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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 March 31, 2025

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

For the transition period from ______________ to ______________

Commission File Number 333-139298

Bridgeline Digital, Inc.

(Exact name of registrant as specified in its charter)

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

100 Sylvan Road, Suite G700
Woburn, Massachusetts		01801
(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)

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	The NASDAQ Capital Market

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, smaller reporting company, or an emerging growth company. See the 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 ☐

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

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

The number of shares of common stock par value $0.001 per share, outstanding as of May 15, 2025 was 11,916,588.

Bridgeline Digital, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period ended March 31, 2025

Index

		Page
Part I	Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2025 (unaudited) and September 30, 2024	4

	Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended March 31, 2025 and 2024	5

	Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three and six months ended March 31, 2025 and 2024	6

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended March 31, 2025 and 2024	7

	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended March 31, 2025 and 2024	8

	Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Qualitative and Quantitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

Part II	Other Information

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

Signatures		31

Bridgeline Digital, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period ended March 31, 2025

Statements contained in this Report on Form 10-Q, other than statements or characterizations of historical fact, are forward-looking statements. These “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief or current expectations of Bridgeline Digital, Inc. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, business operations and the business of our customers, suppliers and partners; our ability to retain and upgrade current customers; increasing our recurring revenue; our ability to attract new customers; our revenue growth rate; our history of net loss and our ability to achieve or maintain profitability, instability in the financial markets, including the banking sector; our liability for any unauthorized access to our data or our users’ content, including through privacy and data security breaches; any decline in demand for our platform or products; changes in the interoperability of our platform across devices, operating systems, and third-party applications that we do no control; competition in our markets; our ability to respond to rapid technological changes, extend our platform, develop new features or products, or gain market acceptance for such new features or products, particularly in light of potential disruptions to the productivity of our employees resulting from remote work; our ability to manage our growth or plan for future growth, and our acquisition of other businesses and the potential of such acquisitions to require significant management attention, disrupt our business, or dilute stockholder value; the volatility of the market price of our common stock; the ability to maintain our listing on the NASDAQ Capital Market; or our ability to maintain an effective system of internal controls as well as other risks described in our filings with the Securities and Exchange Commission. Any of such risks could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Bridgeline Digital, Inc. assumes no obligation to, and does not currently intend to, update any such forward-looking statements, except as required by applicable law. We urge readers to review carefully the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, and 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.

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)
	*March 31, 2025*			*September 30, 2024*
ASSETS
Current assets:
Cash and cash equivalents	$	2,751		$	1,390
Accounts receivable, net		1,400			1,288
Prepaid expenses and other current assets		583			269
Total current assets		4,734			2,947
Property and equipment, net		53			74
Operating lease assets		197			163
Intangible assets, net		3,542			3,908
Goodwill		8,468			8,468
Other assets		25			42
Total assets	$	17,019		$	15,602

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	209		$	282
Current portion of operating lease liabilities		96			157
Accounts payable		1,809			1,112
Accrued liabilities		1,222			988
Deferred revenue		2,139			2,189
Total current liabilities		5,475			4,728
Long-term debt, net of current portion		197			244
Operating lease liabilities, net of current portion		101			6
Warrant liabilities		185			98
Other long-term liabilities		471			520
Total liabilities		6,429			5,596

Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock - $0.001 par value; 1,000,000 shares authorized;
Series C Convertible Preferred stock: 11,000 shares authorized; 0 shares issued and outstanding at March 31, 2025 and 350 shares issued and outstanding at September 30, 2024		-			-
Common stock - $0.001 par value; 50,000,000 shares authorized; 11,916,588 shares issued and outstanding at March 31, 2025 and 10,417,609 issued and outstanding at September 30, 2024		12			10
Additional paid-in capital		103,717			101,833
Accumulated deficit		(92,902	)		(91,538	)
Accumulated other comprehensive loss		(237	)		(299	)
Total stockholders’ equity		10,590			10,006
Total liabilities and stockholders’ equity	$	17,019		$	15,602

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

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)

	*Three Months Ended March 31,*						*Six Months Ended March 31,*
	*2025*			*2024*			*2025*			*2024*
Net revenue:
Subscription and perpetual licenses	$	3,052		$	3,010		$	6,100		$	6,096
Digital engagement services		823			794			1,566			1,463
Total net revenue		3,875			3,804			7,666			7,559
Cost of revenue:
Subscription and perpetual licenses		867			860			1,760			1,687
Digital engagement services		392			420			755			796
Total cost of revenue		1,259			1,280			2,515			2,483
Gross profit		2,616			2,524			5,151			5,076
Operating expenses:
Sales and marketing		1,076			941			2,058			1,854
General and administrative		783			766			1,569			1,547
Research and development		1,110			1,037			2,183			2,130
Depreciation and amortization		195			299			390			684
Restructuring and acquisition related expenses		197			-			207			15
Total operating expenses		3,361			3,043			6,407			6,230
Loss from operations		(745	)		(519	)		(1,256	)		(1,154	)
Interest expense and other, net		(5	)		(53	)		(9	)		(53	)
Change in fair value of warrant liabilities		25			(25	)		(89	)		(7	)
Loss before income taxes		(725	)		(597	)		(1,354	)		(1,214	)
Provision for income taxes		5			5			10			10
Net loss		(730	)		(602	)		(1,364	)		(1,224	)
Redemption of Series C Convertible Preferred Stock		(331	)		-			(331	)		-
Net loss applicable to common shareholders		(1,061	)		(602	)		(1,695	)		(1,224	)
Net loss per share attributable to common shareholders:
Basic net loss per share	$	(0.10	)	$	(0.06	)	$	(0.16	)	$	(0.12	)
Diluted net loss per share	$	(0.10	)	$	(0.06	)	$	(0.16	)	$	(0.12	)
Number of weighted average shares outstanding:
Basic		10,507,720			10,417,609			10,461,674			10,417,609
Diluted		10,507,720			10,430,602			10,461,674			10,430,602

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

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)

	*Three Months Ended March 31,*						*Six Months Ended March 31,*
	*2025*			*2024*			*2025*			*2024*
Net loss	$	(730	)	$	(602	)	$	(1,364	)	$	(1,224	)
Other comprehensive loss:
Net change in foreign currency translation adjustment		(9	)		(6	)		62			(25	)
Comprehensive loss	$	(739	)	$	(608	)	$	(1,302	)	$	(1,249	)

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

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(Unaudited)

	*For the Six Months Ended March 31, 2025*
																*Accumulated*
	*Preferred Stock*					*Common Stock*				*Additional*						*Other*			*Total*
										*Paid-in*			*Accumulated*			*Comprehensive*			*Stockholders’*
	*Shares*			*Amount*		*Shares*		*Amount*		*Capital*			*Deficit*			*Income (Loss)*			*Equity*
Balance at October 1, 2024		350		$	-		10,417,609	$	10	$	101,833		$	(91,538	)	$	(299	)	$	10,006
Stock-based compensation expense		-			-		-		-		107			-			-			107
Net loss		-			-		-		-		-			(634	)		-			(634	)
Foreign currency translation		-			-		-		-		-			-			71			71
Balance at December 31, 2024		350		$	-		10,417,609	$	10	$	101,940		$	(92,172	)	$	(228	)	$	9,550
Stock-based compensation expense		-			-		-		-		107			-			-			107
Redemption of Series C Convertible Preferred Stock (Note 8)		(350	)		-		-		-		(331	)		-			-			(331	)
Issuance of common stock, net of offering costs		-			-		1,473,979		2		1,981			-			-			1,983
Issuance of common stock - stock options exercised		-			-		25,000		-		20			-			-			20
Net loss		-			-		-		-		-			(730	)		-			(730	)
Foreign currency translation		-			-		-		-		-			-			(9	)		(9	)
Balance at March 31, 2025		-		$	-		11,916,588	$	12	$	103,717		$	(92,902	)	$	(237	)	$	10,590

	*For the Six Months Ended March 31, 2024*
														*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, 2023		350	$	-		10,417,609	$	10	$	101,275	$	(89,577	)	$	(248	)	$	11,460
Stock-based compensation expense		-		-		-		-		112		-			-			112
Net loss		-		-		-		-		-		(622	)		-			(622	)
Foreign currency translation		-		-		-		-		-		-			(19	)		(19	)
Balance at December 31, 2023		350	$	-		10,417,609	$	10	$	101,387	$	(90,199	)	$	(267	)	$	10,931
Stock-based compensation expense		-		-		-		-		182		-			-			182
Net loss		-		-		-		-		-		(602	)		-			(602	)
Foreign currency translation		-		-		-		-		-		-			(6	)		(6	)
Balance at March 31, 2024		350	$	-		10,417,609	$	10	$	101,569	$	(90,801	)	$	(273	)	$	10,505

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

BRIDGELINE DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	*Six Months Ended March 31,*
	*2025*			*2024*
Cash flows from operating activities:
Net loss	$	(1,364	)	$	(1,224	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets		366			612
Depreciation and other amortization		37			86
Change in fair value of warrant liabilities		89			7
Stock-based compensation		214			294
Changes in operating assets and liabilities
Accounts receivable		(122	)		(457	)
Prepaid expenses and other current assets		(313	)		(111	)
Other assets		13			(10	)
Accounts payable and accrued liabilities		945			(250	)
Deferred revenue		(14	)		71
Other liabilities		(45	)		-
Total adjustments		1,170			242
Net cash used in operating activities		(194	)		(982	)
Cash flows used in investing activities:
Purchase of property and equipment		(7	)		(5	)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock, net of offering costs		1,983			-
Proceeds from stock option exercised		20			-
Redemption of Series C Convertible Preferred Stock and warrants		(331	)		-
Payments of long-term debt		(101	)		(105	)
Net cash provided by (used in) financing activities		1,571			(105	)
Effect of exchange rate changes on cash and cash equivalents		(9	)		17
Net increase (decrease) in cash and cash equivalents		1,361			(1,075	)
Cash and cash equivalents at beginning of period		1,390			2,377
Cash and cash equivalents at end of period	$	2,751		$	1,302

Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	3		$	5
Income taxes	$	16		$	15

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

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 is an AI-powered marketing technology company that offers a suite of products that help companies grow online revenue by driving more visitors to their websites, converting more visitors to purchasers, and increasing average order value per purchaser.

Bridgeline’s software is available through a cloud-based Software as a Service (“SaaS”) model. Additionally, Bridgeline’s software is available via a perpetual licensing business model, in which the software can reside on premise at the customer’s facility, or manage-hosted by Bridgeline. Bridgeline’s product offerings include:

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

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

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

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

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

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

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

The Company has four wholly-owned subsidiaries: Bridgeline Digital Pvt. Ltd., located in Bangalore, India; Bridgeline Digital Canada, Inc., located in Ontario, Canada; Hawk Search Inc. located in Rosemont, Illinois and Bridgeline Digital Belgium BV, located in Brussels, Belgium.

The Company’s corporate headquarters is located in Woburn, Massachusetts. The Company maintains regional field offices serving the following geographical locations: Woodbury, New York; Rosemont, Illinois; Atascadero, California; Ontario, Canada; and Brussels, Belgium.

Liquidity and Management’s Plans

The Company has historically incurred operating losses and used cash on hand and from financing activities to fund operations as well as develop new products. The Company is continuing to maintain tight control over discretionary spending for the 2025 fiscal year. The Company believes that future revenues and cash flows will supplement its working capital and it has an appropriate cost structure to support future revenue growth.

The Company may offer and sell, from time to time, in one or more offerings, up to $50 million of its debt or equity securities, or any combination thereof. Such securities offerings may be made pursuant to the Company’s currently effective registration statement on Form S-3 (File No. 333-285176), which was initially filed with the Securities and Exchange Commission on February 24, 2025 and declared effective on February 27, 2025 (the “Shelf Registration Statement”). A complete description of the types of securities that the Company may sell is described in the Preliminary Prospectus contained in the Shelf Registration Statement. As of the date of the filing of this Quarterly Report, there are no active offerings for the sale or obligations to purchase any of the Company’s securities pursuant to the Shelf Registration Statement. There can be no assurances that the Company will offer any securities for sale or that if the Company does offer any securities that it will be successful in selling any portion of the securities offered on a timely basis if at all, or on terms acceptable to us. Further, our ability to offer or sell such securities may be limited by rules of the NASDAQ Capital Market.

On March 24, 2025, the Company entered into a Securities Purchase Agreement with purchasers, pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of 1,000,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $1.50 per share, for aggregate gross proceeds from the offering of approximately $1.5 million before deducting the placement agent fee and related offering expenses (see Note 8). Proceeds after deducting offering expenses was $1.3 million.

On March 25, 2025, the Company separately entered into a form of subscription agreement with certain accredited investors relating to a private placement transaction and sale (the “Private Placement”) of 473,979 unregistered shares of the Company’s common stock at an offering price of $1.52 per share , for aggregate gross proceeds from the Private Placement of approximately $720 thousand before deducting related offering expenses. Proceeds after deducting offering expenses was $700 thousand.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

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

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and with the instructions to Form 10-Q and Regulation S-X, and in the opinion of the Company’s management, these condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments and accruals, necessary for their fair presentation. The operating results for the three and six months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ending September 30, 2025. The accompanying September 30, 2024 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 U.S. 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, 2024, filed with the Securities and Exchange Commission (“SEC”) on December 26, 2024.

Recently Adopted Accounting Pronouncements

Segment Reporting

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires that an entity report segment information in accordance with Topic 280, Segment Reporting. The amendment in the ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of the new standard on its consolidated financial statements which is expected to result in enhanced disclosures.

Accounting Pronouncements Pending Adoption

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of the new standard on its consolidated financial statements which is expected to result in enhanced disclosures.

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires that an entity disclose, in the notes to financial statements, specified information about certain costs and expenses. The amendment in the ASU is intended to enhance the transparency and decision usefulness to better understand the major components of an entity’s income statement. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of the new standard on its consolidated financial statements which is expected to result in enhanced disclosures.

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

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

3. Accounts Receivable

Accounts receivable consist of the following:

	*As of March 31, 2025*			*As of September 30, 2024*
Accounts receivable	$	1,704		$	1,551
Allowance for credit losses		(304	)		(263	)
Accounts receivable, net	$	1,400		$	1,288

As of March 31, 2025 and September 30, 2024, no customer exceeded 10% of accounts receivable.

Allowance for Credit Losses

The following illustrates the activity in our allowance for credit losses on accounts receivable:

Balance as of October 1, 2024	$	263
Credit loss expense (recovery)		90
Write-off/adjustments		(49	)
Balance as of March 31, 2025	$	304

4. Fair Value Measurement and Fair Value of Financial Instruments

The Company’s financial instruments consist principally of accounts receivable, accounts payable, warrant liabilities, and long-term debt arrangements. The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, under U.S. GAAP, 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 carrying value of the Company’s accounts receivable and accounts payable approximates fair value due to their short-term nature. As of March 31, 2025 and September 30, 2024, the aggregate fair values of long-term debts were $0.4 million and $0.5 million, respectively, with an aggregate carrying value of $0.4 million and $0.5 million, respectively. The fair value is based on interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. If measured at fair value in the financial statements, the debt would be classified as Level 2 in the fair value hierarchy.

The Company’s warrant liabilities are measured at fair value at each reporting period with changes in fair value recognized in earnings during the period. The fair value of the Company’s warrant liabilities are valued utilizing Level 3 inputs. Warrant liabilities are valued using a Monte Carlo option-pricing model, which takes into consideration the volatilities of comparable public companies, due to the relatively low trading volume of the Company’s common stock. The Monte Carlo option-pricing model uses certain assumptions, including expected life and annual volatility. The range and weighted average volatilities of comparable public companies utilized was 20.2% - 77.0% and 42.7%, respectively, as of March 31, 2025, and 21.0% - 55.0% and 40.3%, respectively, as of September 30, 2024. The volatility utilized in the Monte Carlo option-pricing model was determined by weighing 60% to the Company-specific volatility and 40% on comparable public companies. The significant inputs and assumptions utilized were as follows:

	*As of March 31, 2025*						*As of September 30, 2024*
	*Montage Capital*			*Series D Preferred*			*Montage Capital*			*Series D Preferred*
Volatility		51.0	%		63.4	%		51.0	%		52.5	%
Risk-free rate		4.8	%		3.9	%		4.8	%		3.7	%
Stock price	$	1.48		$	1.48		$	1.15		$	1.15

The Company recognized a gain of $25 thousand and a loss of $(25) thousand for the three months ended March 31, 2025 and 2024, respectively, related to the change in fair value of warrant liabilities. The Company recognized a loss of $(89) thousand and a loss of $(7) thousand for the six months ended March 31, 2025 and 2024, respectively, related to the change in fair value of warrant liabilities. The changes in fair value of warrant liabilities were due to changes in inputs, primarily a change in the stock price, to the Monte Carlo option-pricing model.

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 March 31, 2025 and September 30, 2024, are as follows:

	*As of March 31, 2025*
	*Level 1*		*Level 2*		*Level 3*		*Total*

Liabilities:
Warrant liabilities:
Montage	$	-	$	-	$	6	$	6
Series D		-		-		179		179
Total warrant liabilities	$	-	$	-	$	185	$	185

	*As of September 30, 2024*
	*Level 1*		*Level 2*		*Level 3*		*Total*

Liabilities:
Warrant liabilities:
Montage	$	-	$	-	$	10	$	10
Series D		-		-		88		88
Total warrant liabilities	$	-	$	-	$	98	$	98

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

	*Warrant Liabilities*
Balance at beginning of period, September 30, 2024	$	98
Additions		-
Payments or exercises		-
Adjustment to fair value		114
Balance at end of period, December 31, 2024	$	212
Additions		-
Payments or exercises		(2	)
Adjustment to fair value		(25	)
Balance at end of period, March 31, 2025	$	185

5. Intangible Assets

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

	*As of March 31, 2025*		*As of September 30, 2024*
Domain and trade names	$	545	$	572
Customer related		2,796		3,048
Technology		201		288
Balance at end of period	$	3,542	$	3,908

Total amortization expense was $182 thousand and $266 thousand related to intangible assets for the three months ended March 31, 2025 and 2024, respectively, and $366 thousand and $612 thousand for the six months ended March 31, 2025 and 2024, respectively, and is reflected in operating expenses on the Condensed Consolidated Statements of Operations. The estimated amortization expense for fiscal year 2025 (remaining), 2026, 2027, 2028, 2029 and thereafter is $367, $674, $559, $559, $473, and $910 thousand, respectively.

6. Accrued Liabilities

Accrued liabilities consist of the following:

	*As of March 31, 2025*		*As of September 30, 2024*
Compensation and benefits	$	634	$	405
Professional fees		209		268
Insurance		92		-
Other		287		315
Balance at end of period	$	1,222	$	988

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

7. Long-term Debt

On March 1, 2021, the Company assumed the outstanding long-term debt obligations of an acquired business and issued a seller note to one of the selling shareholders. The assumed debt obligations and seller note are denominated in Euros.

Long-term debt consisted of the following:

	*As of March 31, 2025*			*As of September 30, 2024*
Term loan payable, accruing interest at 3-Month EURIBOR plus 1.3% per annum, payable in quarterly installments starting in April 2023 and matures in July 2028.	$	276		$	325
Seller’s note payable (“Seller’s note”), due to one of the selling shareholders, accruing interest at a fixed rate of 4.0% per annum. The Seller’s note is payable over 5 installments and matures in September 2025.		130			201
Total debt		406			526
Less: current portion		(209	)		(282	)
Long-term debt, net of current portion	$	197		$	244

At March 31, 2025, future maturities of long-term debt are as follows:

Fiscal year:
2025 (remaining)	$	169
2026		79
2027		79
2028		79
Total long-term debt	$	406

8. Stockholders’ Equity

Under our Certificate of Incorporation, we are authorized, subject to limitations prescribed by Delaware law and our Charter, to issue up to 1,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions. Our Board of Directors can increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our Board of Directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock.

Series C Convertible Preferred Stock

The Company had designated 11,000 shares of its preferred stock as Series C Convertible Preferred Stock (“Series C Preferred Stock”). The shares of Series C Preferred Stock may be converted, at the option of the holder at any time, into such number of shares of common stock equal to (i) the number of shares of Series C Preferred Stock to be converted, multiplied by the stated value of $1,000 and (ii) divided by the conversion price in effect at the time of conversion. Series C Preferred Stock vote on an as-converted basis along with shares of the Company’s common stock, were not entitled to receive dividends, unless specifically declared by our Board of Directors, and in the event of any liquidation, dissolution or winding up of the Company the holders of Series C Preferred Stock were entitled to receive in preference to the holders of common stock, Series A Preferred Stock, Series B Preferred Stock and any other stock, the amount equal to the stated value per share of Series C Preferred Stock. The Company may not effect, and a holder will not be entitled to, convert the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

On March 5, 2025, the Company entered into a Securities Redemption Agreement (the “Redemption Agreement”) with Michael Taglich and Claudia Taglich (the “Sellers”), pursuant to which the Company agreed to purchase and redeem from the Sellers: (i) all 350 shares of the Company’s Series C Preferred Stock, par value $0.001 per share; (ii) placement agent warrants to purchase an aggregate of 13,000 shares of the Company’s common stock, par value $0.001 per share; and (iii) stock options issued on or before December 31, 2017, to purchase 108 shares of common stock (collectively, the “Securities”). The aggregate purchase price for the Securities was $332.5 thousand which was allocated first amongst the liability classified placement agent warrants based on the purchase date fair value, then no value was allocated to the options as the fair value was deemed to be insignificant and then, the remainder of the purchase price was allocated to the equity classified Series C Preferred Shares.

The Company accounted for the redemption of the Series C Preferred Stock as a return to the preferred stockholder measured as the difference between the (1) purchase price allocated to the Series C Preferred Stock of $331 thousand and (2) the carrying value of the Series C Preferred Stock, which was $0. The difference of $331 thousand was recognized as a reduction in additional paid-in capital, in the absence of retained earnings, and is included as a component of net loss attributable to common shareholders. As of March 31, 2025 and September 30, 2024, the Company had no shares of Series C Preferred Stock outstanding, and 350 shares of Series C Preferred Stock outstanding, respectively.

Amended and Restated Stock Incentive Plan

The Company has granted common stock, common stock warrants, and common stock option awards (the “Equity Awards”) to employees, consultants, advisors and former debt holders of the Company and to former owners and employees of acquired companies that have become employees of the Company. The Company’s Amended and Restated Stock Incentive Plan (the “Plan”) provided for the issuance of up to 5,000 shares of common stock. This Plan expired in August 2016. On April 29, 2016, the stockholders approved a new stock incentive plan, the 2016 Stock Incentive Plan (the “2016 Plan”). The 2016 Plan authorizes the award of incentive stock options, non-statutory stock options, restricted stock, unrestricted stock, performance shares, stock appreciation rights and any combination thereof to employees, officers, directors, consultants, independent contractors and advisors of the Company. The 2016 Plan provides for the issuance in the aggregate of up to 2,400,000 shares of common stock associated with awards granted under the Stock Incentive Plan. As of March 31, 2025, there were 2,079,540 options outstanding and approximately 40 thousand shares available for future issuance under the 2016 Plan.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Compensation Expense

Compensation expense is generally recognized on a graded accelerated basis over the vesting period of grants. Compensation expense is recorded in the condensed consolidated statements of operations with a portion charged to Cost of revenue and a portion to Operating expenses, depending on the employee’s department.

During the three and six months ended March 31, 2025 and 2024, compensation expense related to share-based payments was as follows:

	*Three Months Ended March 31,*				*Six Months Ended March 31,*
	*2025*		*2024*		*2025*		*2024*
Cost of revenue	$	-	$	1	$	-	$	1
Operating expenses		107		128		214		240
Interest expense and other, net		-		53		-		53
	$	107	$	182	$	214	$	294

As of March 31, 2025, the Company had approximately $0.3 million of unrecognized compensation costs related to unvested options, which is expected to be recognized over a weighted-average period of 1.2 years.

Common Stock Warrants

The Company typically issues warrants to individual investors and placement agents to purchase shares of the Company’s common stock in connection with public and private placement fund raising activities. Warrants may also be issued to individuals or companies in exchange for services provided to the Company. The warrants are typically exercisable six months after the issue date, expire in five years, and contain a cashless exercise provision and piggyback registration rights.

March 2025 Placement Agent Warrants - In March 2025, in connection with the Registered Direct offering, the Company issued 70,000 warrants to purchase shares of the Company’s common stock to WestPark Capital, Inc. who acted as the exclusive placement agent for the offering, (the “March 2025 Placement Agent Warrants”). As compensation for their services, the Company paid to WestPark a fee equal to 7% of the aggregate purchase price paid for shares placed by WestPark at closing and reimbursed WestPark for certain expenses incurred in connection with the offering. The March 2025 Placement Agent Warrants were issued March 26, 2025 with an exercise price of $1.875 per share and expire March 24, 2030. The March 2025 Placement Agent Warrants were determined to be equity-classified awards.

Montage Warrant - As additional consideration for a prior loan arrangement which was paid in full in a prior period not presented, the Company issued to Montage Capital an eight-year warrant (the “Montage Warrant”) to purchase the Company’s common stock at a price equal to $132.50 per share. The Montage Warrant contains an equity buy-out provision upon the earlier of (1) dissolution or liquidation of the Company, (2) any sale or distribution of all or substantially all of the assets of the Company, or (3) a “Change in Control” as defined within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934. Montage Capital has the right to receive an equity buy-out of $250. If the equity buy-out is exercised, the Montage Warrant will be surrendered to the Company for cancellation.

Series A and B and C Preferred Warrants - In March 2019, in connection with the issuance of the Company’s Series C Preferred Stock, the Company issued warrants to purchase the Company’s common stock. These warrants were designated as (i) Series A Warrants with an initial term of 5.5 years and an exercise price of $4.00; (ii) Series B Warrants, which expired unexercised during the Company’s 2021 fiscal year, with an initial term of 24 months and an exercise price of $4.00; and (iii) Series C Warrants with an initial term of 5.5 years and an exercise price of $0.05 (collectively, hereinafter referred to as the “Series C Preferred Warrants”). The Company also issued warrants with an exercise price of $4.00 to purchase shares of the Company’s common stock to the Placement Agents. The Company may not effect, and a holder will not be entitled to convert, the Series C Preferred Stock or exercise any Series C Preferred Warrants, which, upon giving effect to such conversion or exercise, would cause (i) the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise.

During fiscal 2024, all Series A, Series C and Placement Agent Warrants issued in connection with the Series C Preferred Stock and Investor Warrants expired.

Series D Preferred Warrants - In May 2021, in connection with the issuance of the Company’s Series D Preferred Stock, the Company issued warrants to purchase the Company’s common stock. These warrants consisted of (i) warrants issued to investors in Series D Preferred Stock to purchase in the aggregate up to 592,106 shares of common stock with an initial term of five and a half years which ends on November 16, 2026 and an initial exercise price of $2.51 and (ii) Placement Agents warrants to purchase an aggregate of 179,536 shares of common stock with an initial term of five years which ends on May 12, 2026 and an initial exercise price of $2.85. Collectively, these warrants are referred to as the “Series D Preferred Warrants.”

As of March 31, 2025, 13,000 Placement Agent Warrants have been redeemed in connection with the Redemption Agreement.

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

The Montage Warrants, Series A and C Preferred Warrants, the Placement Agent Warrants issued in connection with the Series C Preferred Stock, and the Series D Warrants were all determined to be derivative liabilities and are subject to remeasurement each reporting period (see Note 4).

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

During the six months ended March 31, 2025 and 2024, there were no warrants that were exercised.

Total warrants outstanding as March 31, 2025, were as follows:

Type	*Issue Date*	*Shares*		*Price*		*Expiration*
Financing (Montage)	10/10/2017		1,327	$	132.50	10/10/2025
Placement Agent	2/4/2021		31,564	$	3.88	2/4/2026
Investors	5/14/2021		592,106	$	2.51	11/16/2026
Placement Agent	5/14/2021		166,536	$	2.85	5/12/2026
Placement Agent	3/26/2025		70,000	$	1.88	3/24/2030
			861,533

Summary of Option and Warrant Activity and Outstanding Shares

A summary of combined restricted stock, stock option and warrant activity for the six months ended March 31, 2025, is as follows:

	*Restricted Stock*		*Stock Options*					*Stock Warrants*
	*Awards*		*Awards*			*Weighted Average Exercise Price*		*Warrants*			*Weighted Average Exercise Price*
Outstanding, September 30, 2024		200,000		2,107,895		$	2.25		804,533		$	2.85
Granted		-		-			-		70,000			1.88
Exercised or redeemed		-		(25,000	)		0.81		(13,000	)		2.85
Forfeited		-		(3,104	)		13.49		-			-
Expired		-		(251	)		486.56		-			-
Outstanding, March 31, 2025		200,000		2,079,540		$	2.20		861,533		$	2.77
Options vested and exercisable, March 31, 2025				1,702,536		$	2.46

As of March 31, 2025, the aggregate intrinsic value of options outstanding and exercisable was $434 thousand and $263 thousand, respectively, and the weighted-average remaining contractual term was 7.2 and 6.9 years, respectively.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

9. Net Loss Per Share Attributable to Common Shareholders

Basic net loss per share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding. Diluted net loss per share attributable to common shareholders is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of outstanding stock options and warrants using the “treasury stock” method and convertible preferred stock using the “as-if-converted” method. The computation of diluted earnings per share does not include the effect of outstanding stock options, warrants and convertible preferred stock that are considered anti-dilutive.

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

(in thousands, except per share data)	*Three Months Ended March 31,*						*Six Months Ended March 31,*
	*2025*			*2024*			*2025*			*2024*
Numerator:
Net loss	$	(730	)	$	(602	)	$	(1,364	)	$	(1,224	)
Redemption of Series C Convertible Preferred Stock		(331	)		-			(331	)		-
Net loss applicable to common shareholders	$	(1,061	)	$	(602	)	$	(1,695	)	$	(1,224	)

Denominator:
Weighted-average shares outstanding for basic earnings per share		10,507,720			10,417,609			10,461,674			10,417,609
Effect of dilutive securities:
Options		-			-			-			-
Warrants		-			12,993			-			12,993
Preferred stock		-			-			-			-
Weighted-average shares outstanding for diluted earnings per share		10,507,720			10,430,602			10,461,674			10,430,602

Basic net loss per share	$	(0.10	)	$	(0.06	)	$	(0.16	)	$	(0.12	)
Diluted net loss per share	$	(0.10	)	$	(0.06	)	$	(0.16	)	$	(0.12	)

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

	*Three Months Ended March 31,*				*Six Months Ended March 31,*
	*2025*		*2024*		*2025*		*2024*
Stock options		2,079,540		2,121,562		2,079,540		2,121,562
Warrants		861,533		1,689,150		861,533		1,689,150
Series C Convertible Preferred Stock		-		38,899		-		38,899

10. Revenues and Other Related Items

Disaggregated Revenues

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 March 31,*				*Six Months Ended March 31,*
Revenues:	*2025*		*2024*		*2025*		*2024*
United States	$	3,250	$	3,199	$	6,442	$	6,296
International		625		605		1,224		1,263
	$	3,875	$	3,804	$	7,666	$	7,559

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

Long-lived assets located in foreign jurisdictions aggregated approximately $0.9 million and $1.0 million as of March 31, 2025 and September 30, 2024, respectively.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The Company’s revenue by type is as follows:

	*Three Months Ended March 31,*				*Six Months Ended March 31,*
Revenues:	*2025*		*2024*		*2025*		*2024*
Subscription	$	2,624	$	2,652	$	5,261	$	5,358
Maintenance		98		110		208		234
Hosting		330		248		631		504
Digital engagement services		823		794		1,566		1,463
	$	3,875	$	3,804	$	7,666	$	7,559

For the three and six months ended March 31, 2025 and 2024, no single customer exceeded 10% of the Company’s total revenue.

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 is expected to be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as noncurrent deferred revenue included in Other long-term liabilities.

The following table summarizes the classification and net change in deferred revenue as of and for the three and six months ended March 31, 2025:

	*Deferred Revenue*
	*Current*			*Long-Term*
Balance as of October 1, 2024	$	2,189		$	345
Decrease		(366	)		(15	)
Balance as of December 31, 2024	$	1,823		$	330
Increase (decrease)		316			(29	)
Balance as of March 31, 2025	$	2,139		$	301

11. Income Taxes

Provision for income taxes consists of the estimated liability for state income taxes owed by the Company. Net operating loss carryforwards are estimated to be sufficient to offset any potential taxable income for all periods presented. During each of the three months ended March 31, 2025 and 2024, the Company recognized a provision for income taxes of $5 thousand. During each of the six months ended March 31, 2025 and 2024, the Company recognized a provision for income taxes of $10 thousand.

12. Leases

The Company leases facilities in the United States for its corporate and regional field offices. During the three and six months ended March 31, 2025 and 2024, the Company was also a lessee/sublessor for certain office locations.

In October 2023, the Company entered into a sublease for its Rosemont, Illinois location. During the quarter ended December 31, 2023, the Company remeasured its operating lease liability for one of its sublet locations as a result of a change in the expected lease term. Such remeasurement resulted in an adjustment to the operating lease asset of less than $0.1 million, which approximated to the amount in which the operating lease liability was remeasured. During the quarter ended March 31, 2025, the Company remeasured its operating lease liability for one of its sublet locations as a result of a change in the expected lease term in conjunction with the extension of the sublease. Such remeasurement resulted in an adjustment to the operating lease asset of less than $0.1 million, which approximated to the amount in which the operating lease liability was remeasured. The sublease is for $6 thousand a month and has a term through January 31, 2028.

The components of net lease costs were as follows:

	*Three Months Ended March 31,*						*Six Months Ended March 31,*
	*2025*			*2024*			*2025*			*2024*
Condensed Consolidated Statement of Operations:
Operating lease cost	$	46		$	52		$	96		$	119
Variable lease cost		15			15			32			50
Less: Sublease income, net		(18	)		(33	)		(36	)		(88	)
Total	$	43		$	34		$	92		$	81

Cash paid for amounts included in the measurement of lease liabilities was $76 thousand and $93 thousand for the six months ended March 31, 2025 and 2024, all of which represents operating cash flows from operating leases. As of March 31, 2025, the weighted average remaining lease term was 2.3 years and the weighted average discount rate was 10.5%.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

At March 31, 2025, future minimum rental commitments under non-cancelable leases with initial or remaining terms in excess of one year were as follows:

	*Operating Leases*			*Receipts Subleases*		*Net Leases*
Fiscal year:
2025 (remaining)	$	60		$	30	$	30
2026		70			72		(2	)
2027		63			72		(9	)
2028		21			24		(3	)
Total lease commitments		214			198		16
Less: Amount representing interest		(17	)
Present value of lease liabilities		197
Less: current portion		(96	)
Operating lease liabilities, net of current portion	$	101

As of March 31, 2025, the Company had lease commitments that extended to fiscal 2028.

13. Commitments and Contingencies

The Company leases certain of its buildings under non-cancelable lease agreements. Refer to the Leases footnote (Note 12) of the Notes to the Condensed Consolidated Financial Statements for additional information.

The Company frequently warrants that the technology solutions it develops for its clients will operate in accordance with the project specifications without defects for a specified warranty period, subject to certain limitations that the Company believes are standard in the industry. In the event that defects are discovered during the warranty period, and none of the limitations apply, the Company is obligated to remedy the defects until the solution that the Company provided operates within the project specifications. The Company is not typically obligated by contract to provide its clients with any refunds of the fees they have paid, although a small number of its contracts provide for the payment of liquidated damages upon default. The Company has purchased and maintains insurance policies covering professional errors and omissions, property damage and general liability that reduce its monetary exposure for warranty-related claims and enable it to recover a portion of any future amounts paid.

The Company’s contracts typically provide for testing and client acceptance procedures that are designed to mitigate the likelihood of warranty-related claims, although there can be no assurance that such procedures will be effective for each project. The Company has not paid any material amounts related to warranties for its solutions. The Company sometimes commits unanticipated levels of effort to projects to remedy defects covered by its warranties. The Company’s estimate of its exposure to warranties on contracts is immaterial as of March 31, 2025 and September 30, 2024.

The Company’s agreements with customers generally require the Company to indemnify the customer against claims in which the Company’s products infringe third-party patents, copyrights, or trademarks and indemnify against product liability matters. As of March 31, 2025 and September 30, 2024, the Company has not experienced any losses related to the indemnification obligations and no significant claims with respect thereto were outstanding. The Company does not expect significant claims related to the indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

Litigation

The Company is subject to ordinary routine litigation and claims incidental to its business. As of March 31, 2025, the Company was not engaged with any material legal proceedings.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

14. Related Party Transactions

Brandon Ross

On February 14, 2025, the Board appointed Brandon Ross to serve as a Class III Director of the Board, to fill the vacancy created by the resignation of Mr. Taglich. Mr. Ross will serve until his term expires at the 2026 Annual Meeting of Stockholders. Mr. Ross currently serves as Head of Placements and Senior Managing Director at WestPark Capital, Inc.

Of the 70,000 2025 Placement Agent Warrants issued to WestPark Capital, Inc. or its designees in March 2025, warrants to purchase 28,000 shares of Common Stock were designated to Mr. Ross. The warrants are exercisable immediately, expire on March 24, 2030 and have an exercise price of $1.875 per share.

Michael Taglich

On February 10, 2025, Michael Taglich announced his resignation from the Board of Directors. Refer to the Stockholder's Equity footnote regarding the Redemption Agreement (Note 8).

Michael Ketslakh

On February 10, 2025, the Board appointed Michael Ketslakh to serve as a Class II Director of the Board, to fill the vacancy created by the resignation of Mr. Landers. Mr. Ketslakh will serve until his term expires at the 2025 Annual Meeting of Stockholders.

Mr. Ketslakh participated in the Private Placement and purchased 394,736 unregistered shares.

15. 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.

BRIDGELINE DIGITAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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

All statements included in this section, other than statements or characterizations of historical fact, are forward-looking statements. These “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may" "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These statements appear in a number of places and include statements regarding the intent, belief or current expectations of Bridgeline Digital, Inc. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, business operations and the business of our customers, suppliers and partners; our ability to retain and upgrade current customers; increasing our recurring revenue; our ability to attract new customers; our revenue growth rate; our history of net loss and our ability to achieve or maintain profitability; instability in the financial markets, including the banking sector; our liability for any unauthorized access to our data or our users’ content, including through privacy and data security breaches; any decline in demand for our platform or products; changes in the interoperability of our platform across devices, operating systems, and third-party applications that we do no control; competition in our markets; our ability to respond to rapid technological changes, extend our platform, develop new features or products, or gain market acceptance for such new features or products, particularly in light of potential disruptions to the productivity of our employees resulting from remote work; our ability to manage our growth or plan for future growth, and our acquisition of other businesses and the potential of such acquisitions to require significant management attention, disrupt our business, or dilute stockholder value; the volatility of the market price of our common stock; the ability to maintain our listing on the NASDAQ Capital Market; or our ability to maintain an effective system of internal controls as well as other risks described in our filings with the Securities and Exchange Commission. Any of such risks could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. We urge readers to review carefully the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, as well as in the other documents that we file with the Securities and Exchange Commission.

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

Overview

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

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

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

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

Locations

Our corporate office is located in Woburn, Massachusetts. We maintain regional field offices serving the following geographical locations: Woodbury, New York; Rosemont, Illinois; Atascadero, California; Ontario, Canada; and Brussels, Belgium.

We have four wholly-owned subsidiaries: Bridgeline Digital Pvt. Ltd., located in Bangalore, India; Bridgeline Digital Canada, Inc., located in Ontario, Canada; Hawk Search, Inc. located in Rosemont, Illinois and Bridgeline Digital Belgium BV, located in Brussels, Belgium.

Customer Information

We currently have over 2,000 active customers. For the three and six months ended March 31, 2025 and 2024, no customer exceeded 10% of our revenue.

Results of Operations for the Three and Six Months Ended March 31, 2025 compared to the Three and Six Months Ended March 31, 2024

Total net revenue for each of the three months ended March 31, 2025 and 2024, was $3.9 million. We had net loss of $(0.7) million and $(0.6) million for the three months ended March 31, 2025 and 2024, respectively. Included in the net loss for the three months ended March 31, 2025 and 2024, was a gain of $25 thousand and a loss of $(25) thousand, respectively, as a result of the change in fair value of certain warrant liabilities. Basic and diluted loss per share attributable to common shareholders was $ (0.10) and $ (0.06) for the three months ended March 31, 2025 and 2024, respectively.

Total net revenue for each of the six months ended March 31, 2025 and 2024, was $7.7 million and $7.6 million, respectively. We had net loss of $(1.4) million and $(1.2) million for the six months ended March 31, 2025 and 2024, respectively. Included in the net loss for the six months ended March 31, 2025 and 2024, was a loss of $(89) thousand and a loss of $(7) thousand, respectively, as a result of the change in fair value of certain warrant liabilities. Basic and diluted loss per share attributable to common shareholders was $ (0.16) and $ (0.12) for the six months ended March 31, 2025 and 2024, respectively.

(in thousands)	Three Months Ended March 31,																Six Months Ended March 31,
Revenue	2025				%	2024				%	Change			% Change			2025				%	2024				%	Change			% Change
Subscription and perpetual licenses	$	3,052		79	%	$	3,010		79	%	$	42			1	%	$	6,100		80	%	$	6,096		81	%	$	4		0		%
Digital engagement services		823		21	%		794		21	%		29			4	%		1,566		20	%		1,463		19	%		103		7		%
Total net revenue		3,875					3,804					71			2	%		7,666					7,559					107			1	%

Cost of revenue
Subscription and perpetual licenses		867		28	%		860		29	%		7			1	%		1,760		29	%		1,687		28	%		73		4		%
Digital engagement services		392		48	%		420		53	%		(28	)		(7	)%		755		48	%		796		54	%		(41	)	(5		)%
Total cost of revenue		1,259		32	%		1,280		34	%		(21	)		(2	)%		2,515		33	%		2,483		33	%		32		1		%
Gross profit		2,616		68	%		2,524		66	%		92			4	%		5,151		67	%		5,076		67	%		75		1		%

Operating expenses
Sales and marketing		1,076		28	%		941		25	%		135			14	%		2,058		27	%		1,854		25	%		204		11		%
General and administrative		783		20	%		766		20	%		17			2	%		1,569		20	%		1,547		20	%		22		1		%
Research and development		1,110		29	%		1,037		27	%		73			7	%		2,183		28	%		2,130		28	%		53		2		%
Depreciation and amortization		195		5	%		299		8	%		(104	)		(35	)%		390		5	%		684		9	%		(294	)	(43		)%
Restructuring and acquisition related expenses		197		5	%		-		0	%		197			0	%		207		3	%		15		0	%		192		1280		%
Total operating expenses		3,361					3,043					318			10	%		6,407					6,230					177			3	%

Loss from operations		(745	)				(519	)				(226	)		44	%		(1,256	)				(1,154	)				(102	)		9	%
Interest expense and other, net		(5	)				(53	)				48			0	%		(9	)				(53	)				44			(83	)%
Change in fair value of warrant liabilities		25					(25	)				50			(200	)%		(89	)				(7	)				(82	)		1171	%
Loss before income taxes		(725	)				(597	)				(128	)		21	%		(1,354	)				(1,214	)				(140	)		12	%
Provision for income taxes		5					5					-			0	%		10					10					-			0	%

Net loss	$	(730	)			$	(602	)			$	(128	)		21	%	$	(1,364	)			$	(1,224	)			$	(140	)		11	%

Non-GAAP Measure:
Adjusted EBITDA	$	(239	)			$	(83	)			$	(156	)		188	%	$	(432	)			$	(200	)			$	(232	)		116	%

Revenue

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

Subscription and Perpetual Licenses

Revenue from subscription (SaaS) and perpetual licenses of $3.1 million for the three months ended March 31, 2025 increased from $3.0 million for the three months ended March 31, 2024.

Revenue from subscription (SaaS) and perpetual licenses of $6.1 million for the six months ended March 31, 2025 remained consistent with $6.1 million for the six months ended March 31, 2024.

Subscription and perpetual licenses revenue as a percentage of total revenue of 79% for the three months ended March 31, 2025 remained consistent with 79% for the three months ended March 31, 2024.

Subscription and perpetual licenses revenue as a percentage of total revenue of 80% for the six months ended March 31, 2025 decreased from 81% for the six months ended March 31, 2024.

Digital Engagement Services

Revenue from digital engagement services of $0.8 million for the three months ended March 31, 2025 remained consistent with $0.8 million for the three months ended March 31, 2024.

Revenue from digital engagement services of $1.6 million for the six months ended March 31, 2025 increased from $1.5 million for the six months ended March 31, 2024.

Digital engagement services revenue as a percentage of total revenue of 21% for the three months ended March 31, 2025 remained consistent with 21% for the three months ended March 31, 2024.

Digital engagement services revenue as a percentage of total revenue of 20% for the six months ended March 31, 2025 increased from 19% for the six months ended March 31, 2024.

The increase in revenue from digital engagement services as a percentage of total revenue for the six months ended March 31, 2025 was a result of additional services volumes in the six months ended March 31, 2025.

Cost of Revenue

Total cost of revenue of $1.3 million for the three months ended March 31, 2025 remained consistent with $1.3 million for the three months ended March 31, 2024.

Total cost of revenue of $2.5 million for the six months ended March 31, 2025 remained consistent with $2.5 million for the six months ended March 31, 2024.

Cost of Subscription and Perpetual Licenses

Cost of subscription and perpetual licenses of $0.9 million for the three months ended March 31, 2025 remained consistent with $0.9 million for the three months ended March 31, 2024.

The cost of subscription and perpetual licenses as a percentage of subscription and perpetual licenses revenue was 28% for the three months ended March 31, 2025 and 2024.

Cost of subscription and perpetual licenses of $1.8 million for the six months ended March 31, 2025 increased from $1.7 million for the six months ended March 31, 2024.

The cost of subscription and perpetual licenses as a percentage of subscription and perpetual licenses revenue was 29% and 28% for the six months ended March 31, 2025 and 2024, respectively.

The changes in cost of subscription and perpetual licenses are primarily due to higher server costs.

Cost of Digital Engagement Services

Cost of digital engagement services of $0.4 million for the three months ended March 31, 2025 remained consistent with $0.4 million for the three months ended March 31, 2024.

The cost of total digital engagement services as a percentage of total digital engagement services revenue was 48% and 53% for the three months ended March 31, 2025 and 2024, respectively.

Cost of digital engagement services of $0.8 million for the six months ended March 31, 2025 remained consistent with $0.8 million for the six months ended March 31, 2024.

The cost of total digital engagement services as a percentage of total digital engagement services revenue was 48% and 54% for the six months ended March 31, 2025 and 2024, respectively.

The decrease in cost of digital engagement services is primarily due to lower personnel costs.

Gross Profit

Gross profit of $2.6 million for the three months ended March 31, 2025 increased from $2.5 million for the three months ended March 31, 2024.

The gross profit margin was 68% and 66% for the three months ended March 31, 2025 and 2024, respectively.

Gross profit of $5.2 million for the six months ended March 31, 2025 increased from $5.1 million for the six months ended March 31, 2024.

The gross profit margin was 67% for the six months ended March 31, 2025 and 2024.

Operating Expenses

Sales and Marketing Expenses

Sales and marketing expenses of $1.1 million for the three months ended March 31, 2025 increased from $0.9 million for the three months ended March 31, 2024.

Sales and marketing expense as a percentage of total revenue was 28% and 25% for the three months ended March 31, 2025 and 2024, respectively.

Sales and marketing expenses of $2.1 million for the six months ended March 31, 2025 increased from $1.9 million for the six months ended March 31, 2024.

Sales and marketing expense as a percentage of total revenue was 27% and 25% for the six months ended March 31, 2025 and 2024, respectively.

The increase compared to the prior periods is primarily attributable to higher personnel costs and higher marketing spend on leads and conferences.

General and Administrative Expenses

General and administrative expenses of $0.8 million for the three months ended March 31, 2025 remained consistent with $0.8 million for the three months ended March 31, 2024.

General and administrative expense as a percentage of total revenue was 20% for each of the three months ended March 31, 2025 and 2024.

General and administrative expenses of $1.6 million for the six months ended March 31, 2025 increased from $1.5 million for the six months ended March 31, 2024.

General and administrative expense as a percentage of total revenue was 20% and 20% for the six months ended March 31, 2025 and 2024.

Research and Development

Research and development expenses of $1.1 million for the three months ended March 31, 2025 increased from $1.0 million for the three months ended March 31, 2024.

Research and development expenses as a percentage of total revenue was 29% and 27% for the three months ended March 31, 2025 and 2024, respectively.

Research and development expenses of $2.2 million for the six months ended March 31, 2025 increased from $2.1 million for the six months ended March 31, 2024.

Research and development expenses as a percentage of total revenue was 28% for each of the six months ended March 31, 2025 and 2024.

The increase compared to the prior period is primarily attributable to higher personnel costs.

Restructuring and Acquisition Related Expenses

Restructuring and acquisition related expenses were $0.2 million and $0.2 million for the six months and the three months ended March 31, 2025, respectively, compared to an insignificant amount in the six months ended March 31, 2024.

The increase compared to the prior period is primarily attributable to personnel restructuring costs.

Depreciation and Amortization

Depreciation and amortization expense was $0.2 million and $0.3 million for the three months ended March 31, 2025 and 2024, respectively.

Depreciation and amortization as a percentage of total revenue was 5% and 8% for the three months ended March 31, 2025 and 2024, respectively.

Depreciation and amortization expense was $0.4 million and $0.7 million for the six months ended March 31, 2025 and 2024, respectively.

Depreciation and amortization as a percentage of total revenue was 5% and 9% for the six months ended March 31, 2025 and 2024, respectively.

Loss from Operations

The loss from operations was $(0.7) million and $(0.5) for the three months ended March 31, 2025 and 2024, respectively.

The loss from operations was $(1.3) million and $(1.2) million for the six months ended March 31, 2025 and 2024, respectively.

Interest expense and other, net

Interest expense and other, net, was $(5) thousand and $(53) thousand for the three months ended March 31, 2025 and 2024.

Interest expense and other, net, was $(9) thousand and $(53) thousand for the six months ended March 31, 2025 and 2024.

Change in fair value of warrant liabilities

We recognized a gain/(loss) related to the change in fair value of warrant liabilities of $25 thousand and $(25) thousand for the three months ended March 31, 2025 and 2024, respectively.

We recognized a (loss)/gain related to the change in fair value of warrant liabilities of $(89) thousand and $(7) thousand for the six months ended March 31, 2025 and 2024, respectively.

Provision for Income Taxes

The provision for income taxes was $5 thousand for each of the three months ended March 31, 2025 and March 31, 2024. The provision for income taxes was $10 thousand for each of the six months ended March 31, 2025 and March 31, 2024. The provision for income taxes consists of estimated liability for federal and state income taxes owed by us. Net operating loss (“NOL”) carryforwards are estimated to be sufficient to offset any potential taxable income for all periods presented. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. We maintain a valuation allowance against its net deferred tax assets.

Adjusted EBITDA

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

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

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

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

	Three Months Ended March 31,						Six Months Ended March 31,
	2025			2024			2025			2024
Net loss	$	(730	)	$	(602	)	$	(1,364	)	$	(1,224	)
Provision for income tax		5			5			10			10
Interest expense and other, net		5			53			9			53
Change in fair value of warrants		(25	)		25			89			7
Amortization of intangible assets		182			266			366			612
Depreciation and other amortization		20			41			37			86
Restructuring and acquisition related charges		197			-			207			15
Stock-based compensation		107			129			214			241
Adjusted EBITDA	$	(239	)	$	(83	)	$	(432	)	$	(200	)

Liquidity and Capital Resources

Cash Flows

Operating Activities

Cash used in operating activities was $(0.2) million for the six months ended March 31, 2025, compared to cash used in operating activities of $(1.0) million for the six months ended March 31, 2024. The change in cash used in operating activities, compared to the prior period, was primarily due to changes in non-cash items, including amortization, stock-based compensation, and changes in fair value of warrant liabilities, and changes in prepaids and other current assets, accounts payable and accrued liabilities, and deferred revenue.

Investing Activities

There was $(7) thousand cash used in investing activities for the six months ended March 31, 2025 and $(5) thousand cash used in investing activities for the six months ended March 31, 2024.

Financing Activities

Cash provided by financing activities was $1.6 million for the six months ended March 31, 2025 primarily related to proceeds from the issuance of common stock and the redemption of Preferred Series C shares and $(0.1) million used for the six months ended March 31, 2024.

Capital Resources and Liquidity Outlook

We have historically incurred operating losses and used cash on hand and from financing activities to fund operations as well as develop new products. The Company is continuing to maintain tight control over discretionary spending for the 2025 fiscal year. The Company believes that future revenues and cash flows will supplement its working capital and it has an appropriate cost structure to support future revenue growth.

We may offer and sell, from time to time, in one or more offerings, up to $50 million of its debt or equity securities, or any combination thereof. Such securities offerings may be made pursuant to the Company’s currently effective registration statement on Form S-3 (File No. 333-285176), which was initially filed with the Securities and Exchange Commission on February 24, 2025 and declared effective on February 27, 2025 (the “Shelf Registration Statement”). A complete description of the types of securities that the Company may sell is described in the Preliminary Prospectus contained in the Shelf Registration Statement. As of the date of the filing of this Quarterly Report, there are no active offerings for the sale or obligations to purchase any of the Company’s securities pursuant to the Shelf Registration Statement. There can be no assurances that the Company will offer any securities for sale or that if the Company does offer any securities that it will be successful in selling any portion of the securities offered on a timely basis if at all, or on terms acceptable to us. Further, our ability to offer or sell such securities may be limited by the rules of the NASDAQ Capital Market.

On March 24, 2025, the Company entered into a Securities Purchase Agreement with purchasers, pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of 1,000,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $1.50 per share, for aggregate gross proceeds from the offering of approximately $1.5 million before deducting the placement agent fee and related offering expenses (see Note 8). Proceeds after deducting offering expenses was $1.3 million.

On March 25, 2025, the Company separately entered into a form of subscription agreement with certain accredited investors relating to a private placement transaction and sale (the “Private Placement”) of 473,979 unregistered shares of the Company's common stock at an offering price of $1.52 per share, for aggregate gross proceeds from the Private Placement of approximately $720 thousand before deducting related offering expenses. Proceeds after deducting offering expenses was $700 thousand.

Off-Balance Sheet Arrangements

At this time, we do not have any off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons.

Contractual Obligations

We lease all of our office locations. The gross obligations for operating leases is $0.2 million, with obligations extending through January 2028. Debt payments on our various debt obligations total $0.4 million of which $0.2 million is expected to be paid in the next twelve months.

Critical Accounting Policies

These critical accounting policies and estimates by our management should be read in conjunction with Note 2, Summary of Significant Accounting Policies to the Consolidated Financial Statements that were prepared in accordance with U.S. GAAP.

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

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

	●	Revenue recognition;
	●	Accounts receivable;
	●	Accounting for goodwill and other intangible assets;
	●	Accounting for business combinations;
	●	Accounting for common stock purchase warrants; and
	●	Accounting for stock-based compensation.

Revenue Recognition

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

Revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect 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, we include an estimate of the amount we expect to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur. Our subscription service arrangements are non-cancelable and do not contain refund-type provisions. Revenue is reported net of applicable sales and use tax.

We recognize revenue from contracts with customers using a five-step model, which is described below:

	1.	Identify the customer contract;
	2.	Identify performance obligations that are distinct;
	3.	Determine the transaction price;
	4.	Allocate the transaction price to the distinct performance obligations; and
	5.	Recognize revenue as the performance obligations are satisfied.

Accounts Receivable

The allowance for credit losses is determined based upon a variety of judgments and factors. Factors considered in determining the allowance include historical collection, write-off experience, and management’s assessment of collectability from customers, including current conditions, reasonable forecasts, and expectations of future collectability and collection efforts. Management continuously assesses the collectability of receivables and adjusts estimates based on actual experience and future expectations based on economic indicators. Management also monitors the aging analysis of receivables to determine if there are changes in the collections of accounts receivable. Receivable balances are written-off against the allowance for credit losses when such balances are deemed to be uncollectible.

Accounting for Goodwill and Intangible Assets

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

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

Accounting for Business Combinations

We allocate the amount we pay for each acquisition to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets which arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. We allocate any excess purchase price that exceeds the fair value of the net tangible and identifiable intangible assets acquired to goodwill. The use of alternative valuation assumptions, including estimated growth rates, cash flows and discounts rates and estimated useful lives could result in different purchase price allocations and amortization expense in current and future periods. Transaction costs associated with these acquisitions are expensed as incurred through general and administrative expense on the consolidated statements of operations. In those circumstances where an acquisition involves a contingent consideration arrangement, we recognize a liability equal to the fair value of the contingent payments expected to be made as of the acquisition date. We re-measure this liability each reporting period and recognizes changes in the fair value through income (loss) before income taxes within the consolidated statements of operations.

Accounting for Common Stock Purchase Warrants

We evaluate common stock warrants as they are issued to determine whether they should be classified as an equity instrument or a liability. Those warrants that are classified as a liability are carried at fair value at each reporting period, with changes in their fair value recognized in change in fair value of warrant liabilities in the consolidated statements of operations. The fair value of our warrant liabilities are valued utilizing Level 3 inputs. Warrant liabilities are valued using a Monte Carlo option-pricing model, which takes into consideration the volatilities of comparable public companies, due to the relatively low trading volume of our common stock. The Monte Carlo option-pricing model uses certain assumptions, including expected life and annual volatility.

Accounting for Stock-Based Compensation

At March 31, 2025, we maintained two stock-based compensation plans, one of which has expired but still contains vested stock options. The two plans are more fully described in Note 8 of these condensed consolidated financial statements.

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

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

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

We recognize deferred tax assets for stock-based awards that result in deductions on our income tax returns, based on the amount of stock-based compensation recognized and the statutory tax rate in the jurisdiction in which we will receive a tax deduction.

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 March 31, 2025.

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.

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 for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission on December 26, 2024.

Item 1A.

Risk Factors.

There have been no material changes to the risk factors described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission on December 26, 2024.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

There were $0.7 million in sales of unregistered equity securities in the six months ended March 31, 2025.

On March 25, 2025, the Company entered into subscription agreements with certain accredited investors, including several of its officers and directors, in connection with a private placement of its common stock. Pursuant to the agreements, the Company sold an aggregate of 473,979 shares of its common stock at a purchase price of $1.52 per share, resulting in gross proceeds of approximately $720,448, before deducting offering expenses. The private placement closed on March 26, 2025.

The offer and sale of the securities were made in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D promulgated thereunder.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

Exhibit No.		Description of Document

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		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).

3.3		Amendment to the Amended and Restated By-laws (incorporated by reference to Exhibit 3.1 to our current Report on Form 8-K filed on September 10, 2021).

3.4		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).

3.5		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).

4.1		Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.1 to our current Report on Form 8-K filed on March 25, 2025).

10.1		Securities Redemption Agreement, dated March 5, 2025 (incorporated by reference to Exhibit 10.1 to our current Report on Form 8-K filed on March 11, 2025).

10.2		Form of Securities Purchase Agreement, dated as of March 24, 2025 (incorporated by reference to Exhibit 10.1 to our current Report on Form 8-K filed on March 25, 2025).

10.3		Form of Subscription Agreement, dated as of March 25, 2025 (incorporated by reference to Exhibit 10.2 to our current Report on Form 8-K filed on March 25, 2025).

31.1*		Certification of Chief Executive Officer, pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer, pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer, pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

32.2*		Certification of Chief Financial Officer, pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

101.INS**		Inline XBRL Instance

101.SCH**		Inline XBRL Taxonomy Extension Schema

101.CAL**		Inline XBRL Taxonomy Extension Calculation

101.DEF**		Inline XBRL Taxonomy Extension Definition

101.LAB**		Inline XBRL Taxonomy Extension Labels

101.PRE**		Inline XBRL Taxonomy Extension Presentation

104		Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 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.

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)

May 15, 2025		/s/ Roger Kahn
Date		Roger Kahn President and Chief Executive Officer (Principal Executive Officer)

May 15, 2025		/s/ Thomas R. Windhausen
Date		Thomas R. Windhausen Chief Financial Officer (Principal Financial and Accounting Officer)

Bridgeline Digital, Inc. 10-Q