What changed in this filing

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Item 1A. Risk Factors

2023-12-27 compared with 2022-12-21 · 132 added, 190 removed, 417 unchanged (44% of the section changed)

12 unchanged sentences

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 incurred net income of approximately $2.2 million for the year ended September 30, 2022, which includes income related to the change in the fair value of warrant liabilities.

Since our inception in 2000 and through fiscal 2019, and in fiscal 2021, we have incurred net losses, and may do so again.

As of September 30, 2022, we had an accumulated deficit of approximately $80 million.

We incurred net loss of approximately $9.4 million for the year ended September 30, 2023, which includes gains related to the change in the fair value of warrant liabilities and a goodwill impairment charge of $7.5 million.

Since our inception in 2000 and through fiscal 2019, and in fiscal 2021 and fiscal 2023, we have incurred net losses, and may do so again.

As of September 30, 2023, we had an accumulated deficit of approximately $90 million.

Our prior losses have had an adverse effect on our stockholders’

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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.

In July 2021, the Company received approximately $5.8 million in cash relating the issuance of 1,543,779 shares of its common stock upon exercise of Series A Warrants, originally issued in March 2019, with an exercise price of $4.00 per share.

On May 14, 2021, the Company offered and sold, in a registered direct offering, a total of 1,060,000 shares of its common stock at a price of $2.28 per share.

On the same day, the Company entered into securities purchase agreements with certain institutional investors in connection with a private placement of 2,700 shares of newly designated Series D Convertible Preferred Stock at a price of $1,000 per share and warrants to purchase up to an aggregate of 592,105 shares of common stock at an exercise price of $2.51 per share.

The aggregate proceeds, net of cash paid for certain fees due to placement agents and transaction related expenses, of these two transactions that occurred on the same day was $4.6 million.

On February 4, 2021, the Company offered and sold a total of 880,000 shares of its common stock, par value $0.001 per share, to certain institutional and accredited investors at a public offering price of $3.10 per share in a registered direct offering.

The aggregate proceeds from this transaction, net of certain fees due to placement agents and transaction expenses, was approximately $2.5 million.

In connection with the acquisition of HawkSearch completed during the third quarter of fiscal year 2021, the Company recognized an obligation for a deferred payment representing a portion of the purchase price of $2.0 million payable on or before December 31, 2021, and contingent earn-out payments of $2.2 million (acquisition date fair value) which are payable, no later than December 31, 2022 (subsequently amended), and may vary in amount in the event of achievement of certain revenue targets and operational goals.

In connection with the acquisition of WooRank completed during the second quarter of fiscal year 2021, the Company (1) assumed the outstanding long-term debt obligations of $2.1 million of the acquiree, (2) issued a seller note of $352 thousand to one of the selling shareholders payable over a five-year period, (3) deferred a portion of the purchase price of $376 thousand, and (4) recognized contingent earn-out payments of $1.3 million (acquisition date fair value) which were payable in the event of achievement of certain revenue targets and operational goals.

On August 17, 2020, the Company entered into an arrangement with an investment banking firm to sell up to $4,796,090 of shares of the Company’s common stock, $0.001 par value.

There are no obligations for the sale or purchase of the Company’s common stock pursuant to this offering.

Accordingly, there can be no assurances that the Company or investment banking firm will be successful in selling any portion of the shares available for sale pursuant to this offering.

On December 18, 2020, the Company delivered written notice to Roth Capital Partners that it was suspending all offers and sales under the At the Market Offering Agreement, during which time the Company will not make any sales of Placement Shares.

On August 17, 2021, the ATM offering expired unused.

Further, our ability to obtain financing may be limited by rules of the Nasdaq Stock 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.

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Considering a reduction in our license renewal rate could reduce our revenue, these consequences could be exacerbated if we are dependent upon several major customers and any one of them were to elect not to renew.

The length of our sales cycle can alternate markedly, which could result in significant fluctuations in license revenues being recognized from quarter to quarter.

The length of our sales cycle can alternate markedly, which could result in significant fluctuations in the recognition of license revenues 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.

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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.

Competitors and partners are investing in artificial intelligence. 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.

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The marketplace is highly fragmented with a large number of competitors and potential competitors.

Our prominent public company competitors include companies such as Coveo, Elastic, Semrush and WeCommerce.

Our competitors include companies such as Algolia, Bloomreach, Coveo, Searchspring, Semrush, Sitecore and Yext.

We face competition from customers and potential customers who develop their own applications internally.

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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 2022 was approximately 286,000 shares per day compared to approximately 2,839,000 for fiscal 2021, and 484,000 for fiscal 2020.

The average shares traded per day in fiscal 2023 was approximately 56,000 shares per day compared to approximately 286,000 for fiscal 2022, and 2,839,000 for fiscal 2021.

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.

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and general economic and industry conditions.

During fiscal 2022, the closing price of our common stock as reported by NASDAQ fluctuated between $1.10 and $4.12.

During fiscal 2023, the closing price of our common stock as reported by the Nasdaq Capital Market fluctuated between $0.82 and $1.42.

We are required to meet certain financial criteria in order to maintain our listing on the Nasdaq Capital Market.

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Such corrective actions could include a reverse stock split, which may adversely affect the liquidity of our common stock.

Additionally, there is no way to guarantee that such a measure, if implemented, would help us regain compliance with the minimum bid price requirement or maintain compliance with other NASDAQ listing rules.

Additionally, there is no way to guarantee that such a measure, if implemented, would help us regain compliance with Nasdaq's minimum bid price requirement or maintain compliance with its other listing rules.

We are dependent upon our management team and the loss of any of these individuals could harm our business.

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We maintain a key man insurance policy covering our Chief Executive Officer.

Our business can be impacted by geopolitical events, trade and other international disputes, war, terrorism, natural disasters, public health issues, and other business interruptions.

Geopolitical events, trade and other international disputes, war, terrorism, natural disasters, public health issues, and other business interruptions can adversely impact international commerce and the global economy, and could have a material adverse effect on our business, customers, employees, and partners.

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.

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We have acquired multiple businesses since our inception in 2000, including two in fiscal 2021.

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.

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 stockholders 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.

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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 1,000,000 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, 11,000 shares have been designated as Series C Preferred and 4,200 shares have been designated as Series D 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.

Our Certificate of Incorporation authorizes the issuance of up to 1,000,000 shares of preferred stock, par value $0.001 per share, without stockholder 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, 11,000 shares have been designated as Series C Preferred and 4,200 shares have been designated as Series D 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.

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Alternatively, if a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

The COVID-19 pandemic could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, and capital investments.

In 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our services.

The COVID-19 pandemic and similar issues in the future could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, and capital investments.

Several public health organizations have recommended, and some governments have implemented, certain measures to slow and limit the transmission of the virus, including shelter in place, social distancing ordinances, and business shutdowns.

There is considerable uncertainty regarding the extent to which the COVID-19 outbreak will continue to spread, and the extent and duration of governmental and other measures implemented to try to limit the spread of the virus.

The pandemic and such preventive measures, or others required or that we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of certain locations, decreased employee availability, increased claims or other expenses, potential border closures, and others.

These disruptions and challenges may continue for an indefinite period of time and may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments.

Additionally, the effects of COVID-19 on the global economy could adversely affect our ability to access the capital and other financial markets, and if so, we may need to consider alternative sources of funding for some of our operations and for working capital, which may increase our cost of, as well as adversely impact our access to, capital.

These uncertain economic conditions may also result in the inability of our customers to make payments to us, on a timely basis or at all.

Although these disruptions may continue to occur, the long-term economic impact and near-term financial impacts of the COVID-19 pandemic, including but not limited to, possible impairment, restructuring, and other charges, cannot be reliably quantified or estimated at this time due to the uncertainty of future developments.

Unresolved Staff Comments.

Cybersecurity.

Not applicable.

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

18 unchanged sentences

Perth Mews RO

Perth, ON K7H 3A0

Perth, ON K7H 3A0, Canada

Brussels, Belgium

9 unchanged sentences

Not applicable.

Market for Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities.

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is currently traded on The NASDAQ Stock Market LLC, under the trading symbol “BLIN”.

Number of Shareholders

Our common stock is currently traded on the Nasdaq Capital Market under the trading symbol “BLIN”.

Number of Stockholders

As of December 27, 2023, we had approximately 60 stockholders of record.

1 unchanged sentence

Dividend Policy

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.

We have not declared or paid cash dividends on our common stock and do not plan to pay cash dividends to our common stockholders in the near future.

Recent Sales of Unregistered Securities;

1 unchanged sentence

There were no sales of unregistered or registered equity securities during the fiscal year ended September 30, 2023.

Selected Financial Data.

Not required.

Not applicable.

Management ’

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Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a variety of factors and risks, including the impact of any weakness in the U.S.

and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited market for our common stock, the ability to maintain our listing on the NASDAQ Capital Market, the volatility of the market price of our common stock, the ability to raise capital, the performance of our products, our ability to respond to rapidly evolving technology and customer requirements, our ability to protect our proprietary technology, the security of our software and response to cyber security risks, our ability to meet our financial obligations and commitments, our dependence on our management team and key personnel, our ability to hire and retain future key personnel, our ability to maintain an effective system of internal controls, or our ability to respond to government regulations.

and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited market for our common stock, the ability to maintain our listing on the Nasdaq Capital Market, the volatility of the market price of our common stock, the ability to raise capital, the performance of our products, our ability to respond to rapidly evolving technology and customer requirements, our ability to protect our proprietary technology, the security of our software and response to cyber security risks, our ability to meet our financial obligations and commitments, our dependence on our management team and key personnel, our ability to hire and retain future key personnel, our ability to maintain an effective system of internal controls, or our ability to respond to government regulations.

These and other risks are more fully described herein and in our other filings with the Securities and Exchange Commission.

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Bridgeline Digital is a marketing technology company that offers a suite of products that help companies grow online revenue and share information with customers, partners, and employees.

HawkSearch is a search, recommendation, and personalization application, built for marketers, merchandisers, and developers that enhances, normalizes, and enriches a customer's site search and browse experience.

HawkSearch leverages advanced artificial intelligence, machine learning and industry-leading analyzers to deliver accurate results from federated data sources.

Celebros Search is a commerce-oriented site search product that provides Natural Language Processing with artificial intelligence to present relevant search results based on long-tail keyword searches in seven languages.

Woorank is a Search Engine Optimization (“SEO”) audit tool that generates an instant audit of the site’s technical, on-page, and off-page SEO. 

Woorank’s clear, actionable insights help companies increase their search ranking, website traffic, audience engagement, conversion, and customer retention rates.

Our Unbound platform is a Digital Experience Platform that includes Web Content Management, eCommerce, eMarketing, Social Media management, and Web Analytics.

The Unbound platform, combined with its professional services, assists customers in driving lead generation, increasing revenue, improving customer service and loyalty, enhancing employee knowledge, and reducing operational costs. 

Our TruPresence product empowers large franchises, brand networks, and other multi-unit organizations to manage a large hierarchy of digital properties at scale.

OrchestraCMS is the only content and digital experience platform built 100% native on Salesforce and helps customers create websites and intranets 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.

All of our software is available through a cloud-based software as a service (“

SaaS ”) model.

Additionally, Unbound and HawkSearch are available 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.

All of Bridgeline’s software is available through a cloud-based Software as a Service (“SaaS”) model, whose flexible architecture provides customers hosting and support.

Additionally, Unbound and HawkSearch have the option to be available via a traditional perpetual licensing business model, in which the software can reside on a dedicated infrastructure either on premise at the customer’s facility, or manage-hosted by Bridgeline via a cloud-based, dedicated hosted services model.

Bridgeline's product offerings include: 

a site search, recommendation, and personalization software application, built for marketers, merchandisers, and developers to enhance, normalize, and enrich an online customer's content search and product discovery experience. 

Celebros Search:

a commerce-oriented site search product that provides Natural Language Processing with artificial intelligence to present relevant search results based on long-tail keyword searches.

a Search Engine Optimization (“SEO”) audit tool that generates an instant performance audit of the site’s technical, on-page, and off-page SEO.

a Digital Experience Platform that includes Web Content Management, eCommerce, Digital Marketing, and Web Analytics. 

a web content management and eCommerce platform that supports the needs of multi-unit organizations and franchises.

OrchestraCMS:

the only content and digital experience platform built 100% native on Salesforce and helps customers create websites and intranets for their customers, partners, and employees.

Sales and Marketing

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These companies are generally categorized in the following vertical markets: 

Distributors and Wholesalers

Multi-Unit Franchises & Enterprises

Manufacturers

Associations and Foundations

Banks and Credit Unions

eCommerce Retailers

Industrial Distribution (Electrical, Plumbing, Building, Cleaning, Restaurant, Furniture Suppliers)

Franchises & Enterprises

Health Services and Life Sciences

High Technology (software and hardware)

Credit Unions and Regional Banks

Associations and Foundations

Industrial Distribution and Wholesale

Manufacturers

Each of the Bridgeline companies goes to market through two main types of partnerships.

The first partner category includes platforms such as Optimizely, BigCommerce, Adobe, Sitefinity and others.

The first partner category includes platforms such as Adobe, BigCommerce, Optimizely, Sitefinity, Shopify and others.

The Bridgeline software often embeds directly into these platforms through connectors and SDK solutions that Bridgeline develops in concert with each platform.

The second category includes web-development agencies which typically have deep relationships with end-customers and have the technical expertise to implement the Bridgeline software solutions according to client needs, platform requirements, and industry standards.

Goodwill and Intangible Asset Impairment

During the year ended September 30, 2023, the Company recognized a goodwill impairment charge of $7.5 million. 

There were no goodwill impairment charges recognized during the year ended September 30, 2022.

Bridgeline will continue to evaluate expanding its distribution of its suite of products and interactive development capabilities through acquisitions.

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This integration may reduce the aggregate of such expenses for the combined businesses and similarly improve operating results.

On March 1, 2021, the Company, pursuant to a Share Purchase Agreement (the “WooRank Purchase Agreement”), acquired all of the issued and outstanding shares of WooRank SRL (“WooRank”), an entity located in Belgium.

The total purchase price of approximately $2.4 million consisted of (1) $285 thousand in cash paid at closing or in close proximity to closing, (2) $376 thousand of deferred cash payable in installments post-closing, (3) a $352 thousand seller note issued to one of the selling shareholders, and (4) amounts payable to one selling shareholder as consideration for assistance with certain matters related to the acquisition for a period of one year from the closing date of the acquisition.

On the closing date, the Company issued 29,433 shares of its common stock, with an aggregate issuance date fair value of $99 thousand for a portion of the purchase price. The WooRank Purchase Agreement also provides for additional consideration, in the event of achievement of certain revenue targets and operational goals, to the selling shareholders. 

The fair value of contingent consideration was $1.3 million on the acquisition date.

On May 28, 2021, the Company, pursuant to a Share Purchase Agreement (the “Hawk Purchase Agreement”), acquired all of the issued and outstanding shares of HawkSearch, Inc., an Illinois corporation (“HawkSearch”).

The total purchase price of approximately $9.9 million consisted of (1) $4.8 million initial cash payment at closing, (2) an issuance of 1,500 shares of the Company’s newly designated Series D Preferred Stock with an aggregate issuance date fair value of $930 thousand, and (3) $2.0 million deferred cash (payable on or before December 31, 2021).

The Hawk Purchase Agreement also provides for additional consideration, in the event of achievement of certain revenue targets, to the selling shareholders as an additional earn-out, payable in two installments, as amended and as follows:

(i) the aggregate sum of $1,779 thousand which was paid on July 1, 2022;

and (ii) the aggregate sum of $250 thousand, which was paid on October 3, 2022, as included within the Amendment to the Stock Purchase Agreement, dated June 15, 2022.

The fair value of contingent consideration was $250 thousand on September 30, 2022, all of which was paid in October 2022

Customer Information

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Summary of Results of Operations

Total revenue for the fiscal year ended September 30, 2022 (“fiscal 2022”) increased to $16.8 million from $13.3 million for the fiscal year ended September 30, 2021 (“fiscal 2021”). The loss from operations for fiscal 2022 was $1.9 million, compared with a loss from operations of $1.2 million for fiscal 2021.

We had a net income for fiscal 2022 of $2.1 million, which included a gain of approximately $3.7 million as a result of the change in fair value of certain warrant liabilities, compared with a net loss of $6.7 million, which included a loss of approximately $5.9 million as a result of the change in fair value of certain warrant liabilities and a $1.2 million discrete benefit in taxes in fiscal 2021.

Basic net income (loss) per share attributable to common shareholders for fiscal 2022 was $0.21 compared with the equivalent basic net loss per share attributable to common shareholders of ($1.47) for fiscal 2021.

Diluted net income (loss) per share attributable to common shareholders for fiscal 2022 was $0.20 compared with the equivalent diluted net loss per share attributable to common shareholders of ($1.47) for fiscal 2021.

Total revenue for the fiscal year ended September 30, 2023 (“fiscal 2023”) decreased to $15.9 million from $16.8 million for the fiscal year ended September 30, 2022 (“fiscal 2022”). The loss from operations for fiscal 2023 was $9.9 million, compared with a loss from operations of $1.9 million for fiscal 2022.

We had a net loss for fiscal 2023 of $9.4 million, which included income of approximately $0.6 million as a result of the change in fair value of certain warrant liabilities, and a goodwill impairment charge of $7.5 million in fiscal 2023, compared with a net income of $2.1 million, which included income of approximately $3.7 million as a result of the change in fair value of certain warrant liabilities fiscal 2022.

Basic net loss per share attributable to common stockholders for fiscal 2023 was $(0.91) compared with the equivalent basic net income per share attributable to common stockholders of $0.21 for fiscal 2022.

Diluted net loss per share attributable to common stockholders for fiscal 2023 was $(0.91) compared with the equivalent diluted net income per share attributable to common stockholders of $0.20 for fiscal 2022.

(in thousands)

September 30,

Digital engagement services

% of total net revenue

Year Ended September 30,

Subscription and perpetual licenses

% of total net revenue

Digital engagement services

Total net revenue

Cost of revenue

Digital engagement services

% of digital engagement services revenue

Subscription and perpetual licenses

% of subscription and perpetual revenue

Digital engagement services

Total cost of revenue

Gross profit margin

Operating expenses

Sales and marketing

% of total revenue

General and administrative

% of total revenue

Research and development

% of total revenue

Depreciation and amortization

% of total revenue

Goodwill impairment

Restructuring and acquisition related expenses

% of total revenue

Total operating expenses

1 unchanged sentence

Change in fair value of contingent consideration, interest expense and other, net

Government grant income

Change in fair value of warrant liabilities

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Provision for (benefit from) income taxes

Net income/(loss)

Net (loss) income

Non-GAAP Measure:

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Our revenue is derived from two sources:

(i) digital engagement services and (ii) subscription and perpetual licenses.

(i) Subscription and Perpetual licenses and (ii) Digital Engagement Services.

Subscription and Perpetual Licenses

Revenue from Subscription and perpetual licenses decreased $0.8 million, or 6%, to $12.7 million in fiscal 2023 from $13.6 million in fiscal 2022.

The decrease compared to the prior period included a reduction in revenue from a particular customer.

Subscription and perpetual license revenue as a percentage of total revenue decreased to 80% in fiscal 2023 from 81% in fiscal 2022. 

Digital Engagement Services

Digital engagement services revenue is comprised of implementation and retainer-related services.

Total revenue from digital engagement services of $3.3 million in fiscal 2022 decreased 1% from $3.3 million in fiscal 2021.

Digital engagement services revenue as a percentage of total revenue decreased to 19% in fiscal 2022 from 25% in fiscal 2021.

The decreases compared to the prior period are attributable to the increase in subscription and perpetual licenses, including additional revenue related to business acquisitions during fiscal 2021.

Subscription and Perpetual Licenses

Revenue from subscription (SaaS) and perpetual licenses increased $3.6 million, or 36%, to $13.6 million in fiscal 2022 from $10.0 million in fiscal 2021.

The increase compared to the prior period is primarily due to significant multi-year license renewals across our diverse portfolio of companies and the inclusion of a full year of revenue from the Company’s fiscal 2021 acquisitions compared to fiscal 2021, which only included revenues from the acquisition date to period end.

Subscription and perpetual license revenue as a percentage of total revenue increased to 81% in fiscal 2022 from 75% in fiscal 2021.

The increase as a percentage of total revenue is attributable to the increase in subscription licenses, including renewals and additional revenue related to the business acquisitions during fiscal 2021.

Total revenue from digital engagement services of $3.1 million in fiscal 2023 decreased 4% from $3.3 million in fiscal 2022.

Digital engagement services revenue as a percentage of total revenue increased to 20% in fiscal 2023 from 19% in fiscal 2022. 

Cost of Revenue

Total cost of revenue for fiscal 2022 of $5.1 million increased $0.6 million, or 13%, from $4.5 million.

The increase for fiscal 2022 compared to fiscal 2021 is primarily attributable to costs incurred related to the business acquisitions during fiscal 2021. 

Cost of Digital Engagement Services

Cost of digital engagement services increased 1%, to $1.8 million in fiscal 2022 from $1.7 million in fiscal 2021.

The increase in cost of digital engagement services in fiscal 2022 compared to fiscal 2021 is primarily due to personnel costs, including costs incurred related to the business acquisitions during fiscal 2021.

The cost of total digital engagement services as a percentage of total digital engagement services revenue increased to 54% in fiscal 2022 from 53% in fiscal 2021.

The increase as a percentage of revenues in fiscal 2022 compared to fiscal 2021 is primarily due to the overall decrease in digital engagement services revenue and costs incurred related to business acquisitions during fiscal 2021, as noted above.

Total cost of revenue for fiscal 2023 of $5.0 million decreased $0.1 million, or 2% compared to the prior period. 

Cost of Subscription and Perpetual License

Cost of subscription and perpetual licenses of $3.4 million in fiscal 2022 increased $0.6 million, or 20%, from $2.8 million in fiscal 2021.

The increase in cost of subscription and perpetual licenses in fiscal 2022 compared to fiscal 2021 is primarily due to higher costs to operate our cloud-based hosting model with Amazon Web Services and additional personnel costs, including costs incurred related to the business acquisitions during fiscal 2021.

The cost of subscription and perpetual licenses as a percentage of subscription and perpetual license revenue decreased to 25% in fiscal 2022 from 28% in fiscal 2021. The decrease as a percentage of revenues is primarily due to the overall increases in subscription and perpetual license revenue.

Gross profit of $11.7 million increased $3.0 million, or 34%, in fiscal 2022 to compared to $8.7 million for fiscal 2021.

The gross profit margin increased to 70% for fiscal 2022 compared to 66% for fiscal 2021.

The increase in the gross profit margin for fiscal 2022 compared to fiscal 2021 is primarily attributable to the increase in the proportion of license revenue, which is generally associated with higher margins, to digital engagement service revenue.

Cost of subscription and perpetual licenses of $3.4 million in fiscal 2023 increased slightly from fiscal 2022.

The increase in cost of subscription and perpetual licenses in fiscal 2023 compared to fiscal 2022 is primarily due to higher costs to operate our cloud-based hosting model with Amazon Web Services, offset by a decrease in personnel costs. The cost of subscription and perpetual licenses as a percentage of subscription and perpetual license revenue increased to 26% in fiscal 2023 from 25% in fiscal 2022. These increases are primarily due to the overall decrease in subscription and perpetual license revenue.

Cost of Digital Engagement Services

Cost of digital engagement services decreased 6%, to $1.7 million in fiscal 2023 from $1.8 million in fiscal 2022.

The cost of total digital engagement services as a percentage of total digital engagement services revenue decreased to 52% in fiscal 2023 from 54% in fiscal 2022.

These decreases are primarily due to the overall decrease in personnel costs. 

Gross profit of $10.9 million decreased $0.8 million, or 7%, in fiscal 2023 compared to $11.7 million for fiscal 2022.

The gross profit margin decreased to 68% for fiscal 2023 compared to 70% for fiscal 2022.

The decrease in the gross profit margin for fiscal 2023 compared to fiscal 2022 is primarily attributable to the decrease in the proportion of subscription and perpetual license revenue, which is generally associated with higher margins, to digital engagement service revenue.

Operating Expenses

Sales and Marketing Expenses

Sales and marketing expenses of $5.2 million in fiscal 2022 increased $2.5 million, or 92%, from $2.7 million in fiscal 2021.

Sales and marketing expense as a percentage of total revenue increased to 31% in fiscal 2022 compared to 21% in fiscal 2021.

The increase compared to the prior period is primarily attributable to higher personnel costs and additional sales and marketing costs, including such additional costs related to the business acquisitions during fiscal 2021.

Sales and marketing expenses of $4.8 million in fiscal 2023 decreased $0.5 million, or 9%, from $5.2 million in fiscal 2022.

Sales and marketing expense as a percentage of total revenue decreased to 30% in fiscal 2023 compared to 31% in fiscal 2022.

The decrease compared to the prior period is primarily attributable to lower personnel costs and marketing spend on leads and conferences.

General and Administrative Expenses

General and administrative expenses of $3.4 million in fiscal 2022 increased $1.0 million, or 44%, from $2.4 million in fiscal 2021.

General and administrative expense as a percentage of revenue increased to 20% in fiscal 2022 compared to 18% in fiscal 2021.

These increases are primarily due to additional costs related to the business acquisitions during fiscal 2021.

General and administrative expenses of $3.2 million in fiscal 2023 decreased $0.2 million, or 6%, from $3.4 million in fiscal 2022.

General and administrative expense as a percentage of revenue was 20% in fiscal 2023 and fiscal 2022.

These decreases are primarily due to lower personnel costs.

Research and Development

Research and development expense of $3.2 million in fiscal 2022 increased $0.8 million, or 35%, from $2.4 million in fiscal 2021.

Research and development expense of $3.7 million in fiscal 2023 increased $0.5 million, or 14%, from $3.2 million in fiscal 2022.

Research and development expense as a percentage of total revenue increased to 23% in fiscal 2023 compared to 19% for fiscal 2022.

These increases compared to the prior period are primarily attributable to personnel and other additional costs related to the business acquisitions during fiscal 2021.

These increases compared to the prior period are primarily attributable to higher personnel costs.

Depreciation and Amortization

Depreciation and amortization expense of $1.6 million in fiscal 2022 increased by $0.4 million, or 33%, from $1.2 million in fiscal 2021.

Depreciation and amortization as a percentage of total revenue increased to 10% in fiscal 2022 compared to 9% in fiscal 2021.

These increases are primarily due to amortization of intangible assets resulting from business acquisitions during fiscal 2021.

Depreciation and amortization expense of $1.5 million in fiscal 2023 decreased by $0.1 million, or 4%, from $1.6 million in fiscal 2022.

Depreciation and amortization as a percentage of total revenue remained consistent at 10% in fiscal 2023 and 2022. 

Goodwill Impairment

During the year ended September 30, 2023, the Company recognized a goodwill impairment charge of $7.5 million. There were no goodwill impairment charges recognized during the year ended September 30, 2022.

Restructuring and Acquisition Related Expenses

Restructuring and acquisition related expenses was $0.1 million in fiscal 2023, compared to $0.2 million in fiscal 2022.

During fiscal 2023 expenses incurred were related to severance and merger and acquisition costs and during fiscal 2022 expenses incurred were related to further acquisition integrations.

Loss from Operations

The loss from operations was $1.9 million for fiscal 2022 compared to a loss from operations of $1.2 million for fiscal 2021, an increase of $0.7 million or 60%.

The loss from operations was $9.9 million for fiscal 2023 compared to a loss from operations of $1.9 million for fiscal 2022, a decrease of $8.0 million or 423%.

Change in fair value of contingent consideration, interest expense and other, net

Government grant income;

Change in fair value of warrant liabilities

The Company recognized a gain related to the change in fair value of warrant liabilities of $3.7 million, for the year ended September 30, 2022 and a loss related to the change in fair value of warrant liabilities of $5.9 million for the year ended September 30, 2021, respectively.

During the year ended September 30, 2021, the Company recognized government grant income of $88 thousand associated with proceeds received under the PPP deemed probable to be forgiven based on the actual expenditures for qualified expenses during the period.

As of the first quarter of fiscal 2021, the Company expended all loan proceeds on qualified expenses incurred during the period.

The Company applied for full PPP loan forgiveness on March 29, 2021 and received approval from the U.S.

Small Business Administration’s (the “SBA”) in August 2021.

During the first quarter of fiscal 2021, the remaining loan proceeds were expended on qualified expenses and as a result, the Company recognized $88 thousand of government grant income.

During the years ended September 30, 2022 and 2021, change in fair value of contingent consideration, interest expense and other, net, was $0.4 million of gain in fiscal 2022 compared to a loss of $0.9 million in fiscal 2021, and included non-recurring non-operating costs.

Provision for Income Taxes

The provision for (benefit from) income taxes was $30 thousand for fiscal 2022 and ($1.2) million for fiscal 2021, respectively.

Income tax expense consists of estimated liability for federal and state income taxes owed by the Company.  Net operating loss (“NOL”) carryforwards are estimated to be sufficient to offset any potential taxable income for all periods presented.

The change in fair value of contingent consideration, interest expense and other, net, was $0.2 million of expense in fiscal 2023, which primarily consisted of non-recurring non-operating costs, compared to $0.4 million of income in fiscal 2022, which primarily consisted of the change in fair value of contingent consideration. 

Change in fair value of warrant 

The Company recognized a gain related to the change in fair value of warrant liabilities of $0.6 million for fiscal 2023, and a gain related to the change in fair value of warrant liabilities of $3.7 million for fiscal 2022. 

Provision for Income Taxes 

The provision for (benefit from) income taxes was ($94) thousand for fiscal 2023 and $30 thousand for fiscal 2022.

Income tax expense consists of estimated liability for federal and state income taxes owed by the Company. Net operating loss (“NOL”) carryforwards are estimated to be sufficient to offset any potential taxable income for all periods presented.

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.

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As of September 30, 2023 and 2022, the Company had a valuation allowance on its net deferred tax assets of $10.8 million and $10.5 million, respectively.

The Federal NOL carryforward is approximately $27.8 million as of September 30, 2022 of which $21.9 million is subject to the 20-year carryforward and expire on various dates through 2039. The remaining federal NOL carryforward of $5.9 million is indefinite.

The Federal NOL carryforward is approximately $37.3 million as of September 30, 2023 of which $29.6 million is subject to the 20-year carryforward and expire on various dates through 2038. The remaining federal NOL carryforward of $7.7 million is indefinite.

Net operating losses incurred after December 31, 2017 carry forward indefinitely.

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The Company also has approximately $45.4 million in state NOLs which expire on various dates through 2041.

The acquisition of HawkSearch during the third quarter of fiscal 2021 resulted in the recognition of deferred tax liabilities of approximately $1.2 million related to intangible assets.

The acquisition of HawkSearch during the third quarter of fiscal 2021 resulted in the recognition of deferred tax liabilities of approximately $1.2 million related to intangible assets.

Prior to the business combination, the Company had a full valuation allowance on its net deferred tax assets.

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Consequently, the impact of such resulted in the release of $1.2 million of the pre-existing valuation allowance against the deferred tax assets and corresponding deferred tax benefit recognized during fiscal 2021.

We recognize deferred tax assets for 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.

Adjusted EBITDA

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GAAP operating performance measure) to Adjusted EBITDA:

September 30,

Year Ended September 30,

Net income (loss)

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Change in fair value of contingent consideration, interest expense and other, net

Government grant income

Change in fair value of warrants

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Depreciation and other amortization

Goodwill impairment

Restructuring and acquisition related charges

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Adjusted EBITDA

Adjusted EBITDA decreased year over year, which is primarily attributable to additional costs related to the business acquisitions during fiscal 2021 as well as additional sales and marketing spend.

Liquidity and Capital Resources

Operating Activities

Cash used in operating activities was $0.1 million during fiscal 2022 compared to $1.0 million during fiscal 2021.  The change in cash used in operating activities compared to the prior period was primarily due to an increase in net earnings partially offset by changes in non-cash items, including changes in fair value of warrant liabilities, and changes to accounts payable and accrued liabilities as well as deferred revenue.

Cash provided by operating activities was $0.3 million during fiscal 2023 compared to cash used in operating activities of $0.1 million during fiscal 2022. The change in cash used in operating activities compared to the prior period was primarily due to a decrease in net earnings and changes in non-cash items, including changes in fair value of warrant liabilities and goodwill impairment, and changes to accounts payable and accrued liabilities as well as deferred revenue.

Investing Activities

Cash used in investing activities was $0.2 million during fiscal 2022 compared to cash used in investing activities of $4.5 million during fiscal 2021.

Cash used in investing activities during fiscal 2022 related primarily to software development capitalized costs and purchases of property and equipment.

Cash used in investing activities during fiscal 2021 was primarily related to net cash paid for the purchase of businesses during the second and third fiscal quarters of 2021.

Cash used in investing activities was $25 thousand during fiscal 2023 compared to cash used in investing activities of $0.2 million during fiscal 2022.

Cash used in investing activities during fiscal 2023 related primarily to purchases of property and equipment.

Cash used in investing activities during fiscal 2022 was primarily related to capitalized software development costs and purchases of property and equipment.

Financing Activities

Cash used in financing activities was $5.5 million during fiscal 2022 compared with cash provided of $13.5 million during fiscal 2021.

Cash used in financing activities during fiscal 2022 was primarily related to deferred purchase price and contingent consideration payments related to acquisitions completed during fiscal 2021.

Cash provided by financing activities during fiscal 2021, was primarily attributable to cash proceeds of approximately $14.3 million related to the issuance of common stock, Series D Convertible Preferred Stock and stock options and warrant exercises partially offset by re-payments of contingent consideration and long-term debt assumed in connection with the acquisition of a business.

Cash used in financing activities was $0.6 million during fiscal 2023 compared with $5.5 million during fiscal 2022.

Cash used in financing activities during both fiscal 2023 and fiscal 2022 was primarily related to payments of long-term debt and deferred purchase price and contingent consideration payments related to acquisitions completed during fiscal 2021.

Capital Resources and Liquidity Outlook

In connection with an acquisition of a business completed during the 2021 fiscal year third quarter (HawkSearch), the Company recognized a contingent consideration obligation with a current carrying value of $0.3 million as of September 30, 2022, all of which was paid in October 2022.

In connection with an acquisition of a business completed during the 2021 fiscal year second quarter (WooRank), the Company assumed the outstanding long-term debt obligations of which approximately $1.0 million remains outstanding at September 30, 2022, with $0.4 million payable over the next twelve months.

The Company has historically incurred operating losses and used cash on hand and from financing activities to fund operations as well as develop new products.

The Company believes that future revenues and cash flows will supplement its working capital and it has an appropriate cost structure to support future revenue growth.

The Company may offer and sell, from time to time, in one or more offerings, up to $50 million of its debt or equity securities, or any combination thereof. 

Such securities offerings may be made pursuant to the Company’s currently effective registration statement on Form S-3 (File No.

333-262764), which was initially filed with the Securities and Exchange Commission on February 16, 2022 and declared effective on March 4, 2022 (the “Shelf Registration”). 

A complete description of the types of securities that the Company may sell is described in the Preliminary Prospectus contained in the Shelf Registration.  

As of the date of the filing of this Quarterly Report, there are no active offerings for the sale or obligations to purchase any of the Company’s securities pursuant to the Shelf Registration. 

There can be no assurances that the Company will offer any securities for sale or that if the Company does offer any securities that it will be successful in selling any portion of the securities offered on a timely basis if at all, or on terms acceptable to us. 

Further, our ability to offer or sell such securities may be limited by rules of the NASDAQ Capital Market.

The Company may offer and sell, from time to time, in one or more offerings, up to $50 million of its debt or equity securities, or any combination thereof. Such securities offerings may be made pursuant to the Company’s currently effective registration statement on Form S-3 (File No.

333-262764), which was initially filed with the Securities and Exchange Commission on February 16, 2022 and declared effective on March 4, 2022 (the “Shelf Registration”). A complete description of the types of securities that the Company may sell is described in the Preliminary Prospectus contained in the Shelf Registration. As of the date of the filing of this Quarterly Report, there are no active offerings for the sale or obligations to purchase any of the Company’s securities pursuant to the Shelf Registration. There can be no assurances that the Company will offer any securities for sale or that if the Company does offer any securities that it will be successful in selling any portion of the securities offered on a timely basis if at all, or on terms acceptable to us. Further, our ability to offer or sell such securities may be limited by rules of the Nasdaq Stock Market.

Off-Balance Sheet Arrangements

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We lease all of our office locations.

The gross obligations for operating leases and subleases is $0.6 million of which $0.2 million is expected in the next twelve months.

Debt payments on the Company’s various debt obligations total $1.0 million of which $0.4 million is expected to be paid in the next twelve months.

In connection with an acquisition of a business completed in the Company’s 2021 fiscal year, contingent consideration obligations total $0.3 million, which was paid in October 2022.

The gross obligations for operating leases and subleases is $0.4 million of which $0.2 million is expected in the next twelve months.

Debt payments on the Company’s various debt obligations total $0.7 million of which $0.3 million is expected to be paid in the next twelve months.

Critical Accounting Policies and Estimates

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Accounting for business combinations;

Accounting for common stock purchase warrants;

Accounting for stock-based compensation.

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The Company derives its revenue from two sources:

(i) Software Licenses, which are comprised of subscription fees (“SaaS”), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, and (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering search.

(i) Subscription and Perpetual Licenses, which are comprised of software subscription fees (“SaaS”), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, and (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering search.

Customers who license the software on a subscription basis, which can be described as “Software as a Service”

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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;

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.

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 the 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.

Determine the transaction price - The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding sales taxes that are collected on behalf of government agencies.

Allocate the transaction price to distinct performance obligations - The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services being provided to the customer.

The Company determines the SSP of its goods and services based upon the historical average sales prices for each type of software license and professional services sold.

Recognize revenue as the performance obligations are satisfied

Revenue is recognized when or as control of the promised goods or services is transferred to customers.

Recognize revenue as the performance obligations are satisfied - Revenue is recognized when or as control of the promised goods or services is transferred to customers.

Revenue from SaaS licenses is recognized ratably over the subscription period beginning on the date the license is made available to customers.

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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.

Payment terms may vary by customer but generally do not exceed 45 days from invoice date.

Invoicing for digital engagement services are either monthly or upon achievement of milestones and payment terms for such billings are within the standard terms described above.

Invoices for subscriptions and hosting are typically issued monthly and are generally due in the month of service.

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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 a reasonable possibility of changing.

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The Company re-measures this liability each reporting period and recognizes changes in the fair value through income (loss) before income taxes within the consolidated statements of operations.

Accounting for Common Stock Purchase Warrants

The Company evaluates common stock warrants as they are issued to determine whether they should be classified as an equity instrument or a liability.

Those warrants that are classified as a liability are carried at fair value at each reporting period, with changes in their fair value recognized in change in fair value of warrant liabilities in the consolidated statements of operations.

The fair value of the Company’s warrant liabilities are valued utilizing Level 3 inputs.

Warrant liabilities are valued using a Monte Carlo option-pricing model, which takes into consideration the volatilities of comparable public companies, due to the relatively low trading volume of the Company’s common stock.

The Monte Carlo option-pricing model uses certain assumptions, including expected life and annual volatility.

Accounting for Stock-Based Compensation

At September 30, 2023, we maintained two stock-based compensation plans, one of which has expired but still contains vested stock options.

The two plans are more fully described in Note 12 of these consolidated financial statements.

The Company accounts for stock-based compensation awards in accordance with ASC 718, Compensation-Stock Topic of the Codification.  Share-based payments (to the extent they are compensatory) are recognized in our consolidated statements of operations based on their fair values. 

We recognize stock-based compensation expense for share-based payments issued that are expected to vest on a straight-line basis over the service period of the award, which is generally three years.  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.

The two plans are more fully described in Note 12 –

Stockholders’

Equity of these consolidated financial statements.

The Company accounts for stock-based compensation awards in accordance with ASC 718, Compensation-Stock Compensation . 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 that are expected to vest on a straight-line basis over the service period of the award, which is generally three years. 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 recognize 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 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. 

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.

We estimate the fair value of 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 recognize to vary.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors