bsqr20230930

bsqr20230930_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, 2023

☐	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.)

PO Box 59478, Renton, WA		98058
(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, 2023: 19,870,527

Table of Contents

BSQUARE CORPORATION

FORM 10-Q

For the Quarterly Period Ended September 30, 2023

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	18

Item 4	Controls and Procedures	18

	PART II. OTHER INFORMATION

Item 1	Legal Proceedings	18

Item 1A	Risk Factors	18

Item 6	Exhibits	20

	Signatures	21

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, 2023*			*December 31, 2022*
ASSETS
Current assets:
Cash and cash equivalents	$	8,816		$	35,414
Restricted cash		222			221
Short-term investments		22,796			7
Accounts receivable, net of allowance for doubtful accounts of $50 at September 30, 2023 and December 31, 2022		5,703			3,985
Contract assets		376			—
Prepaid expenses and other current assets		398			410
Total current assets		38,311			40,037
Property and equipment, net of accumulated depreciation		473			813
Right-of-use lease assets, net		732			1,297
Other non-current assets		24			24
Total assets	$	39,540		$	42,171
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Third-party software fees payable	$	3,926		$	4,073
Accounts payable		290			414
Accrued compensation		238			430
Other accrued expenses		276			232
Deferred revenue		81			201
Operating lease		373			362
Total current liabilities		5,184			5,712
Deferred revenue, long-term		—			9
Operating lease, long-term		824			1,051
Other liabilities, long-term		14			—

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: 19,870,527 and 20,337,906 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		172,158			172,558
Accumulated other comprehensive loss		(1,070	)		(1,053	)
Accumulated deficit		(137,570	)		(136,106	)
Total shareholders' equity		33,518			35,399
Total liabilities and shareholders' equity	$	39,540		$	42,171

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,*
	*2023*			*2022*			*2023*			*2022*
Revenue:
Partner Solutions	$	8,634		$	7,557		$	21,652		$	26,042
Edge to Cloud		658			849			2,306			2,490
Total revenue		9,292			8,406			23,958			28,532
Cost of revenue:
Partner Solutions		7,681			6,574			18,375			22,232
Edge to Cloud		616			697			1,931			2,083
Total cost of revenue		8,297			7,271			20,306			24,315
Gross profit		995			1,135			3,652			4,217
Operating expenses:
Selling, general and administrative		2,250			2,030			5,440			6,195
Research and development		297			259			864			776
Total operating expenses		2,547			2,289			6,304			6,971
Loss from operations		(1,552	)		(1,154	)		(2,652	)		(2,754	)
Other income, net		419			29			1,188			116
Loss before income taxes		(1,133	)		(1,125	)		(1,464	)		(2,638	)
Income taxes		—			—			—			—
Net loss	$	(1,133	)	$	(1,125	)	$	(1,464	)	$	(2,638	)
Basic and diluted loss per share	$	(0.06	)	$	(0.05	)	$	(0.07	)	$	(0.13	)
Shares used in per share calculations:
Basic and diluted		19,849			20,470			19,996			20,441

Net loss	$	(1,133	)	$	(1,125	)	$	(1,464	)	$	(2,638	)
Other comprehensive loss
Foreign currency translation, net of tax		(8	)		(14	)		(18	)		(62	)
Total other comprehensive loss		(8	)		(14	)		(18	)		(62	)
Comprehensive loss	$	(1,141	)	$	(1,139	)	$	(1,482	)	$	(2,700	)

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,*
	*2023*			*2022*
Cash flows from operating activities:
Net loss	$	(1,464	)	$	(2,638	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		391			311
Loss on sale of property and equipment		98			—
Loss on impairment of right-of-use lease assets		363			—
Accretion of discount on investments		(723	)		—
Stock-based compensation		233			298
Changes in operating assets and liabilities:
Accounts receivable		(1,718	)		300
Contract assets		(376	)		(5	)
Prepaid expenses and other assets		13			(191	)
Third-party software fees payable		(147	)		425
Accounts payable and accrued expenses		(272	)		(248	)
Deferred revenue		(129	)		(749	)
Net cash used in operating activities		(3,731	)		(2,497	)
Cash flows from investing activities:
Additions to property and equipment		(149	)		(406	)
Proceeds from short-term investments		31,750			—
Purchases of short-term investments		(53,816	)		(10,677	)
Net cash used in investing activities		(22,215	)		(11,083	)
Cash flows from financing activities:
Proceeds from exercise of stock options		26			79
Cash settlement of performance stock units		—			(137	)
Repurchases of common stock		(659	)		—
Net cash used in financing activities		(633	)		(58	)
Effect of exchange rate changes on cash and cash equivalents		(18	)		(62	)
Net decrease in cash and cash equivalents		(26,597	)		(13,700	)
Cash, restricted cash, and cash equivalents, beginning of period		35,635			40,086
Cash, restricted cash, and cash equivalents, end of period	$	9,038		$	26,386

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, 2023

Shares

Amount

Shares

SEC Form 10-Q filed by BSQUARE Corporation