form10k_16986.htm

Effective October1, 2009, the Company changed its method of accounting for its common stock warrants to comply with the guidance in ASC 815-40-15 “Derivatives and Hedging” (formerly Emerging Issues Task force EITF 07-05). ASC 815-40-15 requires many common stock awards that were previously treated as equity to be accounted for as liabilities due to certain features with downside ratchet provisions that are not considered indexed to a company’s stock. The Company evaluated its common stock warrants to determine whether they should be classified as an equity instrument or a liability and made the determination that its common stock warrants should be classified as liabilities; however, the fair value of the related liability was immaterial. Accordingly, no adjustment was needed.

Subsequent to the adoption of AC 815-40-15, the common stock warrants are carried at fair value at each reporting date, with changes in their fair value recorded in other income (expense) in the consolidated statements of operation. The Company estimates the fair value of common stock warrants issued to non-employees using a binomial options pricing model. As of September 30, 2010, the change in fair value of the common stock warrants was immaterial for all interim periods since the date of adoption and no adjustment to income(loss) was recorded in the consolidated statements of operations for the year ended September 30, 2010.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Option and Warrant Activity and Outstanding Shares

A summary of combined option and warrant activity follows:

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

Outstanding, September 30, 2008		1,728,691		$	3.06		307,000		$	5.49
Granted		1,917,989			0.90		—			—
Exercised		—			—		(5,000	)		0.00
Forfeited or expired		(2,176,473	)		2.55		—			—
Outstanding, September 30, 2009		1,470,207			0.91		302,000			5.58
Granted		1,002,000			1.17		—			—
Exercised		(5,999	)		0.90		—			—
Forfeited or expired		(120,503	)		1.12		—			—
Outstanding, September 30, 2010		2,345,705		$	1.01		302,000		$	5.58

Options granted above include 1.6 million options issued in connection with the October 2008 Repricing Plan (the “Repricing Plan”). Pursuant to the Repricing Plan, each holder of Bridgeline options was offered the opportunity to have their outstanding options modified by (i) reducing the granted exercise price to a lower exercise price equal to the current fair market of the common stock on the date of the modification and (ii) starting a new three year vesting schedule. The fair value of the modified options of $300 thousand was calculated using the difference in value between the original terms and the new terms as of the modification date. The incremental cost of the modified option over the original option is being recognized as additional compensation expense over a three year vesting period that began on the date of the modification.

There were 5,999 options exercised during the year ended September 30, 2010, with an intrinsic value of $0.90 per share. There were no options exercised during the year ended September 30, 2009. The intrinsic value of the warrants exercised during the year ended September 30, 2009 was $4 thousand, or $0.88 per share.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of the status of Bridgeline’s nonvested shares is as follows:

				Weighted
				Average
				Grant-Date
	Shares			Fair Value
Nonvested at September 30, 2009		1,454,371		$	0.91
Granted		1,002,000			1.17
Vested		(502,328	)		0.91
Forfeited		(120,503	)		1.12
Nonvested at September 30, 2010		1,833,540		$	1.04

Price ranges of outstanding and exercisable options as of September 30, 2010 are summarized below:

Outstanding Options						Exercisable Options
				Weighted
				Average		Number
		Number		Remaining		of		Aggregate
Exercise		of		Contractual		Options		Intrinsic
Price		Options		Life (Years)		Exercisable		Value (1)
$	0.01		6,667		2.00		6,667	$	8
	0.36		3,219		1.41		3,219		3
	0.64		45,000		8.37		15,000		9
	0.75		43,332		8.30		15,321		7
	0.81		19,500		8.29		6,498		3
	0.90		1,183,537		8.03		415,290		133
	1.04		100,000		9.87		—		—
	1.05		25,000		9.85		—		—
	1.06		120,167		8.54		40,053		6
	1.07		4,200		1.41		4,200		1
	1.09		32,500		9.84		—		—
	1.12		365,000		9.24		—		—
	1.14		10,000		9.90		—		—
	1.20		20,000		9.27		—		—
	1.22		10,000		8.05		3,334		—
	1.24		10,000		8.05		—		—
	1.25		25,000		8.05		—		—
	1.29		70,000		8.07		—		—
	1.30		225,000		8.07		—		—
	1.39		25,000		8.08		—		—
	2.50		2,333		7.53		2,333		—
$	3.00		250		3.75		250		—
			2,345,705		8.19		512,165	$	170

(1)	The aggregate intrinsic value was calculated based on the gross difference between the Company’s closing stock price on the last day of trading of fiscal 2010 of $1.22 and the exercise prices for all in-the money options vested and exercisable, excluding tax effects.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Compensation Expense

The Company estimates the fair value of stock options using the Black-Scholes-Merton option valuation model (the “Model”). The assumptions used to calculate compensation expense follows:

	Year Ended September 30,
	2010	2009
Expected option life in years	6.5	6.5
Expected volatility	56.00%	61.00%
Expected dividend rate	0.00%	0.00%
Risk free interest rate	1.86% to 2.98%	1.36% to 2.82%
Option exercise prices	$1.04 to $1.39	$0.64 to $1.24
Weighted average fair value granted during the year	$0.67	$0.46

Compensation expense is generally recognized on a graded straight-line basis over the vesting period of grants. During the years ended September 30, 2010 and 2009, the Company recognized $449 thousand and $538 thousand, respectively, as compensation expense related to share based payments. As of September 30, 2010, the Company had approximately $358 thousand of unrecognized compensation costs related to unvested options which the Company expects to recognize through fiscal 2013.

12. Income Taxes

The Company’s income tax provision was computed based on the federal statutory rate and average state statutory rates, net of the related federal benefit. The provision differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes.

The sources, all domestic, and tax effects of the differences are as follows:

	Year Ended September 30,
	2010			2009
Income tax benefit at the federal statutory rate of 34%	$	(114	)	$	258
Permanent differences, net		479			544
State income tax expense (benefit), net of federal benefit		(16	)		19
Change in valuation allowance attributable to operations		(345	)		(748	)
Other		69			(42	)
Total	$	73		$	31

As of September 30, 2010, the Company has a federal net operating loss (NOL) carryforward of approximately $2.9 million that expires on various dates through 2027. The state NOL carryforwards vary by state with NOL's existing in some jurisdictions and not others. Internal Revenue Code Section 382 places a limitation on the amount of taxable income which can be offset by NOL carryforwards after a change in control of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these “change of ownership” provisions, utilization of NOL carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. The Company has not performed a Section 382 analysis. However, if performed, Section 382 may be found to limit potential future utilization of our NOL carryforwards.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company has net operating loss carryforwards and other deferred tax benefits that are available to offset future taxable income. 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. Accordingly, the Company has established a full valuation allowance against its net deferred tax asset at September 30, 2010 and 2009. For the year ended September 30, 2010, the valuation allowance for deferred tax assets decreased $1.8 million which was mainly due to the decreases in certain allowances, intangibles and reserves. For the year ended September 30, 2009, the valuation allowance for deferred tax assets increased $1.4 million which was mainly due to increases in deferred revenue and certain allowances, intangibles and reserves.

The provisions of ASC 740-10 “Accounting for Uncertain Income Tax Positions”, requires that the impact of tax positions be recognized in the financial statements if they are more likely than not of being sustained upon examination, based on the technical merits of the position. There was no impact to the Company as a result of adopting ASC 740-10 as the Company’s management has determined that the Company has no uncertain tax positions requiring recognition under ASC 740-10 as of September 30, 2010 and 2009.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense. Penalties, if incurred, are recognized as a component of tax expense.

The Company is subject to U.S. federal income tax as well as income tax of certain state jurisdictions. The Company has not been audited by the Internal Revenue Service (IRS) or any states in connection with income taxes. The tax periods from 2007 – 2010 generally remain open to examination by the IRS and state authorities.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	September 30,
	2010			2009
Deferred tax assets:
Current:
Bad debt reserve	$	99		$	106
Deferred revenue		348			374
Long-term
AMT carryforward		39			32
Net operating loss carryforwards		1,190			1,618
Intangibles		—			1,210
Total deferred tax assets		1,676			3,340
Deferred tax liabilities:
Current:
Contract loss reserve		—			(3	)
Long-term:
Intangibles		(149	)		—
Depreciation		(79	)		(91	)
Total deferred tax liabilities		(228	)		(94	)
Total deferred tax assets, net, before valuation allowance		1,448			3,246
Valuation allowance		(1,448	)		(3,246	)
Net deferred tax assets	$	—		$	—

In January 2003, the Company established Bridgeline Software Pvt. Ltd in Bangalore, India under the Software Technology Parks of India law. This law establishes a tax holiday for the first ten years of operation; therefore the Company has not incurred any foreign taxes. To date, the foreign taxes not incurred as a result of this tax holiday have not been significant.

BRIDGELINE DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Undistributed earnings of the Company’s foreign subsidiary amounted to approximately $431 thousand and $375 thousand at September 30, 2010 and 2009, respectively. These earnings are considered to be indefinitely reinvested; accordingly, no provision for US federal and state income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends of otherwise, the Company would be subject to both US income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the applicable foreign tax authority. Determination of the amount of unrecognized deferred US income tax liability is not material and the detailed calculations have not been performed. As of September 30, 2010, there would be minimal withholding taxes upon remittance of all previously unremitted earnings.

13. Earnings per Share

Basic and diluted net (loss) income per share are calculated as follows:

	Year Ended September 30,
	2010			2009
Net (loss) income	$	(377	)	$	758
Basic net (loss) income per share:
Weighted average common shares outstanding		11,186,187			11,008,879
Basic net (loss) income per share	$	(0.03	)	$	0.07
Diluted net (loss) income per share:
Weighted average common shares outstanding		11,186,187			11,008,879
Weighted average dilutive common share equivalents		—			263,311
Total weighted average common shares outstanding
and dilutive common equivalents		11,186,187			11,272,190
Diluted net (loss) income per share	$	(0.03	)	$	0.07

Options to purchase shares of the Company’s common stock of 362,240 for fiscal 2010 were excluded from the computation of diluted net loss per share as the effect was anti-dilutive to the Company’s net loss. Also, excluded were shares issuable in connection with the e.Magination acquisition. Options to purchase shares of the Company's common stock of 263,311 shares were included in the computation of diluted net income per share for fiscal 2009.

Options to purchase shares of the Company’s common stock of 384,916 and 316,750 for fiscal 2010 and 2009, respectively, were not included in the computation of diluted net income per share because the exercise price of the options was greater than the weighted average market price of the common stock during the period.

14. Subsequent Events

We evaluated subsequent events through the date and time our consolidated financial statements were issued.

On October 29, 2010, the Company sold 1,000,000 shares of common stock at $1.00 per share for gross proceeds of $1,000,000 in a private placement. Net proceeds to the Company after offering expenses were approximately $857,000. The placement agents also received a four year warrant exercisable for 64,000 shares of the Company’s common stock at a price equal to $1.45 per share. In return for such warrants, the placement agents agreed to cancel certain outstanding warrants to purchase shares of the Company’s common stock previously issued to such placement agents to purchase 67,216 shares of the Company’s common stock at a price of $5.00 per share and 61,015 shares of the Company’s common stock at a price of $7.50 per share.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None

Item 9A. Controls and Procedures.

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer (Principal Executive Officer) and our Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2010, the end of our fiscal year covered by this report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, we concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2010. In making this assessm ent, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that as of September 30, 2010, our internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles. Our management reviewed the results of their assessment with our Board of Directors.

During the 2010 fiscal year and subsequent to year end we enhanced several positions in our Company, including a new Vice President and Corporate Controller, with specific responsibilities for external financial reporting, internal control, revenue recognition and purchase accounting. We also continued to enhance our financial system with the use of outside consultants.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to a permanent exemption from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

Inherent limitations on effectiveness of controls

Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and

personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentat ion. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal controls over financial reporting that occurred during the fiscal quarter ended September 30, 2010 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B: Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The following table sets forth information regarding our directors and executive officers:

Name	Age	Position

Thomas Massie	49	Chairman, Chief Executive Officer and President
John Cavalier	71	Director(1)(2)(3)(4)

William Coldrick	68	Director (2)(3)(4)

Kenneth Galaznik	59	Director (1)(4)

Robert Hegarty	47	Director(2)(3)(4)
Scott Landers	40	Director(1)(4)
Erez Katz	47	Chief Operating Officer
Ronald Levenson	54	Executive Vice President, Chief Financial Officer and Treasurer

Brett Zucker	38	Executive Vice President and Chief Technical Officer

Michael Prinn	37	Vice President of Finance and Chief Accounting Officer

(1)	Member of the Audit Committee.
(2)	Member of the Compensation Committee.
(3)	Member of the Nominating and Governance Committee.
(4)	Independent director.

The additional information required by this Item 10 of Form 10-K is hereby incorporated by reference to the information in our definitive proxy statement to be filed within 120 days after the close of our fiscal year.

Item 11. Executive Compensation.

The information required by this Item 11 of Form 10-K is hereby incorporated by reference to the information in our definitive proxy statement to be filed within 120 days after the close of our fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

We maintain a number of equity compensation plans for employees, officers, directors and other entities and individuals whose efforts contribute to our success. The table below sets forth certain information as of our fiscal year ended September 30, 2010 regarding the shares of our common stock available for grant or granted under our equity compensation plans.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (a)/(c)

Equity compensation plans approved by security holders		2,345,705	$	1.01		54,295

Equity compensation plans not approved by security holders (1)		302,000		5.58		-

Total		2,647,705	$	3.50		54,295

(1) In 2006, the Company issued 280,000 warrants to note holders of Senior Secured Notes issued in a private placement (which have been repaid) (the “Debt Warrants”) and issued 112,000 warrants to the underwriters of the debt offering (the “Underwriter’s Debt Warrants”). The Debt Warrants are exercisable into shares of the Company’s common stock at $0.001 per share any time within five years from the date of grant. The Underwriter’s Debt Warrants are exercisable at $5.00 per share any time within five years from the grant date provided, however, that no such exercise could take place prior to the earlier of the date of an initial public offering or April 21, 2008. The costs of the both the Debt Warrants and the Underwriter’s Debt Warrants were fully amortized over the term of t he Senior Notes. As of September 30, 2009, (i) 240,000 Debt Warrants have been exercised and 40,000 Debt Warrants are outstanding, and (ii) 112,000 Underwriter’s Debt Warrants are outstanding.

In July 2007, the Company issued 150,000 warrants to the underwriter’s of the Company’s initial public offering (the “IPO Warrants”). Each IPO Warrant has an exercise price of $7.50 and can be exercised at any time from January 2008 through July 2012. The Company recorded the grant date fair value of these IPO Warrants using the Black-Scholes-Merton option valuation model directly to additional paid in capital as part of the costs of the initial public offering. At September 30, 2009, there were 150,000 IPO Warrants outstanding.

At September 30, 2010 there were 302,000 Debt Warrants, Underwriter’s Warrants and IPO Warrants outstanding.

The additional information required by this Item 12 of Form 10-K is hereby incorporated by reference to the information in our definitive proxy statement to be filed within 120 days after the close of our fiscal year.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item 13 of Form 10-K is hereby incorporated by reference to the information in our definitive proxy statement to be filed within 120 days after the close of our fiscal year.

Item 14. Principal Accounting Fees and Services.

The information required by this Item 14 of Form 10-K is hereby incorporated by reference to the information in our definitive proxy statement to be filed within 120 days after the close of our fiscal year.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Documents Filed as Part of this Form 10-K

1. Financial Statements (included in Item 8 of this report on Form 10-K):

– Reports of Independent Registered Public Accounting Firm

– Consolidated Balance Sheets as of September 30, 2010 and 2009

– Consolidated Statements of Operations for the years ending September 30, 2010 and 2009

– Consolidated Statements of Shareholders’ Equity for the years ending September 30, 2010 and 2009

– Consolidated Statements of Cash Flows for the years ending September 30, 2010 and 2009

– Notes to Consolidated Financial Statements

2. Financial Statement Schedules

– Not applicable

(b) Exhibits

Documents listed below, except for documents followed by a parenthetical, are being filed as exhibits. Documents followed by a parenthetical are not being filed herewith and, pursuant to Rule 12b-32 of the General Rules and Regulations promulgated by the SEC under the Securities Exchange Act of 1934 (the Act), reference is made to such documents as previously filed as exhibits with the SEC.

Item		Title

2.1		Objectware, Inc. Acquisition Agreement (incorporated by reference to Exhibit 2.3 to our Registration Statement on Form S-B2, File No. 333-139298)
2.2		First Amendment to Agreement and Plan of Merger filed as Exhibit 2.3, dated as of March 29, 2007 (incorporated by reference to Exhibit 10.55 to our Registration Statement on Form S-B2, File No. 333-139298)
2.3		Second Amendment to Agreement and Plan of Merger filed as Exhibit 2.3, dated June 14, 2007 (incorporated by reference to Exhibit 10.63 to our Registration Statement on Form S-B2, File No. 333-139298)
2.4		Purple Monkey Studios, Inc. Acquisition Agreement (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on September 5, 2007)
2.5		Tenth Floor, Inc Acquisition Agreement (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on February 1, 2008)
2.6		Indigio Group, Inc., Acquisition Agreement (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on July 2, 2008)
2.7		Asset Purchase Agreement, dated as of May 11, 2010, by and between Bridgeline Digital, Inc. and TMX Interactive, Inc. (incorporated by reference to Exhibit 2.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed on May 17, 2010)
2.8		Subordinated Promissory Note dated May 11, 2010, issued by Bridgeline Digital, Inc. (incorporated by reference to Exhibit 2.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed on May 17, 2010)
2.9		Asset Purchase Agreement, dated as of July 9, 2010, by and between Bridgeline Digital, Inc. and e.magination network, LLC. (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on July 15, 2010)
3.1(i)		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1(ii) to our Registration Statement on Form S-B2, File No. 333-139298)
3.1(ii)		Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated March 19,

		2010 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on March 24, 2010)
3.1(iii)		Amended and Restated By-laws (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on October 30, 2007)

4.1		Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-B2, File No. 333-139298)
10.1		Agreement of Lease between IMD Eleven Hundred East Hector Street LP and Spring Mill Conshohocken LP, collectively, as Landlord and Bridgeline Digital, Inc. as Tenant, dated May 11, 2010 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed on May 17, 2010)
10.2		Office Building Lease between Sixth Road Woburn, LLC and Bridgeline Digital, Inc., dated May 5, 2005 (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-B2, File No. 333-139298)
10.3		Office Building Lease between 104 West 40th Street Partners LLC and Bridgeline Digital, Inc., dated November 26, 2003 (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form S-B2, File No. 333-139298)
10.4		Office Building Lease between Valliappa Software Technological Park Pvt. Ltd. and Bridgeline Digital Enterprises Pvt. Ltd. dated December 5, 2005 (incorporated by reference to Exhibit 10.5 to our Registration Statement on Form S-B2, File No. 333-139298)
10.5		Office Building Lease between North LaSalle L.P. and Bridgeline Digital, Inc. dated May 27, 2008 (incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-KSB filed on December 29, 2008)
10.6		Office Building Lease between NHD II Point LLC and Bridgeline Digital, Inc., dated August 7, 2008 (incorporated by reference to Exhibit 10.40 to our Annual Report on Form 10-KSB filed on December 29, 2008)
10.7*		Employment Agreement with Thomas Massie, dated October 1, 2001 (incorporated by reference to Exhibit 10.7 to our Registration Statement on Form S-B2, File No. 333-139298)
10.8*		Employment Agreement between Bridgeline Digital, Inc. and Ronald M. Levenson (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 15, 2009)
10.9*		Amendment to Employment Agreement between Bridgeline Digital, Inc. and Ronald M. Levenson (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on May 15, 2009)
10.10*		Employment Agreement with Brett Zucker, dated January 1, 2006 (incorporated by reference to Exhibit 10.9 to our Registration Statement on Form S-B2, File No. 333-139298)
10.11*		Employment Agreement with Erez M. Katz, dated October 29, 2010 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 4, 2010)
10.12		Form of Warrant to Purchase Common Stock of Bridgeline Digital, Inc. issued to the investors listed on Schedule A attached thereto, as amended (incorporated by reference to Exhibit 10.23 to our Registration Statement on Form S-B2, File No. 333-139298)
10.13		Form of Warrant to Purchase Common Stock of Bridgeline Digital, Inc. issued to Placement Agent in April 2006 offering, as amended (incorporated by reference to Exhibit 10.24 to our Registration Statement on Form S-B2, File No. 333-139298)
10.14		Form of Warrant to Purchase Common Stock of Bridgeline Digital, Inc., issued to the underwriters (incorporated by reference to Exhibit 10.65 to our Registration Statement on Form S-B2, File No. 333-139298)
10.15		Amended and Restated Stock Incentive Plan (incorporated by reference to Appendix B to our Definitive Proxy Statement filed on February 25, 2008)*
10.16		Lead Dog Digital, Inc. 2001 Stock Option Plan (incorporated by reference to Exhibit 10.34 to our Registration Statement on Form S-B2, File No. 333-139298)*
10.17		Amended and Restated Loan Agreement dated March 31, 2010, between Bridgeline Digital, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 5, 2010)
10.18		Amended and Restated Intellectual Property Security Agreement dated March 31, 2010, between Bridgeline Digital, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on April 5, 2010)
10.19		Securities Purchase Agreement between Bridgeline Digital, Inc. and the investors named therein,

		dated October 29, 2010 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 4, 2010)
10.20		Form of Common Stock Purchase Warrant issued to Placement Agent, dated October 29, 2010 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on November 4, 2010)
21.1		Subsidiaries of the Registrant
23.1		Consent of Marcum LLP
23.2		Consent of UHY LLP
31.1		CEO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		CFO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		CEO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		CFO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*		Management compensatory plan.

Not applicable

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
	a Delaware corporation

	By:	/s/ Thomas Massie Name: Thomas Massie
		Title: Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Thomas Massie	Chief Executive Officer and Director	December 29, 2010
Thomas Massie	(Principal Executive Officer)

/s/ Ronald Levenson	Chief Financial Officer	December 29, 2010
Ronald Levenson	(Principal Financial Officer)

/s/ Michael Prinn	Chief Accounting Officer	December 29, 2010
Michael Prinn

/s/ John Cavalier	Director	December 29, 2010
John Cavalier

/s/ William Coldrick	Director	December 29, 2010
William Coldrick


/s/ Kenneth Galaznik	Director	December 29, 2010
Kenneth Galaznik

/s/ Robert Hegarty	Director	December 29, 2010
Robert Hegarty

/s/ Scott Landers		Director		December 29, 2010
Scott Landers

Exhibit Index

21.1			Subsidiaries of the Registrant
23.1			Consent of Marcum LLP
23.2			Consent of UHY LLP
31.1			CEO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			CFO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			CEO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			CFO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-21.1 2 exh21-1_16986.htm SUBSIDIARIES OF BRIDGELINE DIGITAL, INC. exh21-1_16986.htm

EXHIBIT 21.1

Subsidiaries of Bridgeline Digital, Inc.

e.magination IG, LLC

Bridgeline Digital, Pvt. Ltd.

EX-23.1 3 exh23-1_16986.htm ACCOUNTANT'S CONSENT exh23-1_16986.htm

EXHIBIT 23.1

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT

We consent to the incorporation by reference in the Registration Statement of Bridgeline Digital, Inc. on Form S-8 (No. 333-170819) of our report dated December 29, 2010, with respect to our audit of the consolidated financial statements of Bridgeline Digital, Inc. as of September 30, 2010 and for the year then ended, which report is included in this Annual Report on Form 10-K of Bridgeline Digital, Inc. for the year ended September 30, 2010.

/s/ Marcum LLP

Marcum LLP

Boston, Massachusetts

December 29, 2010

EX-23.2 4 exh23-2_16986.htm ACCOUNTANT'S CONSENT exh23-2_16986.htm

EXHIBIT 23.2

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT

We consent to the incorporation by reference in the Registration Statement of Bridgeline Digital, Inc. on Form S-8 (No. 333-170819) of our report dated December 28, 2009, pertaining to the consolidated financial statements of Bridgeline Digital, Inc. (formally Bridgeline Software, Inc.) as of September 30, 2009 and for the year then ended, which appears in the Annual Report on Form 10-K of Bridgeline Digital, Inc. for the year ended September 30, 2010.

/s/ UHY LLP

Boston, Massachusetts

December 29, 2010

EX-31.1 5 exh31-1_16986.htm EXECUTIVE OFFICER CERTIFICATION exh31-1_16986.htm

EXHIBIT 31.1

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

I, Thomas L. Massie, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Bridgeline Digital, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: December 29, 2010

	/s/ Thomas L. Massie
	Thomas L. Massie
	President and Chief Executive Officer (Principal Executive Officer)

EX-31.2 6 exh31-2_16986.htm EXECUTIVE OFFICER CERTIFICATION exh31-2_16986.htm

EXHIBIT 31.2

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

I, Ronald M. Levenson, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Bridgeline Digital, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

	(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: December 29, 2010

	/s/ Ronald M. Levenson
	Ronald M. Levenson
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32.1 7 exh32-1_16986.htm EXECUTIVE OFFICER CERTIFICATION exh32-1_16986.htm

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bridgeline Software, Inc. (the “Company”) on Form 10-K for the year ended September 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Thomas L. Massie, President and Chief Executive Officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

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

(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and result of operations of the Company for the periods presented.

Date: December 29, 2010		/s/ Thomas L. Massie
	Name:	Thomas L. Massie
	Title:	President and Chief Executive Officer (Principal Executive Officer)

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

EX-32.2 8 exh32-2_16986.htm EXECUTIVE OFFICER CERTIFICATION exh32-2_16986.htm

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bridgeline Software, Inc. (the “Company”) on Form 10-K for the year ended September 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Ronald M. Levenson, Executive Vice President and Chief Financial Officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

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

Date: December 29, 2010		/s/ Ronald M. Levenson
	Name:	Ronald M. Levenson
	Title:	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

-----END PRIVACY-ENHANCED MESSAGE-----

Delaware	52-2263942
State or Other Jurisdiction of Incorporation	IRS Employer Identification No.

10 Sixth Road
Woburn, Massachusetts	01801
(Address of Principal Executive Offices)	(Zip Code)

Title of each class	Name of exchange on which registered
Common Stock, $0.001 par value per share	The NASDAQ Stock Market, LLC


Large accelerated filer 	Accelerated filer 	Non-accelerated filer  (Do not check if a smaller reporting company)	Smaller reporting company x

	·	Financial services
	·	Associations and foundations
	·	Health services and life sciences
	·	High technology (software and hardware)
	·	Transportation and storage
	·	Professional sports (teams and individuals)
	·	U.S. Government

· Code of Business Ethics
· Committee Charters for the following Board Committees:
§ Nominating and Corporate Governance Committee
§ Audit Committee

	·		changes in demand for our products;
	·		introduction, enhancement or announcement of products by us or our competitors;
	·		market acceptance of our new products;
	·		the growth rates of certain market segments in which we compete;
	·		size and timing of significant orders;
	·		budgeting cycles of customers;
	·		mix of products and services sold;
	·		changes in the level of operating expenses;

	·		completion or announcement of acquisitions; and
	·		general economic conditions in regions in which we conduct business.

	·		harm to our reputation;
	·		lost sales;
	·		delays in commercial release;
	·		product liability claims;
	·		contractual disputes;

	·		negative publicity;
	·		delays in or loss of market acceptance of our products;
	·		license terminations or renegotiations; or
	·		unexpected expenses and diversion of resources to remedy errors.

	·		be expensive and time consuming to defend;
	·		result in negative publicity;
	·		force us to stop licensing our products that incorporate the challenged intellectual property;
	·		require us to redesign our products;
	·		divert management’s attention and our other resources; or
	·		require us to enter into royalty or licensing agreements in order to obtain the right to use necessary technologies, which may not be available on terms acceptable to us, if at all.

	·		terminate contracts for convenience, in whole or in part, at any time and for any reason;
	·		reduce or modify contracts or subcontracts if its requirements or budgetary constraints change;
	·		cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; and
	·		claim certain rights in products provided by us.

	·		user privacy;
	·		the pricing and taxation of goods and services offered over the Internet;

	·		consumer protection, including the potential application of “do not call” registry requirements on customers and consumer backlash in general to direct marketing efforts of customers;
	·		the online distribution of specific material or content over the Internet; or

Geographic Location	Address	Size
Atlanta, Georgia	5555 Triangle Parkway Norcross, Georgia 30092	8,547 square feet, professional office space
Baltimore, Maryland	6711 Columbia Gateway Dr. Baltimore, Maryland 21046	4,925 square feet, Professional office space
Bangalore, India	65 Bagmane Tech Park, C.V Raman Nagar Byrasandra, Corp Ward 83, Bangalore 560 052	6,000 square feet professional office space
Boston, Massachusetts	10 Sixth Road Woburn, Massachusetts 01801	9,335 square feet, professional office space
Chicago, Illinois	30 N. LaSalle Street, 20th Floor Chicago, IL 60602	4,880 square feet, professional office space
Denver, Colorado	410 17th Street, Suite 600 Denver, CO 80202	12,270 square feet, professional office space
Philadelphia, Pennsylvania	1100 East Hector Street Conshohocken, Pennsylvania	4,619 square feet Professional office space
New York, New York	104 West 40th Street New York, NY. 10018	4,400 square feet, professional office space
Virginia	4,300 Wilson Boulevard Arlington, VA 22203	4,801 square feet, professional office space

	·		the content of websites;
	·		copyrights;


Year Ended September 30, 2010	High	Low

Fourth Quarter	$ 1.25	$ 0.95
Third Quarter	$ 1.32	$ 1.01
Second Quarter	$ 1.61	$ 1.12
First Quarter	$ 1.33	$ 1.04

Year Ended September 30, 2009	High	Low

Fourth Quarter	$ 1.65	$ 0.80
Third Quarter	$ 1.79	$ 0.92
Second Quarter	$ 1.52	$ 0.36
First Quarter	$ 1.39	$ 0.50


RESULTS OF OPERATIONS
	Year Ended September 30,
(dollars in thousands)					$			%
	2010		2009		Change			Change

Revenue
Web application development services
iAPPS development services	$	8,717	$	7,964	$	753			9	%
% of total revenue		37%		33%
Other development services		11,134		12,308		(1,174	)		(10	%)
% of total revenue		47%		52%
Subtotal web application development services		19,851		20,272		(421	)		(2	%)
% of total revenue		84%		85%
Managed service hosting		1,931		2,202		(271	)		(12	%)
% of total revenue		8%		9%
Subscription and perpetual licenses		1,776		1,427		349			24	%
% of total revenue		8%		6%
Total revenue		23,558		23,901		(343	)		(1	%)

Cost of revenue
Web application development services
iAPPS development cost		4,146		3,531		615			17	%
% of iAPPS development revenue		48%		44%
Other development cost		5,875		5,891		(16	)		–	%
% of other development revenue		53%		48%
Subtotal web application development services		10,021		9,422		599			6	%
% of Web application development services revenue		50%		46%
Managed service hosting		603		595		8			1	%
% of managed service hosting		31%		27%
Subscription and perpetual licenses		583		516		67			13	%
% of subscription and perpetual licenses revenue		33%		36%
Total cost of revenue		11,207		10,533		674			6	%
Gross profit		12,351		13,368		(1,017	)		(8	%)
Gross profit margin		52.4%		55.9%

Operating expenses
Sales and marketing		5,962		6,192		(230	)		(4	%)
% of total revenue		25%		26%
General and administrative		4,416		4,001		415			10	%

	Year Ended September 30,
	2010			2009
Net (loss) income	$	(377	)	$	758
Provision for income taxes		73			31
Interest (income) expense, net		65			40
Amortization of intangible assets		619			517
Depreciation		759			795
EBITDA		1,139			2,141
Other amortization		271			180
Stock-based compensation		449			538
Adjusted EBITDA	$	1,859		$	2,859


	For the Year Ending September 30,
(in thousands)	2011		2012		2013		2014		2015		2016		Total
Payment obligations by year
Bank line of credit	$	2,350	$	2,650	$	—	$	—	$	—	$	—	$	5,000
Debt (inc. interest)		130		170		168		42		—		—		510
Capital leases		50		11		—		—		—		—		61
Operating leases (a)		1,220		918		638		413		204		92		3,485
Contingent acquisition payments (b)		900		441		473		159		—		—		1,973
Contingent acquisition payments (c)		660		585		83		—		—		—		1,328
Total	$	5,310	$	4,775	$	1,362	$	614	$	204	$	92	$	12,357

(a) Net of sublease income
(b) The contingent acquisition payments are maximum potential earn-out consideration payable to former owners of acquired companies. Amounts actually paid may be less. Contingent acquisition payments do not include $675 thousand of potential common stock issuable upon achievement of certain revenue and earnings targets, which has been recorded.
(c) Potential contingent acquisition payments related to acquisitions completed prior to September 30, 2009 and not currently recorded. Contingent payments will be recorded when and if earned.


										Accumulated
	Common Stock				Additional					Other			Total
			Par		Paid in		Accumulated			Comprehensive			Stockholders’
	Shares		Value		Capital		Deficit			Income (Loss)			Equity
Balance at September 30, 2008		10,665,533	$	11	$	34,647	$	(16,369	)	$	(99	)	$	18,190
Stock-based compensation expense		—		—		538		—			—			538
Issuance of common stock		516,676		—		435		—			—			435
and options for earnouts														—
Comprehensive income														—
Net income		—		—		—		758			—			758
Foreign currency translation		—		—		—		—			(17	)		(17	)
adjustment														—
Total comprehensive income		—		—		—		758			(17	)		741
Balance at September 30, 2009		11,182,209		11		35,620		(15,611	)		(116	)		19,904
Stock-based compensation expense		—		—		449		—			—			449
Exercise of stock options		5,999		—		5		—			—			5
Common stock to be issued
in connection with acquisition (see Note 5)		—		—		675		—			—			675
Comprehensive loss
Net (loss)		—		—		—		(377	)		—			(377	)
Foreign currency translation		—		—		—		—			—			—
adjustment														—
Total comprehensive (loss)		—		—		—		(377	)		—			(377	)
Balance at September 30, 2010		11,188,208	$	11	$	36,749	$	(15,988	)	$	(116	)	$	20,656

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

Description	Estimated Useful Life
Developed and core technology	3 years
Non-compete agreements	3 years
Customer relationships	5 - 6 years
Trademarks and trade names	10 years

Net assets acquired:	Amount
Cash	$	3
Other current assets		889
Equipment		51
Other assets		60
Intangible assets		1,420
Goodwill		4,421
Total assets		6,844
Current liabilities		1,590
Total liabilities assumed		1,590
Net assets acquired	$	5,254

Purchase price:
Cash paid	$	2,750
Promissory note issued		500
Contingent earnouts – payable in cash		1,329
Contingent earnouts – payable in common stock		675
Total purchase price	$	5,254

	Amount
Other acquisition related payments:
Payment of rent related to prior periods	$	59
Payment of employee related liabilities		37
Payment of seller transactions costs		70
Payoff of line of credit		187
Total	$	353

	At September 30, 2010
	Gross		Accumulated			Net
	Asset		Amortization			Amount
Intangible assets:
Domain and trade names	$	26	$	(26	)	$	—
Customer related & non-compete agreements		4,034		(1,772	)		2,262
Acquired software		362		(332	)		30
Total intangible assets	$	4,422	$	(2,130	)	$	2,292

	At September 30, 2009
	Gross		Accumulated			Net
	Asset		Amortization			Amount
Intangible assets:
Domain and trade names	$	26	$	(26	)	$	—
Customer related & non-compete agreements (a)		2,613		(1,242	)		1,371
Acquired software		362		(243	)		119
Total intangible assets	$	3,001	$	(1,511	)	$	1,490

	September 30,
Amortization expense charged to:	2010		2009

Cost of revenue	$	89	$	90
Operating expense		530		427
Total	$	619	$	517

Year Ending September 30,	Amount
2011	$	2,475
2012		2,817
2013		167
2014		41
2015		—
Total	$	5,500