Bridgeline Digital(BLIN) - 2023 Q4 - Annual Report

PART I Item 1. Business Bridgeline Digital, Inc. is a marketing technology company providing cloud-based software products to help businesses increase online revenue - Bridgeline Digital is a marketing technology company focused on helping companies grow online revenue through a suite of products[150] - The company's software is primarily available through a cloud-based Software as a Service (SaaS) model, with some products also offered via perpetual licensing[133][180] Key Product Offerings | Product | Description | | :--- | :--- | | HawkSearch | AI-powered site search, recommendation, and personalization software | | Woorank | SEO audit tool for analyzing and improving website performance | | Unbound | A comprehensive Digital Experience Platform (Web Content Management, eCommerce, etc.) | | OrchestraCMS | A digital experience platform built 100% native on Salesforce | | TruPresence | A web content management and eCommerce platform for multi-unit organizations and franchises | - As of September 30, 2023, the company employed approximately 55 full-time employees, with 40 in the United States[112] - Research and development expenses were approximately $3.7 million (23% of revenues) in fiscal 2023, an increase from $3.2 million (19% of revenues) in fiscal 2022[166] Item 1A. Risk Factors The company faces significant risks, including a history of net losses and an accumulated deficit of approximately $90 million as of September 30, 2023 - The company has a history of net losses, incurring a net loss of approximately $9.4 million in fiscal 2023, and had an accumulated deficit of about $90 million as of September 30, 2023[196] - The company operates in a highly competitive market with low barriers to entry, facing competitors who may offer lower prices or have greater resources[107][234] - There is a risk of stock price volatility and potential delisting from the Nasdaq Capital Market if the minimum closing bid price of $1.00 per share is not maintained[212] - The company relies on third-party cloud provider Amazon Web Services (AWS) for hosting, and any service disruption could harm the business[199][231] - Security breaches pose a significant risk, potentially leading to loss of customer data, litigation, and damage to the company's reputation[115][232] - Future growth may require additional financing, which may not be available on acceptable terms[106][175] Item 1B. Unresolved Staff Comments The company has no unresolved staff comments - There are no unresolved staff comments[253] Item 2. Properties The company leases all of its office locations, including its corporate headquarters in Woburn, Massachusetts, and other professional spaces internationally Office Locations (Leased) | Geographic Location | Description | | :--- | :--- | | Woburn, Massachusetts | Corporate Headquarters, Professional office space | | Woodbury, New York | Professional office space | | Rosemont, Illinois | Professional office space | | Atascadero, California | Professional office space | | Brussels, Belgium | Professional office space | | Ontario, Canada | PO Box | Item 3. Legal Proceedings The company is not currently involved in any material legal proceedings, only routine litigation incidental to its business - As of the report date, the company is not involved in any material legal proceedings[222] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine safety disclosures are not applicable[255] PART II Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under 'BLIN', with approximately 60 stockholders of record and no history or plans for cash dividends - Common stock is traded on the Nasdaq Capital Market under the symbol "BLIN"[257] - As of December 27, 2023, there were 10,417,609 shares of common stock outstanding[146] - The company has never declared or paid cash dividends and does not plan to in the near future[278] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2023 saw a 6% revenue decline to $15.9 million and a significant operating loss of $9.9 million, primarily due to a $7.5 million goodwill impairment charge Fiscal Year 2023 vs 2022 Performance (in millions) | Metric | Fiscal 2023 | Fiscal 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $15.9 | $16.8 | (6)% | | Loss from Operations | $(9.9) | $(1.9) | 423% | | Net (Loss) Income | $(9.4) | $2.1 | (540)% | | Goodwill Impairment | $7.5 | $0.0 | N/A | - The significant increase in operating loss was primarily due to a $7.5 million goodwill impairment charge recognized in fiscal 2023[288][298] - Cash provided by operating activities was $0.3 million in fiscal 2023, compared to cash used of $0.1 million in fiscal 2022, mainly due to changes in non-cash items like goodwill impairment and warrant liability valuation[328] - The company has an effective shelf registration statement on Form S-3 to offer and sell up to $50 million of debt or equity securities, though no offerings are currently active[309] Item 8. Financial Statements and Supplementary Data This section presents audited consolidated financial statements for fiscal years 2023 and 2022, including the independent auditor's report and notes detailing critical accounting policies - The independent auditor's report from PKF O'Connor Davies, LLP expresses an opinion that the financial statements are presented fairly in all material respects[353] - Critical Audit Matters identified were the valuation of Goodwill and Intangible Assets, and the valuation of Warrant Liabilities, due to the significant management judgment and complex estimates involved[356][413] Consolidated Balance Sheet Highlights (in thousands) | Account | Sept 30, 2023 | Sept 30, 2022 | | :--- | :--- | :--- | | Total Assets | $17,631 | $27,513 | | Goodwill, net | $8,468 | $15,985 | | Total Liabilities | $6,171 | $7,161 | | Total Stockholders' Equity | $11,460 | $20,352 | Consolidated Statements of Operations Highlights (in thousands) | Account | Year Ended Sept 30, 2023 | Year Ended Sept 30, 2022 | | :--- | :--- | :--- | | Total Net Revenue | $15,885 | $16,819 | | Goodwill Impairment | $7,517 | $0 | | Loss from Operations | $(9,915) | $(1,897) | | Net (Loss) Income | $(9,435) | $2,145 | Notes to Consolidated Financial Statements The notes detail a $7.5 million goodwill impairment, warrant liability classifications, significant NOL carryforwards, preferred stock, and related-party transactions - A goodwill impairment charge of $7.5 million was recognized in fiscal 2023 due to macro-economic conditions and a sustained decline in the company's market capitalization[500][525] - The company has significant federal NOL carryforwards of approximately $37.3 million and state NOLs of $45.4 million, though their future use may be limited by IRC Section 382[19] - Certain common stock warrants (Montage, Series A, C, and D) are classified as liabilities and are re-measured to fair value each period, with changes recognized in earnings. In FY2023, this resulted in a gain of $0.6 million[604][496] - As of September 30, 2023, there were 350 shares of Series C Convertible Preferred Stock outstanding and no shares of Series A, B, or D Preferred Stock outstanding[542][543][571][572] - Related party transactions involve director Michael Taglich and his firm, Taglich Brothers, Inc., which has acted as a placement agent for offerings and provided advisory services[593][624] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure - There were no disagreements with accountants on accounting and financial disclosure[595][657] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of September 30, 2023, with no significant changes during the fiscal year - Management concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[596] - Based on the COSO 2013 framework, management concluded that internal control over financial reporting was effective as of September 30, 2023[25] - No significant changes occurred in internal controls over financial reporting during the fiscal year ended September 30, 2023[26] Item 9B. Other Information There is no other information to report under this item - None[58][628] PART III Item 10. Directors, Executive Officers and Corporate Governance This section provides information on the company's directors and executive officers, board committees, and the adopted Code of Ethics - The Board of Directors includes Chairperson Joni Kahn, President & CEO Roger Kahn, and CFO Thomas R. Windhausen[630] - The Board has three main committees: Audit (met 4 times in FY2023), Compensation (met 2 times), and Nominating and Corporate Governance (met 3 times)[33][66][636][35] - The company has adopted a Code of Ethics applicable to all officers and employees, which is available on its website[32] - During fiscal 2023, all Section 16(a) filing requirements were met, with the exception of two untimely Form 4 filings for Roger Kahn[64] Item 11. Executive Compensation This section details compensation for named executive officers, including President and CEO Roger Kahn's $499,188 total compensation in FY2023, and outlines non-employee director compensation Summary Compensation for Named Executive Officers (FY2023) | Name and Principal Position | Salary | Bonus | Total | | :--- | :--- | :--- | :--- | | Roger Kahn - President and CEO | $400,000 | $99,188 | $499,188 | | Thomas R. Windhausen - CFO | $251,250 | $42,534 | $293,784 | - CEO Roger Kahn's employment agreement provides for an annual salary of $400,000 and the opportunity to earn incentive bonuses[70] - Non-employee directors receive an annual retainer of $12,000, plus $1,500 per meeting attended. Committee chairs receive additional annual fees ranging from $5,000 to $15,000[642][73] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of December 22, 2023, President and CEO Roger Kahn was the largest beneficial owner among management, holding 13.57% of common stock, with all executive officers and directors owning 18.84% as a group - As of December 22, 2023, there were 10,417,609 shares of Common Stock and 350 shares of Series C Preferred Stock issued and outstanding[41] Beneficial Ownership of Common Stock (as of Dec 22, 2023) | Name / Group | Percent of Shares Outstanding | | :--- | :--- | | Roger Kahn (President & CEO) | 13.57% | | All current executive officers and directors as a group | 18.84% | - Michael and Claudia Taglich beneficially own 100% of the 350 outstanding shares of Series C Preferred Stock[676] Equity Compensation Plan Information (as of Sept 30, 2023) | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Available for Future Issuance | | :--- | :--- | :--- | :--- | | Approved by security holders | 1,831,515 | $2.56 | 315,422 | | Not approved by security holders | 1,757,629 | $3.64 | - | | Total | 3,589,144 | - | 315,422 | Item 13. Certain Relationships and Related Transactions, and Director Independence This section discloses related-party transactions involving director Michael Taglich and his firm, Taglich Brothers, Inc., with the Audit Committee responsible for their review and approval - The Audit Committee is responsible for reviewing and approving the terms of any related-party transactions[46] - Director Michael Taglich is the Chairman and President of Taglich Brothers, Inc., which has acted as a placement agent and provided advisory services for the company[94] - In November 2018, the company engaged Taglich Brothers for advisory services, which earned a success fee of $200,000 in connection with the Stantive acquisition[80] - Michael Taglich purchased 350 units of Series C Preferred Stock and associated warrants in a private transaction in March 2019[681] Item 14. Principal Accounting Fees and Services PKF O'Connor Davies LLP is the independent auditor, with audit fees of $245,500 in FY2023 and $243,050 in FY2022, and all services are pre-approved by the Audit Committee - The principal independent registered public accounting firm is PKF O'Connor Davies LLP, serving since February 27, 2021[48] Aggregate Fees Paid to PKF O'Connor Davies LLP | Type of Service | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Audit Fees | $245,500 | $243,050 | | Audit-Related Fees | — | — | | Tax Fees | — | — | | Total | $245,500 | $243,050 | - The Audit Committee has sole authority to approve the scope of the audit and all audit and non-audit related services and fees[83] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists all financial statements and exhibits filed with the Form 10-K report, including corporate governance documents, material contracts, and Sarbanes-Oxley certifications - This section lists all financial statements, schedules, and exhibits filed with the report[50] - Filed exhibits include the Certificate of Incorporation, By-Laws, various stock and warrant agreements, employment agreements with executive officers, and Sarbanes-Oxley certifications[687][688][88]