Revenue

We adopted the new revenue recognition accounting standard ASC 606 effective October 1, 2018 on a modified retrospective basis and applied the new standard only to contracts that were not completed contracts prior to October 1, 2018. See Note 1 for a description of our ASC 606 revenue recognition accounting policy. Financial results for reporting periods during fiscal 2019 are presented in compliance with the new revenue recognition standard. Historical financial results for reporting periods prior to fiscal 2019 have not been retroactively restated and are presented in conformity with amounts previously disclosed under ASC 605. This note includes additional information regarding the impacts from the adoption of the new revenue recognition standard on our financial results for the three months ended December 31, 2018. This includes the presentation of financial results during fiscal 2019 under ASC 605 for comparison to the prior year. Our revenue recognition accounting policy for ASC 605 is included in the Company's Annual Report on Form 10-K for the year ended September 30, 2018, which was filed with the SEC on March 15, 2019.

Disaggregation of Revenues

The following table summarizes revenues from contracts with customers for the three months ended December 31, 2018, respectively, (in thousands):



	SOFO		SFI		MSKK		Eliminations			Total

Revenue:

Hardware	$	812	$	139	$	9	$	(110	)	$	850
Software	642		115		198		(117		)	838
Shipping	62		1		—		—			63

Product and other total	1,516		255		207		(227		)	1,751

Support	1,987		189		247		(231		)	2,192
Hosting	1,054		149		353		—			1,556
Events	1,231		38		651		—			1,920
Installs & training	79		4		—		—			83

Services total	4,351		380		1,251		(231		)	5,751

Total revenue	$	5,867	$	635	$	1,458	$	(458	)	$	7,502

Effect of adopting ASC 606

Opening Balance Sheet Adjustment on October 1, 2018

As a result of applying the modified retrospective method to adopt ASC 606, the following amounts on our Condensed Consolidated Balance Sheet (Unaudited) were adjusted as of October 1, 2018 to reflect the cumulative effect adjustment to the opening balance of accumulated deficit (in thousands):



	As reported			ASC 606 adoption			Adjusted
	September 30, 2018			adjustments			October 1, 2018
Capitalized commissions, current	$	—		$	580		$	580
Total current assets	10,825			580			11,405

Capitalized commissions, long-term	—			112			112
Total assets	$	13,583		$	692		$	14,275

Accrued liabilities	1,609			2			1,611
Unearned revenue	11,645			(924		)	10,721
Total current liabilities	16,590			(922		)	15,668

Other long-term liabilities	202			(2		)	200
Long-term portion of unearned revenue	1,691			(75		)	1,616
Total liabilities	20,041			(999		)	19,042

Accumulated deficit	(207,419		)	1,691			(205,728		)
Total stockholders' equity (deficit)	(6,458		)	1,691			(4,767		)
Total liabilities and stockholders' equity (deficit)	$	13,583		$	692		$	14,275

Effect of ASC 606 as of and for the Three Months Ended December 31, 2018

The following table summarizes the effect of adopting ASC 606 on our Condensed Consolidated Balance Sheet (Unaudited) as of December 31, 2018 (in thousands):



							Amounts without
	As reported			ASC 606 adoption			ASC 606 impact
	December 31, 2018			impact			December 31, 2018
Capitalized commissions, current	$	509		$	(509	)	$	—
Total current assets	8,655			(509		)	8,146

Capitalized commissions, long-term	114			(114		)	—
Total assets	$	11,493		$	(623	)	$	10,870

Accrued liabilities	1,013			(2		)	1,011
Unearned revenue	9,009			798			9,807
Total current liabilities	13,844			796			14,640

Other long-term liabilities	186			2			188
Long-term portion of unearned revenue	2,168			74			2,242
Total liabilities	17,822			872			18,694

Accumulated deficit	(207,516		)	(1,495		)	(209,011		)
Total stockholders' equity (deficit)	(6,329		)	(1,495		)	(7,824		)
Total liabilities and stockholders' equity (deficit)	$	11,493		$	(623	)	$	10,870

The following table summarizes the effect of adopting ASC 606 on our Condensed Consolidated Statement of Operations (Unaudited) for the three months ended December 31, 2018 (in thousands):



							Amounts without
	As reported			ASC 606 adoption			ASC 606 impact
	December 31, 2018			impact			December 31, 2018
Product and other revenue	$	1,751		$	126		$	1,877
Total revenue	7,502			126			7,628

Product and other cost of revenue	651			—			651
Total cost of revenue	1,842			—			1,842

Gross margin	5,660			126			5,786

Selling and marketing (operating expenses)	3,943			(70		)	3,873
Loss from operations	(1,654		)	196			(1,458		)
Loss before income taxes	(1,800		)	196			(1,604		)
Net loss	$	(1,788	)	$	196		$	(1,592	)
Net loss attributable to common stockholders	$	(1,841	)	$	196		$	(1,645	)

Loss per common share
-basic	$	(0.36	)	$	0.04		$	(0.32	)
-diluted	$	(0.36	)	$	0.04		$	(0.32	)

The following table summarizes the effect of adopting ASC 606 on our Condensed Consolidated Statement of Cash Flow for the three months ended December 31, 2018 (in thousands):



							Amounts without
	As reported			ASC 606 adoption			ASC 606 impact
	December 31, 2018			impact			December 31, 2018
Cash flows from operating activities:
Net loss	$	(1,788	)	$	196		$	(1,592	)

Changes in operating assets and liabilities:
Capitalized commissions	70			(70		)	—
Unearned revenue	(1,183		)	(126		)	(1,309		)
Net cash used in operating activities	$	248		$	—		$	248

Transaction price allocated to future performance obligations

ASC 606 allows for the use of certain practical expedients, which we have elected and applied to measure our future performance obligations as of December 31, 2018.

As of December 31, 2018, the aggregate amount of the transaction price that is allocated to our future performance obligations was approximately $3.6 million in the next three months, $9.0 million in the next twelve months, and the remaining $2.2 million thereafter.

Disclosures related to our contracts with customers

Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our contracts with customers. We record assets for amounts related to performance obligations that are satisfied but not yet billed and/or collected. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. These liabilities are classified as current and non-current unearned revenue.

Unearned revenues

Unearned revenues represent our obligation to transfer products or services to our client for which we have received consideration, or an amount of consideration is due, from the client. During the three months ended December 31, 2018, revenues recognized related to the amount included in the unearned revenues balance at the beginning of the period was $4.3 million.

Assets recognized from the costs to obtain our contracts with customers

We recognize an asset for the incremental costs of obtaining a contract with a customer. We amortize these deferred costs proportionate with related revenues over the period of the contract. During the three months ended December 31, 2018, amortization expense recognized related to the amount included in the capitalized commissions at the beginning of the period was $249 thousand.