bsqr20220930

bsqr20220930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

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

For the transition period from to

Commission File Number: 000-27687

BSQUARE CORPORATION

(Exact name of registrant as specified in its charter)

Washington		91-1650880
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1415 Western Ave, Suite 700, Seattle, WA		98101
(Address of principal executive offices)		(Zip Code)

(425) 519-5900

(Registrant’s telephone number, including area code)

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

Title of each class			Trading symbol(s)		Name of each exchange on which registered
Common stock, no par value			BSQR		The NASDAQ Stock Market LLC

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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 outstanding as of October 31, 2022: 20,493,827

Table of Contents

BSQUARE CORPORATION

FORM 10-Q

For the Quarterly Period Ended September 30, 2022

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION

Item 1	Financial Statements	1

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3	Quantitative and Qualitative Disclosures About Market Risk	17

Item 4	Controls and Procedures	17

	PART II. OTHER INFORMATION

Item 1A	Risk Factors	17

Item 6	Exhibits	17

	Signatures	18

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

BSQUARE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

	*September 30, 2022*			*December 31, 2021*
ASSETS
Current assets:
Cash and cash equivalents	$	26,165		$	39,529
Restricted cash		221			557
Short-term investments		10,677			—
Accounts receivable, net of allowance for doubtful accounts of $50 at September 30, 2022 and December 31, 2021		4,614			4,914
Contract assets		51			46
Prepaid expenses and other current assets		551			364
Total current assets		42,279			45,410
Property and equipment, net of accumulated depreciation		821			726
Right-of-use lease assets, net		1,340			1,598
Other non-current assets		24			24
Total assets	$	44,464		$	47,758
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Third-party software fees payable	$	5,053		$	4,628
Accounts payable		329			426
Accrued compensation		379			502
Other accrued expenses		191			219
Deferred revenue		346			944
Operating lease		351			357
Total current liabilities		6,649			7,076
Deferred revenue, long-term		43			194
Operating lease, long-term		1,107			1,363

Shareholders' equity:
Preferred stock, no par value: 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, no par value: 37,500,000 shares authorized: 20,493,827 and 20,374,406 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		172,637			172,397
Accumulated other comprehensive loss		(1,086	)		(1,024	)
Accumulated deficit		(134,886	)		(132,248	)
Total shareholders' equity		36,665			39,125
Total liabilities and shareholders' equity	$	44,464		$	47,758

See notes to condensed consolidated financial statements.

Table of Contents

BSQUARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2022*			*2021*
Revenue:
Partner Solutions	$	7,557		$	9,638		$	26,042		$	28,393
Edge to Cloud		849			1,008			2,490			2,896
Total revenue		8,406			10,646			28,532			31,289
Cost of revenue:
Partner Solutions		6,574			8,491			22,232			24,528
Edge to Cloud		697			827			2,083			2,648
Total cost of revenue		7,271			9,318			24,315			27,176
Gross profit		1,135			1,328			4,217			4,113
Operating expenses:
Selling, general and administrative		2,030			1,786			6,195			6,209
Research and development		259			408			776			941
Total operating expenses		2,289			2,194			6,971			7,150
Loss from operations		(1,154	)		(866	)		(2,754	)		(3,037	)
Other income (expense), net		29			(29	)		116			1,575
Loss before income taxes		(1,125	)		(895	)		(2,638	)		(1,462	)
Income taxes		—			—			—			—
Net loss	$	(1,125	)	$	(895	)	$	(2,638	)	$	(1,462	)
Basic and diluted loss per share	$	(0.05	)	$	(0.05	)	$	(0.13	)	$	(0.09	)
Shares used in per share calculations:
Basic and diluted		20,470			19,603			20,441			15,419

Net loss	$	(1,125	)	$	(895	)	$	(2,638	)	$	(1,462	)
Other comprehensive loss
Foreign currency translation, net of tax		(14	)		37			(62	)		(30	)
Total other comprehensive (loss) income		(14	)		37			(62	)		(30	)
Comprehensive loss	$	(1,139	)	$	(858	)	$	(2,700	)	$	(1,492	)

See notes to condensed consolidated financial statements.

Table of Contents

BSQUARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	*Nine Months Ended September 30,*
	*2022*			*2021*
Cash flows from operating activities:
Net loss	$	(2,638	)	$	(1,462	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		311			409
Stock-based compensation		298			596
Gain on extinguishment of PPP loan		—			(1,584	)
Changes in operating assets and liabilities:
Accounts receivable		300			185
Contract assets		(5	)		(33	)
Prepaid expenses and other assets		(191	)		(30	)
Third-party software fees payable		425			(51	)
Accounts payable and accrued expenses		(248	)		(451	)
Deferred revenue		(749	)		(771	)
Net cash used in operating activities		(2,497	)		(3,192	)
Cash flows from investing activities:
Additions to property and equipment		(406	)		(375	)
Purchases of short-term investments		(10,677	)		—
Net cash from investing activities		(11,083	)		(375	)
Cash flows from financing activities:
Proceeds from the sale of common stock, net of issuance fees		—			31,936
Proceeds from exercise of stock options		79			68
Cash settlement of performance stock units		(137	)		—
Net cash (used in) provided by financing activities		(58	)		32,004
Effect of exchange rate changes on cash and cash equivalents		(62	)		(30	)
Net decrease in cash and cash equivalents		(13,700	)		28,407
Cash, restricted cash, and cash equivalents, beginning of period		40,086			12,960
Cash, restricted cash, and cash equivalents, end of period	$	26,386		$	41,367

See notes to condensed consolidated financial statements.

Table of Contents

BSQUARE CORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

									*Accumulated*
									*Other*						*Total*
	*Preferred Stock*				*Common Stock*				*Comprehensive*			*Accumulated*			*Shareholders'*
For the Three Months Ended September 30, 2022	*Shares*		*Amount*		*Shares*		*Amount*		*Income (Loss)*			*Deficit*			*Equity*
Balance as of June 30, 2022		—	$	—		20,468,395	$	172,445	$	(1,072	)	$	(133,761	)	$	37,612
Exercise of stock options		—		—		8,125		8		—			—			8
Issuance of common stock upon settlement of restricted stock units (RSUs)		—		—		17,307		—		—			—			—
Stock-based compensation		—		—		—		184		—			—			184
Net loss		—		—		—		—		—			(1,125	)		(1,125	)
Foreign currency translation adjustment, net of tax		—		—		—		—		(14	)		—			(14	)
Balance as of September 30, 2022		—	$	—		20,493,827	$	172,637	$	(1,086	)	$	(134,886	)	$	36,665

									*Accumulated*
									*Other*						*Total*
	*Preferred Stock*				*Common Stock*				*Comprehensive*			*Accumulated*			*Shareholders'*
For the Three Months Ended September 30, 2021	*Shares*		*Amount*		*Shares*		*Amount*		*Income (Loss)*			*Deficit*			*Equity*
Balance as of June 30, 2021		—	$	—		13,479,220	$	140,494	$	(1,035	)	$	(130,573	)	$	8,886
Exercise of stock options		—		—		11,875		14		—			—			14
Issuance of common stock upon settlement of restricted stock units (RSUs)		—		—		72,206		—		—			—			—
Sale of common stock		—		—		6,793,798		31,576		—			—			31,576
Stock-based compensation		—		—		—		218		—			—			218
Net loss		—		—		—		—		—			(895	)		(895	)
Foreign currency translation adjustment, net of tax		—		—		—		16		21			—			37
Balance as of September 30, 2021		—	$

SEC Form 10-Q filed by BSQUARE Corporation