bsqr20230331

bsqr20230331_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 March 31, 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.)

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 April 30, 2023: 19,986,485

		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	19

Item 4	Controls and Procedures	19

	PART II. OTHER INFORMATION

Item 1A	Risk Factors	19

Item 6	Exhibits	19

	Signatures	20

	*March 31, 2023*			*December 31, 2022*
ASSETS
Current assets:
Cash and cash equivalents	$	7,520		$	35,414
Restricted cash		221			221
Short-term investments		26,211			7
Accounts receivable, net of allowance for doubtful accounts of $50 at March 31, 2023 and December 31, 2022		4,764			3,985
Contract assets		138			51
Prepaid expenses and other current assets		701			410
Total current assets		39,555			40,088
Property and equipment, net of accumulated depreciation		737			813
Right-of-use lease assets, net		1,234			1,297
Other non-current assets		24			24
Total assets	$	41,550		$	42,222
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Third-party software fees payable	$	4,273		$	4,073
Accounts payable		165			414
Accrued compensation		322			430
Other accrued expenses		258			232
Deferred revenue		179			252
Operating lease		367			362
Total current liabilities		5,564			5,763
Deferred revenue, long-term		7			9
Operating lease, long-term		981			1,051

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: 20,075,395 and 20,337,906 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		172,232			172,558
Accumulated other comprehensive loss		(1,057	)		(1,053	)
Accumulated deficit		(136,177	)		(136,106	)
Total shareholders' equity		34,998			35,399
Total liabilities and shareholders' equity	$	41,550		$	42,222

	*Three Months Ended March 31,*
	*2023*			*2022*
Revenue:
Partner Solutions	$	7,267		$	9,132
Edge to Cloud		874			600
Total revenue		8,141			9,732
Cost of revenue:
Partner Solutions		6,187			7,552
Edge to Cloud		669			697
Total cost of revenue		6,856			8,249
Gross profit		1,285			1,483
Operating expenses:
Selling, general and administrative		1,449			2,143
Research and development		284			261
Total operating expenses		1,733			2,404
Loss from operations		(448	)		(921	)
Other income (expense), net		377			33
Loss before income taxes		(71	)		(888	)
Income taxes		—			—
Net loss	$	(71	)	$	(888	)
Basic and diluted loss per share	$	(0.00	)	$	(0.05	)
Shares used in per share calculations:
Basic and diluted		20,197			16,665

Net loss	$	(71	)	$	(888	)
Other comprehensive loss
Foreign currency translation, net of tax		(4	)		3
Total other comprehensive (loss) income		(4	)		3
Comprehensive loss	$	(75	)	$	(885	)

											*Accumulated*
											*Other*						*Total*
	*Preferred Stock*				*Common Stock*						*Comprehensive*			*Accumulated*			*Shareholders'*
For the Three Months Ended March 31, 2023	*Shares*		*Amount*		*Shares*			*Amount*			*Income (Loss)*			*Deficit*			*Equity*
Balance as of December 31, 2022		—	$	—		20,337,906		$	172,558		$	(1,053	)	$	(136,106	)	$	35,399
Exercise of stock options		—		—		24,167			25			—			—			25
Issuance of common stock upon settlement of restricted stock units (RSUs)		—		—		16,960			—			—			—			—
Repurchase of common stock		—		—		(303,638	)		(366	)		—			—			(366	)
Stock-based compensation		—		—		—			15			—			—			15
Net loss		—		—		—			—			—			(71	)		(71	)
Foreign currency translation adjustment, net of tax		—		—		—			—			(4	)		—			(4	)
Balance as of March 31, 2023		—	$	—		20,075,395		$	172,232		$	(1,057	)	$	(136,177	)	$	34,998

	Three Months Ended March 31,
	2023		2022
Stock options		1,216,055		991,588
Restricted stock units		25,555		22,898

	*Three Months Ended March 31, 2023*						*Three Months Ended March 31, 2022*
	*Partner*		*Edge to*				*Partner*		*Edge to*
	*Solutions*		*Cloud*		*Total*		*Solutions*		*Cloud*		*Total*
Primary geographic area:
North America	$	6,883	$	809	$	7,692	$	8,205	$	563	$	8,768
Europe		75		65		140		91		37		128
Asia		309		—		309		836		—		836
Total	$	7,267	$	874	$	8,141	$	9,132	$	600	$	9,732

	*Three Months Ended March 31, 2023*			*Three Months Ended March 31, 2022*
	*Contract*			*Contract*
	*Assets*			*Assets*
Balance at beginning of period	$	—		$	46
Revenue recognized		132			16
Amounts invoiced		(45	)		(45	)
Reclassifications and other		51			—
Balance at end of period	$	138		$	17

	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
	Deferred			Deferred
	Revenue			Revenue
Balance at beginning of period	$	210		$	1,138
Revenue recognized		(154	)		(269	)
Amounts collected or invoiced		80			295
Reclassifications and other		50			—
Balance at end of period	$	186		$	1,164

	Remainder of
	2023		2024		2025		2026		2027
Edge to Cloud	$	1,447,321	$	1,338,649	$	—	$	—	$	—

	*March 31, 2023*		*December 31, 2022*
Cash	$	2,092	$	2,243
Cash equivalents (see detail in Note 4)		5,428		33,171
Restricted cash (see detail in Note 4)		221		221
Total cash, cash equivalents and restricted cash		7,741		35,635
Short-term investments		26,211		7
Total cash, cash equivalents, restricted cash and short-term investments	$	33,952	$	35,642

							*Gross*		*Gross*
	*Amortized*		*Allowance for*		*Net carrying*		*unrealized*		*unrealized*		*Fair*
	*cost*		*credit losses*		*amount*		*gains*		*losses*		*value*
U.S. treasury securities	$	26,211	$	—	$	26,211	$	13	$	—	$	26,224
Total	$	26,211	$	—	$	26,211	$	13	$	—	$	26,224

	March 31, 2023				December 31, 2022
	Quoted Prices in				Quoted Prices in
	Active Markets				Active Markets
	for Identical				for Identical
	Assets (Level 1)		Total		Assets (Level 1)		Total
Assets
Cash equivalents:
Money market funds	$	5,428	$	5,428	$	13,461	$	13,461
U.S. treasury securities		—		—		19,710		19,710
Total cash equivalents		5,428		5,428		33,171		33,171
Restricted cash:
Money market funds		221		221		221		221
Total assets measured at fair value	$	5,649	$	5,649	$	33,392	$	33,392

Years Ending December 31,
2023, remainder of year	$	276
2024		373
2025		362
2026		276
2027		164
Total minimum lease payments		1,451
Less: amount representing interest		(103	)
Present value of lease liabilities	$	1,348

	*Three Months Ended March 31,*
	*2023*			*2022*
Dividend yield		0	%		0	%
Expected life (years)		5.9			4.9
Expected volatility		96	%		111	%
Risk-free interest rate		2.9	%		1.8	%

	*Three Months Ended*		*Three Months Ended*
Total component lease expense was as follows:	*March 31, 2023*		*March 31, 2022*
Operating leases	$	101	$	75
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities	$	110	$	77

	*March 31, 2023*			*March 31, 2022*
Right-of-use lease assets	$	1,234		$	1,522

Current portion of operating lease liability	$	367		$	358
Operating lease liability, net of current portion		981			1,286
Total operating lease liabilities	$	1,348		$	1,644

Weighted-average remaining lease term (years)		4.0			4.9
Weighted-average discount rate		8.5	%		8.5	%

						*Weighted*
						*Average*
				*Weighted*		*Remaining*
				*Average*		*Contractual*		*Aggregate*
	*Number of*			*Exercise*		*Life*		*Intrinsic*
	*Shares*			*Price*		*(in years)*		*Value*
Balance at December 31, 2022		1,539,278		$	2.05		5.17	$	43,783
Granted		—			—
Exercised		(24,167	)		1.02
Forfeited		(40,026	)		1.39
Expired		(92,839	)		2.75
Balance at March 31, 2023		1,382,246			2.05		5.39		25,642
Vested and expected to vest at March 31, 2023		1,382,246			2.05		5.39		25,642
Exercisable at March 31, 2023		1,133,477			2.16		4.87		18,908

	*Number of*			*Weighted Average*
	*Shares*			*Award Price*
Unvested at December 31, 2022		45,109		$	3.25
Granted		—			—
Vested		(16,960	)		3.25
Forfeited		(7,692	)		3.25
Unvested at March 31, 2023		20,457			3.25
Expected to vest after March 31, 2023		20,457			3.25

	*March 31, 2023*
Stock options outstanding		1,382,246
Restricted stock units and performance stock units outstanding		270,457
Stock options and restricted stock units available for future grant		920,743
Common stock reserved for future issuance		2,573,446

	*March 31, 2023*		*December 31, 2022*
Property and equipment, net:
North America	$	737	$	813
Europe		—		—
Total property and equipment, net	$	737	$	813

	Three Months Ended March 31,
(In thousands, except percentages)	2023			2022			$ Change			% Change
Total revenue	$	8,141		$	9,732		$	(1,591	)		(16	)
Total cost of revenue		6,856			8,249			(1,393	)		(17	)
Gross profit		1,285			1,483			(198	)		(13	)
Operating expenses		1,733			2,404			(671	)		(28	)
Loss from operations		(448	)		(921	)		473			(51	)
Other income, net		377			33			344			1,042
(Loss) income before income taxes		(71	)		(888	)		817			(92	)
Income taxes		—			—			—			—
Net (loss) income	$	(71	)	$	(888	)	$	817			(92	)

SEC Form 10-Q filed by BSQUARE Corporation