publicly-held company.
Our Board of Directors has determined that Mr. Lander’s financial skills, public-company experience, strategic business acumen
and executive leadership make him a qualified to continue as a member of our Board of Directors.
Michael Taglich has been a member of our Board of Directors since 2013. He is the Chairman and President of Taglich Brothers,
Inc., a New York City based securities firm which he co-founded in 1992 with his brother Robert Taglich. Taglich Brothers, Inc. focuses
on public and private micro-cap companies in a wide variety of industries. He is currently the Chairman of the Board of Air Industries
Group Inc., a publicly traded aerospace and defense company (NYSE AIRI), and Mare Island Dry Dock Inc., a privately-held company.
He also serves as a director of a number of other private companies. Michael Taglich brings extensive professional experience which spans
various aspects of senior management, including finance, operations and strategic planning. Mr. Taglich has more than 30 years of financial
industry experience and served on his first public company board over 20 years ago.
Our Board of Directors has determined that Mr. Taglich’s executive strategic business skills in both private and public companies,
as well as his experience leading and advising high-growth companies, make him a qualified to continue as a member of our Board of
Directors.
Roger Kahn has been a member of our Board of Directors since December 2017. Mr. Kahn joined the Company as the Chief
Operating Officer in August 2015 and has been our President and Chief Executive Officer since May 2016. Prior to joining Bridgeline
Digital, Mr. Kahn co-founded FatWire, a leading content management and digital engagement company. As the General Manager and
Chief Technology Officer of FatWire, Mr. Kahn built the company into a global corporation with offices in thirteen countries. FatWire was
acquired by Oracle in 2011. Mr. Kahn received his Ph.D. in Computer Science and Artificial Intelligence from the University of Chicago.
Our Board of Directors has determined that Mr. Kahn’s vast experience as a successful entrepreneur in the technology space, as
well as his technical and leadership acumen, make him qualified to continue as a member of our Board of Directors.
62
Mark G. Downey has been our Executive Vice President and Chief Financial Officer and Treasurer since July 2019. Mr. Downey
comes to Bridgeline with more than 25 years of executive experience, including more than 15 years as a CFO and COO at several public
and privately-held companies in the technology, private equity, financial services and professional services industries. Mr. Downey has
extensive accounting, capital markets structuring, risk, treasury, M&A due diligence, technology enhancements, and overall operational
and management experience. Prior to joining Bridgeline Digital, Inc., Mr. Downey served as a consultant and Director of Accounting &
Transaction Services at MorganFranklin Consulting from 2015 to 2019. He was the global CFO and COO at Algodon Group, a private
equity firm from 2014 to 2015 and CFO and COO and Treasurer at Dahlman Rose, Tullett Prebon and Commerzbank Securities from 2000
through 2014. He started his career at Coopers and Lybrand and holds a B.B.A. in Accounting from Iona College – Hagan School of
Business and is a member of the American Institute of Certified Public Accountants and New York State Society of Certified Public
Accountants.
There are no family relationships between any of the directors and the Company’s executive officers, including between Ms. Joni
Kahn and Mr. Roger Kahn, the Company’s President and Chief Executive Officer.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) requires the Company’s executive
officers, directors and persons who beneficially own more than 10% of a registered class of the Company’s equity securities (collectively,
the “Reporting Persons”) to file certain reports regarding ownership of, and transactions in, the Company’s securities with the Securities
and Exchange Commission (the “SEC”). These officers, directors and stockholders are also required by SEC rules to furnish the Company
with copies of all Section 16(a) reports that they file with the SEC. With respect to fiscal 2020 and 2019 and based solely on its review of
the copies of such forms and amendments thereto received by it, the Company believes that all of the executive officers, directors, and
owners of ten percent of the outstanding Common Stock complied with all applicable filing requirements.
Code of Conduct and Ethics
The Company's Board of Directors has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the
Securities Act that applies to all of the Company's officers and employees, including its principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics codifies the business and
ethical principles that govern the Company's business. A copy of the Code of Ethics is available on the Company's website
www.bridgeline.com. The Company intends to post amendments to or waivers from its Code of Ethics (to the extent applicable to its
principal executive officer, principal financial officer or principal accounting officer) on its website. The Company's website is not part of
this proxy statement.
The Company has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.
Committees of the Board of Directors
Audit Committee
The Audit Committee assists the Board in the oversight of the audit of our consolidated financial statements and the quality and
integrity of our accounting, auditing and financial reporting processes. The Audit Committee is responsible for making recommendations
to the Board concerning the selection and engagement of independent registered public accountants and for reviewing the scope of the
annual audit, audit fees, results of the audit and auditor independence. The Audit Committee also reviews and discusses with management
and the Board such matters as accounting policies, internal accounting controls and procedures for preparation of financial statements. Our
Audit Committee is comprised of Mr. Galaznik (Chair), Ms. Kahn and Mr. Landers. Our Board has determined that each of the members
of the Audit Committee meet the criteria for independence under the standards provided by the Nasdaq Stock Market. The Board of
Directors has adopted a written charter for the Audit Committee. A copy of such charter is available on the Company's website,
www.bridgeline.com. During Fiscal 2020, the Audit Committee met four times. Each member of the Audit Committee attended each such
meeting. The Chairman of the Audit Committee was present at all meetings.
Audit Committee Financial Expert. Our Board has also determined that each of Mr. Galaznik and Mr. Landers qualifies as an
"audit committee financial expert" as defined under Item 407(d) (5) of Regulation S-K and as an independent director as defined by the
Nasdaq listing standards.
Compensation Committee
The Compensation Committee evaluates the performance of our senior executives, considers the design and competitiveness of
our compensation plans, including the review of independent research and data regarding compensation paid to executives of public
companies of similar size and geographic location, reviews and approves senior executive compensation and administers our equity
compensation plans. In addition, the Committee also conducts reviews of executive compensation to ensure compliance with Section
162(m) of the Internal Revenue Code of 1986, as amended. Our Compensation Committee is comprised of Ms. Kahn (Chair), Mr. Galaznik
and Mr. Landers, all of whom are independent directors. The Board of Directors has adopted a written charter for the Compensation
Committee. A copy of such charter is available on the Company's website, www.bridgeline.com. During Fiscal 2020, the Compensation
Committee met five times.
63
Nominating and Corporate Governance Committee
The Nominating and Governance Committee identifies candidates for future Board membership and proposes criteria for Board
candidates and candidates to fill Board vacancies, as well as a slate of directors for election by the shareholders at each annual meeting.
The Nominating and Governance Committee also annually assesses and reports to the Board on Board and Board Committee performance
and effectiveness and reviews and makes recommendations to the Board concerning the composition, size and structure of the Board and
its committees. A copy of such charter is available on the Company's website, www.bridgeline.com. Our Nominating and Governance
Committee is comprised of Mr. Landers (Chair) and Ms. Kahn, each of whom are independent directors. During Fiscal 2020, the
Nominating and Governance Committee met four times.
Item 11. Executive Compensation.
Summary Compensation Table
The following Summary Compensation Table sets forth the total compensation paid or accrued for the fiscal years ended September 30,
2020 and September 30, 2019 for our principal executive officer and our other two most highly compensated executive officers who were
serving as executive officers as of September 30, 2020. We refer to these officers as our named executive officers.
Name and
Principal Position
Roger Kahn
President and Chief
Executive Officer
Mark G. Downey
Executive Vice President
Chief Financial Officer and Treasurer
Carole Tyner (1)
Former Chief Financial Officer
Fiscal
Year End
2019
Salary
Bonus
All Other
Compensation
(2)
Total
$
300,000 $
26,042 $
- $
326,042
2020
2019
2020
2019
$
$
$
$
300,000 $
60,000 $
15,624 $
- $
- $
- $
315,624
60,000
240,000 $
201,167 $
5,000 $
7,500 $
- $
116,189 $
245,000
324,856
(1) Carole Tyner resigned as Chief Financial Officer on August 31, 2019. Effective July 1, 2019, Mark Downey was appointed as Executive
Vice President, Chief Financial Officer and Treasurer.
(2) Amounts paid to Carole Tyner in fiscal 2019 represented severance of $110,000, unused vacation of $5,077 and COBRA of $1,112.
Employment Agreements
Roger Kahn
On August 24, 2015, Mr. Roger "Ari" Kahn joined Bridgeline Digital, Inc. (the "Company") as the Company's Chief Operating Officer.
On December 1, 2015, Mr. Kahn and another were named Co-Interim Chief Executive Officers and Presidents and assumed the
responsibilities of the Office of the Chief Executive Officer and President. On May 6, 2016, the Company appointed Mr. Kahn as President
and Chief Executive Officer, effective May 10, 2016. Mr. Kahn's employment agreement was amended and reported on Form 8-K filed
with the Securities and Exchange Commission on May 13, 2016. In furtherance of Mr. Kahn's employment with the Company, a new
employment agreement was entered into on September 13, 2019 by and between the Company and Mr. Kahn. The principal change to Mr.
Kahn's employment agreement is that it will automatically renew each fiscal year unless the Company provides written notice of its intent
not to renew such employment agreement at least sixty (60) days in advance of the Company's fiscal year rather than the employment
agreement only renewing upon notice from the Company.
Carole Tyner
On June 28, 2019, Ms. Carole Tyner resigned from her position of Chief Financial Officer of Bridgeline Digital, Inc. (the "Company") to
pursue new professional opportunities. Upon Ms. Tyner's departure on August 31, 2019, she received a lump sum separation payment
equivalent to six-months base salary, and further, she continued to receive COBRA health insurance continuation benefits with the
Employer portion of the premiums paid by the Company through February 28, 2020.
64
Mark G. Downey
Effective July 1, 2019, Mark G. Downey was appointed by the Company's Board of Directors as Executive Vice President, Chief Financial
Officer and Treasurer of the Company. The Company and Mr. Downey entered into an employment agreement (the "Employment
Agreement"), effective July 1, 2019 through September 30, 2020, whereby he will receive two-hundred and forty thousand dollars base
salary and the ability to earn a bi-annual incentive bonus of thirty thousand dollars. Mr. Downey may also participate in such equity-based
and cash-based incentive programs as the Company may from time to time make available to its executive officers, in accordance with the
terms and conditions of such programs, as well as, the Company's other applicable employee benefits plans and programs. His Employment
Agreement, which has been renewed through September 2021, also provides that in the event Mr. Downey's employment is terminated by
the Company without cause or if the Company terminates his employment for good reason, he is entitled to receive severance benefits. The
foregoing descriptions of the material terms of the Employment Agreement by and between the Company and Mr. Downey do not purport
to be complete descriptions and are qualified in their entirety by reference to the Employment Agreement, which is filed as Exhibit 10.1
on Form 8-K. There are no family relationships between Mr. Downey and any director or executive officer of the Company.
Outstanding Equity Awards at Fiscal 2020 Year-End
The following table sets forth information concerning outstanding stock options for each named executive officer as of
September 30, 2020.
Name
Roger Kahn (1) ....................... 08/24/2015
08/19/2016
Grant
Date
Number of
Securities
Underlying
Unexercised
Options
Exercisable (1)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(1)
800
716
1,516
- $
- $
-
Exercise
price
($/sh)
287.50
205.00
Option
Expiration
Date
08/24/2025
08/19/2026
(1)
Shares vest in equal installments upon the anniversary date of the grant over three years.
Director Compensation
The non-employee members of our Board of Directors are compensated as follows:
● Compensation. Each outside director receives an annual retainer of $12,000 and is compensated $1,500 for each meeting such
director attends in person. Members of the Audit Committee receive additional annual compensation of $3,000.
● Committee Chair Bonus. The Chair of the Board of Directors receives an additional annual fee of $15,000. The Chair of the Audit
Committee receives an additional annual fee of $10,000. The Chairs of the Compensation Committee and Nominating and
Corporate Governance Committee each receive an additional annual fee of $5,000. These fees are payable in lump sums in
advance. Other directors who serve on our standing committees, other than the Audit Committee, do not receive additional
compensation for their committee services.
65
Director Compensation Table
The following table sets forth information concerning the compensation paid to our non-employee directors during the fiscal year ended
September 30, 2020.
Director
Ken Galaznik ..................................................... $
Joni Kahn ...........................................................
Scott Landers .....................................................
Michael Taglich .................................................
$
Annual
Retainer
Board
Meetings
Chairman
Additional
Total
12,000 $
12,000
12,000
12,000
48,000 $
6,000 $
6,000
6,000
6,000
24,000 $
10,000
15,000
5,000
$
3,000
3,000
30,000 $
6,000 $
28,000
36,000
26,000
18,000
108,000
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act. In computing the number of shares beneficially
owned by a person or a group and the percentage ownership of that person or group, shares of our common stock subject to options or
warrants currently exercisable or exercisable within 60 days after December 23, 2020 are deemed outstanding, but are not deemed
outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each
individual named below is our address, 100 Sylvan Road, Suite G-700, Woburn, Massachusetts 01801.
The following tables set forth, as of December 23, 2020, the beneficial ownership of our Series C Preferred and Common Stock by (i) each
person or group of persons known to us to beneficially own more than 5% of the outstanding shares of each class of the outstanding
securities, (ii) each of our directors and named executive officers, and (iii) all of our executive officers and directors as a group. At the
close of business on December 23, 2020 there were 350 shares of our Series C Preferred and 4,420,170 shares of our Common Stock issued
and outstanding.
Except as indicated in the footnotes to the tables below, each stockholder named in the table has sole voting and investment power with
respect to the shares shown as beneficially owned by such stockholder.
This information is based upon information received from or on behalf of the individuals named herein.
Series C Preferred Stock
Name and Address
Michael and Claudia Taglich
790 New York Avenue
Huntington, NY 11743
All current executive officers and directors as a group
Number of
Shares
Owned (1)
350
350
Percent of Shares
Outstanding
100.00%
*
(1) Holders of Series C Preferred are entitled to vote on all matters presented to our stockholders on an as-converted basis. Each share
of Series C Preferred Stock is convertible, at the option of each respective holder, into approximately 111.11 shares of Common
Stock.
Common Stock
Name and Address
Michael Taglich
Director
Roger Kahn
President, Chief Executive Officer, Director
Kenneth Galaznik
Director
Scott Landers
Director
Joni Kahn
Director
Mark G. Downey
Chief Financial Officer and Treasurer
All current executive officers and directors as a group
Number of
Shares
Owned
304,387
8,392
758
721
719
-
314,977
Percent of Shares
Outstanding
6.47%
0.19%
0.02%
0.02%
0.02%
-
6.72%
(1)
(2)
(3)
(4)
(5)
(6)
66
(1)
(2)
(3)
(4)
(5)
(6)
Includes 248,805 shares issuable upon the exercise of warrants, and 174 shares of Common Stock subject to currently exercisable
options (includes options that will become exercisable within 60 days of December 23, 2020). Also includes 35 shares of Common
Stock and 2 shares issuable upon the exercise of warrants owned by Mr. Taglich’s spouse.
Includes 172 shares issuable upon the exercise of warrants and 5,246 shares of Common Stock subject to currently exercisable
options (includes options that will become exercisable within 60 days of December 23, 2020). Includes 545 shares of common
stock owned by Mr. Kahn’s spouse.
Includes 146 shares of Common Stock subject to currently exercisable options (includes options that will become exercisable within
60 days of December 23, 2020).
Includes 138 shares of Common Stock subject to currently exercisable options (includes options that will become exercisable within
60 days of December 23, 2020). Includes 8 shares of Common Stock owned by Mr. Lander’s children.
Includes 130 shares of Common Stock subject to currently exercisable options (includes options that will become exercisable within
60 days of December 23, 2020).
Includes 5,824 shares of Common Stock subject to currently exercisable options (includes options that will become exercisable
within 60 days of December 23, 2020).
We maintain a number of equity compensation plans for employees, officers, directors and other entities and individuals whose efforts
contribute to our success. The table below sets forth certain information as of our fiscal year ended September 30, 2020 regarding the shares
of our common stock available for grant or granted under our equity compensation plans.
Equity Compensation Plan Information
Number of
securities
Number of
securities
Plan category
exercise of
to be issued upon Weighted average remaining available
for future issuance
exercise price of
under equity
outstanding options, outstanding options,
warrants and rights warrants and rights compensation plans
(excluding securities
reflected in
column a) (c)
(b)
(a)
Equity compensation plans approved by security holders ..........
613,201 $
4.76
190,045
Equity compensation plans not approved by security holders
(1) ...........................................................................................
5,492,879 $
4.37
-
Total ...........................................................................................
6,106,080 $
-
190,045
(1) At September 30, 2020, there were 5,492,879 total Warrants outstanding.
67
Stock warrants outstanding at September 30, 2020 are as follows:
Type
Placement Agent ....................................................................
Placement Agent ....................................................................
Placement Agent ....................................................................
Director/Shareholder ..............................................................
Director/Shareholder ..............................................................
Director/Shareholder ..............................................................
Director/Shareholder ..............................................................
Placement Agent ....................................................................
Placement Agent ....................................................................
Placement Agent ....................................................................
Investors .................................................................................
Director/Shareholder ..............................................................
Financing ...............................................................................
Director/Shareholder ..............................................................
Investors .................................................................................
Placement Agent ....................................................................
Issue
Date
06-Nov-13
28-Mar-14
28-Oct-14
31-Dec-14
12-Feb-15
12-May-15
31-Dec-15
17-May-16
11-May-16
15-Jul-16
08-Nov-16
31-Dec-16
10-Oct-17
31-Dec-17
19-Oct-18
14-Apr-19
Shares
Extended
Price
Expiration
- $
- $
- $
- $
- $
- $
120 $
1,736 $
1,067 $
880 $
4,271 $
120 $
1,327 $
120 $
3,120 $
10,000 $
1,625.00
1,312.50
812.50
1,000.00
1,000.00
1,000.00
1,000.00
187.50
187.50
230.00
175.00
1,000.00
132.50
1,000.00
25.00
31.25
06-Nov-18
28-Mar-19
28-Oct-19
31-Dec-19
12-Feb-20
12-May-20
31-Dec-20
17-May-21
11-May-21
15-Jul-21
09-May-22
31-Dec-21
10-Oct-25
31-Dec-21
19-Oct-23
16-Oct-23
Total .............................................................................................
22,761
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 404(d) of Regulation S-K requires the Company to disclose any transaction or proposed transaction which occurred since the beginning
of the two most recently completed fiscal years in which the amount involved exceeds the lesser of $120,000 or one percent (1%) of the
average of the Company’s total assets as of the end of the last two completed fiscal years in which the Company is a participant and in
which any related person has or will have a direct or indirect material interest. A related person is any executive officer, director, nominee
for director, or holder of 5% or more of the Company's Common Stock, or an immediate family member of any of those persons.
In accordance with our Audit Committee charter, our Audit Committee is responsible for reviewing and approving the terms of any related
party transactions. Therefore, any material financial transaction between the Company and any related person would need to be approved
by our Audit Committee prior to the Company entering into such transaction.
In October 2013, Mr. Michael Taglich joined the Board of Directors. Michael Taglich is the Chairman and President of Taglich Brothers,
Inc. a New York based securities firm. Taglich Brothers, Inc. acted as placement agents for many of the Company’s private offerings in
2012, 2013, 2014, and 2016. They were also the placement agent for the Company’s $3 million subordinated debt offering in 2013, the
Series A Preferred stock sale in 2015, and Promissory Term Notes in 2018. As of August 16, 2019, Michael Taglich beneficially owns
approximately 10% of Bridgeline stock. Michael Taglich has also guaranteed $1.5 million in connection with the Company’s out of formula
borrowings on its credit facility with Heritage Bank. In consideration of previous loans made by Michael Taglich to the Company and the
personal guaranty for Heritage Bank of Commerce, Mr. Taglich has been issued warrants to purchase common stock totaling 1,080 shares
at an exercise price of $1,000.00 per share.
In connection with the Company’s private placement completed in November 2016, the Company issued to the Investors warrants to
purchase an aggregate total of 4,271 shares of common stock. Included were warrants to purchase 172 shares of common stock issued to
Roger Kahn and warrants to purchase 308 shares of common stock issued to Michael Taglich. Each warrant to purchase common stock
expires five and one-half years from the date of issuance and is exercisable for $175.00 per share beginning six months from the date of
issuance, or May 9, 2017. The warrants expire May 9, 2022.
In connection with previous private offerings and debt issuances, Taglich Brothers, Inc. were granted placement agent warrants to purchase
4,246 shares of common stock at a weighted average price of $321.00 per share.
In September 2018, the Company sold and issued subordinate promissory notes (the “Promissory Term Notes”) to certain accredited
investors (each, a “Purchaser”), pursuant to which it issued to the Purchasers (i) Promissory Term Notes, in the aggregate principal amount
of approximately $941,000. The Promissory Term Notes have an original issue discount of fifteen percent (15%), bear interest at a rate of
twelve percent (12%) per annum, and have a maturity date of the earlier to occur of (a) six months from the date of execution of the
Purchase Agreement, or (b) the consummation of a debt or equity financing resulting in the gross proceeds to the Company of at least $3.0
million. Michael Taglich participated in the Note Purchase Agreement in September 2018. Michael Taglich purchased Promissory Term
Notes in the amount of approximately $122,000 pursuant to the Note Purchase Agreement. Taglich Brothers, Inc. served as placement
agent for the above transaction, for which services the Company paid to Taglich Brothers, Inc. $40,000 in cash compensation, or five
percent (5%) of the net proceeds received by the Company.
68
Item 14. Principal Accounting Fees and Services.
Audit Fees
The firm of Marcum LLP acts as our principal independent registered public accounting firm. They have served as our independent auditors
since April 26, 2010. A representative of Marcum LLP is expected to attend this year's Annual Meeting, and he will have an opportunity
to make a statement if he desires to do so. It is also expected that such representative will be available to respond to appropriate questions.
The table below shows the aggregate fees that the Company paid or accrued for the audit and other services provided by Marcum LLP for
the fiscal years ended September 30, 2020 and September 30, 2019. The Company did not engage its independent registered public
accounting firm during either of the fiscal years ended September 30, 2020 or September 30, 2019 for any other non-audit services.
Type of Service
Audit Fees
Audit-Related Fees
Tax Fees
Total
Amount of Fee for Fiscal Year Ended
September 30, 2020
$261,397
—
—
$261,397
September 30, 2019
$268,271
—
—
$268,271
Audit Fees. This category includes fees for the audits of the Company's annual financial statements, review of financial statements
included in the Company's Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection
with statutory and regulatory filings or engagements for the relevant fiscal years.
Audit-Related Fees. This category consists of audits performed in connection with certain acquisitions.
Tax Fees. This category consists of professional services rendered for tax compliance, tax planning and tax advice. The services for
the fees disclosed under this category include tax return preparation, research and technical tax advice.
There were no other fees paid or accrued to Marcum LLP in the fiscal years ended September 30, 2020 or September 30, 2019.
Audit Committee Pre-Approval Policies and Procedures.
Before an independent public accounting firm is engaged by the Company to render audit or non-audit services, the engagement is
approved by the Audit Committee. Our Audit Committee has the sole authority to approve the scope of the audit and any audit-related
services as well as all audit fees and terms. Our Audit Committee must pre-approve any audit and non-audit related services by our
independent registered public accounting firm. During our fiscal year ended September 30, 2020, no services were provided to us by our
independent registered public accounting firm other than in accordance with the pre-approval procedures described herein.
69
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Documents Filed as Part of this Form 10-K
1. Financial Statements (included in Item 8 of this report on Form 10-K):
– Reports of Independent Registered Public Accounting Firm
– Consolidated Balance Sheets as of September 30, 2020 and 2019
– Consolidated Statements of Operations for the years ending September 30, 2020 and 2019
– Consolidated Statements of Comprehensive Income/(Loss) for the years ending September 30, 2020 and 2019
– Consolidated Statements of Shareholders’ Equity for the years ending September 30, 2020 and 2019
– Consolidated Statements of Cash Flows for the years ending September 30, 2020 and 2019
– Notes to Consolidated Financial Statements
2. Financial Statement Schedules
– Not applicable
70
(b) Exhibits
Documents listed below, except for documents followed by a parenthetical, are being filed as exhibits. Documents followed by a
parenthetical are not being filed herewith and, pursuant to Rule 12b-32 of the General Rules and Regulations promulgated by the SEC
under the Securities Exchange Act of 1934 (the Act), reference is made to such documents as previously filed as exhibits with the SEC.
Incorporated by Reference
Form
8-K
Filing Date
October 19, 2018
Exhibit No.
1.1
10-Q
8-K
10-Q
8-K
8-K
DEF 14
A
May 15, 2013
November 4, 2014
February 17, 2015
October 19, 2018
December 14, 2018
July 14, 2014
3.1
3.1
3.2
3.1
3.1
C
Incorporated by Reference
Form
8-K
8-K
Filing Date
November 4, 2014
January 9, 2015
Exhibit No.
10.2
10.2
10-Q
February 17, 2015
10-Q
10-Q
May 15, 2015
May 15, 2015
8-K
July 24, 2015
10.2
10.6
10.9
10.2
March 22, 2016 Appendix B
DEF 14
A
8-K
8-K
May 17, 2016
June 15, 2016
8-K
8-K
8-K
8-K
8-K
November 4, 2016
November 4, 2016
November 4, 2016
November 4, 2016
October 13, 2017
8-K
8-K
October 13, 2017
October 13, 2017
10-Q
May 15, 2018
8-K
8-K
8-K
8-K
September 11,
2018
September 11,
2018
September 11,
2018
October 24, 2018
10.3
10.3
10.1
10.2
10.3
10.4
10.1
10.2
10.3
10.2
10.1
10.2
10.3
10.1
Incorporated by Reference
Form
Filing Date
Exhibit No.
Filed
Herewith
Filed
Herewith
Filed
Herewith
X
X
X
X
X
X
X
X
X
X
X
X
Exhibit
No.
1.1
3.1
3.2
3.3
3.4
3.5
10.1
Exhibit
No.
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
Exhibit
Underwriting Agreement by and between Bridgeline Digital, Inc. and ThinkEquity, dated
October 16, 2018
Amended and Restated Certificate of Incorporation, as amended
Certificate of Designations of the Series A Convertible Preferred Stock
Amended and Restated By-Laws
Certificate of Designations of the Series B Convertible Preferred Stock
Amended and Restated By-Laws
Amended and Restated Stock Incentive Plan, as amended
Exhibit
Form of Common Stock Purchase Warrant Issued to Placement Agent
Form of Common Stock Purchase Warrant Issued by Company to Michael Taglich dated
January 7, 2015
Form of Common Stock Purchase Warrant Issued by Company to Michael Taglich dated
February 17, 2015
Form of Restricted Stock Agreement
Form of Common Stock Purchase Warrant Issued by Company to Michael Taglich dated
May 12, 2015
Form of Common Stock Purchase Warrant Issued by Company to Michael Taglich dated
July 21, 2015
Bridgeline Digital Inc. 2016 Stock Incentive Plan
Form of Common Stock Purchase Warrant issued to Placement Agent
Placement Agreement between Bridgeline Digital, Inc and Taglich Brothers, Inc dated
March 31, 2016
Form of Securities Purchase Agreement dated November 3, 2016
Form of Purchaser Warrant
Form of Registration Rights Agreement dated November 3, 2016
Form of Insider Securities Purchase Agreement dated November 3, 2016
Loan and Security Agreement between Bridgeline Digital, Inc and Montage Capital II, L.P.
dated October 10, 2017
Form of Warrant to Purchase Stock issued to Montage Capital II, L.P
Intercreditor Agreement between Heritage Bank of Comerce and Montage Capital II, L.P
dated October 10, 2017
First Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and
Montage Capital II. LP, dated May 10, 2018
Form of Note Purchase Agreement
Form of Promissory Note
Form of Subordination Agreement
Second Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc
and Montge Capital II, L.P., dated October 22, 2018
Exhibit
No.
21.1
23.1
31.1
31.2
32.1
32.2
101.INS**
101.SCH**
101.CAL**
101.DEF**
101.LAB**
101.PRE**
Exhibit
Subsidiaries of the Registrant
Consent of Marcum LLP
CEO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CFO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CEO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
CFO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
XBRL Instance
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation
XBRL Taxonomy Extension Definition
XBRL Taxonomy Extension Labels
XBRL Taxonomy Extension Presentation
(c) Financial Statement Schedules
Not applicable
71
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
BRIDGELINE DIGITAL, INC.
a Delaware corporation
By:
/s/ Roger Kahn
Name: Roger Kahn
December 23, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Roger Kahn
/s/ Mark G. Downey
Mark G. Downey
/s/Kenneth Galaznik
Kenneth Galaznik
/s/ Joni Kahn
Joni Kahn
/s/ Scott Landers
Scott Landers
/s/ Michael Taglich
Michael Taglich
President and Chief Executive Officer, Director
(Principal Executive Officer)
December 23, 2020
December 23, 2020
December 23, 2020
December 23, 2020
December 23, 2020
December 23, 2020
Chief Financial Officer
(Principal Financial Officer)
Director
Director
Director
Director
72
Index of Exhibits
Exhibit No.
21.1
23.1
31.1
31.2
32.1
32.2
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
Description of Document
Subsidiaries of the Registrant
Consent of Marcum LLP
CEO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
CFO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
CEO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
CFO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
XBRL Instance
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation
XBRL Taxonomy Extension Definition
XBRL Taxonomy Extension Labels
XBRL Taxonomy Extension Presentation
*XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the
Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, as amended,
and otherwise is not subject to liability under these sections.
73
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