bsqr20210930

bsqr20210930_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, 2021

☐	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, 2021: 20,357,099

Table of Contents

BSQUARE CORPORATION

FORM 10-Q

For the Quarterly Period Ended September 30, 2021

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION

Item 1	Financial Statements	3

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4	Controls and Procedures	21

	PART II. OTHER INFORMATION

Item 1A	Risk Factors	22

Item 6	Exhibits	23

	Signatures	24

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

BSQUARE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	*September 30, 2021*			*December 31, 2020*
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	41,030		$	12,623
Restricted cash		337			337
Accounts receivable, net of allowance for doubtful accounts of $50 and $50 at September 30, 2021 and December 31, 2020, respectively		5,992			6,177
Contract assets		33			456
Prepaid expenses and other current assets		562			409
Total current assets		47,954			20,002
Property and equipment, net of accumulated depreciation		705			322
Deferred tax assets		—			7
Intangible assets, net of accumulated amortization		—			71
Right-of-use lease asset, net		1,660			1,853
Other non-current assets		24			27
Total assets	$	50,343		$	22,282
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Third-party software fees payable	$	6,407		$	6,458
Accounts payable		400			489
Paycheck Protection Program loan		—			950
Accrued compensation		424			717
Other accrued expenses		147			216
Deferred revenue		1,098			2,088
Operating lease		354			344
Total current liabilities		8,830			11,262
Deferred revenue, long-term		247			28
Operating lease, long-term		1,430			1,630
Paycheck Protection Program loan, long-term		—			634

Shareholders' equity:
Preferred stock, no par: 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, no par: 37,500,000 shares authorized: 20,357,099 and 13,235,038 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		172,318			139,726
Accumulated other comprehensive loss		(1,014	)		(992	)
Accumulated deficit		(131,468	)		(130,006	)
Total shareholders' equity		39,836			8,728
Total liabilities and shareholders' equity	$	50,343		$	22,282

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,*
	*2021*			*2020*			*2021*			*2020*
Revenue:
Partner Solutions	$	9,638		$	9,145		$	28,393		$	33,160
Edge to Cloud		1,008			1,275			2,896			2,913
Total revenue		10,646			10,420			31,289			36,073
Cost of revenue:
Partner Solutions		8,491			7,402			24,528			27,502
Edge to Cloud		827			1,128			2,648			3,050
Total cost of revenue		9,318			8,530			27,176			30,552
Gross profit		1,328			1,890			4,113			5,521
Operating expenses:
Selling, general and administrative		1,786			1,987			6,209			6,951
Research and development		408			41			941			222
Total operating expenses		2,194			2,028			7,150			7,173
Loss from operations		(866	)		(138	)		(3,037	)		(1,652	)
Other (loss) income, net		(29	)		2			1,575			(31	)
Loss before income taxes		(895	)		(136	)		(1,462	)		(1,683	)
Income taxes		—			—			—			—
Net loss	$	(895	)	$	(136	)	$	(1,462	)	$	(1,683	)
Basic loss per share	$	(0.05	)	$	(0.01	)	$	(0.09	)	$	(0.13	)
Diluted loss per share	$	(0.05	)	$	(0.01	)	$	(0.09	)	$	(0.13	)
Shares used in per share calculations:
Basic		19,603			13,165			15,419			13,205
Diluted		19,603			13,165			15,419			13,205

Net loss	$	(895	)	$	(136	)	$	(1,462	)	$	(1,683	)
Other comprehensive gain (loss)
Foreign currency translation, net of tax		37			11			(30	)		(27	)
Unrealized loss on investments, net of tax		—			(3	)		—			(3	)
Total other comprehensive gain (loss)		37			8			(30	)		(30	)
Comprehensive loss	$	(858	)	$	(128	)	$	(1,492	)	$	(1,713	)

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,*
	*2021*			*2020*
Cash flows from operating activities:
Net loss	$	(1,462	)	$	(1,683	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		409			494
Stock-based compensation		596			601
Gain on extinguishment of PPP loan		(1,584)			—
Changes in operating assets and liabilities:
Accounts receivable, net		185			3,702
Contract assets		(33	)		123
Prepaid expenses and other assets		(33	)		(342	)
Third-party software fees payable		(51	)		(1,502	)
Accounts payable and accrued expenses		(451	)		(314	)
Operating lease		3			(15	)
Deferred revenue		(771	)		(310	)
Net cash (used in) provided by operating activities		(3,192	)		754
Cash flows from investing activities:
Additions to property and equipment		(375	)		(374	)
Proceeds from maturities of short-term investments		—			2,250
Net cash (used in) provided by investing activities		(375	)		1,876
Cash flows from financing activities:
Proceeds from Paycheck Protection Program loan		—			1,580
Proceeds from sale of common stock, net of issuance fees		31,936			—
Proceeds from exercise of stock options		68			—
Net cash provided by financing activities		32,004			1,580
Effect of exchange rate changes on cash and cash equivalents		(30	)		50
Net increase in cash and cash equivalents		28,407			4,260
Cash, restricted cash, and cash equivalents, beginning of period		12,960			8,312
Cash, restricted cash, and cash equivalents, end of period	$	41,367		$	12,572

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, 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
Vesting of restricted stock awards		—		—		72,206		—		—			—			—
Sale of common stock		—		—

SEC Form 10-Q filed by BSQUARE Corporation