What changed in Bridgeline Digital, Inc.'s 10-K — 2023 vs 2024

Ltd., located in Bangalore, India; Bridgeline Digital Canada, Inc., located in Ontario, Canada; Hawk Search Inc. located in Rosemont, Illinois and Bridgeline Digital Belgium BV, located in Brussels, Belgium. Developments Bridgeline launched multiple new product enhancements this year, particularly in the area of Artificial Intelligence (“AI”) and Generative AI.

The following are key capabilities of Bridgeline's software: Category Feature Capability Smart Search (Retrieval Augmentation) Concept Search NLP Multi-lingual Smart Search (Retrieval Augmentation) Visual Search Image upload via mobile devices Smart Search (Retrieval Augmentation) Image Search Search images with text Smart Response (Generative AI) Smart Summary Prompt driven analysis of results Smart Response (Generative AI) Conversational Search Thread maintained and prompt driven Smart Response (Generative AI) Smart Filters Automated facet selection Smart Tools AI Multiplier Machine learning based on site usage Smart Tools AI Content Assistant Extension to WYSIWYG editor Smart Tools AI Synonym Generator Extension of standard synonym option 4 Table of Contents Products and Services Products Subscription and Perpetual Licenses Bridgeline’s software is available through a cloud-based SaaS model.

HawkSearch’s Keyword Search and Merchandising allows site visitors to search product catalogs and content using keywords and allows markets to improve search results with synonyms, unit of measure conversions, and trending products.

HawkSearch’s Smart Search allows site visitors to search by image upload or phone camera, textual image description, and concept (aka Natural Language Processing) through Retrieval Augmented Generation to get relevant results. HawkSearch’s Smart Response leverages generative AI to summarize, synthesize, compare or start a conversation with the visitor to help find the most relevant results.

We also pursue strategic alliances and partnerships to enhance the sales and distribution opportunities of Bridgeline intellectual property. We currently have partner relationships with platforms such as Adobe, BigCommerce, Optimizely, Sitefinity, Shopify, and others.

Competition The markets for our products and services, including eCommerce platform software, eMarketing software, software for web content management, web analytics software and digital engagement services are highly competitive, fragmented, and rapidly changing. Barriers to entry in such markets remain relatively low. The markets are significantly affected by new product introductions and other market activities of industry participants.

We believe we compete adequately with others and we distinguish ourselves from our competitors in a number of ways, including: ● Many AI software providers are offering a one size fits all solution for their customers which lack customer specific rules and insights, or what we call ‘Merchandising Capabilities’ that power the underlying AI and Machine Learning features.

The information posted on our website is not incorporated by reference into this Annual Report on Form 10-K.

If we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis. We may require additional financing to execute our business plan and further expand our operations. We may require additional funding to further expand our operations.

We have made, and expect to continue making investments in the integration of AI into our platforms, products, and services. However, AI presents various risks, challenges, and potential unintended consequences that could disrupt our ability to effectively integrate and leverage these technologies.

The process of refining and expanding our AI-driven offerings may involve significant costs, and there can be no assurance that our efforts will ultimately succeed. The complexity of AI systems, coupled with rapidly evolving competition in the AI space, introduces significant uncertainty about our ability to successfully integrate and commercialize these technologies.

Competitors may develop more effective or efficient AI solutions, potentially undermining our competitive position. Additionally, the regulatory environment surrounding AI is still in development, and new laws or regulations could emerge that require substantial adjustments to our business practices. These changes could impose unexpected costs or operational disruptions, and the full scope and impact of such regulatory developments remain uncertain.

Furthermore, we rely on third-party vendors that incorporate AI in the products and services they provide to us. As a result, we may not have full visibility or control over the quality, security, performance, or compliance of AI-powered solutions sourced externally.

There is also a risk that the underlying algorithms used by us or our vendors may be flawed, or trained on incomplete or biased datasets, leading to inaccuracies, inefficiencies, or other negative consequences. AI technologies also carry the risk of generating content that is factually incorrect, offensive, or infringing on third-party intellectual property rights.

Any of these factors, whether related to internal AI development, third-party dependencies, or regulatory changes, could have a material adverse effect on our business, financial performance, and operations.

If our security measures or those of our third-party cloud computing platform provider are breached and unauthorized access is obtained to a customer ’ s data, our services may be perceived as not being secure, and we may incur significant legal and financial exposure and liabilities.

The average shares traded per day in fiscal 2024 was approximately 41,000 shares p er day compared to approximately 56,000 for fiscal 2023, and 286,000 for fiscal 2022.

Such corrective actions could include a reverse stock split, which may adversely affect the liquidity of our common stock.

We have issued preferred stock with rights senior to our common stock, and may issue additional preferred stock in the future, in order to consummate a merger or other transaction necessary to continue as a going concern.

Item 1C. Cybersecurity. Risk Management and Strategy Our cybersecurity and risk management program is intended to protect the confidentiality, integrity, and availability of our critical information systems and the data resident on them.

We have designed our IT systems and processes with the intention that our solutions should defend against the ever-evolving threat landscape while remaining agile to keep up with such threats.

We have established processes for assessing, identifying and managing cybersecurity risks, which are built into our information technology function and are designed to safeguard our information assets and operations from internal and external cyber threats, including protecting employee information from unauthorized access to or attacks on our networks and systems.

These processes include physical, procedural and technical safeguards, response plans, regular tests on our systems, incident simulations and routine reviews of our policies and procedures to identify risks and enhance our practices. We also employ processes to identify material risks from cybersecurity threats associated with our use of third-party service providers.

In an effort to deter and detect cyber threats, we periodically provide training programs to our employees on issues related to privacy and data protection, cybersecurity risks, and the importance of reporting all incidents immediately. Topics include identifying phishing, password protection, securing confidential data, and mobile security.

In addition, we use technology-based tools to mitigate cybersecurity risks and to bolster our employee-based cybersecurity programs. We also perform annual vulnerability assessments, conducted by independent, third-party cybersecurity firms. Additionally, as part of our overall risk mitigation strategy, the Company obtains certain insurance policies.

However, such insurance may not be sufficient in type or amount to cover us fully against claims related to security breaches, cyber-attacks and other related breaches. An incident response plan has been established which provides detailed information on actions to take in the event of an incident.

The incident response plan includes the scope of the plan, establishes the incident response team, details the incident response lifecycle, and provides templates to make the process easier to document and follow. Timelines, communication methods, and notification information are included in the plan to ensure the process can be followed in high pressure situations which can occur during incidents.

Governance The Audit Committee of our Board of Directors provides direct cybersecurity risk oversight. Our management provides timely disclosure and related updates to the Audit Committee regarding potential cybersecurity threats, incidents and general risks.

Our management periodically evaluates information on evolving cybersecurity risks and, based on its assessment of the processes the Company has put in place, does not believe there are currently any known risks from cybersecurity threats that are reasonably likely to materially affect us or our business strategy, results of operations, or financial condition.

Further, we have not had any cybersecurity incidents in 2024, and through the date of filing of this Form 10-K. While prior incidents have not had a material impact on us, future incidents could have a material adverse effect on our business, results of operations and cash flows.

For additional information about our cybersecurity risks, see Item 1A — Risk Factors on this Annual Report on Form 10-K.