Bridgeline Digital, Inc 10-Q for FY2020 Q1

Bridgeline Digital, Inc. (BLIN)

10-Q 2020-02-13 For: 2019-12-31

Added on April 07, 2026

About this 10-Q

Bridgeline Digital, Inc filed this 10-Q on February 13, 2020, covering the quarter ended December 31, 2019 (FY2020 Q1).

Headline figures

Quarter ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.83M; up 19.2% from $2.38M a year earlier
Net income: $136K; compared with a net loss of $4.96M a year earlier
Diluted EPS: -$0.81; compared with -$22.87 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

Delaware		52-2263942
State or other jurisdiction of incorporation or organization		IRS Employer Identification No.

100 Summit Drive
Burlington, Massachusetts		01803
(Address of Principal Executive Offices)		(Zip Code)

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
		Emerging growth company ☐

Title of each class	Trading Symbols(s)	Name of each exchange on which registered
Common Stock, par value $0.001	BLIN	NASDAQ

		Page
Part I	Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets (unaudited) as of December 31, 2019 and September 30, 2019	4

	Condensed Consolidated Statements of Operations (unaudited) for the three months ended December 31, 2019 and 2018	5

	Condensed Consolidated Statements of Comprehensive Income/(Loss) (unaudited) for the three months ended December 31, 2019 and 2018	6

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended December 31, 2019 and 2018	7

	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended December 31, 2019 and 2018	8

	Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Qualitative and Quantitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	35

Part II	Other Information

Item 1.	Legal Proceedings	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 6.	Exhibits	37

Signatures		39

	December 31, 2019			September 30, 2019
ASSETS

Current assets:
Cash and cash equivalents	$	408		$	296
Accounts receivable, net		1,086			979
Prepaid expenses		379			351
Other current assets		46			49
Total current assets		1,919			1,675
Property and equipment, net		283			299
Operating lease assets		462			-
Intangible assets, net		3,269			3,509
Goodwill		5,557			5,557
Other assets		83			115
Total assets	$	11,573		$	11,155

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Current portion of operating lease liabilities	$	209		$	-
Accounts payable		1,910			1,740
Accrued liabilities		936			835
Deferred revenue		1,963			1,262
Total current liabilities		5,018			3,837

Operating lease liabilities, net of current portion		253			-
Warrant liabilities		2,413			3,514
Other long term liabilities		5			8
Total liabilities		7,689			7,359

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; 441 shares issued and outstanding at December 31, 2019 and September 30, 2019		-			-
Series A Convertible Preferred stock:
264,000 shares and 262,310 shares at December 31, 2019 and 264,000 shares and 262,310 shares at September 30, 2019, issued and outstanding (liquidation preference $2,782 at December 31, 2019)		-			-
Common stock - $0.001 par value; 50,000,000 shares authorized;
2,798,475 shares at December 31, 2019 and 2,798,475 shares at September 30, 2019, issued and outstanding		3			3
Additional paid-in capital		77,964			75,620
Accumulated deficit		(73,746	)		(71,489	)
Accumulated other comprehensive loss		(337	)		(338	)
Total stockholders’ equity		3,884			3,796
Total liabilities and stockholders’ equity	$	11,573		$	11,155

	Three Months Ended December 31,
	2019			2018
Net revenue:
Digital engagement services	$	1,096		$	1,073
Subscription and perpetual licenses		1,736			1,302
Total net revenue		2,832			2,375
Cost of revenue:
Digital engagement services		583			855
Subscription and perpetual licenses		728			486
Total cost of revenue		1,311			1,341
Gross profit		1,521			1,034
Operating expenses:
Sales and marketing		1,076			814
General and administrative		754			778
Research and development		390			418
Depreciation and amortization		258			26
Goodwill impairment		-			3,732
Restructuring and acquisition related expenses		5			-
Total operating expenses		2,483			5,768
Loss from operations		(962	)		(4,734	)
Interest expense, net		-			(79	)
Amortization of debt discount		-			(150	)
Change in fair value of warrant liabilities		1,101			12
Income (loss) before income taxes		139			(4,951	)
Provision for income taxes		3			4
Net income (loss)		136			(4,955	)
Dividends on convertible preferred stock		(79	)		(79	)
Deemed dividend on amendment of Series A convertible preferred stock		(2,314	)		-
Net loss applicable to common shareholders	$	(2,257	)	$	(5,034	)
Net loss per share attributable to common shareholders:
Basic net loss per share	$	(0.81	)	$	(22.87	)
Diluted net loss per share	$	(0.81	)	$	(22.87	)
Number of weighted average shares outstanding:
Basic		2,798,475			220,156
Diluted		2,798,475			220,156

	For the Three Months Ended December 31, 2019
														Accumulated
	Preferred Stock				Common Stock				Additional					Other			Total
									Paid-in		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity
Balance at October 1, 2019		262,751	$	-		2,798,475	$	3	$	75,620	$	(71,489	)	$	(338	)	$	3,796
Stock-based compensation expense										30								30
Dividends on Series A convertible preferred stock												(79	)					(79	)
Deemed dividend on amendment of Series A convertible preferred stock (Note 8)										2,314		(2,314	)					-
Net income												136						136
Foreign currency translation															1			1
Balance at December 31, 2019		262,751	$	-		2,798,475	$	3	$	77,964	$	(73,746	)	$	(337	)	$	3,884

	Three Months Ended December 31,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	136		$	(4,955	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss on disposal of property and equipment		-			9
Amortization of intangible assets		237			4
Depreciation		16			20
Other amortization		5			15
Goodwill impairment		-			3,732
Amortization of debt discount		-			150
Change in fair value of warrant liabilities		(1,101	)		(12	)
Stock-based compensation		30			97
Changes in operating assets and liabilities
Accounts receivable		(273	)		(546	)
Prepaid expenses		(19	)		28
Other current assets and other assets		28			(10	)
Accounts payable and accrued liabilities		183			(499	)
Deferred revenue		872			344
Other liabilities		(4	)		68
Total adjustments		(26	)		3,400
Net cash provided by (used in) operating activities		110			(1,555	)
Cash flows from investing activities:
Software development capitalization costs		-			(11	)
Purchase of property and equipment		-			(7	)
Net cash used in investing activities		-			(18	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs		-			4,376
Payments on bank line of credit		-			(201	)
Payments on term notes from Montage Capital		-			(125	)
Payments on promissory term notes		-			(941	)
Cash dividends paid on Series A convertible preferred stock		-			(79	)
Net cash provided by financing activities		-			3,030
Effect of exchange rate changes on cash and cash equivalents		2			-
Net increase in cash and cash equivalents		112			1,457
Cash and cash equivalents at beginning of period		296			644
Cash and cash equivalents at end of period	$	408		$	2,101
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	-		$	185
Income taxes	$	3		$	4
Non cash investing and financing activities:
Dividends accrued on convertible preferred stock	$	79		$	-

	As of December 31, 2019			As of September 30, 2019
Accounts receivable	$	1,190		$	1,067
Allowance for doubtful accounts		(104	)		(88	)
Accounts receivable, net	$	1,086		$	979

	As of December 31, 2019						As of September 30, 2019
	Montage Capital			Series C Preferred			Montage Capital			Series C Preferred
Volatility		78	%		81.1	%		71	%		80.9	%
Risk-free rate		1.74	%		1.70	%		1.59	%		1.59	%
Stock price	$	1.54		$	1.54		$	1.91		$	1.91

	As of December 31, 2019
	Level 1		Level 2		Level 3		Total

Liabilities:
Warrant liability - Montage	$	-	$	-	$	13	$	13
Warrant liability - Series A, B and C		-		-		2,400		2,400
Total Liabilities	$	-	$	-	$	2,413	$	2,413

	As of September 30, 2019
	Level 1		Level 2		Level 3		Total

Liabilities:
Warrant liability - Montage	$	-	$	-	$	14	$	14
Warrant liability - Series A, B and C		-		-		3,500		3,500
Total Liabilities	$	-	$	-	$	3,514	$	3,514

	Three Months Ended December 31, 2019
Balance at beginning of period, October 1, 2019	$	3,514
Additions		-
Exercises		-
Adjustment to fair value		(1,101	)
Balance at end of period, December 31, 2019	$	2,413

	As of December 31, 2019		As of September 30, 2019
Domain and trade names	$	28	$	52
Customer related		1,897		2,032
Technology		1,344		1,425
Balance at end of period	$	3,269	$	3,509

	Issue
Type	Date	Shares		Price		Expiration
Director/Shareholder	2/12/2015		240	$	1,000.00	2/12/2020
Director/Shareholder	5/12/2015		240	$	1,000.00	5/12/2020
Director/Shareholder	12/31/2015		120	$	1,000.00	12/31/2020
Placement Agent	5/17/2016		1,736	$	187.50	5/17/2021
Placement Agent	5/11/2016		1,067	$	187.50	5/11/2021
Placement Agent	7/15/2016		880	$	230.00	7/15/2021
Investors	11/9/2016		4,271	$	175.00	5/9/2022
Director/Shareholder	12/31/2016		120	$	1,000.00	12/31/2021
Financing (Montage)	10/10/2017		1,327	$	132.50	10/10/2025
Director/Shareholder	12/31/2017		120	$	1,000.00	12/31/2021
Investors	10/19/2018		3,120	$	25.00	10/19/2023
Placement Agent	10/16/2018		10,000	$	31.25	10/16/2023
Investors	3/12/2019		159,236	$	4.00	10/19/2023
Investors	3/12/2019		2,556,875	$	4.00	9/12/2024
Investors	3/12/2019		2,556,875	$	4.00	9/12/2021
Investors	3/12/2019		69,295	$	0.05	9/12/2024
Placement Agent	3/12/2019		127,848	$	4.00	9/12/2024
Total			5,493,370

Weighted-average fair value per share option	$	0.96
Expected life (in years)		6.0
Volatility		76.29	%
Risk-free interest rate		1.61	%
Dividend yield		0.0	%

	Stock Options				Stock Warrants
			Weighted					Weighted
			Average					Average
			Exercise					Exercise
	Options		Price		Warrants			Price

Outstanding, October 1, 2019		7,848	$	306.41		5,493,857		$	4.54
Granted		682,353		1.40		-			-
Exercised		-		-		-			-
Forfeited/Exchanged		-		-		-			-
Expired		-		-		(487	)		904.90
Outstanding, December 31, 2019		690,201	$	4.63		5,493,370		$	4.46
Options vested and exercisable, December 31, 2019		5,576	$	307.46

	Three Months Ended December 31,
Revenues:	2019		2018
Digital Engagement Services	$	1,096	$	1,073
Subscription		350		764
Perpetual Licenses		1,044		154
Maintenance		85		127
Hosting		257		257
	$	2,832	$	2,375

	Deferred Revenue
	Current		Long Term
Balance as of October 1, 2019	$	1,262	$	8
Increase(decrease)		701		(3	)
Balance as of December 31, 2019	$	1,963	$	5

	Three Months Ended December 31, 2019
Condensed Consolidated Statement of Operations:
Operating lease cost	$	83
Variable lease cost		5
Less: Sublease income, net		(27	)
Total	$	61

	Operating Leases			Receipts Subleases		Net Leases
Fiscal year:
2020 (a)	$	194		$	46	$	148
2021		114			-		114
2022		88			-		88
2023		88			-		88
2024		30			-		30
Total lease commitments	$	514		$	46	$	468
Less: Amount representing interest		(52	)
Present value of lease liabilities	$	462
Less: current portion		(209	)
Operating lease liabilities, net of current portion	$	253

2020	$	40
2021		79
2022		82
2023		85
2024		88
Thereafter		60
Total lease commitments	$	434

(in thousands)	Three Months Ended December 31,
							$			%
	2019			2018			Change			Change
Revenue
Digital engagement services	$	1,096		$	1,073		$	23			2	%
% of total net revenue		39	%		45	%
Subscription and perpetual licenses		1,736			1,302			434			33	%
% of total net revenue		61	%		55	%
Total net revenue		2,832			2,375			457			19	%

Cost of revenue
Digital engagement services		583			855			(272	)		(32	%)
% of digital engagement services revenue		53	%		80	%
Subscription and perpetual licenses		728			486			242			50	%
% of subscription and perpetual revenue		42	%		37	%
Total cost of revenue		1,311			1,341			(30	)		(2	%)
Gross profit		1,521			1,034			487			47	%
Gross profit margin		54	%		44	%

Operating expenses
Sales and marketing		1,076			814			262			32	%
% of total revenue		38	%		34	%
General and administrative		754			778			(24	)		(3	%)
% of total revenue		27	%		33	%
Research and development		390			418			(28	)		(7	%)
% of total revenue		14	%		18	%
Depreciation and amortization		258			26			232			892	%
% of total revenue		9	%		1	%
Goodwill impairment		-			3,732			(3,732	)		(100	%)
% of total revenue		0	%		157	%
Restructuring and acquisition related expenses		5			-			5			100	%
% of total revenue		0	%		0	%
Total operating expenses		2,483			5,768			(3,285	)		(57	%)


Loss from operations		(962	)		(4,734	)		3,772			(80	%)
Interest expense, net		-			(79	)		79			(100	%)
Amortization of debt discount		-			(150	)		150			(100	%)
Other income, net		1,101			12			1,089			9,075	%
Income (loss) before income taxes		139			(4,951	)		5,090			(103	%)
Provision for income taxes		3			4			(1	)		(25	%)

Net income/(loss)	$	136		$	(4,955	)	$	5,091			(103	%)

Non-GAAP Measure:
Adjusted EBITDA	$	(669	)	$	(1,016	)	$	347			(34	%)

	●	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; and

	●	Accounting for stock-based compensation.

		•		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.

1.1		Underwriting Agreement (incorporated by reference to Exhibit 1.1 to our Form 8-K filed on October 19, 2018)

3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q filed on May 15, 2013)

3.2		Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated May 4, 2015 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on May 5, 2015)

3.3		Certificate of Designations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on November 4, 2014)

3.4		Amended and Restated By-laws (incorporated by reference to Exhibit 3.1 to our current Report on Form 10-Q filed on February 17, 2015)

3.5		Certificate of Designations of the Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on October 19, 2018)

3.6		Amended and Restated By-laws (incorporated by reference to Exhibit 3.1 to our current Report on Form 8-K filed on December 14, 2018)

3.7		Certificate of Designations of the Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on March 13, 2019)

3.8		Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated April 26, 2019 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on April 26, 2019)

3.9		Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated May 1, 2019 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on May 1, 2019)

4.1		Registration Rights Agreement, dated November 3, 2016, by and between Bridgeline Digital, Inc. and the Investors party thereto (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K Filed on November 4, 2016)

4.2		Form of Warrant (incorporated by reference to Exhibit 4.1 to our Form 8-K filed on October 19, 2018)

4.3		Form of Warrants (incorporated by reference to Exhibits 4.1, 4.2 ,4.3, 4.4 and 4.5 to our Form 8-K filed on March 13, 2019)

4.4		Registration Rights Agreement, dated March 12, 2019, by and between Bridgeline Digital, Inc. and the Investors party thereto (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K Filed on March 13, 2019)

10.1*		Employment Agreement with Mark G. Downey dated July 1, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K Filed on July 3, 2019)

31.1		Certification required by Rule 13a-14(a) or Rule 15d-14(a).

31.2		Certification required by Rule 13a-14(a) or Rule 15d-14(a).

32.1		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).

32.2		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).

101.INS*		XBRL Instance

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation

101.DEF*		XBRL Taxonomy Extension Definition

101.LAB*		XBRL Taxonomy Extension Labels

101.PRE*		XBRL Taxonomy Extension Presentation

		Bridgeline Digital, Inc.
		(Registrant)

February 13, 2020		/s/ Roger Kahn
Date		Roger Kahn President and Chief Executive Officer (Principal Executive Officer)

February 13, 2020		/s/ Mark Downey
Date		Mark Downey Chief Financial Officer (Principal Financial and Accounting Officer)

1.	I have reviewed this Quarterly Report on Form 10-Q of Bridgeline Digital, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: February 13, 2020	/s/ Roger Kahn
Name:	Roger Kahn
Title:	President and Chief Executive Officer
	(Principal Executive Officer)