Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and with the instructions to Form

-Q and Regulation S-

and in the opinion of the Company’s management these condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments and accruals, necessary for the fair presentation. The operating results for the

three

and

nine

months ended

June 30, 2019

are

not

necessarily indicative of the results to be expected for the year ending

September 30, 2019.

The accompanying

September 30, 2018

Condensed Consolidated Balance Sheet has been derived from the audited financial statements at that date, but does

not

include all of the information and footnotes required by US GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form

-K for the year ended

September 30, 2018

filed with the Securities and Exchange Commission on

December 28, 2018.

Revenue Recognition

May 2014,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”)

No.

2014

09,

Revenue from Contracts with Customers: Topic

606

(ASU

2014

or ASC

606

), to supersede nearly all existing revenue recognition guidance under U.S. GAAP, which became effective for the Company on

October 1, 2018.

The core principle of ASU

2014

is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU

2014

defines a

five

-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates

may

be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Under ASC

606,

revenue is recognized when a customer obtains control of a promised good or service and is recognized in an amount that reflects the consideration that the entity expects to receive in exchange for the good or service. In addition, ASC

606

also includes subtopic ASC

340

40,

Other Assets and Deferred Costs- Contracts with Customers

, referred to herein as ASC

340

40,

which provides guidance on accounting for certain revenue related costs including costs associated with obtaining and fulfilling a contract, discussed further below.

The Company adopted the new revenue guidance using the modified retrospective method applied to those contracts which were

not

completed as of

October 1, 2018.

Results for reporting periods beginning after

September 30, 2018

are presented under the new guidance, while prior period amounts are

not

adjusted and continue to be reported in accordance with historic revenue guidance. The Company applied the new standard using practical expedients where:

	●	the measurement of the transaction price excludes all taxes assessed by governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer;
	●	the new revenue guidance has been applied to portfolios of contracts with similar characteristics;
	●	the modified retrospective approach has been applied only to contracts that are not completed contracts at the date of initial adoption; and
	●	the value of unsatisfied performance obligations for contracts with an original expected length of one year or less has not been disclosed.

Revenue recognition from the Company’s primary revenue streams remained substantially unchanged following adoption of ASC

606

and therefore did

not

have a material impact on its revenues. The impact of applying the new guidance in fiscal

2019

versus the prior guidance resulted in a change to the period over which sales commissions are amortized to incorporate an estimated customer life. This resulted in a longer amortization period for deferred commission expense, which reduces expense compared to the application of the prior guidance.

Upon adoption, Other current assets increased by

$59

due to the capitalization of the current portion of sales commissions and Other assets increased by

$27

due to the capitalization of the noncurrent portion of sales commissions. Retained earnings decreased by

$86

as a net result of these adjustments. The comparative information has

not

been restated and continues to be reported under the accounting standards in effect for those periods.

The following tables summarize the impact of adopting ASC

606

on the Company’s condensed consolidated financial statements during the

nine

months ended and as of

June 30, 2019:

	As of June 30, 2019

	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Balance Sheet
Assets
Other current assets	$	89			38		$	51
Other assets		103			27			76
Equity
Retained earnings	$	(72,101	)		(65	)	$	(72,166	)

	Three Months Ended June 30, 2019							Nine Months Ended June 30, 2019

	As Reported		Adjustments			As If Presented Under ASC 605		As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Operations
Sales and Marketing	$	1,268	$	(21	)	$	1,247	$	3,083		$	(12	)	$	3,071
Net income/(loss)	$	7,311	$	(21	)	$	7,332	$	(10,166	)	$	(12	)	$	(10,154	)
Net income/(loss) per share
Basic	$	3.62	$	0.01		$	3.63	$	(12.38	)	$	(0.02	)	$	(12.36	)
Diluted	$	3.56	$	0.01		$	3.57	$	(12.38	)	$	(0.02	)	$	(12.36	)

	Nine Months Ended June 30, 2019

	As Reported			Adjustments			As If Presented Under ASC 605
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities
Net loss	$	(10,166	)	$	(12	)	$	(10,154	)
Other current assets and other assets	$	129		$	12		$	141

The Company derives its revenue from

three

sources: (i) Software Licenses, which are comprised of subscription fees ("SaaS"), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering and (iii) hosting of perpetual licenses. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS” and do

not

take possession of the software.

Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. If the consideration promised in a contract includes a variable amount, for example, overage fees, contingent fees or service level penalties, the Company includes an estimate of the amount it expects to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will

not

occur. The Company’s subscription service arrangements are non-cancelable and do

not

contain refund-type provisions. Revenue is reported net of applicable sales and use tax.

The Company recognizes revenue from contracts with customers using a

five

-step model, which is described below:

•

Identify the customer contract;

•

Identify performance obligations that are distinct;

•

Determine the transaction price;

•

Allocate the transaction price to the distinct performance obligations; and

•

Recognize revenue as the performance obligations are satisfied.

Identify the customer contract

A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability and consideration is probable.

Identify performance obligations that are distinct

A performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.

Determine the transaction price

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding sales taxes that are collected on behalf of government agencies.

Allocate the transaction price to the distinct performance obligations

The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services being provided to the customer. The Company determines the SSP of its goods and services based upon the historical average sales prices for each type of software license and professional services sold.

Recognize revenue as the performance obligations are satisfied

Revenues are recognized when or as control of the promised goods or services is transferred to customers. Revenue from SaaS licenses is recognized ratably over the subscription period beginning on the date the license is made available to customers. Most subscription contracts are

three

-year terms. Customers who license the software on a perpetual basis receive rights to use the software for an indefinite time period and an option to purchase post-customer support (“PCS”). PCS revenue is recognized ratably on a straight-line basis over the period of performance and the perpetual license is recognized upon delivery. The Company also offers hosting services for those customers who purchase a perpetual license and do

not

want to run the software in their environment. Revenue from hosting is recognized ratably over the service period, ranging from

one

three

-year terms. The Company recognizes revenue from professional services as the services are provided.

Disaggregation of Revenue

The Company provides disaggregation of revenue based on geography and product groupings within the notes (Note

) as it believes this best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Deferred Revenue

Amounts that have been invoiced are recorded in accounts receivable and deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has

not

yet been recognized. Deferred revenue that will be recognized during the succeeding

-month period is recorded as current deferred revenue, and the remaining portion is recorded as noncurrent deferred revenue included in Other long-term liabilities. Deferred revenue during the

nine

months ended

June 30, 2019

increased by

$1.2

million. As of

June 30, 2019,

approximately

$13

of revenue is expected to be recognized from remaining performance obligations for contracts with original performance obligations that exceed

one

year. The Company expects to recognize revenue on approximately

99%

of these remaining performance obligations over the next

months, with the balance recognized thereafter.

	Deferred Revenue
	Current		Long Term
Balance as of October 1, 2018	$	594	$	20
Increase(decrease)		341		(7	)
Balance as of December 31, 2018		935		13
Increase(decrease)		417		(5	)
Balance as of March 31, 2019		1,352		8
Increase(decrease)		480		5
Balance as of June 30, 2019	$	1,832	$	13

Deferred

Capitalized

Commission

Costs

The incremental direct costs of obtaining a contract, which primarily consist of sales commissions paid for new subscription contracts are deferred and amortized on a straight-line basis over a period of approximately

three

years. The Company evaluated both qualitative and quantitative factors, including the estimated life cycles of its offerings, renewal rates, and its customer attrition to determine the amortization periods for the capitalized costs. The initial amortization period will generally be the customer contract term, which is typically

thirty-six

(

) months, with some exceptions. Deferred capitalized commission expense that will be recorded as expense during the succeeding

-month period is recorded as current deferred capitalized commission costs, and the remaining portion is recorded as long-term deferred capitalized commission costs. Total deferred capitalized commissions were

$66

as of the quarter ended

June 30, 2019

compared to

$77

as of the year ended

September 30, 2018.

Current deferred capitalized commission costs are included in Other current assets in the Condensed Consolidated Balance Sheet and noncurrent deferred capitalized commission costs are included in Other assets in the Condensed Consolidated Balance Sheet. Amortization expense for the

three

and

nine

months ended

June 30, 2019

was

$19

and

$53,

respectively.

Accounting Pronouncements Pending Adoption

Leases

February 2016,

the FASB issued ASU

No.

2016

02,

which is guidance on accounting for leases. ASU

No.

2016

requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after

December 15, 2018.

Early adoption is permitted. The Company is evaluating the impact of the guidance on its consolidated financial position, results of operations and related disclosures.

Earnings Per Share

July 2017,

the FASB issued ASU

No.

2017

11,

which simplifies the accounting for certain financial instruments with down round features. This new standard will reduce income statement volatility for many companies that issue warrants and convertible instruments containing such features. ASU

2017

is effective for public companies in

2019

and all other entities in

2020.

Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Compensation

–

Stock Compensation

June 2018,

the FASB issued ASU

2018

07,

which expands the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. ASU

2018

is effective for interim periods in fiscal years beginning after

December 15, 2018,

with early adoption permitted, but

earlier than the Company’s adoption date of Topic

606.

The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Derivative Financial Instruments

August 2017,

the FASB issued ASU

No.

2017

12,

"Derivatives and Hedging (Topic

815

) Targeted Improvements to Accounting for Hedging Activities", which amends and simplifies existing guidance to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance is effective for annual reporting periods beginning after

December 15, 2018

including interim reporting periods within those annual reporting periods and early adoption is permitted. Management is currently evaluating the impact of the new guidance on its consolidated financial statements.

Intangibles

–

Goodwill and Other - Internal-Use Software

August 2018,

the FASB issued ASU

2018

15,

which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. ASU

2018

is effective for interim periods in fiscal years beginning after

December 15, 2019,

with early adoption permitted.

Fair Value

August 2018,

the FASB issued ASU

2018

13,

which is guidance that changes the fair value measurement disclosure requirements of ASC

820.

This guidance is will be effective for all entities for fiscal years beginning after

December 15, 2019,

including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Company is evaluating the impact the update will have on its disclosures.

Financial Instruments – Credit Losses

June 2016,

the FASB issued ASU

No.

2016

13,

Financial Instruments-Credit Losses (Topic

326

)

, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This standard is effective for fiscal years beginning after

December 15, 2019,

including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures.

All other Accounting Standards Updates issued but

not

yet effective are

not

expected to have a material effect on the Company’s future financial statements.