What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-12-27 compared with 2022-12-21 · 434 added, 507 removed, 757 unchanged (55% of the section changed)

Quantitative and Qualitative Disclosures About Market Risk.

Not required. 

Financial Statements and Supplementary Data.

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Consolidated Statements of Comprehensive Income/(Loss) for the years ended September 30, 2023 and 2022

Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2022 and 2021

Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2023 and 2022

Consolidated Statements of Cash Flows for the years ended September 30, 2023 and 2022

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit 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 audit, 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.

Those standards require that we plan and perform the audit 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 audit, 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.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Goodwill and Intangible Assets

As described in Notes 6 and 7 to the consolidated financial statements, the carrying values of the Company’s goodwill and intangible assets, net of accumulated amortization, was $8.5 million and $4.9 million, respectively, as of September 30, 2023.

The carrying value of goodwill is not amortized, but is tested for impairment annually as of September 30, as well as whenever events or changes in circumstances indicate that the carrying amount of a reporting unit may not be recoverable.

Goodwill is assessed at the consolidated level as one reporting unit.

The Company periodically reviews its long-lived assets, which includes its finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may exceed their fair value.

During the quarter ended September 30, 2023, due to macro-economic conditions and a sustained decline in the Company's market capitalization, management determined a quantitative impairment test should be performed. Therefore management, with the assistance of an independent valuation expert, performed a quantitative test of impairment on goodwill and finite-lived intangible assets as of September 30, 2023.

As a result, based on the quantitative assessment performed, the Company recognized a goodwill impairment charge of $7.5 million during the year ended September 30, 2023, and concluded that its finite-lived intangible assets were not impaired.

Given the determination of the fair value of goodwill and finite-lived intangible assets required significant judgment by management when developing the fair value estimate of the consolidated reporting unit and estimating the recoverability of the asset group, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, and including the need to involve professionals in our firm having the expertise in the valuation of long-lived assets.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included:

obtaining an independent third-party valuation report to gain an understanding of management’s key assumptions used in determining the fair value of goodwill and finite-lived intangible assets.

evaluating the mathematical accuracy of the calculations including the completeness and accuracy of underlying data used in the models.

evaluating the reasonableness of significant assumptions used by management related to growth rates, including management’s ability to accurately forecast future revenue and cash flows by comparing actual results to management’s historical forecasts and evidence obtained in other areas of the audit.

using professionals with specialized skills and knowledge to assist in evaluating the appropriateness of the Company’s undiscounted and discounted cash flow models including key assumptions used by management.

assessing the appropriateness of the disclosures in the consolidated financial statements.

Warrant Liabilities

As described in Note 5 to the consolidated financial statements, the Company classifies warrants on its Series A, C and D convertible preferred stock as liabilities that are subject to re-measurement on a quarterly basis.

As described in Note 5 to the consolidated financial statements, the Company classifies warrants on its Series A, C and D convertible preferred stock as liabilities that are subject to re-measurement on a quarterly basis.

Management, with the assistance of an independent valuation expert, estimates the fair value of the warrant liabilities using the Monte Carlo option-pricing model, which takes into consideration the volatilities of the Company and comparable public companies.

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evaluating management’s assessment and accounting analysis as to the classification of warrant liabilities.

obtaining third party valuation reports to gain an understanding of management’s key assumptions used in determining the fair value of warrant liabilities.

obtaining independent third-party valuation reports to gain an understanding of management’s key assumptions used in determining the fair value of warrant liabilities.

with the assistance of our valuation specialists, evaluating the methodologies and key assumptions used by management to assess the Company’s fair value of warrant liabilities, including assessing the reasonableness of the source information underlying the valuation assumptions.

performing independent shadow calculations to test the reasonableness of the fair values for warrant liabilities concluded on by the Company’s specialist.

assess the appropriateness of the disclosures in the consolidated financial statements.

assessing the appropriateness of the disclosures in the consolidated financial statements.

/s/ PKF O'Connor Davies, LLP

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Total current assets

10,418  

Property and equipment, net

1 unchanged sentence

Intangible assets, net

15,985  

Goodwill, net

15,985  

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Accrued liabilities

Purchase price and contingent consideration payable, current portion (Note 17)

Purchase price and contingent consideration payable, current portion

Deferred revenue

Total current liabilities

Long-term debt, net of current portion (Note 10)

Long-term debt, net of current portion

Operating lease liabilities, net of current portion

Purchase price and contingent consideration payable, net of current portion (Note 17)

Warrant liabilities

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Total liabilities

17,390  

Commitments and contingencies (Note 14)

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50,000,000 shares authorized;

10,417,609 shares at September 30, 2022 and 10,187,128 shares at September 30, 2021, issued and outstanding

10,417,609 shares issued and outstanding at September 30, 2023 and September 30, 2022

Additional paid-in capital

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Accumulated deficit

( 89,577 )  

Accumulated other comprehensive loss

( 248 )  

Total stockholders’

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Years Ended September 30,

Digital engagement services

$ 3,259  

$ 3,296  

Subscription and perpetual licenses

13,560  

Digital engagement services

Total net revenue

16,819  

13,259  

Cost of revenue:

Digital engagement services

Subscription and perpetual licenses

Digital engagement services

Total cost of revenue

11,702  

Operating expenses:

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Depreciation and amortization

Goodwill impairment

Restructuring and acquisition related expenses

Total operating expenses

13,599  

Loss from operations

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

Government grant income (Note 10)

Interest (income) expense and other, net

Change in fair value of warrant liabilities

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Provision for (benefit from) income taxes

Net income (loss)

Deemed dividend on convertible preferred stock (Note 12)

Net loss attributable to common shareholders

$ 2,145  

Net income (loss) per share attributable to common shareholders:

$ 0.21  

$ 0.20  

Net (loss) income

Net (loss) income per share attributable to common stockholders:

Number of weighted average shares outstanding:

10,232,862  

5,935,981  

10,366,907  

5,935,981  

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

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(in thousands)

Years Ended September 30,

Year Ended September 30,

Net income (loss)

$ 2,145  

Other comprehensive income (loss):

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Comprehensive income (loss)

Deemed dividend on convertible preferred stock (Note 12)

Comprehensive loss attributable to common shareholders

$ 2,278  

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

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Stock-based compensation expense

Deemed dividend on beneficial conversion feature (Note 12)

Issuance of common stock –

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warrants exercised

Issuance of common stock, net of offering costs

Issuance of stock in connection with acquisition of a business

Issuance of Series D convertible preferred stock, net of offering costs

Issuance of Series D convertible preferred in connection with acquisition of business

Series D convertible preferred stock conversion to common

Issuance of restricted common stock

Foreign currency translation

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Stock-based compensation expense

Issuance of common stock –

stock options exercised

Issuance of common stock –

warrants exercised

Issuance of restricted common stock

Foreign currency translation

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(in thousands)

September 30,

Year Ended September 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Amortization of intangible assets

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Deferred income taxes

Government grant income (Note 10)

Goodwill impairment

Changes in operating assets and liabilities

Accounts receivable

Prepaid expenses and other current assets and other assets

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

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Total adjustments

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Software development capitalization costs

Purchase of property and equipment

Purchase of business, net of cash acquired

Software development capitalization costs

Net cash (used in) investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of Series D convertible preferred stock, net of issuance costs

Proceeds from stock option and warrant exercises

Payments of contingent consideration and deferred cash payable

Payments of long-term debt

Net cash (used in) provided by financing activities

Payments of contingent consideration and deferred cash payable

Proceeds from stock option and warrant exercises

Net cash (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Right-of-use asset obtained in exchange for new operating lease liability

Consideration paid in stock in connection with acquisition of businesses

Offering costs settled by issuance of liability classified warrants

Deemed dividend on convertible preferred stock (Note 12)

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

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Bridgeline Digital is a marketing technology company that offers a suite of products that help companies grow online revenue by driving more traffic to their websites, converting more visitors to purchasers, and increasing average order value.

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

HawkSearch leverages advanced artificial intelligence, machine learning and industry-leading merchandising features to deliver accurate and highly relevant results and recommendations derived from multiple 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 with support for multiple languages.

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

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

Our Unbound platform is a Digital Experience Platform that includes Web Content Management, eCommerce, Digital Marketing, and Web Analytics.

The Unbound platform, combined with its professional services, assists customers in powering engaging digital experiences that drive lead generation, increase revenue, improve customer service and loyalty, enhance employee knowledge, and reduce operational costs. 

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

TruPresence provides centralized and distributed management of content and products from parent sites down to multiple child sites for consistency in branding and messaging, while also enabling regional / local site owners to manage the local messaging, products and promotions specific to their local market.

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.

The software uniquely combines 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 Bridgeline’s software is available through a cloud-based Software as a Service (“

SaaS ”) model, whose flexible architecture provides customers hosting and support.

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.

Bridgeline Digital was incorporated under the laws of the State of Delaware on August 28, 2000.

The Company’s corporate office is located in Woburn, Massachusetts.  The Company maintains regional field offices serving the following geographical locations:

The Company’s corporate headquarters is located in Woburn, Massachusetts. The Company maintains regional field offices serving the following geographical locations:

Woodbury, New York;

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(in thousands, except share and per share data)

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

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The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.

The most significant estimates included in these consolidated financial statements are the valuation of accounts receivable, including the adequacy of the allowance for doubtful accounts, recognition and measurement of deferred revenues, fair value of contingent consideration and fair value measurements related to the valuation of warrants.

The most significant estimates included in these consolidated financial statements are the valuation of accounts receivable, including the adequacy of the allowance for doubtful accounts, valuation of long-lived assets, recognition and measurement of deferred revenues, fair value of contingent consideration and fair value measurements related to the valuation of warrants.

The complexity of the estimation process and factors relating to assumptions, risks and uncertainties inherent with the use of the estimates affect the amount of revenue and related expenses reported in the Company’s consolidated financial statements.

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The Company considers all highly liquid instruments with original maturity of three months or less from the date of purchase to be cash equivalents.

The Company’s cash is maintained with what management believes to be high-credit quality financial institutions.  At times, deposits held at these banks may exceed the insured limits.  Management believes that the financial institutions that hold the Company’s deposits are financially sound and have minimal credit risk.

The Company’s cash is maintained with what management believes to be high-credit quality financial institutions. At times, deposits held at these banks may exceed the insured limits. Management believes that the financial institutions that hold the Company’s deposits are financially sound and have minimal credit risk.

Risks associated with cash and cash equivalents are mitigated by the Company’s investment policy, which limits the Company’s investing of excess cash into only money market mutual funds.

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Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable.

The Company extends credit to customers on an unsecured basis in the normal course of business.  Management performs ongoing credit evaluations of its customers’

financial condition and limits the amount of credit when deemed necessary.  Accounts receivable are carried at original invoice amount, less an estimate for doubtful accounts based on a review of all outstanding amounts.

The Company extends credit to customers on an unsecured basis in the normal course of business. Management performs ongoing credit evaluations of its customers’

financial condition and limits the amount of credit when deemed necessary. Accounts receivable are carried at original invoice amount, less an estimate for doubtful accounts based on a review of all outstanding amounts.

The Company has no off-balance sheets risks such as foreign exchange contracts, interest rate swaps, option contracts or other foreign hedging agreements.

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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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do not take possession of the software.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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.

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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.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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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The Company provides disaggregation of revenue based on geography and product groupings (see Note 15 ) as it believes this best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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 is 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 is 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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Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets ( three to five years).

Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful life of the asset or the lease term.  Repairs and maintenance costs are expensed as incurred.

Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful life of the asset or the lease term.

Repairs and maintenance costs are expensed as incurred.

Internal-Use Software

Costs incurred in the preliminary stages of development were expensed as incurred.  Once an application had reached the development stage, internal and external costs, if direct and incremental, were capitalized until the software was substantially complete and ready for its intended use.

Costs incurred in the preliminary stages of development were expensed as incurred. Once an application had reached the development stage, internal and external costs, if direct and incremental, were capitalized until the software was substantially complete and ready for its intended use.

Capitalization ceased upon completion of all substantial testing.

The Company also capitalized costs related to specific upgrades and enhancements when it was probable that the expenditures would result in additional functionality.  Capitalized costs were recognized as part of equipment and improvements.

Training costs were expensed as incurred.  Internal use software was amortized on a straight-line basis over its estimated useful life, generally three years.

The Company also capitalized costs related to specific upgrades and enhancements when it was probable that the expenditures would result in additional functionality. Capitalized costs were recognized as part of equipment and improvements.

Training costs were expensed as incurred. Internal use software was amortized on a straight-line basis over its estimated useful life, generally three years.

Implementation costs incurred in cloud-computing arrangements that are a service contract are capitalized and amortized over the life of the arrangement.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Research and Development and Software Development Costs

Costs for research and development of a software product to sell, lease or otherwise market are charged to operations as incurred until technological feasibility has been established.  Once technological feasibility has been established, certain software development costs incurred during the application development stage are eligible for capitalization.

Costs for research and development of a software product to sell, lease or otherwise market are charged to operations as incurred until technological feasibility has been established. Once technological feasibility has been established, certain software development costs incurred during the application development stage are eligible for capitalization.

Based on the Company’s software product development process, technological feasibility is established upon completion of a working model.

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Capitalization ceases when a product is available for general release to customers.

Capitalization costs are included in other assets in the consolidated financial statements.  The Company incurred development costs of $ 0.1  million during fiscal 2022 and none in fiscal 2021.

Capitalization costs are included in other assets in the consolidated financial statements. The Company did not incur any development costs during fiscal 2023 and incurred $ 0.1 of development costs in fiscal 2022 .

Intangible Assets

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Customer related

3 - 10  

Domain and trade names

1 - 15  

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in each business combination.

Goodwill is 

not  amortized, but it is subject to an annual assessment for impairment, which the Company performs during the 

fourth  quarter, or more frequently if events occur or circumstances change such that it is more likely than 

not  that an impairment 

exist. Goodwill is assessed at the consolidated level as one reporting unit.

In applying the goodwill impairment test, the Company has the option to perform a qualitative test (also known as “Step 

) or a quantitative test (“Step 

Under the Step 

0  test, the Company 

first  assesses qualitative factors to determine whether it is more likely than 

not  that the fair value of the reporting unit is less than its carrying value.

Qualitative factors 

include, but are 

not  limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other entity and reporting unit specific events.

If after assessing these qualitative factors, the Company determines it is “more-likely-than- not”

 that the fair value of the reporting unit is less than the carrying value, then performing the Step 

1  quantitative test is necessary.

Step 1  of the quantitative test requires comparison of the fair value of the reporting unit to the respective carrying value.

If the carrying value of the reporting unit is less than the fair value, 

no  impairment exists.

Otherwise, the Company would recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value up to the amount of goodwill. 

The Company generally estimates the fair value using a weighting of the income and market approaches.

The Company uses industry accepted valuation models.

Under the income approach, the Company uses a discounted cash flow methodology which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others.

For the market approach, the Company uses the guideline public company method.

Under this method, the Company utilizes information from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values.

The Company also reconciles the aggregate fair values of its reporting unit to its current market capitalization, allowing for a reasonable control premium.

BRIDGELINE DIGITAL, INC.

1 unchanged sentence

(in thousands, except share and per share data)

The carrying value of goodwill is not amortized, but is tested for impairment annually as of September 30, as well as on an interim basis whenever events or changes in circumstances indicate that the carrying amount of a reporting unity may not be recoverable.

An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Goodwill is assessed at the consolidated level as one reporting unit.

Valuation of Long-Lived Assets

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If such fair value is less than the current carrying value, the asset is written down to the estimated fair value.

There were no impairments of goodwill or long-lived assets in fiscal 2022 or 2021.

There were no impairments of long-lived assets, other than impairment of goodwill, in fiscal 2023 or 2022 .

Business Combinations

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The Company determines the appropriate method of measuring assets and liabilities as to whether the method should be based on the functional currency of the entity in the environment in which it operates or the reporting currency of the Company, the U.S.

dollar.  The Company has determined that the functional currency of its foreign subsidiaries are the local currencies of their respective jurisdictions.  Assets and liabilities are translated into U.S.

dollar. The Company has determined that the functional currency of its foreign subsidiaries are the local currencies of their respective jurisdictions. Assets and liabilities are translated into U.S.

dollars at exchange rates in effect at the balance sheet date.

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equity and are included in accumulated other comprehensive income (loss).

The Company’s foreign currency translation net gains (losses) for fiscal 2022 and 2021 were $ 133 and $ 28 , respectively.  Transaction gains and losses related to monetary assets and liabilities denominated in a currency different from a subsidiary’s functional currency are included in the consolidated statements of operations.

The Company’s foreign currency translation net gains (losses) for fiscal 2023 and 2022 were ($ 28 ) and $ 133 , respectively. Transaction gains and losses related to monetary assets and liabilities denominated in a currency different from a subsidiary’s functional currency are included in the consolidated statements of operations.

Segment Information

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The Company estimates forfeitures at the date of grant based on the Company’s historical experience and future expectations.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Common Stock Purchase Warrants

The Company estimated the fair value of common stock warrants issued to non-employees using a binomial options pricing model.

The Company estimates the fair value of common stock warrants issued to non-employees using a binomial options pricing model.

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

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

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Advertising Costs

Advertising costs are expensed when incurred.

Such costs were $ 459 and $ 286 for fiscal 2022 and 2021, respectively.

Such costs were $ 112  and $ 169  for fiscal 2023 and 2022 , respectively.

Employee Benefits

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tax code that affected the Company’s fiscal year ended September 30, 2018, including, but not limited to, reducing the U.S.

federal corporate tax rate. 

For taxable years after December 31, 2017, the Tax Act reduced the federal corporate tax rate to 21 percent.

federal corporate tax rate. For taxable years after December 31, 2017, the Tax Act reduced the federal corporate tax rate to 21 percent.

The Tax Act repealed the Corporate Alternative Minimum Tax (“AMT”).

9 unchanged sentences

Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company provides for reserves for potential payments of taxes to various tax authorities related to uncertain tax positions.  Reserves are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely than not”

to be realized following resolution of any uncertainty related to the tax benefit, assuming that the matter in question will be raised by the tax authorities.  Interest and penalties associated with uncertain tax positions are included in the provision for benefit from income taxes.

The Company provides for reserves for potential payments of taxes to various tax authorities related to uncertain tax positions. Reserves are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely than not”

to be realized following resolution of any uncertainty related to the tax benefit, assuming that the matter in question will be raised by the tax authorities. Interest and penalties associated with uncertain tax positions are included in the provision for benefit from income taxes.

The Company does not provide for U.S.

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Net Income (Loss) Per Share

The Company presents basic and diluted income (loss) per share information for its common stock.

The Series D Preferred Stock was considered participating securities, as the security may participate in undistributed earnings with common stock.

The holders of the Series D Preferred Stock are entitled to share in dividends, on an as-converted basis, if the holders of common stock were to receive dividends, other than dividends in the form of common stock.

The Company is required to use the two -class method when computing earnings per share.

The two -class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings.

In determining the amount of net earnings to allocate to common stockholders, earnings are allocated to both common and participating securities based on their respective weighted-average shares outstanding for the period.

Securities are deemed not to be participating in losses if there is no obligation to fund such losses.

The Series D Preferred Stock does not participate in losses, and as a result, the Company does not allocate losses to these securities in periods of loss.

Diluted earnings per share for the common stock is computed using the more dilutive of the two -class method or the “if-converted”

and treasury stock methods. During the fourth quarter of fiscal 2021, all Series D Preferred Stock were converted to common shares with no remaining Series D Preferred Stock outstanding at September 30, 2022 or 2021.

The Company presents basic and diluted income (loss) per share information for its common stock. Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net income (loss) per share attributable to common stockholders is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of outstanding stock options and warrants using the “treasury stock”

method and convertible preferred stock using the as-if-converted method. The computation of diluted earnings per share does not include the effect of outstanding stock options, warrants and convertible preferred stock that are considered anti-dilutive.

BRIDGELINE DIGITAL, INC.

1 unchanged sentence

(in thousands, except share and per share data)

Basic net income (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding.  Diluted net income (loss) per share attributable to common shareholders is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of outstanding stock options and warrants using the “treasury stock”

method and convertible preferred stock using the as-if-converted method.  The computation of diluted earnings per share does not include the effect of outstanding stock options, warrants and convertible preferred stock that are considered anti-dilutive.

Recently Issued Accounting Pronouncements Not Yet Effective

Recently Adopted Accounting Standards

Debt —

Debt with Conversion and Other Options

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020 - 06, Debt —

Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging —

August 2020,  the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 

2020 - 06,  

Debt —

Debt with Conversion and Other Options (Subtopic  

470 - 20 )  and 

Derivatives and Hedging —

Contracts in Entity ’

s Own Equity (Subtopic 815 - 40 ) (“ASU 2020 - 06”

The ASU 2020 - 06 simplifies the accounting for convertible instruments and application of the equity classification guidance and made certain disclosure amendments.

s Own Equity (Subtopic  

40 )  (“ASU 

2020 - 06 ”).

The ASU 

2020 - 06  simplifies the accounting for convertible instruments and application of the equity classification guidance and made certain disclosure amendments.

In addition, this ASU also amends certain aspects of the earnings per share (“EPS”) guidance.

ASU 2020 - 06 is effective for financial reporting periods beginning after December 15, 2021, except smaller reporting companies for which this ASU is effective for financial reporting periods beginning after December 15, 2023.

Early adoption is permitted, and an entity should adopt this ASU as of the beginning of its annual fiscal year.

The Company elected to early adopt ASU 2020 - 06 as of the first day of the fiscal year ending September 30, 2023, using the modified retrospective approach.

Based on an evaluation performed, the Company determined that the adoption of ASU 2020 - 06 will not have any impact on its accumulated deficit as of October 1, 2022 or any other components of the balance sheet.

The Company does not expect that the adoption of ASU 2020 - 06 to have a material impact on its earnings per share.

2020 - 06  is effective for financial reporting periods beginning after 

December 15, 2021 ,  except smaller reporting companies for which this ASU is effective for financial reporting periods beginning after 

December 15, 2023 .

 Early adoption is permitted, and an entity should adopt this ASU as of the beginning of its annual fiscal year.

The Company elected to early adopt ASU 

2020 - 06  as of the 

first  day of the fiscal year ending 

September 30, 2023 ,  using the modified retrospective approach which allows for a cumulative-effect adjustment to the opening balance of retained earnings or accumulated deficit in the period of adoption.

The adoption of ASU 2020 - 06 did not have any impact on the accumulated deficit or any other components of the consolidated balance sheet as of October 1, 2022 nor did it have a material impact on earnings per share for the year ended September 

Recently Issued Accounting Pronouncements Not Yet Effective

Financial Instruments –

5 unchanged sentences

ASU 2016 - 13 is effective for smaller reporting companies for annual reporting periods beginning after December 15, 2022, including interim periods within those annual reporting periods, with early adoption permitted.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements and related disclosures.

The adoption of ASU 2016 - 13 during the Company's fiscal 2024 first quarter did not have a material impact on its consolidated financial statements and related disclosures.

Business Combinations

6 unchanged sentences

The guidance should be applied prospectively to business combinations occurring on or after the effective date of the amendment in this update.

The Company is evaluating the potential impact of this adoption on its consolidated financial statements and related disclosures.

The adoption of ASU 2021 - 08 during the Company's fiscal 2024 first quarter did not have a material impact on its consolidated financial statements and related disclosures.

Segment Reporting 

In November 2023, the FASB issued ASU No.

2023 - 07,  

Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures, which requires that an entity report segment information in accordance with Topic 280, Segment Reporting.

The amendment in the ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements which is expected to result in enhanced disclosures.

In December 2023, the FASB issued ASU No.

2023 - 09,  

Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this Update are effective for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements which is expected to result in enhanced disclosures.

All other Accounting Standards Updates issued but not yet effective are not expected to have a material effect on the Company’s future consolidated financial statements or related disclosures.

9 unchanged sentences

Allowance for doubtful accounts

( 180 )  

Accounts receivable, net

1 unchanged sentence

$ 1,182  

As of and for the year ended September 30, 2022, no customers exceeded 10% of accounts receivable and no customers exceeded 10% of the Company’s total revenues.

As of and for the year ended September 30, 2021, two customers represented approximately 13 %, and 10 % of accounts receivable and no customers exceeded 10% of the Company’s total revenues.

As of and for the years ended September 30, 2023  and 2022  

no customers exceeded 10% of accounts receivable and no customers exceeded 10% of the Company’s total revenues. 

Property and equipment

6 unchanged sentences

Less accumulated depreciation and amortization

( 456 )  

Property and equipment, net

Depreciation and amortization on the above assets were $ 102 and $ 72 in fiscal 2022 and 2021, respectively.

Depreciation and amortization on the above assets were $ 144  and $ 102 in fiscal 2023 and 2022 , respectively.

Fair Value Measurement and Fair Value of Financial Instruments

13 unchanged sentences

The carrying value of the Company’s accounts receivable and accounts payable approximate their fair value due to their short-term nature.

As of September 30, 2022 and 2021, the aggregate fair values of long-term debts were $0.9 million and $ 1.7 million, respectively, with an aggregate carrying value of $ 1.0 million and $ 1.9 million, respectively.

As of September 30, 2023 and 2022 , the aggregate fair values of long-term debts were $ 0.6  million and $ 0.9 million, respectively, with an aggregate carrying value of $ 0.7  million and $ 1.0  million, respectively.

The fair value is based on interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities.

If measured at fair value in the financial statements, the debt would be classified as Level 2 in the fair value hierarchy.

If measured at fair value in the consolidated financial statements, the debt would be classified as Level 2 in the fair value hierarchy.

BRIDGELINE DIGITAL, INC.

10 unchanged sentences

As of September 30, 2022

Risk-free rate

Montage Capital

Series C Preferred

Series D Preferred

Montage Capital

Series C Preferred

Series D Preferred

60.7 %  

3 unchanged sentences

83.9 %  

Risk-free rate

$ 0.83  

The Company recognized a gain of $ 3,655 and a loss of ($ 5,885 ) for the years ended September 30, 2022 and 2021, respectively, related to the change in fair value of warrant liabilities.

$ 0.83  

$ 1.31  

The Company recognized a gain $ 0.6 million and $ 3.7 million for the years ended September 30, 2023 and 2022 , respectively, related to the change in fair value of warrant liabilities.

The changes in fair value of warrant liabilities were due to changes in inputs, primarily a change in the stock price and the risk-free rate, to the Monte Carlo option-pricing model.

The Company’s contingent consideration obligations are from arrangements resulting from acquisitions that involve potential future payment of consideration that is contingent upon the achievement of the revenue targets and operational goals. Contingent consideration is recognized at its estimated fair value at the date of acquisition based on the Company’s expected probability of future payment, discounted using a weighted average cost of capital in accordance with accepted valuation methodologies.

The Company’s goodwill (see Note 6 ) and contingent consideration obligations were from arrangements resulting from acquisitions, completed in prior periods not presented.

The contingent consideration was a result of former potential future payments of consideration that were contingent upon the achievement of revenue targets and operational goals. Contingent consideration is recognized at its estimated fair value at the date of acquisition based on the Company’s expected probability of future payment, discounted using a weighted average cost of capital in accordance with accepted valuation methodologies.

The Company reviews and re-assesses the estimated fair value of contingent consideration liabilities at each reporting period and the updated fair value could differ materially from the initial estimates.

4 unchanged sentences

Significant increases or decreases to either of these inputs in isolation could result in a significantly higher or lower liability with a higher liability limited to the contractual maximum of the contingent consideration liabilities.

Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and each reporting period and the amount paid will be recognized in earnings.

The significant inputs and assumptions utilized were as follows:

At September 30,

Revenue discount rate

Revenue volatility

The fair value of contingent consideration was $ 250 thousand on 

September 30, 2022 , all of which was paid in October 2022. 

There were no contingent consideration amounts remaining thereafter.

Assets and liabilities of the Company measured at fair value on a recurring basis as of September 30, 2023 and 2022 , are as follows:

As of September 30, 2023

Goodwill, net

$ 8,468  

Discount rate

$ 8,468  

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

Assets and liabilities of the Company measured at fair value on a recurring basis as of September 30, 2022 and 2021, are as follows:

Warrant liabilities:

Series A and C

Total warrant liabilities

As of September 30, 2022

7 unchanged sentences

(in thousands, except share and per share data)

As of September 30, 2021

Warrant liabilities:

Series A and C

Total warrant liabilities

The following table provides a roll forward of the fair value, as determined by Level 3 inputs, as follows:

Contingent Consideration Obligations

Total Liabilities

Warrant Liabilities  

Balance at beginning of period, October 1, 2021

$ 3,649  

$ 4,404  

The following table provides a rollforward of the fair value, as determined by Level 3 inputs, as follows:

Consideration

Balance at beginning of period, October 1, 2020

Exercises or payments

( 2,768 )  

Adjustment to fair value

Balance at end of period, September 30, 2021

( 631 )  

$ 4,404  

Balance at end of period, September 30, 2022

Exercises or payments

( 250 )  

Adjustment to fair value

2 unchanged sentences

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.  

Annual tests were performed at September 30, 2022 and 2021.

Management performed a qualitative assessment that did not result in any impairment indicators at September 30, 2022 and 2021.

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Impairment charges are reflected as a reduction in goodwill in the Company’s consolidated balance sheets and an expense in the Company’s consolidated statements of operations. 

Annual tests were performed at September 30, 2023 and 2022 .

Due to the current inflationary macro-economic conditions and a sustained decline in the Company's market capitalization, for the 2023 test, the Company elected to forgo the qualitative test and performed a quantitative goodwill impairment test by comparing the fair value of its reporting unit to its respective carrying value.

The Company estimated the fair value of the reporting unit using a 75% and 25% weighting to the market approach and income approach, respectively, and a discount rate of 22.9%.

The Company used industry accepted valuation models.

Under the income approach (level 3 inputs), the Company used a discounted cash flow methodology which required management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others.

For the market approach, the Company used the guideline public company method.

Under this method, the Company utilized information from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit, to create valuation multiples that were applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values.

The Company also reconciled the aggregate fair value of its reporting unit to its current market capitalization, allowing for a reasonable control premium.

Based on the impairment assessment performed ,  the Company recognized a goodwill impairment charge of $ 7.5  million, all of which was attributable to goodwill, during fiscal 2023.

The Company concluded that the definite-lived and other long-lived assets were 

not  impaired.

For fiscal 

2022  management performed a qualitative assessment that did not result in any impairment indicators at 

September 30, 2022 .

Changes in the carrying value of goodwill are as follows:

18 unchanged sentences

$ 6,268  

Total amortization expense related to intangible assets was $ 1,487 and $ 1,130 for the years ended September 30, 2022 and 2021, respectively, and is reflected in Operating expenses on the consolidated statements of operations.

The estimated amortization expense for fiscal years 2023, 2024, 2025, 2026, 2027 and thereafter is $ 1,373 , $ 1,004 , $ 723 , $ 667 , $ 554 and $ 1,947 , respectively.

Total amortization expense related to intangible assets was $ 1,378  and $ 1,487 for the years ended September 30, 2023 and 2022 , respectively, and is reflected in Operating expenses on the consolidated statements of operations.

The estimated amortization expense for fiscal years 

2024, 2025, 2026, 2027, 2028  and thereafter is $ 990 , $ 730 , $ 671 , $ 557 , $ 557  and $ 1,385 , respectively.

Accrued Liabilities

5 unchanged sentences

Restructuring and Acquisition Related Expenses

In connection with the acquisition of businesses completed during fiscal 2021  (see Note 17 ), the Company incurred restructuring and acquisition related expenses of $ 0.2 million and $ 1.2 million during the year ended September 30, 2022 and 2021, which are included in Restructuring and acquisition related expenses in the consolidated statements of operations.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The Company incurred restructuring and acquisition related expenses of $ 0.1  million and $ 0.2 million during the year ended September 30, 2023 and 2022 , which are included in Restructuring and acquisition related expenses in the consolidated statements of operations.

Long-term Debt

On March 1, 2021, the Company assumed the outstanding long-term debt obligations of an acquired business and issued a seller note to one of the selling shareholders (see Note 17 ).

On March 1, 2021, the Company assumed the outstanding long-term debt obligations of an acquired business and issued a seller note to one of the selling stockholders.

The assumed debt obligations and seller note are denominated in Euros.

1 unchanged sentence

As of September 30,

Vendor loan payable (“Vendor loan”), accruing interest at 3.0 % per annum.

Principal and interest are payable in one remaining installment in March 2023.

Term loan payable, accruing interest at fixed rates ranging between 0.99 % to 1.5 % per annum, payable in monthly or quarterly payments of interest and principal and matures in October 2022.

Term loan payable, accruing interest at 3-Month EURIBOR plus 1.3 % per annum, payable in quarterly installments starting in April 2023 and matures in July 2028 .

Seller’s note payable (“Seller’s note”), due to one of the selling shareholders, accruing interest at a fixed rate of 4.0% per annum.

Seller’s note payable (“Seller’s note”), due to one of the selling stockholders, accruing interest at a fixed rate of 4.0 % per annum.

The Seller’s note is payable over 5 installments and matures in September 2025 .

Vendor loan payable (“Vendor loan”), accruing interest at 3.0 % per annum.

Principal and interest are payable in one remaining installment in March 2023.

Term loan payable, accruing interest at fixed rates ranging between 0.99 % to 1.5 % per annum, payable in monthly or quarterly payments of interest and principal and matured in October 2022 .

Less current portion:

Long-term debt, net of current portion

( 267 )  

At September 30, 2022, future maturities of long-term debt are as follows:

Fiscal year :

$ 1,017  

Long-term debt, net of current portion

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data) 

At September 30, 2023 , future maturities of long-term debt are as follows:

The Company leases facilities in the United States for its corporate and regional field offices.

28 unchanged sentences

Sublease income, net

Cash paid for amounts included in the measurement of lease liabilities was $ 108 and $ 225 for the years ended September 30, 2022 and 2021, respectively, all of which represents operating cash flows from operating leases.

As of September 30, 2022 and 2021, the weighted average remaining lease term was 3.4 and 3.3 years, respectively, and the weighted average discount rate was 7.0 % for both periods.

(156 )  

Cash paid for amounts included in the measurement of lease liabilities was $ 233 thousand and $ 108 thousand for the years ended September 30, 2023 and 2022 , respectively, all of which represents operating cash flows from operating leases.

As of September 30, 2023 and 2022 , the weighted average remaining lease term was 3.1  and 3.4 years, respectively, and the weighted average discount rate was 7.0 % for both periods.

At September 30, 2023 , future minimum rental commitments under non-cancelable leases with initial or remaining terms in excess of one year, which have commenced, were as follows:

Payments Operating Leases  

Receipts Subleases  

Total lease commitments

Amount representing interest

( 83 )  

Present value of lease liabilities

Current portion

( 148 )  

Operating lease liabilities, net of current portion

In fiscal 2022 the Company entered into a lease which ends in January 2028 for office space in Rosemont, IL. 

Total rental payments over the full term will be $ 0.4 million. 

There is an option, at the Company’s election, to terminate the lease early in August 2025.

If the early termination option were to be executed, the total rent payments would be $0.2 million, plus a $ 0.1 million termination fee.

As of September 30, 2023 , the Company had no lease commitments that extend past fiscal 2028.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Starting October 1, 2023, the Company has subleased its office space in Rosemont, Illinois.

The sublease is for $ 6  thousand per month, through August 31, 2025.

At September 30, 2022 , future minimum rental commitments under non-cancelable leases with initial or remaining terms in excess of one year were as follows:

Payments Operating Leases  

Receipts Subleases  

Total lease commitments

Amount representing interest

( 116 )  

Present value of lease liabilities

Current portion

( 199 )  

Operating lease liabilities, net of current portion

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Stockholders ’

Under our Certificate of Incorporation, we are authorized, subject to limitations prescribed by Delaware law and our Charter, to issue up to 1,000,000  shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions.

Our Board of Directors can increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders.

Our Board of Directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. 

Under our Certificate of Incorporation, we are authorized, subject to limitations prescribed by Delaware law and our Charter, to issue up to 

1,000,000  shares of preferred stock in 

one  or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions.

Our Board of Directors can increase or decrease the number of shares of any series, but 

not  below the number of shares of that series then outstanding, without any further vote or action by our stockholders.

Our Board of Directors 

authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock.

Series A Convertible Preferred Stock

The Company has designated 264,000 shares of its preferred stock as Series A Convertible Preferred Stock (“Series A Preferred Stock”).

The shares of Series A Preferred Stock may be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series A Preferred Stock to be converted, multiplied by the stated value of $ 10 and (ii) divided by the conversion price in effect at the time of conversion.

As of September 30, 2022 and 2021, the Company had no shares of Series A Preferred Stock outstanding.

The Company has designated 

264,000  shares of its preferred stock as Series A Convertible Preferred Stock (“Series A Preferred Stock”).

The shares of Series A Preferred Stock 

may  be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series A Preferred Stock to be converted, multiplied by the stated value of $ 10  and (ii) divided by the conversion price in effect at the time of conversion.

September 30, 2023  and 2022 ,  the Company had 

no  shares of Series A Preferred Stock outstanding.

Series B Convertible Preferred Stock

The Company has designated 5,000 shares of its preferred stock as Series B Convertible Preferred Stock (“Series B Preferred Stock”).

The shares of Series B Preferred Stock may be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series B Preferred Stock to be converted, multiplied by the stated value of $ 1,000 and (ii) divided by the conversion price in effect at the time of conversion.

As of September 30, 2022 and 2021, the Company had no shares of Series B Preferred Stock outstanding. 

The Company has designated 

5,000  shares of its preferred stock as Series B Convertible Preferred Stock (“Series B Preferred Stock”).

The shares of Series B Preferred Stock 

may  be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series B Preferred Stock to be converted, multiplied by the stated value of $ 1,000  and (ii) divided by the conversion price in effect at the time of conversion.

As of September 30, 2023  and 

2022 , the Company had 

no  shares of Series B Preferred Stock outstanding. 

Series C Convertible Preferred Stock

The Company has designated 11,000 shares of its preferred stock as Series C Convertible Preferred Stock (“Series C Preferred Stock”).

The shares of Series C Preferred Stock may be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series C Preferred Stock to be converted, multiplied by the stated value of $ 1,000 and (ii) divided by the conversion price in effect at the time of conversion.

Series C Preferred Stock vote on an as-converted basis along with shares of the Company’s common stock, are not entitled to receive dividends, unless specifically declared by our Board of Directors, and in the event of any liquidation, dissolution or winding up of the Company the holders of Series C Preferred Stock are entitled to receive in preference to the holders of common stock, Series A Preferred Stock, Series B Preferred Stock and any other stock, the amount equal to the stated value per share of Series C Preferred Stock.

The Company may not effect, and a holder will not be entitled to, convert the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99% ) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

As of September 30, 2022 and 2021, the Company had 350 shares of Series C Preferred Stock outstanding, which were convertible into an aggregate of 38,889 shares of the Company’s common stock. 

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Registered Offering of Common Stock and Private Placement of Series D Convertible Preferred Stock (the “

May 2021 Offerings ”

On May 14, 2021, the Company offered and sold a total of 1,060,000 shares of its common stock, to certain institutional investors at a public offering price of $ 2.28 per share in a registered direct offering (“RD Offering”).

The RD Offering was registered under the Securities Act of 1933, as amended, pursuant to a prospectus supplement to the Company's currently effective registration statement on Form S- 3.

Additionally, on May 14, 2021, the Company entered into securities purchase agreements with certain institutional investors pursuant to which the Company offered and sold a total of 2,700 units (“Units”) at a purchase price of $ 1,000 per Unit (“Private Placement”).

Each Unit consisted of (i) one share of the Company’s newly designated Series D Convertible Preferred Stock (“Series D Preferred Stock”) and (ii) warrants to purchase common stock up to one -half of the shares issuable upon conversion of the Series D Preferred Stock as a part of the Units.

In total, the Company issued 2,700 shares of Series D Preferred Stock and warrants to purchase up to 592,106 shares of common stock.

Joseph Gunnar & Company, LLC acted as lead placement agent for both the RD Offering and the Private Placement (collectively, the “May 2021 Offerings”) and Taglich Brothers, Inc.

acted as co-placement agent for the May 2021 Offerings (the "Placement Agents").

As compensation for their services, the Company paid to the Placement Agents a fee equal to 8 % of the aggregate purchase price paid and reimbursed the Placement Agents for certain expenses incurred in connection with the May 2021 Offerings.

In addition, the Company issued to the Placement Agents warrants, in substantially the same form as the Series D Preferred Warrants, to purchase an aggregate of 179,536 shares of common stock.

In connection with the Private Placement, the Company has designated 4,200 shares of its preferred stock as Series D Convertible Preferred Stock. 

The shares of Series D Preferred Stock may be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series D Preferred Stock to be converted, multiplied by the stated value of $ 1,000 and (ii) divided by the conversion price in effect at the time of conversion. 

Holders of Series D Preferred Stock were prohibited from converting Series D Preferred Stock into conversion shares if, as a result of such conversion, the holder, together with its affiliates, would own more than 4.99 % (or 9.99 % upon the election of the holder prior to the issuance of the Series D Preferred Stock) of the total number of shares of common stock then issued and outstanding.

At the original issuance date, shares of Series D Preferred Stock issued in Private Placement were convertible into an aggregate of 1,184,211 shares of common stock.

The Company’s common stock is listed on the NASDAQ Capital Market, and, as such, it is subject to the applicable rules of the Nasdaq Stock Market LLC, including Nasdaq Listing Rule 

5635 (a), which requires stockholder approval in connection with the acquisition of another company (see Note 17 ) if the Nasdaq-listed company will issue 20% or more of its common stock.

For purposes of Nasdaq Listing Rule 

5635 (a), the issuance of any common stock in the Acquisition (see Note 17 ) and the May 2021 Offerings would be aggregated together.

Thus, to permit the issuance of common stock upon conversion of the Series D Preferred Stock and upon exercise of the warrants issued in the Private Placement, the Company had to obtain stockholder approval of these issuances.

Upon issuance, the Company had determined that such prohibition did not represent an inability for the Company to satisfy its obligation to deliver shares upon conversion, as the holders’

conversion option itself was contingent upon Stockholder Approval.

On September 16, 2021, the Company obtained Stockholder Approval.

The Company determined that the Series D Preferred Stock should be classified as permanent equity.

The Series D Preferred Stock contained an embedded conversion feature that could affect the ultimate settlement of the Series D Preferred Stock.

The Company determined that the embedded conversion feature’s economic characteristics and risks were clearly and closely related to the economic characteristics and risks of the Series D Preferred Stock.

As a result, the embedded conversion feature was not required to be bifurcated from the Series D Preferred Stock.

The Series D Preferred Stock issued contained a beneficial conversion feature, which arises when a debt or equity security is issued with an embedded conversion option that is deemed beneficial to the investor, that is, in-the-money, at inception, as the conversion option has an effective conversion price that is less than the market price of the underlying stock at the commitment date.

An embedded beneficial conversion feature is required to be recognized separately by allocating a portion of the proceeds equal to the intrinsic value, at the commitment date, of the feature to additional paid-in capital.

As discussed below, the May 2021 Offerings cash proceeds allocated to the Series D Preferred Stock based on its relative fair value resulted in an effective conversion price of $ 1.41 , which was below the commitment date fair value of the underlying shares of common stock of $ 2.50 , resulting in a beneficial conversion feature measured at $ 1.3 million.

As discussed in Note 17, upon the acquisition of HawkSearch during the third quarter of fiscal 2021, Series D Preferred Stock was issued as part of consideration transferred in which the intrinsic value of the embedded conversion feature was calculated at $ 724 as of the acquisition date.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

During the fourth quarter of fiscal 2021, the Company recognized the impact of the beneficial conversion feature upon Stockholder Approval, as the beneficial conversion feature became immediately exercisable, at the option of the holder.

The Company recognized full accretion of the beneficial conversion feature as a deemed dividend of $ 2.0 million to the Series D Preferred Stock.

Such deemed dividend was recognized as an increase to accumulated deficit and an increase to additional paid-in capital and was included as a component of net loss attributable to common stockholders. During the fourth quarter of fiscal 2021, all Series D Preferred Stock was converted to common shares with no remaining Series D Preferred Stock outstanding at September 30, 2022 and 2021.

As noted above, in connection with the May 2021 Offerings, the Company issued Series D Preferred Warrants and Placement Agents Warrants to purchase up to 592,106 and 179,536 shares of common stock, respectively.

The Series D Preferred and Placement Agents Warrants (hereinafter referred to collectively as the “Series D Warrants”) are puttable at the option of the holder in the event of a Fundamental Transaction, as defined in the respective warrant agreements.

The put feature requires the Company to pay holders an amount of cash equal to the Black-Scholes Value, as defined in the respective warrant agreements, of the remaining unexercised portion of the Series D Warrants on the date of consummation of such Fundamental Transaction.

The Company determined that the Series D Warrants are required to be classified as liabilities measured at fair value at their issuance date and to be subsequently remeasured at fair value each reporting period, with changes in fair value recognized in period earnings (see Note 5 ).

As the common stock in the RD Offering was sold concurrently with the Units sold in the Private Placement, for any common purchasers, inclusive of purchaser affiliated entities, the aggregate proceeds from the May 2021 Offerings were allocated, on an investor-by-investor basis, to the Series D Preferred Warrants based on their fair value and the residual proceeds to the common stock and Series D Preferred Stock based on their relative fair values.

Accordingly, the May 2021 Offerings proceeds, net of certain fees due to placement agents, inclusive of the fair value of warrants issued to placement agents, and transaction-related expenses, of $ 4.3 million were allocated $ 1.0 million to the Series D Preferred Warrants based on their issuance-date fair value, $ 1.9 million to common stock and $ 1.3 million to Series D Preferred Stock based on their respective relative fair values.

The issuance-date fair value of the Series D Warrants issued to placement agents was determined to be incremental cost directly attributable to the May 2021 Offerings and was charged by the Company against proceeds along with other fees paid to the Placement Agents.

Registered Offering and Sale of Common Stock

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 “Offering”).

The Offering was registered under the Securities Act of 1933, as amended, pursuant to a prospectus supplement to the Company’s currently effective registration statement on Form S- 3 (File No.

333 - 239104 ), which was initially filed with the SEC on June 12, 2020, and was declared effective on June 25, 2020.

The Company filed the final prospectus supplement for the Offering on or about February 5, 2021.

The Offering closed on February 8, 2021, and resulted in proceeds, net of certain fees due to placement agents and transaction expenses, to the Company of approximately $ 2.5 million.

The net proceeds received by the Company will be used for general corporate purposes, including general working capital.

Joseph Gunnar & Company, LLC acted as lead placement agent for the Offering, and Taglich Brothers, Inc.

acted as co-placement agent for the Offering.

As compensation for their services, the Company paid to the Placement Agents a fee equal to 8 % of the aggregate purchase price paid for shares placed by the Placement Agents at closing and reimbursed the Placement Agents for certain expenses incurred in connection with the Offering.

In addition, the Company issued to the Placement Agents warrants to purchase an aggregate of 58,169 shares of common stock (the “Placement Agent Warrants”).

The Placement Agent Warrants have a term of five years from the date of issuance and an exercise price of $3.875 per share.

The Company has designated 

11,000  shares of its preferred stock as Series C Convertible Preferred Stock (“Series C Preferred Stock”).

The shares of Series C Preferred Stock 

may  be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series C Preferred Stock to be converted, multiplied by the stated value of $ 1,000  and (ii) divided by the conversion price in effect at the time of conversion.

Series C Preferred Stock vote on an as-converted basis along with shares of the Company’s common stock, are 

not  entitled to receive dividends, unless specifically declared by our Board of Directors, and in the event of any liquidation, dissolution or winding up of the Company the holders of Series C Preferred Stock are entitled to receive in preference to the holders of common stock, Series A Preferred Stock, Series B Preferred Stock and any other stock, the amount equal to the stated value per share of Series C Preferred Stock.

The Company 

not  effect, and a holder will 

not  be entitled to, convert the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 

4.99%  (or, at the election of the holder, 

9.99% ) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

September 30, 2023  and 

2022 ,  the Company had 

350  shares of Series C Preferred Stock outstanding, which were convertible into an aggregate of 

38,889  shares of the Company’s common stock. 

Series D Convertible Preferred Stock

The Company has designated 

4,200  shares of its preferred stock as Series D Convertible Preferred Stock (“Series D Preferred Stock”). The shares of Series D Preferred Stock 

be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series D Preferred Stock to be converted, multiplied by the stated value of $ 1,000  and (ii) divided by the conversion price in effect at the time of conversion.

The Company 

not  effect, and a holder will 

not  be entitled to convert, the Series D Preferred Stock or exercise any Series D Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 

4.99 % (or, at the election of the holder, 

9.99 %) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

September 30, 2023  and 2022 , the Company had no shares of Series D Preferred Stock outstanding.

BRIDGELINE DIGITAL, INC.

5 unchanged sentences

This Plan expired in August 2016.

As of September 30, 2022, there were 1,333 options outstanding under the Plan.

On April 29, 2016, the stockholders approved a new stock incentive plan, the 2016 Stock Incentive Plan (the “2016 Plan”).

The 2016 Plan authorizes the award of incentive stock options, non-statutory stock options, restricted stock, unrestricted stock, performance shares, stock appreciation rights and any combination thereof to employees, officers, directors, consultants, independent contractors and advisors of the Company.

At the annual meeting held on March 30, 2022, the Company’s stockholders voted to amend the 2016 Plan to increase the number of shares of the Company’s common stock available for issuance as awards granted under the Stock Incentive Plan to 1,650,000 shares.

As of September 30, 2022, there were 1,356,594  options outstanding and 239,074  shares available for future issuance under the 2016 Plan.

The 2016 Plan provides for the issuance in the aggregate of up to 2,400,000 shares of common stock associated with awards granted under the Stock Incentive Plan.

September 30, 2023 , there were 1,831,515 options outstanding and approximately 315,422  shares available for future issuance under the 2016 Plan.

Compensation Expense

Compensation expense is generally recognized on a graded accelerated basis over the vesting period of grants.

Compensation expense is recognized in the consolidated statements of operations with a portion charged to Cost of revenue and a portion to Operating expenses, depending on the employee’s department.

Compensation expense is recorded in the consolidated statements of operations with a portion charged to Cost of revenue and a portion to Operating expenses, depending on the employee’s department.

During the years ended September 30, 2023 and 2022 , compensation expense related to share-based payments was as follows:

September 30,

Year Ended September 30,  

Cost of revenue

Operating expenses

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

Change in fair value of contingent consideration, interest expense and other, net includes compensation expense related the fair value of fully-vested stock options granted in August 2021 and April 2022. 

During fiscal 2022 and 2021, 120,000 shares and 100,000 shares, respectively, were granted to directors, as more fully described below under the caption “

Summary of Option and Warrant Activity and Outstanding Shares .” 

As of September 30, 2022, the Company had approximately $ 0.9  million of unrecognized compensation costs related to unvested options, which is expected to be recognized over a weighted-average period of 2.14  years.

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

Change in fair value of contingent consideration, interest expense and other, net includes compensation expense related to the fair value of fully-vested stock options granted to directors in August 2023 and April 2022. 

As of September 30, 2023 , the Company had approximately $ 0.7  million of unrecognized compensation costs related to unvested shared-based payments, which is expected to be recognized over a weighted-average period of 1.9  years.

Common Stock Warrants

The Company typically issues warrants to individual investors and placement agents to purchase shares of the Company’s common stock in connection with public and private placement fund raising activities.

Warrants may also be issued to individuals or companies in exchange for services provided to the Company.

The warrants are typically exercisable six months after the issue date, expire in five years, and contain a cashless exercise provision and piggyback registration rights.

Montage Warrant - As additional consideration for a prior loan arrangement which was paid in full in a prior period not presented, the Company issued to Montage Capital an eight -year warrant (the “Montage Warrant”) to purchase the Company’s common stock at a price equal to $ 132.50 per share.

Warrants 

may  also be issued to individuals or companies in exchange for services provided to the Company.

The warrants are typically exercisable 

six  months after the issue date, expire in 

five  years, and contain a cashless exercise provision and piggyback registration rights.

Montage Warrant  - As additional consideration for a prior loan arrangement which was paid in full in a prior period 

not  presented, the Company issued to Montage Capital an 

eight -year warrant (the “Montage Warrant”) to purchase the Company’s common stock at a price equal to $ 132.50  per share.

The Montage Warrant contains an equity buy-out provision upon the earlier of ( 1 ) dissolution or liquidation of the Company, ( 2 ) any sale or distribution of all or substantially all of the assets of the Company, or ( 3 ) a “Change in Control”

as defined within the meaning of Sections 13 (d) and 14 (d)( 2 ) of the Securities Exchange Act of 1934.

Montage Capital has the right to receive an equity buy-out of $ 250 .

as defined within the meaning of Sections 

13 (d) and 

14 (d)( 2 ) of the Securities Exchange Act of 

 Montage Capital has the right to receive an equity buy-out of $ 250 .

If the equity buy-out is exercised, the Montage Warrant will be surrendered to the Company for cancellation.

Series A and B and C Preferred Warrants - In March 2019, in connection with the issuance of the Company’s Series C Preferred Stock, the Company issued warrants to purchase the Company’s common stock.

These warrants were designated as (i) Series A Warrants with an initial term of 5.5 years and an exercise price of $4.00;

(ii) Series B Warrants, which expired unexercised during the Company’s 2021 fiscal year, with an initial term of 24 months and an exercise price of $4.00;

and (iii) Series C Warrants with an initial term of 5.5 years and an exercise price of $ 0.05 (collectively, hereinafter referred to as the “Series C Preferred Warrants”).

The Company also issued warrants with an exercise price of $ 4.00 to purchase shares of the Company’s common stock to the Placement Agents.

The Company may not effect, and a holder will not be entitled to convert, the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99% ) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

Series A and B and C Preferred Warrants -  In 

March 2019, 

in connection with the issuance of the Company’s Series C Preferred Stock, the Company issued warrants to purchase the Company’s common stock.

These warrants were designated as (i) Series A Warrants with an initial term of 

5.5  years and an exercise price of 

 (ii) Series B Warrants, which expired unexercised during the Company’s 

2021  fiscal year, with an initial term of 

24  months and an exercise price of 

 and (iii) Series C Warrants with an initial term of 

5.5  years and an exercise price of $ 0.05  (collectively, hereinafter referred to as the “Series C Preferred Warrants”).

The Company also issued warrants with an exercise price of $ 4.00  to purchase shares of the Company’s common stock to the Placement Agents.

The Company 

not  effect, and a holder will 

not  be entitled to convert, the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 

4.99%  (or, at the election of the holder, 

9.99% ) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

September 30, 2023 ,  the number of shares issuable upon exercise of the (i) Series A Warrants were 

872,625  shares;

(ii) Series C Warrants were 

13,738  shares;

(iii) the Placement Agent Warrants issued in connection with the Series C Preferred Stock were 

11,992  shares;

and (iv) Investor Warrants were 

41,621  shares.

BRIDGELINE DIGITAL, INC.

1 unchanged sentence

(in thousands, except share and per share data)

As of September 30, 2022, the number of shares issuable upon exercise of the (i) Series A Warrants were 872,625 shares;

(ii) Series C Warrants were 13,738 shares;

(iii) the Placement Agent Warrants issued in connection with the Series C Preferred Stock were 11,992 shares;

and (iv) Investor Warrants were 41,621 shares.

Series D Preferred Warrants - The Units sold in Private Placement on May 14, 2021 also consisted of Series D Warrants to purchase up to 592,106 shares of common stock.

The Series D Preferred Warrants issued on May 14, 2021 have an initial exercise date of November 14, 2021, with a term of five and a half years which ends on November 16, 2026.

Series D Preferred Warrants have an exercise price of $2.51.

In addition, pursuant to the May 2021 Offerings, the Company issued to the Placement Agents warrants to purchase an aggregate of 179,536 shares of common stock.

The Placement Agents Warrants issued on May 14, 2021 have an initial exercise date of November 14, 2021, with a term of five years which ends on May 12, 2026.

The Placement Agent Warrants have an exercise price of $2.85.

The Company may not effect, and a holder will not be entitled to convert, the Series D Preferred Stock or exercise any May 2021 Offering Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99% ) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

As of September 30, 2022, no Series D Warrants have been exercised and the aggregate number of shares issuable upon exercise was 592,106 and 179,536 shares for investors and placement agents, respectively.

Series D Preferred Warrants – In May 2021, in connection with the issuance of the Company’s Series D Preferred Stock, the Company issued warrants to purchase the Company’s common stock.

These warrants consisted of (i) warrants issued to investors in Series D Preferred Stock to purchase in the aggregate up to 

592,106  shares of common stock with an initial term of 

five  and a half years which ends on 

November 16, 2026 and an initial exercise price of 

$2.51 and (ii) Placement Agents warrants to purchase an aggregate of 

179,536  shares of common stock with an initial term of 

five  years which ends on 

May 12, 2026 and an initial exercise price of 

Collectively, these warrants are referred to as the “Series D Preferred Warrants.”

The Company 

not  effect, and a holder will 

4.99%  (or, at the election of the holder, 

9.99% ) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

September 30, 2023 ,  

no  Series D Warrants have been exercised and the aggregate number of shares issuable upon exercise was 

592,106  and 

179,536  shares for investors and placement agents, respectively.

The Montage Warrants, Series A and C Preferred Warrants, the Placement Agent Warrants issued in connection with the Series C Preferred Stock, and the Series D Warrants were all determined to be derivative liabilities and are subject to remeasurement each reporting period (see Note 5 ).

During year ended September 30, 2022, 26,605 Placement Agent Warrants were exercised. 

During years ended September 30, 2023  and 2022, there were 0  and 26,605 Placement Agent Warrants exercised, respectively. 

Total warrants outstanding as September 30, 2023 , were as follows:

24 unchanged sentences

Warrant Issuances

The Company did not issue warrants to purchase common stock during the year ended September 30, 2022.

During the year ended September 30, 2021, the Company issued warrants to purchase common stock as follows:

Exercise Price

Placement Agent - public offering

58,169  

$ 3.88  

Investors - Series D

592,106  

$ 2.51  

Placement Agent

179,536  

$ 2.85  

Total issued in fiscal 2021

829,811  

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The Company did not issue warrants to purchase common stock during the years ended September 30, 2023  and 

Summary of Option and Warrant Activity and Outstanding Shares

During the year ended September 30, 2023 ,  

the Company, (i) issued 300,000 total options to its Chief Executive Officer at an exercise price of $ 1.18 , which vest in 36 equal monthly installments over a three -year period, (ii) issued 50,000 total options to employees at an exercise price of $ 1.34 , which vest ratably over a 

three -year period in equal quarterly installments, (iii) issued 152,000 total options to employees at an exercise price of $ 1.18 , which vest ratably over a 

three -year period in equal quarterly installments, and (iv) issued 200,000 total options to the Board of Directors at an exercise price of $ 1.18 , which vested immediately.

During the year ended September 30, 2022 ,the Company, (i) issued 5,000 total options at an exercise price of $ 3.99 , which vest ratably over a 3 -year period, (ii) issued 120,000 total options to Board members at an exercise price of $ 1.85 , which vested immediately upon issuance, (iii) issued 362,000 total options to its Chief Executive Officer at an exercise price of $ 1.85 , which vest ratably over a 3 -year period, (iv) issued 48,000 total options to employees at an exercise price of $ 1.27 , which vest ratably over a 3 -year period and (v) issued 200,000 total shares of restricted stock to its Chief Executive Officer at grant-date fair value of $ 1.29 , based upon the closing price of the Company’s common stock on the grant date, which vest quarterly over a 3 -year period.

All such options granted expire ten years from date of grant.

During the year ended September 30, 2021, the Company granted options to purchase 240,000  shares of which (a) 95,500 shares were granted at an exercise price of $2.51, which vest ratably over a three -year period commencing on June 1, 2021, ( b) 100,000 shares were granted to directors at an exercise price of $ 5.92 which vested immediately upon the grant date of August 2, 2021, and (c) 44,500 shares were granted at an exercise price of $ 4.11 , which vest ratably over a three -year period commencing on September 30, 2021.

All such options granted expire ten years from the date of grant.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the year ended September 30, 2023 and 2022 are as follows:

5 unchanged sentences

Expected life (in years)

88.5 %  

90.7 %  

89.2 %  

Risk-free interest rate

6 unchanged sentences

A summary of combined restricted stock, stock option and warrant activity is as follows:

Restricted Stock  

Stock Options

2 unchanged sentences

Weighted Average

Awards  

Exercise Price

7 unchanged sentences

535,000  

( 1,976,387 )

( 13,334 )  

( 26,605 )  

( 113,838 )  

( 133 )  

937.88  

( 4,511 )  

218.89  

Outstanding, September 30, 2022

7 unchanged sentences

( 64 )  

1,873.44  

Outstanding, September 30, 2023

5 unchanged sentences

There were 1,148,097  and 619,461 options vested and exercisable as of September 30, 2023 and 2022 , respectively.

The options outstanding at September 30, 2022 and 2021 had an aggregate intrinsic value of $ 2 and $ 1,530 , respectively.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The options outstanding at September 30, 2023 and 2022 had an aggregate intrinsic value of $ 0  and $ 2 , respectively.

A summary of the status of unvested options is as follows:

4 unchanged sentences

702,000  

( 541,048 )  

Forfeited/Cancelled

( 16,000 )  

Unvested at September 30, 2023

2 unchanged sentences

The following table summarizes information about outstanding stock options at September 30, 2023 :

Weighted Average  

Remaining  

Number of  

Contractual Life  

Weighted Average  

Aggregate  

Exercise Price

Intrinsic Value

Number of Options

Weighted Average Remaining Contractual Life (Years)

Weighted Average Exercise Price

Aggregate Intrinsic Value  

Options outstanding

4 unchanged sentences

$ 3.23  

Net Income (Loss) Per Share Attributable to Common Shareholders

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 Net Income (Loss) Per Share Attributable to Common Stockholders

Basic and diluted net income (loss) per share is computed as follows:

(in thousands, except share and per share data)

As of September 30,

Net income (loss) –

basic earnings per share

$ 2,145  

Deemed dividend on amendment of Series A convertible preferred stock

Net income (loss) applicable to common shareholders - basic earnings per share

Years Ended September 30,

Net income (loss) applicable to common stockholders - basic earnings per share

Effect of dilutive securities:

Change in fair value of in-the-money warrant derivative liabilities

( 39 )  

Net income (loss) applicable to common shareholders - diluted earnings per share

$ 2,106  

Net income (loss) applicable to common stockholders - diluted earnings per share

Weighted-average shares outstanding for basic earnings per share

10,232,862  

5,935,981  

Effect of dilutive securities:

81,765  

13,391  

Preferred stock

38,889  

Weighted-average shares outstanding for diluted earnings per share

10,366,907  

5,935,981  

Basic net income (loss) per share

$ 0.21  

Diluted net income (loss) per share

$ 0.20  

Potential common stock equivalents excluded from the computation of diluted net income (loss) per share because their inclusion would have been anti-dilutive were as follows (in shares):

1 unchanged sentence

Stock options

712,907  

765,232  

1,743,891  

1,788,745  

Convertible preferred stock

38,889  

Commitments and Contingencies

5 unchanged sentences

The Company has purchased insurance policies covering professional errors and omissions, property damage and general liability that reduce its monetary exposure for warranty-related claims and enable it to recover a portion of any future amounts paid.

The Company’s contracts typically provide for testing and client acceptance procedures that are designed to mitigate the likelihood of warranty-related claims, although there can be no assurance that such procedures will be effective for each project.  The Company has not paid any material amounts related to warranties for its solutions.  The Company sometimes commits unanticipated levels of effort to projects to remedy defects covered by its warranties.  The Company’s estimate of its exposure to warranties on contracts is immaterial as of September 30, 2022 and 2021.

The Company has not paid any material amounts related to warranties for its solutions. The Company sometimes commits unanticipated levels of effort to projects to remedy defects covered by its warranties. The Company’s estimate of its exposure to warranties on contracts is immaterial as of September 30, 2023 and 2022 .

The Company’s agreements with customers generally require the Company to indemnify the customer against claims in which the Company’s products infringe third -party patents, copyrights, or trademarks and indemnify against product liability matters.

As of September 30, 2022 and 2021, the Company has not experienced any losses related to the indemnification obligations and no significant claims with respect thereto were outstanding.  The Company does not expect significant claims related to the indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

As of September 30, 2023 and 2022 , the Company has not experienced any losses related to the indemnification obligations and no significant claims with respect thereto were outstanding. The Company does not expect significant claims related to the indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

The Company is subject to ordinary routine litigation and claims incidental to its business.

As of September 30, 2023 , the Company was not engaged in any material legal proceedings.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Revenues and Other Related Items

2 unchanged sentences

The Company’s revenue by geography (based on customer address) is as follows:

Years Ended September 30,

Year Ended September 30,

United States

5 unchanged sentences

The largest concentration within the Company’s international revenue geography is within Canada.

Long-lived assets located in foreign jurisdictions aggregated approximately $ 6.7 million and $ 7.5 million as of September 30, 2022 and 2021, respectively.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Long-lived assets located in foreign jurisdictions aggregated approximately $ 1.3  million and $ 2.3  million as of September 30, 2023 and 2022 , respectively.

The Company’s revenue by type is as follows:

4 unchanged sentences

11,182  

11,995  

Perpetual Licenses

9 unchanged sentences

$ 2,097  

Increase (decrease)

( 154 )  

Balance as of September 30, 2022

5 unchanged sentences

(in thousands, except share and per share data)

The components of the Company’s tax provision (benefit) as of September 30, 2022 and 2021, is as follows:

 Income Taxes

The components of the Company’s tax provision (benefit) as of September 30, 2023 and 2022 , is as follows: 

Year Ended September 30,

( 37 )  

Total current

( 31 )  

( 63 )  

Total deferred

( 63 )  

$ ( 94 )  

The Company’s income tax provision was computed using the federal statutory rate and average state statutory rates, net of related federal benefit.

2 unchanged sentences

Income tax provision/(benefit) at the federal statutory rate of 21%

Permanent differences, net

$ ( 1,995 )  

Permanent differences, net

State income tax provision/(benefit)

Foreign income taxed at different rates

( 30 )  

Foreign income taxed at different rates

Change in valuation allowance on deferred tax assets

True up adjustments

As of September 30, 2022, the Company has federal net operating loss (“NOL”) carryforwards of approximately $ 27.8  million of which $ 21.9 million is subject to the 20 -year carryforward and expire on various dates through 2039.

$ ( 94 )  

As of September 30, 2023 , the Company has federal net operating loss (“NOL”) carryforwards of approximately $ 37.3  million 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.

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Accordingly, the Company has established a valuation allowance against a portion of its deferred tax assets at September 30, 2023 and 2022 .

For the years ended September 30, 2022 and 2021, the valuation allowance for deferred tax assets increased by $ 0.4  million and decreased by $ 1.2  million, respectively.

The acquisition of HawkSearch, Inc.

in fiscal 2021 (see Note 17 ) resulted in the recognition of deferred tax liabilities of approximately $ 1,181  related to intangible assets.

For the years ended September 30, 2023 and 2022 , the valuation allowance for deferred tax assets increased by $ 0.3  million and $ 0.4  million, respectively.

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.

The deferred tax liabilities generated from the business combination netted against the Company’s pre-existing deferred tax assets.

Consequently, the impact of such resulted in the release of $1,181 of the pre-existing valuation allowance against the deferred tax assets and corresponding deferred tax benefit recognized during the year ended September 30, 2021.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense.

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.

We also recognize interest accrued related to unrecognized tax benefits in interest expense.

Penalties, if incurred, are recognized as a component of tax expense.

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The Company has not been audited by the Internal Revenue Service (“IRS”) or any states in connection with income taxes.

The tax periods from 2019 –

2022 generally remain open to examination by the IRS and state authorities.

The tax periods from 2020  –

2023  generally remain open to examination by the IRS and state authorities.

BRIDGELINE DIGITAL, INC.

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Bad debt reserve

Deferred revenue

Accrued expenses

Net operating loss carryforwards

10,627  

10,456  

Right of use liability

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Valuation allowance

( 10,802 )  

Net deferred tax assets

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Net deferred tax liabilities

$ ( 227 )  

Net deferred tax assets are reflected in Other assets and net deferred tax liabilities are reflected in Other long-term liabilities on the consolidated balance sheets.

Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $ 0 at September 30, 2022 and 2021.

There were no undistributed earnings of the Company’s foreign subsidiaries at September 30, 2023 and 2022 .

The 2017 Tax Act subjects a U.S.

shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries.

stockholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries.

The FASB Staff Q&A, Topic 740, No.

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Additionally, the 2017 Tax Act provides for a tax benefit to U.S.

taxpayers that sell goods or services to foreign customers under the new Foreign Derived Intangible Income Deduction ("FDII") rules.

As of September 30, 2022, the Company reported GILTI of $ 0.4 million, which resulted in $ 0.1 million of tax expense for the year ended September 30, 2022.

taxpayers that sell goods or services to foreign customers under the new Foreign Derived Intangible Income Deduction (“FDII”) rules.

As of September 30, 2023 , the Company did not have GILTI to be reported and as of September 30, 2022, the Company reported GILTI of $ 0.4 million, which resulted in $ 0.1 million of tax expense for the year ended September 30, 2022.

When accounting for uncertain income tax positions, the impact of uncertain tax positions is recognized in the consolidated financial statements if they are more likely than not of being sustained upon examination, based on the technical merits of the position.

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The Company does not expect any change to this determination in the next twelve months. 

WooRank Acquisition

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, an entity located in Belgium.

The Company accounted for the WooRank transaction as a business combination in accordance with ASC Topic 805, Business Combinations .

The purchase price consisted of ( 1 ) cash paid at closing, ( 2 ) deferred cash payable in installments post-closing, ( 3 ) a 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.

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 pursuant to three separate earn-out provisions.

Under certain conditions, up to €

600 thousand (approximately $ 723 thousand at acquisition date) of the purchase price is payable, at the Company’s discretion, in shares of the Company’s common stock, par value $ 0.001 per share (“common stock”), at a price per share equal to the greater of (i) the closing price of the Company’s common stock on the date of issuance or (ii) $ 3.38 .

On the closing date, the Company issued 29,433 shares of its common stock for a portion of the purchase price.

The Company accounted for the WooRank transaction as a business combination.

The Company determined that the fair value of the gross assets acquired was not concentrated in a single identifiable asset of a group of similar assets.

Assets acquired and liabilities assumed have been recognized at their estimated fair values as of the acquisition date.

The fair value of common stock issued as part of consideration transferred was determined based on the acquisition date closing market price of the Company’s common stock.

The estimated fair value of the contingent consideration was determined based on the Company’s expected probability of future payment, discounted using a weighted average cost of capital.

The fair value of the contingent consideration is included within Purchase price and contingent consideration payable on the consolidated balance sheets.

The fair value of intangible assets was based on valuations using a discounted cash flow model (Level 3 inputs) which requires significant estimates and assumptions, including estimating future revenues and costs.

The fair value of debt obligations assumed was based on the interest rates underlying these instruments in relation to the market rates available for similar instruments.

The excess of the purchase price over the assets acquired and liabilities assumed was recognized as goodwill.

The goodwill is attributable to expected synergies and customer cross selling opportunities between the Company and WooRank.

BRIDGELINE DIGITAL, INC.

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(in thousands, except share and per share data)

HawkSearch Acquisition

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, an Illinois corporation.

The purchase price consisted of ( 1 ) an initial cash payment at closing, ( 2 ) issuance of 1,500 shares of the Company’s newly designated Series D Preferred Stock, and ( 3 ) deferred cash payable on or before December 31, 2021.

The Hawk Purchase Agreement also provided 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) on or before July 1, 2022, the aggregate sum of $ 1,799 thousand (which was paid on July 1, 2022);

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

The Company accounted for the HawkSearch transaction as a business combination.

The Company determined that the fair value of the gross assets acquired was not concentrated in a single identifiable asset of a group of similar assets.

Assets acquired and liabilities assumed have be recognized at their estimated fair values as of the acquisition date.

The fair value of Series D Preferred Stock issued as part of consideration transferred was determined based on the price paid by third -party investors in the Private Placement (see Note 12 ) which occurred in close proximity to the acquisition date.

As more fully described in Note 12, the Series D Preferred Stock contains an embedded beneficial conversion feature.

The intrinsic value of $ 724 was calculated as of the acquisition date.

The fair value of contingent consideration was determined based on the probability of achievement of the revenue targets and operational goals, which includes estimating future revenues.

The excess of the purchase price over the assets acquired and liabilities assumed was recognized as goodwill.

The goodwill is attributable to expected synergies and customer cross selling opportunities between the Company and HawkSearch.

The acquisition date fair value of consideration transferred was as follows:

Cash paid at or in close proximity to closing

$ 4,800  

$ 5,085  

Future deferred payments

Common stock ( 29,433 shares at $ 3.38 per share)

Series D Convertible Preferred Stock ( 1,500 shares at $ 618 per share)

Seller’s note

Contingent consideration (earn-outs)

Total consideration paid

$ 2,401  

$ 9,920  

$ 12,321  

The acquisition date fair value of assets acquired, and liabilities assumed was as follows:

Assets acquired:

Non-cash current assets

Property and equipment

Intangible assets:

Acquired software

Customer relationships

Domain and trade names

10,428  

Total assets acquired

13,010  

18,181  

Liabilities assumed:

Current liabilities

Assumed debt obligations

Deferred tax liabilities

Total liabilities assumed

Total consideration paid

$ 2,401  

$ 9,920  

$ 12,321  

The average useful lives of the identifiable intangible assets acquired were as follows:

Acquired software

Customer relationships

Domain and trade names

Total revenue from the WooRank and HawkSearch acquisitions from their respective date of acquisition through September 30, 2021 

was $ 1.0 million and $ 1.9 million, respectively.

Total earnings from the acquisitions are impracticable to disclose as the operations were merged with existing operations and certain costs were not accounted for separately.

Pro Forma Information (Unaudited)

The following is the pro forma information assuming the acquisitions occurred on October 1, 2020:

(in thousands, except share and per share data)  

September 30,

$ 16,381  

Net income (loss) attributable to common shareholders - basic

Net income (loss) attributable to common shareholders - diluted

Net income (loss) per share attributable to common shareholders:

Weighted average common shares outstanding - basic

5,935,981  

Weighted average common shares outstanding - diluted

5,935,981  

Pro forma information for the year ended September 30, 2022, is not presented as the amount reported in the Consolidated Statements of Operations include the activities of these acquisitions for the period then ended.

Related Party Transactions

In October 2013, Mr.

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(“Taglich Brothers”), a New York based securities firm.

Taglich Brothers were the Placement Agents for many of the Company’s private offerings and debt issuances.

As of September 30, 2022, Michael Taglich beneficially owns approximately 3.6 % of the Company’s stock.

In connection with the November 2016 Private Placement, the Company issued to the investors warrants to purchase an aggregate total of 4,270 shares of common stock.

Included were warrant shares issued to Roger Kahn ( 172 shares), the Company’s President and Chief Executive Officer, and Michael Taglich ( 308 shares).

Each warrant share expires five and one -half years from the date of issuance and is exercisable for $ 175 per share beginning six months from the date of issuance, or May 9, 2017. 

The warrants expired in May 9, 2022.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Taglich Brothers acted as placement agents for many of the Company’s private offerings and debt issuances.

In connection with previous private offerings and debt issuances which occurred prior to the fiscal years presented in these consolidated financial statements, Taglich Brothers were granted Placement Agent Warrants to purchase 4,246 shares of common stock at a weighted average price of $ 321.00 per share and were granted Placement Agent Warrants to purchase 10,926 shares of common stock at a weighted average price of $ 761.61 per share. 

In consideration of previous loans made by Michael Taglich to the Company and the personal guaranty on a former third -party credit facility no longer maintained by the Company, Mr.

Taglich has been issued warrants to purchase common stock totaling 1,080 shares at an exercise price of $ 1,000 per share.

In November 2018, the Company engaged Taglich Brothers Inc, on a non-exclusive basis, to perform advisory and investment banking services to identify possible acquisition target possibilities.

Michael Taglich, a director and shareholder of the Company, is the President and Chairman of Taglich Brothers Inc.

Fees for the services were $ 8 per month for three months and $ 5 per month thereafter, cancellable at any time.

In November 2018, the Company engaged Taglich Brothers Inc, on a non-exclusive basis, to perform advisory and investment banking services to identify possible acquisition target possibilities. 

Fees for the services were $ 8 thousand per month for three months and $ 5 thousand per month thereafter, cancellable at any time.

Taglich Brothers Inc.

could also earn a success fee ranging from $ 200 for a revenue target acquisition of under $5 million up to $ 1 million for an acquisition target over $200 million.

could also earn a success fee ranging from $ 200 thousand for a revenue target acquisition of under $5 million up to $ 1 million for an acquisition target over $200 million. 

In connection with the asset purchase of Stantive, Taglich Brothers earned a success fee of $200,000.

Michael Taglich purchased 350 units in the amount of $ 350 of Series C Preferred Stock and associated warrants in the private transaction consummated on March 13, 2019.

Taglich’s purchase was subject to stockholder approval pursuant to Nasdaq Marketplace Rule 5635 (c), for which approval by the stockholders of the Company was obtained on April 26, 2019.

In connection with the February and May 2021 Offerings (see Note 12 ), Taglich Brothers, Inc.

received warrants to purchase 82,945 shares of the Company’s common stock with a weighted average exercise price of $ 3.21 and weighted average term of 5.0 years.

Taglich’s purchase was subject to stockholder approval pursuant to the Nasdaq Stock Market Rule 5635 (c), for which approval by the stockholders of the Company was obtained on April 26, 2019.

In connection with the Company’s registered direct offering completed in February 2021, the Company issued Taglich Brothers 29,084 Investors warrants.

Each warrant to purchase common stock expires five years from the date of issuance and is non-cash exercisable for $ 3.875 per share beginning six -months from the date of issuance, or February 4, 2021. The warrants expire February 4, 2026. 

In connection with the Company’s Series D Preferred Stock registered direct offering and PIPE completed in May 2021, the Company issued Taglich Brothers 53,861 Investors warrants. Each warrant to purchase common stock expires five years from the date of issuance and is non-cash exercisable for $ 2.850 per share beginning six -months from the date of issuance, or May 14, 2021. The warrants expire May 12, 2026. 

Subsequent Events

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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 7A. Quantitative and Qualitative Disclosures About Market Risk