Forward Looking Statement

Statements contained in this Annual Report on Form 10-K that are not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as “should,” “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intends,” “continue,” or similar terms or variations of those terms or the negative of those terms. 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. Forward-looking statements are merely our current predictions of future events. Investors are cautioned that any such forward-looking statements are inherently uncertain, are not guaranties of future performance and involve risks and uncertainties. Actual results may differ materially from our predictions. Important factors that could cause actual results to differ from our predictions include 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 volatility of the market price of our common stock, the ability to maintain our listing on the NASDAQ Capital Market, 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, dependence on third parties, 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, and our ability to respond to government regulations. Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized, nor is there any assurance that we have identified all possible issues which we might face. We assume no obligation to update our forward-looking statements to reflect new information or developments. 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.

 

PART I

 

Item 1. Business.

 

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 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, 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.

 

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 Burlington, Massachusetts.  The Company maintains regional field offices serving the following geographical locations: Boston, MA; Chicago, IL; 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) platform 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 SEO best practices, drive eCommerce initiatives, and measure results with actionable analytics.

 

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 need.
●	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 enabling 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.

 

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 deliver 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 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 the 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 Search Engine Optimization (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.

 

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.

 

 

Managed Service Hosting

 

Revenue from Managed Service Hosting

 

Revenue from managed service hosting is reported as managed service hosting in the accompanying consolidated financial statements.

 

A large number of our customers engage Bridgeline to host and manage the mission critical web sites and web stores we develop. Through our partnership with Amazon Web Services, we provide 24/7 application monitoring, emergency response, version control of application control, load balancing, managed firewall security and virus protection services, and secure UDS environments. We provide shared hosting, dedicated hosting, and SaaS hosting for our customers.

 

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 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 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.

 

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, 2018.

 

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 $2.2 million or 22% of revenues and $1.6 million or 12% of revenues during fiscal 2019 and 2018, respectively.

 

Employees

 

We had 72 employees worldwide as of September 30, 2019. 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
	●	Associations and Foundations

 

 

For the year ended September 30, 2019, two customers each generated approximately 11 - 15% of our revenue. For the year ended September 30, 2018, three customers each generated approximately 10% - 14% 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.

 

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 as 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

 

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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.

 

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 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.

 

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. 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.

 

Our operating lease commitments may adversely affect our financial condition and cash flows from operations.

 

We have contractual commitments in operating lease arrangements, which are not reflected on our consolidated balance sheets. 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.

 

 

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 incurred net losses in each fiscal year since our inception in 2000, including net losses of $9.5 million (inclusive of goodwill impairment charge of $3.7 million) and $7.2 million for the fiscal years ended September 30, 2019 and 2018, respectively. As of September 30, 2019, we had an accumulated deficit of approximately $71.5 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 (deficit) 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.

 

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:

 

	●	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.

 

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.

 

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 year 2019, two of our customers in aggregate accounted for approximately 26% 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.

 

 

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.

 

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 2019 was approximately 264,000 shares per day compared to approximately 406,000 shares for fiscal 2018, 26,000 for fiscal 2017 and 38,000 for fiscal 2016. 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 2019, the closing price of our common stock as reported by NASDAQ fluctuated between $1.76 and $59. 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.

 

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:

 

	●	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 product 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.

 

 

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:

 

	●	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.

 

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 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.

 

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.

 

 

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 not 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 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.

 

 

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.

 

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.

 

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.

 

 

Item 1B. Unresolved Staff Comments

 

Not required. 

 

  

Item 2.   Properties.

 

The following table lists our offices, all of which are leased: 

 

Geographic Location		Address		Size
Boston, Massachusetts		100 Summit Drive		6,360 square feet,
		Burlington, Massachusetts 01803		professional office space
Chicago, Illinois		318 W Adams Street		875 square feet,
		Chicago, IL  60606		professional office space
Woodbury, New York		150 Woodbury Road		1,605 square feet,
		Woodbury, NY  11797		professional office space
Kingston, Ontario		61 Hyperion Court		9,654 square feet,
		Kingston, ON, K7K 7K7		professional office space
Sydney, Australia		L20 201 Sussex St.		PO Box
		Sydney,  NSW 2000
Karnataka, India		No. 14 15th Cross		PO Box
		NR Vidyappeta Circle
		Ashok Nagar, BLR South
		Karnataka 560050

 

 

Item 3.  Legal Proceedings.

 

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 table sets 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, 2019		High				Low
Fourth Quarter		$	3.11			$	1.76
Third Quarter		$	16.00			$	2.25
Second Quarter		$	15.50			$	7.70
First Quarter		$	59.00			$	11.00

 

 

Year Ended September 30, 2018		High				Low
Fourth Quarter		$	3.75			$	0.79
Third Quarter		$	3.50			$	1.03
Second Quarter		$	2.89			$	1.81
First Quarter		$	4.45			$	2.11

 

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. During fiscal 2018, we did issue stock dividends to holders of our Series A preferred stock. As of December 10, 2019, 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.

 

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, 2019 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 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 volatility of the market price of our common stock, the ability to maintain our listing on the NASDAQ Capital Market, 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, dependence on third parties, 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, and 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, 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.

 

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 Burlington, Massachusetts. The Company maintains regional field offices serving the following geographical locations: Boston, MA; Chicago, IL; 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 Pty, Ltd. located in Australia.

 

 

Increase in Authorized Shares and Reverse Stock Split

 

On April 26, 2019, the Company’s Shareholders and the Board of Directors approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the total number of shares of Common Stock, par value $0.001 per share (“Common Stock”), authorized for issuance thereunder from 50 million shares to 2.5 billion shares (the “Increase in Authorized”). On the same date the Company’s Shareholders and the Board of Directors also approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split of both its issued and outstanding and authorized shares of Common Stock, par value $0.001 per share, at a ratio of one (1) share of Common Stock for every fifty (50) shares of Common Stock at any time prior to December 31, 2019 (the “Reverse Split”) pursuant to which all classes of the Company’s issued and outstanding shares of Common Stock at the close of business on such date were combined and reconstituted into a smaller number of shares of Common Stock in a ratio of one (1) share of Common Stock for every fifty (50) shares of Common Stock (“1-for-50 reverse stock split”). The 1-for-50 reverse stock split was effective as of close of business on May 1, 2019 (the “Effective Date”) and the Company’s stock began trading on a split-adjusted basis on May 2, 2019.

 

The reverse stock split reduced the number of shares of the Company’s Common Stock authorized from 2.5 billion shares to 50 million shares. Proportional adjustments have been made to the conversion and exercise prices of the Company’s outstanding convertible preferred stock, warrants, restricted stock awards, and stock options, and to the number of shares issued and issuable under the Company’s Stock Incentive Plans. The Company did not issue any fractional shares in connection with the reverse stock split. Instead, any stockholder who would otherwise be entitled to receive a fractional share of Common Stock as a result of the reverse stock split is entitled to receive a cash payment in lieu thereof based on the average of the closing sales prices of a share of the Company’s Common Stock on the Nasdaq Capital Market during regular trading hours for the five consecutive trading days immediately preceding the Effective Date. The reverse stock split does not modify the rights or preferences of the Common Stock. The number of authorized shares of the Company’s Common Stock is 50 million shares and the par value remain $0.001.

 

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, 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 210 active customers. For the year ended September 30, 2019, two customers each represented approximately 11% - 15% of the Company’s total revenue. For the year ended September 30, 2018, three customers each represented approximately 10% - 14% of the Company’s total revenue.

 

 

Summary of Results of Operations

 

Total revenue for the fiscal year ended September 30, 2019 (“fiscal 2019”) decreased to $10.0 million from $13.6 million for the fiscal year ended September 30, 2018 (“fiscal 2018”). Loss from operations for fiscal 2019 was ($11.1) million, which included a goodwill impairment charge of $3.7 million, compared with loss from operations of ($7.0) million, which included a goodwill impairment charge of $4.9 million, for fiscal 2018. We had a net loss for fiscal 2019 of ($9.5) million, including a goodwill impairment charge of $3.7 million, compared with a net loss of ($7.2) million, including a goodwill impairment charge of $4.9 million, for fiscal 2018. Basic net loss per share calculation attributable to common shareholders for fiscal 2019 was ($8.16) compared with the equivalent basic net loss per share attributable to common shareholders of ($89.05) for fiscal 2018.

 

(in thousands)		Years Ended September 30,
										$				%
Revenue		2019				2018				Change				Change
Digital engagement services		$	4,117			$	6,914				(2,797	)			(40	%)
% of total net revenue			41	%			51	%
Subscription and perpetual licenses			4,837				5,609				(772	)			(14	%)
% of total net revenue			49	%			41	%
Managed service hosting			998				1,045				(47	)			(4	%)
% of total net revenue			10	%			8	%
Total net revenue		$	9,952			$	13,568			$	(3,616	)			(27	%)
Cost of revenue
Digital engagement services			2,591				4,473				(1,882	)			(42	%)
% of digital engagement services revenue			63	%			65	%
Subscription and perpetual licenses			2,486				2,011				475				24	%
% of subscription and perpetual revenue			51	%			36	%
Managed service hosting			283				264				19				7	%
% of managed service hosting revenue			28	%			25	%
Total cost of revenue			5,360				6,748				(1,388	)			(21	%)
Gross profit			4,592				6,820				(2,228	)			(33	%)
Gross profit margin			46	%			50	%
Operating expenses
Sales and marketing			4,824				3,951				873				22	%
% of total revenue			48	%			29	%
General and administrative			3,022				2,852				170				6	%
% of total revenue			30	%			21	%
Research and development			2,185				1,604				581				36	%
% of total revenue			22	%			12	%
Depreciation and amortization			620				356				264				74	%
% of total revenue			6	%			3	%
Goodwill impairment			3,732				4,859				(1,127	)			(23	%)
% of total revenue			38	%			36	%
Restructuring and acquisition related expenses			1,277				187				1,090				583	%
% of total revenue			13	%			1	%
Total operating expenses			15,660				13,809				1,851				13	%
Loss from operations			(11,068	)			(6,989	)			(4,079	)			58	%
Interest expense, net			(304	)			(265	)			(39	)			15	%
Amortization of debt discount			(231	)			(129	)			(102	)			79	%
Other income, net			2,133				161				1,972				1,225	%
Loss before income taxes			(9,470	)			(7,222	)			(2,248	)			31	%
Provision for (benefit from) income taxes			4				(3	)			7				(233	%)
Net income/(loss)		$	(9,474	)		$	(7,219	)		$	(2,255	)			31	%
Non-GAAP Measure:
Adjusted EBITDA		$	(5,160	)		$	(1,059	)		$	(4,101	)			387	%

 

 

Revenue

 

Total revenue for the fiscal year ended September 30, 2019 decreased $3.6 million, or 27%, to $10.0 million from $13.6 million in fiscal 2018. Our revenue is derived from three sources: (i) digital engagement services; (ii) subscription and perpetual licenses; and (iii) managed service hosting.

 

Digital Engagement Services

 

Digital engagement services revenue is comprised of Bridgeline Unbound implementation and retainer related services. Total revenue from digital engagement services decreased $2.8 million, or 40%, to $4.1 million in fiscal 2019 from $6.9 million in fiscal 2018. Digital engagement services revenue as a percentage of total revenue decreased to 41% in fiscal 2019 from 51% in fiscal 2018. The decreases compared to the prior period is primarily due to a decrease in new service engagements. Digital engagement services revenues from acquisitions was $747 thousand for fiscal 2019.

 

Subscription and Perpetual Licenses

 

Revenue from subscription (SaaS) and perpetual licenses decreased $0.8 million, or 14%, to $4.8 million in fiscal 2019 from $5.6 million in fiscal 2018. The decrease compared to the prior period is primarily due to a decline in SaaS license revenue due to the loss of a large customer that we previously disclosed. Subscription and perpetual license revenue as a percentage of total revenue increased to 49% in fiscal 2019 from 41% in fiscal 2018. The increase as a percentage of total revenue is attributable to the overall decreases in digital engagement services revenue. Subscription and perpetual license revenue from acquisitions was $657 thousand for fiscal 2019.

 

Managed Service Hosting

 

Revenue from managed service hosting remained constant at $1.0 million for both fiscal 2019 and fiscal 2018. We were able to maintain renewals for hosting service contracts sold in previous periods.

 

Managed services revenue as a percentage of total revenue increased to 10% in fiscal 2019 from 8% in fiscal 2018. The increases as a percentage of revenue is attributable to the overall decreases in other revenue streams, primarily digital engagement services.

 

 

Cost of Revenue

 

Total cost of revenue for fiscal 2019 decreased $1.4 million, or 21%, to $5.4 million from $6.7 million in fiscal 2018. The gross profit margin decreased to 46% for the fiscal 2019 compared to 50% for fiscal 2018. The decline in the gross profit margin for fiscal 2019 compared to fiscal 2018 is attributable to the decrease in digital engagement services revenue.

 

Cost of Digital Engagement Services

 

Cost of digital engagement services decreased $1.9 million, or 42%, to $2.6 million in fiscal 2019 from $4.5 million in fiscal 2018. The cost of total digital engagement services as a percentage of total digital engagement services revenue decreased to 63% in fiscal 2019 from 65% in fiscal 2018. The decrease in cost of digital engagement services in fiscal 2019 compared to fiscal 2018 is primarily due to a decrease in headcount.

 

Cost of Subscription and Perpetual License

 

Cost of subscription and perpetual licenses increased $475 thousand, or 24%, to $2.5 million in fiscal 2019 compared to $2.0 million in fiscal 2018. Costs to support SaaS licenses are primarily fixed costs.

 

The cost of subscription and perpetual licenses as a percentage of subscription and perpetual license revenue increased to 51% in fiscal 2019 from 36% in fiscal 2018. The increase is due to fixed costs to operate our cloud-based hosting model with Amazon Web Services without a commensurate increase in license revenue.

 

Cost of Managed Service Hosting

 

Cost of managed service hosting increased $19 thousand, or 7%, in fiscal 2019 to $283 thousand compared to $264 thousand in fiscal 2018. The cost of managed services as a percentage of managed services revenue increased to 28% in fiscal 2019 from 25% in fiscal 2018. These increases are attributable to fixed costs to operate our cloud-based hosting model with Amazon Web Services and variable internal support costs.

 

Gross Profit

 

Gross profit decreased $2.2 million, or 33%, in fiscal 2019 to $4.6 million compared to $6.8 million in fiscal 2018. The decrease in fiscal 2019 is primarily attributable to the decrease in revenues, as, overall costs decreased by 21%.

 

Operating Expenses

 

Sales and Marketing Expenses

 

Sales and marketing expenses increased $873 thousand, or 22%, to $4.7 million in fiscal 2019 from $4.0 million in fiscal 2018. The decrease is primarily attributable to decreases in headcount and facility costs and travel related expenditures, partially offset by increases in marketing expenses. Sales and marketing expense as a percentage of total revenue increased to 48% in fiscal 2019 compared to 29% in fiscal 2018. The increases compared to the prior period are primarily attributable to the overall decrease in revenue and an increase in headcount from acquisitions.

 

 

General and Administrative Expenses

 

General and administrative expenses increased $170 thousand, or 6%, to $3.0 million in fiscal 2019 from $2.9 million in fiscal 2018. The decrease is attributable to decreases in headcount and overall administration expenses. General and administrative expense as a percentage of revenue increased to 30% in fiscal 2019 compared to 21% in fiscal 2018. The increases compared to the prior period are primarily attributable to an increase in headcount from recent acquisitions.

 

Research and Development

 

Research and development expense increased $581 thousand, or 36%, to $2.2 million in fiscal 2019 from $1.6 million in fiscal 2018. The increases compared to the prior period are primarily attributable to an increase in headcount from acquisitions. Research and development expense as a percentage of total revenue increased to 22% in fiscal 2019 compared to 12% for fiscal 2018. The increase as a percentage of total revenues in fiscal 2019 is a function of the decrease in total revenues in fiscal 2019.

 

Depreciation and Amortization

 

Depreciation and amortization expense increased by $264 thousand, or 74%, to $620 thousand in fiscal 2019 from $356 thousand in fiscal 2018. Depreciation and amortization as a percentage of total revenue increased to 6% in fiscal 2019 from 3% in fiscal 2018. The increase is primarily due to amortization of intangible assets resulting from acquisitions.

 

Goodwill Impairment

 

The carrying value of goodwill is not amortized, but it typically 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 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 2019 and 2018, the Company performed impairment tests and recognized an aggregated impairment charge, for all test dates during the respective periods, of $3.7 million and $4.9 million, respectively.

 

Restructuring and Acquisition Related Expenses

 

Commencing in fiscal 2015 and through fiscal 2018, 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 work-force 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 the second quarter of fiscal 2017, the Company initiated a plan to shut down its operations in India, which is expected to be completed in early fiscal 2020. 

 

In total, restructuring expenses were $625 thousand and $187 thousand in fiscal 2019 and fiscal 2018, respectively. These charges consist of the total lease expenses less sub-lease rental income, other miscellaneous lease termination costs, 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.

 

 

Loss from Operations

 

The loss from operations was ($11.1) million for fiscal 2019 compared to a loss from operations of ($7.0) million for fiscal 2018, a decrease of ($4.0) million or 58% for fiscal 2019. The loss from operations included a goodwill impairment charge of $3.7 million and $4.9 million in fiscal 2019 and 2018, respectively.

 

Other income (expense), net

 

During the year ended September 30, 2019, we recognized an expense of $11.3 million related to the allocation of proceeds from the sale of Preferred Series C stock and Series C Preferred warrants. The expense was entirely offset by the aggregate other income recognized related to the change in fair value of the associated warrant liabilities of $13.4 million during fiscal 2019. During fiscal 2018, there were no similar expense charges recognized upon issuance of warrants and the aggregate other income recognized related to the change in fair value of warrant liabilities was $160 thousand.

 

Provision for Income Taxes

 

We recorded an income tax expense of $4 thousand for fiscal 2019 compared to an income tax benefit of ($3) thousand for fiscal 2018. The Company has net operating loss 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, excluding the portion attributable to the alternative minimum tax of $22 thousand at September 30, 2019 and 2018.

 

The Federal net operating loss (NOL) carryforward of approximately $34 million as of September 30, 2019 expires on various dates through 2039. 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 $30 million in state NOLs which expire on various dates through 2038.

 

Adjusted EBITDA

 

We also measure our performance based on a non-U.S. 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-U.S. 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 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 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 for a complete analysis of our profitability, as net income 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.

 

 

The following table reconciles net loss (which is the most directly comparable U.S. GAAP operating performance measure) to Adjusted EBITDA:

 

		Years Ended September 30,
		2019				2018
Net loss		$	(9,474	)		$	(7,219	)
Provision for income tax			4				(3	)
Interest expense, net			304				244
Change in fair value of warrants/warrant expense			(2,132	)			(161	)
Amortization of debt discount			231				129
Amortization of intangible assets			544				242
Depreciation			66				105
Goodwill impairment			3,732				4,859
Restructuring and acquisition related charges			1,277				187
Other amortization			39				66
Stock based compensation			249				492
Adjusted EBITDA		$	(5,160	)		$	(1,059	)

 

Adjusted EBITDA was ($5.2) million for fiscal 2019 compared with ($1.1) million for fiscal 2018. This was primarily due to the decline in revenues.

 

Liquidity and Capital Resources

 

Cash Flows

 

Operating Activities

 

Cash used in operating activities was $4.2 million for fiscal 2019 compared to cash used in operating activities of $1.1 million for fiscal 2018.  This increase in use of cash was driven by decreases with our accounts receivables collections, fair market value of our warrant liabilities, goodwill impairment charge and increases with our accounts payable and accrued liabilities.

 

Investing Activities

 

Cash used in investing activities was $5.7 million for fiscal 2019 compared with $50 thousand for fiscal 2018. We primarily used cash to acquire the assets of Stantive and Seevolution.

 

Financing Activities

 

Cash provided by financing activities was $9.5 million for fiscal 2019 compared with $1.1 million for fiscal 2018. In fiscal 2019, cash provided by financing activities was attributable to the public offering in October 2018 and private offering in March 2019. In October 2018, we sold an aggregate of 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 the Company’s common stock at an exercise price of $25.00 and (ii) Preferred stock of 4,288 Class B Units, with each Class B Unit, convertible into 40 shares of the Company’s common stock at a conversion price of $25.00. The net proceeds to the Company after deducting the underwriter’s fees and expenses was approximately $5.0 million. The proceeds of the October public offering were used to paydown the Promissory Term Notes of $941 thousand. In a private offering in March 2019, the Company sold Preferred stock of 10,227.50 Class C Units, with each Class C Unit convertible into 1,136,390 shares of the Company’s common stock at a conversion price of $9.00, for net proceeds of $9.1 million. The proceeds of the March 2019 private offering were used to pay down the Heritage Bank of Commerce line of credit by $2.2 million leaving a zero balance at March 31, 2019, as well as, the loan due to Montage Capital in the amount of $922 thousand. The proceeds also funded the asset purchase of Stantive Technologies Group Inc. for $5.2 million.

 

 

In fiscal 2018, we raised funds from a term note with Montage Capital II, L.P. and the promissory term notes, issued in September 2018. We made net payments on our bank line of credit of $419 thousand.

 

Capital Resources, Liquidity Outlook and Going Concern

 

In the second quarter of fiscal 2019, the Company concluded a private offering that raised net cash proceeds of $9.2 million. Proceeds were used to pay-off in full the outstanding amounts on our Heritage Bank of Commerce line of credit and Montage Capital II, L.P. loan. At September 30, 2019, the Company had no debt. Further, in the second quarter of fiscal 2019, the Company used cash to purchase the assets of Seevolution, Inc. and Stantive Technologies Group Inc., which assets included technology and customers. While the Company believes the future revenues and cash flows from these newly acquired customers will supplement its working capital and the Company believes 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. No definitive agreements for additional financing are in place as of the date of this annual report and there can be no assurances that 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 of this annual report.

 

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. We currently have no future commitments that extend past fiscal 2021.

 

The following summarizes our future contractual obligations:

 

(in thousands)		As of September 30, 2019
Payment obligations by year		FY20				FY21				Total
Operating Leases (a)		$	79			$	12			$	91

 

(a) Net of sublease income

 

 

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 accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

The preparation of 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 period. We regularly make estimates and assumptions that affect the reported amounts of assets and liabilities. The most significant estimates included in our 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; and
	●	Accounting for stock-based compensation.

 

Revenue Recognition

 

Overview

 

The Company derives its revenue from three sources: (i) Software Licenses, which are comprised of subscription fees (“SaaS”), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering and (iii) hosting perpetual licenses. 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 types of software license and professional services sold.

 

Recognize revenue as the performance obligations are satisfied

 

Revenues are 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. Invoicing 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.

 

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 Codification 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.

 

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, 2019, 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 13 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.   

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not required. 

 

 

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., and subsidiaries (the “Company”) as of September 30, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended September 30, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2019, 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 may need 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.

 

 

/s/ Marcum LLP

 

Marcum LLP

 

We have served as the Company’s auditor since 2006.

 

Boston, MA
December 27, 2019

 

 

BRIDGELINE DIGITAL, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

 

BRIDGELINE DIGITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

 

 

  The accompanying notes are an integral part of these consolidated financial statements.

 

 

BRIDGELINE DIGITAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands) 

 

 

 The accompanying notes are an integral part of these consolidated financial statements.

 

 

BRIDGELINE DIGITAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

BRIDGELINE DIGITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

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, 2019, 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, 2019.  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, 2019, 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 US generally accepted accounting principles. Our management reviewed the results of their 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 quarter ended September 30, 2019 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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		64		Chairperson (1)(2)(3)(4)
Kenneth Galaznik		68		Director (1)(2)(4)
Scott Landers		49		Director (1)(2)(3)(4)
Michael Taglich		54		Director
Roger Kahn		50		Director, President and Chief Executive Officer
Mark G. Downey		54		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)	Independent director.
(5)	Mr. Downey was appointed as our Chief Financial Officer and Treasurer effective July 1, 2019, following the resignation of our former Chief Financial Officer, Carole Tyner.

 

 

Biographies

 

 

Joni Kahn has been a member of our Board of Directors since April 2012. Ms. Joni Kahn and Mr. Roger Kahn, the Company’s President and Chief Executive Officer, are not related. 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 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 service and support technology organizations. Her service on prior boards also provides financial and governance experience.

 

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.

 

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. Monotype is a publicly-held 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.

 

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 each Air Industries Group Inc., a publicly traded aerospace and defense company (NYSE AIRI), and BioVentrix, Inc., a privately held medical device company whose products are directed at heart failure treatment. He also serves as a director of a number of other private companies, and is a director of Icagen Inc, a drug screening company. 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. 

 

 

 

Roger Kahn was elected to the Board of Directors in 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 and annual revenues of $40 million. FatWire was acquired by Oracle in 2011 for $160 million. Mr. Kahn received his Ph.D. in Computer Science and Artificial Intelligence from the University of Chicago. Mr. Kahn brings extensive experience to our Board as an experienced senior executive and industry expert. As a prior chief operating officer, Mr. Kahn brings extensive leadership experience in international business operations and strategic planning, and his Ph.D. provides significant value to the Company’s technology footprint.

 

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 2018 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 all applicable filing requirements, except as follows:

 

●

Michael Taglich, a director and 6% stockholder of the Company, filed a Form 4 reporting three late transactions;

●

Scott Landers, a director of the Company, filed a Form 4 reporting two late transactions;

●

Joni Kahn, a director of the Company, filed a Form 4 reporting two late transactions; and

●

Kenneth Galaznik, a director of the Company, filed a Form 4 reporting two late transactions.

 

 

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.

 

Committees of the Board of Directors

 

The Company has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

 

 

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 2018, 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 2018, the Compensation Committee met six times and acted two times by unanimous written consent.

 

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 2018, 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, 2019 and September 30, 2018 for our principal executive officer and our other two most highly compensated executive officers who served as executive officers during the year ended September 30, 2019. We refer to these officers as our named executive officers.

 

Name and		Fiscal											Option				All Other
Principal Position		Year End			Salary				Bonus				Awards				Compensation (3)				Total
Roger Kahn		2019			$	300,000			$	26,042			$	-			$	-			$	326,042
President and Chief
Executive Officer		2018			$	300,000			$	67,497			$	-			$	-			$	367,497
Michael Prinn (1)		2019			$	-			$	-			$	-			$	-			$	-
Former Executive Vice President
and Chief Financial Officer		2018			$	250,000			$	40,498			$	-			$	-			$	290,498
Carole Tyner (2)		2019			$	201,167			$	7,500			$	-			$	116,189			$	324,856
Former Chief Financial Officer
		2018			$	186,750			$	5,933			$	-			$	-			$	192,683
Mark G. Downey		2019			$	60,000			$	-			$	-			$	-			$	60,000
Executive Vice President
Chief Financial Officer and Treasurer

 

(1) Michael Prinn resigned as Executive Vice President and Chief Financial Officer effective September 25, 2018.

 

(2) 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.

 

(3) Amounts paid to Carole Tyner in fiscal 2019 represent 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. ("Bridgeline" or the "Company") to pursue new professional opportunities. Ms. Tyner will continue to provide services to the Company as an employee until August 31, 2019. Upon Ms. Tyner's departure on August 31, 2019, she will receive a lump sum separation payment equivalent to six-months base salary, and further, she will continue to receive COBRA health insurance continuation benefits with the Employer portion of the premiums paid by the Company up through February 28, 2020.

 

 

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 and made 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 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 2019 Year-End

 

The following table sets forth information concerning outstanding stock options for each named executive officer as of September 30, 2019.

 

	Name	Grant Date	Number of Securities Underlying Unexercised Options Exercisable (1)			Number of Securities Underlying Unexercised Options Unexercisable (1)			Exercise price ($/sh)			Option Expiration Date
	Roger Kahn (1)	08/24/2015		800			-		$	287.50		08/24/2025
		08/19/2016		716			-		$	205.00		08/19/2026
				1,516			-

 

(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.

 

 

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, 2019.

 

		Annual				Board
Director		Retainer				Meetings				Chairman				Additional				Total
Galaznik, Ken		$	12,000			$	6,000			$	10,000			$	-			$	28,000
Kahn, Joni			12,000				6,000				15,000				3,000				36,000
Landers, Scott			12,000				6,000				5,000				3,000				26,000
Taglich, Michael			12,000				6,000				-				-				18,000
		$	48,000			$	24,000			$	30,000			$	6,000			$	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 27, 2019 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 Summit Drive, Burlington, Massachusetts 01803.

 

The following tables set forth, as of December 27, 2019, the beneficial ownership of our Series A Preferred, 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 27, 2019 there were 262,310 shares of Series A Preferred, 441 shares of our Series C Preferred and 12,798,475 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 A Preferred Stock

 

	Name and Address (1)		Number of Shares Owned (2)		Percent of Shares Outstanding
	Robert Taglich 790 New York Avenue Huntington, NY 11743		65,993		25.16%
	Alvin Fund, LLC 215 West 98th Street, Apt. 10A New York, NY 10025		22,446		8.56%
	Shadow Capital, LLC 3601 SW 29th Street Topeka, KS 66614		21,128		8.05%
	Sterling Family Investment, LLC 12400 Dutch Forest PL Edmond, OK 73013		21,128		8.05%
	All current executive officers and directors as a group		-		*

 

(1)	Each of our officers and directors are excluded from this table, as no officer or director currently holds shares of Series A Preferred.

 

(2)	Holders of Series A Preferred are entitled to vote on all matters presented to our stockholders on an as-converted basis. Each share of Series A Preferred is convertible, at the option of each respective holder, into approximately 0.012 shares of our Common Stock.

 

 

Series C Preferred Stock

 

	Name and Address (1)		Number of Shares Owned (2)		Percent of Shares Outstanding
	Michael and Claudia Taglich 790 New York Avenue Huntington, NY 11743		350		79.37%
	Orca Capital GMBH Sperl-Ring 2 Hettenshausen, Germany 85276		50		11.34%
	Seevolution PC 4221 Wilshire Boulevard, STE 355 Los Angeles, CA 90010		36		8.16%
	Hudson Bay Master Fund Ltd. 777 3rd Avenue, 30th Floor New York, NY 10017		5		1.13%
	All current executive officers and directors as a group		350		*

 

 

(1)	Each of our officers and directors are excluded from this table, as no officer or director currently holds shares of Series C Preferred.

 

(2)	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		Number of Shares Owned		Percent of Shares Outstanding
	Michael Taglich Director		304.366	(1)	9.86%
	Roger Kahn President, Chief Executive Officer, Director		8,392	(2)	0.30%
	Kenneth Galaznik Director		745	(3)	0.03%
	Scott Landers Director		700	(4)	0.03%
	Joni Kahn Director		698	(5)	0.02%
	Mark G. Downey Chief Financial Officer and Treasurer		-		-
	All current executive officers and directors as a group (7)		314,901	(6)	10.18%

 

(1)

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 27, 2019). Also includes 35 shares of Common Stock and 2 shares issuable upon the exercise of warrants owned by Mr. Taglich’s spouse.

 

 

(2)	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 27, 2019). Includes 545 shares of common stock owned by Mr. Kahn’s spouse.

 

(3)	Includes 146 shares of Common Stock subject to currently exercisable options (includes options that will become exercisable within 60 days of December 27, 2019).

 

(4)	Includes 138 shares of Common Stock subject to currently exercisable options (includes options that will become exercisable within 60 days of December 27, 2019). Includes 8 shares of Common Stock owned by Mr. Launder’s children.

  

(5)	Includes 130 shares of Common Stock subject to currently exercisable options (includes options that will become exercisable within 60 days of December 12, 2019).

 

(6)	Includes 5,824 shares of Common Stock subject to currently exercisable options (includes options that will become exercisable within 60 days of December 27, 2019).

 

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, 2019 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

to be issued upon

Weighted average

remaining available

exercise of

exercise price of

for future issuance

outstanding options,

outstanding options,

under equity

warrants and rights

warrants and rights

compensation plans

Plan category

(a)

(b)

(excluding securities reflected in column a) (c)

Equity compensation plans approved by security holders

457,846

$

6.83

262,534

Equity compensation plans not approved by security holders (1)

546,151

$

6.16

-

Total

1,003,997

$

-

262,534

 

 

(1)	At September 30, 2019, there were 546,151 total Warrants outstanding.     Stock warrants outstanding at September 30, 2019 are as follows:

 

		Issue
Type		Date		Shares				Price			Expiration
Placement Agent		06-Nov-13			-			$	1,625.00		06-Nov-18
Placement Agent		28-Mar-14			-			$	1,312.50		28-Mar-19
Placement Agent		28-Oct-14			247			$	812.50		28-Oct-19
Director/Shareholder		31-Dec-14			240			$	1,000.00		31-Dec-19
Director/Shareholder		12-Feb-15			240			$	1,000.00		12-Feb-20
Director/Shareholder		12-May-15			240			$	1,000.00		12-May-20
Director/Shareholder		31-Dec-15			120			$	1,000.00		31-Dec-20
Placement Agent		17-May-16			1,736			$	187.50		17-May-21
Placement Agent		11-May-16			1,067			$	187.50		11-May-21
Placement Agent		15-Jul-16			880			$	230.00		15-Jul-21
Investors		09-Nov-16			4,271			$	175.00		09-May-22
Director/Shareholder		31-Dec-16			120			$	1,000.00		31-Dec-21
Financing		10-Oct-17			1,327			$	132.50		10-Oct-25
Director/Shareholder		31-Dec-17			120			$	1,000.00		31-Dec-21
Investors		19-Oct-18			3,120			$	25.00		19-Oct-23
Placement Agent		14-Apr-19			10,000			$	31.25		16-Oct-23
Total					23,728

 

 

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 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.

 

 

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, 2006. 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, 2019 and September 30, 2018. The Company did not engage its independent registered public accounting firm during either of the fiscal years ended September 30, 2019 or September 30, 2018 for any other non-audit services.

 

Type of Service		Amount of Fee for Fiscal Year Ended
		September 30, 2019		September 30, 2018
Audit Fees		$268,271		$250,670
Audit-Related Fees		—		—
Tax Fees		—		—
Total		$268,271		$250,670

 

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, 2019 or September 30, 2018.

 

 

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, 2019, no services were provided to us by our independent registered public accounting firm other than in accordance with the pre-approval procedures described herein.

 

 

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, 2019 and 2018

  –  Consolidated Statements of Operations for the years ending September 30, 2019 and 2018

  –  Consolidated Statements of Comprehensive Loss for the years ending September 30, 2019 and 2018

  –  Consolidated Statements of Shareholders’ Equity for the years ending September 30, 2019 and 2018

  –  Consolidated Statements of Cash Flows for the years ending September 30, 2019 and 2018

  –  Notes to Consolidated Financial Statements

 

2. Financial Statement Schedules

 

 –  Not applicable

 

(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.

 

Exhibit				Incorporated by Reference
No.		Exhibit		Form		Filing Date		Exhibit No.
1.1		Underwriting Agreement by and between Bridgeline Digital, Inc. and ThinkEquity, dated October 16, 2018		8-K		October 19, 2018		1.1
2.1		Asset Purchase Agreement, dated as of May 11, 2010, by and between Bridgeline Digital, Inc. and TMX Interactive, Inc.		10-Q		May 17, 2010		2.1
2.3		Asset Purchase Agreement, dated as of July 9, 2010, by and between Bridgeline Digital, Inc. and e.magination network, LLC		8-K		July 15, 2010		2.1
2.4		Agreement and Plan of Merger, dated as of October 3, 2011, by and among Bridgeline Digital, Inc., Magnetic Corporation and Jennifer Bakunas		8-K		October 6, 2011		2.1
2.5		Agreement and Plan of Merger, dated as of May 31, 2012, by and among Bridgeline Digital, Inc., MarketNet, Inc. and Jill Bach		8-K		June 5, 2012		2.1
3.1		Amended and Restated Certificate of Incorporation, as amended		10-Q		May 15, 2013		3.1
3.2		Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated May 4, 2015		8-K		May 5, 2015		3.1
3.3		Certificate of Designations of the Series A Convertible Preferred Stock		8-K		November 4, 2014		3.1
3.4		Amended and Restated By-Laws		10-Q		February 17, 2015		3.2
3.5		Certificate of Designations of the Series B Convertible Preferred Stock		8-K		October 19, 2018		3.1
3.6		Amended and Restated By-Laws		8-K		December 14, 2018		3.1
4.1		Specimen Common Stock Certificate  (File No. 333-139298)		SB-2/A		June 20, 2007		4.1
4.2		Form of Warrant		8-K		October 19, 2018		4.1
10.1*		Employment Agreement with Roger “Ari” Kahn, dated August 24, 2015		10-K		December 24, 2015		10.1
10.2*		First Amendment to Employment Agreement, Roger “Ari” Kahn, dated May 10, 2016		8-K		May 13, 2016		10.1
10.3*		Employment Agreement with Michael D. Prinn dated January 19, 2011		8-K		January 21, 2011		10.1
10.4*		Employment Agreement with Michael D. Prinn dated November 11, 2016		10-Q		February 14, 2017		10.7
10.5		Amended and Restated Stock Incentive Plan, as amended		DEF 14 A		July 14, 2014		C
10.6		Securities Purchase Agreement between Bridgeline Digital, Inc. and the investors named therein, dated October 29, 2010		8-K		November 4, 2010		10.1
10.7		Securities Purchase Agreement between Bridgeline Digital, Inc. and the investors named therein, dated May 31, 2012		8-K		June 5, 2012		10.1
10.8		Form of Common Stock Purchase Warrant issued to Placement Agent, dated November 6, 2013		8-K		November 12, 2013		10.3
10.9		Placement Agent Agreement between Bridgeline Digital, Inc. and Taglich Brothers, Inc., dated October 30, 2013		8-K		November 12, 2013		10.5
10.10		Form of Restricted Stock Agreement by and between Bridgeline Digital, Inc. and certain Board of Directors, dated February 24, 2014		10-Q		May 15, 2014		10.2
10.11		Securities Purchase Agreement between Bridgeline Digital, Inc. and the Investors named therein dated March 28, 2014		10-Q		May 15, 2014		10.3
10.12		Form of Common Stock Purchase Warrant issued to Placement Agent, dated March 28, 2014		10-Q		May 15, 2014		10.4
10.13		Securities Purchase Agreement between Bridgeline Digital, Inc and the investors therein, dated October 28, 2014		8-K		November 4, 2014		10.1

 

 

Exhibit				Incorporated by Reference						Filed
No.		Exhibit		Form		Filing Date		Exhibit No.		Herewith
10.14		Form of Common Stock Purchase Warrant Issued to Placement Agent		8-K		November 4, 2014		10.2
10.15		Form of Common Stock Purchase Warrant Issued by Company to Michael Taglich dated January 7, 2015		8-K		January 9, 2015		10.2
10.16		Side Letter between the Company and Michael Taglich, dated January 7, 2015		8-K		January 9, 2015		10.3
10.17		Form of Common Stock Purchase Warrant Issued by Company to Michael Taglich dated February 17, 2015		10-Q		February 17, 2015		10.2
10.18		Form of Restricted Stock Agreement		10-Q		May 15, 2015		10.6
10.19		Form of Common Stock Purchase Warrant Issued by Company to Michael Taglich dated May 12, 2015		10-Q		May 15, 2015		10.9
10.20		Form of Common Stock Purchase Warrant Issued by Company to Michael Taglich dated July 21, 2015		8-K		July 24, 2015		10.2
10.21		Securities Purchase Agreement between Bridgeline Digital, Inc and the investors therein, dated October 13, 2015		10-Q		February 12, 2016		10.3
10.22		Bridgeline Digital Inc. 2016 Stock Incentive Plan		DEF 14 A		March 22, 2016		Appendix  B
10.23		Form of Common Stock Purchase Warrant issued to Placement Agent		8-K		May 17, 2016		10.3
10.24		Loan and Security Agreement between Bridgeline Digital Inc. and Heritage Bank of Commerce, dated June 9, 2016		8-K		June 15, 2016		10.1
10.25		Unconditional Guarantee entered into by Michael N. Taglich in favor of Heritage Bank of Commerce, dated June 9, 2016		8-K		June 15, 2016		10.2
10.26		Placement Agreement between Bridgeline Digital, Inc and Taglich Brothers, Inc dated March 31, 2016		8-K		June 15, 2016		10.3
10.27		First Amendment to the Loan and Security Agreement between Bridgeline Digital Inc. and Heritage Bank of Commerce, dated August 15, 2016		10-Q		August 15, 2016		10.12
10.28		Form of Securities Purchase Agreement dated November 3, 2016		8-K		November 4, 2016		10.1
10.29		Form of Purchaser Warrant		8-K		November 4, 2016		10.2
10.30		Form of Registration Rights Agreement dated November 3, 2016		8-K		November 4, 2016		10.3
10.31		Form of Insider Securities Purchase Agreement dated November 3, 2016		8-K		November 4, 2016		10.4
10.32		Second Amendment to the Loan and Security Agreement between Bridgeline Digital Inc. and Heritage Bank of Commerce, dated December 14, 2016		10-K		December 14, 2016		10.66
10.33		Third Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and Heritage Bank of Commerce dated August 10, 2017		10-Q		August 14, 2017		10.1
10.34		First Amendment to Affirmation of Guaranty between Michael N. Taglich and Heritage Bank of Commerce		10-Q		August 14, 2017		10.2
10.35		Loan and Security Agreement between Bridgeline Digital, Inc and Montage Capital II, L.P. dated October 10, 2017		8-K		October 13, 2017		10.1
10.36		Form of Warrant to Purchase Stock issued to Montage Capital II, L.P		8-K		October 13, 2017		10.2
10.37		Intercreditor Agreement between Heritage Bank of Commerce and Montage Capital II, L.P dated October 10, 2017		8-K		October 13, 2017		10.3
10.38		Fifth Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and Heritage Bank of Commerce, dated November 27, 2017		8-K		November 28, 2017		10.1
10.39		Seventh Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and Heritage Bank of Commerce, dated May 10, 2018		10-Q		May 15, 2018		10.1
10.40		First Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and Montage Capital II. LP, dated May 10, 2018		10-Q		May 15, 2018		10.2
10.41		Eight Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and Heritage Bank of Commerce, dated August 10, 2018		10-Q		August 14, 2018		10.1
10.42		Form of Note Purchase Agreement		8-K		September 11, 2018		10.1
10.43		Form of Promissory Note		8-K		September 11, 2018		10.2
10.44		Form of Subordination Agreement		8-K		September 11, 2018		10.3
10.45		Ninth Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and Heritage Bank of Commerce, dated September 21, 2018		8-K		September 25, 2018		10.1
10.46		Second Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and Montage Capital II, L.P., dated October 22, 2018		8-K		October 24, 2018		10.1

 

 

Exhibit				Incorporated by Reference						Filed
No.		Exhibit		Form		Filing Date		Exhibit No.		Herewith
10.47		Tenth Amendment to the Loan and Security Agreement between Bridgeline Digital, Inc and Heritage Bank of Commerce, dated December 27, 2018		10-K		December 28, 2018		10.1
21.1		Subsidiaries of the Registrant								X
23.1		Consent of Marcum LLP								X
31.1		CEO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002								X
31.2		CFO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002								X
32.1		CEO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002								X
32.2		CFO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002								X
101.INS**		XBRL Instance								X
101.SCH**		XBRL Taxonomy Extension Schema								X
101.CAL**		XBRL Taxonomy Extension Calculation								X
101.DEF**		XBRL Taxonomy Extension Definition								X
101.LAB**		XBRL Taxonomy Extension Labels								X
101.PRE**		XBRL Taxonomy Extension Presentation								X

 

 

 

(c) Financial Statement Schedules

 

Not applicable 

 

 

SIGNATURES

 

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.

 

	BRIDGELINE DIGITAL, INC.
	a Delaware corporation
	By:	/s/ Roger Kahn
		Name: Roger Kahn
		December 27, 2019

 

 

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		President and Chief Executive Officer, Director (Principal Executive Officer)		December 27, 2019
/s/ Mark G. Downey		Chief Financial Officer		December 27, 2019
Mark G. Downey		(Principal Financial Officer)
/s/Kenneth Galaznik		Director		December 27, 2019
Kenneth Galaznik
/s/ Joni Kahn		Director		December 27, 2019
Joni Kahn
/s/ Scott Landers		Director		December 27, 2019
Scott Landers
/s/ Michael Taglich		Director		December 27, 2019
Michael Taglich

 

 

 Index of Exhibits

 

Exhibit No.	Description of Document
21.1 23.1	Subsidiaries of the Registrant Consent of Marcum LLP
31.1	CEO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	CFO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	CEO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	CFO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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

 

*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.

 

83