UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

~~(Mark~~(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 333-139298

Bridgeline Digital, Inc.

(Exact name of registrant as specified in its charter)

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

100 Sylvan Road, Suite G7000
Woburn,, Massachusetts	~~0180~~101801
(Address of Principal Executive Offices)	(Zip Code)

(781) 376-5555

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section (12)b of the Act:

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

The number of shares of Common Stock par value $0.001 per share, outstanding as of ~~August 10, 2020~~May 14, 2021 was ~~4,420,170.~~6,451,548.

Bridgeline Digital, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period ended ~~June 30~~~~, 20~~20March 31, 2021

Index

		Page
Part I	Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets (unaudited) as of ~~June 30, 2020~~March 31, 2021 and September 30, ~~2019~~2020	4


	Condensed Consolidated Statements of Operations (unaudited) for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	5

	Condensed Consolidated Statements of Comprehensive Income/(Loss) (unaudited) for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	6


	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	7

	Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	8

	Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25	29

Item 3.	Qualitative and Quantitative Disclosures About Market Risk	34	38

Item 4.	Controls and Procedures	34	38

PartII	Other Information

Item 1.	Legal Proceedings	35	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35	39

Item 6.6.	Exhibits	36	40

Signatures		41	38

Bridgeline Digital, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period ended ~~June 30, 2020~~March 31, 2021

~~All statements included~~Statements contained in this Report on Form 10-Q, , other than statements or characterizations of historical fact, are forward-looking statements. These ~~“forward-looking statements”~~“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief or current expectations of Bridgeline Digital, Inc.These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, the impact of the ~~COVID – 19~~coronavirus pandemic and related public health measures onthat may affect our financial results; business operations and the business of our customers, suppliers and partners; our ability to retain and upgrade current customers; increasing our recurring revenue; our ability to attract new customers; our revenue growth rate; our history of net loss and our ability to achieve or maintain ~~profitability;~~profitability, our liability for any unauthorized access to our data or our ~~users’~~users’ content, including through privacy and data security breaches; any decline in demand for our platform or products; changes in the interoperability of our platform across devices, operating systems, and third party applications that we do no control; competition in our markets; our ability to respond to rapid technological changes, extend our platform, develop new features or products, or gain market acceptance for such new features or products, particularly in light of potential disruptions to the productivity of our employees resulting from remote work; our ability to manage our growth or plan for future growth, and our acquisition of other businesses and the potential of such acquisitions to require significant management attention, disrupt our business, or dilute stockholder value; the volatility of the market price of our common stock; the ability to maintain our listing on the NASDAQ Capital Market; or our ability to maintain an effective system of internal controls as well as other risks described in our filings with the Securities and Exchange Commission.Any of such risks could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Bridgeline Digital, Inc. assumes no obligation to, and does not currently intend to, update any such forward-looking statements, except as required by applicable law. We urge readers to review carefully the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019 as well as~~2020, and in the other documents that we file with the Securities and Exchange Commission. You can read these documents at ~~www.sec.gov.~~www.sec.gov.

Where we say “we,” “us,” “our,” “Company” or “Bridgeline Digital” we mean Bridgeline Digital, Inc.

PART I—I—FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements.

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)


	June 30, 2020			September 30, 2019			March 31, 2021			September 30, 2020
ASSETS

Current assets:
Cash and cash equivalents	$	1,165		$	296		$	3,497		$	861
Accounts receivable, net		799			979			717			665
Prepaid expenses		267			351			394			268
Other current assets		18			49			537			111
Total current assets		2,249			1,675			5,145			1,905
Property and equipment, net		252			299			240			238
Operating lease assets		325			-			584			294
Intangible assets, net		2,831			3,509			3,856			2,617
Goodwill		5,557			5,557			8,018			5,557
Other assets		83			115			86			49
Total assets	$	11,297		$	11,155		$	17,929		$	10,660

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Current portion of long-term debt	$	466		$	-		$	659		$	-
Current portion of operating lease liabilities		96			-			191			96
Accounts payable		1,869			1,740			1,236			1,311
Accrued liabilities		588			835			701			599
Deferred revenue		1,779			1,262
Purchase price and contingent consideration payable (Note 15)								2,006			-
Paycheck Protection Program liability (Note 8)								-			88
Deferred revenues								1,666			1,511
Total current liabilities		4,798			3,837			6,459			3,605

Long term debt, net of current portion		582			-
Long-term debt, net of current portion								1,461			-
Operating lease liabilities, net of current portion		229			-			393			198
Warrant liabilities		2,436			3,514			4,205			2,486
Other long term liabilities		5			8
Other long-term liabilities								22			15
Total liabilities		8,050			7,359			12,540			6,304

Commitments and contingencies

Stockholders’ equity:
Preferred stock - $0.001 par value; 1,000,000 shares authorized;
Series C Convertible Preferred stock:
11,000 shares authorized; 355 shares issued and outstanding at June 30, 2020 and 441 shares at September 30, 2019, issued and outstanding		-			-
11,000 shares authorized; 350 shares issued and outstanding at March 31, 2021 and September 30, 2020								-			-
Series A Convertible Preferred stock:
264,000 shares authorized; no shares outstanding at June 30, 2020 and 262,310 shares at September 30, 2019, issued and outstanding		-			-
264,000 shares authorized; no shares outstanding at March 31, 2021 and September 30, 2020								-			-
Common stock - $0.001 par value; 50,000,000 shares authorized;
4,419,614 shares at June 30, 2020 and 2,798,475 shares at September 30, 2019, issued and outstanding		4			3
5,391,548 shares at March 31, 2021 and 4,420,170 shares at September 30, 2020, issued and outstanding								5			4
Additional paid-in capital		78,255			75,620			81,125			78,316
Accumulated deficit		(74,652	)		(71,489	)		(75,301	)		(73,583	)
Accumulated other comprehensive loss		(360	)		(338	)		(440	)		(381	)
Total stockholders’ equity		3,247			3,796			5,389			4,356
Total liabilities and stockholders’ equity	$	11,297		$	11,155		$	17,929		$	10,660

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE~~INCOME~~/(~~LOSS~~) INCOME/(LOSS)

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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ~~STOCKHOLDERS’~~’ EQUITY

For the Three and Nine Months Ended June 30, 2020

Accumulated

Preferred Stock

Common Stock

Additional

Other

Total

Paid-in

Accumulated

Comprehensive

Stockholders’

Shares

Amount

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at October 1, 2019
262,751 $ - 2,798,475 $ 3 $ 75,620 $ (71,489 ) $ (338 ) $ 3,796
Stock-based compensation expense
30 30
Dividends on Series A convertible preferred stock
(79 ) (79 )
Deemed dividend on amendment of Series A convertible preferred stock (Note 8)
2,314 (2,314 ) -
Net income
136 136
Foreign currency translation
1 1
Balance at December 31, 2019
262,751 $ - 2,798,475 $ 3 $ 77,964 $ (73,746 ) $ (337 ) $ 3,884
Series A convertible preferred stock conversion to common
(107,416 ) 613,806 -
Stock-based compensation expense
50 50
Dividends on Series A convertible preferred stock
(27 ) (27 )
Net income
822 822
Foreign currency translation
(59 ) (59 )
Balance at March 31, 2020
155,335 $ - 3,412,281 $ 3 $ 78,014 $ (72,951 ) $ (396 ) $ 4,670
Series A convertible preferred stock dividend liabilities settled in shares
112,960 1 188 189
Series A convertible preferred stock conversion to common
(154,894 ) 884,817 -
Series C convertible preferred stock conversion to common
(86 ) 9,556 -
Stock-based compensation expense
53 53
Net loss
(1,701 ) (1,701 )
Foreign currency translation
36 36
Balance at June 30, 2020
355 $ - 4,419,614 $ 4 $ 78,255 $ (74,652 ) $ (360 ) $ 3,247

	For the Three and Six Months Ended March 31, 2021
														Accumulated
	Preferred Stock				Common Stock				Additional					Other			Total
									Paid-in		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity
Balance at October 1, 2020		350	$	-		4,420,170	$	4	$	78,316	$	(73,583	)	$	(381	)	$	4,356
Stock-based compensation expense										51								51
Net loss												(1,162	)					(1,162	)
Foreign currency translation															10			10
Balance at December 31, 2020		350	$	-		4,420,170	$	4	$	78,367	$	(74,745	)	$	(371	)	$	3,255
Stock-based compensation expense										39								39
Issuance of common stock – stock options exercised						13,333				19								19
Issuance of common stock – warrants exercised						48,612				140								140
Issuance of common stock, net of offering costs						880,000		1		2,461								2,462
Issuance of stock in connection with acquisition of business						29,433				99								99
Net loss												(556	)					(556	)
Foreign currency translation															(69	)		(69	)
Balance at March 31, 2021		350	$	-		5,391,548	$	5	$	81,125	$	(75,301	)	$	(440	)	$	5,389

For the Three and Nine Months Ended June 30, 2019

Accumulated

Preferred Stock

Common Stock

Additional

Other

Total

Paid-in

Accumulated

Comprehensive

Stockholders’

Shares

Amount

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at October 1, 2018
262,364 $ - 84,005 $ - $ 66,553 $ (61,778 ) $ (351 ) $ 4,424
Issuance of common stock, net of issuance costs
(54 ) 28,481 - 4,377 4,377
Stock-based compensation expense
97 97
Preferred B stock conversion to common
169,139 -
Dividends on Series A convertible preferred stock
(79 ) (79 )
Net loss
(4,955 ) (4,955 )
Cumulative effect of the adoption of ASC 606
78 78
Balance at December 31, 2018
262,310 $ - 281,625 $ - $ 71,027 $ (66,734 ) $ (351 ) $ 3,942
Common stock issued in connection with acquisition of business
40,000 476 476
Stock-based compensation expense
38 38
Preferred B stock conversion to common
3,201 -
Dividends on Series A convertible preferred stock
(78 ) (78 )
Net loss
(12,522 ) (12,522 )
Foreign currency translation
(1 ) (1 )
Balance at March 31, 2019
262,310 $ - 324,826 $ - $ 71,541 $ (79,334 ) $ (352 ) $ (8,145 )
Issuance of common stock, net of issuance costs
1,382,039 3 3,969 3,972
Stock-based compensation expense
74 74
Series C Convertible Perferred stock issurance and conversion to common
441 1,087,443 1 1
Dividends on Series A convertible preferred stock
(78 ) (78 )
Net loss
7,311 7,311
Foreign currency translation
19 19
Balance at June 30, 2019
262,751 $ - 2,794,308 $ 3 $ 75,585 $ (72,101 ) $ (333 ) $ 3,154

	For the Three and Six Months Ended March 31, 2020
															Accumulated
	Preferred Stock					Common Stock				Additional					Other			Total
										Paid-in		Accumulated			Comprehensive			Stockholders’
	Shares			Amount		Shares		Amount		Capital		Deficit			Loss			Equity
Balance at October 1, 2019		262,751		$	-		2,798,475	$	3	$	75,620	$	(71,489	)	$	(338	)	$	3,796
Stock-based compensation expense											30								30
Dividends on Series A convertible preferred stock													(79	)					(79	)
Deemed dividend on amendment of Series A convertible preferred stock (Note 10)											2,314		(2,314	)					-
Net income													136						136
Foreign currency translation																1			1
Balance at December 31, 2019		262,751		$	-		2,798,475	$	3	$	77,964	$	(73,746	)	$	(337	)	$	3,884
Series A convertible preferred stock conversion to common		(107,416	)				613,806												-
Stock-based compensation expense											50								50
Dividends on Series A convertible preferred stock													(27	)					(27	)
Net income													822						822
Foreign currency translation																(59	)		(59	)
Balance at March 31, 2020		155,335		$	-		3,412,281	$	3	$	78,014	$	(72,951	)	$	(396	)	$	4,670

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

1.Description of Business

Overview

Bridgeline Digital, The Digital Engagement ~~Company™~~Company (the “Company”), helps customers maximize the performance of their full digital experience from websites and intranets to online stores and campaigns and integrates Web Content Management, eCommerce, Marketing Automation, Site Search, Authenticated Portals, Social Media Management, Translation and Web Analytics to help organizations deliver digital experiences.

The Bridgeline Unbound platform is delivered through a cloud-based SaaS (“Software as a Service”) multi-tenant business model, providing maintenance, daily technical operation and support; or via a traditional perpetual licensing business model, in which the software resides on a dedicated server in either the customer’s facility or hosted by Bridgeline via a cloud-based hosted services model.

OrchestraCMS, delivered through a cloud-based SaaS, is the only content and digital experience platform built 100% native on Salesforce and helps customers create compelling digital experiences for their customers, partners, and employees; uniquely combining content with business data, processes and applications across any channel or device, including Salesforce Communities, social media, portals, intranets, websites, applications and services.

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

Woorank SRL (“Woorank”) is a leading SEO (“Search Engine Optimization”) audit and digital marketing tool that can look at a customer’s site through Google’s eyes and generate an instant audit of the site’s technical, on-page and off-page SEO. Woorank’s clear, actionable insights not only help companies increase their search ranking and website traffic, but also improve audience engagement, conversion, and customer retention rates.

The Company was incorporated under the laws of the State of Delaware on August 28, 2000.

Locations

The Company’s corporate office is located in Woburn, Massachusetts. The Company maintains regional field offices serving the following geographical locations: Boston, Massachusetts; ~~Chicago, Illinois;~~ New York, New York; Ontario, Canada; and ~~Ontario, Canada.~~Brussels, Belgium. The Company has three wholly-owned subsidiaries: Bridgeline Digital Pvt. Ltd. located in Bangalore, India, Bridgeline Digital Canada, Inc. located in Ontario, Canada, and ~~Stantive Technologies Pty. Ltd.~~Bridgeline Digital Belgium BV located in ~~Australia.~~Brussels, Belgium.

~~Going Concern~~

~~The Company has incurred operating losses~~Liquidity and used cash in its operating activities for the past several years. Cash was used to fund operations, develop new products, and build infrastructure. During the prior fiscal years and continuing into the current fiscal year, the Company has executed a restructuring plan that included a reduction of workforce and office space, which significantly reduced operating expenses. In March 2020, the Company executed a reduction in force plan for its domestic and Canadian operations aimed at improving efficiencies by combining functions, certain responsibilities and eliminating redundancies, which resulted in a reduction of 15 positions. The reduction in force was part of the Company’s continuing and ongoing efforts to maintain a lower cost structure and was not an action taken in response to the coronavirus pandemic described below. The Company is continuing to maintain tight control over discretionary spending for the remainder of the 2020 fiscal year.Management’s Plans

In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic. We expect our operations in all locations to be affected as the virus continues to proliferate. We have adjusted certain aspects of our operations to protect employees and customers while still meeting customers’ needs for vital technology. We will continue to monitor the situation closely and it is possible that we will implement further measures. In light of the uncertainty as to the severity and duration of the pandemic, the impact on our revenues, profitability and financial position is uncertain at this time.

On May 11, 2021 the Company entered into a Definitive Purchase Agreement (the “Hawk Purchase Agreement”) with Svanaco, Inc., an Illinois corporation, and Svanawar, Inc., an Illinois corporation (collectively, the “Sellers”) to purchase all of the issued and outstanding shares of Hawk Search, Inc., an Illinois corporation (“Hawk Search”) (the “Acquisition”). The total consideration under the Purchase Agreement is approximately $9.25 million, subject to certain working capital adjustments (the “Purchase Price”). The Purchase Price is payable as follows: (i) an initial cash payment of approximately $5.75 million, (ii) an issuance of approximately $1.50 million of newly designated shares of the Company’s preferred stock, par value $0.001 per share, and (3) approximately $2.0 million in cash, to be paid on or before December 31, 2021. In addition, the Purchase Price may be increased to $11.83 million by an additional payment to Sellers of approximately $2.58 million, in cash, as an additional earn-out based upon Hawk Search’s revenue performance after the consummation of the Acquisition (the “Closing”), payable to Sellers no later than December 31, 2022.

~~BRIDGELINE DIGITAL, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

The Closing of the Acquisitionis conditioned upon, among other things, the Acquisition Closing on or before May 28, 2021, obtaining all necessary consents and approvals for to the Acquisition, and the Company securing financing to fund the Purchase Price in an amount and on the terms satisfactory to the Company in its sole and absolute discretion. The Purchase Agreements contain customary representations, warranties, agreements and conditions to completing stock purchases, indemnification rights and obligations of the parties.

On ~~April 17, 2020,~~May 14, 2021, the Company offered and sold, in a registered direct offering, a total 1,060,000 shares of its common stock at a price of $2.28 per share, for gross proceeds of approximately $2.4 million prior to deduction of commissions and offering expenses. Additionally, the Company entered into securities purchase agreements with certain institutional investors in connection with a ~~loan with~~private placement of 2,700 shares of newly designated Series D Convertible Preferred Stock (the “Series D Preferred Stock”) at a price of $1,000 per share and warrants to purchase up to an aggregate ~~principal amount~~ of ~~$1,047,500, pursuant~~592,105 shares of common stock at an exercise price of $2.51 per share (the “Warrants”). The Company received gross proceeds from the private placement of approximately $2.7 million, prior to deduction of commissions and offering expenses. Beginning on the ~~Paycheck Protection Program~~six month anniversary of the original issuance date, the Series D Preferred Stock holders are entitled to receive cumulative dividends at the annual rate per share of Preferred Stock as a percentage of the stated value per share of 9% on the last day of each calendar quarter.

~~While~~In connection with an acquisition of a business completed during the 2021 fiscal year second quarter, the Company ~~believes that future revenues and cash flows, as acquisitions completed in~~(1) assumed the ~~fiscal 2019 second quarter continue to be integrated and a full year~~outstanding long-term debt obligations of operations has occurred, will supplement its working capital and that it has an appropriate cost structure to support future revenue growth, based upon its current working capital and projected cash flows in$2.1 million of the acquiree of which $659 thousand is payable over the next twelve months, (2) issued a seller note of $352 thousand to one of the selling shareholders payable over a five-year period, (3) deferred a portion of the purchase price of $487 thousand which is expected to be paid within the next twelve months and (4) recognized contingent earn-out payments of $1.6 million which are payable in the event of achievement of certain revenue targets and operational goals.

In prior years, the Company ~~will need additional sources of financing in place in order~~incurred operating losses and used cash to ~~ensure~~fund operations, develop new products, and build infrastructure. During its ~~operations are adequately funded.~~ 2020 fiscal year, the Company executed an operating plan that reduced operating expenses that have not yet been realized for a full twelve month period. The Company is continuing to maintain tight control over discretionary spending for the 2021 fiscal year. The Company believes it has sufficient revenue and working capital to support future growth.

On August ~~13,~~17, 2020, the Company entered into an arrangement with an investment banking firm to sell up to ~~$3,822,339~~$4,796,090 of shares of the Company’s common stock, $0.001 par value. Refer to Note 810 under the caption, At the Market Offering, for a detailed description of this capital raising activity. There are no obligations for the sale or purchase of the Company’s common stock pursuant to this offering. Accordingly, there can be no assurances that the Company or investment banking firm will be successful in selling any portion of the shares available for sale pursuant to this offering. On December 18, 2020, the Company delivered written notice to Roth Capital Partners that it was suspending all offers and sales under the At the Market Offering Agreement (the “Suspension Period”), during which time the Company will not make any sales of Placement Shares. No other definitive agreements for additional financing are in place as of the issuance date of this Form 10-Q, and there can be no assurances that additional sources of financing could be obtained on terms that are favorable or acceptable to usthe Company and that revenue growth and improvement in cash flows can be achieved. ~~Accordingly, management believes that there is substantial doubt about the Company’s ability to continue as a going concern for at least twelve months following the issuance date of this Form 10-Q.~~ No adjustments have been made to the accompanying ~~condensed~~ consolidated financial statements as a result of this uncertainty.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

2.Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and with the instructions to Form 10-Q and Regulation S-X, and in the opinion of the Company’s management these condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments and accruals, necessary for their fair presentation. The operating results for the three and ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, are not necessarily indicative of the results to be expected for the year ending September 30, ~~2020.~~2021. The accompanying September 30, ~~2019~~2020 Condensed Consolidated Balance Sheet has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended September 30, ~~2019~~2020, as filed with the Securities and Exchange Commission on December ~~27, 2019.~~23, 2020.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation in the current period financial statements. These reclassifications had no effect on the previously reported net loss.

~~Leases~~Intangibles – Goodwill and Other - Internal-Use Software

In ~~February 2016,~~August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2016-02,~~ ~~Leases: Topic 842~~ (“ASU 2016-02” or “ASC 842”), which outlines principles for the recognition, measurement, presentation and disclosure of leases applicable to both lessors and lessees. The new standard requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases.

The Company adopted the new lease standard during the fiscal 2020 first quarter using the effective date of October 1, 2019 as the date of initial application; therefore, the comparative prior periods presented have not been adjusted and continue to be reported under the previous lease standard. The Company applied the new standard using certain practical expedients, including:

●

~~the package of practical expedients, which permits the Company not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs;~~

●

~~the short-term lease recognition exemption, which does not require the recognition of a right-of-use (“ROU”) asset or lease liability for those leases that qualify;~~

●

~~accounting for lease components and non-lease components as a single lease component for all underlying classes of assets.~~

As a result of adopting the new standard, substantially all of the Company’s operating lease commitments were recognized as operating lease assets and liabilities, initially measured as the present value of future lease payments for the remaining lease term discounted using an incremental borrowing rate of 7.0%. At October 1, 2019, the adoption date, the Company recognized operating lease assets and liabilities of approximately $545.

~~BRIDGELINE DIGITAL, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

The adoption of the new standard is non-cash in nature and had no impact on net cash flows from operating, investing or financing activities. See Note 12 for additional information regarding the Company’s lease arrangements and updated summary of significant accounting policies related to our leases.

~~Accounting Pronouncements Pending Adoption~~

~~Intangibles~~ – ~~Goodwill and Other - Internal-Use Software~~

~~In August 2018, the FASB issued ASU~~No. 2018-15, which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The effective date of this new standard for the Company was October 1, 2020. Under the new standard, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. ~~ASU 2018-15~~As of October 1, 2020, the Company did not have significant implementation costs incurred in a cloud computing arrangement that is ~~effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, with early~~a service contract and therefore upon adoption ~~permitted. The Company is currently evaluating~~ the impact of the new standard on its consolidated financial statements and related ~~disclosures.~~disclosures was not material. All future implementation costs in such arrangements will be capitalized and amortized over the life of the arrangement, which may have a material impact in those future periods if such costs are material.

Fair Value

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair value measurement disclosure requirements of ~~ASC~~Accounting Standards Codification (“ASC”) 820. ~~ASU 2018-13 will be~~The effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, with early adoption is permitted for any eliminated or modified disclosures upon issuancedate of this ~~ASU. The~~new standard for the Company ~~is currently evaluating~~was October 1, 2020. As the adoption of this standard was limited to revised disclosures, the impact of the new standard on its consolidated financial statements was not material.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and ~~related disclosures.~~per share data)

Accounting Pronouncements Pending Adoption

Financial Instruments – Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. 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.

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.

As of ~~June 30, 2020,~~March 31, 2021, two customers represented approximately ~~16%~~28% and ~~10%~~18% of accounts receivable. As of September 30, ~~2019,~~2020, three customers represented approximately ~~16%~~15%, 14% and ~~12%~~10% of accounts receivable. For the three months ended ~~June 30,~~March 31, 2021 and 2020, one customer represented approximately ~~11%~~10% and 13% of the Company’s total revenue, ~~and for~~respectively. For the ~~three~~six months ended ~~June 30, 2019, two customers represented approximately 14%~~March 31, 2021 and ~~11% of the Company’s total revenue. For the nine months ended June 30,~~ 2020, one customer represented approximately 10% and 12% of the Company’s total revenue, ~~and for the nine months ended June 30, 2019, two customers represented approximately 16% and 12% of the Company’s total revenue.~~respectively.

44.. Fair Value Measurement and Fair Value of Financial Instruments

The Company’s ~~other~~ financial instruments consist principally of accounts receivable, accounts payable, warrant liabilities and ~~warrant liabilities.~~long-term debt arrangements. The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, companies are required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:

Level 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3—Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The Company believes the ~~recorded values for~~carrying value of its accounts receivable and accounts payable approximate ~~current~~ fair ~~values~~value as of ~~June 30, 2020~~March 31, 2021 and September 30, ~~2019 because of~~2020, due to their short-term nature.

The Company’s warrant liabilities are measured at fair value at each reporting period with changes in fair value recognized in earnings during the period. The fair value of the Company’s warrant liabilities are valued utilizing Level 3 inputs. Warrant liabilities are valued using a Monte Carlo option-pricing model, which takes into consideration the ~~market values~~volatilities of comparable public companies, ~~considering among other factors,~~due to the ~~use~~relatively low trading volume of ~~multiples of earnings, and adjusted to reflect~~ the ~~restrictions on the ability of our shares to trade in an active market.~~Company’s common stock The Monte Carlo option-pricing model uses certain assumptions, including expected life and annual volatility. The range and weighted average volatilities of comparable public companies utilized was 27.8% - 72.2% and 45.3%, respectively, as of March 31, 2021, and 26.2% - 70.7% and 43.5%, respectively, as of September 30, 2020. The volatility utilized in the Monte Carlo option-pricing model was determined by weighing 60% to the Company-specific volatility and 40% on comparable public companies. The significant inputs and assumptions utilized were as follows:

	As of June 30, 2020						As of September 30, 2019						As of March 31, 2021						As of September 30, 2020
	Montage Capital			Series C Preferred			Montage Capital			Series C Preferred			Montage Capital			Series C Preferred			Montage Capital			Series C Preferred
Volatility		82	%		84.8	%		71	%		80.9	%		86.3	%		89.3	%		84	%		84.1	%
Risk-free rate		0.32	%		0.20	%		1.59	%		1.59	%		0.78	%		0.50	%		0.28	%		0.20	%
Stock price	$	1.69		$	1.69		$	1.91		$	1.91		$	2.89		$	2.89		$	1.86		$	1.86

The Company recognized ~~losses~~gains/(losses) of ~~$1,843~~($418) and ~~gains of $10,146~~$1,820 for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, and ~~gains of $1,078~~($1,859) and ~~$11,204~~$2,921 for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, related to the change in fair value of warrant liabilities. The changes in fair value of warrant liabilities for the three and six months ended March 31, 2021, were due to changes in inputs, primarily an increase in stock price and the risk-free rate, to the Monte Carlo option-pricing model. The changes in fair value of warrant liabilities for the three and six months ended March 31, 2020, were due to changes in inputs, primarily a ~~change~~decline in ~~the~~ stock price and the risk-free rate, to the Monte Carlo option-pricing model.

Assets and liabilities of the Company measured at fair value on a recurring basis as of ~~June 30, 2020~~March 31, 2021 and September 30, ~~2019~~2020, are as follows:

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

Total amortization expense related to intangible assets was ~~$207~~$223 and ~~$240~~$230 related to intangible assets for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, and ~~$678~~$441 and ~~$306~~$470 for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, and is reflected in Operating expenses on the Condensed Consolidated Statements of Operations. The estimated amortization expense for fiscal year ~~2020~~2021 (remaining), ~~2021,~~ 2022, 2023, 2024, 2025 and thereafter is ~~$215, $860, $765, $684, $297~~$579, $1,063, $982, $596, and ~~$10,~~$311, and $325 respectively.

8.Paycheck Protection Program

On April 17, 2020, Bridgeline Digital, Inc. entered into a loan with BNB Bank as the lender in an aggregate principal amount of ~~$1,047,500~~$1,048 (“PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The PPP Loan is evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loan bears interest at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, has an initial term of two years, and is unsecured and guaranteed by the U.S. Small Business ~~Administration.~~Administration (“SBA”). Payments are deferred for at least the first six months and payable in 18 equal consecutive monthly installments of principal and interest commencing upon expiration of the deferral period of the PPP Loan Date. ~~During the three and nine months ended June 30, 2020, interest expense was approximately $2 related to the Note.~~ The Company may apply to the ~~Lender~~lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the twenty-four week period beginning on April 21, 2020, calculated in accordance with the terms of the CARES Act. The Note provides for prepayment and customary events of default, including, among other things, cross-defaults on any other loan with the lender. The PPP Loan may be accelerated upon the occurrence of an event of default.

U.S. GAAP does not contain authoritative accounting standards for forgivable loans provided by governmental entities to a for-profit entity. Absent authoritative accounting standards, interpretative guidance issued and commonly applied by financial statement preparers allows for the selection of accounting policies amongst acceptable alternatives. Based on facts and circumstances outlined below, the Company determined it most appropriate to account for the PPP Loan proceeds as an in-substance government grant by analogy to International Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance. Under the provisions of IAS 20, “a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”; however, based on certain interpretations, it is analogous to “probable” as defined in FASB ASC 450-20-20 under U.S. GAAP, which is the definition the Company has applied to its expectations of PPP Loan forgiveness. Under IAS 20, government grants are recognized in earnings on a systematic basis over the periods in which the Company recognizes costs for which the grant is intended to compensate (i.e., qualified expenses). Further, IAS 20 permits for the recognition in earnings either separately under a general heading such as other income, or as a reduction of the related expenses. The Company ~~currently intends~~has elected to ~~use~~recognize government grant income separately within other income to present a clearer distinction in its consolidated financial statements between its operating income and the ~~proceeds for purposes consistent with~~amount of net income resulting from the PPP ~~however,~~Loan and subsequent expected forgiveness. The Company believes this presentation method promotes greater comparability amongst all periods presented.

The Company has performed initial calculations for the PPP Loan forgiveness according to the terms and conditions of the SBA’s Loan Forgiveness Application (Revised January 19, 2021) and, based on such calculations, expects that the PPP Loan will be forgiven in full, based on usage of related proceeds. In addition, the Company has determined it is probable the Company will meet all the conditions of the PPP Loan forgiveness. However, there can be no assurances that the Company will ultimately meet the conditions for forgiveness of the loan or that the Company will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.

~~US GAAP does~~The Company applied for full PPP Loan forgiveness on March 29, 2021. In accordance with the terms and conditions under the Payroll Protection Program Flexibility Act of 2020 (the “Flexibility Act”), the lender has 60 days from receipt of the completed application to issue a decision to the SBA. If the lender determines that the borrower is entitled to forgiveness, in whole or in part, of the amount applied for under the statute and applicable regulations, the lender must request payment from the SBA at the time the lender issues its decision to the SBA. The SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, not ~~contain authoritative accounting standards for forgivable loans provided by governmental entities~~later than 90 days after the lender issues its decision to ~~a for-profit entity. Absent authoritative accounting standards, interpretative guidance issued and commonly applied by financial statement preparers allow for~~ the ~~selection of accounting policies amongst acceptable alternatives. Based on facts and circumstances,~~SBA. The amount the Company ~~determined~~borrowed is within the “safe-harbor” limitations of the SBA. Although the Company believes it ~~most appropriate to account for~~is probable that the PPP Loan ~~proceeds under the debt model. Under the debt model,~~will be forgiven, the Company ~~recognizes~~cannot provide any objective assurance that it will obtain forgiveness in whole or in part.

Pursuant to the ~~proceeds received as debt, recognizes periodic interest expense~~Flexibility Act, the Company’s PPP Loan agreement will be amended in the ~~period in which the interest accrues at the stated interest rate and defers the recognition of any potential forgiveness~~event that no amount or less than all of the loan principal or interest until the period in which the Company has been legally released from its obligation by the lender. The Company deemed the debt model to be the most appropriate accounting policy for this arrangement as the underlying PPP Loan is ~~a legal form of debt~~forgiven. In addition, starting in August 2021, the Company will be required to make principal and ~~there are significant contingencies outside~~interest payments, or an adjustment amount based on the loan amendment over the remaining term of the ~~control~~PPP Loan until such time as the loan is fully settled. The Company classifies unexpended loan proceeds on the accompanying consolidated balance sheets as a current or noncurrent liability based on the contractual maturities of the underlying loan agreement. During the first quarter of fiscal 2021, the remaining loan proceeds were expended on qualified expenses and as a result, the Company ~~mainly~~recognized $88 as government grant income. As of September 30, 2020, unexpended loan proceeds of $88 were classified as a current liability.

810.~~. S~~Stockholders~~tockholders~~’ Equity

Series A ConvertiblePreferred 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 (“Conversion Shares”) equal (i) to the number of shares of Series A Preferred Stock to be converted, multiplied by the stated value of $10.00 (the “Stated Value”) and (ii) divided by the conversion price in effect at the time of conversion.

On December 31, 2019 (the “Amendment Date”), the Company filed a First Amended and Restated Certificate of Designations of the Series A Convertible Preferred Stock (the “Series A Amendment”) with the Secretary of State for the State of Delaware, which amended and restated the Series A Preferred Stock, as more particularly set forth below:

Conversion Price: ~~Reduced~~Reduces the conversion price from $812.50 per share to $1.75 per share, subject to adjustment in the event of stock splits or stock dividends.

Mandatory Conversion: The Company has the right, in its sole discretion, to require the holders to convert shares of the Series A Preferred Stock into Conversion Shares if (i) the Company’s common stock has closed at or above $2.28 ($32.50 prior to the Series A Amendment) for fifteen (ten prior to the Series A Amendment) consecutive trading days and (ii) the Conversion Shares are (a) registered for resale on an effective registration statement or (b) may be resold pursuant to Rule 144.

~~Company’s~~Company’s Redemption Option: The Company may redeem all or a portion of the outstanding shares of Series A Preferred Stock, at its option, provided that the Company ~~provides~~provide ten business days’ prior written notice of its intent to redeem the Series A Preferred Stock to the holder and in cash at a price per share of Series A Preferred Stock equal to 100% of the Stated Value of such shares of Series A Preferred Stock plus all accrued and unpaid dividends. Notwithstanding, the holder may convert its Series A Preferred Stock prior to the exercise of the Company’s redemption option.

Dividends: Each outstanding share of Series A Preferred Stock is entitled to receive cumulative dividends, payable quarterly in arrears, at a rate of 5% per annum for the first eighteen months commencing on January 1, 2020 after which time the dividend rate will increase to 12% per annum (the dividend rate was 12% per annum prior to the Series A Amendment). Dividends are payable in cash or, at the election of the Company, by delivery of additional shares (“PIK Shares”) of Series A Preferred Stock, subject to a cap of 64,000 PIK Shares, in the aggregate. Any accrued but unpaid dividends on the shares of Preferred Stock to be converted shall also be converted into common stock at the conversion price.

In the event of any liquidation, dissolution, or winding up of the Company, the holders of shares of Series A Preferred Stock will be entitled to receive in preference to the holders of common stock, the amount equal to the Stated Value per share of Series A Preferred Stock plus declared and unpaid dividends, if any. After such payment has been made, the remaining assets of the Company will be distributed ratably to the holders of common stock. The Series A Preferred Stock shall vote with the ~~Common Stock~~common stock on an ~~as converted~~as-converted basis.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Prior to fiscal 2019, the Company had issued 64,000 shares of Series A Preferred Stock as PIK Shares to the Series A preferred shareholders, which is the maximum amount of cumulative PIK Shares authorized. Therefore, all future dividend payments will be cash dividends.

The Company determined that the Series A Amendment ~~represents~~represented an extinguishment for accounting purposes. In making this determination, the Company considered the significance of the contractual terms added and revisions to existing contractual terms, including, but not limited to, the significant change in the conversion price and the addition of the Company’s redemption option. These additions and revisions to existing contractual terms were considered to be qualitatively significant. The extinguishment of equity-classified convertible preferred stock is recognized as a deemed dividend measured as the difference between (1) the fair value of the consideration transferred; that is, the Series A Preferred Stock, as amended, and (2) the carrying value of the Series A Preferred Stock. At the Amendment Date, the fair value of the Series A Preferred Stock, as amended, was approximately $2,629 and its carrying value was approximately $315, resulting in a deemed dividend of $2,314 recognized as an increase to accumulated deficit and an increase to additional paid-in capital, ~~and is~~which was included as a component of net loss applicable to common shareholders. The estimated Amendment Date fair value of the Series A Preferred Stock was determined using the present value of probability weighted scenario analysis based on the per share publicly traded closing stock price of the Company’s common stock.

~~During the nine months ended June 30, 2020, all previously outstanding shares of~~ Series AC Convertible Preferred ~~Stock were converted into common stock.~~

~~Series B~~ ~~Convertible~~~~Preferred~~ Stock

~~On October 16, 2018, in connection with a public offering, the~~The Company ~~issued 4,288 Series B Convertible Preferred Stock, par value $0.001 per share, with each share of Series B Convertible Preferred Stock convertible into 40~~has designated 11,000 shares of ~~the Company’s common~~its preferred stock ~~at a conversion price of $25.00 per share. As of September 30, 2019, all of the shares of Series B Convertible Preferred Stock were converted into 171,520 shares of common stock.~~

~~Series C Preferred Convertible Stock and Associated Warrants~~

~~On March 12, 2019, the Company entered into Securities Purchase Agreements with certain accredited investors (each, a “~~~~Purchaser~~~~”), pursuant to which the Company offered and sold to the Purchasers an aggregate of 10,227.5 units (“~~~~Units~~~~”) for $1,000 per Unit, with such Units consisting of (i) an aggregate of 10,227.5 shares of the Company’s newly designated~~as Series C Convertible Preferred Stock ~~par value $0.001 per share~~ (“~~Series C Preferred~~ ~~stock~~~~”); (ii) warrants to purchase an aggregate of 1,136,390 shares of Company common stock, par value $0.001 per share (“~~~~Common Stock~~~~”), subject to adjustment (as set forth below), with a term of 5.5 years (“~~~~Series A Warrants~~~~”); (iii) warrants to purchase an aggregate of 1,136,390 shares of Common Stock, subject to adjustment (as set forth below), with a term of 24 months (“~~~~Series B Warrants~~~~”); and (iv) warrants to purchase an aggregate of 1,420,486 shares with a term of 5.5 years (“~~~~Series C Warrants~~~~,” and together with the Series A Warrants and Series B Warrants, the “~~Series C Preferred ~~Warrants~~”Stock”). The ~~Company also issued warrants to purchase an aggregate of 127,848 shares of the Company’s Common Stock to the placement agents that were also subject to the same resets as described below.~~

At the time of issuance, no shares of Series C Preferred stock could be converted into Conversion Shares and no Series C Preferred Warrants could be exercised for shares of Common Stock, unless and until such time that the Company had obtained approval from its stockholders, at an annual or special meeting or via written consent, to (i) issue the Conversion Shares and warrants upon the conversion and exercise of the Series C Preferred stock and associated warrants, respectively, which number of shares in the aggregate exceeds 20% of the Company’s shares of Common Stock issued and outstanding immediately prior to the Closing Date, as required by Nasdaq Marketplace Rule 5635(d) (the “~~Issuance Approval~~~~”), and (ii) amend its Amended and Restated Certificate of Incorporation, as amended (“~~~~Charter~~”) to increase the number of shares of Common Stock available for issuance thereunder (or effect a reverse stock split of its issued and outstanding shares of Common Stock so as to effectively increase the number of shares of Common Stock available for issuance) by a sufficient amount to permit the conversion of all outstanding Series C Preferred stock into Conversion Shares and all Series C Preferred Warrants into warrant shares (the “~~Authorized Share Approval~~~~,” and together with the Issuance Approval, the “~~~~Stockholder Approvals~~~~”). In addition, the~~ Company may not effect, and a ~~Purchaser~~holder will not be entitled to, convert the Series C Preferred ~~stock~~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~~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~~common stock outstanding immediately after giving effect to the exercise. ~~The Stockholder Approvals were obtained on April 26, 2019 and the Company’s Charter was amended on April 29, 2019.~~ As of ~~June 30, 2020, a total of 9,872.5~~March 31, 2021, the Company had 350 shares of Series C Preferred ~~stock have been converted to 1,096,999 shares of Common Stock.~~Stock outstanding.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The Company determined that the Series C Preferred stock and the Series C Preferred Warrants are each separate freestanding financial instruments issued in a single transaction (the Private Placement) and that the Series C Warrants have been determined to be derivative liabilities, which are measured at fair value on a recurring basis. The net proceeds of that single transaction were allocated to each of the freestanding financial instruments based on their fair values. The purchase price was allocated to the Series C Preferred Warrants first leaving no value for the Series C Preferred stock, as the Series C Warrants were fair valued at $21.5 million and the total proceeds were only $10.3 million. The final allocation of the proceeds resulted in a charge against income of $11.2 million for the excess of the fair value over the net proceeds, which was recorded in the fiscal 2019 second quarter.

Common Stock

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 U.S. Securities and Exchange Commission (“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 (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 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.

At the Market Offering

On August ~~13,~~17, 2020, the Company entered into an arrangement with an investment banking firm (the “Manager”) to sell up to ~~3,822,339~~$4,796,090 of shares of the Company’s ~~Common Stock, $0.001~~common stock with a par value of $0.001 (the “ATM Offering”). Pursuant to the ATM Offering, shares may be sold on a daily basis, commencing no earlier than August 17, 2020, at a gross sales price equal to the market price for shares of the Company’s ~~Common Stock~~common stock on the ~~Nasdaq~~NASDAQ Capital Market at the time of sale of such shares. The Manager has no obligation to purchase shares of the Company’s ~~Common Stock~~common stock and is only obligated to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell shares of the Company’s ~~Common Stock.~~common stock. Accordingly, there can be no assurances that the Manager will be successful in selling any portion of the shares available for sale under the ATM Offering. The Company shall pay to the Manager a placement fee of 2.5% of the gross sales price of shares sold. The ATM Offering shall remain in effect until the earlier of August ~~13,~~17, 2021, or upon written notice of termination by either the Company or the Manager. On December 18, 2020, the Company delivered written notice to Roth Capital Partners that it was suspending all offers and sales under the Suspension Period, during which time the Company will not make any sales of Placement Shares. Other than the suspension of the ATM Offering, the At the Market Offering Agreement remains in full force and effect during the Suspension Period.

The Company currently intends to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes.

~~Public Offering~~

~~On October 16, 2018, the Company issued and sold in a public offering (the “~~~~Offering~~~~”) an aggregate~~As of (i) 28,480 Class A Units (the “Class A Units”) at a price of $25.00 per Class A Unit, consisting of (i) one share of the Company’s common stock and one five-year warrant to purchase one share of Company common stock at an exercise price of $25.00 per share and (ii) 4,288 Class B Units, consisting of one share of Series B Convertible Preferred Stock and a Warrant to purchase one share of common stock. The net proceeds to the Company from the Offering, after deducting the underwriter’s fees and expenses, were approximately $4.4 million.

~~In addition, the Company granted the underwriter of the Offering a 45-day option (the “~~~~Over-allotment Option”)~~ ~~to purchase up to an additional 30,000~~March 31, 2021, there have been no shares of common stock ~~and additional warrants to purchase an additional 30,000 shares of common stock. At~~sold under the ~~time of the Offering, the underwriter partially exercised the Over-allotment Option by electing to purchase from the Company additional warrants to purchase 8,000 shares of common stock.~~ATM offering.

Amended and Restated Stock Incentive Plan

The Company has granted common stock, common stock warrants, and common stock option awards (the “Equity Awards”) to employees, consultants, advisors and former debt holders of the Company and to former owners and employees of acquired companies that have become employees of the Company. The Company’s Amended and Restated Stock Incentive Plan (the “Plan”) provided for the issuance of up to 5,000 shares of common stock. This Plan expired in August 2016. As of ~~June 30, 2020,~~March 31, 2021, there were 3,246 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. In November 2019, the Company increased the number of common shares available for issuance under the 2016 Plan from 10,000 shares to 800,000 shares. There were no revisions to exercise prices, terms or any other underlying provisions of existing stock options outstanding. As of ~~June 30, 2020,~~March 31, 2021, there were ~~589,955~~569,955 options outstanding and ~~210,045~~230,045 shares available for future issuance under the 2016 Plan.

1719

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Compensation expense is generally recognized on a graded accelerated basis over the vesting period of grants. Compensation expense is recorded in the Condensed 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 three and ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ compensation expense related to share-based payments was as follows:

As of ~~June 30, 2020,~~March 31, 2021, the Company had approximately ~~$358~~$235 of unrecognized compensation costs related to unvested options, which isare expected to be recognized over a weighted-average period of ~~2.3~~1.7 years.

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~~fundraising activities. Warrants may also be issued to individuals or companies in exchange for services provided for 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 ~~the Montage Loan,~~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~~”“Montage Warrant”) to purchase ~~1,326 shares of~~ 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 Section 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. If the equity buy-out is exercised, the Montage Warrant will be surrendered to the Company for cancellation. ~~The fair value~~As of March 31, 2021, the number of shares issuable upon exercise of the Montage ~~warrant liability at June 30, 2020 and September 30, 2019 was $26 and $14, respectively.~~Warrants were 1,327 shares.

Series A, B and C Preferred Warrants - ~~Reset Dates and Reset Price~~ - ~~The~~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; (ii) Series B Warrants ~~had~~with an initial term of 24 months and an exercise price of ~~$9.00 per share;~~ ~~provided, however~~~~, that the~~$4; 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 A Warrants~~“Series C Preferred Warrants”). The Company also issued warrants with an exercise price of $4 to purchase shares of the Company’s common stock to the placement agents. The Company may not effect, and ~~Series B Warrants could~~a holder will not be ~~reset up~~entitled to, ~~three times (each, a “~~~~Reset Date~~~~”), as more specifically set forth in~~convert the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to ~~a price equal~~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 ~~greater of (i) 80%~~election of the ~~average~~holder, 9.99%) of ~~the two lowest VWAP days out of the 20 consecutive trading days immediately preceding the Reset Date, and (ii) $4.00 (the “~~~~Floor~~~~”) (the “~~~~Reset Price~~~~”). Upon the applicable Reset Date,~~ the number of shares of ~~Common Stock issuable pursuant~~common stock outstanding immediately after giving effect to the ~~Series A Warrants~~exercise. During the three and six months ended March 31, 2021, 2,556,875 Series B Warrants ~~would also be adjusted, as more specifically set forth in the Series C Warrants. The~~expired unexercised and 48,612 Series C Warrants were ~~not exercisable until the applicable Reset Date. At the First Reset Date, which was May 29, 2019, the Reset Price was set to the Floor price~~exercised.

As of ~~$4.00 per share. Therefore, there will be no future Reset Dates or Reset Prices. The shares were fixed to the following at the Reset Date:~~March 31, 2021, the number of shares ~~of Common Stock~~ issuable upon exercise of the (i) Series A Warrants iswere 2,556,875 ~~shares, Series B Warrants is 2,556,875 shares, and~~shares; (ii) Series C Warrants ~~is 1,420,486. The number of shares of Common Stock issuable upon exercise of warrants issued to~~were 20,683 shares; and (iii) the ~~placement agents is 127,848 shares.~~

~~As of June 30, 2020, a total of 1,351,217 shares of Series C Warrants have been exercised and no Series A, B or~~ placement agent warrants ~~exercised. The fair value of the total warrant liability related to~~issued in connection with the Series ~~A, B and~~ C ~~warrants~~Preferred Stock were 127,848 shares.

The Montage Warrants, Series C Preferred Warrants and the placement agent warrants ~~at June 30, 2020~~issued in connection with the Series C Preferred Stock, were all determined to be derivative liabilities and ~~September 30, 2019 was $2,410 and $3,500, respectively.~~are subject to remeasurement each reporting period (See Note 4).

Total warrants outstanding as ~~June 30, 2020~~March 31, 2021 were as follows:

During the ~~nine~~three months ended ~~June 30, 2020,~~December 31, 2019, the Company granted options to purchase 681,353 shares at an exercise price of $1.40, of which (a) 70,000 shares vest on November 20, 2020 and the remainder vest ratably over a three-year period commencing November 20, 2019 and (b) 1,000 shares at an exercise price of $1.61 which vest ratably over a three-year period commencing on December 2, 2019. All such options granted expire ten years from the date of grant. There were no options granted during the three and six months ended March 31, 2021.

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 ~~nine~~six months ended ~~June 30,~~March 31, 2020, are as follows:

The expected option term is the number of years the Company estimates the options will be outstanding prior to exercise based on historical trends of employee turnover. Expected volatility is based on historical daily price changes of the Company’s common stock for a period equal to the expected life. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant. The expected dividend yield is zero since the Company does not currently pay cash dividends on its common stock and does not anticipate doing so in the foreseeable future.

A summary of combined stock option and warrant activity for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 are as follows:

As of ~~June 30, 2020,~~March 31, 2021, the aggregate intrinsic value of options outstanding and exercisable was ~~$169~~$832 and ~~there was no aggregate intrinsic value of options exercisable. As of June 30, 2020,~~$318, respectively, and the weighted average remaining contractual term ~~of options outstanding~~was 8.6 and ~~exercisable was 9.3 and 5.6~~8.5 years, respectively.

911.. Net Income (~~Loss~~)(Loss) Per Share Attributable to Common Shareholders

Basic ~~income (loss)~~loss per share is computed by dividing net ~~income (loss)~~loss applicable to common shareholders by the weighted average number of common shares outstanding. Diluted net ~~income (loss)~~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.

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

(in thousands, except per share data)	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Numerator:
Net income (loss)	$	(1,701	)	$	7,311		$	(742	)	$	(10,166	)	$	(556	)	$	822		$	(1,718	)	$	959
Accrued dividends on convertible preferred stock		-			(78	)		(106	)		(235	)		-			(27	)		-			(106	)
Deemed dividend on amendment of Series A convertible preferred stock		-			-			(2,314	)		-			-			-			-			(2,314	)
Net income (loss) applicable to common shareholders - basic earnings per share	$	(1,701	)	$	7,233		$	(3,162	)	$	(10,401	)	$	(556	)	$	795		$	(1,718	)	$	(1,461	)
Effect of dilutive securities:
Change in warrant derivative liability		-			(18	)		-			(18	)		-			(60	)		-			(60	)
Accrued dividends on convertible preferred stock														-			27			-			-
Net income (loss) applicable to common shareholders - diluted earnings per share	$	(1,701	)	$	7,215		$	(3,162	)	$	(10,419	)	$	(556	)	$	762		$	(1,718	)	$	(1,521	)

Denominator:
Weighted-average shares outstanding for basic earnings per share		3,876,677			1,996,326			3,264,734			839,975			4,999,938			3,124,174			4,706,869			2,960,435
Effect of dilutive securities:
Warrants		-			1,000			-			1,000			-			66,546			-			66,713
Preferred stock		-			35,440			-			-			-			1,222,215			-			-
Weighted-average shares outstanding for diluted earnings per share		3,876,677			2,032,766			3,264,734			840,975			4,999,938			4,412,935			4,706,869			3,027,147

Basic net income/(loss) per share	$	(0.44	)	$	3.62		$	(0.97	)	$	(12.38	)	$	(0.11	)	$	0.25		$	(0.36	)	$	(0.49	)
Diluted net income/(loss) per share	$	(0.44	)	$	3.56		$	(0.97	)	$	(12.38	)	$	(0.11	)	$	0.17		$	(0.36	)	$	(0.50	)

For the three and six months ended March 31, 2021, diluted net loss per share was the same as basic net loss per share, as the effects of all the Company’s potential common stock equivalents were anti-dilutive as the Company reported a net loss applicable to common shareholders for the periods and the impact of in-the-money warrants was also anti-dilutive. Potential common stock equivalents excluded include the Series A Convertible Preferred Stock, Series C Convertible Preferred Stock, stock options and warrants (see Note 10) and 216,590 contingently issuable shares associated with an acquired business (see Note 15).

Potential common stock equivalents excluded from the computation of diluted net income (loss) per share because inclusion would have been anti-dilutive included stock options and warrants to purchase common stock totaling 593,201 and 5,403,954, respectively, for the three months ended ~~June 30,~~March 31, 2020, and for the ~~nine~~six months ended ~~June 30,~~March 31, 2020, included stock options and ~~warrant~~warrants to purchase common stock totaling ~~690,175~~690,201 and 5,403,954, respectively, and preferred stock convertible into an aggregate of ~~39,444~~934,109 common shares. For the three months ended June 30, 2019, stock options of 7,848 and warrants to purchase of 5,424,562 shares of common stock were not included in the computation of diluted net income per share because they were considered antidilutive and for the nine months ended June 30, 2019, diluted net loss per share is the same as the basic net loss per share as the effects of all the Company’s potential common stock equivalents are antidilutive because the Company reported a loss for the periods.

Amounts that have been invoiced are recorded in accounts receivable and deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has not yet been recognized. Deferred revenue that is expected to be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as noncurrent deferred revenue included in Other long-term liabilities. ~~Deferred revenue during the nine months ended June 30, 2020 increased by $517.~~ As of ~~June 30, 2020,~~March 31, 2021, approximately $5$22 of revenue is expected to be recognized from remaining performance obligations for contracts with original performance obligations that exceed one year. The Company expects to recognize revenue on approximately 99% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

The following table summarizes the classification and net change in deferred revenue as of and for the ~~nine~~six months ended ~~June 30, 2020:~~March 31, 2021:

The incremental direct costs of obtaining a contract, which primarily consist of sales commissions paid for new subscription contracts, are deferred and amortized on a straight-line basis over a period of approximately three years. The Company evaluated both qualitative and quantitative factors, including the estimated life cycles of its offerings, renewal rates, and its customer attrition to determine the amortization periods for the capitalized costs. The initial amortization period is generally the customer contract term, which is typically thirty-six (36) months, with some exceptions. Deferred capitalized commissions that will be recognized as expense during the succeeding 12-month period are recognized as current deferred capitalized commission costs, and the remaining portion is recognized as long-term deferred capitalized commission costs. Total deferred capitalized commissions were $31 and $70 as of June 30, 2020 and September 30, 2019, respectively. Current deferred capitalized commission costs are included in Other current assets in the Condensed Consolidated Balance Sheets and noncurrent deferred capitalized commission costs are included in Other assets in the Condensed Consolidated Balance Sheets.

114.2. Leases

The Company leases facilities in the United States for its corporate and regional field offices. During the ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, the Company ~~was~~is also a lessee/sublessor for certain office ~~locations relating to its restructuring plans commenced in fiscal 2015.~~locations.

Determination of Whether a Contract Contains a Lease

We determine if an arrangement is a lease at inception or modification of a contract and classify each lease as either an operating or finance lease at commencement. The Company reassesses lease classification subsequent to commencement upon a change to the expected lease term or a modification to the contract. Operating leases represent the Company’s right to use an underlying asset as lessee for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease.

A contract contains a lease if the contract conveys the right to control the use of the identified property or equipment, explicitly or implicitly, for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and obtain substantially all of the economic benefit from the use of the underlying asset. At commencement, contracts containing a lease are further evaluated for classification as an operating lease or finance lease based on their terms.

ROU Model and Determination of Lease Term

The Company uses the ~~ROU~~right of use (“ROU”) model to account for leases, which requires an entity to recognize a lease liability and ROU asset on the lease commencement date. A lease liability is measured equal to the present value of the remaining lease payments over the lease term and is discounted using the incremental borrowing rate, as the rates implicit in the Company’s leases are not readily determinable. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Lease payments include payments made before the commencement date and any residual value guarantees, if applicable. The initial ROU asset consists of the initial measurement of the lease liability, adjusted for any payments made before the commencement date, initial direct costs and lease incentives earned. When determining the lease term, the Company includes option periods when it is reasonably certain that those options will be exercised.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Lease Costs

For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as operating lease costs on a straight-line basis over the applicable lease terms. Some operating lease arrangements include variable lease costs, including real estate taxes, insurance, common area maintenance or increases in rental costs related to inflation. Such variable payments, other than those dependent upon a market index or rate, are excluded from the measurement of the lease liability and are expensed when the obligation for those payments is incurred.

~~BRIDGELINE DIGITAL, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Significant Assumptions and Judgements

Management makes certain estimates and assumptions regarding each new lease and sublease agreement, renewal and amendment, including, but not limited to, property values, market rents, useful life of the underlying property, discount rate and probable term, all of which can impact (1) the classification as either an operating or finance lease, (2) measurement of lease liabilities and ~~right-of-use~~ROU assets and (3) the term over which the ~~right-of-use~~ROU asset and leasehold improvements are amortized. The amount of depreciation and amortization, interest and rent expense would vary if different estimates and assumptions were used.

The components of net lease costs were as follows:

							Three Months Ended March 31,						Six Months Ended March 31,
	Three Months Ended June 30, 2020			Nine Months Ended June 30, 2020			2021			2020			2021			2020
Condensed Consolidated Statement of Operations:
Operating lease cost	$	62		$	247		$	29		$	102		$	47		$	185
Variable lease cost		46			141			13			20			27			73
Less: Sublease income, net		(18	)		(73	)		(26	)		(28	)		(51	)		(55	)
Total	$	90		$	315		$	16		$	94		$	23		$	203

Cash paid for amounts included in the measurement of lease liabilities was ~~$220~~$117 for the ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, all of which ~~all~~ represents operating cash flows from operating leases. As of ~~June 30, 2020,~~March 31, 2021, the weighted average remaining lease term was ~~3.2~~3.6 years and the weighted average discount rate was 7.0%.

At ~~June 30, 2020, future minimum rental commitments under non-cancelable leases with initial or remaining terms in excess of one year, which have commenced, were as follows:~~

In January 2020, the Company entered into a new lease arrangement for its offices in Woodbury, New York. As of June 30, 2020, the lease had not yet commenced as the new office space is currently under construction. The Company had originally expected to move into the new office space on or about May 1, 2020; however, due to the current state of the COVID-19 pandemic, there have been delays in construction, inclusive of obtaining necessary building permits from the local municipality. Due to the uncertainty associated with the COVID-19 pandemic, the Company cannot reasonably estimate when such construction efforts will be completed and by extension when the lease will commence. Future minimum non-cancellable payments upon commencement of the new lease are as follows:

* Future minimum non-cancellable lease payments during the period from June 1, 2020 to MayMarch 31, 2021, are approximately $6 per month following the date of substantial completion of construction of the associated office space. The amounts represented above are for a full 12-month period based on the original expectation of moving into the new office space on or about May 1, 2020. As described above, the Company cannot reasonably estimate when the commencement date will occur.

~~At September 30, 2019,~~ future minimum rental commitments under non-cancelable leases with initial or remaining terms in excess of one year were as follows:

At September 30, 2020, future minimum rental commitments under non-cancelable leases with initial or remaining terms in excess of one year were as follows:

15.Acquisition

On March 1,3 2021, the Company, pursuant to a Share Purchase Agreement (the “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 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) 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. At March 31, 2021, € 550 thousand of the remaining purchase price and related earn-out may be settled, at the Company’s option, in shares of the Company’s common stock.

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 be recognized at their estimated fair values as of the acquisition date. 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 contingent consideration was determined based on the probability of achievement of the revenue targets and operational goals, which includes estimating future revenues. 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.

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

Cash, including deferred cash payable $ 711
Common stock (29,433 shares at $3.38 per share)
99
Seller’s note
352
Contingent consideration (earn-outs)
1,617
Total consideration paid
$ 2,779

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

Assets acquired:

Cash
$ 627
Non-cash current assets
351
Property and equipment
5
Intangible assets:

Acquired software
282
Customer relationships
1,280
Domain and trade names
116
Goodwill
2,461
Total assets acquired
5,122

Liabilities assumed:

Current liabilities
198
Assumed debt obligations
2,145
Total liabilities assumed
2,343

Total consideration paid
$ 2,779

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The average useful lives of the identifiable intangible assets acquired was five years for acquired software, eight years for customer relationships and twelve years for domain and trade names.

Total revenue from the Woorank acquisition totaled $153 for the three months ended March 31, 2021. Total earnings from the acquisition is 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 unaudited pro forma information assuming the Woorank acquisition occurred on October 1, 2019:

Three Months Ended
March 31,

Six Months Ended
March 31,

2021

2020

2021

2020

(in thousands, except per share data)

Revenue
$ 3,179 $ 3,294 $ 6,376 $ 6,643

Net income (loss) applicable to common shareholders - basic
(390 ) 668 (1,486 ) (1,832 )
Net income (loss) applicable to common shareholders - diluted
(390 ) 635 (1,486 ) (1,892 )

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

Basic
$ (0.08 ) $ 0.21 $ (0.32 ) $ (0.62 )
Diluted
$ (0.08 ) $ 0.14 $ (0.32 ) $ (0.63 )

Weighted average common shares outstanding - basic
4,999,938 3,124,174 4,706,869 2,960,435
Weighted average common shares outstanding - diluted
4,999,938 4,412,935 4,706,869 3,027,147

15.18. Subsequent Events

The Company evaluated subsequent events through the date of this filing and concluded there were no material subsequent events requiring adjustment to or additional disclosure in these interim condensed consolidated financial ~~statements.~~statements, other than as disclosed below.

Hawk Search Acquisition

The initial accounting for the transaction is incomplete at the date these consolidated financial statements are available to be issued, as the information necessary to complete such evaluation is in the process of being obtained and more thoroughly evaluated. The Company has not yet determined fair value of consideration transferred, the acquired assets and liabilities to be acquired nor the fair value or probabilities of contingent consideration to be transferred. Accordingly, such disclosures cannot be made.

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

On May 14, 2021, the Company offered and sold, in a registered direct offering, a total 1,060,000 shares of its common stock at a price of $2.28 per share, for gross proceeds of approximately $2.4 million prior to deduction of commissions and offering expenses. Additionally, the Company entered into securities purchase agreements with certain institutional investors in connection with a private placement of 2,700 shares of newly designated Series D Convertible Preferred Stock (the “Series D Preferred Stock”) at a price of $1,000 per share and warrants to purchase up to an aggregate of 592,105 shares of common stock at an exercise price of $2.51 per share (the “Warrants”). The Company received gross proceeds from the private placement of approximately $2.7 million, prior to deduction of commissions and offering expenses.

The Series D Preferred Stock is convertible into an aggregate of approximately 1,184,211 shares of common stock at a conversion price of $2.28 per share, subject to certain ownership limitations, upon the Company obtaining shareholder approval to provide for the full conversion of the Series D Preferred Stock and the full exercise of the Warrants (“Shareholder Approval”). Beginning on the six month anniversary of the original issuance date, the Series D Preferred Stock holders are entitled to receive cumulative dividends at the annual rate per share of Preferred Stock as a percentage of the stated value per share of 9% on the last day of each calendar quarter, which right will terminate upon receipt of Shareholder Approval. Until Shareholder Approval is obtained, the Series D Preferred Stockholders have preferential liquidation rights over the Company's common stockholders and holders of the Company’s outstanding preferred stock. The Warrants are exercisable six months from the date of issuance and will expire five and a half years following the date of issuance.

Joseph Gunnar & Co. is acting as the lead placement agent and Taglich Brothers, Inc. is acting as co-placement agent. The Company intends to use the net proceeds of the offerings to fund certain cash payments payable in accordance with the Hawk Purchase Agreement and for general working capital purposes.

All statements included in this section,, other than statements or characterizations of historical fact, are forward-looking statements. These ~~“forward-looking statements”~~“forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," ~~"may,"~~"may" "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These statements appear in a number of places and include statements regarding the intent, belief or current expectations of Bridgeline Digital, Inc. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, the impact of the ~~COVID – 19~~coronavirus pandemic and related public health measures on our financial results; business operations and the business of our customers, suppliers and partners; our ability to retain and upgrade current customers; increasing our recurring revenue; our ability to attract new customers; our revenue growth rate; our history of net loss and our ability to achieve or maintain profitability; our liability for any unauthorized access to our data or our ~~users’~~users’ content, including through privacy and data security breaches; any decline in demand for our platform or products; changes in the interoperability of our platform across devices, operating systems, and third party applications that we do no control; competition in our markets; our ability to respond to rapid technological changes, extend our platform, develop new features or products, or gain market acceptance for such new features or products, particularly in light of potential disruptions to the productivity of our employees resulting from remote work; our ability to manage our growth or plan for future growth, and our acquisition of other businesses and the potential of such acquisitions to require significant management attention, disrupt our business, or dilute stockholder value; the volatility of the market price of our common stock; the ability to maintain our listing on the NASDAQ Capital Market; or our ability to maintain an effective system of internal controls as well as other risks described in our filings with the Securities and Exchange Commission. Any of such risks could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. We urge readers to review carefully the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019~~2020 as well as in the other documents that we file with the Securities and Exchange Commission.

This section should be read in combination with the accompanying un~~audited~~ unaudited condensed consolidated financial statements and related notes prepared in accordance with United States generally accepted accounting principles.

Bridgeline Digital, The Digital Engagement ~~Company™,~~Company, helps customers maximize the performance of their full digital experience from websites and intranets to eCommerce experiences. Bridgeline’s Unbound platform ~~is a Digital Experience Platform that deeply~~ integrates Web Content Management, eCommerce, ~~Marketing Automation, Site Search, Authenticated Portals,~~eMarketing, Social Media ~~Management,~~management, and Web Analytics (Insights) with the goal of assisting marketers to deliver ~~exceptional~~ digital experiences that attract, engage, nurture, and convert their customers across all channels. Bridgeline offers a core accelerator framework for rapidly implementing digital experiences on the Bridgeline Unbound ~~Platform~~platform, which provides customers with cost-effective solutions in addition to velocity to market.

Bridgeline’s Unbound platform combined with its professional services assists customers in digital business transformation, driving lead generation, increasing revenue, improving customer service and loyalty, enhancing employee knowledge, and reducing operational costs. The Bridgeline Unbound platform bridges the gaps between ~~web content management,~~Web Content Management, eCommerce, eMarketing, and social and web analytics by providing all of these components in one unified and deeply integrated platform.

Our Unbound Franchise product empowers large franchises, healthcare networks, associations/chapters and other multi-unit organizations to manage a large hierarchy of digital properties at scale. The platform provides an easy-to-use administrative console that enables corporate marketing to provide consistency in branding and messaging while providing flexible publishing capabilities at the local-market level. The platform empowers brand networks to unify, manage, scale and optimize a hierarchy of web properties and marketing campaigns on a global, national and local level.

The Unbound platform is delivered through a cloud-based software as a service (“~~SaaS~~”SaaS”) multi-tenant business model, whose flexible architecture provides customers with ~~state-of-the-art~~state of the art deployment providing maintenance, daily technical operation and support; or via a traditional perpetual licensing business model, in which the software resides on a dedicated ~~infrastructure~~server in either the customer’s facility or ~~manage-hosted~~hosted by Bridgeline via a cloud-based hosted services model.

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

~~Bridgeline Digital was incorporated under the laws~~Woorank SRL (“Woorank”) is a leading SEO (“Search Engine Optimization”) audit and digital marketing tool that can look at a customer’s site through Google’s eyes and generate an instant audit of the ~~State of Delaware on August 28, 2000.~~site’s technical, on-page and off-page SEO. Woorank’s clear, actionable insights not only help companies increase their search ranking and website traffic, but also improve audience engagement, conversion, and customer retention rates.

The Company’s corporate office is located in Woburn, Massachusetts. The Company maintains regional field offices serving the following geographical locations: Boston, MA; ~~Chicago, IL;~~ New York, NY; Ontario, Canada and ~~Ontario, Canada.~~Brussels, Belgium. The Company has three wholly-owned subsidiaries: Bridgeline Digital Pvt. Ltd. located in Bangalore, India, Bridgeline Digital Canada Inc. located in Ontario, Canada, and ~~Stantive Technologies Pty, Ltd.~~Bridgeline Digital Belgium BV located in ~~Australia.~~Brussels, Belgium.

For the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ one customer represented approximately ~~11% of the Company’s total revenue~~10% and ~~for the three months ended June 30, 2019, two customers represented approximately 14% and 11%~~13% of the Company’s total revenue, respectively. For the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, one customer represented approximately 10% and 12% of the Company’s total revenue, ~~and for the nine months ended June 30, 2019, two customers represented approximately 16% and 12% of the Company’s total revenue.~~respectively.

Results of Operations for the Three and Six Months Ended March 31, 2021~~Three~~ ~~and~~ ~~Nine~~ M~~onths~~ E~~nded~~ ~~June 30, 2020~~ compared to the Threeand ~~Nine~~Six Months Ended~~June 30, 2019~~ March 31, 2020

Total revenue for the three months ended ~~June 30, 2020~~March 31, 2021 was ~~approximately $2.6~~$2.9 million and ~~approximately~~ $2.7 million for the three months ended ~~June 30, 2019.~~March 31, 2020. We had a net loss of ~~approximately $1.7 million and had net income of approximately $7.3 million~~$556 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019, respectively. Included in~~ net income of $822 thousand for the three months ended ~~June 30, 2020 and 2019~~March 31, 2020. Included in the net loss for the three months ended March 31, 2021 was a loss of ~~approximately $1.8 million and a gain approximately $11.2 million, respectively,~~$418 thousand as a result of the change in fair value of certain warrant liabilities. Included in net income for the three months ended June 30, 2019 were one-time acquisition costs of approximately $938 thousand. Basic net income (loss) per share attributable to common shareholders was ($0.44) for the three months ended June 30, 2020 and $3.62 for the three months ended June 30, 2019.

Total revenue for the nine months ended June 30, 2020 was approximately $8.2 million and approximately $7.3 million for the nine months ended June 30, 2019. We had a net loss of approximately ($741) thousand for the nine months ended June 30, 2020 and a net loss of approximately ($10.2) million for the nine months ended June 30, 2019. Included in net income for the nine months ended June 30,March 31, 2020 was a gain of ~~approximately $1.1~~$1.8 million as a result of the change in fair value of certain warrant liabilities. Basic and diluted net income (loss) per share attributable to common shareholders was $(0.11) for the three months ended March 31, 2021 and $0.25 and $0.17, respectively, for the three months ended March 31, 2020.

Total revenue for the six months ended March 31, 2021 was $5.7 million and $5.6 million for the six months ended March 31, 2019. We had a net loss of $1.7 million for the six months ended March 31, 2021 and net income of $959 thousand for the six months ended March 31, 2020. Included in the net loss for the ~~nine~~six months ended ~~June 30, 2019~~March 31, 2021 was a ~~goodwill impairment charge~~loss of ~~approximately $3.7~~$1.9 million as a result of the change in fair value of certain warrant liabilities and ~~restructuring and acquisition costs~~income of ~~approximately $1.2 million.~~$88 thousand related to government grant income related to the Paycheck Protection Program (“PPP”) loan. Included in net income for the six months ended March 31, 2020 was a gain of $2.9 million as a result of the change in fair value of certain warrant liabilities. During the ~~nine~~six months ended ~~June 30,~~March 31, 2020, the Company amended its Series A Convertible Preferred Stock resulting in a deemed dividend of ~~approximately~~ $2.3 million charged against net income to arrive at net loss applicable to common shareholders for purposes of calculating earnings per share. Basic and diluted net loss per share attributable to common shareholders was ($~~0.97)~~0.36) for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 and ($~~12.38)~~0.49) and ($0.50), respectively, for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020.

(in thousands)	Three Months Ended June 30,												Nine Months Ended June 30,												Three Months Ended March 31,												Six Months Ended March 31,
							$			%									$			%
	2020			2019			Change			Change			2020			2019			Change			Change
Revenue																									2021			2020			$ Change			% Change			2021			2020			$ Change			% Change
Digital engagement services	$	713		$	1,118		$	(405	)		(36	%)	$	2,708		$	3,102			(394	)		(13	%)	$	885		$	899		$	(14	)		(2	%)	$	1,722		$	1,995			(273	)		(14	%)
% of total net revenue		27	%		42	%								33	%		43	%								31	%		33	%								30	%		36	%
Subscription and perpetual licenses		1,919			1,575			344			22	%		5,494			4,162			1,332			32	%		1,989			1,839			150			8	%		3,988			3,575			413			12	%
% of total net revenue		73	%		58	%								67	%		57	%								69	%		67	%								70	%		64	%
Total net revenue		2,632			2,693			(61	)		(2	%)		8,202			7,264			938			13	%		2,874			2,738			136			5	%		5,710			5,570			140			2	%

Cost of revenue
Digital engagement services		395			416			(21	)		(5	%)		1,432			1,635			(203	)		(12	%)		474			457			17			4	%		848			1,026			(178	)		(17	%)
% of digital engagement services revenue		55	%		37	%								53	%		53	%								54	%		51	%								49	%		51	%
Subscription and perpetual licenses		684			1,075			(391	)		(36	%)		2,190			2,604			(414	)		(16	%)		592			727			(135	)		(19	%)		1,175			1,517			(342	)		(23	%)
% of subscription and perpetual revenue		36	%		68	%								40	%		63	%								30	%		40	%								29	%		42	%
Total cost of revenue		1,079			1,491			(412	)		(28	%)		3,622			4,239			(617	)		(15	%)		1,066			1,184			(118	)		(10	%)		2,023			2,543			(520	)		(20	%)
Gross profit		1,553			1,202			351			29	%		4,580			3,025			1,555			51	%		1,808			1,554			254			16	%		3,687			3,027			660			22	%
Gross profit margin		59	%		45	%								56	%		42	%								63	%		57	%								65	%		54	%

Operating expenses
Sales and marketing		312			1,469			(1,157	)		(79	%)		2,130			3,519			(1,389	)		(39	%)		525			786			(261	)		(33	%)		969			1,818			(849	)		(47	%)
% of total revenue		12	%		55	%								26	%		48	%								18	%		29	%								17	%		33	%
General and administrative		464			785			(321	)		(41	%)		1,936			2,216			(280	)		(13	%)		608			723			(115	)		(16	%)		1,073			1,472			(399	)		(27	%)
% of total revenue		18	%		29	%								24	%		31	%								21	%		26	%								19	%		26	%
Research and development		402			592			(190	)		(32	%)		1,218			1,499			(281	)		(19	%)		479			426			53			12	%		828			816			12			1	%
% of total revenue		15	%		22	%								15	%		21	%								17	%		16	%								15	%		15	%
Depreciation and amortization		224			257			(33	)		(13	%)		731			361			370			102	%		239			249			(10	)		(4	%)		471			507			(36	)		(7	%)
% of total revenue		9	%		10	%								9	%		5	%								8	%		9	%								8	%		9	%
Goodwill impairment		-			-			-			0	%		-			3,732			(3,732	)		(100	%)
% of total revenue		0	%		0	%								0	%		51	%
Restructuring and acquisition related expenses		1			938			(937	)		(100	%)		373			1,242			(869	)		(70	%)		84			367			(283	)		(77	%)		294			372			(78	)		(21	%)
% of total revenue		0	%		35	%								5	%		17	%								3	%		13	%								5	%		7	%
Total operating expenses		1,403			4,041			(2,638	)		(65	%)		6,388			12,569			(6,181	)		(49	%)		1,935			2,551			(616	)		(24	%)		3,635			4,985			(1,350	)		(27	%)


Income (loss) from operations		150			(2,839	)		2,989			(105	%)		(1,808	)		(9,544	)		7,736			(81	%)		(127	)		(997	)		870			(87	%)		52			(1,958	)		2,010			(103	%)
Interest expense and other, net		(2	)		7			(9	)		(129	%)		(3	)		(316	)		313			(99	%)		(4	)		(1	)		(3	)		300	%		2			(1	)		3			(300	%)
Amortization of debt discount		-			-			-			0	%		-			(231	)		231			(100	%)
Warranty liability expense		-			-			-			0	%		-			(11,272	)		11,272			(100	%)
Government grant income																										-			-			-			0	%		88			-			88			100	%
Change in fair value of warrant liabilities		(1,843	)		10,146			(11,989	)		(118	%)		1,078			11,204			(10,126	)		(90	%)		(418	)		1,820			(2,238	)		(123	%)		(1,859	)		2,921			(4,780	)		(164	%)
Income (loss) before income taxes		(1,695	)		7,314			(9,009	)		(123	%)		(733	)		(10,159	)		9,426			(93	%)		(549	)		822			(1,371	)		(167	%)		(1,717	)		962			(2,679	)		(278	%)
Provision for income taxes		6			3			3			100	%		9			7			2			29	%		7			-			7			100	%		1			3			(2	)		(67	%)

Net income/(loss)	$	(1,701	)	$	7,311		$	(9,012	)		(123	%)	$	(742	)	$	(10,166	)	$	9,424			(93	%)	$	(556	)	$	822		$	(1,378	)		(168	%)	$	(1,718	)	$	959		$	(2,677	)		(279	%)

Non-GAAP Measure:
Adjusted EBITDA	$	428		$	(1,556	)	$	1,984			(128	%)	$	(571	)	$	(3,968	)	$	3,397			(86	%)	$	235		$	(331	)	$	566			(171	%)	$	907		$	(999	)	$	1,906			(191	%)

Our revenue is derived from two sources: (i) digital engagement services and (ii) subscription and perpetual licenses.

Digital engagement services revenue is comprised of implementation and retainer related services. In total, revenue from digital engagement services decreased ~~$405~~$14 thousand, or ~~36%~~2%, to ~~$713~~$885 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$1.1 million~~$899 thousand for the three months ended ~~June 30, 2019~~March 31, 2020 and decreased ~~$394~~$273 thousand, or ~~13%~~14%, to ~~$2.7~~$1.7 million for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$3.1~~$2.0 million for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. Digital engagement services revenue as a percentage of total revenue decreased to ~~27%~~31% from ~~42%~~33% for the three months ended ~~June 30, 2020~~March 31, 2021 compared to the three months ended ~~June 30, 2019~~March 31, 2020 and decreased to ~~33%~~30% from ~~43%~~36% for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. The decrease as a percentage of total revenue is attributable to increases in revenues generated from subscription and perpetual licenses during the three and ~~nine~~six months ended ~~June 30, 2020.~~March 31, 2021.

Revenue from subscription (SaaS) and perpetual licenses increased ~~$344~~$150 thousand, or ~~22%~~8%, to ~~$1.9~~$2.0 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$1.6~~$1.8 million for the three months ended ~~June 30, 2019,~~March 31, 2020 and increased ~~$1.3 million,~~$413 thousand, or ~~32%~~12%, to ~~$5.5~~$4.0 million for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$4.2~~$3.6 million for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. The increase for the three and ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to the prior period is primarily due to significant multi-year license ~~revenues~~renewals across our diverse portfolio of ~~$428 thousand~~Fortune 500 companies and ~~$1.9 million, respectively, realized from our two acquisitions completed in~~ the ~~fiscal 2019 second quarter, partially offset by cancelled SaaS subscriptions for legacy customers.~~inclusion of one month of Woorank revenue. Subscription and perpetual license revenue as a percentage of total revenue increased to ~~73%~~69% from ~~58%~~67% for the three months ended ~~June 30, 2020~~March 31, 2021 compared to the three months ended ~~June 30, 2019~~March 31, 2020 and increased to ~~67%~~70% from ~~57%~~64% for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. The increase as a percentage of total revenue is primarily attributable to the ~~two acquisitions completed~~overall decreases in ~~the fiscal 2019 second quarter which resulted in the Company acquiring a larger proportion of subscription and perpetual licenses over~~ digital engagement ~~service contracts.~~services revenue.

Total cost of revenue decreased ~~$412~~$118 thousand, or ~~28%~~10%, to ~~$1.1~~$1.0 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$1.5~~$1.2 million for the three months ended ~~June 30, 2019~~March 31, 2020 and decreased ~~$617~~$520 thousand, or ~~15%~~20%, to ~~$3.6~~$2.0 million for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$4.2~~$2.5 million for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. The gross profit margin increased to ~~59%~~63% for the three months ended ~~June 30, 2020,~~March 31, 2021 compared to ~~45%~~57% for the three months ended ~~June 30, 2019~~March 31, 2020 and increased to ~~56%~~65% for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~42%~~54% for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. The increase in the gross profit margin for the three and ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to the prior period is primarily attributable to decreases in headcount ~~and the use of third-party consultants~~ and increases in the proportion of license revenue, which are generally associated with higher margins, to digital engagement service revenue.

Cost of digital engagement services ~~decreased $21~~increased $17 thousand, or 5%4%, to ~~$395~~$474 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$416~~$457 thousand for the three months ended ~~June 30, 2019~~March 31, 2020 and decreased ~~$203~~$178 thousand, or ~~12%~~17%, to ~~$1.4~~$848 thousand for the six months ended March 31, 2021 compared to $1.0 million for the ~~nine~~six months ended ~~June 30, 2020 compared to $1.6 million for the nine months ended June 30, 2019.~~March 31, 2020. The ~~decrease~~increase for the three ~~and nine~~ months ended ~~June 30, 2020~~March 31, 2021 compared to the prior period is primarily due to the allocation of support team and third-party subcontractor ~~costs.~~costs and one month of Woorank costs and the decrease for the six months ended March 31, 2021 compared to the prior period is primarily due to the allocation of support team and third-party subcontractor costs . The cost of digital engagement services as a percentage of digital engagement services revenue increased to ~~55%~~54% for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~37%~~51% for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~remained consistent at 53%~~decreased to 49% for the ~~nine~~six months ended ~~June 30, 2020 and 2019.~~March 31, 2021 compared to 51% for the six months ended March 31, 2020. The increase as a percentage of revenues for the three months ended ~~June 30, 2020~~March 31, 2021 compared to the prior period is primarily due to the overall decreases in digital engagement services revenue.

Cost of subscription and perpetual licenses decreased ~~$391~~$135 thousand, or ~~36%~~19%, to ~~$684~~$592 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$1.1 million~~$727 thousand for the three months ended ~~June 30, 2019~~March 31, 2020 and decreased ~~$414~~$342 thousand, or ~~16%~~23%, to ~~$2.1~~$1.2 million for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$2.6~~$1.5 million for the ~~nine~~six months ended June 30, 2019. The decrease for the three and nine months ended June 30, 2020 compared to the prior period is primarily due to a reduction of the workforce and less allocated time by the delivery team and third-party subcontractors on platform support projects.March 31, 2020. The cost of subscription and perpetual licenses as a percentage of subscription and perpetual license revenue decreased to ~~36%~~30% for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~68%~~40% for the three months ended ~~June 30, 2019~~March 31, 2020 and decreased to ~~40%~~29% for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~63%~~42% for the ~~nine~~six months ended ~~June 30, 2019. These~~March 31, 2020. The decreases ~~are~~for the three and six months ended March 31, 2021 compared to the prior period is primarily ~~attributable~~due to a reduction ~~of the workforce~~within our fixed costs to operate our cloud-based hosting model with Amazon Web Services and ~~less allocated time by the delivery team and third-party subcontractors on platform~~variable internal support ~~projects.~~costs.

Sales and marketing expenses decreased ~~$1.2 million,~~$261 thousand, or ~~79%~~33%, to ~~$312~~$525 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$1.5 million~~$786 thousand for the three months ended ~~June 30, 2019~~March 31, 2020 and decreased ~~$1.4 million,~~$849 thousand, or ~~39%~~47%, to ~~$2.1~~$969 thousand for the six months ended March 31, 2021 compared to $1.8 million for the ~~nine~~six months ended ~~June 30, 2020 compared to $3.5 million for the nine months ended June 30, 2019.~~March 31, 2020. Sales and marketing expenses represented ~~12%~~18% and ~~55%~~29% of total revenue for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, and ~~26%~~17% and ~~48%~~33% of total revenue for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The decrease for the three and six months ended ~~June 30, 2020~~March 31, 2021 compared to the prior ~~period~~periods is attributable to decreases in ~~headcount. The decrease for the nine months ended June 30, 2020 compared to the prior period is attributable to a decrease in~~ headcount and ~~personnel from acquisitions as well as decreased commission expenses incurred.~~travel-related expenses.

General and administrative expenses decreased ~~$321~~$115 thousand, or ~~41%~~16%, to ~~$464~~$608 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$785~~$723 thousand for the three months ended ~~June 30, 2019~~March 31, 2020 and decreased ~~$280~~$399 thousand, or ~~13%~~27%, to ~~$1.9~~$1.1 million for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$2.2~~$1.5 million for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. General and administrative expenses represented ~~18%~~21% and ~~29%~~26% of total revenue for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, and ~~24%~~19% and ~~31%~~26% of total revenue for the ~~nine~~six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The ~~decrease~~decreases for the three and six months ended ~~June 30, 2020~~March 31, 2021 compared to the prior period was primarily due to the decrease in ~~overall support~~ headcount and personnel expenses. ~~The decrease for the nine months ended June 30, 2020 compared to the prior period was primarily due to a decrease in headcount and personnel from acquisitions.~~

Research and development expense ~~decreased $190~~increased $53 thousand, or ~~32%~~12%, to ~~$402~~$479 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$592~~$426 thousand for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~decreased $281~~increased $12 thousand, or ~~19%~~1%, to ~~$1.2 million~~$828 thousand for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$1.5 million~~$816 thousand for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. Research and development expenses represented ~~15%~~17% and ~~22%~~16% of total revenue for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively and 15~~% and 21%~~15% of total revenue for each of the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 and ~~2019, respectively. The decrease for the three and nine months ended June 30, 2020 compared to the prior period is primarily attributable to decreases in headcount.~~2020.

Depreciation and amortization expense decreased ~~$33~~$10 thousand, or ~~13%~~4%, to ~~$224~~$241 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$257~~$249 thousand for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~increased $370~~decreased $36 thousand, or ~~102%~~7%, to ~~$731~~$471 thousand for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$361~~$507 thousand for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. The decrease for the three months ended June 30, 2020 is primarily due to a reduction of amortization of intangible assets, specifically software development costs. The increase for the nine months ended June 30, 2020 is primarily due to amortization of intangible assets resulting from previous acquisitions. Depreciation and amortization expense represented 9%8% and ~~10%~~9% of total revenue for the three and six months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and 9% and 5% of total revenue for the nine months ended June 30, 2020 and 2019, respectively,~~

During the nine months ended June 30, 2019, the Company performed an interim impairment test, which resulted in an impairment charge of $3.7 million. An impairment charge is recognized for the amount by which the carrying amount exceeds the Company’s fair value. There were no impairment charges for the nine months ended June 30, 2020.respectively.

In connection with the acquisition of a business completed during the fiscal 2021 second quarter, the Company incurred acquisition expenses of $84 during the three months ended March 31, 2021 and $294 during the six months ended March 31, 2021. There were no acquisition related expenses incurred during the three and six months ended March 31, 2020.

During the three and ~~nine~~six months ended ~~June 30,~~March 31, 2020, the Company recognized $1$365 thousand ~~and $373 thousand, respectively,~~ related to a reduction in force in its U.S. and Canada operations aimed at improving efficiencies by combining functions, certain responsibilities and eliminating redundancies, which resulted in a reduction of 15 positions.

During the three and nine months ended June 30, 2019, we committed to a restructuring plan to reorganize our international operations to maximize efficiencies and reduce operating costs. Restructuring expenses were $814 thousand for the three and nine months ended June 30, 2019, respectively, and represented 30% and 11% of total revenue for the three months and nine months ended June 30, 2019, respectively. Acquisition related expenses related to the acquisition of Stantive Technologies Group Inc. consummated in March 2019 were $124 thousand and $428 thousand for the three and nine months ended June 30, 2019 and represented 5% and 6% of total revenue for the three months and nine months ended June 30, 2019, respectively. There were no acquisition related expenses incurred during the three and nine months ended June 30, 2020.

~~The income (loss)~~Net loss from operations was ~~$150~~$127 thousand for the three months ended ~~June 30, 2020~~March 31, 2021 compared to $997 thousand for the three months ended March 31, 2020. Income from operations was $52 thousand for the six months ended March 31, 2021 compared to a loss from operations of ~~($2.8)~~$2.0 million for the six months ended March 31, 2020. Operating expenses decreased $616 thousand, or 24%, to $1.9 million for the three months ended ~~June 30, 2019, and a loss of ($1.8) million for the nine months ended June 30, 2020~~March 31, 2021 compared to ~~a loss of ($9.5) million for the nine months ended June 30, 2019. Operating expenses decreased~~ $2.6 ~~million, or 65%, to $1.4~~ million for the three months ended ~~June 30,~~March 31, 2020 ~~compared~~and decreased $1.4 million, or 27%, to ~~$4.0~~$3.6 million for the ~~three~~six months ended ~~June 30, 2019, and decreased $6.2 million, or 49%,~~March 31, 2021 compared to ~~$6.4~~$5.0 million for the ~~nine~~six months ended ~~June 30, 2020 compared to $12.6 million for the nine months ended June 30, 2019.~~March 31, 2020. The ~~increases~~decreases for the three and six months ended ~~June 30, 2020~~March 31, 2021 compared to the prior period were primarily due to reduction in ~~headcounts~~headcount and ~~for the nine months ended June 30, 2020 compared~~a reduction within our fixed costs to ~~the prior period were primarily attributable to a goodwill impairment charge of $3.7 million~~operate our cloud-based hosting model with Amazon Web Services and ~~restructuring expenses of $1.2 million which occurred in the prior period and similar charges did not recur.~~variable internal support costs.

The Company recognized a loss related to the change in fair value of warrant liabilities of $418 thousand for the three months ended March 31, 2021 compared to a gain of $1.8 million for the three months ended ~~June 30,~~March 31, 2020 ~~compared to $11.2~~and a loss of $1.9 million for the ~~three~~six months ended ~~June 30, 2019 and~~March 31, 2021 compared to a gain of ~~$1.1~~$2.9 million for the ~~nine~~six months ended June 30, 2020 compared to $11.2 million for the nine months ended June 30, 2019. During the nine months ended June 30, 2019, we also recognized a warranty liability expense of $11.3 million related to the excess of fair value allocated to warrants over the proceeds received from the issuance of Series C Preferred Convertible Stock and associated warrants.March 31, 2020.

During the ~~three and nine months ended June 30, 2020, interest expense was $2 thousand. During~~first quarter of fiscal 2021, the ~~three and nine months ended June 30, 2019, interest expense, net, inclusive~~Company recognized government grant income of ~~amortization~~$88 thousand associated with proceeds received under the Paycheck Protection Program deemed probable to be forgiven based on the actual expenditures for qualified expenses during the period. As of ~~debt discounts, was $7 thousand and $547 thousand, respectively.~~the first quarter of fiscal 2021, the Company expended all loan proceeds on qualified expenses incurred during the period. The Company applied for full PPP Loan forgiveness on March 29, 2021. Although the Company believes it is probable that the PPP Loan will be forgiven, the Company cannot provide any objective assurance that it will obtain forgiveness in whole or in part.

The provision for income tax expense was $9$7 thousand and $7$1 thousand for the ~~nine~~three and six months ended ~~June 30,~~March 31, 2021, respectively, and $0 and $3 thousand for the three and six months ended March 31, 2020, ~~and 2019,~~ respectively. Income tax expense represents the estimated liability for federal and state income taxes owed. We have net operating loss carryforwards and other deferred tax benefits that are available to offset any potential taxable income.

We also measure our performance based on a non-GAAP (“Generally Accepted Accounting Principles”) measurement of earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, impairment of goodwill and intangible assets, non-cash warrant related expenses, change in fair value of derivative instruments and restructuring and acquisition related charges (“Adjusted EBITDA”).

We believe this non-GAAP financial measure of Adjusted EBITDA is useful to management and investors in evaluating our operating performance for the periods presented and provide a tool for evaluating our ongoing operations.

Adjusted EBITDA, however, is not a measure of operating performance under ~~U.S.~~U.S GAAP and should not be considered as an alternative or substitute for ~~U.S.~~U.S GAAP profitability measures such as (i) ~~loss~~income (loss) from operations and net income (loss), or (ii) cash flows from operating, investing and financing activities, both as determined in accordance with ~~U.S.~~U.S GAAP. Adjusted EBITDA as an operating performance measure has material limitations since it excludes the financial statement impact of income taxes, net interest expense, amortization of intangibles, depreciation, goodwill impairment, restructuring charges, acquisition related expenses, loss on disposal of assets, other amortization, changes in fair value of warrant liabilities and stock-based compensation, and therefore does not represent an accurate measure of profitability. As a result, Adjusted EBITDA should be evaluated in conjunction with net income (loss) for a complete analysis of our profitability, as net income (loss) includes the financial statement impact of these items and is the most directly comparable ~~U.S.~~U.S GAAP operating performance measure to Adjusted EBITDA. Our definition of Adjusted EBITDA may also differ from and therefore may not be comparable with similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that Adjusted EBITDA has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under ~~U.S.~~U.S GAAP.

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

Adjusted EBITDA increased year over year, which is primarily attributable to increases in revenues and cost control measures.

Cash ~~used in~~provided by operating activities was ~~$227~~$203 thousand for the ~~nine~~six months ended ~~June 30, 2020~~March 31, 2021 compared to cash used in operating activities of ~~$3.3 million~~$90 thousand for the ~~nine~~six months ended ~~June 30, 2019.~~March 31, 2020. The change in cash provided by operating activities compared to the prior period was primarily due to ~~a decrease~~an increase in ~~loss from operations~~net income (loss) after consideration of non-cash items partially offset by ~~decreases~~increases in accounts ~~receivable~~receivables and ~~prepaid expenses and increases~~decreases in accounts payable and ~~deferred revenue.~~accrued liabilities.

Cash provided by investing activities was $347 thousand for the six months ended March 31, 2021, which primarily related to excess cash acquired in connection with the acquisition of a business over the cash consideration paid during the period. We did not have any cash flows from investing activities for the ~~nine~~six months ended June 30, 2020 compared to cash used in investing activities of $5.7 million for the nine months ended June 30, 2019. Cash used in investing activities during the prior comparable period was primarily related to the acquisition of Stantive and Seevolution. The Company does not expect material expenditures for property and equipment during the 2020 fiscal year.March 31, 2020.

Cash provided by financing activities was ~~$1.0~~$2.1 million for the ~~nine~~six months ended ~~June 30, 2020 compared~~March 31, 2021, which primarily related to ~~cash provided by financing activities~~net proceeds of ~~$9.6~~approximately $2.5 million ~~for~~from a registered offering and sale of 880,000 shares of the nine months ended June 30, 2019. Cash provided by financing activities for the nine months ended June 30, 2020 was attributable to the proceeds received under the Paycheck Protection Program. Cash provided by financing activities for the nine months ended June 30, 2019 was attributable to the public offering in October 2018 and a private offering in March 2019,Company’s common stock partially offset by repayments of ~~term and promissory notes.~~long-term debt assumed in connection with the acquisition of a business. We did not have any cash flows from financing activities for the six months ended March 31, 2020.

In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a ~~pandemic, and we~~pandemic. We expect our operations in all locations to be affected as the virus continues to proliferate. We have adjusted certain aspects of our operations to protect employees and customers while still meeting customers’ needs for vital technology. We will continue to monitor the situation closely and it is possible that we will implement further measures. In light of the uncertainty as to the severity and duration of the pandemic, the impact on our revenues, profitability and financial position is uncertain at this time.

On ~~April 17, 2020,~~May 11, 2021 the Company entered into a ~~loan~~Definitive Purchase Agreement (the “Hawk Purchase Agreement”) with Svanaco, Inc., an Illinois corporation, and Svanawar, Inc., an Illinois corporation (collectively, the “Sellers”) to purchase all of the issued and outstanding shares of Hawk Search, Inc., an Illinois corporation (“Hawk Search”) (the “Acquisition”). The total consideration under the Purchase Agreement is approximately $9.25 million, subject to certain working capital adjustments (the “Purchase Price”). The Purchase Price is payable as follows: (i) an initial cash payment of approximately $5.75 million, (ii) an issuance of approximately $1.50 million of newly designated shares of the Company’s preferred stock, par value $0.001 per share, and (3) approximately $2.0 million in cash, to be paid on or before December 31, 2021. In addition, the Purchase Price may be increased to $11.83 million by an additional payment to Sellers of approximately $2.58 million, in cash, as an additional earn-out based upon Hawk Search’s revenue performance after the consummation of the Acquisition (the “Closing”), payable to Sellers no later than December 31, 2022.

In connection with an ~~aggregate principal amount~~acquisition of ~~$1,047,500, pursuant~~a business completed during the 2021 fiscal year second quarter, the Company (1) assumed the outstanding long-term debt obligations of $2.1 million of the acquiree of which $659 thousand is payable over the next twelve months, (2) issued a seller note of $352 thousand to one of the ~~Paycheck Protection Program.~~selling shareholders payable over a five-year period, (3) deferred a portion of the purchase price of $487 thousand which is expected to be paid within the next twelve months and (4) recognized contingent earn-out payments of $1.6 million which are payable in the event of achievement of certain revenue targets and operational goals.

In prior years, the Company incurred operating losses and used cash to fund operations, develop new products, and build infrastructure. During its 2020 fiscal year, the Company executed an operating plan that reduced operating expenses, but has not yet been realized for a full twelve month period. The Company is continuing to maintain tight control over discretionary spending for the 2021 fiscal year. The Company believes that it has sufficient revenue and working capital to support future growth.

On August ~~13,~~17, 2020, the Company entered into an arrangement with an investment banking firm ~~(the “Manager”)~~ to sell up to ~~3,822,339~~$4,796,090 of shares of the Company’s ~~Common Stock,~~common stock, $0.001 par ~~value (the “ATM Offering”). Pursuant~~value. Refer to Note 10 under the ~~ATM~~caption, At the Market Offering ~~shares may be sold on~~, for a ~~daily basis, commencing~~detailed description of this capital raising activity. There are no ~~earlier than August 17, 2020, at a gross sales price equal to~~obligations for the ~~market price for shares~~sale or purchase of the Company’s ~~Common Stock on the Nasdaq Capital Market at the time of sale of such shares. The Manager has no obligation~~common stock pursuant to purchase shares of the Company’s Common Stock and is only obligated to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell shares of the Company’s Common Stock.this offering. Accordingly, there can be no assurances that the ~~Manager~~Company or investment banking firm will be successful in selling any portion of the shares available for sale pursuant to this offering. On December 18, 2020, the Company delivered written notice to Roth Capital Partners that it was suspending all offers and sales under the ~~ATM Offering. The Company shall pay to~~At the ~~Manager a placement fee of 2.5% of the gross sales price of shares sold. The ATM~~Market Offering ~~shall remain in effect until the earlier of August 13, 2021 or upon written notice of termination by either the Company or the Manager.~~

~~The Company currently intends to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes.~~

While the Company believes that future revenues and cash flows, as we continue to integrate and realize a full year of operations from acquisitions completed in the fiscal 2019 second quarter, will supplement its working capital and it has an appropriate cost structure to support future revenue growth, based upon its current working capital and projected cash flows in the next twelve months,Agreement (the “Suspension Period”), during which time the Company will ~~need additional sources~~not make any sales of ~~financing in place in order to ensure its operations are adequately funded.~~Placement Shares. No other definitive agreements for additional financing are in place as of the issuance date of this Form 10-Q, and there can be no assurances that additional sources of financing could be obtained on terms that are favorable or acceptable to usthe Company and that revenue growth and improvement in cash flows can be achieved. ~~Accordingly, management believes there is substantial doubt about~~No adjustments have been made to the ~~Company’s ability to continue~~accompanying consolidated financial statements as a ~~going concern for at least twelve months following the issuance~~result of this ~~Form 10-Q.~~uncertainty.

We do not have any off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons, other than our operating leases and contingent acquisition payments.

We currently do not have any variable interest entities. We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Therefore, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

The Company leases its facilities in the United States and Canada. The following summarizes our cash contractual obligations and commitments by maturity as of ~~June 30, 2020:~~March 31, 2021:

These critical accounting policies and estimates by our management were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and should be read in conjunction with Note 2 Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December ~~27, 2019.~~23, 2020.

The preparation of financial statements in accordance US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. We regularly make estimates and assumptions that affect the reported amounts of assets and liabilities. The most significant estimates included in our financial statements are the valuation of accounts receivable and long-term assets, including intangibles, goodwill and deferred tax assets, stock-based compensation, amounts of revenue to be recognized on service contracts in progress, unbilled receivables, and deferred revenue. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment:

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. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS” do not take possession of the software.

Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. If the consideration promised in a contract includes a variable amount, for example, overage fees, contingent fees or service level penalties, the Company includes an estimate of the amount it expects to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur. The Company’s subscription service arrangements are non-cancelable and do not contain refund-type provisions. Revenue is reported net of applicable sales and use tax.

The Company recognizes revenue from contracts with customers using a five-step model, which is described below:

We maintain an allowance for doubtful accounts which represents estimated losses resulting from the inability, failure or refusal of our clients to make required payments.

We analyze historical percentages of uncollectible accounts and changes in payment history when evaluating the adequacy of the allowance for doubtful accounts. We use an internal collection effort, which may include our sales and services groups as we deem appropriate. Although we believe that our allowances are adequate, if the financial condition of our clients deteriorates, resulting in an impairment of their ability to make payments, or if we underestimate the allowances required, additional allowances may be necessary, resulting in increased expense in the period in which such determination is made.

Accounting for ~~Cost of Computer Software to be Sold, Leased or Otherwise Marketed~~Implementation Costs Incurred in a Cloud Computing Arrangement

~~We charge research and development expenditures for technology development to operations as incurred. However, in~~In accordance with Accounting Standards Codification ~~985-20~~(“ASC”) 350-40, ~~Costs of Software to be Sold Leased or Otherwise Marketed~~Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, we capitalize certain software development costs subsequent to the establishment of technological feasibility. Based on our product development process, technological feasibility is established upon completion of a working model. Certainimplementation costs incurred ~~between completion~~in a cloud computing arrangement that is a service contract and amortize those costs over the term of ~~a working model and~~ the ~~point at which the product is ready for general release is capitalized if significant. Once the product is available for general release, the capitalized costs are amortized in cost of sales.~~arrangement.

Goodwill is tested for impairment annually during the fourth quarter of every year and more frequently if events and circumstances indicate that the asset might be impaired. The purpose of an impairment test is to identify any potential impairment by comparing the carrying value of a reporting unit including goodwill to its fair value. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Factors that could lead to a future impairment include material uncertainties such as operational, economic and competitive factors specific to the key assumptions underlying the fair value estimate we use in our impairment testing that have a reasonable possibility of changing. This could include a significant reduction in projected revenues, a deterioration of projected financial performance, future acquisitions and/or mergers, and a decline in our market value as a result of a significant decline in our stock price.

At ~~June 30, 2020,~~March 31, 2021, we maintained two stock-based compensation plans, one of which has expired but still contains vested and unvested stock options. The two plans are more fully described in Note 13 to the Consolidated Financial Statements of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December ~~27, 2019.~~23, 2020.

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

We recognize stock-based compensation expense for share-based payments issued or assumed after October 1, 2006 that are expected to vest on a straight-line basis over the service period of the award, which is generally three years. We recognize the fair value of the unvested portion of share-based payments granted prior to October 1, 2006 over the remaining service period, net of estimated forfeitures. In determining whether an award is expected to vest, we use an estimated, forward-looking forfeiture rate based upon our historical forfeiture rate and reduce the expense over the recognition period. Estimated forfeiture rates are updated for actual forfeitures quarterly. We also consider, each quarter, whether there have been any significant changes in facts and circumstances that would affect our forfeiture rate. Although we estimate forfeitures based on historical experience, actual forfeitures in the future may differ. In addition, to the extent our actual forfeitures are different than our estimates, we record a true-up for the difference in the period that the awards vest, and such true-ups could materially affect our operating results.

We estimate the fair value of employee stock options using the Black-Scholes-Merton option valuation model. The fair value of an award is affected by our stock price on the date of grant as well as other assumptions including the estimated volatility of our stock price over the term of the awards and the estimated period of time that we expect employees to hold their stock options. The risk-free interest rate assumption we use is based upon United States ~~treasury~~Treasury interest rates appropriate for the expected life of the awards. We use the historical volatility of our publicly traded options in order to estimate future stock price trends. In order to determine the estimated period of time that we expect employees to hold their stock options, we use historical trends of employee turnovers. Our expected dividend rate is zero since we do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The aforementioned inputs entered into the option valuation model we use to fair value our stock awards are subjective estimates and changes to these estimates will cause the fair value of our stock awards and related stock-based compensation expense we record to vary.

We record 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.

USU.S GAAP does not contain authoritative accounting standards for ~~forgiveable~~forgivable loans provided by governmental entities to a for-profit entity. Absent authoritative accounting standards, interpretative guidance issued and commonly applied by financial statement preparers ~~allow~~allows for the selection of accounting policies amongst acceptable alternatives. Based on the facts and circumstances, the Company determined it most appropriate to account for the PPP Loan proceeds ~~under the debt model.~~ as an in-substance government grant by analogy to International Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance. Under the ~~debt model,~~provisions of IAS 20, “a forgivable loan from government is treated as a government grant when there is reasonable assurance that the ~~Company recognizes~~entity will meet the ~~proceeds received as debt, recognizes periodic interest expense in the period in which the interest accrues at the stated interest rate and defers the recognition of any potential~~terms for forgiveness of the ~~loan principal or interest until~~loan.” IAS 20 does not define “reasonable assurance”; however, based on certain interpretations, it is analogous to “probable” as defined in FASB ASC 450-20-20 under U.S GAAP, which is the ~~period~~definition the Company has applied to its expectations of PPP Loan forgiveness. Under IAS 20, government grants are recognized in earnings on a systematic basis over the periods in which the Company ~~has been legally released from its obligation by~~recognizes costs for which the ~~lender.~~grant is intended to compensate (i.e., qualified expenses). Further, IAS 20 permits for the recognition in earnings either separately under a general heading such as other income, or as a reduction of the related expenses. The Company ~~deemed~~has elected to recognize government grant income separately within other income to present a clearer distinction in its consolidated financial statements between its operating income and the ~~debt model to be~~amount of net income resulting from the ~~most appropriate accounting policy for this arrangement as the underlying~~ PPP Loan ~~is a legal form of debt~~ and ~~there are significant contingencies outside of the control of the~~subsequent expected forgiveness. The Company ~~mainly related to the third-party approval process for forgiveness.~~ believes this presentation method promotes greater comparability amongst all periods presented.

~~Item~~ 3. ~~Qualitative and Quantitative Disclosures About Market Risk~~.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of ~~June 30, 2020.~~March 31, 2021.

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

From time to time we are subject to ordinary routine litigation and claims incidental to our business. We are not currently involved in any legal proceedings that we believe are material beyond those previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December ~~27, 2019.~~23, 2020.

There were no sales of unregistered equity securities in the ~~nine~~six months ended ~~June 30, 2020.~~March 31, 2021.

**XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 and 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Nine Months Ended June 30, 2020			Six Months Ended March 31, 2021
Balance at beginning of period, October 1, 2019	$	3,514
Balance at beginning of period, October 1, 2020				$	2,486
Additions		-			-
Exercises		-			-
Adjustment to fair value		(1,101	)		1,441
Balance at end of period, December 31, 2019	$	2,413
Balance at end of period, December 31, 2020				$	3,927
Additions		-			-
Exercises		-			(140	)
Adjustment to fair value		(1,820	)		418
Balance at end of period, March 31, 2020	$	593
Additions
Exercises
Adjustment to fair value		1,843
Balance at end of period, June 30, 2020	$	2,436
Balance at end of period, March 31, 2021				$	4,205

	As of March 31, 2021		As of September 30, 2020
Compensation and benefits	$	324	$	368
Professional fees		32		29
Taxes		132		46
Insurance		65		-
Other		148		156
Balance at end of period	$	701	$	599

	As of March 31, 2021
Vendor loan payable (“Vendor loan”), accruing interest at 4.0% per annum. Principal and interest are payable in two lump-sum installments and the loan matures on February 1, 2023	$	724
Term loan payable, accruing interest at fixed rates ranging between .99% to 1.5% per annum, payable in monthly or quarterly payments of interest and principal and matures on October 10, 2022		574
Term loan payable, accruing interest at 1.3% per annum, payable in quarterly installments and matures on April 30, 2027		470
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. The Seller’s note is payable over 5 installments and matures on January 1, 2026.		352
Total debt		2,120
Less current portion:		(659	)
Long-term debt, net of current portion	$	1,461

							Issue
Type	Issue Date	Shares		Price		Expiration	Date	Shares		Price		Expiration
Director/Shareholder	12/31/2015		120	$	1,000.00	12/31/2020
Placement Agent	5/17/2016		1,736	$	187.50	5/17/2021	5/17/2016		1,736	$	187.50	5/17/2021
Placement Agent	5/11/2016		1,067	$	187.50	5/11/2021	5/11/2016		1,067	$	187.50	5/11/2021
Placement Agent	7/15/2016		880	$	230.00	7/15/2021	7/15/2016		880	$	230.00	7/15/2021
Investors	11/9/2016		4,271	$	175.00	5/9/2022	11/9/2016		4,271	$	175.00	5/9/2022
Director/Shareholder	12/31/2016		120	$	1,000.00	12/31/2021	12/31/2016		120	$	1,000.00	12/31/2021
Financing (Montage)	10/10/2017		1,327	$	132.50	10/10/2025	10/10/2017		1,327	$	132.50	10/10/2025
Director/Shareholder	12/31/2017		120	$	1,000.00	12/31/2021	12/31/2017		120	$	1,000.00	12/31/2021
Investors	10/19/2018		3,120	$	25.00	10/19/2023	10/19/2018		3,120	$	25.00	10/19/2023
Placement Agent	10/16/2018		10,000	$	31.25	10/16/2023	10/16/2018		10,000	$	31.25	10/16/2023
Investors	3/12/2019		159,236	$	4.00	10/19/2023	3/12/2019		159,236	$	4.00	10/19/2023
Investors	3/12/2019		2,556,875	$	4.00	9/12/2024	3/12/2019		2,556,875	$	4.00	9/12/2024
Investors	3/12/2019		2,556,875	$	4.00	9/12/2021	3/12/2019		20,683	$	0.05	9/12/2024
Investors	3/12/2019		69,295	$	0.05	9/12/2024
Placement Agent							3/12/2019		127,848	$	4.00	9/12/2024
Placement Agent	3/12/2019		127,848	$	4.00	9/12/2024	2/4/2021		58,169	$	3.88	2/4/2026
Total			5,492,890						2,945,452

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

	As of June 30, 2020			As of September 30, 2019			As of March 31, 2021			As of September 30, 2020
Accounts receivable	$	920		$	1,067		$	748		$	698
Allowance for doubtful accounts		(121	)		(88	)		(31	)		(33	)
Accounts receivable, net	$	799		$	979		$	717		$	665

	As of June 30, 2020								As of March 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Liabilities:
Warrant liability - Montage	$	-	$	-	$	26	$	26	$	-	$	-	$	15	$	15
Warrant liability - Series A, B and C		-		-		2,410		2,410
Warrant liability - Series A and C										-		-		4,190		4,190
Total Liabilities	$	-	$	-	$	2,436	$	2,436	$	-	$	-	$	4,205	$	4,205

Fiscal year:
2021 (remaining)	$	196
2022		625
2023		461
2024		166
2025		166
Thereafter		506
Total commitments	$	2,120

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

Outstanding, October 1, 2019		7,848		$	306.41		5,493,857		$	4.54
Outstanding, October 1, 2020												613,201		$	4.76		5,492,890		$	4.37
Granted		682,353			1.40		-			-		-			-		58,169			3.88
Exercised		-			-		-			-		-			-		(48,612	)		0.05
Forfeited/Exchanged		(97,000	)		3.96		-			-		(39,840	)		2.27		(120	)		1,000
Expired		-			-		(967	)		952.11		(160	)		119.50		(2,556,875	)		4.00
Outstanding, June 30, 2020		593,201		$	4.87		5,492,890		$	4.37
Options vested and exercisable, June 30, 2020		6,605		$	310.92
Outstanding, March 31, 2021												573,201		$	4.90		2,945,452		$	4.71
Options vested and exercisable, March 31, 2021												220,200		$	10.42

	Deferred Revenue
	Current			Long Term
Balance as of October 1, 2019	$	1,262		$	8
Increase(decrease)		701			(3	)
Balance as of December 31, 2019	$	1,963		$	5
Increase(decrease)		(224	)		-
Balance as of March 31, 2020	$	1,739		$	5
Increase(decrease)		40			-
Balance as of June 30, 2020	$	1,779		$	5

	Operating Leases
Fiscal year:
2020 (remaining)	$	39
2021		114
2022		88
2023		88
2024		32
Total lease commitments	$	361
Less: Amount representing interest		(36	)
Present value of lease liabilities	$	325
Less: Current portion		(96	)
Operating lease liabilities, net of current portion	$	229

From June 1, 2020 to May 31, 2021 *	$	78	*
From June 1, 2021 to May 31, 2022		81
From June 1, 2022 to May 31, 2023		84
From June 1, 2023 to May 31, 2024		87
From June 1, 2024 to end of lease term		90
Total	$	420

	Payments Operating Leases		Receipts Subleases		Net Leases		Payments Operating Leases			Receipts Subleases		Net Leases
Fiscal year:
2020	$	152	$	73	$	79
2021		12		-		12
2021 (remaining)							$	115		$	51	$	64
2022								185			101		84
2023								173			101		72
2024								116			34		82
2025								76			-		76
Thereafter								7			-		7
Total lease commitments	$	164	$	73	$	91	$	672		$	287	$	385
Less: Amount representing interest								(88	)
Present value of lease liabilities							$	584
Less: current portion								(191	)
Operating lease liabilities, net of current portion							$	393

	Payments Operating Leases		Receipts Subleases		Net Leases
Fiscal year:
2021	$	96	$	101	$	(5	)
2022		82		101		(19	)
2023		85		101		(16	)
2024		87		36		51
2025		88		-		88
Total lease commitments	$	438	$	339	$	99

Cash, including deferred cash payable	$	711
Common stock (29,433 shares at $3.38 per share)		99
Seller’s note		352
Contingent consideration (earn-outs)		1,617
Total consideration paid	$	2,779

Assets acquired:
Cash	$	627
Non-cash current assets		351
Property and equipment		5
Intangible assets:
Acquired software		282
Customer relationships		1,280
Domain and trade names		116
Goodwill		2,461
Total assets acquired		5,122

Liabilities assumed:
Current liabilities		198
Assumed debt obligations		2,145
Total liabilities assumed		2,343

Total consideration paid	$	2,779

(in thousands)

Payment obligations by year	FY20 (remaining)		FY21		FY22		FY23		FY24		Thereafter		Total		FY21 (remaining)			FY22			FY23			FY24			FY25		Thereafter		Total
Operating leases	$	59	$	193	$	170	$	173	$	117	$	60	$	772	$	115		$	185		$	173		$	116		$	76	$	7	$	672
Sublease income																(51	)		(101	)		(101	)		(34	)		-		-		(287	)
Net cash contractual obligations															$	64		$	84		$	72		$	82		$	76	$	7	$	385

	•	Identify the customer contract;
	•	Identify performance obligations that are distinct;
	•	Determine the transaction price;
	•	Allocate the transaction price to the distinct performance obligations; and
	•	Recognize revenue as the performance obligations are satisfied.

Exhibit No.		Description of Document
~~1.1~~
1.1		Underwriting Agreement (incorporated by reference to Exhibit 1.1 to our Form 8-K filed on October 19, 2018)

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

~~3.2~~ 3.3		~~Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated May 4, 2015 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on May 5, 2015)~~

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

3.4		Amended and Restated By-laws (incorporated by reference to Exhibit ~~3.1~~3.2 to our current Report on Form 10-Q filed on February 17, 2015)

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

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

~~3.7~~ 4.1		~~Certificate of Designations of the Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on March 13, 2019)~~

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

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

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

~~4.2~~ 10.1		~~Form of Warrant (incorporated by reference to Exhibit 4.1 to our Form 8-K filed on October 19, 2018)~~

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

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

10.1*		~~Employment Agreement with Mark G. Downey~~Woorank SRL., dated ~~July 1, 2019~~February 2, 2021 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K Filed on ~~July~~February 3, 2021)

10.2		Form of Securities Purchase Agreement, dated February 4, 2021 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K Filed on February 9, 2021)

10.3		Form of Placement Agent Warrant, dated February 4, 2021 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K Filed on February 9, 2021)

10.4		Employment Agreement dated September 13, 2019 between Bridgeline Digital, Inc. and Roger “Ari” Kahn (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K Filed on September 18, 2019)

10.5		First Amendment to Roger “Ari” Kahn’s Employment Agreement dated February 25, 2021 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K Filed on March 2, 2021)


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

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

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

~~32.2~~32.1		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. ~~§1350)~~§1350).

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

101.INS*		XBRL Instance

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation

101.DEF*		XBRL Taxonomy Extension Definition

101.LAB*		XBRL Taxonomy Extension Labels

101.PRE*		XBRL Taxonomy Extension Presentation

		Bridgeline Digital, Inc.
		(Registrant)

~~August 13, 2020~~ May 17, 2021		/s/ Roger Kahn
Date		Roger Kahn President and Chief ~~Execut~~~~ive~~Executive Officer (Principal Executive Officer)


May 17, 2021
~~August 13, 2020~~		/s/ Mark G. Downey
Date		Mark G. Downey Chief Financial Officer (Principal Financial and Accounting Officer)