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Note 5. Acquisitions
 12 Months Ended
Sep. 30, 2012
Business Combination Disclosure [Text Block]
5. Acquisitions

Marketnet, Inc.

On May 31, 2012, the Company completed the acquisition of Marketnet, Inc. (“Marketnet”), an interactive technology company based in Dallas, Texas. Bridgeline acquired all of the outstanding capital stock of Marketnet for consideration consisting of (i) $20 thousand in cash and (ii) assumption of debt of $244 thousand and (ii) contingent consideration of up to $650 thousand in cash and 204,331 shares of Bridgeline Digital common stock. The cash consideration was further reduced by $142 thousand due to the Seller’s inability to meet an agreed upon target for working capital. This contingent consideration is payable quarterly over the 12 consecutive calendar quarters following the acquisition, contingent upon the acquired business achieving certain quarterly revenue and quarterly operating income targets during the period. To the extent that either the quarterly revenue target or the quarterly operating income target is not met in a particular quarter, the earn-out period will be extended for up to four additional quarters. Marketnet is also eligible to earn additional bonus equity consideration of 200,000 shares, if annual net revenues of the acquired business exceed a certain threshold in any fiscal year through September 30, 2015. The Company is required to assess the probability of the acquired business achieving the contingent cash and stock payments which requires management to make estimates and judgments based on forecasts of future performance. As a result, the Company estimated and accrued $607 thousand of the contingent cash consideration to be achieved and $262 thousand of the contingent stock consideration (valued at $1.38 per share) to be achieved. The contingent common stock has been issued and is being held in escrow pending satisfaction of the applicable targets. Marketnet’s operating results are reflected in the Company’s condensed consolidated financial statements as of the acquisition date.

Magnetic Corporation

On October 3, 2011, the Company completed the acquisition of Magnetic Corporation (“Magnetic”), a web technology company based in Tampa, Florida. Bridgeline acquired all of the outstanding capital stock of Magnetic for consideration consisting of (i) $150 thousand in cash and (ii) contingent consideration of up to $600 thousand in cash and 166,666 shares of Bridgeline Digital common stock, valued at $150 thousand ($0.90 per share). The cash consideration was further reduced by $100 thousand due to the Seller’s inability to meet an agreed upon target for working capital. The contingent consideration is payable quarterly over the 12 consecutive calendar quarters following the acquisition, contingent upon the acquired business achieving certain quarterly revenue and quarterly operating income targets during the period. The contingent common stock has been issued and is being held in escrow pending satisfaction of the applicable targets.  To the extent that either the quarterly revenue target or the quarterly operating income target is not met in a particular quarter, the earn-out period will be extended for up to four additional quarters. The Company is required to assess the probability of the acquired business achieving the contingent cash and stock payments which requires management to make estimates and judgments based on forecasts of future performance. As a result, the Company estimated and accrued $600 thousand of the contingent cash consideration to be achieved and $150 thousand of the contingent stock consideration to be achieved. Magnetic’s operating results are reflected in the Company’s condensed consolidated financial statements as of the acquisition date, which corresponds to the Company’s commencement of fiscal 2012.

The estimated fair value of net assets acquired from the acquisitions of Marketnet and Magnetic are summarized as follows: 

   
Amount
 
Net assets acquired:
       
Cash
  $ 35  
Accounts Receivable, net
    363  
Other Assets
    265  
Fixed Assets
    91  
Intangible Assets
    1,030  
Goodwill
    1,175  
Total Assets
    2,959  
Current Liabilities
    1,199  
Liabilities, net of current
    73  
Total liabilities assumed
    1,272  
Net assets acquired:
  $ 1,687  
         
Purchase Price:
       
Cash Paid
  $ 70  
Contingent earnouts - payable in cash
    1,206  
Contingent earnouts - payable in common stock
    411  
    $ 1,687  

As part of the Magnetic acquisition, of the $430 thousand allocated to intangible assets, $350 thousand is allocated to customer relationships and $80 thousand is allocated to non-compete agreements, with an average useful life of five years.

As part of the Marketnet acquisition, of the $600 thousand allocated to intangible assets, $440 thousand is allocated to customer relationships and $160 thousand is allocated to non-compete agreements, with an average useful life of five years. These amounts are preliminary and will be adjusted when the formal valuations are completed.

The goodwill recorded as a result of the Magnetic and Marketnet acquisitions are nondeductible for tax purposes.

Contingent earnout liabilities for acquisitions completed after January 1, 2009 were recorded at fair value based on valuation models that utilize relevant factors such as estimated probabilities of the acquisitions achieving the performance targets throughout the earnout period. The following table summarizes the changes in earnout liabilities for the fiscal year ended September 30, 2012:

Balance at September 30, 2011
  $ 1,067  
Contingent earnout liability accruals
    1,458  
Contingent earnout liability payments
    (437 )
Contingent earnout liability valuation adjustment
    (723 )
Balance at September 30, 2012
  $ 1,365  

The following unaudited pro forma financial information reflects the combined results of operations for Bridgeline for the fiscal years ended September 30, 2012 and 2011.  This information does not necessarily reflect the results of operations that would have occurred had the acquisitions taken place at the beginning of the period, and is not necessarily indicative of the results which may be obtained in the future (in thousands, except per share data):

   
Year Ended September 30,
 
   
2012
   
2011
 
Total revenue
  $ 28,019     $ 31,268  
Net loss
    (1,020 )     (678 )
Net loss per share
               
Basic and diluted
  $ (0.08 )   $ (0.06 )
Number of weighted average shares
               
Basic and diluted
    13,135,178       12,311,433