10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 (Mark One)

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

For the quarterly period ended June 30, 2019

OR

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

100 Summit Drive
Burlington, Massachusetts	01803
(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, 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  ☐ 

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, 2019 was 2,794,308.

1

Bridgeline Digital, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period ended June 30, 2019

Index

		Page
Part I	Financial Information
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2019 and September 30, 2018	4
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Comprehensive Income/(Loss) (unaudited) for the three and nine months ended June 30, 2019 and 2018	6
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended June 30, 2019 and June 30, 2018	7
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended June 30, 2019 and 2018	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Qualitative and Quantitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
Part II	Other Information
Item 1.	Legal Proceedings	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 6.	Exhibits	43
Signatures		45

2

Bridgeline Digital, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period ended June 30, 2019

Statements contained in this Report on Form 10-Q that are not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements may be identified by the use of forward-looking terminology such as “should,” “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intends,” “continue,” or similar terms or variations of those terms or the negative of those terms.  These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief or current expectations of Bridgeline Digital, Inc. Forward-looking statements are merely our current predictions of future events. Investors are cautioned that any such forward-looking statements are inherently uncertain, are not guaranties of future performance and involve risks and uncertainties. Actual results may differ materially from our predictions. Important factors that could cause actual results to differ from our predictions include the impact of the weakness in the U.S. and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited market for our common stock, the volatility of the market price of our common stock, the ability to maintain our listing on the NASDAQ Capital market, the ability to raise capital, the performance of our products, our ability to respond to rapidly evolving technology and customer requirements, our ability to protect our proprietary technology, dependence on third parties, the security of our software and response to cyber security risks, our ability to meet our financial obligations and commitments, our dependence on our management team and key personnel, our ability to hire and retain future key personnel, or our ability to maintain an effective system of internal controls, and our ability to respond to government regulations. Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized, nor is there any assurance that we have identified all possible issues which we might face. We assume no obligation to update our forward-looking statements to reflect new information or developments. We urge readers to review carefully the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018 as well as in the other documents that we file with the Securities and Exchange Commission. You can read these documents at www.sec.gov.

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

3

PART I—FINANCIAL INFORMATION

 Item 1. Condensed Consolidated Financial Statements.

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (in thousands, except share and per share data)

(Unaudited)

	June 30,			September 30,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	1,298		$	644
Accounts receivable and unbilled receivables, net		1,658			1,721
Prepaid expenses		442			452
Other current assets		89			21
Total current assets		3,487			2,838
Property and equipment, net		315			80
Intangible assets, net		3,747			20
Goodwill		5,557			7,782
Other assets		103			280
Total assets	$	13,209		$	11,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,312		$	1,577
Accrued liabilities		1,172			580
Debt, current		-			1,017
Deferred revenue		1,832			594
Total current liabilities		4,316			3,768
Debt, net of current portion		-			2,574
Warrant liabilities		5,726			180
Other long term liabilities		13			54
Total liabilities		10,055			6,576
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; 441 shares issued and outstanding at June 30, 2019		-			-
Series A Convertible Preferred stock:
264,000 shares and 262,310 shares at June 30, 2019 and 264,000 shares and 262,364 shares at September 30, 2018, issued and outstanding (liquidation preference $2,624 at June 30, 2019)		-			-
Common stock - $0.001 par value; 50,000,000 shares authorized;
2,794,308 at June 30, 2019 and 84,005 at September 30, 2018, issued and outstanding		3			-
Additional paid-in capital		75,585			66,553
Accumulated deficit		(72,101	)		(61,778	)
Accumulated other comprehensive loss		(333	)		(351	)
Total stockholders’ equity		3,154			4,424
Total liabilities and stockholders’ equity	$	13,209		$	11,000

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

4

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (in thousands, except share and per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net revenue:
Digital engagement services	$	1,118		$	1,578		$	3,102		$	5,559
Subscription and perpetual licenses		1,322			1,262			3,411			4,367
Managed service hosting		253			243			751			839
Total net revenue		2,693			3,083			7,264			10,765
Cost of revenue:
Digital engagement services		573			977			2,007			3,666
Subscription and perpetual licenses		834			510			2,010			1,503
Managed service hosting		84			47			222			213
Total cost of revenue		1,491			1,534			4,239			5,382
Gross profit		1,202			1,549			3,025			5,383
Operating expenses:
Sales and marketing		1,268			892			3,083			2,800
Support		201			99			436			245
General and administrative		785			625			2,216			2,156
Research and development		592			406			1,499			1,221
Depreciation and amortization		257			93			361			305
Goodwill impairment		-			4,615			3,732			4,615
Restructuring and acquisition related expenses		938			6			1,242			187
Total operating expenses		4,041			6,736			12,569			11,529
Loss from operations		(2,839	)		(5,187	)		(9,544	)		(6,146	)
Interest income (expense), net		7			(70	)		(305	)		(199	)
Amortization of debt discount		-			(28	)		(231	)		(82	)
Other income (expense), net		10,146			133			(79)			166
Income/(loss) before income taxes		7,314			(5,152	)		(10,159	)		(6,261	)
Provision for income taxes		3			10			7			11
Net income/(loss)		7,311			(5,162	)		(10,166	)		(6,272	)
Dividends on convertible preferred stock		(78	)		(79	)		(235	)		(231	)
Net income/(loss) applicable to common shareholders	$	7,233		$	(5,241	)	$	(10,401	)	$	(6,503	)
Net income/(loss) per share attributable to common shareholders:
Basic net income/(loss) per share	$	3.62		$	(61.78	)	$	(12.38	)	$	(77.00	)
Diluted net income/(loss) per share	$	3.56		$	(61.78	)	$	(12.38	)	$	(77.00	)
Number of weighted average shares outstanding:
Basic		1,996,326			84,825			839,975			84,457
Diluted		2,032,766			84,825			839,975			84,457

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

5

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

 (in thousands)

(Unaudited)

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2019		2018			2019			2018
Net income/(loss)	$	7,311	$	(5,162	)	$	(10,166	)	$	(6,272	)
Other Comprehensive Income:
Net change in foreign currency translation adjustment		19		(1	)		18			(1	)
Comprehensive income/(loss)	$	7,330	$	(5,163	)	$	(10,148	)	$	(6,273	)

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

6

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 (in thousands)

(Unaudited)

	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	$	-		85	$	-	$	66,553	$	(61,778	)	$	(351	)	$	4,424
Issuance of common stock						28		-		4,377								4,377
Stock-based compensation expense										97								97
Preferred B stock conversion to common						168		-		-								-
Dividends - issued												(79	)					(79	)
Net loss												(4,955	)					(4,955	)
Prior Period Adjustment - ASC 606 adoption												78						78
Foreign currency translation																		-
Balance at December 31, 2018		262		-		282		-		71,027		(66,734	)		(351	)		3,942
Issuance of common stock						40		-		476								476
Stock-based compensation expense										38								38
Preferred B stock conversion to common						3												-
Dividends - issued												(78	)					(78	)
Net loss												(12,522	)					(12,522	)
Foreign currency translation															(1	)		(1	)
Balance at March 31, 2019		262		-		325		-		71,541		(79,334	)		(352	)		(8,145	)
Issuance of common stock, net of issuance costs						1,382		3		3,969								3,972
Stock-based compensation expense										74								74
Series C Convertible Preferred stock issuance and conversion to common		1				1,087				1								1
Dividends - issued												(78	)					(78	)
Net income												7,311						7,311
Foreign currency translation															19			19
Balance at June 30, 2019		263	$	-		2,794	$	3	$	75,585	$	(72,101	)	$	(333	)	$	3,154

	For the Three and Nine Months Ended June 30, 2018
														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, 2017		244	$	-		84	$	-	$	65,873	$	(54,249	)	$	(350	)	$	11,274
Stock-based compensation expense										99								99
Stock dividends - issued		7								75								75
Stock dividends - declared												(75	)					(75	)
Net loss												(430	)					(430	)
Foreign currency translation															(1	)		(1	)
Balance at December 31, 2017		251		-		84		-		66,047		(54,754	)		(351	)		10,942
Stock-based compensation expense										97								97
Issuance of common stock - restricted shares						-		-		49								49
Stock dividends - issued		7								76								76
Stock dividends - declared		1		-								(77	)					(77	)
Net loss												(680	)					(680	)
Foreign currency translation																		-
Balance at March 31, 2018		259		-		84		-		66,269		(55,511	)		(351	)		10,407
Stock-based compensation expense										102								102
Issuance of common stock - restricted shares						-		-		24								24
Stock dividends - issued		-		1						39								40
Stock dividends - declared		-		-								(79	)					(79	)
Net loss												(5,162	)					(5,162	)
Foreign currency translation																		-
Balance at June 30, 2018		259	$	1		84	$	-	$	66,434	$	(60,752	)	$	(351	)	$	5,332

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

7

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (in thousands)

(Unaudited)

	Nine Months Ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(10,166	)	$	(6,272	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of property and equipment		9			60
Amortization of intangible assets		310			214
Depreciation		50			85
Other amortization		32			50
Goodwill impairment		3,732			4,615
Amortization of debt discount		231			82
Warrant liability expense		11,272			-
Change in fair value of warrant liabilities		(11,204	)		(156	)
Stock-based compensation		210			374
Changes in operating assets and liabilities
Accounts receivable and unbilled receivables		971			923
Prepaid expenses		3			(40	)
Other current assets and other assets		129			-
Accounts payable and accrued liabilities		329			(201	)
Deferred revenue		722			(625	)
Other liabilities		62			(81	)
Total adjustments		6,858			5,300
Net cash used in operating activities		(3,308	)		(972	)
Cash flows used in investing activities:
Software development capitalization costs		(12	)		-
Purchase of property and equipment		(21	)		(30	)
Acquisition of businesses		(5,638	)		-
Net cash used in investing activities		(5,671	)		(30	)
Cash flows provided by financing activities:
Proceeds from issuance of common stock, net of issuance costs		4,700			-
Proceeds from issuance of preferred stock, net of issuance costs		9,123			-
Proceeds from term notes from Montage Capital, net of issuance costs		-			953
Borrowing on bank line of credit		75			888
Payments on bank line of credit		(2,156	)		(1,121	)
Payments on term notes from Montage Capital		(922	)		-
Payments on promissory term notes		(941	)		-
Cash dividends paid on Series A convertible preferred stock		(235	)		(38	)
Net cash provided by financing activities		9,644			682
Effect of exchange rate changes on cash and cash equivalents		(11	)		(1	)
Net increase (decrease) in cash and cash equivalents		654			(321	)
Cash and cash equivalents at beginning of period		644			748
Cash and cash equivalents at end of period	$	1,298		$	427
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	307		$	190
Income taxes	$	11		$	14
Non cash investing and financing activities:
Consideration paid in Common Stock in connection with acquisition of business	$	480		$	-
Dividends on convertible preferred stock	$	235		$	114

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

8

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1.   Description of Business

Overview

Bridgeline Digital, The Digital Engagement Company™ (the “Company”), helps customers with their 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.

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 Burlington, Massachusetts.  The Company has three wholly-owned subsidiaries: Bridgeline Digital Pvt. Ltd. located in Bangalore, India, Bridgeline Digital Canada, Inc. located in Ontario, Canada, and Stantive Technologies Pty. Ltd. located in Australia.

Increase in Authorized Shares and Reverse Stock Split

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

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

The accompanying unaudited interim condensed consolidated financial statements as of June 30, 2019 and September 30, 2018 and for the three and nine months ended June 30, 2019 and 2018 and footnotes have been retroactively adjusted to reflect the effects of the 1-for-50 reverse stock split.

9

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Liquidity and Management’s Plans

The Company has incurred operating losses 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 past two fiscal years and continuing into the current fiscal year, the Company has executed on a restructuring plan that included a reduction of workforce and office space, which significantly reduced operating expenses. The Company is continuing to maintain tight control over discretionary spending in the current fiscal year.

In the second quarter of this current fiscal year, the Company concluded a private offering that raised a net $9.2 million in cash. Proceeds were used to pay down the Heritage Bank of Commerce line of credit to zero and pay the Company’s outstanding loan to Montage Capital II, L.P in full. The Company has zero debt at June 30, 2019. Also, in the second quarter of the current fiscal year, the Company used cash to purchase the assets of Seevolution, Inc. and Stantive Technologies Group Inc., which assets included technology and customers. The Company believes the future revenues and cash flows from these newly acquired customers will supplement the working capital to sustain operations for the next twelve months. While there can be no assurances that the anticipated sales will be achieved for future periods to provide positive cash flows, the Company’s management believes it will have an appropriate cost structure to support the revenues that will be achieved. As such, management believes that it is probable that we will meet our working capital, capital expenditure and debt repayment needs, if any, for the next twelve months from the issuance date of this Form 10-Q.

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 the fair presentation. The operating results for the three and nine months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending September 30, 2019. The accompanying September 30, 2018 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, 2018 filed with the Securities and Exchange Commission on December 28, 2018.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09 or ASC 606), to supersede nearly all existing revenue recognition guidance under U.S. GAAP, which became effective for the Company on October 1, 2018. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of a promised good or service and is recognized in an amount that reflects the consideration that the entity expects to receive in exchange for the good or service. In addition, ASC 606 also includes subtopic ASC 340-40, Other Assets and Deferred Costs- Contracts with Customers, referred to herein as ASC 340-40, which provides guidance on accounting for certain revenue related costs including costs associated with obtaining and fulfilling a contract, discussed further below.

10

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The Company adopted the new revenue guidance using the modified retrospective method applied to those contracts which were not completed as of October 1, 2018. Results for reporting periods beginning after September 30, 2018 are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with historic revenue guidance.  The Company applied the new standard using practical expedients where:

● the measurement of the transaction price excludes all taxes assessed by governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer;

● the new revenue guidance has been applied to portfolios of contracts with similar characteristics;

● the modified retrospective approach has been applied only to contracts that are not completed contracts at the date of initial adoption; and

● the value of unsatisfied performance obligations for contracts with an original expected length of one year or less has not been disclosed.

Revenue recognition from the Company’s primary revenue streams remained substantially unchanged following adoption of ASC 606 and therefore did not have a material impact on its revenues. The impact of applying the new guidance in fiscal 2019 versus the prior guidance resulted in a change to the period over which sales commissions are amortized to incorporate an estimated customer life. This resulted in a longer amortization period for deferred commission expense, which reduces expense compared to the application of the prior guidance.  

Upon adoption, Other current assets increased by $59 due to the capitalization of the current portion of sales commissions and Other assets increased by $27 due to the capitalization of the noncurrent portion of sales commissions. Retained earnings decreased by $86 as a net result of these adjustments. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated financial statements during the nine months ended and as of June 30, 2019:

	As of June 30, 2019
	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Balance Sheet
Assets
Other current assets	$	89			38		$	51
Other assets		103			27			76
Equity
Retained earnings	$	(72,101	)		(65	)	$	(72,166	)

11

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

	Three Months Ended June 30, 2019							Nine Months Ended June 30, 2019
	As Reported		Adjustments			As If Presented Under ASC 605		As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Operations
Sales and Marketing	$	1,268	$	(21	)	$	1,247	$	3,083		$	(12	)	$	3,071
Net income/(loss)	$	7,311	$	(21	)	$	7,332	$	(10,166	)	$	(12	)	$	(10,154	)
Net income/(loss) per share
Basic	$	3.62	$	0.01		$	3.63	$	(12.38	)	$	(0.02	)	$	(12.36	)
Diluted	$	3.56	$	0.01		$	3.57	$	(12.38	)	$	(0.02	)	$	(12.36	)

	Nine Months Ended June 30, 2019
	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities
Net loss	$	(10,166	)	$	(12	)	$	(10,154	)
Other current assets and other assets	$	129		$	12		$	141

The Company derives its revenue from three sources: (i) Software Licenses, which are comprised of subscription fees ("SaaS"), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering and (iii) hosting of perpetual licenses. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS” and do not take possession of the software.  

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

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

• Identify the customer contract;

• Identify performance obligations that are distinct;

• Determine the transaction price;

• Allocate the transaction price to the distinct performance obligations; and

• Recognize revenue as the performance obligations are satisfied.

12

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Identify the customer contract

A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability and consideration is probable.

Identify performance obligations that are distinct

A performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services.  A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.  

Determine the transaction price

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

Allocate the transaction price to the distinct performance obligations

The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services being provided to the customer.  The Company determines the SSP of its goods and services based upon the historical average sales prices for each type of software license and professional services sold.  

 Recognize revenue as the performance obligations are satisfied

Revenues are recognized when or as control of the promised goods or services is transferred to customers.  Revenue from SaaS licenses is recognized ratably over the subscription period beginning on the date the license is made available to customers. Most subscription contracts are three-year terms. Customers who license the software on a perpetual basis receive rights to use the software for an indefinite time period and an option to purchase post-customer support (“PCS”). PCS revenue is recognized ratably on a straight-line basis over the period of performance and the perpetual license is recognized upon delivery.  The Company also offers hosting services for those customers who purchase a perpetual license and do not want to run the software in their environment. Revenue from hosting is recognized ratably over the service period, ranging from one to three-year terms. The Company recognizes revenue from professional services as the services are provided.

Disaggregation of Revenue

The Company provides disaggregation of revenue based on geography and product groupings within the notes (Note 13) as it believes this best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

13

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Deferred Revenue

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 will 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, 2019 increased by $1.2 million.  As of June 30, 2019, approximately $13 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.  

	Deferred Revenue
	Current		Long Term
Balance as of October 1, 2018	$	594	$	20
Increase(decrease)		341		(7	)
Balance as of December 31, 2018		935		13
Increase(decrease)		417		(5	)
Balance as of March 31, 2019		1,352		8
Increase(decrease)		480		5
Balance as of June 30, 2019	$	1,832	$	13

Deferred Capitalized Commission Costs

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 will generally be the customer contract term, which is typically thirty-six (36) months, with some exceptions. Deferred capitalized commission expense that will be recorded as expense during the succeeding 12-month period is recorded as current deferred capitalized commission costs, and the remaining portion is recorded as long-term deferred capitalized commission costs. Total deferred capitalized commissions were $66 as of the quarter ended June 30, 2019 compared to $77 as of the year ended September 30, 2018. Current deferred capitalized commission costs are included in Other current assets in the Condensed Consolidated Balance Sheet and noncurrent deferred capitalized commission costs are included in Other assets in the Condensed Consolidated Balance Sheet. Amortization expense for the three and nine months ended June 30, 2019 was $19 and $53, respectively.

Accounting Pronouncements Pending Adoption

Leases

In February 2016, the FASB issued ASU No. 2016-02, which is guidance on accounting for leases. ASU No. 2016-02 requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the guidance on its consolidated financial position, results of operations and related disclosures.

Earnings Per Share

In July 2017, the FASB issued ASU No. 2017-11, which simplifies the accounting for certain financial instruments with down round features. This new standard will reduce income statement volatility for many companies that issue warrants and convertible instruments containing such features. ASU 2017-11 is effective for public companies in 2019 and all other entities in 2020. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Compensation – Stock Compensation

In June 2018, the FASB issued ASU 2018-07, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company’s adoption date of Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

14

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Derivative Financial Instruments

In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities", which amends and simplifies existing guidance to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance is effective for annual reporting periods beginning after December 15, 2018 including interim reporting periods within those annual reporting periods and early adoption is permitted. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Intangibles – Goodwill and Other - Internal-Use Software

In August 2018, the FASB issued ASU 2018-15, which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. ASU 2018-15 is effective for interim periods in fiscal years beginning after December 15, 2019, with early adoption permitted.

Fair Value

In August 2018, the FASB issued ASU 2018-13, which is guidance that changes the fair value measurement disclosure requirements of ASC 820. This guidance is will be effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Company is evaluating the impact the update will have on its disclosures.

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. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact that the standard will have 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 financial statements.

3. Accounts Receivable and Unbilled Receivables

Accounts receivable and unbilled receivables consists of the following:

	As of			As of
	June 30, 2019			September 30, 2018
Accounts receivable	$	1,765		$	1,866
Unbilled receivables		11			36
Subtotal		1,776			1,902
Allowance for doubtful accounts		(118	)		(181	)
Accounts receivable and unbilled receivables, net	$	1,658		$	1,721

As of June 30, 2019, one customer represented more than 10% of accounts receivable. As of September 30, 2018, two customers represented more than 10% of accounts receivable. For the three months ended June 30, 2019, two customers represented 14% and 11% of the Company’s total revenue. For the nine months ended June 30, 2019, two customers represented 16% and 12% of the Company’s total revenue. For the three months ended June 30, 2018, two customers each represented 12% and one customer represented 11% of the Company’s total revenue. For the nine months ended June 30, 2018, two customers represented 14% and 12% of the Company’s total revenue.

15

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

4.   Acquisitions

On February 13, 2019, the Company entered into an Asset Purchase Agreement with Seevolution Inc, a Delaware corporation, Celebros, Inc., a Delaware corporation, and Elisha Gilboa, an individual and shareholder of Seevolution, (the “Seevolution Asset Purchase Agreement”). The Seevolution Asset Purchase Agreement sets forth the terms and conditions pursuant to which the Company acquired certain assets in exchange for consideration paid consisting of (i) $418 in cash at the time of the purchase, (ii) the payment of $100 of additional cash to be paid out $10 per month for ten months starting April 30, 2019 and (iii) 40,000 shares of Bridgeline Digital common stock. 

The Company accounted for the Seevolution transaction as an asset acquisition. Goodwill is not recognized in an asset purchase. 

On March 13, 2019, the Company entered into an Asset Purchase Agreement with Stantive Technologies Group Inc., (“Stantive”) a corporation organized under the laws of Ontario, Canada to purchase substantially all of the assets of Stantive and assume certain liabilities. The Company also acquired all of the outstanding stock of Stantive Technologies Group, Pty, a company incorporated in Australia, which was a subsidiary of Stantive. The total purchase price, including cure costs, for Stantive and its Australian subsidiary was approximately $5.2 million in cash.

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

The Company assessed the fair market value of the acquired companies as of the respective purchase dates, as follows:

Net assets acquired:	Seevolution		Stantive		Total
Cash	$	-	$	8	$	8
Accounts receivable, net		47		844		891
Other assets		-		40		40
Fixed assets, net		-		272		272
Intangible assets		1,024		3,007		4,031
Goodwill		-		1,507		1,499
Total assets		1,071		5,678		6,741
Current liabilities		76		488		556
Net assets acquired:	$	995	$	5,190	$	6,185
Purchase Price:
Cash Paid (including acquisition costs)	$	418	$	5,190	$	5,608
Future deferred payments (present value)		97		-		97
Common stock ( fair value)		480		-		480
Total consideration paid	$	995	$	5,190	$	6,185

16

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

As part of the Seevolution acquisition, of the $1 million allocated to intangible assets, $602 is allocated to customer relationships, $401 is allocated to technology with an average useful life of five years, and $21 is allocated to trademarks with an average useful life of one year. Amortization expense of intangible assets was $55 and $83 for the three and nine months ended June 30, 2019.

As part of the Stantive acquisition, of the $3 million allocated to intangible assets, $1.7 million is allocated to customer relationships and $1.2 million is allocated to technology with an average useful life of five years, and $75 is allocated to trademarks with an average useful life of one year. Amortization expense of intangible assets was $182 and $212 for the three and nine months ended June 30, 2019.

Total revenue from the Seevolution and Stantive acquisitions totaled $968 and $1,263 for the three and nine months ended June 30, 2019. Total earnings from the two acquisitions is impracticable to disclose as the acquisitions were asset purchases and the operations were merged with existing operations and not accounted for separately.

Pro Forma Information

The following is the unaudited pro forma information assuming the Stantive acquisition occurred on October 1, 2017:

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
(In thousands, except per share data)	2019		2018			2019			2018
Revenue	$	2,693	$	3,733		$	8,621		$	12,828
Net income/(loss) applicable to common shareholders		7,311		(5,822	)		(11,234	)		(8,268	)
Net income/(loss) per share attributable to common shareholders:
Basic	$	3.62	$	(68.64	)	$	(13.37	)	$	(97.90	)
Diluted	$	3.56	$	(68.64	)	$	(13.37	)	$	(97.90	)
Weighted average common shares outstanding - basic		1,996		85			840			84
Weighted average common shares outstanding - diluted		2,033		85			840			84

5.   Fair Value Measurement and Fair Value of Financial Instruments

The Company’s other financial instruments consist principally of accounts receivable, accounts payable, and debt. 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.

17

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The Company believes the recorded values for accounts receivable and accounts payable and short-term debt approximate current fair values as of June 30, 2019 and September 30, 2018 because of their short-term nature and durations. The carrying value of long-term debt also approximates fair value as of September 30, 2018 based upon the Company’s ability to acquire similar debt at similar maturities and renew current debt instruments under similar terms as the original debt.

In October 2017, the Company recorded a liability associated with a warrant to purchase common stock issued to Montage Capital II, L.P (“Montage Capital”). The fair value of the warrant liability utilizes a Level 3 input. To determine the value of the warrant liability, the Company used a Monte Carlo option-pricing model, which takes into consideration the market values of comparable public companies, considering among other factors, the use of multiples of earnings, and adjusted to reflect the restrictions on the ability of our shares to trade in an active market. The Monte Carlo option-valuation model also uses certain assumptions to determine the fair value, including expected life and annual volatility. The initial valuation assumptions included an expected life of eight (8) years, volatility of 80%, and a risk-free interest rate of 2.24%. At June 30, 2019, volatility decreased to 76%, the risk-free rate was 1.84% and the Company’s stock price declined to $2.45 per share.

The fair value of the warrant liability was valued at the loan execution date in the amount of $341 and is revalued at the end of each reporting period to fair value. The fair value of the warrant is included in Warrant liabilities in the Condensed Consolidated Balance Sheets. Changes in fair value are included in Other income (expense),net in the Statements of Operations in the period the change occurs. the Company recorded a gain (income) of $96 in the quarter ended June 30, 2019. In total, the Company has recorded net gains (income) as a result in the change in fair value of $315 since the original valuation in October 2017. The fair value of the Montage Capital warrant at June 30, 2019 is $26.

In connection with the private offering of Series C Convertible Preferred Stock issued on March 12, 2019, the Company issued Series A, Series B and Series C warrants (“collectively, the “Series C Preferred Warrants”) to accredited investors and the placement agents. These Series C Preferred Warrants have been classified as liabilities with the fair value determined using the Monte Carlo option-pricing model. The fair value of the Series C Preferred Warrants are included in Warrant liabilities in the Condensed Consolidated Balance Sheets. The initial valuation assumptions included an average expected life of five and one-half (5.5) years, volatility of 76.8%, and a risk-free interest rate of 2.4%. The fair value of the Series C Preferred Warrants as of June 30, 2019 is $5.7 million. Changes in fair value are included in Other income (expense),net in the Statements of Operations in the period the change occurs. The Company recorded a gain (income) of $10.1 million in the quarter ended June 30, 2019. The resulting gain was primarily due to changes in inputs to the valuation model, including a decline in the stock price. At June 30, 2019, volatility increased to 80.8%, the risk-free rate was 1.84% and the Company’s stock price declined to $2.45 per share. There were also exercises of the Series C warrants during the quarter ended June 30, 2019, which also contributed to the decrease in the value of the liability by $4.8 million.

18

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Assets and liabilities of the Company measured at fair value on a recurring basis as of June 30, 2019 and September 30, 2018 are as follows:

	As of June 30, 2019
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability - Montage	$	-	$	-	$	26	$	26
Warrant liability - Series A, B and C		-		-		5,700		5,700
Total Liabilities	$	-	$	-	$	5,726	$	5,726

	As of September 30, 2018
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability - Montage	$	-	$	-	$	180	$	180
Total Liabilities	$	-	$	-	$	180	$	180

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

	Nine Months Ended June 30,
	2019
Balance at beginning of period, October 1, 2018	$	180
Additions		-
Adjustment to fair value		(12	)
Balance at end of period, December 31, 2018		168
Additions		21,500
Adjustment to fair value		(1,046	)
Balance at end of period, March 31, 2019		20,622
Exercises		(4,750	)
Adjustment to fair value		(10,146	)
Balance at end of period, June 30, 2019	$	5,726

6. Goodwill

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

An interim test was performed at December 31, 2018, as a decline in the stock price and other negative qualitative factors led management to conclude that there was a potential impairment. The fair value was calculated using the Company’s market price.  In performing the interim impairment test, Management concluded that goodwill was impaired and recorded a charge of $3.7 million. This amount is reflected as a reduction in goodwill of $3.7 million in the Company’s Condensed Consolidated Balance Sheet as of June 30, 2019 with the offset as an expense in the Company’s Condensed Consolidated Statement of Operations. There was no additional impairment at June 30, 2019. 

19

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

On March 13, 2019, the Company entered into an Asset Purchase Agreement with Stantive and recorded goodwill of $1.5 million, which represented the excess of purchase price over the fair market value of the assets acquired.

Changes in the carrying value of goodwill are as follows:

	As of			As of
	June 30, 2019			September 30, 2018
Balance at beginning of period	$	7,782		$	12,641
Acquisitions		1,507			-
Impairment		(3,732	)		(4,859	)
Balance at end of period	$	5,557		$	7,782

7.   Intangible Assets

The components of intangible assets, net of accumulated amortization, are as follows:

	As of		As of
	June 30, 2019		September 30, 2018
Domain and trade names	$	76	$	10
Customer related		2,166		-
Technology		1,505		-
Non-compete agreements		-		10
Balance at end of period	$	3,747	$	20

Total amortization expense related to intangible assets for the nine months ended June 30, 2019 and the year ended September 30, 2018 was $306 and $242, respectively, and is reflected in operating expenses on the Condensed Consolidated Statements of Operations. The estimated amortization expense for fiscal year 2019 (remaining), 2020, 2021, 2022 and thereafter is $238, $900, $858, $763, and $988, respectively.

8.   Restructuring and Acquisition Related Expenses

Restructuring Expenses

Commencing in fiscal 2015 and through fiscal 2019, the Company’s management approved, committed to and initiated plans to restructure and further improve efficiencies by implementing cost reductions in line with expected decreases in revenue. The Company renegotiated several office leases and relocated to smaller space, while also negotiating sub-leases for the original space. In addition, the Company executed a general work-force reduction and recognized costs for severance and termination benefits. These restructuring charges and accruals require estimates and assumptions, including contractual rental commitments or lease buy-outs for vacated office space and related costs, and estimated sub-lease income. The Company’s sub-lease assumptions include the rates to be charged to a sub-tenant and the timing of the sub-lease arrangement. All of the vacated lease spaces are currently contractually occupied by new sub-tenants for the remaining life of the lease. In the second quarter of fiscal 2017, the Company initiated a plan to shut down its operations in India, which is targeted to be completed in fiscal 2019. In the third quarter of fiscal 2019, the Company incurred further restructuring expenses related to a work-force reduction primarily for its international operations and recognized costs for severance and termination benefits.

20

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

All of these estimates and assumptions will be monitored on a quarterly basis for changes in circumstances with the corresponding adjustments reflected in the consolidated statement of operations. All of these estimates and assumptions will be monitored on a quarterly basis for changes in circumstances with the corresponding adjustments reflected in the Condensed Consolidated Statements of Operations.

The following table summarizes the restructuring activity for the nine months ended June 30, 2019:

	Facility Closures and Other Costs
Balance at beginning of period, October 1, 2018	$	78
Charges to operations		-
Cash disbursements		(29	)
Balance at end of period, December 31, 2018		49
Charges to operations		-
Cash disbursements		(14	)
Balance at end of period, March 31, 2019		35
Charges to operations		420
Cash disbursements		(14	)
Balance at end of period, June 30, 2019	$	441

The components of the accrued restructuring liabilities is as follows:

	As of		As of
	June 30, 2019		September 30, 2018
Facilities and related	$	21	$	77
Other costs (employee termination costs)		420		1
Total	$	441	$	78

As of June 30, 2019, $441 was reflected in Accrued liabilities in the Condensed Consolidated Balance Sheet. As of September 30, 2018, $53 is reflected in Accrued liabilities and $25 is reflected in Other long term liabilities in the Condensed Consolidated Balance Sheet.

Acquisition Related Expenses

In connection with the acquisition of Stantive, the Company incurred legal, accounting and consulting fees of $124 and $428 for the three and nine months ended June 30, 2019, respectively, which is included in Restructuring and acquisition related expenses in the Condensed Consolidated Statements of Operations.

9.   Debt

The Company has a Line of Credit with Heritage Bank of Commerce (“Heritage Bank”). As of June 30, 2019, the Company has no borrowings on the Line of Credit. The Company’s debt as of September 30, 2018 consisted of the Line of Credit from Heritage Bank, a term loan with Montage Capital II, L.P. (“Montage Capital”), and Promissory Term Notes.

21

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Debt at September 30, 2018 consists of the following:

	As of
	September 30, 2018
Line of credit borrowings	$	2,081
Term loan - Montage Capital		922
Other promissory notes		941
Other (debt discount)		(353	)
Total debt		3,591
Less current portion		1,017
Long term debt, net of current portion	$	2,574

Heritage Line of Credit

In June 2016, the Company entered into a new Loan and Security Agreement (“Heritage Agreement”), with Heritage Bank. The Heritage Agreement had an original term of 24 months but was further amended in February 2019 to a maturity date of February 29, 2020. The Company paid an annual commitment fee of 0.4% of the commitment amount in the first year and 0.2% in the following years.  The facility fee will be $6 on each anniversary thereafter. Borrowings are secured by all of the Company’s assets and all of the Company’s intellectual property. The Company is required to comply with certain financial and reporting covenants including an Asset Coverage Ratio and an Adjusted EBITDA metric. The Company was in compliance with the Adjusted EBITDA metric as of June 30, 2019.

The Heritage Agreement provides for up to $2.5 million of revolving credit advances which may be used for acquisitions and working capital purposes. Borrowings are limited to the lesser of (i) $2.5 million and (ii) 75% of eligible receivables as defined. The Company can borrow up to $1.0 million in out of formula borrowings for specified periods of time. The borrowings or credit advances may not exceed the monthly borrowing base capacity, which will fluctuate based on monthly accounts receivable balances. The Company may request credit advances if the borrowing capacity is more than the current outstanding loan advance and must pay down the outstanding loan advance if it exceeds the borrowing capacity.  As of June 30, 2019, the Company had no outstanding balance under the Heritage Agreement.

Amendments – Heritage Bank

The Company and Heritage Bank have executed numerous amendments since the origination of the Heritage Agreement. Those amendments that are significant as of June 30, 2019 are the following:

The first amendment, executed on August 15, 2016, included a decrease in the revolving line of credit from $3.0 million to $2.5 million. The second amendment, executed on December 14, 2016, included a minimum cash requirement of $250 in the Company’s accounts at Heritage. On October 6, 2017, a fourth amendment was executed, which included a consent to the Company’s incurrence of additional indebtedness from Montage Capital and the grant of a second position lien to Montage Capital. In addition, Heritage Bank and Montage Capital entered into an Intercreditor Agreement dated October 10, 2017 and acknowledged by the Company. On September 21, 2018, the ninth amendment was executed and addressed the minimum unrestricted cash requirements for the Company’s accounts at Heritage Bank upon repayment of certain Promissory Term Notes issued by the Company on September 7, 2018 in the principal amount of $941. On December 27, 2018, the tenth amendment was executed, which extended the maturity date of the Loan Agreement to January 1, 2020, as well as, set new financial covenants for fiscal 2019. On February 14, 2019, the eleventh amendment was executed, which extended the maturity date of the Loan Agreement to February 29, 2020, as well as, set new financial covenants for fiscal 2019. On May 15, 2019, the twelfth amendment was executed, which included a waiver for a failed covenant metric.

22

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Montage Capital II, L.P. Loan Agreement

On October 10, 2017, the Company entered into a Loan and Security Agreement (the “Montage Agreement” or “Montage Loan”) with Montage Capital. The Montage Agreement has a thirty-six (36) month term which matures on October 10, 2020. $1 million of borrowing was advanced on the date of closing. Borrowings bear interest at the rate of 12.75% per annum.

On May 10, 2018, the first amendment to the Montage Agreement (the “First Amendment”) was executed. The First Amendment included the Adjusted EBITDA metrics for the third quarter of fiscal 2018 and a waiver for not achieving the Adjusted EBITDA metrics for the quarter ended March 31, 2018. A second amendment to the Montage Agreement (the “Second Amendment”) was executed on October 22, 2018. The Second Amendment included modifications to financial covenants and addressed the minimum unrestricted cash requirements for the Company’s accounts at Heritage Bank upon repayment of debt incurred by the Company pursuant to certain Promissory Term Notes (see below) issued by the Company on September 7, 2018 in the amount of $941. A third amendment to the Montage Agreement (the “Third Amendment”) was executed on December 7, 2018 and included the new financial covenants for fiscal 2019. The Montage Loan was paid in full and discharged on March 13, 2019. A loss on early extinguishment of debt of $221 was recorded in the three months ended March 31, 2019 related to the remaining unamortized debt discount expense.

Promissory Term Notes

On September 7, 2018, the Company sold and issued subordinate promissory notes (the “Promissory Term Notes”) to certain accredited investors (“Purchasers”), pursuant to which it issued to the Purchasers (i) Promissory Term Notes, in the aggregate principal amount of approximately $941. The Promissory Term Notes had an original issue discount of fifteen percent (15%), bore interest at a rate of twelve percent (12%) per annum, and had a maturity date of the earlier to occur of (a) six months from the date of execution of the Purchase Agreement, or (b) the consummation of a debt or equity financing resulting in the gross proceeds to the Company of at least $3.0 million. After recording $141 of original issue discount and debt issuance costs of $40, the Company received net cash proceeds in the aggregate amount of $760 for the Promissory Term Notes. On October 19, 2018, the Company completed an equity financing resulting in gross proceeds of $5.0 million and repaid the Promissory Term Notes including accrued interest of $13 for a total of $954 on October 23, 2018.

Further, Heritage Bank and Montage Capital both approved the issuance of the Promissory Term Notes and the repayment terms and each Purchaser also entered into a Subordination Agreement with the two parties, pursuant to which the Purchasers agreed to subordinate (i) all of the Company’s indebtedness and obligations to the Purchasers, whether presently existing or arising in the future, to all of the Company’s indebtedness the both Heritage Bank and Montage Capital and (ii) all of the Purchasers’ security interests, if any, to all of Heritage Bank’s and Montage Capital’s security interests in property of the Company.

10.   Shareholders’ Equity

Preferred Stock Series A Convertible Stock

In October 2014, the Company designated 264,000 shares of its Preferred stock (the “Preferred Stock”) as Series A convertible preferred stock and sold 200,000 shares of Series A convertible preferred stock at a purchase price of $10.00 per share for gross proceeds of $2.0 million in a private placement. The shares of 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 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. The current conversion price is $812.50 and is subject to adjustment in the event of stock splits or stock dividends. As of June 30, 2019, a total of 1,636 preferred shares have been converted to 20 shares of common stock.

23

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Any accrued but unpaid dividends on the shares of Preferred Stock to be converted shall also be converted in common stock at the conversion price. A mandatory provision also may provide that the Company will have the right to require the holders to convert shares of Preferred Stock into Conversion Shares if (i) the Company’s common stock has closed at or above $1,625 per share for ten 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.

In the event of any liquidation, dissolution, or winding up of the Company, the holders of shares of 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 Preferred Shares shall vote with the Common Stock on an as converted basis.

Effective January 1, 2017, cumulative dividends are payable at a rate of 12% per year. The Company has issued 64,000 shares of Preferred Stock as PIK dividends to the preferred shareholders, which is the maximum amount of cumulative PIK dividends authorized. Therefore, all future dividend payments will be cash dividends. Total cash dividend payments for the nine months ended June 30, 2019 were $235.

Preferred Stock Series B Convertible Stock

On October 16, 2018, in connection with a public offering, 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 shares of the Company’s common stock at a conversion price of $25.00 per share. As of June 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 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”). 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 will not be entitled to, convert the Series C Preferred stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of Common Stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to the exercise. The Stockholder Approvals were obtained on April 26, 2019 and the Company’s Charter was amended on April 29, 2019. As of June 30, 2019, a total of 9,786.50 shares of Series C Preferred stock have been converted to 1,087,443 shares of Common Stock.

24

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 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 second quarter of fiscal 2019.

Common Stock

Public Offering

On October 16, 2018, the Company issued and sold in a public offering (the “Offering”) an aggregate 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, was 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 shares of common stock and additional warrants to purchase an additional 30,000 shares of common stock. At 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.

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 debt holders of the Company and to former owners and employees of acquired companies that have become employees of the Company. On April 29, 2016, the stockholders approved a new stock incentive plan, The 2016 Stock Incentive Plan (the “2016 Plan”). The 2016 Plan replaced an older plan that had expired in August 2016. No new shares will be granted under the old 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. Initially, a total of 10,000 shares of the Company’s Common Stock is reserved for issuance under the 2016 Plan. As of June 30, 2019, there were 7,859 options outstanding under this plan and 5,399 shares available for future issuance.

Compensation expense

The Company estimates the fair value of stock options using the Black-Scholes-Merton option valuation model.  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 Goods Sold and a portion to Operating Expenses depending on the employee’s department. During the three and nine months ended June 30, 2019, the Company recognized $74 and $209, respectively, as compensation expense related to share based payments related to stock options. For the three and nine months ended June 30, 2018, the Company recognized $126 and $373, respectively, as compensation expense related to share based payments related to stock options. As of June 30, 2019, the Company had approximately $59 of unrecognized compensation costs related to unvested options, which the Company expects to recognize through fiscal 2021.

Common Stock Warrants

The Company typically issues warrants to individual investors and placement agents to purchase shares of the Company’s common stock in connection with public and private placement fund raising activities. Warrants may also be issued to individuals or companies in exchange for services provided 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.

25

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Montage Warrant - As additional consideration for the Montage Loan, the Company issued to Montage Capital an eight-year warrant (the “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 shall have 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 of the Montage warrant liability at June 30, 2019 is $26 and is included in Warrant liabilities in the Condensed Consolidated Balance Sheet.

Series A, B and C Preferred Warrants - Reset Dates and Reset Price - The Series A Warrants and Series B Warrants had an initial exercise price of $9.00 per share; provided, however, that the exercise price of the Series A Warrants and Series B Warrants could be reset up to three times (each, a “Reset Date”), as more specifically set forth in the Series C Warrants, to a price equal to the greater of (i) 80% of the average 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 to the Series A Warrants and Series B Warrants would also be adjusted, as more specifically set forth in the Series C Warrants. The 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 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: the number of shares of Common Stock issuable upon exercise of the Series A Warrants is 2,556,875 shares, Series B Warrants is 2,556,875 shares, and Series C Warrants is 1,420,486. The number of shares of Common Stock issuable upon exercise of warrants issued to the placement agents is 127,848 shares.

During the three months ended June 30, 2019, shareholders exercised 1,347,050 shares of the Series C Warrants. There were no Series A, B or placement agents warrants exercised as of June 30, 2019. The fair value of the total warrant liability related to the Series A, B and C warrants and the placement agent warrants at June 30, 2019 is $5.7 million and is included in Warrant liabilities in the Condensed Consolidated Balance Sheets.

26

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Total warrants outstanding as June 30, 2019 were as follows:

	Issue
Type	Date	Shares		Price		Expiration
Placement Agent	10/28/2014		247	$	812.50	10/28/2019
Director/Shareholder	12/31/2014		240	$	1,000.00	12/31/2019
Director/Shareholder	2/12/2015		240	$	1,000.00	2/12/2020
Director/Shareholder	5/12/2015		240	$	1,000.00	5/12/2020
Director/Shareholder	12/31/2015		120	$	1,000.00	12/31/2020
Placement Agent	5/17/2016		1,736	$	187.50	5/17/2021
Placement Agent	5/11/2016		1,067	$	187.50	5/11/2021
Placement Agent	7/15/2016		880	$	230.00	7/15/2021
Investors	11/9/2016		4,271	$	175.00	5/22/2022
Director/Shareholder	12/31/2016		120	$	1,000.00	12/31/2021
Financing (Montage)	10/10/2017		1,327	$	132.50	10/10/2025
Director/Shareholder	12/31/2017		120	$	1,000.00	12/31/2021
Placement Agent	10/16/2018		10,000	$	31.25	10/16/2023
Investors	10/19/2018		3,120	$	25.00	10/19/2023
Investors	3/12/2019		159,236	$	4.00	10/19/2023
Investors	3/12/2019		2,556,875	$	4.00	9/12/2021
Investors	3/12/2019		2,556,875	$	4.00	9/12/2024
Investors	3/12/2019		73,462	$	0.05	9/12/2024
Placement Agent	3/12/2019		127,848	$	4.00	9/12/2024
Total			5,498,024

27

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Summary of Option and Warrant Activity and Outstanding Shares

	Stock Options						Stock Warrants
				Weighted						Weighted
				Average						Average
				Exercise						Exercise
	Options			Price			Warrants			Price
Outstanding, October 1, 2018		9,157		$	341.50			10,926		$	308.32
Granted		-			-			7,084,990			3.86
Exercised		-			-			(1,392,694	)		0.18
Forfeited/Exchanged		(1,128	)		(486	)		(204,880	)		(25.00	)
Expired		(181	)		(1,219	)		(318	)		(1,373.43	)
Outstanding, June 30, 2019		7,848		$	306.41			5,498,024		$	4.53

As of June 30, 2019, there are 5,688 options available for exercise.  All options are out-of-the-money and have a zero intrinsic value.

11.  Net Income/(Loss) Per Share

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

	Three Months Ended						Nine Months Ended
(in thousands, except per share data)	June 30,						June 30,
	2019			2018			2019			2018
Numerator:
Net income/(loss)	$	7,311		$	(5,162	)	$	(10,166	)	$	(6,272	)
Change in warrant derivative liability		(18	)		-			(18	)		-
Accrued dividends on convertible preferred stock		(78	)		(79	)		(235	)		(231	)
Net income/(loss) applicable to common shareholders	$	7,215		$	(5,241	)	$	(10,419	)	$	(6,503	)
Denominator:
Weighted average shares outstanding for basic earnings per share		1,996			85			840			84
Effect of dilutive securities:
Warrants		1			-			1			-
Preferred stock		36			-			-			-
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share		2,033			85			841			84
Basic net income/(loss) per share	$	3.62		$	(61.78	)	$	(12.38	)	$	(77.00	)
Diluted net income/(loss) per share	$	3.56		$	(61.78	)	$	(12.38	)	$	(77.00	)

Basic net income/(loss) per share is computed by dividing net income/(loss) available to common shareholders by the weighted average number of common shares outstanding.  Diluted net income/(loss) per share applicable 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, warrants and convertible preferred stock using the “treasury stock” method. For the three months ended June 30, 2019, stock options of 7,848 and warrants to purchase 5,424,562 shares of common stock were not included in the computation of diluted net income per share because they were considered antidilutive. For the three months ended June 30, 2018 and both the nine months ended June 30, 2019 and 2018, the 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.

12.  Disaggregated Revenue and Segment Reporting

The Company operates as one operating segment, therefore, all required financial segment information can be found in the Condensed Consolidated Financial Statements. 

The Company disaggregates revenue from contracts with customers by geography and product grouping, as it believes this best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

28

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
Revenues:	2019		2018		2019		2018
United States	$	2,369	$	2,538	$	6,631	$	9,894
International		324		545		633		871
	$	2,693	$	3,083	$	7,264	$	10,765

The Company’s revenue by type is as follows:

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
Revenues:	2019		2018		2019		2018
Digital Engagement Services	$	1,102	$	1,578	$	3,070	$	5,559
Subscription		1,230		1,140		2,934		3,935
Perpetual Licenses		-		7		145		72
Maintenance		92		115		332		360
Hosting		269		243		783		839
	$	2,693	$	3,083	$	7,264	$	10,765

13.  Income Taxes

Income tax expense was $3 and $10 for the three months ended June 30, 2019 and 2018, respectively, and $7 and $11 for the nine months ended June 30, 2019 and 2018, respectively. Income tax expense consists of the estimated liability for federal and state income taxes owed by the Company.  Net operating loss carry forwards are estimated to be sufficient to offset any potential taxable income for all periods presented.

14.  Related Party Transactions

In November 2018, the Company engaged Taglich Brothers Inc, on a non-exclusive basis, to perform advisory and investment banking services to identify possible acquisition target possibilities. Michael Taglich, a director and shareholder of the Company, is the President and Chairman of Taglich Brothers Inc. Fees for the services were $8 per month for three months and $5 thereafter, cancellable at any time. Taglich Brothers Inc. could also earn a success fee ranging from $200 for a revenue target acquisition of under $5 million up to $1 million for an acquisition target over $200 million. In connection with the asset purchase of Stantive, The Taglich Brothers earned a success fee of $200.

Michael Taglich also purchased 350 units in the amount of $350 of Series C Preferred Convertible stock and associated warrants in the private transaction consummated on March 13, 2019. Mr. Taglich’s purchase was subject to stockholder approval pursuant to Nasdaq Marketplace Rule 5635(c), for which approval by the stockholders of the Company was obtained on April 26, 2019.

15.  Legal Proceedings

The Company is subject to ordinary routine litigation and claims incidental to its business. As of June 30, 2019, the Company was not engaged with any material legal proceedings.

16. 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 disclosure in these interim condensed consolidated financial statements, except as already disclosed in these financial statements.

29

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

This section contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a variety of factors and risks including the impact of the weakness in the U.S. and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited market for our common stock, the ability to maintain our listing on the NASDAQ Capital Market, the volatility of the market price of our common stock, the ability to raise capital, the performance of our products, our ability to respond to rapidly evolving technology and customer requirements, our ability to protect our proprietary technology, the security of our software and response to cyber security risks, our ability to meet our financial obligations and commitments, our dependence on our management team and key personnel, our ability to hire and retain future key personnel, our ability to maintain an effective system of internal controls, or our ability to respond to government regulations. These and other risks are more fully described herein and in our other filings with the Securities and Exchange Commission.

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

Overview

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

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

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

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

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

Locations

The Company’s corporate office is located in Burlington, Massachusetts.  The Company has three wholly-owned subsidiaries: Bridgeline Digital Pvt. Ltd. located in Bangalore, India, Bridgeline Digital Canada, Inc. located in Ontario, Canada, and Stantive Technologies Pty, Ltd. located in Australia.

Acquisitions

On February 13, 2019, the Company entered into an Asset Purchase Agreement with Seevolution Inc, a Delaware corporation, Celebros, Inc., a Delaware corporation, and Elisha Gilboa, an individual and shareholder of Seevolution, (the “Seevolution Asset Purchase Agreement”). The Seevolution Asset Purchase Agreement sets forth the terms and conditions pursuant to which the Company acquired certain assets in exchange for consideration paid consisting of (i) $400 thousand in cash at the time of the purchase, (ii) the payment of $100 thousand of additional cash to be paid out $10 thousand per month for ten months starting April 30, 2019 and (iii) 40,000 shares of Bridgeline Digital common stock. Costs to complete the transaction were approximately $18 thousand.

30

On March 13, 2019, the Company entered into an Asset Purchase Agreement with Stantive Technologies Group Inc., (“Stantive”) a corporation organized under the laws of Ontario, Canada to purchase substantially all of the assets of Stantive and assume certain liabilities. The Company also acquired all of the outstanding stock of Stantive Technologies Group, Pty, a company incorporated in Australia, which was a subsidiary of Stantive. The total purchase price for Stantive and its Australian subsidiary was $5.2 million in cash.

Customer Information

For the three months ended June 30, 2019, two customers represented 14% and 11% of the Company’s total revenue. For the nine months ended June 30, 2019, two customers represented 16% and 12% of the Company’s total revenue. For the three months ended June 30, 2018, two customers each represented 12% and one customer represented 11% of the Company’s total revenue. For the nine months ended June 30, 2018, two customers represented 14% and 12% of the Company’s total revenue.

Results of Operations for the Three and Nine Months Ended June 30, 2019 compared to the Three and Nine Months Ended June 30, 2018

Total revenue for the three months ended June 30, 2019 was $2.7 million and $3.1 million for the three months ended June 30, 2018. We had net income of $7.3 million for the three months ended June 30, 2019 and a net loss of ($5.2) million for the three months ended June 30, 2018. Included in net income for the three months ended June 30, 2019 was a gain of $10.1 million as a result of the change in fair value of certain warrant liabilities, partially offset by restructuring and acquisition costs of $938 thousand.  Included in the net loss for the three months ended June 30, 2018 was a goodwill impairment charge of $4.6 million.  Basic net income/(loss) per share applicable to common shareholders was $3.62 for the three months ended June 30, 2019 and ($61.78) for the three months ended June 30, 2018. Total revenue from acquisitions was $968 thousand for the three months ended June 30, 2019.

Total revenue for the nine months ended June 30, 2019 was $7.3 million and $10.8 million for the nine months ended June 30, 2018. We had net loss of ($10.2) million for the nine months ended June 30, 2019 and ($6.3) million for the nine months ended June 30, 2018. Included in the net loss for the nine months ended June 30, 2019 was a goodwill impairment of $3.7 million and restructuring and acquisition costs of $1.2 million.  Included in the net loss for the nine months ended June 30, 2018 was a goodwill impairment of $4.6 million. Basic and diluted net loss per share applicable to common shareholders was ($12.38) for the nine months ended June 30, 2019 and ($77.00) for the nine months ended June 30, 2018. Total revenue from acquisitions was $1.3 million for the nine months ended June 30, 2019.

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	Three Months			Three Months									Nine Months			Nine Months
(in thousands)	Ended			Ended									Ended			Ended
	June 30,			June 30,						%			June 30,			June 30,						%
Revenue	2019			2018			Change			Change			2019			2018			Change			Change
Digital enagement services	$	1,118		$	1,578			(460	)		(29%	)	$	3,102		$	5,559			(2,457	)		(44%	)
% of total net revenue		42	%		51	%								43	%		52	%
Subscription and perpetual licenses		1,322			1,262			60			5	%		3,411			4,367			(956	)		(22%	)
% of total net revenue		49	%		41	%								47	%		41	%
Managed service hosting		253			243			10			4	%		751			839			(88	)		(10%	)
% of total net revenue		9	%		8	%								10	%		7	%
Total net revenue	$	2,693		$	3,083		$	(390	)		(13%	)	$	7,264		$	10,765		$	(3,501	)		(33%	)
Cost of revenue
Digital engagement services		573			977			(404	)		(41%	)		2,007			3,666			(1,659	)		(45%	)
% of digital engagement services revenue		51	%		62	%								65	%		66	%
Subscription and perpetual licenses		834			510			324			64	%		2,010			1,503			507			34	%
% of subscription and perpetual revenue		63	%		40	%								59	%		34	%
Managed service hosting		84			47			37			79	%		222			213			9			4	%
% of managed service hosting revenue		33	%		19	%								30	%		25	%
Total cost of revenue		1,491			1,534			(43	)		(3%	)		4,239			5,382			(1,143	)		(21%	)
Gross profit		1,202			1,549			(347	)		(22%	)		3,025			5,383			(2,358	)		(44%	)
Gross profit margin		45	%		50	%								42	%		50	%
Operating expenses
Sales and marketing		1,268			892			376			42	%		3,083			2,800			283			10	%
% of total revenue		47	%		29	%								42	%		26	%
Support		201			99			102			103	%		436			245			191			78	%
% of total revenue		7	%		3	%								6	%		2	%
General and administrative		785			625			160			26	%		2,216			2,156			60			3	%
% of total revenue		29	%		20	%								31	%		20	%
Research and development		592			406			186			46	%		1,499			1,221			278			23	%
% of total revenue		22	%		13	%								21	%		11	%
Depreciation and amortization		257			93			164			176	%		361			305			56			18	%
% of total revenue		10	%		3	%								5	%		3	%
Goodwill impairment		-			4,615			(4,615	)		100	%		3,732			4,615			(883	)		(19%	)
% of total revenue		0	%		150	%								51	%		43	%
Restructuring and acquisition related expenses		938			6			932			15,533	%		1,242			187			1,055			564	%
% of total revenue		35	%		0	%								17	%		2	%
Total operating expenses		4,041			6,736			(2,695	)		(40%	)		12,569			11,529			1,040			9	%
Loss from operations		(2,839	)		(5,187	)		2,348			(45%	)		(9,544	)		(6,146	)		(3,398	)		55	%
Interest income (expense), net		7			(70	)		77			(110%	)		(305	)		(199	)		(106	)		53	%
Amortization of debt discount		-			(28	)		28			(100%	)		(231	)		(82	)		(149	)		182	%
Other income (expense), net		10,146			133			10,013			7,529	%		(79	)		166			(245	)		(148%	)
Income/(loss) before income taxes		7,314			(5,152	)		12,466			(242%	)		(10,159	)		(6,261	)		(3,898	)		62	%
Provision for income taxes		3			10			(7	)		70	%		7			11			(4	)		(36%	)
Net income/(loss)	$	7,311		$	(5,162	)	$	12,473			(242%	)	$	(10,166	)	$	(6,272	)	$	(3,894	)		62	%
Non-GAAP Measure:
Adjusted EBITDA	$	(1,562	)	$	(332	)	$	(1,230	)		370	%	$	(3,974	)	$	(611	)	$	(3,363	)		550	%

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Revenue

Our revenue is derived from three sources: (i) digital engagement services (ii) subscription and perpetual licenses and (iii) managed service hosting.

Digital Engagement Services

Digital engagement services revenue is comprised of implementation and retainer related services. In total, revenue from digital engagement services decreased $460 thousand, or 29%, to $1.1 million for the three months ended June 30, 2019 compared to $1.6 million for the three months ended June 30, 2018 and decreased $2.5 million, or 44%, to $3.1 million for the nine months ended June 30, 2019 compared to $5.6 million for the nine months ended June 30, 2018. The decrease for the three and nine months ended June 30, 2019 compared to the prior period is primarily due to a decrease in new service engagements. Digital engagement services revenue as a percentage of total revenue decreased to 42% from 51% for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 and decreased to 43% from 52% for the nine months ended June 30, 2019 compared to the nine months ended June 30, 2018. The decrease as a percentage of total revenue is attributable to overall decreases in revenues generated from service engagements. Digital engagement services revenue from acquisitions was $384 thousand and $512 thousand for the three and nine months ended June 30, 2019.

Subscription and Perpetual Licenses

Revenue from subscription and perpetual licenses increased $60 thousand, or 5%, to $1.3 million for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 and decreased $956 thousand, or 22%, to $3.4 million for the nine months ended June 30, 2019 compared to $4.4 million for the nine months ended June 30, 2018.  The increase for the three months ended June 30, 2019 compared to the prior period is primarily due to license revenues realized from our two recent acquisitions. The decrease for the nine months ended June 30, 2019 compared to the prior period is primarily due to a decline in SaaS license revenue due to the loss of a large customer that we previously disclosed. Subscription and perpetual license revenue as a percentage of total revenue increased to 49% from 41% for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 and increased to 47% from 41% for the nine months ended June 30, 2019 compared to the nine months ended June 30, 2018. The increase as a percentage of total revenue is attributable to the overall decreases in digital engagement services revenue. Subscription and perpetual license revenue from acquisitions was $584 thousand and $751 thousand for the three and nine months ended June 30, 2019.

Managed Service Hosting

Revenue from managed service hosting increased $10 thousand, or 4%, to $253 thousand for the three months ended June 30, 2019 compared to $243 thousand for the three months ended June 30, 2018 and decreased $88 thousand, or 10%, to $751 thousand for the nine months ended June 30, 2019 compared to $839 thousand for the nine months ended June 30, 2018. The decrease for the nine months ended June 30, 2019 compared to the prior period is due to customer attrition offset by new hosting contracts entered into the current fiscal year. Managed services revenue as a percentage of total revenue increased to 9% for the three months ended June 30, 2019 compared to 8% for the three months ended June 30, 2018 and increased to 10% for the nine months ended June 30, 2019 compared to 7% for the nine months ended June 30, 2018. The increase as a percentage of revenue is attributable to the overall decreases in other revenue streams.

Costs of Revenue

Total cost of revenue decreased $43 thousand, or 3%, to $1.5 million for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 and decreased $1.1 million, or 21%, to $4.2 million for the nine months ended June 30, 2019 compared to $5.4 million for the nine months ended June 30, 2018. The gross profit margin declined to 45% and 42% for the three and nine months ended June 30, 2019, respectively, compared to 50% for the three and nine months ended June 30, 2018. The decline in the gross profit margin for the three and nine months ended June 30, 2019 compared to the three and nine months ended June 30, 2018 is attributable to the decrease in digital engagement services revenue.

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Cost of Digital Engagement Services

Cost of digital engagement services decreased $404 thousand, or 41%, to $573 thousand for the three months ended June 30, 2019 compared to $977 thousand for the three months ended June 30, 2018 and decreased $1.7 million, or 45%, to $2.0 million for the nine months ended June 30, 2019 compared to $3.7 million for the nine months ended June 30, 2018. The decrease is primarily due to a decrease in headcount. The cost of digital engagement services as a percentage of digital engagement services revenue increased to 51% for the three months ended June 30, 2019 compared to 62% for the three months ended June 30, 2018 and decreased to 65% for the nine months ended June 30, 2019 compared to 66% for the nine months ended June 30, 2018.   The decreases as a percentage of revenues for the three and nine months ended June 30, 2019 as compared to the three and nine months ended June 30, 2018 is primarily due to under-utilization of billable consultants due to the decrease in engagements.

Cost of Subscription and Perpetual License

Cost of subscription and perpetual licenses increased $324 thousand, or 64%, to $834 thousand for the three months ended June 30, 2019 compared to $510 thousand for the three months ended June 30, 2018 and increased $507 thousand, or 34%, to $2.0 million for the nine months ended June 30, 2019 compared to $1.5 million for the nine months ended June 30, 2018. The cost of subscription and perpetual licenses as a percentage of subscription and perpetual license revenue increased to 63% for the three months ended June 30, 2019 compared to 40% for the three months ended June 30, 2018 and increased to 59% for the nine months ended June 30, 2019 compared to 34% for the nine months ended June 30, 2018. The increases are attributable to fixed costs to operate our cloud-based hosting model with Amazon Web Services and variable internal support costs.

Cost of Managed Service Hosting

Cost of managed service hosting increased $37 thousand, or 79%, to $84 thousand for the three months ended June 30, 2019 compared to $47 thousand for the three months ended June 30, 2018 and increased $9 thousand, or 4%, to $222 thousand for the nine months ended June 30, 2019 compared to $213 thousand for the nine months ended June 30, 2018. The cost of managed services as a percentage of managed services revenue increased to 33% for the three months ended June 30, 2019 compared to 19% for the three months ended June 30, 2018 and increased to 30% for the nine months ended June 30, 2019 compared to 25% for the nine months ended June 30, 2018. The increases are attributable to fixed costs to operate our cloud-based hosting model with Amazon Web Services and variable internal support costs.

Operating Expenses

Sales and Marketing Expenses

Sales and marketing expenses increased $376 thousand, or 42%, to $1.3 million for the three months ended June 30, 2019 compared to $892 million for the three months ended June 30, 2018 and increased $283 thousand, or 10%, to $3.1 million for the nine months ended June 30, 2019 compared to $2.8 million for the nine months ended June 30, 2018.  Sales and marketing expenses represented 47% and 29% of total revenue for the three months ended June 30, 2019 and 2018, respectively, and 42% and 26% of total revenue for the nine months ended June 30, 2019 and 2018, respectively. The increases for the three and nine months ended June 30, 2019 compared to the three and nine months ended June 30, 2018 is attributable to the overall decrease in revenue and an increase in headcount from acquisitions.

Support

Support expenses increased $102 thousand, or 103%, to $201 thousand for the three months ended June 30, 2019 compared to $99 thousand for the three months ended June 30, 2018 and increased $191 thousand, or 78%, to $436 thousand for the nine months ended June 30, 2019 compared to $245 thousand for the nine months ended June 30, 2018.  Support expenses represented 7% and 3% of total revenue for the three months ended June 30, 2019 and 2018, respectively, and 6% and 2% of total revenue for the nine months ended June 30, 2019 and 2018, respectively. The increase in expenses for the three and nine months ended June 30, 2019 as compared to the three and nine months ended June 30, 2018 was due to increases in support headcount from acquisitions. The increases as a percentage of revenues for the three and nine months ended June 30, 2019 as compared to the three and nine months ended June 30, 2018 are attributable to the decreases in revenues. 

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General and Administrative Expenses

General and administrative expenses increased $160 thousand, or 26%, to $785 thousand for the three months ended June 30, 2019 compared to $625 thousand for the three months ended June 30, 2018 and increased $60 thousand, or 3%, to $2.2 million for the nine months ended June 30, 2019 compared to the nine months ended June 30, 2018.  General and administrative expenses represented 29% and 20% of total revenue for the three months ended June 30, 2019 and 2018, respectively, and 31% and 20% of total revenue for the nine months ended June 30, 2019 and 2018, respectively. The increase in expense was due to an increase in headcount from acquisitions.

Research and Development

Research and development expense increased $186 thousand, or 46%, to $592 thousand for the three months ended June 30, 2019 compared to $406 thousand for the three months ended June 30, 2018 and increased $278 thousand, or 23%, to $1.5 million for the nine months ended June 30, 2019 compared to $1.2 million for the nine months ended June 30, 2018.  Research and development expenses represented 22% and 13% of total revenue for the three months ended June 30, 2019 and 2018, respectively, and 21% and 11% of total revenue for the nine months ended June 30, 2019 and 2018, respectively. The increase in expenses for the three and nine months ended June 30, 2019 compared to the three and nine months ended June 30, 2018 is due to an increase in headcount from acquisitions. The increases as a percentage of revenues for the three and nine months ended June 30, 2019 as compared to the three and nine months ended June 30, 2018 are attributable to the decreases in revenues.

Depreciation and Amortization

Depreciation and amortization expense increased $164 thousand, or 176%, to $257 thousand for the three months ended June 30, 2019 compared to $93 thousand for the three months ended June 30, 2018 and increased $56 thousand, or 18%, to $361 thousand for the nine months ended June 30, 2019 compared to $305 thousand for the nine months ended June 30, 2018.  The increase is primarily due to amortization of intangible assets resulting from the acquisitions. Amortization expense was $240 thousand and $306 thousand for the three and nine months ended June 30, 2019, respectively. Depreciation and amortization represented 10% and 3% of total revenue for the three months ended June 30, 2019 and 2018, respectively, and 5% and 3% of total revenue for the nine months ended June 30, 2019 and 2018, respectively.   

Goodwill Impairment

The Company performed an interim impairment test for the three months ended December 31, 2018, 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 was no impairment at June 30, 2019.

Restructuring and Acquisition Related Expenses

In the quarter 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.

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Net Loss

Loss from operations

The loss from operations was ($2.8) million for three months ended June 30, 2019 compared to a loss of ($5.2) million for the three months ended June 30, 2018 and ($9.5) million for the nine months ended June 30, 2019 compared to a loss of ($6.1) million for the nine months ended June 30, 2018. Operating expenses decreased $2.7 million, or 40%, to $4.0 million for the three months ended June 30, 2019 compared to $6.7 million for the three months ended June 30, 2018. The increases for the three months ended June 30, 2019 is primarily attributable to restructuring and acquisition expenses and additional headcount from acquisitions. Operating expenses increased $1.0 million, or 9%, to $12.6 million for the nine months ended June 30, 2019 compared to $11.5 million for the nine months ended June 30, 2018. The increase is due to restructuring and acquisition related expenses of $1.2 million and a goodwill impairment charge of $3.7 million. We do not expect to incur any significant additional restructuring and acquisition related costs for the remainder of the fiscal year.

Other income (expense), net

In the three months ended June 30, 2019, we recorded income related to the change in fair value of derivative liabilities of $10.1 million. In the nine months ended June 30, 2019, we recorded expense of $11.3 million related to warrant expense as a result of the allocation of proceeds from the sale of Preferred Series C stock and associated warrants, which was almost entirely offset by the aggregate income recorded for the change in fair value of derivative liabilities.

Income Taxes

The provision for income tax expense was $3 thousand and $10 thousand for the three months ended June 30, 2019 and 2018, respectively, and $7 thousand and $11 thousand for the nine months ended June 30, 2019 and 2018, 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.

Adjusted EBITDA

We also measure our performance based on a non-GAAP (“Generally Accepted Accounting Principles”) measurement of earnings before interest, taxes, depreciation, and amortization and before stock-based compensation expense and impairment of goodwill and intangible assets (“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 GAAP and should not be considered as an alternative or substitute for GAAP profitability measures such as (i) income from operations and net income, or (ii) cash flows from operating, investing and financing activities, both as determined in accordance with GAAP. Adjusted EBITDA as an operating performance measure has material limitations since it excludes the financial statement impact of income taxes, net interest expense, loss on early extinguishment of debt, changes in fair value of warrant liabilities, amortization of intangibles, depreciation, restructuring and acquisition related expenses, goodwill impairment, other amortization and stock-based compensation, and therefore does not represent an accurate measure of profitability.  As a result, Adjusted EBITDA should be evaluated in conjunction with net income for a complete analysis of our profitability, as net income includes the financial statement impact of these items and is the most directly comparable 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 GAAP.

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The following table reconciles Net income/(loss) (which is the most directly comparable GAAP operating performance measure) to Adjusted EBITDA (in thousands):

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income/(loss)	$	7,311		$	(5,162	)	$	(10,166	)	$	(6,272	)
Provision for income tax		3			10			7			11
Interest and other expense, net		(7	)		70			316			200
Change in fair value of warrants/warrant expense		(10,146	)		(133	)		68			(156	)
Amortization of debt discount		-			28			231			82
Amortization of intangible assets		240			71			306			214
Depreciation		16			20			50			85
Goodwill impairment		-			4,615			3,732			4,615
Restructuring and acquisition related charges		938			6			1,242			187
Other amortization		9			17			31			50
Stock based compensation		74			126			209			373
Adjusted EBITDA	$	(1,562	)	$	(332	)	$	(3,974	)	$	(611	)

Adjusted EBITDA decreased year over year and is primarily attributable to a decrease in revenues.

Liquidity and Capital Resources

Cash Flows

Operating Activities

Cash used in operating activities was $3.3 million for the nine months ended June 30, 2019 compared to cash used in operating activities of $972 thousand for the nine months ended June 30, 2018. The increase in the use of cash compared to the prior period was primarily due to an increase in accounts receivable and a decrease in accounts payable.

Investing Activities

Cash used in investing activities was $5.7 million for the nine months ended June 30, 2019 compared to $30 thousand for the nine months ended June 30, 2018.  We primarily used cash to acquire the assets of Stantive and Seevolution. Expenditures for property and equipment during the current fiscal year will not be material.

Financing Activities

Cash provided by financing activities was $9.6 million for the nine months ended June 30, 2019 compared to $682 thousand for the nine months ended June 30, 2018.  Cash provided by financing activities for the nine months ended June 30, 2019 is attributable to the public offering in October 2018 and a private offering in March 2019. In October 2018, we sold an aggregate 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 and (ii) Preferred stock of 4,288 Class B Units, with each Class B Unit, convertible into 40 shares of the Company’s common stock at a conversion price of $25.00. The net proceeds to the Company after deducting the underwriter’s fees and expenses was approximately $5.0 million. The proceeds of the October public offering were used to paydown the Promissory Term Notes of $941 thousand. In a private offering in March 2019, the Company sold Preferred stock of 10,227.50 Class C Units, with each Class C Unit convertible into 1,136,390 shares of the Company’s common stock at a conversion price of $9.00, for net proceeds of $9.1 million. The proceeds of the March 2019 private offering were used to pay down the Heritage Bank of Commerce line of credit by $2.2 million leaving a zero balance at March 31, 2019, as well as, the loan due to Montage Capital in the amount of $922 thousand. The proceeds also funded the asset purchase of Stantive Technologies Group Inc for $5.2 million.

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Capital Resources and Liquidity Outlook 

In the second quarter of this current fiscal year, we concluded a private offering that raised a net $9.2 million in cash. We used these proceeds to pay down our Heritage Bank of Commerce line of credit to zero and pay our outstanding loan to Montage Capital II, L.P in full, so we had no debt at March 31, 2019 and June 30, 2019. Also, in the quarter ended March 31, 2019, we used cash to purchase the assets of Seevolution, Inc and Stantive Technologies Group Inc., which assets included technology and customers. We believe the future revenues and cash flows from these newly acquired customers combined with our existing accounts and cash balance of $1.3 million as of June 30, 2019 will be sufficient to meet the Company’s obligations for a minimum of twelve months from the financial statement issuance date.  Other sources of financing may not be available to us in a timely basis if at all, or on terms acceptable to us. 

Off-Balance Sheet Arrangements

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

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

Commitments and Contingencies

As of June 30, 2019, we have no material commitments or contingencies.

Critical Accounting Policies

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 28, 2018.

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.

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

● Revenue recognition;

● Allowance for doubtful accounts;

● Accounting for cost of computer software to be sold, leased or otherwise marketed;

● Accounting for goodwill and other intangible assets; and

● Accounting for stock-based compensation.

Revenue Recognition

The Company derives its revenue from three sources: (i) Software Licenses, which are comprised of subscription fees ("SaaS"), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering, search and (iii) hosting of perpetual licenses. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS” do not take possession of the software.  

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

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

• Identify the customer contract;

• Identify performance obligations that are distinct;

• Determine the transaction price;

• Allocate the transaction price to the distinct performance obligations; and

• Recognize revenue as the performance obligations are satisfied.

Allowance for Doubtful Accounts

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

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

39

Accounting for Cost of Computer Software to be Sold, Leased or Otherwise Marketed   

We charge research and development expenditures for technology development to operations as incurred.  However, in accordance with Codification 985-20 Costs of Software to be Sold Leased or Otherwise Marketed, we capitalize certain software development costs subsequent to the establishment of technological feasibility.  Based on our product development process, technological feasibility is established upon completion of a working model. Certain costs incurred between completion of a working model and the point at which the product is ready for general release is capitalized if significant. Once the product is available for general release, the capitalized costs are amortized in cost of sales.

Accounting for Goodwill and Intangible Assets

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

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

Accounting for Stock-Based Compensation

At June 30, 2019, we maintained two stock-based compensation plans, one of which has expired but still contains vested and unvested stock options and are more fully described in Note 12 to the Consolidated Financial Statements of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 28, 2018.

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

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

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

We record 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.

40

Item 3. Qualitative and Quantitative Disclosures About Market Risk.

Not required.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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, 2019.

Changes in Internal Control over Financial Reporting

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.

Limitations on Controls

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.

41

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time we are subject to ordinary routine litigation and claims incidental to our business. We are not currently involved in any legal proceedings that we believe are material beyond those previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 28, 2018.

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

There were no sales of unregistered equity securities in the three months ended June 30, 2019.

42

Item 6. Exhibits.

Exhibit No.	Description of Document
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	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 3.2 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	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	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 Agreement, dated March 12, 2019, by and between Bridgeline Digital, Inc. 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 dated July 1, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K Filed on July 3, 2019)

43

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	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

*Management compensatory plan

**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.

44

SIGNATURES

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.

	Bridgeline Digital, Inc.
	(Registrant)
August 14, 2019	/s/    Roger Kahn
Date	Roger Kahn President and Chief Executive Officer  (Principal Executive Officer)
August 14, 2019	/s/    Mark Downey
Date	Mark Downey Chief Financial Officer (Principal Financial and Accounting Officer)

45

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Roger Kahn, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Bridgeline Digital, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: August 14, 2019  

	/s/ Roger Kahn
Name:	Roger Kahn
Title:	President and Chief Executive Officer (Co-Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark Downey, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Bridgeline Digital, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
	(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 Date: August 14, 2019

	/s/ Mark Downey
Name:	Mark Downey
Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Bridgeline Digital, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Roger Kahn, President and Chief Executive Officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 14, 2019		/s/ Roger Kahn
	Name:	Roger Kahn
	Title:	President and Chief Executive Officer (Principal Executive Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Bridgeline Digital, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Mark Downey, Chief Financial Officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 14, 2019		/s/ Mark Downey
	Name:	Mark Downey
	Title:	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

XML

Document And Entity Information - shares	9 Months Ended
	Jun. 30, 2019	Aug. 10, 2019
Document Information [Line Items]
Entity Registrant Name	Bridgeline Digital, Inc.
Entity Central Index Key	0001378590
Trading Symbol	blin
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		2,794,308
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2019	Sep. 30, 2018
Current assets:
Cash and cash equivalents	$ 1,298	$ 644
Accounts receivable and unbilled receivables, net	1,658	1,721
Prepaid expenses	442	452
Other current assets	89	21
Total current assets	3,487	2,838
Property and equipment, net	315	80
Intangible assets, net	3,747	20
Goodwill	5,557	7,782
Other assets	103	280
Total assets	13,209	11,000
Current liabilities:
Accounts payable	1,312	1,577
Accrued liabilities	1,172	580
Debt, current		1,017
Deferred revenue	1,832	594
Total current liabilities	4,316	3,768
Debt, net of current portion		2,574
Warrant liabilities	5,726	180
Other long term liabilities	13	54
Total liabilities	10,055	6,576
Commitments and contingencies
Stockholders’ equity:
Common stock - $0.001 par value; 50,000,000 shares authorized; 2,794,308 at June 30, 2019 and 84,005 at September 30, 2018, issued and outstanding	3
Additional paid-in capital	75,585	66,553
Accumulated deficit	(72,101)	(61,778)
Accumulated other comprehensive loss	(333)	(351)
Total stockholders’ equity	3,154	4,424
Total liabilities and stockholders’ equity	13,209	11,000
Series A Convertible Preferred Stock [Member]
Stockholders’ equity:
Preferred stock

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2019	Sep. 30, 2018
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	2,794,308	84,005
Common stock, shares outstanding (in shares)	2,794,308	84,005
Series C Convertible Preferred Stock [Member]
Preferred stock, shares authorized (in shares)	11,000
Preferred stock, shares issued (in shares)	441
Preferred stock, shares outstanding (in shares)	441
Series A Convertible Preferred Stock [Member]
Preferred stock, shares issued (in shares)	264,000	264,000
Preferred stock, shares outstanding (in shares)	262,310	262,364
Preferred stock, liquidation preference	$ 2,624	$ 2,624

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net revenue:
Net revenue	$ 2,693	$ 3,083	$ 7,264	$ 10,765
Cost of revenue:
Cost of revenue	1,491	1,534	4,239	5,382
Gross profit	1,202	1,549	3,025	5,383
Operating expenses:
Sales and marketing	1,268	892	3,083	2,800
Support	201	99	436	245
General and administrative	785	625	2,216	2,156
Research and development	592	406	1,499	1,221
Depreciation and amortization	257	93	361	305
Goodwill impairment		4,615	3,732	4,615
Restructuring and acquisition related expenses	938	6	1,242	187
Total operating expenses	4,041	6,736	12,569	11,529
Loss from operations	(2,839)	(5,187)	(9,544)	(6,146)
Interest income (expense), net	7	(70)	(305)	(199)
Amortization of debt discount		(28)	(231)	(82)
Other income (expense), net	10,146	133	(79)	166
Income/(loss) before income taxes	7,314	(5,152)	(10,159)	(6,261)
Provision for income taxes	3	10	7	11
Net income/(loss)	7,311	(5,162)	(10,166)	(6,272)
Dividends on convertible preferred stock	(78)	(79)	(235)	(231)
Net income/(loss) applicable to common shareholders	$ 7,233	$ (5,241)	$ (10,401)	$ (6,503)
Net income/(loss) per share attributable to common shareholders:
Basic net income/(loss) per share (in dollars per share)	$ 3.62	$ (61.78)	$ (12.38)	$ (77)
Diluted net income/(loss) per share (in dollars per share)	$ 3.56	$ (61.78)	$ (12.38)	$ (77)
Number of weighted average shares outstanding:
Basic (in shares)	1,996,326	84,825	839,975	84,457
Diluted (in shares)	2,032,766	84,825	839,975	84,457
Service [Member]
Net revenue:
Net revenue	$ 1,118	$ 1,578	$ 3,102	$ 5,559
Cost of revenue:
Cost of revenue	573	977	2,007	3,666
License [Member]
Net revenue:
Net revenue	1,322	1,262	3,411	4,367
Cost of revenue:
Cost of revenue	834	510	2,010	1,503
Technology Service [Member]
Net revenue:
Net revenue	253	243	751	839
Cost of revenue:
Cost of revenue	$ 84	$ 47	$ 222	$ 213

XML

Condensed Consolidated Statements of Comprehensive Income/Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income/(loss)	$ 7,311	$ (5,162)	$ (10,166)	$ (6,272)
Net change in foreign currency translation adjustment	19	(1)	18	(1)
Comprehensive income/(loss)	$ 7,330	$ (5,163)	$ (10,148)	$ (6,273)

XML

Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Series C Convertible Preferred Stock [Member] Preferred Stock [Member]	Series C Convertible Preferred Stock [Member] Common Stock [Member]	Series C Convertible Preferred Stock [Member] Additional Paid-in Capital [Member]	Series C Convertible Preferred Stock [Member] Retained Earnings [Member]	Series C Convertible Preferred Stock [Member] AOCI Attributable to Parent [Member]	Series C Convertible Preferred Stock [Member]	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Sep. 30, 2017							244	84
Balance at Sep. 30, 2017									$ 65,873	$ (54,249)	$ (350)	$ 11,274
Stock-based compensation expense									99			99
Net loss										(430)		(430)
Net change in foreign currency translation adjustment											(1)	(1)
Balance (in shares) at Dec. 31, 2017							251	84
Balance at Dec. 31, 2017									66,047	(54,754)	(351)	10,942
Stock dividends - issued (in shares)							7
Stock dividends - issued									75			75
Stock dividends - declared										(75)		(75)
Balance (in shares) at Sep. 30, 2017							244	84
Balance at Sep. 30, 2017									65,873	(54,249)	(350)	11,274
Net loss												(6,272)
Balance (in shares) at Jun. 30, 2018							259	84
Balance at Jun. 30, 2018							$ 1		66,434	(60,752)	(351)	5,332
Balance (in shares) at Dec. 31, 2017							251	84
Balance at Dec. 31, 2017									66,047	(54,754)	(351)	10,942
Stock-based compensation expense									97			97
Net loss										(680)		(680)
Net change in foreign currency translation adjustment
Balance (in shares) at Mar. 31, 2018							259	84
Balance at Mar. 31, 2018									66,269	(55,511)	(351)	10,407
Stock dividends - issued (in shares)							7
Stock dividends - issued									76			76
Stock dividends - declared										(77)		(77)
Issuance of common stock - restricted shares									49			49
Stock dividends - declared (in shares)							1
Balance (in shares) at Dec. 31, 2017							251	84
Balance at Dec. 31, 2017									66,047	(54,754)	(351)	10,942
Net loss												(6,272)
Net change in foreign currency translation adjustment												(1)
Balance (in shares) at Jun. 30, 2018							259	84
Balance at Jun. 30, 2018							$ 1		66,434	(60,752)	(351)	5,332
Balance (in shares) at Mar. 31, 2018							259	84
Balance at Mar. 31, 2018									66,269	(55,511)	(351)	10,407
Stock-based compensation expense									102			102
Net loss										(5,162)		(5,162)
Net change in foreign currency translation adjustment												(1)
Balance (in shares) at Jun. 30, 2018							259	84
Balance at Jun. 30, 2018							$ 1		66,434	(60,752)	(351)	5,332
Stock dividends - issued							1		39			40
Stock dividends - declared										(79)		(79)
Issuance of common stock - restricted shares									24			24
Balance (in shares) at Sep. 30, 2018							262	85
Balance at Sep. 30, 2018									66,553	(61,778)	(351)	4,424
Stock Issued During Period, Shares, New Issues								28
Issuance of common stock									4,377			4,377
Stock-based compensation expense									97			97
Preferred B stock conversion to common (in shares)								168
Dividends - issued										(79)		(79)
Net loss										(4,955)		(4,955)
Prior Period Adjustment - ASC 606 adoption at Sep. 30, 2018										78		78
Net change in foreign currency translation adjustment
Issuance of common stock, net of issuance costs (in shares)								28
Issuance of common stock, net of issuance costs									4,377			4,377
Balance (in shares) at Dec. 31, 2018							262	282
Balance at Dec. 31, 2018									71,027	(66,734)	(351)	3,942
Balance (in shares) at Sep. 30, 2018							262	85
Balance at Sep. 30, 2018									66,553	(61,778)	(351)	4,424
Net loss												(10,166)
Prior Period Adjustment - ASC 606 adoption at Sep. 30, 2018										78		78
Balance (in shares) at Jun. 30, 2019							263	2,794
Balance at Jun. 30, 2019								$ 3	75,585	(72,101)	(333)	3,154
Balance (in shares) at Dec. 31, 2018							262	282
Balance at Dec. 31, 2018									71,027	(66,734)	(351)	3,942
Stock Issued During Period, Shares, New Issues								40
Issuance of common stock									476			476
Stock-based compensation expense									38			38
Preferred B stock conversion to common (in shares)								3
Dividends - issued										(78)		(78)
Net loss										(12,522)		(12,522)
Net change in foreign currency translation adjustment											(1)	(1)
Issuance of common stock, net of issuance costs (in shares)								40
Issuance of common stock, net of issuance costs									476			476
Balance (in shares) at Mar. 31, 2019							262	325
Balance at Mar. 31, 2019									71,541	(79,334)	(352)	(8,145)
Balance (in shares) at Dec. 31, 2018							262	282
Balance at Dec. 31, 2018									71,027	(66,734)	(351)	3,942
Net loss												(10,166)
Net change in foreign currency translation adjustment												18
Balance (in shares) at Jun. 30, 2019							263	2,794
Balance at Jun. 30, 2019								$ 3	75,585	(72,101)	(333)	3,154
Balance (in shares) at Mar. 31, 2019							262	325
Balance at Mar. 31, 2019									71,541	(79,334)	(352)	(8,145)
Stock Issued During Period, Shares, New Issues								1,382
Issuance of common stock								$ 3	3,969			3,972
Stock-based compensation expense									74			74
Preferred B stock conversion to common (in shares)	1	1,087
Dividends - issued										(78)		(78)
Net loss										7,311		7,311
Net change in foreign currency translation adjustment											19	19
Issuance of common stock, net of issuance costs (in shares)								1,382
Issuance of common stock, net of issuance costs								$ 3	3,969			3,972
Series C Convertible Preferred stock issuance and conversion to common			$ 1			$ 1
Balance (in shares) at Jun. 30, 2019							263	2,794
Balance at Jun. 30, 2019								$ 3	$ 75,585	$ (72,101)	$ (333)	$ 3,154

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net loss	$ (10,166)	$ (6,272)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of property and equipment	9	60
Amortization of intangible assets	306	214
Depreciation	50	85
Other amortization	32	50
Goodwill impairment	3,732	4,615
Amortization of debt discount	231	82
Warrant liability expense	11,272
Change in fair value of warrant liabilities	(11,204)	(156)
Stock-based compensation	210	374
Changes in operating assets and liabilities
Accounts receivable and unbilled receivables	971	923
Prepaid expenses	3	(40)
Other current assets and other assets	129
Accounts payable and accrued liabilities	329	(201)
Deferred revenue	722	(625)
Other liabilities	62	(81)
Total adjustments	6,858	5,300
Net cash used in operating activities	(3,308)	(972)
Cash flows used in investing activities:
Software development capitalization costs	(12)
Purchase of property and equipment	(21)	(30)
Acquisition of businesses	(5,638)
Net cash used in investing activities	(5,671)	(30)
Cash flows provided by financing activities:
Proceeds from issuance of common stock, net of issuance costs	4,700
Proceeds from issuance of preferred stock, net of issuance costs	9,123
Proceeds from term notes from Montage Capital, net of issuance costs		953
Borrowing on bank line of credit	75	888
Payments on bank line of credit	(2,156)	(1,121)
Payments on term notes from Montage Capital	(922)
Payments on promissory term notes	(941)
Cash dividends paid on Series A convertible preferred stock	(235)	(38)
Net cash provided by financing activities	9,644	682
Effect of exchange rate changes on cash and cash equivalents	(11)	(1)
Net increase (decrease) in cash and cash equivalents	654	(321)
Cash and cash equivalents at beginning of period	644	748
Cash and cash equivalents at end of period	1,298	427
Cash paid for:
Interest	307	190
Income taxes	11	14
Non cash investing and financing activities:
Consideration paid in Common Stock in connection with acquisition of business	480
Dividends on convertible preferred stock	$ 235	$ 114

XML

Note 1 - Description of Business

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.

   Description of Business

Overview

Bridgeline Digital, The Digital Engagement Company™ (the “Company”), helps customers with their 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.

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 Burlington, Massachusetts.  The Company has

three

wholly-owned subsidiaries: Bridgeline Digital Pvt. Ltd. located in Bangalore, India, Bridgeline Digital Canada, Inc. located in Ontario, Canada, and Stantive Technologies Pty. Ltd. located in Australia.

Increase in Authorized Shares and Reverse Stock Split

On

April 26, 2019,

the Company’s Shareholders and the Board of Directors approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the total number of shares of Common Stock, par value

$0.001

per share (“

Common Stock

”), authorized for issuance thereunder from

50

million shares to

2.5

billion shares (the “

Increase in Authorized

”). On the same date the Company’s Shareholders and the Board of Directors also approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split of both its issued and outstanding and authorized shares of Common Stock, par value

$0.001

per share, at a ratio of

one

(

1

) share of Common Stock for every

fifty

(

50

) shares of Common Stock at any time prior to

December 31, 2019 (

the “Reverse Split”) pursuant to which all classes of the Company’s issued and outstanding shares of Common Stock at the close of business on such date were combined and reconstituted into a smaller number of shares of Common Stock in a ratio of

one

(

1

) share of Common Stock for every

fifty

(

50

) shares of Common Stock (

“1

-for-

50

reverse stock split”). The

1

-for-

50

reverse stock split was effective as of close of business on

May 1, 2019 (

the “Effective Date”) and the Company’s stock began trading on a split-adjusted basis on

May 2, 2019.

The reverse stock split reduced the number of shares of the Company’s Common Stock authorized from

2.5

billion shares to

50

million shares. Proportional adjustments have been made to the conversion and exercise prices of the Company’s outstanding convertible preferred stock, warrants, restricted stock awards, and stock options, and to the number of shares issued and issuable under the Company’s Stock Incentive Plans. The Company did

not

issue any fractional shares in connection with the reverse stock split. Instead, any stockholder who would otherwise be entitled to receive a fractional share of Common Stock as a result of the reverse stock split is entitled to receive a cash payment in lieu thereof based on the average of the closing sales prices of a share of the Company’s Common Stock on the Nasdaq Capital Market during regular trading hours for the

five

consecutive trading days immediately preceding the Effective Date. The reverse stock split does

not

modify the rights or preferences of the Common Stock. The number of authorized shares of the Company’s Common Stock is

50

million shares and the par value remains

$0.001.

The accompanying unaudited interim condensed consolidated financial statements as of

June 30, 2019

and

September 30, 2018

and for the

three

and

nine

months ended

June 30, 2019

and

2018

and footnotes have been retroactively adjusted to reflect the effects of the

1

-for-

50

reverse stock split.

Liquidity

and Management’s Plans

The Company has incurred operating losses 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 past

two

fiscal years and continuing into the current fiscal year, the Company has executed on a restructuring plan that included a reduction of workforce and office space, which significantly reduced operating expenses. The Company is continuing to maintain tight control over discretionary spending in the current fiscal year.

In the

second

quarter of this current fiscal year, the Company concluded a private offering that raised a net

$9.2

million in cash. Proceeds were used to pay down the Heritage Bank of Commerce line of credit to

zero

and pay the Company’s outstanding loan to Montage Capital II, L.P in full. The Company has

zero

debt at

June 30, 2019.

Also, in the

second

quarter of the current fiscal year, the Company used cash to purchase the assets of Seevolution, Inc. and Stantive Technologies Group Inc., which assets included technology and customers. The Company believes the future revenues and cash flows from these newly acquired customers will supplement the working capital to sustain operations for the next

twelve

months. While there can be

no

assurances that the anticipated sales will be achieved for future periods to provide positive cash flows, the Company’s management believes it will have an appropriate cost structure to support the revenues that will be achieved. As such, management believes that it is probable that we will meet our working capital, capital expenditure and debt repayment needs, if any, for the next

twelve

months from the issuance date of this Form

10

-Q.

XML

Note 2 - Summary of Significant Accounting Policies

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

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 the fair presentation. The operating results for the

three

and

nine

months ended

June 30, 2019

are

not

necessarily indicative of the results to be expected for the year ending

September 30, 2019.

The accompanying

September 30, 2018

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, 2018

filed with the Securities and Exchange Commission on

December 28, 2018.

Revenue Recognition

In

May 2014,

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

No.

2014

-

09,

Revenue from Contracts with Customers: Topic

606

(ASU

2014

-

09

or ASC

606

), to supersede nearly all existing revenue recognition guidance under U.S. GAAP, which became effective for the Company on

October 1, 2018.

The core principle of ASU

2014

-

09

is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU

2014

-

09

defines a

five

-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates

may

be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Under ASC

606,

revenue is recognized when a customer obtains control of a promised good or service and is recognized in an amount that reflects the consideration that the entity expects to receive in exchange for the good or service. In addition, ASC

606

also includes subtopic ASC 

340

-

40,

 

Other Assets and Deferred Costs- Contracts with Customers

, referred to herein as ASC

340

-

40,

which provides guidance on accounting for certain revenue related costs including costs associated with obtaining and fulfilling a contract, discussed further below.

The Company adopted the new revenue guidance using the modified retrospective method applied to those contracts which were

not

completed as of

October 1, 2018.

Results for reporting periods beginning after

September 30, 2018

are presented under the new guidance, while prior period amounts are

not

adjusted and continue to be reported in accordance with historic revenue guidance.  The Company applied the new standard using practical expedients where:

● the measurement of the transaction price excludes all taxes assessed by governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer;

● the new revenue guidance has been applied to portfolios of contracts with similar characteristics;

● the modified retrospective approach has been applied only to contracts that are not completed contracts at the date of initial adoption; and

● the value of unsatisfied performance obligations for contracts with an original expected length of one year or less has not been disclosed.

Revenue recognition from the Company’s primary revenue streams remained substantially unchanged following adoption of ASC

606

and therefore did

not

have a material impact on its revenues. The impact of applying the new guidance in fiscal

2019

versus the prior guidance resulted in a change to the period over which sales commissions are amortized to incorporate an estimated customer life. This resulted in a longer amortization period for deferred commission expense, which reduces expense compared to the application of the prior guidance.  

Upon adoption, Other current assets increased by

$59

due to the capitalization of the current portion of sales commissions and Other assets increased by

$27

due to the capitalization of the noncurrent portion of sales commissions. Retained earnings decreased by

$86

as a net result of these adjustments. The comparative information has

not

been restated and continues to be reported under the accounting standards in effect for those periods.

The following tables summarize the impact of adopting ASC

606

on the Company’s condensed consolidated financial statements during the

nine

months ended and as of

June 30, 2019:

	As of June 30, 2019
	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Balance Sheet
Assets
Other current assets	$	89			38		$	51
Other assets		103			27			76
Equity
Retained earnings	$	(72,101	)		(65	)	$	(72,166	)

	Three Months Ended June 30, 2019							Nine Months Ended June 30, 2019
	As Reported		Adjustments			As If Presented Under ASC 605		As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Operations
Sales and Marketing	$	1,268	$	(21	)	$	1,247	$	3,083		$	(12	)	$	3,071
Net income/(loss)	$	7,311	$	(21	)	$	7,332	$	(10,166	)	$	(12	)	$	(10,154	)
Net income/(loss) per share
Basic	$	3.62	$	0.01		$	3.63	$	(12.38	)	$	(0.02	)	$	(12.36	)
Diluted	$	3.56	$	0.01		$	3.57	$	(12.38	)	$	(0.02	)	$	(12.36	)

	Nine Months Ended June 30, 2019
	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities
Net loss	$	(10,166	)	$	(12	)	$	(10,154	)
Other current assets and other assets	$	129		$	12		$	141

The Company derives its revenue from

three

sources: (i) Software Licenses, which are comprised of subscription fees ("SaaS"), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering and (iii) hosting of perpetual licenses. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS” and do

not

take possession of the software.  

Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. If the consideration promised in a contract includes a variable amount, for example, overage fees, contingent fees or service level penalties, the Company includes an estimate of the amount it expects to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will

not

occur. The Company’s subscription service arrangements are non-cancelable and do

not

contain refund-type provisions. Revenue is reported net of applicable sales and use tax.

The Company recognizes revenue from contracts with customers using a

five

-step model, which is described below:

• Identify the customer contract;

• Identify performance obligations that are distinct;

• Determine the transaction price;

• Allocate the transaction price to the distinct performance obligations; and

• Recognize revenue as the performance obligations are satisfied.

Identify the customer contract

A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability and consideration is probable.

Identify performance obligations that are distinct

A performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services.  A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.  

Determine the transaction price

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

Allocate the transaction price to the distinct performance obligations

The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services being provided to the customer.  The Company determines the SSP of its goods and services based upon the historical average sales prices for each type of software license and professional services sold.  

 

Recognize revenue as the performance obligations are satisfied

Revenues are recognized when or as control of the promised goods or services is transferred to customers.  Revenue from SaaS licenses is recognized ratably over the subscription period beginning on the date the license is made available to customers. Most subscription contracts are

three

-year terms. Customers who license the software on a perpetual basis receive rights to use the software for an indefinite time period and an option to purchase post-customer support (“PCS”). PCS revenue is recognized ratably on a straight-line basis over the period of performance and the perpetual license is recognized upon delivery.  The Company also offers hosting services for those customers who purchase a perpetual license and do

not

want to run the software in their environment. Revenue from hosting is recognized ratably over the service period, ranging from

one

to

three

-year terms. The Company recognizes revenue from professional services as the services are provided.

Disaggregation of Revenue

The Company provides disaggregation of revenue based on geography and product groupings within the notes (Note

13

) as it believes this best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Deferred Revenue

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 will 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, 2019

increased by

$1.2

million.  As of

June 30, 2019,

approximately

$13

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.  

	Deferred Revenue
	Current		Long Term
Balance as of October 1, 2018	$	594	$	20
Increase(decrease)		341		(7	)
Balance as of December 31, 2018		935		13
Increase(decrease)		417		(5	)
Balance as of March 31, 2019		1,352		8
Increase(decrease)		480		5
Balance as of June 30, 2019	$	1,832	$	13

Deferred

Capitalized

Commission

Costs

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 will generally be the customer contract term, which is typically

thirty-six

(

36

) months, with some exceptions. Deferred capitalized commission expense that will be recorded as expense during the succeeding

12

-month period is recorded as current deferred capitalized commission costs, and the remaining portion is recorded as long-term deferred capitalized commission costs. Total deferred capitalized commissions were

$66

as of the quarter ended

June 30, 2019

compared to

$77

as of the year ended

September 30, 2018.

Current deferred capitalized commission costs are included in Other current assets in the Condensed Consolidated Balance Sheet and noncurrent deferred capitalized commission costs are included in Other assets in the Condensed Consolidated Balance Sheet. Amortization expense for the

three

and

nine

months ended

June 30, 2019

was

$19

and

$53,

respectively.

Accounting Pronouncements Pending Adoption

Leases

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

which is guidance on accounting for leases. ASU

No.

2016

-

02

requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after

December 15, 2018.

Early adoption is permitted. The Company is evaluating the impact of the guidance on its consolidated financial position, results of operations and related disclosures.

Earnings Per Share

In

July 2017,

the FASB issued ASU

No.

2017

-

11,

which simplifies the accounting for certain financial instruments with down round features. This new standard will reduce income statement volatility for many companies that issue warrants and convertible instruments containing such features. ASU

2017

-

11

is effective for public companies in

2019

and all other entities in

2020.

Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Compensation

–

Stock Compensation

In

June 2018,

the FASB issued ASU

2018

-

07,

which expands the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. ASU

2018

-

07

is effective for interim periods in fiscal years beginning after

December 15, 2018,

with early adoption permitted, but

no

earlier than the Company’s adoption date of Topic

606.

The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Derivative Financial Instruments

In

August 2017,

the FASB issued ASU

No.

2017

-

12,

"Derivatives and Hedging (Topic

815

) Targeted Improvements to Accounting for Hedging Activities", which amends and simplifies existing guidance to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance is effective for annual reporting periods beginning after

December 15, 2018

including interim reporting periods within those annual reporting periods and early adoption is permitted. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Intangibles

–

Goodwill and Other - Internal-Use Software

In

August 2018,

the FASB issued ASU

2018

-

15,

which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. ASU

2018

-

15

is effective for interim periods in fiscal years beginning after

December 15, 2019,

with early adoption permitted.

Fair Value

In

August 2018,

the FASB issued ASU

2018

-

13,

which is guidance that changes the fair value measurement disclosure requirements of ASC

820.

This guidance is will be effective for all entities for fiscal years beginning after

December 15, 2019, 

including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Company is evaluating the impact the update will have on its disclosures.

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. This standard is effective for fiscal years beginning after

December 15, 2019,

including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact that the standard will have 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 financial statements.

XML

Note 3 - Accounts Receivable and Unbilled Receivables

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

3.

Accounts Receivable and Unbilled Receivables

Accounts receivable and unbilled receivables consists of the following:

	As of			As of
	June 30, 2019			September 30, 2018
Accounts receivable	$	1,765		$	1,866
Unbilled receivables		11			36
Subtotal		1,776			1,902
Allowance for doubtful accounts		(118	)		(181	)
Accounts receivable and unbilled receivables, net	$	1,658		$	1,721

As of

June 30, 2019,

one

customer represented more than

10%

of accounts receivable. As of

September 30, 2018,

two

customers represented more than

10%

of accounts receivable. For the

three

months ended

June 30, 2019,

two

customers represented

14%

and

11%

of the Company’s total revenue. For the

nine

months ended

June 30, 2019,

two

customers represented

16%

and

12%

of the Company’s total revenue. For the

three

months ended

June 30, 2018,

two

customers each represented

12%

and

one

customer represented

11%

of the Company’s total revenue. For the

nine

months ended

June 30, 2018,

two

customers represented

14%

and

12%

of the Company’s total revenue.

XML

Note 4 - Acquisitions

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Business Combination Disclosure [Text Block]

4

.   

Acquisitions

On

February 13, 2019,

the Company entered into an Asset Purchase Agreement with Seevolution Inc, a Delaware corporation, Celebros, Inc., a Delaware corporation, and Elisha Gilboa, an individual and shareholder of Seevolution, (the “Seevolution Asset Purchase Agreement”). The Seevolution Asset Purchase Agreement sets forth the terms and conditions pursuant to which the Company acquired certain assets in exchange for consideration paid consisting of (i)

$418

in cash at the time of the purchase, (ii) the payment of

$100

of additional cash to be paid out

$10

per month for

ten

months starting

April 30, 2019

and (iii)

40,000

shares of Bridgeline Digital common stock. 

The Company accounted for the Seevolution transaction as an asset acquisition. Goodwill is

not

recognized in an asset purchase. 

On

March 13, 2019,

the Company entered into an Asset Purchase Agreement with Stantive Technologies Group Inc., (“Stantive”) a corporation organized under the laws of Ontario, Canada to purchase substantially all of the assets of Stantive and assume certain liabilities. The Company also acquired all of the outstanding stock of Stantive Technologies Group, Pty, a company incorporated in Australia, which was a subsidiary of Stantive. The total purchase price, including cure costs, for Stantive and its Australian subsidiary was approximately

$5.2

million in cash.

The Company accounted for the Stantive transaction as a business combination in accordance with ASC Topic

805,

Business Combinations

. 

The Company assessed the fair market value of the acquired companies as of the respective purchase dates, as follows:

Net assets acquired:	Seevolution		Stantive		Total
Cash	$	-	$	8	$	8
Accounts receivable, net		47		844		891
Other assets		-		40		40
Fixed assets, net		-		272		272
Intangible assets		1,024		3,007		4,031
Goodwill		-		1,507		1,499
Total assets		1,071		5,678		6,741
Current liabilities		76		488		556
Net assets acquired:	$	995	$	5,190	$	6,185
Purchase Price:
Cash Paid (including acquisition costs)	$	418	$	5,190	$	5,608
Future deferred payments (present value)		97		-		97
Common stock ( fair value)		480		-		480
Total consideration paid	$	995	$	5,190	$	6,185

As part of the Seevolution acquisition, of the

$1

million allocated to intangible assets,

$602

is allocated to customer relationships,

$401

is allocated to technology with an average useful life of

five

years, and

$21

is allocated to trademarks with an average useful life of

one

year. Amortization expense of intangible assets was

$55

and

$83

for the

three

and

nine

months ended

June 30, 2019.

As part of the Stantive acquisition, of the

$3

million allocated to intangible assets,

$1.7

million is allocated to customer relationships and

$1.2

million is allocated to technology with an average useful life of

five

years, and

$75

is allocated to trademarks with an average useful life of

one

year. Amortization expense of intangible assets was

$182

and

$212

for the

three

and

nine

months ended

June 30, 2019.

Total revenue from the Seevolution and Stantive acquisitions totaled

$968

and

$1,263

for the

three

and

nine

months ended

June 30, 2019.

Total earnings from the

two

acquisitions is impracticable to disclose as the acquisitions were asset purchases and the operations were merged with existing operations and

not

accounted for separately.

Pro Forma Information

The following is the unaudited pro forma information assuming the Stantive acquisition occurred on

October 1, 2017:

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
(In thousands, except per share data)	2019		2018			2019			2018
Revenue	$	2,693	$	3,733		$	8,621		$	12,828
Net income/(loss) applicable to common shareholders		7,311		(5,822	)		(11,234	)		(8,268	)
Net income/(loss) per share attributable to common shareholders:
Basic	$	3.62	$	(68.64	)	$	(13.37	)	$	(97.90	)
Diluted	$	3.56	$	(68.64	)	$	(13.37	)	$	(97.90	)
Weighted average common shares outstanding - basic		1,996		85			840			84
Weighted average common shares outstanding - diluted		2,033		85			840			84

XML

Note 5 - Fair Value Measurement and Fair Value of Financial Instruments

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

5

.   Fair Value Measurement and Fair Value of Financial Instruments

The Company’s other financial instruments consist principally of accounts receivable, accounts payable, and debt. 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 accounts receivable and accounts payable and short-term debt approximate current fair values as of

June 30, 2019

and

September 30, 2018

because of their short-term nature and durations. The carrying value of long-term debt also approximates fair value as of

September 30, 2018

based upon the Company’s ability to acquire similar debt at similar maturities and renew current debt instruments under similar terms as the original debt.

In

October 2017,

the Company recorded a liability associated with a warrant to purchase common stock issued to Montage Capital II, L.P (“Montage Capital”). The fair value of the warrant liability utilizes a Level 

3

input. To determine the value of the warrant liability, the Company used a Monte Carlo option-pricing model, which takes into consideration the market values of comparable public companies, considering among other factors, the use of multiples of earnings, and adjusted to reflect the restrictions on the ability of our shares to trade in an active market. The Monte Carlo option-valuation model also uses certain assumptions to determine the fair value, including expected life and annual volatility. The initial valuation assumptions included an expected life of

eight

(

8

) years, volatility of

80%,

and a risk-free interest rate of

2.24%.

At

June 30, 2019,

volatility decreased to

76%,

the risk-free rate was

1.84%

and the Company’s stock price declined to

$2.45

per share.

The fair value of the warrant liability was valued at the loan execution date in the amount of

$341

and is revalued at the end of each reporting period to fair value. The fair value of the warrant is included in Warrant liabilities in the Condensed Consolidated Balance Sheets. Changes in fair value are included in Other income (expense),net in the Statements of Operations in the period the change occurs. the Company recorded a gain (income) of

$96

in the quarter ended

June 30, 2019.

In total, the Company has recorded net gains (income) as a result in the change in fair value of

$315

since the original valuation in

October 2017.

The fair value of the Montage Capital warrant at

June 30, 2019

is

$26.

In connection with the private offering of Series C Convertible Preferred Stock issued on

March 12, 2019,

the Company issued Series A, Series B and Series C warrants (“collectively, the “Series C Preferred Warrants”) to accredited investors and the placement agents. These Series C Preferred Warrants have been classified as liabilities with the fair value determined using the Monte Carlo option-pricing model. The fair value of the Series C Preferred Warrants are included in Warrant liabilities in the Condensed Consolidated Balance Sheets. The initial valuation assumptions included an average expected life of

five

and

one

-half (

5.5

) years, volatility of

76.8%,

and a risk-free interest rate of

2.4%.

The fair value of the Series C Preferred Warrants as of

June 30, 2019

is

$5.7

million. Changes in fair value are included in Other income (expense),net in the Statements of Operations in the period the change occurs. The Company recorded a gain (income) of

$10.1

 million in the quarter ended

June 30, 2019.

The resulting gain was primarily due to changes in inputs to the valuation model, including a decline in the stock price. At

June 30, 2019,

volatility increased to

80.8%,

the risk-free rate was

1.84%

and the Company’s stock price declined to

$2.45

per share. There were also exercises of the Series C warrants during the quarter ended

June 30, 2019,

which also contributed to the decrease in the value of the liability by 

$4.8

 million.

Assets and liabilities of the Company measured at fair value on a recurring basis as of

June 30, 2019

and

September 30, 2018

are as follows:

	As of June 30, 2019
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability - Montage	$	-	$	-	$	26	$	26
Warrant liability - Series A, B and C		-		-		5,700		5,700
Total Liabilities	$	-	$	-	$	5,726	$	5,726

	As of September 30, 2018
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability - Montage	$	-	$	-	$	180	$	180
Total Liabilities	$	-	$	-	$	180	$	180

The following table provides a rollforward of the fair value, as determined by Level

3

inputs, of the warrant liabilities:

	Nine Months Ended June 30,
	2019
Balance at beginning of period, October 1, 2018	$	180
Additions		-
Adjustment to fair value		(12	)
Balance at end of period, December 31, 2018		168
Additions		21,500
Adjustment to fair value		(1,046	)
Balance at end of period, March 31, 2019		20,622
Exercises		(4,750	)
Adjustment to fair value		(10,146	)
Balance at end of period, June 30, 2019	$	5,726

XML

Note 6 - Goodwill

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Goodwill Disclosure [Text Block]

6

. Goodwill

The carrying value of goodwill is

not

amortized, but is typically tested for impairment annually, as well as, whenever events or changes in circumstances indicate that the carrying amount of a reporting unit

may

not

be recoverable. 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.  

An interim test was performed at

December 31, 2018,

as a decline in the stock price and other negative qualitative factors led management to conclude that there was a potential impairment. The fair value was calculated using the Company’s market price.  In performing the interim impairment test, Management concluded that goodwill was impaired and recorded a charge of 

$3.7

million. This amount is reflected as a reduction in goodwill of

$3.7

million in the Company’s Condensed Consolidated Balance Sheet as of

June 30, 2019

with the offset as an expense in the Company’s Condensed Consolidated Statement of Operations. There was

no

additional impairment at

June 30, 2019. 

On

March 13, 2019,

the Company entered into an Asset Purchase Agreement with Stantive and recorded goodwill of

$1.5

million, which represented the excess of purchase price over the fair market value of the assets acquired.

Changes in the carrying value of goodwill are as follows:

	As of			As of
	June 30, 2019			September 30, 2018
Balance at beginning of period	$	7,782		$	12,641
Acquisitions		1,507			-
Impairment		(3,732	)		(4,859	)
Balance at end of period	$	5,557		$	7,782

XML

Note 7 - Intangible Assets

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

7

.   Intangible Assets

The components of intangible assets, net of accumulated amortization, are as follows:

	As of		As of
	June 30, 2019		September 30, 2018
Domain and trade names	$	76	$	10
Customer related		2,166		-
Technology		1,505		-
Non-compete agreements		-		10
Balance at end of period	$	3,747	$	20

Total amortization expense related to intangible assets for the

nine

months ended

June 30, 2019

and the year ended

September 30, 2018

was

$306

and

$242,

respectively, and is reflected in operating expenses on the Condensed Consolidated Statements of Operations. The estimated amortization expense for fiscal year

2019

(remaining),

2020,

2021,

2022

and thereafter is

$238,

$900,

$858,

$763,

and

$988,

respectively.

XML

Note 8 - Restructuring and Acquisition Related Expenses

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

8.

   Restructuring

and Acquisition Related Expenses

Restructuring

Expenses

Commencing in fiscal

2015

and through fiscal

2019,

the Company’s management approved, committed to and initiated plans to restructure and further improve efficiencies by implementing cost reductions in line with expected decreases in revenue. The Company renegotiated several office leases and relocated to smaller space, while also negotiating sub-leases for the original space. In addition, the Company executed a general work-force reduction and recognized costs for severance and termination benefits. These restructuring charges and accruals require estimates and assumptions, including contractual rental commitments or lease buy-outs for vacated office space and related costs, and estimated sub-lease income. The Company’s sub-lease assumptions include the rates to be charged to a sub-tenant and the timing of the sub-lease arrangement. All of the vacated lease spaces are currently contractually occupied by new sub-tenants for the remaining life of the lease. In the

second

quarter of fiscal

2017,

the Company initiated a plan to shut down its operations in India, which is targeted to be completed in fiscal

2019.

In the

third

quarter of fiscal

2019,

the Company incurred further restructuring expenses related to a work-force reduction primarily for its international operations and recognized costs for severance and termination benefits.

All of these estimates and assumptions will be monitored on a quarterly basis for changes in circumstances with the corresponding adjustments reflected in the consolidated statement of operations. All of these estimates and assumptions will be monitored on a quarterly basis for changes in circumstances with the corresponding adjustments reflected in the Condensed Consolidated Statements of Operations.

The following table summarizes the restructuring activity for the

nine

months ended

June 30, 2019:

	Facility Closures and Other Costs
Balance at beginning of period, October 1, 2018	$	78
Charges to operations		-
Cash disbursements		(29	)
Balance at end of period, December 31, 2018		49
Charges to operations		-
Cash disbursements		(14	)
Balance at end of period, March 31, 2019		35
Charges to operations		420
Cash disbursements		(14	)
Balance at end of period, June 30, 2019	$	441

The components of the accrued restructuring liabilities is as follows:

	As of		As of
	June 30, 2019		September 30, 2018
Facilities and related	$	21	$	77
Other costs (employee termination costs)		420		1
Total	$	441	$	78

As of

June 30, 2019,

$441

was reflected in Accrued liabilities in the Condensed Consolidated Balance Sheet. As of

September 30, 2018,

$53

is reflected in Accrued liabilities and

$25

is reflected in Other long term liabilities in the Condensed Consolidated Balance Sheet.

Acquisition Related Expenses

In connection with the acquisition of Stantive, the Company incurred legal, accounting and consulting fees of

$124

and

$428

for the

three

and

nine

months ended

June 30, 2019,

respectively, which is included in Restructuring and acquisition related expenses in the Condensed Consolidated Statements of Operations.

XML

Note 9 - Debt

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

9

.   Debt

The Company has a Line of Credit with Heritage Bank of Commerce (“Heritage Bank”). As of

June 30, 2019,

the Company has

no

borrowings on the Line of Credit. The Company’s debt as of

September 30, 2018

consisted of the Line of Credit from Heritage Bank, a term loan with Montage Capital II, L.P. (“Montage Capital”), and Promissory Term Notes.

Debt at

September 30, 2018

consists of the following:

	As of
	September 30, 2018
Line of credit borrowings	$	2,081
Term loan - Montage Capital		922
Other promissory notes		941
Other (debt discount)		(353	)
Total debt		3,591
Less current portion		1,017
Long term debt, net of current portion	$	2,574

Heritage Line of Credit

In

June 2016,

the Company entered into a new Loan and Security Agreement (“Heritage Agreement”), with Heritage Bank. The Heritage Agreement had an original term of

24

months but was further amended in

February 2019

to a maturity date of

February

29,

2020.

The Company paid an annual commitment fee of

0.4%

of the commitment amount in the

first

year and

0.2%

in the following years.  The facility fee will be

$6

on each anniversary thereafter. Borrowings are secured by all of the Company’s assets and all of the Company’s intellectual property. The Company is required to comply with certain financial and reporting covenants including an Asset Coverage Ratio and an Adjusted EBITDA metric. The Company was in compliance with the Adjusted EBITDA metric as of

June 30, 2019.

The Heritage Agreement provides for up to

$2.5

million of revolving credit advances which

may

be used for acquisitions and working capital purposes. Borrowings are limited to the lesser of (i)

$2.5

million and (ii)

75%

of eligible receivables as defined. The Company can borrow up to

$1.0

million in out of formula borrowings for specified periods of time. The borrowings or credit advances

may

not

exceed the monthly borrowing base capacity, which will fluctuate based on monthly accounts receivable balances. The Company

may

request credit advances if the borrowing capacity is more than the current outstanding loan advance and must pay down the outstanding loan advance if it exceeds the borrowing capacity.  As of

June 30, 2019,

the Company had

no

outstanding balance under the Heritage Agreement.

Amendments – Heritage Bank

The Company and Heritage Bank have executed numerous amendments since the origination of the Heritage Agreement. Those amendments that are significant as of

June 30, 2019

are the following:

The

first

amendment, executed on

August 15, 2016,

included a decrease in the revolving line of credit from

$3.0

million to

$2.5

million. The

second

amendment, executed on

December 14, 2016,

included a minimum cash requirement of

$250

in the Company’s accounts at Heritage. On

October 6, 2017,

a

fourth

amendment was executed, which included a consent to the Company’s incurrence of additional indebtedness from Montage Capital and the grant of a

second

position lien to Montage Capital. In addition, Heritage Bank and Montage Capital entered into an Intercreditor Agreement dated

October 10, 2017

and acknowledged by the Company. On

September 21, 2018,

the

ninth

amendment was executed and addressed the minimum unrestricted cash requirements for the Company’s accounts at Heritage Bank upon repayment of certain Promissory Term Notes issued by the Company on

September 7, 2018

in the principal amount of

$941.

On

December 27, 2018,

the

tenth

amendment was executed, which extended the maturity date of the Loan Agreement to

January 1, 2020,

as well as, set new financial covenants for fiscal

2019.

On

February 14, 2019,

the

eleventh

amendment was executed, which extended the maturity date of the Loan Agreement to

February

29,

2020,

as well as, set new financial covenants for fiscal

2019.

On

May 15, 2019,

the

twelfth

amendment was executed, which included a waiver for a failed covenant metric.

Montage Capital II, L.P. Loan Agreement

On

October 10, 2017,

the Company entered into a Loan and Security Agreement (the “Montage Agreement” or “Montage Loan”) with Montage Capital. The Montage Agreement has a

thirty-six

(

36

) month term which matures on

October 10, 2020.

$1

million of borrowing was advanced on the date of closing. Borrowings bear interest at the rate of

12.75%

per annum.

On

May 10, 2018,

the

first

amendment to the Montage Agreement (the “First Amendment”) was executed. The First Amendment included the Adjusted EBITDA metrics for the

third

quarter of fiscal

2018

and a waiver for

not

achieving the Adjusted EBITDA metrics for the quarter ended

March 31, 2018.

A

second

amendment to the Montage Agreement (the “Second Amendment”) was executed on

October 22, 2018.

The Second Amendment included modifications to financial covenants and addressed the minimum unrestricted cash requirements for the Company’s accounts at Heritage Bank upon repayment of debt incurred by the Company pursuant to certain Promissory Term Notes (see below) issued by the Company on

September 7, 2018

in the amount of

$941.

A

third

amendment to the Montage Agreement (the “Third Amendment”) was executed on

December 7, 2018

and included the new financial covenants for fiscal

2019.

The Montage Loan was paid in full and discharged on

March 13, 2019.

A loss on early extinguishment of debt of

$221

was recorded in the

three

months ended

March 31, 2019

related to the remaining unamortized debt discount expense.

Promissory Term Notes

On

September 7, 2018,

the Company sold and issued subordinate promissory notes (the “

Promissory Term Notes

”) to certain accredited investors (“Purchasers”), pursuant to which it issued to the Purchasers (i) Promissory Term Notes, in the aggregate principal amount of approximately

$941.

The Promissory Term Notes had an original issue discount of

fifteen

percent (

15%

), bore interest at a rate of

twelve

percent (

12%

) per annum, and had a maturity date of the earlier to occur of (a)

six

months from the date of execution of the Purchase Agreement, or (b) the consummation of a debt or equity financing resulting in the gross proceeds to the Company of at least

$3.0

million. After recording

$141

of original issue discount and debt issuance costs of

$40,

the Company received net cash proceeds in the aggregate amount of

$760

for the Promissory Term Notes. On

October 19, 2018,

the Company completed an equity financing resulting in gross proceeds of

$5.0

million and repaid the Promissory Term Notes including accrued interest of

$13

for a total of

$954

on

October 23, 2018.

Further, Heritage Bank and Montage Capital both approved the issuance of the Promissory Term Notes and the repayment terms and each Purchaser also entered into a Subordination Agreement with the

two

parties, pursuant to which the Purchasers agreed to subordinate (i) all of the Company’s indebtedness and obligations to the Purchasers, whether presently existing or arising in the future, to all of the Company’s indebtedness the both Heritage Bank and Montage Capital and (ii) all of the Purchasers’ security interests, if any, to all of Heritage Bank’s and Montage Capital’s security interests in property of the Company.

XML

Note 10 - Shareholders' Equity

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

1

0

.   Shareholder

s

’

Equity

Preferred

Stock

Series A

Convertible

Stock

In

October 2014,

the Company designated

264,000

shares of its Preferred stock (the “Preferred Stock”) as Series A convertible preferred stock and sold

200,000

shares of Series A convertible preferred stock at a purchase price of

$10.00

per share for gross proceeds of

$2.0

million in a private placement. The shares of 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 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. The current conversion price is

$812.50

and is subject to adjustment in the event of stock splits or stock dividends. As of

June 30, 2019,

a total of

1,636

preferred shares have been converted to

20

shares of common stock.

Any accrued but unpaid dividends on the shares of Preferred Stock to be converted shall also be converted in common stock at the conversion price. A mandatory provision also

may

provide that the Company will have the right to require the holders to convert shares of Preferred Stock into Conversion Shares if (i) the Company’s common stock has closed at or above

$1,625

per share for

ten

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.

In the event of any liquidation, dissolution, or winding up of the Company, the holders of shares of 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 Preferred Shares shall vote with the Common Stock on an as converted basis.

Effective

January 1, 2017,

cumulative dividends are payable at a rate of

12%

per year. The Company has issued

64,000

shares of Preferred Stock as PIK dividends to the preferred shareholders, which is the maximum amount of cumulative PIK dividends authorized. Therefore, all future dividend payments will be cash dividends. Total cash dividend payments for the

nine

months ended

June 30, 2019

were

$235.

Preferred

Stock

Series B

Convertible

Stock

On

October 16, 2018,

in connection with a public offering, 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

shares of the Company’s common stock at a conversion price of

$25.00

per share. As of

June 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 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

”). 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 will

not

be entitled to, convert the Series C Preferred stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of Common Stock beneficially owned by the Purchaser (together with its affiliates) to exceed

4.99%

(or, at the election of the holder,

9.99%

) of the number of shares of Common Stock outstanding immediately after giving effect to the exercise. The Stockholder Approvals were obtained on

April 26, 2019

and the Company’s Charter was amended on

April 29, 2019.

As of

June 30, 2019,

a total of

9,786.50

shares of Series C Preferred stock have been converted to

1,087,443

shares of Common Stock.

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 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

second

quarter of fiscal

2019.

Common Stock

Public Offering

On

October 16, 2018,

the Company issued and sold in a public offering (the “

Offering

”) an aggregate 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, was 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

shares of common stock and additional warrants to purchase an additional

30,000

shares of common stock. At 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.

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 debt holders of the Company and to former owners and employees of acquired companies that have become employees of the Company. On

April 29, 2016,

the stockholders approved a new stock incentive plan, The

2016

Stock Incentive Plan (the

“2016

Plan”). The

2016

Plan replaced an older plan that had expired in

August 2016.

No

new shares will be granted under the old 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. Initially, a total of

10,000

shares of the Company’s Common Stock is reserved for issuance under the

2016

Plan. As of

June 30, 2019,

there were

7,859

options outstanding under this plan and

5,399

 shares available for future issuance.

Compensation expense

The Company estimates the fair value of stock options using the Black-Scholes-Merton option valuation model.  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 Goods Sold and a portion to Operating Expenses depending on the employee’s department. During the

three

and

nine

months ended

June 30, 2019,

the Company recognized

$74

and

$209,

respectively, as compensation expense related to share based payments related to stock options. For the

three

and

nine

months ended

June 30, 2018,

the Company recognized

$126

and

$373,

respectively, as compensation expense related to share based payments related to stock options. As of

June 30, 2019,

the Company had approximately

$59

of unrecognized compensation costs related to unvested options, which the Company expects to recognize through fiscal

2021.

Common Stock Warrants

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

may

also be issued to individuals or companies in exchange for services provided 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, the Company issued to Montage Capital an

eight

-year warrant (the “

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 shall have 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 of the Montage warrant liability at

June 30, 2019

is

$26

and is included in Warrant liabilities in the Condensed Consolidated Balance Sheet.

Series A, B and C

Preferred

Warrants -

Reset Dates and Reset Price

-

The Series A Warrants and Series B Warrants had an initial exercise price of

$9.00

per share; 

provided, however

, that the exercise price of the Series A Warrants and Series B Warrants could be reset up to

three

times (each, a “

Reset Date

”), as more specifically set forth in the Series C Warrants, to a price equal to the greater of (i)

80%

of the average 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 to the Series A Warrants and Series B Warrants would also be adjusted, as more specifically set forth in the Series C Warrants. The 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 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: the number of shares of Common Stock issuable upon exercise of the Series A Warrants is

2,556,875

shares, Series B Warrants is

2,556,875

shares, and Series C Warrants is

1,420,486.

The number of shares of Common Stock issuable upon exercise of warrants issued to the placement agents is

127,848

shares.

During the

three

months ended

June 30, 2019,

shareholders exercised

1,347,050

shares of the Series C Warrants. There were

no

Series A, B or placement agents warrants exercised as of

June 30, 2019.

The fair value of the total warrant liability related to the Series A, B and C warrants and the placement agent warrants at

June 30, 2019

is

$5.7

million and is included in Warrant liabilities in the Condensed Consolidated Balance Sheets.

Total warrants outstanding as

June 30, 2019

were as follows:

	Issue
Type	Date	Shares		Price		Expiration
Placement Agent	10/28/2014		247	$	812.50	10/28/2019
Director/Shareholder	12/31/2014		240	$	1,000.00	12/31/2019
Director/Shareholder	2/12/2015		240	$	1,000.00	2/12/2020
Director/Shareholder	5/12/2015		240	$	1,000.00	5/12/2020
Director/Shareholder	12/31/2015		120	$	1,000.00	12/31/2020
Placement Agent	5/17/2016		1,736	$	187.50	5/17/2021
Placement Agent	5/11/2016		1,067	$	187.50	5/11/2021
Placement Agent	7/15/2016		880	$	230.00	7/15/2021
Investors	11/9/2016		4,271	$	175.00	5/22/2022
Director/Shareholder	12/31/2016		120	$	1,000.00	12/31/2021
Financing (Montage)	10/10/2017		1,327	$	132.50	10/10/2025
Director/Shareholder	12/31/2017		120	$	1,000.00	12/31/2021
Placement Agent	10/16/2018		10,000	$	31.25	10/16/2023
Investors	10/19/2018		3,120	$	25.00	10/19/2023
Investors	3/12/2019		159,236	$	4.00	10/19/2023
Investors	3/12/2019		2,556,875	$	4.00	9/12/2021
Investors	3/12/2019		2,556,875	$	4.00	9/12/2024
Investors	3/12/2019		73,462	$	0.05	9/12/2024
Placement Agent	3/12/2019		127,848	$	4.00	9/12/2024
Total			5,498,024

Summary of Option and Warrant Activity and Outstanding Shares

	Stock Options						Stock Warrants
				Weighted						Weighted
				Average						Average
				Exercise						Exercise
	Options			Price			Warrants			Price
Outstanding, October 1, 2018		9,157		$	341.50			10,926		$	308.32
Granted		-			-			7,084,990			3.86
Exercised		-			-			(1,392,694	)		0.18
Forfeited/Exchanged		(1,128	)		(486	)		(204,880	)		(25.00	)
Expired		(181	)		(1,219	)		(318	)		(1,373.43	)
Outstanding, June 30, 2019		7,848		$	306.41			5,498,024		$	4.53

As of

June 30, 2019,

there are

5,688

options available for exercise.  All options are out-of-the-money and have a

zero

intrinsic value.

XML

Note 11 - Net Income (Loss) Per Share

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

11.

  Net

Income/(

Loss

)

Per Share

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

	Three Months Ended						Nine Months Ended
(in thousands, except per share data)	June 30,						June 30,
	2019			2018			2019			2018
Numerator:
Net income/(loss)	$	7,311		$	(5,162	)	$	(10,166	)	$	(6,272	)
Change in warrant derivative liability		(18	)		-			(18	)		-
Accrued dividends on convertible preferred stock		(78	)		(79	)		(235	)		(231	)
Net income/(loss) applicable to common shareholders	$	7,215		$	(5,241	)	$	(10,419	)	$	(6,503	)
Denominator:
Weighted average shares outstanding for basic earnings per share		1,996			85			840			84
Effect of dilutive securities:
Warrants		1			-			1			-
Preferred stock		36			-			-			-
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share		2,033			85			841			84
Basic net income/(loss) per share	$	3.62		$	(61.78	)	$	(12.38	)	$	(77.00	)
Diluted net income/(loss) per share	$	3.56		$	(61.78	)	$	(12.38	)	$	(77.00	)

Basic net income/(loss) per share is computed by dividing net income/(loss) available to common shareholders by the weighted average number of common shares outstanding.  Diluted net income/(loss) per share applicable 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, warrants and convertible preferred stock using the “treasury stock” method. For the

three

months ended

June 30, 2019,

stock options of

7,848

and warrants to purchase

5,424,562

shares of common stock were

not

included in the computation of diluted net income per share because they were considered antidilutive. For the

three

months ended

June 30, 2018

and both the

nine

months ended

June 30, 2019

and

2018,

the 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.

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Note 12 - Disaggregated Revenue and Segment Reporting

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

12

.  Disaggregated Revenue

and

Segment Reporting

The Company operates as

one

operating segment, therefore, all required financial segment information can be found in the Condensed Consolidated Financial Statements. 

The Company disaggregates revenue from contracts with customers by geography and product grouping, as it believes this best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

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

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
Revenues:	2019		2018		2019		2018
United States	$	2,369	$	2,538	$	6,631	$	9,894
International		324		545		633		871
	$	2,693	$	3,083	$	7,264	$	10,765

The Company’s revenue by type is as follows:

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
Revenues:	2019		2018		2019		2018
Digital Engagement Services	$	1,102	$	1,578	$	3,070	$	5,559
Subscription		1,230		1,140		2,934		3,935
Perpetual Licenses		-		7		145		72
Maintenance		92		115		332		360
Hosting		269		243		783		839
	$	2,693	$	3,083	$	7,264	$	10,765

XML

Note 13 - Income Taxes

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

13

.  Income Taxes

Income tax expense was

$3

and

$10

for the

three

months ended

June 30, 2019

and

2018,

respectively, and

$7

and

$11

for the

nine

months ended

June 30, 2019

and

2018,

respectively. Income tax expense consists of the estimated liability for federal and state income taxes owed by the Company.  Net operating loss carry forwards are estimated to be sufficient to offset any potential taxable income for all periods presented.

XML

Note 14 - Related Party Transactions

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

14

.  Related Party Transactions

In

November 2018,

the Company engaged Taglich Brothers Inc, on a non-exclusive basis, to perform advisory and investment banking services to identify possible acquisition target possibilities. Michael Taglich, a director and shareholder of the Company, is the President and Chairman of Taglich Brothers Inc. Fees for the services were

$8

per month for

three

months and

$5

thereafter, cancellable at any time. Taglich Brothers Inc. could also earn a success fee ranging from

$200

for a revenue target acquisition of under

$5

million up to

$1

million for an acquisition target over

$200

million. In connection with the asset purchase of Stantive, The Taglich Brothers earned a success fee of

$200.

Michael Taglich also purchased

350

units in the amount of

$350

of Series C Preferred Convertible stock and associated warrants in the private transaction consummated on

March 13, 2019.

Mr. Taglich’s purchase was subject to stockholder approval pursuant to Nasdaq Marketplace Rule

5635

(c), for which approval by the stockholders of the Company was obtained on

April 26, 2019.

XML

Note 15 - Legal Proceedings

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

15

.  Legal Proceedings

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

June 30, 2019,

the Company was

not

engaged with any material legal proceedings.

XML

Note 16 - Subsequent Events

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

16.

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 disclosure in these interim condensed consolidated financial statements, except as already disclosed in these financial statements.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

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.

Basis of Accounting, Policy [Policy Text Block]

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 the fair presentation. The operating results for the

three

and

nine

months ended

June 30, 2019

are

not

necessarily indicative of the results to be expected for the year ending

September 30, 2019.

The accompanying

September 30, 2018

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, 2018

filed with the Securities and Exchange Commission on

December 28, 2018.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09 or ASC 606), to supersede nearly all existing revenue recognition guidance under U.S. GAAP, which became effective for the Company on October 1, 2018. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of a promised good or service and is recognized in an amount that reflects the consideration that the entity expects to receive in exchange for the good or service. In addition, ASC 606 also includes subtopic ASC 340-40, 

Other Assets and Deferred Costs- Contracts with Customers

, referred to herein as ASC 340-40, which provides guidance on accounting for certain revenue related costs including costs associated with obtaining and fulfilling a contract, discussed further below.

The Company adopted the new revenue guidance using the modified retrospective method applied to those contracts which were not completed as of October 1, 2018. Results for reporting periods beginning after September 30, 2018 are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with historic revenue guidance.  The Company applied the new standard using practical expedients where:

● the measurement of the transaction price excludes all taxes assessed by governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer;

● the new revenue guidance has been applied to portfolios of contracts with similar characteristics;

● the modified retrospective approach has been applied only to contracts that are not completed contracts at the date of initial adoption; and

● the value of unsatisfied performance obligations for contracts with an original expected length of one year or less has not been disclosed.

Revenue recognition from the Company’s primary revenue streams remained substantially unchanged following adoption of ASC 606 and therefore did not have a material impact on its revenues. The impact of applying the new guidance in fiscal 2019 versus the prior guidance resulted in a change to the period over which sales commissions are amortized to incorporate an estimated customer life. This resulted in a longer amortization period for deferred commission expense, which reduces expense compared to the application of the prior guidance.  

Upon adoption, Other current assets increased by $59 due to the capitalization of the current portion of sales commissions and Other assets increased by $27 due to the capitalization of the noncurrent portion of sales commissions. Retained earnings decreased by $86 as a net result of these adjustments. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated financial statements during the nine months ended and as of June 30, 2019:

	As of June 30, 2019
	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Balance Sheet
Assets
Other current assets	$	89			38		$	51
Other assets		103			27			76
Equity
Retained earnings	$	(72,101	)		(65	)	$	(72,166	)

	Three Months Ended June 30, 2019							Nine Months Ended June 30, 2019
	As Reported		Adjustments			As If Presented Under ASC 605		As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Operations
Sales and Marketing	$	1,268	$	(21	)	$	1,247	$	3,083		$	(12	)	$	3,071
Net income/(loss)	$	7,311	$	(21	)	$	7,332	$	(10,166	)	$	(12	)	$	(10,154	)
Net income/(loss) per share
Basic	$	3.62	$	0.01		$	3.63	$	(12.38	)	$	(0.02	)	$	(12.36	)
Diluted	$	3.56	$	0.01		$	3.57	$	(12.38	)	$	(0.02	)	$	(12.36	)

	Nine Months Ended June 30, 2019
	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities
Net loss	$	(10,166	)	$	(12	)	$	(10,154	)
Other current assets and other assets	$	129		$	12		$	141

The Company derives its revenue from three sources: (i) Software Licenses, which are comprised of subscription fees ("SaaS"), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering and (iii) hosting of perpetual licenses. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS” and do not take possession of the software.  

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

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

• Identify the customer contract;

• Identify performance obligations that are distinct;

• Determine the transaction price;

• Allocate the transaction price to the distinct performance obligations; and

• Recognize revenue as the performance obligations are satisfied.

Identify the customer contract

A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability and consideration is probable.

Identify performance obligations that are distinct

A performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services.  A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.  

Determine the transaction price

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

Allocate the transaction price to the distinct performance obligations

The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services being provided to the customer.  The Company determines the SSP of its goods and services based upon the historical average sales prices for each type of software license and professional services sold.  

 

Recognize revenue as the performance obligations are satisfied

Revenues are recognized when or as control of the promised goods or services is transferred to customers.  Revenue from SaaS licenses is recognized ratably over the subscription period beginning on the date the license is made available to customers. Most subscription contracts are three-year terms. Customers who license the software on a perpetual basis receive rights to use the software for an indefinite time period and an option to purchase post-customer support (“PCS”). PCS revenue is recognized ratably on a straight-line basis over the period of performance and the perpetual license is recognized upon delivery.  The Company also offers hosting services for those customers who purchase a perpetual license and do not want to run the software in their environment. Revenue from hosting is recognized ratably over the service period, ranging from one to three-year terms. The Company recognizes revenue from professional services as the services are provided.

Disaggregation of Revenue

The Company provides disaggregation of revenue based on geography and product groupings within the notes (Note

13

) as it believes this best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Deferred Revenue

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 will 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, 2019

increased by

$1.2

million.  As of

June 30, 2019,

approximately

$13

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.  

	Deferred Revenue
	Current		Long Term
Balance as of October 1, 2018	$	594	$	20
Increase(decrease)		341		(7	)
Balance as of December 31, 2018		935		13
Increase(decrease)		417		(5	)
Balance as of March 31, 2019		1,352		8
Increase(decrease)		480		5
Balance as of June 30, 2019	$	1,832	$	13

Deferred

Capitalized

Commission

Costs

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 will generally be the customer contract term, which is typically

thirty-six

(

36

) months, with some exceptions. Deferred capitalized commission expense that will be recorded as expense during the succeeding

12

-month period is recorded as current deferred capitalized commission costs, and the remaining portion is recorded as long-term deferred capitalized commission costs. Total deferred capitalized commissions were

$66

as of the quarter ended

June 30, 2019

compared to

$77

as of the year ended

September 30, 2018.

Current deferred capitalized commission costs are included in Other current assets in the Condensed Consolidated Balance Sheet and noncurrent deferred capitalized commission costs are included in Other assets in the Condensed Consolidated Balance Sheet. Amortization expense for the

three

and

nine

months ended

June 30, 2019

was

$19

and

$53,

respectively.

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Pronouncements Pending Adoption

Leases

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

which is guidance on accounting for leases. ASU

No.

2016

-

02

requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after

December 15, 2018.

Early adoption is permitted. The Company is evaluating the impact of the guidance on its consolidated financial position, results of operations and related disclosures.

Earnings Per Share

In

July 2017,

the FASB issued ASU

No.

2017

-

11,

which simplifies the accounting for certain financial instruments with down round features. This new standard will reduce income statement volatility for many companies that issue warrants and convertible instruments containing such features. ASU

2017

-

11

is effective for public companies in

2019

and all other entities in

2020.

Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Compensation

–

Stock Compensation

In

June 2018,

the FASB issued ASU

2018

-

07,

which expands the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. ASU

2018

-

07

is effective for interim periods in fiscal years beginning after

December 15, 2018,

with early adoption permitted, but

no

earlier than the Company’s adoption date of Topic

606.

The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Derivative Financial Instruments

In

August 2017,

the FASB issued ASU

No.

2017

-

12,

"Derivatives and Hedging (Topic

815

) Targeted Improvements to Accounting for Hedging Activities", which amends and simplifies existing guidance to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance is effective for annual reporting periods beginning after

December 15, 2018

including interim reporting periods within those annual reporting periods and early adoption is permitted. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Intangibles

–

Goodwill and Other - Internal-Use Software

In

August 2018,

the FASB issued ASU

2018

-

15,

which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. ASU

2018

-

15

is effective for interim periods in fiscal years beginning after

December 15, 2019,

with early adoption permitted.

Fair Value

In

August 2018,

the FASB issued ASU

2018

-

13,

which is guidance that changes the fair value measurement disclosure requirements of ASC

820.

This guidance is will be effective for all entities for fiscal years beginning after

December 15, 2019, 

including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Company is evaluating the impact the update will have on its disclosures.

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. This standard is effective for fiscal years beginning after

December 15, 2019,

including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact that the standard will have 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 financial statements.

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Note 2 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

	As of June 30, 2019
	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Balance Sheet
Assets
Other current assets	$	89			38		$	51
Other assets		103			27			76
Equity
Retained earnings	$	(72,101	)		(65	)	$	(72,166	)

	Three Months Ended June 30, 2019							Nine Months Ended June 30, 2019
	As Reported		Adjustments			As If Presented Under ASC 605		As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Operations
Sales and Marketing	$	1,268	$	(21	)	$	1,247	$	3,083		$	(12	)	$	3,071
Net income/(loss)	$	7,311	$	(21	)	$	7,332	$	(10,166	)	$	(12	)	$	(10,154	)
Net income/(loss) per share
Basic	$	3.62	$	0.01		$	3.63	$	(12.38	)	$	(0.02	)	$	(12.36	)
Diluted	$	3.56	$	0.01		$	3.57	$	(12.38	)	$	(0.02	)	$	(12.36	)

	Nine Months Ended June 30, 2019
	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities
Net loss	$	(10,166	)	$	(12	)	$	(10,154	)
Other current assets and other assets	$	129		$	12		$	141

Contract with Customer, Asset and Liability [Table Text Block]

	Deferred Revenue
	Current		Long Term
Balance as of October 1, 2018	$	594	$	20
Increase(decrease)		341		(7	)
Balance as of December 31, 2018		935		13
Increase(decrease)		417		(5	)
Balance as of March 31, 2019		1,352		8
Increase(decrease)		480		5
Balance as of June 30, 2019	$	1,832	$	13

XML

Note 3 - Accounts Receivable and Unbilled Receivables (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	As of			As of
	June 30, 2019			September 30, 2018
Accounts receivable	$	1,765		$	1,866
Unbilled receivables		11			36
Subtotal		1,776			1,902
Allowance for doubtful accounts		(118	)		(181	)
Accounts receivable and unbilled receivables, net	$	1,658		$	1,721

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Note 4 - Acquisitions (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Net assets acquired:	Seevolution		Stantive		Total
Cash	$	-	$	8	$	8
Accounts receivable, net		47		844		891
Other assets		-		40		40
Fixed assets, net		-		272		272
Intangible assets		1,024		3,007		4,031
Goodwill		-		1,507		1,499
Total assets		1,071		5,678		6,741
Current liabilities		76		488		556
Net assets acquired:	$	995	$	5,190	$	6,185
Purchase Price:
Cash Paid (including acquisition costs)	$	418	$	5,190	$	5,608
Future deferred payments (present value)		97		-		97
Common stock ( fair value)		480		-		480
Total consideration paid	$	995	$	5,190	$	6,185

Business Acquisition, Pro Forma Information [Table Text Block]

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
(In thousands, except per share data)	2019		2018			2019			2018
Revenue	$	2,693	$	3,733		$	8,621		$	12,828
Net income/(loss) applicable to common shareholders		7,311		(5,822	)		(11,234	)		(8,268	)
Net income/(loss) per share attributable to common shareholders:
Basic	$	3.62	$	(68.64	)	$	(13.37	)	$	(97.90	)
Diluted	$	3.56	$	(68.64	)	$	(13.37	)	$	(97.90	)
Weighted average common shares outstanding - basic		1,996		85			840			84
Weighted average common shares outstanding - diluted		2,033		85			840			84

XML

Note 5 - Fair Value Measurement and Fair Value of Financial Instruments (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	As of June 30, 2019
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability - Montage	$	-	$	-	$	26	$	26
Warrant liability - Series A, B and C		-		-		5,700		5,700
Total Liabilities	$	-	$	-	$	5,726	$	5,726

	As of September 30, 2018
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability - Montage	$	-	$	-	$	180	$	180
Total Liabilities	$	-	$	-	$	180	$	180

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Nine Months Ended June 30,
	2019
Balance at beginning of period, October 1, 2018	$	180
Additions		-
Adjustment to fair value		(12	)
Balance at end of period, December 31, 2018		168
Additions		21,500
Adjustment to fair value		(1,046	)
Balance at end of period, March 31, 2019		20,622
Exercises		(4,750	)
Adjustment to fair value		(10,146	)
Balance at end of period, June 30, 2019	$	5,726

XML

Note 6 - Goodwill (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Goodwill [Table Text Block]

	As of			As of
	June 30, 2019			September 30, 2018
Balance at beginning of period	$	7,782		$	12,641
Acquisitions		1,507			-
Impairment		(3,732	)		(4,859	)
Balance at end of period	$	5,557		$	7,782

XML

Note 7 - Intangible Assets (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	As of		As of
	June 30, 2019		September 30, 2018
Domain and trade names	$	76	$	10
Customer related		2,166		-
Technology		1,505		-
Non-compete agreements		-		10
Balance at end of period	$	3,747	$	20

XML

Note 8 - Restructuring and Acquisition Related Expenses (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Restructuring Reserve by Type of Cost [Table Text Block]

	Facility Closures and Other Costs
Balance at beginning of period, October 1, 2018	$	78
Charges to operations		-
Cash disbursements		(29	)
Balance at end of period, December 31, 2018		49
Charges to operations		-
Cash disbursements		(14	)
Balance at end of period, March 31, 2019		35
Charges to operations		420
Cash disbursements		(14	)
Balance at end of period, June 30, 2019	$	441

Restructuring and Related Costs [Table Text Block]

	As of		As of
	June 30, 2019		September 30, 2018
Facilities and related	$	21	$	77
Other costs (employee termination costs)		420		1
Total	$	441	$	78

XML

Note 9 - Debt (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Debt [Table Text Block]

	As of
	September 30, 2018
Line of credit borrowings	$	2,081
Term loan - Montage Capital		922
Other promissory notes		941
Other (debt discount)		(353	)
Total debt		3,591
Less current portion		1,017
Long term debt, net of current portion	$	2,574

XML

Note 10 - Shareholders' Equity (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Issue
Type	Date	Shares		Price		Expiration
Placement Agent	10/28/2014		247	$	812.50	10/28/2019
Director/Shareholder	12/31/2014		240	$	1,000.00	12/31/2019
Director/Shareholder	2/12/2015		240	$	1,000.00	2/12/2020
Director/Shareholder	5/12/2015		240	$	1,000.00	5/12/2020
Director/Shareholder	12/31/2015		120	$	1,000.00	12/31/2020
Placement Agent	5/17/2016		1,736	$	187.50	5/17/2021
Placement Agent	5/11/2016		1,067	$	187.50	5/11/2021
Placement Agent	7/15/2016		880	$	230.00	7/15/2021
Investors	11/9/2016		4,271	$	175.00	5/22/2022
Director/Shareholder	12/31/2016		120	$	1,000.00	12/31/2021
Financing (Montage)	10/10/2017		1,327	$	132.50	10/10/2025
Director/Shareholder	12/31/2017		120	$	1,000.00	12/31/2021
Placement Agent	10/16/2018		10,000	$	31.25	10/16/2023
Investors	10/19/2018		3,120	$	25.00	10/19/2023
Investors	3/12/2019		159,236	$	4.00	10/19/2023
Investors	3/12/2019		2,556,875	$	4.00	9/12/2021
Investors	3/12/2019		2,556,875	$	4.00	9/12/2024
Investors	3/12/2019		73,462	$	0.05	9/12/2024
Placement Agent	3/12/2019		127,848	$	4.00	9/12/2024
Total			5,498,024

Share-based Payment Arrangement, Option, Activity [Table Text Block]

	Stock Options						Stock Warrants
				Weighted						Weighted
				Average						Average
				Exercise						Exercise
	Options			Price			Warrants			Price
Outstanding, October 1, 2018		9,157		$	341.50			10,926		$	308.32
Granted		-			-			7,084,990			3.86
Exercised		-			-			(1,392,694	)		0.18
Forfeited/Exchanged		(1,128	)		(486	)		(204,880	)		(25.00	)
Expired		(181	)		(1,219	)		(318	)		(1,373.43	)
Outstanding, June 30, 2019		7,848		$	306.41			5,498,024		$	4.53

XML

Note 11 - Net Income (Loss) Per Share (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended						Nine Months Ended
(in thousands, except per share data)	June 30,						June 30,
	2019			2018			2019			2018
Numerator:
Net income/(loss)	$	7,311		$	(5,162	)	$	(10,166	)	$	(6,272	)
Change in warrant derivative liability		(18	)		-			(18	)		-
Accrued dividends on convertible preferred stock		(78	)		(79	)		(235	)		(231	)
Net income/(loss) applicable to common shareholders	$	7,215		$	(5,241	)	$	(10,419	)	$	(6,503	)
Denominator:
Weighted average shares outstanding for basic earnings per share		1,996			85			840			84
Effect of dilutive securities:
Warrants		1			-			1			-
Preferred stock		36			-			-			-
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share		2,033			85			841			84
Basic net income/(loss) per share	$	3.62		$	(61.78	)	$	(12.38	)	$	(77.00	)
Diluted net income/(loss) per share	$	3.56		$	(61.78	)	$	(12.38	)	$	(77.00	)

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Note 12 - Disaggregated Revenue and Segment Reporting (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Revenue from External Customers by Geographic Areas [Table Text Block]

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
Revenues:	2019		2018		2019		2018
United States	$	2,369	$	2,538	$	6,631	$	9,894
International		324		545		633		871
	$	2,693	$	3,083	$	7,264	$	10,765

Disaggregation of Revenue [Table Text Block]

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
Revenues:	2019		2018		2019		2018
Digital Engagement Services	$	1,102	$	1,578	$	3,070	$	5,559
Subscription		1,230		1,140		2,934		3,935
Perpetual Licenses		-		7		145		72
Maintenance		92		115		332		360
Hosting		269		243		783		839
	$	2,693	$	3,083	$	7,264	$	10,765

XML

Note 1 - Description of Business (Details Textual) $ / shares in Units, $ in Thousands		3 Months Ended
	May 01, 2019 $ / shares shares	Mar. 31, 2019 USD ($)	Jun. 30, 2019 USD ($) $ / shares shares	Apr. 26, 2019 $ / shares	Apr. 25, 2019 shares	Apr. 02, 2019 shares	Sep. 30, 2018 $ / shares shares
Common Stock, Par or Stated Value Per Share | $ / shares	$ 0.001		$ 0.001	$ 0.001			$ 0.001
Common Stock, Shares Authorized | shares	50,000,000		50,000,000		50,000,000	2,500,000,000	50,000,000
Proceeds from Issuance of Private Placement, Net		$ 9,200
Heritage Agreement [Member]
Long-term Line of Credit, Total		$ 0	$ 0
Reverse Stock Split [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	50

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Note 2 - Summary of Significant Accounting Policies 1 (Details Textual) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended	12 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2019	Sep. 30, 2018	Oct. 01, 2018
Other Assets, Current	$ 89			$ 89	$ 21
Other Assets, Noncurrent, Total	103			103	280
Retained Earnings (Accumulated Deficit), Ending Balance	(72,101)			(72,101)	(61,778)
Contract with Customer, Liability, Increase (Decrease) During Period, Current	480	$ 417	$ 341	1,200
Revenue, Remaining Performance Obligation, Amount	$ 13			$ 13
Deferred Capitalized Commission Costs [Member]
Capitalized Contract Cost, Amortization Period	3 years			3 years
Capitalized Contract Cost, Increase (Decrease) During Period	$ 66				$ 77
Capitalized Contract Cost, Amortization		$ 19		$ 53
Accounting Standards Update 2014-09 [Member]
Other Assets, Current						$ 59
Other Assets, Noncurrent, Total						27
Retained Earnings (Accumulated Deficit), Ending Balance						$ 86

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Note 2 - Summary of Significant Accounting Policies 2 (Details Textual) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01	Jun. 30, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue, Remaining Performance Obligation, Percentage	99.00%

XML

Note 2 - Summary of Significant Accounting Policies - Impact of Adopting ASC 606 (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						6 Months Ended		9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Oct. 01, 2018	Sep. 30, 2018
Other current assets	$ 89						$ 89		$ 89			$ 21
Other assets	103						103		103			280
Retained earnings	(72,101)						(72,101)		(72,101)			$ (61,778)
Sales and Marketing	1,268			$ 892					3,083	$ 2,800
Net income/(loss)	$ 7,311	$ (12,522)	$ (4,955)	$ (5,162)	$ (680)	$ (430)	(10,166)	$ (6,272)	$ (10,166)	$ (6,272)
Basic (in dollars per share)	$ 3.62			$ (61.78)					$ (12.38)	$ (77)
Diluted (in dollars per share)	$ 3.56			$ (61.78)					$ (12.38)	$ (77)
Net loss	$ 7,311	$ (12,522)	$ (4,955)	$ (5,162)	$ (680)	$ (430)	(10,166)	$ (6,272)	$ (10,166)	$ (6,272)
Other current assets and other assets									129
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Other current assets	51						51		51
Other assets	76						76		76
Retained earnings	(72,166)						(72,166)		(72,166)
Sales and Marketing	1,247								3,071
Net income/(loss)	$ 7,332								$ (10,154)
Basic (in dollars per share)	$ 3.63								$ (12.36)
Diluted (in dollars per share)	$ 3.57								$ (12.36)
Net loss	$ 7,332								$ (10,154)
Other current assets and other assets									141
Accounting Standards Update 2014-09 [Member]
Other current assets											$ 59
Other assets											27
Retained earnings											$ 86
Accounting Standards Update 2014-09 [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Other current assets	38						38		38
Other assets	27						27		27
Retained earnings	(65)						$ (65)		(65)
Sales and Marketing	(21)								(12)
Net income/(loss)	$ (21)								$ (12)
Basic (in dollars per share)	$ 0.01								$ (0.02)
Diluted (in dollars per share)	$ 0.01								$ (0.02)
Net loss	$ (21)								$ (12)
Other current assets and other assets									$ 12

XML

Note 2 - Summary of Significant Accounting Policies - Deferred Revenue (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Balance, current	$ 1,352	$ 935	$ 594	$ 594
Balance, noncurrent	8	13	20	20
Increase(decrease), current	480	417	341	1,200
Increase(decrease), noncurrent	5	(5)	(7)
Balance, current	1,832	1,352	935	1,832
Balance, noncurrent	$ 13	$ 8	$ 13	$ 13

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Note 3 - Accounts Receivable and Unbilled Receivables (Details Textual) - Customer Concentration Risk [Member]	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Accounts Receivable [Member]
Number of Major Customers			1		2
Revenue Benchmark [Member]
Number of Major Customers	2	2	2	2
Revenue Benchmark [Member] | Customer One [Member]
Concentration Risk, Percentage	14.00%	12.00%	16.00%	14.00%
Revenue Benchmark [Member] | Customer Two [Member]
Concentration Risk, Percentage	11.00%	12.00%	12.00%	12.00%
Revenue Benchmark [Member] | Customer Three [Member]
Concentration Risk, Percentage		11.00%

XML

Note 3 - Accounts Receivable and Unbilled Receivables - Summary of Accounts Receivable and Unbilled Receivables (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Sep. 30, 2018
Accounts receivable	$ 1,776	$ 1,902
Allowance for doubtful accounts	(118)	(181)
Accounts receivable and unbilled receivables, net	1,658	1,721
Trade Accounts Receivable [Member]
Accounts receivable	1,765	1,866
Unbilled Receivables [Member]
Accounts receivable	$ 11	$ 36

XML

Note 4 - Acquisitions (Details Textual) - USD ($) $ in Thousands			3 Months Ended	9 Months Ended		12 Months Ended
	Mar. 13, 2019	Feb. 13, 2019	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Payments to Acquire Businesses, Gross	$ 5,608			$ 5,638
Business Combination, Consideration Transferred, Liabilities Incurred	97
Amortization of Intangible Assets, Total				306	$ 214	$ 242
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual			$ 968	1,263
Seevolution Inc [Member]
Payments to Acquire Businesses, Gross		$ 418
Business Combination, Consideration Transferred, Liabilities Incurred		97
Business Combination, Consideration Transferred, Liabilities Incurred, Monthly Payment		$ 10
Business Combination, Monthly Payment Term		300 days
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares		40,000
Finite-lived Intangible Assets Acquired		$ 1,000
Amortization of Intangible Assets, Total			55	83
Seevolution Inc [Member] | Customer Relationships [Member]
Finite-lived Intangible Assets Acquired		602
Seevolution Inc [Member] | Technology-Based Intangible Assets [Member]
Finite-lived Intangible Assets Acquired		$ 401
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life		5 years
Seevolution Inc [Member] | Trademarks [Member]
Finite-lived Intangible Assets Acquired		$ 21
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life		1 year
Stantive Technologies Group Inc [Member]
Payments to Acquire Businesses, Gross	5,190
Business Combination, Consideration Transferred, Liabilities Incurred
Finite-lived Intangible Assets Acquired	3,000
Amortization of Intangible Assets, Total			$ 182	$ 212
Stantive Technologies Group Inc [Member] | Customer Relationships [Member]
Finite-lived Intangible Assets Acquired	1,700
Stantive Technologies Group Inc [Member] | Technology-Based Intangible Assets [Member]
Finite-lived Intangible Assets Acquired	$ 1,200
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years
Stantive Technologies Group Inc [Member] | Trademarks [Member]
Finite-lived Intangible Assets Acquired	$ 75
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	1 year

XML

Note 4 - Acquisitions - Assets and Liabilities Assumed (Details) - USD ($) $ in Thousands			9 Months Ended
	Mar. 13, 2019	Feb. 13, 2019	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018	Sep. 30, 2017
Cash	$ 8
Accounts receivable, net	891
Other assets	40
Fixed assets, net	272
Intangible assets	4,031
Goodwill	1,499		$ 5,557		$ 7,782	$ 12,641
Total assets	6,741
Current liabilities	556
Net assets acquired:	6,185
Cash Paid (including acquisition costs)	5,608		$ 5,638
Future deferred payments (present value)	97
Common stock ( fair value)	480
Total consideration paid	6,185
Seevolution Inc [Member]
Cash
Accounts receivable, net		47
Other assets
Fixed assets, net
Intangible assets		1,024
Goodwill
Total assets		1,071
Current liabilities		76
Net assets acquired:		995
Cash Paid (including acquisition costs)		418
Future deferred payments (present value)		97
Common stock ( fair value)		480
Total consideration paid		$ 995
Stantive Technologies Group Inc [Member]
Cash	8
Accounts receivable, net	844
Other assets	40
Fixed assets, net	272
Intangible assets	3,007
Goodwill	1,507
Total assets	5,678
Current liabilities	488
Net assets acquired:	5,190
Cash Paid (including acquisition costs)	5,190
Future deferred payments (present value)
Common stock ( fair value)
Total consideration paid	$ 5,190

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Note 4 - Acquisitions - Pro Forma Information (Details) - Stantive Technologies Group Inc [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue	$ 2,693	$ 3,733	$ 8,621	$ 12,828
Net income/(loss) applicable to common shareholders	$ 7,311	$ (5,822)	$ (11,234)	$ (8,268)
Basic (in dollars per share)	$ 3.62	$ (68.64)	$ (13.37)	$ (97.90)
Diluted (in dollars per share)	$ 3.56	$ (68.64)	$ (13.37)	$ (97.90)
Weighted average common shares outstanding - basic (in shares)	1,996	85	840	84
Weighted average common shares outstanding - diluted (in shares)	2,033	85	840	84

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Note 5 - Fair Value Measurement and Fair Value of Financial Instruments (Details Textual) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended		20 Months Ended
	Jun. 30, 2019 USD ($) $ / shares	Jun. 30, 2019 USD ($) $ / shares	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) $ / shares	Mar. 12, 2019	Sep. 30, 2018 USD ($)	Oct. 31, 2017 USD ($)
Share Price | $ / shares	$ 2.45	$ 2.45		$ 2.45
Warrants and Rights Outstanding	$ 5,726	$ 5,726		$ 5,726		$ 180
Fair Value Adjustment of Warrants		11,272
Warrants Issued as Consideration for Loan [Member]
Warrants and Rights Outstanding	26	26		26			$ 341
Fair Value Adjustment of Warrants	96			315
Series Warrants [Member]
Warrants and Rights Outstanding	5,700	$ 5,700		$ 5,700
Fair Value Adjustment of Warrants	10,100
Series Warrants [Member] | Exercises of Warrants [Member]
Fair Value Adjustment of Warrants	$ 4,800
Measurement Input, Expected Term [Member] | Warrants Issued as Consideration for Loan [Member]
Warrants and Rights Outstanding, Measurement Input							8
Measurement Input, Expected Term [Member] | Series Warrants [Member]
Warrants and Rights Outstanding, Measurement Input					5.5
Measurement Input, Price Volatility [Member] | Warrants Issued as Consideration for Loan [Member]
Warrants and Rights Outstanding, Measurement Input	0.76	0.76		0.76			0.8
Measurement Input, Price Volatility [Member] | Series Warrants [Member]
Warrants and Rights Outstanding, Measurement Input	80.8	80.8		80.8	76.8
Measurement Input, Risk Free Interest Rate [Member] | Warrants Issued as Consideration for Loan [Member]
Warrants and Rights Outstanding, Measurement Input	0.0184	0.0184		0.0184			0.0224
Measurement Input, Risk Free Interest Rate [Member] | Series Warrants [Member]
Warrants and Rights Outstanding, Measurement Input	1.84	1.84		1.84	2.4

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Note 5 - Fair Value Measurement and Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Values on a Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Sep. 30, 2018	Oct. 31, 2017
Warrant liabilities	$ 5,726	$ 180
Warrants Issued as Consideration for Loan [Member]
Warrant liabilities	26		$ 341
Montage Warrant [Member]
Warrant liabilities	26
Series Warrants [Member]
Warrant liabilities	5,700
Fair Value, Recurring [Member]
Total liabilities	5,726	180
Fair Value, Recurring [Member] | Warrants Issued as Consideration for Loan [Member]
Warrant liabilities	26
Fair Value, Recurring [Member] | Montage Warrant [Member]
Warrant liabilities		180
Fair Value, Recurring [Member] | Series Warrants [Member]
Warrant liabilities	5,700
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Total liabilities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Warrants Issued as Consideration for Loan [Member]
Warrant liabilities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Montage Warrant [Member]
Warrant liabilities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Series Warrants [Member]
Warrant liabilities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Total liabilities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Warrants Issued as Consideration for Loan [Member]
Warrant liabilities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Montage Warrant [Member]
Warrant liabilities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Series Warrants [Member]
Warrant liabilities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Total liabilities	5,726	180
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Warrants Issued as Consideration for Loan [Member]
Warrant liabilities	26
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Montage Warrant [Member]
Warrant liabilities		$ 180
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Series Warrants [Member]
Warrant liabilities	$ 5,700

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Note 5 - Fair Value Measurement and Fair Value of Financial Instruments - Changes in Contingent Consideration (Details) - Fair Value, Inputs, Level 3 [Member] - Warrant [Member] - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Balance	$ 20,622	$ 168	$ 180
Additions	4,750	21,500
Adjustment to fair value	(10,146)	(1,046)	(12)
Exercises	(4,750)	(21,500)
Balance	$ 5,726	$ 20,622	$ 168

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Note 6 - Goodwill (Details Textual) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 13, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Goodwill, Impairment Loss			$ 4,615	$ 3,732	$ 4,615	$ 4,859
Goodwill, Period Increase (Decrease), Total				(3,700)
Goodwill, Acquired During Period				$ 1,507
Stantive Technologies Group Inc [Member]
Goodwill, Acquired During Period	$ 1,500

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Note 6 - Goodwill - Changes in Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 13, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Balance at beginning of period				$ 7,782	$ 12,641	$ 12,641
Acquisitions				1,507
Impairment			$ (4,615)	(3,732)	$ (4,615)	(4,859)
Balance at end of period	$ 1,499	$ 5,557		$ 5,557		$ 7,782

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Note 7 - Intangible Assets (Details Textual) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Amortization of Intangible Assets, Total	$ 306	$ 214	$ 242
Finite-Lived Intangible Assets, Amortization Expense, Remainder of Fiscal Year	238
Finite-Lived Intangible Assets, Amortization Expense, Year Two	900
Finite-Lived Intangible Assets, Amortization Expense, Year Three	858
Finite-Lived Intangible Assets, Amortization Expense, Year Four	763
Finite-Lived Intangible Assets, Amortization Expense, Year Five	$ 988

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Note 7 - Intangible Assets - Changes in the Carrying Amount of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Sep. 30, 2018
Finite Lived Intangible Assets, Net	$ 3,747	$ 20
Domain And Trade Names [Member]
Finite Lived Intangible Assets, Net	76	10
Customer Relationships [Member]
Finite Lived Intangible Assets, Net	2,166
Technology-Based Intangible Assets [Member]
Finite Lived Intangible Assets, Net	1,505
Noncompete Agreements [Member]
Finite Lived Intangible Assets, Net		$ 10

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Note 8 - Restructuring and Acquisition Related Expenses (Details Textual) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Sep. 30, 2018
Restructuring Reserve, Ending Balance	$ 441	$ 441	$ 78
Stantive Technologies Group Inc [Member]
Business Combination, Acquisition Related Costs	124	428
Accrued Liabilities, Current [Member]
Restructuring Reserve, Ending Balance	$ 441	$ 441	53
Other Noncurrent Liabilities [Member]
Restructuring Reserve, Ending Balance			$ 25

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Note 8 - Restructuring and Acquisition Related Expenses - Restructuring Charges Reserve Activity (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Balance			$ 78
Balance	$ 441
Facility Closing [Member]
Balance	35	$ 49	78
Charges to operations	420
Cash disbursements	(14)	(14)	(29)
Charges to operations	420
Balance	$ 441	$ 35	$ 49

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Note 8 - Restructuring and Acquisition Related Expenses - Accrued Restructuring Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Sep. 30, 2018
Restructuring Reserve	$ 441	$ 78
Facilities and Related [Member]
Restructuring Reserve	21	77
Other Restructuring Costs [Member]
Restructuring Reserve	$ 420	$ 1

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Note 9 - Debt (Details Textual) - USD ($) $ in Thousands					1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended
	Oct. 23, 2018	Oct. 19, 2018	Sep. 07, 2018	Oct. 10, 2017	Jun. 30, 2016	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2018	Jun. 30, 2017	Sep. 30, 2018	Dec. 14, 2016	Aug. 15, 2016
Proceeds from Issuance of Long-term Debt, Total										$ 953
Gain (Loss) on Extinguishment of Debt, Total								$ (28)	(231)	(82)
Debt Instrument, Unamortized Discount, Total													$ 353
Interest Paid, Excluding Capitalized Interest, Operating Activities									307	190
Repayments of Debt									922
Public Offering [Member]
Proceeds from Issuance or Sale of Equity, Total		$ 5,000
Loan Agreement [Member]
Gain (Loss) on Extinguishment of Debt, Total							$ (221)
Promissory Term Notes [Member]
Long-term Debt, Gross			$ 941										941
Debt Instrument, Interest Rate, Stated Percentage			12.00%
Debt Instrument, Interest Rate, Discount Percentage			15.00%
Deb And Equity Financing Minimum Requirement			$ 3,000
Debt Instrument, Unamortized Discount, Total			141
Payments of Debt Issuance Costs			40
Proceeds from Debt, Net of Issuance Costs			$ 760
Interest Paid, Excluding Capitalized Interest, Operating Activities	$ 13
Repayments of Debt	$ 954
Non-Revolving Term Loan [Member]
Long-term Debt, Gross													922
Loan Agreement [Member] | Non-Revolving Term Loan [Member]
Debt Instrument, Term				3 years
Proceeds from Issuance of Long-term Debt, Total				$ 1,000
Debt Instrument, Interest Rate, Stated Percentage				12.75%
Heritage Agreement [Member]
Debt Instrument, Term					2 years
Line of Credit Facility, Commitment Fee Percentage											0.20%	0.40%
Line of Credit Facility, Annual Commitment Fee Amount, Thereafter					$ 6
Line of Credit Facility, Maximum Borrowing Capacity					$ 2,500
Line of Credit Facility, Maximum Borrowing Capacity, Percentage of Eligible Receivables					75.00%
Guaranty Agreement, Out of Formula Borrowings Available, Maximum					$ 1,000
Long-term Line of Credit, Total						$ 0	$ 0		$ 0
Long-term Debt, Gross													$ 2,081
Heritage Agreement [Member] | First Amendment [Member]
Line of Credit Facility, Maximum Borrowing Capacity					$ 3,000										$ 2,500
Heritage Agreement [Member] | Second Amendment [Member]
Line of Credit, Minimum Cash Requirement in Lender Bank Account														$ 250

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Note 9 - Debt - Summary of Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Sep. 30, 2018	Sep. 07, 2018
Other (debt discount)		$ (353)
Total debt		3,591
Less current portion		1,017
Long term debt, net of current portion		2,574
Non-Revolving Term Loan [Member]
Debt		922
Promissory Term Notes [Member]
Debt		941	$ 941
Other (debt discount)			$ (141)
Heritage Agreement [Member]
Debt		$ 2,081

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Note 10 - Shareholders' Equity (Details Textual) - USD ($) $ / shares in Units, $ in Thousands					3 Months Ended		4 Months Ended	9 Months Ended			21 Months Ended	30 Months Ended
	Mar. 13, 2019	Mar. 12, 2019	Oct. 16, 2018	Oct. 27, 2014	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2019	May 01, 2019	Apr. 26, 2019	Sep. 30, 2018	Apr. 29, 2016
Preferred Stock, Shares Authorized					1,000,000		1,000,000	1,000,000	1,000,000		1,000,000	1,000,000			1,000,000
Share Price					$ 2.45		$ 2.45	$ 2.45	$ 2.45		$ 2.45	$ 2.45
Preferred Stock, Par or Stated Value Per Share					0.001		0.001	0.001	0.001		0.001	0.001			$ 0.001
Common Stock, Par or Stated Value Per Share					$ 0.001		$ 0.001	$ 0.001	$ 0.001		$ 0.001	$ 0.001	$ 0.001	$ 0.001	$ 0.001
Warrants and Rights Outstanding, Term					5 years		5 years	5 years	5 years		5 years	5 years
Warrants and Rights Outstanding					$ 5,726		$ 5,726	$ 5,726	$ 5,726		$ 5,726	$ 5,726			$ 180
Fair Value Adjustment of Warrants								$ 11,272
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant					5,688		5,688	5,688	5,688		5,688	5,688
Share-based Payment Arrangement, Expense					$ 74	$ 126		$ 209		$ 373
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total					$ 59		$ 59	$ 59	$ 59		$ 59	$ 59
Warrants Exercisable Term								180 days
The 2016 Stock Incentive Plan [Member]
Common Stock, Capital Shares Reserved for Future Issuance																10,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance					7,859		7,859	7,859	7,859		7,859	7,859
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant					5,399		5,399	5,399	5,399		5,399	5,399
Public Offering [Member]
Proceeds from Issuance or Sale of Equity, Net			$ 4,400
Over-allotment Option, Number of Common Stock Issuable			30,000
Over-allotment Option, Number of Warrants Issuable			30,000
Securities Purchase Agreement [Member]
Stock Issued During Period, Units, New Issues		10,227.5
Units, Price Per Unit		$ 1,000
Units, Convertible Preferred Stock Per Unit		10,227.5
Preferred Stock, Par or Stated Value Per Share		$ 0.001
Common Stock, Par or Stated Value Per Share		$ 0.001
Series B Convertible Preferred Stock [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right			0.001
Convertible Preferred Stock, Shares Issued upon Conversion			40
Convertible Preferred Stock, Conversion Price			$ 25
Series C Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					1,420,486		1,420,486	1,420,486	1,420,486		1,420,486	1,420,486
Warrants and Rights Outstanding	$ 21,500				$ 5,700		$ 5,700	$ 5,700	$ 5,700		$ 5,700	$ 5,700
Proceeds from Issuance of Warrants	$ 10,300
Fair Value Adjustment of Warrants					$ 11,200
Warrants or Rights, Exercised During Period					1,347,050
Series C Warrants [Member] | Securities Purchase Agreement [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		1,136,390
Warrants and Rights Outstanding, Term		5 years 182 days
Series A Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					2,556,875		2,556,875	2,556,875	2,556,875		2,556,875	2,556,875
Warrants and Rights Outstanding					$ 5,700		$ 5,700	$ 5,700	$ 5,700		$ 5,700	$ 5,700
Warrants or Rights, Exercised During Period					0
Series A Warrants [Member] | Securities Purchase Agreement [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		1,136,390
Warrants and Rights Outstanding, Term		2 years
Series B Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					2,556,875		2,556,875	2,556,875	2,556,875		2,556,875	2,556,875
Warrants and Rights Outstanding					$ 5,700		$ 5,700	$ 5,700	$ 5,700		$ 5,700	$ 5,700
Warrants or Rights, Exercised During Period					0
Series B Warrants [Member] | Securities Purchase Agreement [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		1,420,486
Warrants and Rights Outstanding, Term		5 years 182 days
Placement Agent Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					127,848		127,848	127,848	127,848		127,848	127,848
Warrants and Rights Outstanding					$ 5,700		$ 5,700	$ 5,700	$ 5,700		$ 5,700	$ 5,700
Warrants or Rights, Exercised During Period					0
Placement Agent Warrants [Member] | Securities Purchase Agreement [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		127,848
Warrants Issued with Class A Unit [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right			1
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 25
Warrants Issued with Over-allotment Option [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			8,000
Montage Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					1,326		1,326	1,326	1,326		1,326	1,326
Warrants and Rights Outstanding, Term					8 years		8 years	8 years	8 years		8 years	8 years
Warrants and Rights Outstanding					$ 26		$ 26	$ 26	$ 26		$ 26	$ 26
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 132.50		$ 132.50	$ 132.50	$ 132.50		$ 132.50	$ 132.50
Class of Warrant or Right, Equity Buy-out					$ 250		$ 250	$ 250	$ 250		$ 250	$ 250
Convertible Preferred Stock Converted to Common Stock [Member]
Conversion of Stock, Shares Converted							9,786.5				1,636
Conversion of Stock, Shares Issued							1,087,443				20
Conversion of Series B Convertible Preferred Stock to Common Stock [Member]
Conversion of Stock, Shares Issued									171,520
Series A Convertible Preferred Stock [Member]
Preferred Stock, Shares Authorized				264,000
Stock Issued During Period, Shares, New Issues				200,000
Share Price				$ 10
Gross Proceeds From Sale of Stock				$ 2,000
Preferred Stock Conversion Price				$ 812.50
Preferred Stock, Dividend Rate, Percentage												12.00%
Preferred Stock Dividends, Shares, Maximum Cumulative					64,000		64,000	64,000	64,000		64,000	64,000
Dividends, Preferred Stock, Cash								$ 235
Series B Convertible Preferred Stock [Member]
Stock Issued During Period, Shares, New Issues			4,288
Class A Units [Member] | Public Offering [Member]
Stock Issued During Period, Units, New Issues			28,480
Units, Price Per Unit			$ 25
Units, Common Stock Shares Per Unit			1
Units, Warrants Per Unit			1
Class B Units [Member] | Public Offering [Member]
Stock Issued During Period, Units, New Issues			4,288
Units, Convertible Preferred Stock Per Unit			1
Units, Common Stock Shares Per Warrant			1

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Note 10 - Shareholders' Equity - Stock Warrants Outstanding and Issuance (Details)	9 Months Ended
	Jun. 30, 2019 $ / shares shares
Stock Warrants Outstanding, Shares (in shares)	5,498,024
Placement Agent Stock Warrants 1 [Member]
Stock Warrants Outstanding, Issue Date	Oct. 28, 2014
Stock Warrants Outstanding, Shares (in shares)	247
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 812.50
Stock Warrants Outstanding, Expiration	Oct. 28, 2019
Director/Shareholder 1 [Member]
Stock Warrants Outstanding, Issue Date	Dec. 31, 2014
Stock Warrants Outstanding, Shares (in shares)	240
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 1,000
Stock Warrants Outstanding, Expiration	Dec. 31, 2019
Director/Shareholder 2 [Member]
Stock Warrants Outstanding, Issue Date	Feb. 12, 2015
Stock Warrants Outstanding, Shares (in shares)	240
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 1,000
Stock Warrants Outstanding, Expiration	Feb. 12, 2020
Director/Shareholder 3 [Member]
Stock Warrants Outstanding, Issue Date	May 12, 2015
Stock Warrants Outstanding, Shares (in shares)	240
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 1,000
Stock Warrants Outstanding, Expiration	May 12, 2020
Director/Shareholder 4 [Member]
Stock Warrants Outstanding, Issue Date	Dec. 31, 2015
Stock Warrants Outstanding, Shares (in shares)	120
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 1,000
Stock Warrants Outstanding, Expiration	Dec. 31, 2020
Placement Agent Stock Warrants 2 [Member]
Stock Warrants Outstanding, Issue Date	May 17, 2016
Stock Warrants Outstanding, Shares (in shares)	1,736
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 187.50
Stock Warrants Outstanding, Expiration	May 17, 2021
Placement Agent Stock Warrants 3 [Member]
Stock Warrants Outstanding, Issue Date	May 11, 2016
Stock Warrants Outstanding, Shares (in shares)	1,067
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 187.50
Stock Warrants Outstanding, Expiration	May 11, 2021
Placement Agent Stock Warrants 4 [Member]
Stock Warrants Outstanding, Issue Date	Jul. 15, 2016
Stock Warrants Outstanding, Shares (in shares)	880
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 230
Stock Warrants Outstanding, Expiration	Jul. 15, 2021
Investor Stock Warrants 1 [Member]
Stock Warrants Outstanding, Issue Date	Nov. 09, 2016
Stock Warrants Outstanding, Shares (in shares)	4,271
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 175
Stock Warrants Outstanding, Expiration	May 22, 2022
Director/Shareholder 5 [Member]
Stock Warrants Outstanding, Issue Date	Dec. 31, 2016
Stock Warrants Outstanding, Shares (in shares)	120
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 1,000
Stock Warrants Outstanding, Expiration	Dec. 31, 2021
Financing Warrants [Member]
Stock Warrants Outstanding, Issue Date	Oct. 10, 2017
Stock Warrants Outstanding, Shares (in shares)	1,327
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 132.50
Stock Warrants Outstanding, Expiration	Oct. 10, 2025
Director/Shareholder 6 [Member]
Stock Warrants Outstanding, Issue Date	Dec. 31, 2017
Stock Warrants Outstanding, Shares (in shares)	120
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 1,000
Stock Warrants Outstanding, Expiration	Dec. 31, 2021
Placement Agent Stock Warrants 5 [Member]
Stock Warrants Outstanding, Issue Date	Oct. 16, 2018
Stock Warrants Outstanding, Shares (in shares)	10,000
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 31.25
Stock Warrants Outstanding, Expiration	Oct. 16, 2023
Investor Stock Warrants 2 [Member]
Stock Warrants Outstanding, Issue Date	Oct. 19, 2018
Stock Warrants Outstanding, Shares (in shares)	3,120
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 25
Stock Warrants Outstanding, Expiration	Oct. 19, 2023
Investor Stock Warrants 3 [Member]
Stock Warrants Outstanding, Issue Date	Mar. 12, 2019
Stock Warrants Outstanding, Shares (in shares)	159,236
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 4
Stock Warrants Outstanding, Expiration	Oct. 19, 2023
Investor Stock Warrants 4 [Member]
Stock Warrants Outstanding, Issue Date	Mar. 12, 2019
Stock Warrants Outstanding, Shares (in shares)	2,556,875
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 4
Stock Warrants Outstanding, Expiration	Sep. 12, 2021
Investor Stock Warrants 5 [Member]
Stock Warrants Outstanding, Issue Date	Mar. 12, 2019
Stock Warrants Outstanding, Shares (in shares)	2,556,875
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 4
Stock Warrants Outstanding, Expiration	Sep. 12, 2024
Investor Stock Warrants 6 [Member]
Stock Warrants Outstanding, Issue Date	Mar. 12, 2019
Stock Warrants Outstanding, Shares (in shares)	73,462
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 0.05
Stock Warrants Outstanding, Expiration	Sep. 12, 2024
Placement Agent Stock Warrants 6 [Member]
Stock Warrants Outstanding, Issue Date	Mar. 12, 2019
Stock Warrants Outstanding, Shares (in shares)	127,848
Stock Warrants Outstanding, Price (in dollars per share) | $ / shares	$ 4
Stock Warrants Outstanding, Expiration	Sep. 12, 2024

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Note 10 - Shareholders' Equity - Summary of Option and Warrant Activity and Outstanding Shares (Details)	9 Months Ended
	Jun. 30, 2019 $ / shares shares
Share-based Payment Arrangement, Option [Member]
Outstanding, Options (in shares) | shares	9,157
Outstanding, Options, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 341.50
Granted, Options (in shares) | shares
Granted, Options, Weighted Average Exercise Price (in dollars per share) | $ / shares
Exercised, Options (in shares) | shares
Exercised, Options, Weighted Average Exercise Price (in dollars per share) | $ / shares
Forfeited/Exchanged, Options (in shares) | shares	(1,128)
Forfeited/Exchanged, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ (486)
Expired, Options (in shares) | shares	(181)
Expired, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ (1,219)
Outstanding, Options (in shares) | shares	7,848
Outstanding, Options, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 306.41
Stock Warrants [Member]
Outstanding, Warrant (in shares) | shares	10,926
Outstanding, Warrant, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 308.32
Granted, Warrant (in shares) | shares	7,084,990
Granted, Warrant, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 3.86
Exercised, Warrant (in shares) | shares	(1,392,694)
Exercised, Warrant, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 0.18
Forfeited/Exchanged, Warrant (in shares) | shares	(204,880)
Forfeited/Exchanged, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ (25)
Expired, Warrant (in shares) | shares	(318)
Expired, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ (1,373.43)
Outstanding, Warrant (in shares) | shares	5,498,024
Outstanding, Warrant, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 4.53

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Note 11 - Net Income (Loss) Per Share (Details Textual)	3 Months Ended
	Jun. 30, 2019 shares
Share-based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	7,848
Common Stock Called by Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	5,424,562

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Note 11 - Net Income (Loss) Per Share - Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						6 Months Ended		9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net loss	$ 7,311	$ (12,522)	$ (4,955)	$ (5,162)	$ (680)	$ (430)	$ (10,166)	$ (6,272)	$ (10,166)	$ (6,272)
Change in warrant derivative liability	(18)								(18)
Dividends on convertible preferred stock	(78)			(79)					(235)	(231)
Net income/(loss) applicable to common shareholders	$ 7,233			$ (5,241)					$ (10,401)	$ (6,503)
Weighted average shares outstanding for basic earnings per share (in shares)	1,996,326			84,825					839,975	84,457
Warrants (in shares)	1,000								1,000
Preferred stock (in shares)	36,000
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share (in shares)	2,032,766			84,825					839,975	84,457
Basic net income/(loss) per share (in dollars per share)	$ 3.62			$ (61.78)					$ (12.38)	$ (77)
Diluted net income/(loss) per share (in dollars per share)	$ 3.56			$ (61.78)					$ (12.38)	$ (77)

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Note 12 - Disaggregated Revenue and Segment Reporting (Details Textual)	9 Months Ended
	Jun. 30, 2019
Number of Operating Segments	1

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Note 12 - Disaggregated Revenue and Segment Reporting - Revenue by Geography (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues	$ 2,693	$ 3,083	$ 7,264	$ 10,765
UNITED STATES
Revenues	2,369	2,538	6,631	9,894
Non-US [Member]
Revenues	$ 324	$ 545	$ 633	$ 871

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Note 12 - Disaggregated Revenue and Segment Reporting - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues	$ 2,693	$ 3,083	$ 7,264	$ 10,765
Service [Member]
Revenues	1,118	1,578	3,102	5,559
Subscription and Circulation [Member]
Revenues	1,230	1,140	2,934	3,935
Perpetual Licenses [Member]
Revenues		7	145	72
Maintenance [Member]
Revenues	92	115	332	360
Hosting [Member]
Revenues	$ 269	$ 243	$ 783	$ 839

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Note 13 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Expense (Benefit), Total	$ 3	$ 10	$ 7	$ 11

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Note 14 - Related Party Transactions (Details Textual) - USD ($) $ in Thousands		1 Months Ended
	Mar. 13, 2019	Nov. 30, 2018
Taglich Brothers Inc. [Member]
Related Party Transaction, Monthly Fees for Services, First Three Months		$ 8
Related Party Transaction, Monthly Fees for Services, After Three Months		5
Related Party Transaction, Success Fee, Revenue Target Under 5 Million		200
Related Party Transaction, Success Fee, Revenue Target Over 200 Million		$ 1,000
Related Party Transaction, Success Fee	$ 200
Michael Taglich [Member]
Stock Issued During Period, Units, New Issues	350
Proceeds from Issuance or Sale of Equity, Total	$ 350