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 and six months ended March 31, 2019. 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 and six months ended March 31, 2019, respectively, (in thousands):



	Three Months Ended March 31, 2019
	SOFO		SFI		MSKK		Eliminations			Total

Revenue:

Hardware	$	784	$	35	$	376	$	(189	)	$	1,006
Software	618		124		120		(159		)	703
Shipping	87		—		—		—			87

Product and other total	1,489		159		496		(348		)	1,796

Support	1,961		145		976		(241		)	2,841
Hosting	1,062		115		513		—			1,690
Events	850		38		742		—			1,630
Installs and training	29		11		—		—			40

Services total	3,902		309		2,231		(241		)	6,201

Total revenue	$	5,391	$	468	$	2,727	$	(589	)	$	7,997



	Six Months Ended March 31, 2019
	SOFO		SFI		MSKK		Eliminations			Total

Revenue:

Hardware	$	1,598	$	174	$	385	$	(300	)	$	1,857
Software	1,260		239		318		(276		)	1,541
Shipping	148		1		—		—			149

Product and other total	3,006		414		703		(576		)	3,547

Support	3,948		334		1,222		(472		)	5,032
Hosting	2,116		264		866		—			3,246
Events	2,081		76		1,394		—			3,551
Installs & training	108		15		—		—			123

Services total	8,253		689		3,482		(472		)	11,952

Total revenue	$	11,259	$	1,103	$	4,185	$	(1,048	)	$	15,499

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 March 31, 2019 and for the Three and Six Months Ended March 31, 2019

The following table summarizes the effect of adopting ASC 606 on our Condensed Consolidated Balance Sheet (Unaudited) as of March 31, 2019 (in thousands):



							Amounts without
	As reported			ASC 606 adoption			ASC 606 impact
	March 31, 2019			impact			March 31, 2019
Capitalized commissions, current	$	459		$	(459	)	$	—
Prepaid expenses and other current assets	968			—			968
Total current assets	10,600			(459		)	10,141

Capitalized commissions, long-term	129			(129		)	—
Total assets	$	13,324		$	(588	)	$	12,736

Accrued liabilities	1,595			(2		)	1,593
Unearned revenue	8,301			777			9,078
Total current liabilities	13,154			775			13,929

Other long-term liabilities	174			2			176
Long-term portion of unearned revenue	2,329			74			2,403
Total liabilities	20,422			851			21,273

Accumulated deficit	(209,002		)	(1,439		)	(210,441		)
Total stockholders' equity (deficit)	(7,098		)	(1,439		)	(8,537		)
Total liabilities and stockholders' equity (deficit)	$	13,324		$	(588	)	$	12,736

The following tables summarize the effects of adopting ASC 606 on our Condensed Consolidated Statement of Operations (Unaudited) for the three and six months ended March 31, 2019, respectively (in thousands):



	As reported						Amounts without
	Three Months Ended			ASC 606 adoption			ASC 606 impact
	March 31, 2019			impact			March 31, 2019
Product and other revenue	$	1,796		$	20		$	1,816
Total revenue	7,997			20			8,017

Product and other cost of revenue	645			—			645
Total cost of revenue	2,004			—			2,004

Gross margin	5,993			20			6,013

Selling and marketing (operating expenses)	3,836			(35		)	3,801
Loss from operations	(1,123		)	55			(1,068		)
Loss before income taxes	(1,361		)	55			(1,306		)
Net loss	$	(1,486	)	$	55		$	(1,431	)
Net loss attributable to common stockholders	$	(1,531	)	$	55		$	(1,476	)

Loss per common share
-basic	$	(0.29	)	$	0.01		$	(0.28	)
-diluted	$	(0.29	)	$	0.01		$	(0.28	)



	As reported						Amounts without
	Six Months Ended			ASC 606 adoption			ASC 606 impact
	March 31, 2019			impact			March 31, 2019
Product and other revenue	$	3,547		$	146		$	3,693
Total revenue	15,499			146			15,645

Product and other cost of revenue	1,296			—			1,296
Total cost of revenue	3,846			—			3,846

Gross margin	11,653			146			11,799

Selling and marketing (operating expenses)	7,779			(105		)	7,674
Loss from operations	(2,777		)	251			(2,526		)
Loss before income taxes	(3,161		)	251			(2,910		)
Net loss	$	(3,274	)	$	251		$	(3,023	)
Net loss attributable to common stockholders	$	(3,372	)	$	251		$	(3,121	)

Loss per common share
-basic	$	(0.64	)	$	0.05		$	(0.59	)
-diluted	$	(0.64	)	$	0.05		$	(0.59	)

The following table summarizes the effect of adopting ASC 606 on our Condensed Consolidated Statement of Cash Flow for the six months ended March 31, 2019 (in thousands):



							Amounts without
	As reported			ASC 606 adoption			ASC 606 impact
	March 31, 2019			impact			March 31, 2019
Cash flows from operating activities:
Net loss	$	(3,274	)	$	251		$	(3,023	)

Changes in operating assets and liabilities:
Capitalized commissions	105			(105		)	—
Prepaid expenses and other current assets	(25		)	—			(25		)
Unearned revenue	(1,704		)	(146		)	(1,850		)
Net cash used in operating activities	$	(3,251	)	$	—		$	(3,251	)

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 March 31, 2019.

As of March 31, 2019, the aggregate amount of the transaction price that is allocated to our future performance obligations was approximately $3.5 million in the next three months, $8.3 million in the next twelve months, and the remaining $2.3 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 and six months ended March 31, 2019, revenues recognized related to the amount included in the unearned revenues balance at the beginning of the period was $6.9 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 and six months ended March 31, 2019, amortization expense recognized related to the amount included in the capitalized commissions at the beginning of the period was $396 thousand.