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Item 8. Financial Statements and Supplementary Data

2020-09-11 compared with 2019-09-12 · 275 added, 501 removed, 702 unchanged (53% of the section changed)

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Consolidated Statements of Operations for the years ended June 30, 2020 and 2019

Consolidated Statements of Comprehensive Income (Loss) for the years ended June 30, 2019 and 2018

Consolidated Statements of Stockholders’

Equity (Deficit) for the years ended June 30, 2019 and 2018

Consolidated Statements of Comprehensive Income for the years ended June 30, 2020 and 2019

Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended June 30, 2020 and 2019

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of eGain Corporation and subsidiaries (the “Company”) as of June 30, 2019 and 2018, and the related consolidated statements of operations, comprehensive income (loss), stockholders’

equity (deficit), and cash flows for each of the two years in the period ended June 30, 2019 and the related notes and financial statement schedule listed in the index to this Annual Report on Form 10-K at Part IV Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of eGain Corporation and subsidiaries (the “Company”) as of June 30, 2020 and 2019, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2020 and the related notes and financial statement schedule listed in the index to this Annual Report on Form 10-K at Part IV Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the two years in the period ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control—

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 12, 2019, expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenues from contracts with customers in fiscal year ended June 30, 2019 due to the adoption of the new revenue standard.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in fiscal year ended June 30, 2020 due to the adoption of the new lease standard.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2008.

San Jose, California

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Property and equipment, net

Operating lease right-of-use assets (Note 8)

Costs capitalized to obtain revenue contracts, net of current portion

Intangible assets, net

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

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Accrued liabilities

Operating lease liabilities (Note 8)

Deferred revenue

Capital lease obligations

Bank borrowings

Total current liabilities

Deferred revenue, net of current portion

Bank borrowings, net of current portion

Operating lease liabilities, net of current portion (Note 8)

Other long-term liabilities

Total liabilities

Commitments and contingencies (Notes 8 and 9)

Stockholders' equity (deficit):

Commitments and contingencies (Note 9)

Stockholders' equity:

Common stock, $0.001 par value - authorized:

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Accumulated deficit

Total stockholders' equity (deficit)

Total liabilities and stockholders' equity (deficit)

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these consolidated financial statements.

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Operating expenses:

Research and development

Sales and marketing

Research and development

General and administrative

Total operating expenses

Income (loss) from operations

Interest expense, net

Other expense, net

Income (loss) before income tax benefit (provision)

Income tax benefit (provision)

Net income (loss)

Income from operations

Interest income (expense), net

Other income (expense), net

Income before income tax provision

Income tax provision

Per share information:

Earnings (loss) per share:

Earnings per share:

Weighted-average shares used in computation:

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EGAIN CORPORATION

C ONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

C ONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Years Ended June 30,

Net income (loss)

Other comprehensive income, net of taxes:

Foreign currency translation adjustments

Other comprehensive income, net of taxes:

Total comprehensive income (loss)

Total comprehensive income

The accompanying notes are an integral part of these consolidated financial statements.

EGAIN CORPORATION

C ONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

C ONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Comprehensive

Stockholders'

Income (loss)

Equity (Deficit)

Comprehensive

BALANCES AS OF JULY 1, 2018

Cumulative-effect adjustment upon the modified retrospective

adoption of ASU No.

Interest on stockholder notes

Issuance of common stock under employee plans

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection with employee purchase plans

Issuance of common stock from public offering, net of issuance costs

Stock-based compensation

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BALANCES AS OF JUNE 30, 2019

Cumulative-effect adjustment upon the modified retrospective

adoption of ASU No.

Interest on stockholder notes

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Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock under public offering, net of issuance costs

True-up of issuance costs related to public offering

Stock-based compensation

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Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of intangible assets

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Amortization of deferred financing costs

Amortization of right-of-use assets

Depreciation and amortization

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Stock-based compensation

Loss on disposal of property and equipment

(Gain) loss on disposal of property and equipment

Changes in operating assets and liabilities:

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Other current assets

Other non-current assets

Accounts payable

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Deferred revenue

Operating lease liabilities

Other long-term liabilities

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Payments on capital lease obligations

Payments made for deferred financing costs

Proceeds from exercise of stock options

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Proceeds from follow-on public offering, net of issuance costs

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Effect of exchange rate differences on cash and cash equivalents

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Organization and Nature of Business

eGain Corporation (“eGain”, the “Company”, “our”, “we”

or “us”) is a leading provider of cloud-based customer engagement software with operations in the United States, United Kingdom and India.

eGain Corporation (“eGain”, the “Company”, “our”, “we” or “us”) is a leading provider of cloud-based customer engagement software with operations in the United States, United Kingdom and India.

We help B2C brands operationalize digital customer engagement strategy.

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We also provide advanced, integrated analytics for contact centers and digital properties to holistically measure, manage and optimize resources.

We believe the benefits of our products include reduced customer effort, customer satisfaction, connected service processes, converted upsell opportunities, and improved compliance—across mobile, social, web, and phone.

Hundreds of global enterprises rely on eGain to transform fragmented customer service systems into unified Customer Engagement Hubs.

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All significant intercompany balances and transactions have been eliminated.

In fiscal year 2018, we liquidated our Ireland (eGain Communications Ltd.) subsidiary.

Reclassification

Certain reclassifications were made to the consolidated financial statements to conform to the current period presentation.

As of July 1, 2018, we classify recurring and legacy license as subscription revenue due to the strategic decision to move to a cloud delivery model from the hybrid model that included legacy perpetual licenses.

These reclassifications did not result in any change in previously reported net losses, total assets or stockholders’

equity (deficit).

Follow-On Public Offering

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The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed.

The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, or require acceleration of the amortization expense of finite-lived intangible assets.

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We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We refer to accounting estimates of this type as “critical accounting estimates.”

Foreign Currency

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Assets and liabilities of our foreign subsidiaries are translated at month-end exchange rates, and revenue and expenses are translated at the average monthly exchange rates.

The resulting cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss).

Foreign currency transaction gains and losses are included in “other expense, net”

in the consolidated statements of operations, and resulted in a loss of $149,000 and $167,000, in fiscal years 2019 and 2018, respectively.

The resulting cumulative translation adjustments are recorded as a component of accumulated other comprehensive income.

Foreign currency transaction gains and losses are included in “other income (expense), net” in the consolidated statements of operations, and resulted in a loss of $172,000 and $149,000, in fiscal years 2020 and 2019, respectively.

Cash and Cash Equivalents, Restricted Cash and Investments

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We believe the reported carrying amounts of these financial instruments approximate fair value, based upon their short-term nature and comparable market information available at the respective balance sheet dates.

The carrying value of our bank borrowings and capital lease obligations approximates fair value based on the borrowing rates currently available to us for loans and capital leases with similar terms.

Concentration of Credit Risk

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In addition, we established an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information.

One partner and customer accounted for 23% and 18% of accounts receivable as of June 30, 2020, respectively.

Three customers accounted for 18%, 16%, and 15% of accounts receivable as of June 30, 2019.

No customer account balances were over 10% as of June 30, 2018.

Accounts Receivable and Allowance for Doubtful Accounts

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Unbilled accounts receivables are recorded when revenue recognized on the contract exceeds billings, pursuant to contract provisions, and become billable upon certain criteria being met.

Unbilled accounts receivables, for which the Company has the unconditional right to consideration, totaled $1.4 million and $339,000 as of June 30, 2019 and 2018, respectively, and are included in the accounts receivable balance.

Unbilled accounts receivables, for which the Company has the unconditional right to consideration, totaled $1.7 million and $1.4 million as of June 30, 2020 and 2019, respectively, and are included in the accounts receivable balance.

Property and Equipment

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We generally invoice customers in annual or quarterly installments.

The deferred revenue balance does not represent the total contract

value of annual or multi-year, non-cancelable cloud or maintenance and support agreements.

The deferred revenue balance does not represent the total contract value of annual or multi-year, non-cancelable cloud or maintenance and support agreements.

Deferred revenue is influenced by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing and new business linearity within the quarter.

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We determine the period of benefit by taking into consideration the historical and expected durations of our customer contracts, the expected useful lives of our technologies, and other factors.

Commissions for renewal contracts relating to our cloud-based arrangements are generally deferred and then amortized on a straight-line basis over the average period of benefit, which is determined to be five years.

Amortization of deferred sales commissions is included as a component of sales and marketing expenses in our consolidated statements of operations.

Commissions for renewal contracts relating to our cloud-based arrangements are expensed when incurred, as we do not consider renewal contracts to be commensurate with initial customer contracts.

Historically, any commission associated with renewals have been immaterial.

Amortization of costs to obtain revenue contracts is included as a component of sales and marketing expenses in our consolidated statements of operations.

During the fiscal year ended June 30, 2020 and 2019, we capitalized $1.8 million and $809,000 of costs to obtain revenue contracts, respectively, and amortized $842,000 and $663,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $3.4 million and $2.5 million as of June 30, 2020 and June 30, 2019, respectively.

Deferred Financing Costs

Costs relating to obtaining the credit agreement with Wells Fargo Bank are capitalized and amortized over the term of the related debt using the effective interest method.

As of June 30, 2019 and 2018, deferred financing costs were $981,000, and accumulated amortization was $981,000 and $740,000, respectively.

Deferred financing costs are included net of bank borrowings in the accompanying consolidated balance sheets.

Amortization of deferred financing costs recorded as interest expense was $241,000 and $239,000 for the fiscal years ended June 30, 2019 and 2018, respectively.

When a loan is paid in full, any unamortized financing costs are removed from the related accounts and charged to operations as interest expense.

Lease agreements are evaluated to determine whether they are capital or operating leases in accordance with ASC 840, Leases .

When any one of the four test criteria in ASC 840 is met, the lease then qualifies as a capital lease.

Capital leases are capitalized at the lower of the net present value of the total amount payable under the leasing agreement (excluding finance charges) or the fair market value of the leased asset.

Capital lease assets are depreciated on a straight-line basis, over a period consistent with our normal depreciation policy for tangible fixed assets, but not exceeding the lease term.

Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease obligation.

Rent expense for operating leases, which may include free rent or fixed escalation amounts in addition to minimum lease payments, is recognized on a straight-line basis over the duration of each lease term.

Costs relating to obtaining the credit agreement (as amended from time to time, Credit Agreement) with Wells Fargo Bank, National Association, as administrative agent (Wells Fargo) were capitalized and amortized over the term of the related debt using the effective interest method.

We capitalized deferred financing costs of $981,000 in connection with our term loan that has since been fully amortized.

As of June 30, 2020, all financing costs have been charged to operations as interest expense in the prior fiscal year, in connection with the repayment of the term loan.

No amortization of deferred financing costs was recorded to interest expense in fiscal year 2020.

Amortization of deferred financing costs recorded as interest expense was $241,000 in fiscal year 2019.

Lease agreements are evaluated to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases .

Operating leases are included in operating lease right-of-use (ROU) assets, current operating lease liabilities, and noncurrent operating lease liabilities in the consolidated financial statements.

ROU assets represent the Company’s right to use leased assets over the agreed upon term.

Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term.

For operating leases, ROU assets and lease liabilities are recognized at the commencement date of the lease.

The lease liability is measured as the present value of the lease payments over the lease term, using the rate implicit in the lease if readily determinable.

If the rate implicit in the lease cannot be readily determined, the Company uses its incremental

borrowing rate at lease commencement.

The operating lease right-of-use assets are calculated as the present value of the remaining lease payments plus unamortized initial direct costs and any prepayments, less unamortized lease incentives received.

Operating leases typically include non-lease components such as common-area maintenance costs.

We have elected to include non-lease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed.

Non-lease component payments that are not fixed are expensed as incurred as variable lease payments.

Lease terms may include renewal or extension options to the extent they are reasonably certain to be exercised.

The assessment of whether renewal or extension options are reasonably certain to be exercised is made at lease commencement.

Factors considered in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of any leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option were not exercised.

Lease expense is recognized on a straight-line basis over the lease term.

The Company has elected not to recognize right-of-use assets and obligations for leases with an initial term of twelve months or less, and has applied a capitalization threshold to recognize a lease on the balance sheet.

The expense associated with short-term leases and leases that do not meet the Company’s capitalization threshold are recorded to lease expense in the period it is incurred.

Software Development Costs

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Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation .

Determining the fair value of the stock-based awards at the grant date requires significant judgment and the use of estimates, particularly surrounding Black-Scholes valuation assumptions such as stock price volatility and expected option term.

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Under this method, deferred tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

For the legacy eGain business in the United States, based upon the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in all prior years, we have provided a full valuation allowance against our net deferred tax assets.

For the legacy eGain business in the United States, based upon the weight of available evidence, which includes our historical operating performance, our future investment plans, and the uncertainty in the current market environment due to COVID-19, we have provided a full valuation allowance against our net deferred tax assets.

For the legacy eGain business in the United Kingdom, based on the positive evidence, the Company has determined it would be able to utilize the deferred tax assets and does not have a valuation allowance against the deferred tax assets.

The remaining eGain foreign operations as well as Exony’s business have historically been profitable and we believe it is more likely than not that those assets will be realized.

Our tax provision primarily relates to foreign activities as well as state income taxes.

Our income tax rate differs from the statutory tax rates primarily due to the utilization of net operating loss carry-forwards which had previously been valued against as well as our foreign operations.

tax rate differs from the statutory tax rates primarily due to the utilization of net operating loss carry-forwards which had previously been valued against as well as our foreign operations.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Act).

The Tax Act revised the taxation of U.S.

and multinational corporations which significantly reduced the statutory corporate U.S.

federal income tax rate from 35% to 21%, imposed limitations on the ability of corporations to deduct interest expense and made taxation changes on U.S.

multinational corporation’s foreign operations.

The provisions of the Tax Act are complex and likely will be subject to regulatory and administrative guidance.

The Tax Act includes a provision to tax global intangible low-taxed income (GILTI) of foreign subsidiaries and a base erosion anti-abuse tax (BEAT) measure that taxes certain payments between a U.S.

corporation and its foreign subsidiaries.

For the fiscal year ended June 30, 2020, we have $3.2 million of GILTI income inclusion and used our net operating losses to offset our taxable income.

For the fiscal year ended June 30, 2020, we did not incur any BEAT tax.

We account for uncertain tax positions according to the provisions of ASC 740.

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We consider many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

As of June 30, 2019, we have not completed a 382 study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since our company’s formation due to the complexity and cost associated with such a study, and the fact that an additional change in ownership can occur in future periods.

If the Company has experienced an ownership change at any time since its formation, utilization of the NOL or tax credit carryforwards to offset future taxable income and taxes, respectively, would be subject to an annual limitation under the Internal Revenue Code of 1986 and similar state provisions.

Any limitation may result in expiration of all or a portion of our NOL and or tax credit carryforwards before utilization.

Until a study is completed and limitations are known, no amounts of federal and state NOL and tax credit carryforwards are being considered as an uncertain tax position or disclosed as unrecognized tax benefits since no benefits have been realized to date.

As a result, the deferred tax assets related to these domestic loss and tax credit carryforwards and the offsetting valuation allowances have also been removed from our consolidated financial statements with no impact on earnings.

These amounts are no longer recognized until they can be measured after an ownership change analysis is completed.

Comprehensive Income (Loss)

We report comprehensive income (loss) and its components in accordance with ASC 220, Comprehensive Income .

As of June 30, 2020, we have completed a 382 study under Section 382 of the Internal Revenue Code, and have determined there was no loss of NOLs as a result of these changes.

Utilization of the NOL or tax credit carryforwards to offset future taxable income and taxes, respectively, are subject to an annual limitation under the Internal Revenue Code of 1986 and similar state provisions, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments such as built in gain or built in loss, as required.

Any limitation may result in expiration of all or a portion of its NOL and or tax credit carryforwards before utilization.

Comprehensive Income

We report comprehensive income and its components in accordance with ASC 220, Comprehensive Income .

Under the accounting standards, comprehensive loss includes all changes in equity during a period except those resulting from investments by or distributions to owners.

Total comprehensive income (loss) for each of the two years in the period ended June 30, 2019 is shown in the accompanying statements of comprehensive income (loss).

Accumulated other

comprehensive income (loss) presented in the accompanying consolidated balance sheets as of June 30, 2019 and 2018 consist of accumulated foreign currency translation adjustments.

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed using the weighted-average number of shares of common stock outstanding.

Total comprehensive income for each of the two years in the period ended June 30, 2020 is shown in the accompanying statements of comprehensive income.

Accumulated other comprehensive income presented in the accompanying consolidated balance sheets as of June 30, 2020 and 2019 consist of accumulated foreign currency translation adjustments.

Net Income Per Common Share

Basic net income per common share is computed using the weighted-average number of shares of common stock outstanding.

In periods where net income is reported, the weighted average number of shares is increased by warrants and options in the money to calculate diluted net income per common share.

The following table represents the calculation of basic and diluted net income (loss) per common share (in thousands, except per share data):

The following table represents the calculation of basic and diluted net income per common share (in thousands, except per share data):

Years Ended June 30,

Net income (loss) applicable to common stockholders

Basic net income (loss) per common share

Weighted average common shares used in computing basic net income (loss) per common share

Net income applicable to common stockholders

Basic net income per common share

Weighted average common shares used in computing basic net income per common share

Effect of dilutive common equivalents outstanding

Weighted average common shares used in computing diluted net income (loss) per common share

Diluted net income (loss) per common share

Weighted average options to purchase 256,538 and 3,133,960 shares of common stock as of June 30, 2019 and 2018, respectively, were not included in the computation of diluted net income (loss) per common share due to their anti-dilutive effect.

Weighted average common shares used in computing diluted net income per common share

Diluted net income per common share

Weighted average options to purchase 613,643 and 256,538 shares of common stock as of June 30, 2020 and 2019, respectively, were not included in the computation of diluted net income per common share due to their anti-dilutive effect.

Such securities could have a dilutive effect in future periods.

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Pronouncements Not Yet Adopted

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) .

This update requires a customer in a cloud computing service arrangement to follow the internal-use software guidance to determine which implementation costs to recognize and defer as an asset.

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We are currently evaluating the impact of this update on our consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU 2018-07, Compensation —Stock Compensation (Topic 718) —Improvements to Nonemployee Share-Based Payment Accounting .

This update expands the scope of Topic 718, Compensation—Stock Compensation, to include share-based awards granted to non-employees in exchange for goods or services.

The accounting for employees and non-employees will be substantially aligned.

This update is effective for fiscal years beginning after December 15, 2018 (our fiscal year 2020) and interim periods within those fiscal years.

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This update simplifies the accounting for income taxes.

This update is effective for fiscal years beginning after December 15, 2020 (our fiscal year 2022).

We are currently evaluating the impact of this update on our consolidated financial statements and related disclosures.

Pronouncements Recently Adopted

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220):

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This update provides the option to reclassify tax effects to retained earnings relating to items in accumulated other comprehensive income that the FASB refers to as having been stranded in accumulated other comprehensive income as a result of the U.S.

This update is effective for fiscal years beginning after December 15, 2018 (our fiscal year 2020), and interim periods within those fiscal years.

Early adoption is permitted.

We are currently evaluating the impact of this new standard on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires that we recognize lease assets and liabilities on the balance sheet.

This standard is effective for annual periods beginning after December 15, 2018 (our fiscal year 2020), and interim periods within those annual periods.

Early adoption is permitted provided that ASC 606, Revenue Recognition , has been adopted.

We are currently evaluating the impact of this update on our consolidated financial statements and related disclosures.

We adopted this guidance as of our first quarter of fiscal year 2020 without a significant impact on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718)—Improvements to Nonemployee Share-Based Payment Accounting .

This update expands the scope of Topic 718, Compensation—Stock Compensation, to include share-based awards granted to non-employees in exchange for goods or services.

The accounting for employees and non-employees will be substantially aligned.

We adopted this guidance as of our first quarter of fiscal year 2020 without a significant impact on our consolidated financial statements.

In July 2018, the FASB issued ASU No.

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Targeted Improvements , which provides an alternative transition method by allowing companies to initially apply the new leases guidance at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

We are currently evaluating the impact of this update on our consolidated financial statements and related disclosures.

We adopted this guidance as of our first quarter of fiscal year 2020.

In February 2019, the FASB issued ASU No.

2019-01 Leases (Topic 842) Codification Improvements , which align the guidance for fair value of the underlying asset by lessors that are not manufacturers or deals in Topic 842 with that of existing guidance.

2019-01 Leases (Topic 842) Codification Improvements , which aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance.

As a result, the fair value of the underlying asset at lease commencement is its cost.

We are currently evaluating the impact of this update on our consolidated financial statements and related disclosures.

Pronouncements Recently Adopted

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718):

Scope of Modification Accounting , which provides guidance about which changes to the terms or conditions of a shared-based payment award require an entity to apply modification accounting in Topic 718.

ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017 (our fiscal year 2019), including interim reporting periods within those annual reporting periods.

We adopted this guidance in connection with the adoption of ASC 606 as of our first quarter of fiscal year 2019 and the adoption did not have a significant impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230):

Restricted Cash , which provides specific guidance on how to classify restricted cash.

ASU 2016-18 is effective for annual reporting periods beginning after December 15, 2017 (our fiscal year 2019), including interim reporting periods within those annual

reporting periods.

We adopted this guidance as of our first quarter of fiscal year 2019 and the adoption did not have a significant impact on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other Than Inventory , which provides that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.

ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017 (our fiscal year 2019), including interim reporting periods within those annual reporting periods.

We adopted this guidance as of our first quarter of fiscal year 2019 and the adoption did not have a significant impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.

ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 (our fiscal year 2019), and interim periods within those fiscal years.

We adopted this guidance as of our first quarter of fiscal year 2019 and the adoption did not have a significant impact on our consolidated financial statements.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606 or ASC 606) , which supersedes the revenue recognition requirements under Revenue Recognition (Topic 605).

The standard requires increased disclosures including the nature, amount, timing, and any uncertainty of revenues and cash flows related to customer contracts.

Topic 606 includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers , which requires the deferral of incremental costs of obtaining a contract with a customer.

We refer to Topic 606 and Subtopic 340-40 as Topic 606, collectively, for purposes of disclosure and discussion in this filing.

We adopted Topic 606 using the modified retrospective method with a cumulative decrease of $3.8 million to our opening balance of our accumulated deficit as of July 1, 2018 in our first quarter of fiscal year 2019.

Under Topic 606, revenue is recognized when a customer under a contract obtains control of promised goods and services at an amount that reflects consideration that is expected to be received in exchange for those goods and services.

The new revenue recognition standard requires that we apply a five-step approach for recognizing revenue which includes (i) identifying the contract with a customer;

(ii) identifying the performance obligations in the contract;

(iii) determining the transaction price;

(iv) allocating the transaction price to the performance obligations in the contract on a relative standalone selling price (SSP);

and (v) recognizing revenue when, or as, we satisfy each performance obligation in the contract typically through delivery or when control is transferred to the customer.

The adoption of Topic 606 did not significantly impact the revenue recognition of our cloud delivery arrangements, our maintenance and support arrangements, or our time and materials-based professional services.

Additionally, our estimate of SSP remains consistent with our estimate of best estimated selling price (BESP) under Topic 605.

When we determine the transaction price in an arrangement, we include estimates of variable consideration such as usage-based surcharges and potential refunds or credits for service level credits, volume rebates, and tenure discounts.

Revenue recognition under Topic 606 impacted our on-premise offerings that do not incorporate substantial cloud functionality.

Under Topic 605, licenses that were sold with undelivered elements but without vendor-specific objective evidence (VSOE) were recognized ratably over the term of the undelivered elements.

Under Topic 606, the requirement to establish VSOE for undelivered elements was eliminated.

Therefore, we recognize a portion of the sales price upon delivery of the software.

To the extent that amounts recognized as revenue have not been billed, the corresponding amounts are recorded as unbilled receivables and are classified in accounts receivable when the Company has the unconditional right to consideration.

Under Topic 606, the transaction price is allocated to various performance obligations based on their stand-alone selling prices.

Revenue allocated to each performance obligation is recognized as work is performed.

Our consulting and implementation service contracts are bid either on a time-and-materials basis or on a fixed-fee basis.

Fixed fees are

generally paid upon acceptance at pre-determined points in the contract.

Under Topic 605, we had recognized revenue when we met acceptance clauses and billing milestones.

With respect to professional services revenue, when professional service arrangements include acceptance clauses, we factor this in the estimated transaction price if they are probable of being achieved.

Additionally, we recognize the transaction price allocated to professional services over time as the services are provided as compared to the time that the milestone was achieve under prior guidance.

We used the following transitional practical expedients and exemptions in the adoption of Topic 606:

The option to recognize revenue upon invoicing amounts that correspond directly with the value to the customer of performance completed to date which primarily includes professional service arrangements entered on a time and materials basis;

At adoption, the election to reflect the aggregate effect of all modifications occurring before adoption when (i) identifying the satisfied and unsatisfied performance obligations;

(ii) determining the transaction price;

and (iii) allocating the transaction price of the arrangement to the satisfied and unsatisfied performance obligations;

The optional exemption to not disclose the remaining transaction price for short-term contracts less than one year and contracts where the right to invoice method is used.

Contracts that fall under these exemptions relate to short-term professional services and would be expected to be completed, on average, within the next three to six months;

At adoption, the election to use the practical expedient to disregard the effect of the time value of money in a significant financing component when its payment terms are less than one year.

These contract advances are liquidated when revenue is recognized;

The option to expense the cost of obtaining a contract when the amortization period is less than one year.

Costs Capitalized to Obtain Revenue Contracts

Under Topic 606, we capitalize incremental costs of obtaining non-cancelable subscription, maintenance and support revenue contracts.

The capitalized amounts consist primarily of sales commissions paid to our direct sales force.

Capitalized amounts also include (i) amounts paid to employees other than the direct sales force who earn incentive payouts under annual compensation plans that are tied to the value of contracts acquired and (ii) the associated payroll taxes and fringe benefit costs associated with the payments to our employees.

Costs capitalized related to new revenue contracts are generally deferred and amortized on a straight-line basis over a period of benefit that we estimate to be five years.

We determine the period of benefit by taking into consideration the historical and expected durations of our customer contracts, the expected useful lives of our technologies, and other factors.

Commissions for renewal contracts relating to our cloud-based arrangements are generally deferred and then amortized on a straight-line basis over the related contractual renewal period, which is generally five years.

Amortization of deferred sales commissions is included as a component of sales and marketing expenses in our consolidated statements of operations.

During the fiscal year ended June 30, 2019, we capitalized $809,000 of costs to obtain revenue contracts, and amortized $663,000 to sales and marketing expense.

Capitalized costs to obtain revenue contracts, net were $2.5 million as of June 30, 2019.

Deferred Revenue

Deferred revenue primarily consists of payments received or invoiced in advance of revenue recognition from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support.

Deferred revenue is recognized as revenue once revenue recognition criteria is met.

We generally invoice our customers in annual installments.

The deferred revenue balance does not represent the total transaction price of our non-cancelable cloud delivery and support arrangements.

Prior to adopting Topic 606, we netted down our accounts receivable and deferred revenue for amounts that were invoiced but not collected.

We no longer net down our accounts receivable and deferred revenue with the adoption of Topic 606

related to contractual amounts in our arrangements.

Deferred revenue that is expected to be recognized within one year and beyond one year is classified as current and noncurrent deferred revenue, respectively.

Financial Impact from Initial Adoption

The following table shows cumulative adjustments included in our consolidated opening balance sheet as of July 1, 2018 related to the adoption of Topic 606 (in thousands):

We adopted this guidance as of our first quarter of fiscal year 2020.

Effective July 1, 2019, the Company adopted the provisions and expanded disclosure requirements described in Topic 842.

The Company adopted the standard under a modified retrospective approach, using the provision of ASU 2018-11, Leases (Topic 842) Targeted Improvements , which allows for the adoption of Topic 842 to be applied at the beginning of the fiscal year of adoption.

As a result, the consolidated balance sheet and statement of operations for prior periods are not comparable to fiscal year 2020.

In addition, the Company elected the package of practical expedients permitted under the transition guidance, which among other things, allowed the Company to not reassess prior conclusions on lease classifications or initial direct costs, or on whether contracts are or contain a lease.

The Company did not use hindsight when determining the lease term.

Upon adoption, operating leases are now reported on the consolidated balance sheet, which has materially increased total assets and liabilities.

As a result, the Company recorded operating lease right-of-use assets of approximately $4.5 million and corresponding operating lease liabilities of $4.8 million on its opening consolidated balance sheet.

Balance as of

June 30, 2019

Impact as of July 1, 2018

Adjustments due

Balance as of

Balance sheet captions:

Accounts receivable, net

Costs capitalized to obtain revenue contracts, net

Costs capitalized to obtain revenue contracts, net of current portion

Prepaid expenses

Total current assets

Operating lease right-of-use assets (Note 8)

Accrued liabilities

Deferred revenue

Deferred revenue, net of current portion

Accumulated deficit

Financial Impact after Initial Adoption

The following table shows cumulative adjustments included in our consolidated balance sheet as of June 30, 2019 related to the adoption of Topic 606 (in thousands):

June 30, 2019

Reported under

Topic 606 Impact

Excluding Topic

Balance sheet captions:

Accounts receivable, net

Costs capitalized to obtain revenue contracts, net

Costs capitalized to obtain revenue contracts, net of current portion

Deferred revenue

Deferred revenue, net of current portion

Accumulated deficit

The following table presents the financial impact between guidance under Topic 605 and newly adopted guidance under Topic 606 during the fiscal year ended June 30, 2019 (in thousands):

Fiscal Year Ended June 30, 2019

Reported under Topic 606

Topic 606 Impact

Excluding Topic 606 Impact

Income statement captions:

Subscription revenue

Professional services revenue

Total revenue

Total operating expenses

Net income (loss)

Operating lease liabilities (Note 8)

Total current liabilities

Operating lease liabilities, net of current portion (Note 8)

Other long-term liabilities

Total liabilities

Total liabilities and stockholders' equity

Represents prepaid rent reclassified to operating lease right-of-use assets.

Represents capitalization of operating lease right-of-use assets.

Represents reclassification of deferred rent reclassified to operating lease right-of-use assets.

Represents recognition of operating lease liabilities.

Revenue Recognition

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We typically invoice our customers in advance upon execution of the contract or subsequent renewals with payment terms between 30 and 45 days.

Invoiced amounts are recorded in accounts receivable, deferred revenue or revenue, depending

if control transferred to our customers based on each arrangement.

The Company has a royalty revenue agreement with a customer related to the Company’s embedded intellectual property.

Invoiced amounts are recorded in accounts receivable, deferred revenue or revenue, depending if control transferred to our customers based on each arrangement.

The Company has a royalty revenue agreement with a customer related to the Company’s embedded intellectual property.

Under the terms of the agreement, the customer is to provide a combined fixed fee, per agent, for each software license sold containing the embedded software to the Company.

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BALANCE SHEET COMPONENTS

Property and equipment consists of the following (in thousands):

Property and equipment consists of the following:

As of June 30,

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Computers and equipment

Leased equipment

Furniture and fixtures

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Depreciation and amortization expense was $304,000 and $362,000 for the fiscal years ended June 30, 2020 and 2019, respectively.

Accumulated depreciation relating to computers, equipment and software under capital leases totaled $0 and $979,000 as of June 30, 2019 and 2018, respectively.

Amortization of assets under capital leases is included in depreciation and amortization expense.

Disposed fixed assets, which were substantially fully-depreciated, were $3.6 million and $29,000 for the years ended June 30, 2019, and 2018, respectively.

Accrued compensation consists of the following (in thousands):

Disposed fixed assets, which were substantially fully-depreciated, were $920,000 and $3.6 million for the years ended June 30, 2020, and 2019, respectively.

Accrued compensation consists of the following:

As of June 30,

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(in thousands)

VAT liability

Accrued other liabilities

Customer advances

Sales tax payable

VAT liability

Accrued other liabilities

Accrued liabilities

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The following table presents our subscription and professional services revenue during the fiscal years ended June 30, 2020 and 2019, respectively:

Year ended June 30,

Fiscal Year Ended June 30,

(in thousands)

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Revenue by geography is generally determined on the region of our contracting entity rather than the region of our customer.

The relative proportion of our total revenues between each geographic region as presented in the table below was materially consistent across each of our operating segments’

revenues for the periods presented.

Year ended June 30,

The relative proportion of our total revenues between each geographic region as presented in the table below was materially consistent across each of our operating segments’ revenues for the periods presented.

Fiscal Year Ended June 30,

(in thousands)

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Contract Balances

Contract assets, if any, consist of unbilled receivables for which we have the right to consideration for completed performance obligations that have not been invoiced.

Contract assets, if any, consist of unbilled receivables for completed performance obligations which have not been invoiced, and for which we do not have an unconditional right to consideration.

Contract liabilities consist of deferred revenue for which we have an obligation to transfer services to customers and have received consideration in advance or the amount is due from customers.

Once the obligations are fulfilled, then deferred revenue is recognized to revenue in the respective period.

There were no contract assets for the years ended June 30, 2020 and 2019.

The following table presents the changes in contract liabilities (in thousands):

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BANK BORROWINGS

On November 21, 2014, we entered into a Credit Agreement with Wells Fargo and the lenders party thereto.

The Credit Agreement provides for the extension of revolving loans in an aggregate principal amount not to exceed $10.0 million, and a term loan (Term Loan) in an aggregate principal amount not to exceed $10.0 million, but in each case limited by an amount not to exceed 60% of our trailing twelve month revenue from subscription and support fees attributable to software, as calculated under the Credit Agreement.

The obligations under the Credit Agreement mature on November 21, 2019.

Borrowings under the Credit Agreement bear interest, in the case of LIBOR rate loans, at a per annum rate equal to the applicable LIBOR rate, plus 4.75%.

Borrowings under the Credit Agreement that are not LIBOR rate loans bear interest at a per annum rate equal to (i) the greatest of (A) the Federal Funds Rate plus 0.50%, (B) the one month LIBOR rate plus 1.00% per annum, and (C) the rate of interest announced, from time to time, by Wells Fargo as its “prime rate,”

plus (ii) 3.75%.

We will pay certain recurring fees with respect to the Credit Agreement, including servicing fees to the administrative agent.

Prior to the first anniversary of the closing date of the Credit Agreement, voluntary repayments of the Term Loan, voluntary permanent reductions of the commitment related to the Revolving Loans and certain mandatory prepayments are subject a prepayment premium of 1.0% of the amount prepaid or reduced.

Subject to certain exceptions, the loans extended under the Credit Agreement are subject to customary mandatory prepayment provisions with respect to the following:

net proceeds from certain asset sales;

net proceeds from certain issuances or incurrences of debt (other than debt permitted to be incurred under the terms of the Credit Agreement);

net proceeds of certain judgments, settlements and other claims or causes of action of us;

and a portion with step-downs based upon the achievement of a financial covenant linked to the Leverage Ratio (as such term is defined in the Credit Agreement) of our annual excess cash flow and our subsidiaries, and with such required prepayment amount to be reduced dollar-for-dollar by any voluntary prepayments of the Term Loan.

The Credit Agreement contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting our ability and our subsidiaries to:

incur additional indebtedness;

engage in mergers or other fundamental changes;

consummate acquisitions;

sell certain property or assets;

change the nature of their business;

prepay or amend certain indebtedness;

pay dividends, other distributions or repurchase our equity interests or

our subsidiaries;

make investments;

or engage in certain transactions with affiliates.

Subject to the conditions of the Credit Agreement, the Company is required to comply with the following covenants;

(i) a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.50 to 1.00 and (ii) a Leverage Ratio of less than 2.50 to 1.00.

The Credit Agreement contains customary events of default, including with respect to:

nonpayment of principal, interest, fees or other amounts;

failure to perform or observe covenants;

monetary judgment defaults;

bankruptcy, insolvency and dissolution events;

cross-default to other material indebtedness;

material inaccuracy of a representation or warranty when made;

failure to perfect a lien;

actual or asserted invalidity or impairment of any definitive loan documentation or repudiation of guaranties;

or a change of control.

As a condition to entering into the Credit Agreement, we pledged substantially all of our assets, such as accounts receivable and property and equipment as collateral for the benefit of Wells Fargo.

On September 2, 2015, the Company entered into Amendment Number One to the Credit Agreement (Amendment No.

1), which amends the Credit Agreement.

Pursuant to Amendment No.

1, we increased the total maximum Revolving Loan commitments thereunder from $10.0 million to $15.0 million and increased the quarterly installment payments of the Term Loan under the Credit Agreement to $187,500 for the quarters ended September 30, 2015 through December 31, 2015 and $250,000 for each subsequent quarter.

As of March 31, 2018, the quarterly installment payment decreased from $250,000 to $114,407 for the quarter ended March 31, 2018 and for each quarter ending thereafter as a result of a $4.0 million prepayment that we made during the quarter.

Borrowings under the Credit Agreement bear interest, in the case of LIBOR rate loans, at a per annum rate equal to the applicable LIBOR rate, plus 7.0%.

Borrowings under the Credit Agreement that are not LIBOR rate loans bear interest at a per annum rate equal to the rate of interest announced, from time to time, by Wells Fargo as its “prime rate,”

In connection with Amendment No.

1, certain fees were also modified such that prior to the first anniversary of Amendment No.

1, voluntary repayments of the Term Loan, voluntary permanent reductions of the commitment related to the Revolving Loans and certain mandatory prepayments will be subject to prepayment premium of 1.0% of the amount prepaid or reduced.

On January 27, 2017, the Company entered into Amendment Number Two to the Credit Agreement (Amendment No.

2), which further amends the Credit Agreement.

Pursuant to Amendment No.

2, the Applicable Margin (as defined in the Credit Agreement) at which LIBOR loans advanced under the Credit Agreement bear interest may be either the applicable LIBOR rate plus 5.5% per annum or 7.0% per annum, depending on the Company’s TTM Recurring Revenue Calculation (as defined in the Credit Agreement).

The TTM Recurring Revenue Calculation is based on the Company’s consolidated trailing twelve months of revenue relating to subscription revenue attributable to the Company’s software.

Loans may also bear interest under the Credit Agreement at the applicable Base Rate (as defined in the Credit Agreement) and the corresponding Applicable Margin for Base Rate loans is 1.0% per annum less than for LIBOR loans.

Under Amendment No.

2, a 1.0% fee will also be payable until the first anniversary of Amendment No.

2 on the amount of any voluntary prepayment of the Term Loan advanced under the Credit Agreement or the amount of any voluntary reduction of Revolving Loan commitments provided under the Credit Agreement.

Amendment No.

2 modified the two financial covenants the Company is required to comply with as of the Financial Covenant Replacement Date, which is the first day of the fiscal quarter following the date on which the Company has achieved (i) a Fixed Charge Coverage Ratio equal to or greater than 1.50 to 1.00 and (ii) a Leverage Ratio of less than 2.50 to 1.00 for the immediately preceding two consecutive fiscal quarters.

As of June 30, 2019 the Company was in compliance with the terms under the revolving loan commitment.

In addition, the amount of Liquidity (as defined in the Credit Agreement) that the Company is required to maintain on and prior to the Financial Covenant Replacement Date was reduced from $10.0 million to $4.0 million.

Liquidity is calculated based on available credit under the Revolving Loan commitments and balances in certain bank accounts used for operations.

The amount of Liquidity was $45.0 million as of June 30, 2019.

As of June 30, 2019, the Company paid down the remaining principal balance on the Term Loan and all remaining deferred financing costs have been written-off to interest expense.

The monthly custodial fee on the Term Loan is considered to be nominal.

Loss before income tax benefit (provision) consisted of the following (in thousands):

Year Ended June 30,

On January 27, 2017, we entered into Amendment Number Two to the Credit Agreement, which further amended the Credit Agreement with Wells Fargo and the lenders party thereto dated November 21, 2014 (as amended, the Credit Agreement).

The loan was secured by substantially all of our assets.

Our Credit Agreement and the obligations under the agreement matured on November 21, 2019.

All remaining principal was paid prior to that date and all remaining deferred financing costs have been amortized to interest expense.

Income before income tax provision consisted of the following (in thousands):

Fiscal Year Ended June 30,

United States

Income (loss) before income tax benefit (provision)

Income before income tax provision

The following table reconciles the federal statutory tax rate to the effective tax rate of the income tax provision:

Year Ended June 30,

Fiscal Year Ended June 30,

Federal statutory income tax rate

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Stock-based compensation

Deferred return to provision

Net change in valuation allowance

Foreign income

Expiration of tax attributes

Effective tax rate

The components of the income tax (benefit) provision are as follows (in thousands):

Year Ended June 30,

Current provision:

The components of the income tax provision are as follows (in thousands):

Fiscal Year Ended June 30,

Current provision (benefit):

Total current:

Deferred (benefit):

Total deferred:

Income tax (benefit) provision

Income tax provision

As of June 30, 2020, we had federal and state net operating loss carryforwards of approximately $163.6 million and $12.3 million, respectively.

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The California research and development credit carryforwards are approximately $5.2 million as of June 30, 2020 and have an indefinite carryover period.

We also have U.K.

net operating loss carryforwards of approximately $900,000 as of June 30, 2019, which also have an indefinite carryover period.

Code of 1986 and similar state provisions.

This is determined by multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments such as a built in gain or loss, as required.

Any limitation may result in expiration of all or a portion of our NOL and or tax credit carryforwards before utilization.

We maintain a full valuation allowance for other deferred tax assets due to our historical losses and uncertainties surrounding our ability to generate enough future taxable income to realize these assets.

Due to our full valuation allowance, future changes in the Company’s unrecognized tax benefits and recognizable deferred tax benefits, after the completion of an ownership change analysis, are not expected to impact our effective tax rate.

As of June 30, 2020, we have completed a 382 study under Section 382 of the Internal Revenue Code, and have determined there was no loss of NOLs as a result of these changes.

Any limitation may result in expiration of all or a portion of its NOL and or tax credit carryforwards before utilization.

Deferred tax assets and liabilities reflect the net tax effects of net operating loss and credit carryforwards and of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes.

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Accruals and reserves

Lease liability

Gross deferred tax assets

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Net deferred tax assets

Gross deferred tax liabilities

Right-of-use asset

Gross deferred tax liabilities

Total deferred tax assets, net *

*included in other assets on balance sheet

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The aggregate changes in the balance of our gross unrecognized tax benefits during fiscal years 2020 and 2019 were as follows (in thousands):

Year Ended June 30,

Fiscal Year Ended June 30,

Beginning balance

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Ending balance

There is no amount of unrecognized tax benefit, if recognized currently, that would impact the Company’s effective tax rate as of June 30, 2019 and 2018, respectively.

No accrued interest and penalties have been recognized in the tax benefit (provision) related to unrecognized tax benefits.

There is no amount of unrecognized tax benefit, if recognized currently, that would impact the Company’s effective tax rate as of June 30, 2020 and 2019, respectively.

No accrued interest and penalties have been recognized in the tax provision related to unrecognized tax benefits.

We do not anticipate the amount of existing unrecognized tax benefit to significantly increase or decrease during the next twelve months.

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In these jurisdictions, tax years between 2001 and 2019 remain subject to examination by the appropriate governmental agencies due to tax loss carryovers from those years.

STOCKHOLDERS’

STOCKHOLDERS’ EQUITY

We have reserved shares of common stock for issuance as of June 30, 2020 as follows:

13 unchanged sentences

Options under the 2005 Management Plan are granted at a price not less than 100% of the fair market value of the common stock on the date of grant.

Options granted under the 2005 Management Plan are subject to eGain’s right of repurchase, whose right shall lapse with respect to one-forty-eighth (1/48 th ) of the shares granted to a director, officer or key employee for each month of continuous service provided by such director, officer or key employee to eGain.

The options granted under this plan are exercisable for up to ten years from the date of grant.

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2005 Stock Incentive Plan

In March 2005, our board of directors adopted the 2005 Stock Incentive Plan which provides for the grant of stock options to eGain’s employees, officers, directors and consultants.

Our board extend the expiration date of the 2005 Stock Incentive Plan to September 30, 2024 and made certain other changes.

In March 2005, our board of directors adopted the 2005 Stock Incentive Plan which provides for the grant of stock options to eGain’s employees, officers, directors and consultants.

Our board extended the expiration date of the 2005 Stock Incentive Plan to September 30, 2024 and made certain other changes.

Options granted under the 2005 Stock Incentive Plan are non-qualified stock options.

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No shares were granted to consultants during the fiscal year ended June 30, 2020.

Of the options granted during fiscal year 2018, 45,000 shares with a weighted average price of $12.15 were granted to consultants.

2000 Non-Management Stock Option Plan

In July 2000, our board of directors adopted the 2000 Non-Management Stock Option Plan which provided for the grant of non-statutory stock options to employees, advisors and consultants of eGain.

Options under the 2000 Non-Management Stock Option Plan were granted at a price not less than 85% of the fair market value of the common stock on the date of grant.

Our board of directors determines the fair market value (as defined in the 2000 Non-Management Stock Option Plan) of the common stock, date of grant and vesting schedules of the options granted.

The options generally vest ratably over 4 years and expire no later than 10 years from the date of grant.

This plan expired in July 2010 and there are no further options available to grant under the 2000 Non-Management Stock Option Plan.

The following table represents the activity under the 2000 Non-Management Stock Option Plan:

Available for

Balance as of June 30, 2017

Options Exercised

Options Forfeited / Expired

Balance as of June 30, 2018

Options Exercised

Options Forfeited / Expired

Balance as of June 30, 2019

1998 Stock Plan

In June 1998, our board of directors adopted the 1998 Stock Plan which provides for grant of stock options to eligible participants.

Options granted under the 1998 Stock Plan are either incentive stock options or non-statutory stock options.

Incentive stock options may be granted to employees with exercise prices of no less than the fair value of the common stock and non-statutory options may be granted to eligible participants at exercise prices of no less than 85% of the fair value of the common stock on the date of grant.

Our board of directors determines the fair market value (as defined in the 1998 Stock Plan) of the common stock, date of grant and vesting schedules of the options granted.

The options generally vest ratably over a period of four years and expire no later than 10 years from the date of grant.

Options are generally exercisable upon grant, subject to our repurchase rights until vested.

This plan expired in November 2010 and there are no further options available to grant under the 1998 Stock Plan.

The following table represents the activity under the 1998 Stock Plan:

Available for

Balance as of June 30, 2017

Options Exercised

Options Forfeited / Expired

Balance as of June 30, 2018

Options Exercised

Options Forfeited / Expired

Balance as of June 30, 2019

The following table summarizes information about stock options outstanding and exercisable under all stock option plans as of June 30, 2020:

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$13.75-$13.75

$12.80-$12.80

$13.40-$13.40

$13.75-$13.75

$14.40-$14.40

The summary of options vested and exercisable as of June 30, 2020 comprised:

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Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation .

Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period.

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2017 Employee Stock Purchase Plan

In October 2017, our board of directors adopted the 2017 Employee Stock Purchase Plan (ESPP) which provided eligible employees the option purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market value at the entry date of the applicable offering period or at the end of each applicable purchasing period.

The offering period, meaning a period with respect to which the right to purchase shares of our common stock may be granted under the ESPP, will not exceed twenty-seven months and consist of a series of six-month purchase periods.

Eligible employees may join the ESPP at the beginning of any six-month purchase period.

Under the terms of the ESPP, employees can choose to have between 1% and 15% of their base earnings withheld to purchase the Company’s common stock.

The table below summarizes the effect of stock-based compensation (in thousands, except per share amounts):

Year Ended June 30,

The table below summarizes the effect of stock-based compensation (in thousands):

Fiscal Year Ended June 30,

Non-cash stock-based compensation expense

Income tax benefit

Income tax expense

Net income effect

The Company recognized $56,000 of tax expense related to stock-based compensation expense for eGain UK and Exony for the fiscal year ended June 30, 2020.

The tax effect related to stock-based compensation in 2019 was nominal.

There is no income tax effect that has been recognized relating to the stock-based compensation expense in the US due to full valuation allowance.

Total stock-based compensation includes expense related to non-employee awards of $120,000 and $138,000 during the fiscal years ended June 30, 2020 and 2019, respectively.

Total stock-based compensation includes expense related to the ESPP of $305,000 during the fiscal year ended June 30, 2019.

There was no expense related to the ESPP during the year ended June 30, 2018.

In fiscal year 2018, our board of directors approved a repricing to $2.50 per share of certain outstanding options under our 2005 Stock Incentive Plan held by employees who are not executive officers or directors of the Company.

The repricing applied to options held by such employees with an exercise price greater than $2.50 per share which was the closing stock price as reported on Nasdaq on September 19, 2017.

In accordance with ASC 718, as applicable to the repricing, a modification to the price of an option should be treated as an exchange of the original option for a new option.

The calculation of the incremental value associated with the new option is based on the excess of the fair value of the modified option based on current assumptions over the fair value of the original option measured immediately before its price is modified based on current assumptions.

Total incremental stock-based compensation expense recognized related to the repricing was $445,000, of which $11,000 and $434,000 was recognized in 2019 and 2018, respectively.

Total stock-based compensation includes expense related to the ESPP of $294,000 and $305,000 during the fiscal year ended June 30, 2020 and 2019, respectively.

We utilized the Black-Scholes valuation model for estimating the fair value of the stock-based compensation of options granted.

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We used the following assumptions:

Year Ended June 30,

Fiscal Year Ended June 30,

Dividend yield

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Expected life (in years)

The fair value of the ESPP stock-based expense for the fiscal year ended June 30, 2019 was estimated using the following weighted-average assumptions:

June 30, 2019

The fair value of the ESPP stock purchase right is estimated on the date of grant using the following weighted-average assumptions:

Fiscal Year Ended June 30,

Expected term (in years)

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Risk-free interest rate

Estimated forfeiture rate

Fair Value of grants per share

During the fiscal year ended June 30, 2020, employees were granted the right to purchase an aggregate of 127,464 shares under the ESPP, and compensation expense related to those purchase rights for the fiscal year ended June 30, 2020 was $294,000.

During the fiscal year ended June 30, 2020, 133,533 shares were purchased and 773,483 shares remain available to be purchased pursuant to the 2017 ESPP.

The weighted average fair value of these shares as of June 30, 2019 were $2.92 per share.

As of June 30, 2020 unrecognized compensation expense related to purchase rights that will be recognized over a weighted average period of 0.4 years was $172,000.

The dividend yield of zero is based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends.

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We base our estimate of expected life of a stock option on the historical exercise behavior, and cancellations of all past option grants made by the Company during the time period which its common stock has been publicly traded, the contractual term of the option, the vesting period and the expected remaining term of the outstanding options.

In accordance with Accounting Standards Updates (ASU) 2016-09, Compensation—Stock Compensation:

Improvements to Employee Share-Based Accounting , we elected to continue to estimate forfeitures in the calculation of stock-based compensation expense.

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June 30, 2020

Developed technology

Research and development

Customer relationships - maintenance contracts

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June 30, 2019

Developed technology

Research and development

Customer relationships - maintenance contracts

Cost of recurring

Amortization expense related to the above intangible assets for fiscal year ended June 30, 2019 and 2018 was $438,000 and $2.0 million, respectively.

Estimated future amortization expense remaining as of June 30, 2019 for intangible assets acquired is as follows:

Total future amortization expense

COMMITMENTS AND CONTINGENCIES

We lease our facilities under non-cancelable operating leases that expire on various dates through fiscal year 2024.

On May 14, 2014, we entered into the First Amendment to the office lease for our Sunnyvale facility to extend the term of the lease through March 2022 and lease additional space in the current premises.

The term of the additional space commenced on August 5, 2015 and is scheduled to expire on March 31, 2022.

As part of the lease extension, the landlord provided the Company with a tenant improvement allowance during 2015 through 2016 of $411,000.

Our lease agreements provide us with the option to renew.

We recognize rent expense, which includes fixed escalation amounts in addition to minimum lease payment, on a straight-line basis over each lease term.

The difference between the amount paid for rent and the amount recognized under the straight-line basis is recorded as a deferred rent liability.

The deferred rent liability was $427,000 and $382,000 as of June 30, 2019 and 2018, respectively.

We lease certain equipment and software under operating and capital leases with various expiration dates.

For the fiscal years ended June 30, 2019, and 2018, rent expense for facilities under operating leases was $1.2 million and $1.1 million, net of rental income of $656,000 and $692,000, respectively.

A summary of future minimum lease payments is as follows (in thousands):

Fiscal Year June 30,

Amortization expense related to the above intangible assets for fiscal year ended June 30, 2020 and 2019 was $268,000 and $438,000, respectively.

We lease our office facilities under non-cancelable operating leases that expire on various dates through fiscal year 2024.

Additionally, we are the sublessor for certain office space.

All of our office leases are classified as operating leases with lease expense recognized on a straight-line basis over the lease term.

Lease right-of-use assets and liabilities are recognized at the commencement date at the present value of lease payments over the lease term.

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

The following table presents information about leases on our consolidated balance sheet (in thousands):

As of June 30, 2020

Operating lease right-of-use assets

Operating lease liabilities

Operating lease liabilities, net of current portion

The following table presents information about the weighted average lease term and discount rate as follows:

As of June 30, 2020

Weighted average remaining lease term (in years)

Weighted average discount rate

The following table presents information about leases on our consolidated statement of operations (in thousands):

Fiscal Year Ended

June 30, 2020

Operating lease expense

Short-term lease expense

Sublease income

The following table presents supplemental cash flow information about our leases (in thousands):

Fiscal Year Ended

June 30, 2020

Operating cash outflows from operating leases

Right-of-use assets obtained in exchange for new operating lease liabilities

As of June 30, 2020, remaining maturities of lease liabilities are as follows (in thousands):

Fiscal Period:

Total minimum lease payments

Contractual Obligations and Commitments

Contractual agreements with third parties consist of software licenses, maintenance and support for our operations.

As of June 30, 2019, future payments for non-cancellable contractual agreements are $1.3 million in fiscal year 2020.

We do not have any significant commitments related to co-location services for cloud operations as of June 30, 2019 and 2018.

Imputed interest

COMMITMENTS AND CONTINGENCIES

Employee benefit plans

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Amounts expensed under this plan were $466,000 and $441,000, for the fiscal years ended June 30, 2020 and 2019, respectively.

Gratuity Plan—India

In accordance with Gratuity Act of 1972, we sponsor a defined benefit plan (Gratuity Plan) for all of our India employees.

The Gratuity Plan is required by local law, which provides a lump sum payment to vested employees upon retirement or termination of employment in an amount based on each employee’s salary and duration of employment with the Company.

The Gratuity Plan benefit cost for the year is calculated on an actuarial basis.

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Indemnification

We have agreed to indemnify our directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as our director or officer or that person’s services provided to any other company or enterprise at our request.

Transfer Pricing

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We believe that such assessments are without merit and would not have a significant impact on our consolidated financial statements.

Contractual Obligations and Commitments

Contractual agreements with third parties consist of software licenses, maintenance and support for our operations.

As of June 30, 2020, we have paid all non-cancelable contractual agreements related to these software licenses.

As of June 30, 2019, future payments for non-cancelable contractual agreements was $1.3 million.

We have no significant commitments related to co-location services for cloud operations as of June 30, 2020 and 2019.

In the ordinary course of business, we are involved in various legal proceedings and claims related to alleged infringement of third-party patents and other intellectual property rights, commercial, corporate and securities, labor and employment, wage and hour, and other claims that are not expected to have a material impact.

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Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions.

The fair value hierarchy consists of the following three levels:

Level 1 –

instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

Level 2 –

instrument valuations are obtained from readily-available pricing sources for comparable instruments.

Level 3 –

instrument valuations are obtained without observable market value and require a high level of judgment to determine the fair value.

As of June 30, 2019 and 2018, we did not have any Level 1, 2 or 3 assets or liabilities.

Level 1 – instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

Level 2 – instrument valuations are obtained from readily-available pricing sources for comparable instruments.

Level 3 – instrument valuations are obtained without observable market value and require a high level of judgment to determine the fair value.

Our money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as level 1 within the fair value hierarchy.

As of June 30, 2020 and 2019, cash equivalents classified as level 1 instruments were measured at $41.8 million and $29.2 million, respectively.

QUARTERLY FINANCIAL DATA (Unaudited)

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Diluted net income per share

Income (loss) from operations

Basic and diluted net loss per share

Income from operations

Basic net income per share

Diluted net income per share

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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Evaluation of Disclosure Controls and Procedures.

We maintain “disclosure controls and procedures,”

as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (Exchange Act), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (Exchange Act), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.

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There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).

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Projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework in Internal Control—

Integrated Framework (2013) , our management concluded that our internal control over financial reporting was effective as of June 30, 2019.

The effectiveness of our internal control over financial reporting as of June 30, 2019 has been audited by BPM LLP, an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Annual Report on Form 10-K.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework in Internal Control— Integrated Framework (2013) , our management concluded that our internal control over financial reporting was effective as of June 30, 2020.

OTHER INFORMATION

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

eGain Corporation

Sunnyvale, California

Opinion on Internal Control over Financial Reporting

We have audited eGain Corporation and its subsidiaries’

(the Company’s) internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of June 30, 2019 and 2018 and the related consolidated statements of operations, comprehensive income (loss), stockholders’

equity (deficit), and cash flows for each of the two years in the period ended June 30, 2019 of the Company and our report dated September 12, 2019, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

San Jose, California

September 12, 2019

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item (with respect to our Directors) is incorporated by reference from the information under the heading “Election of Directors”

contained in eGain’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for eGain’s 2019 Annual Meeting of Stockholders (Proxy Statement).

Certain information required by this item concerning executive officers is set forth in Part I, Item 4 of this report under the caption “Executive Officers of the Registrant”

and is incorporated herein by reference.

The information contained under the caption “Section 16(a) Beneficial Ownership Reporting Compliance”

in the Proxy Statement is incorporated herein by reference.

The information required by this item (with respect to our Directors) is incorporated by reference from the information under the heading “Election of Directors” contained in eGain’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for eGain’s 2020 Annual Meeting of Stockholders (Proxy Statement).

Certain information required by this item concerning executive officers is set forth in Part I, Item 1 of this report under the caption “Information About Our Executive Officers” and is incorporated herein by reference.

The information contained under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement is incorporated herein by reference.

EXECUTIVE COMPENSATION

The information contained under the headings “Executive Compensation”

and “Compensation Committee Report”

and under the captions “Director Compensation”

in the Proxy Statement is incorporated herein by reference.

The information contained under the headings “Executive Compensation” and “Compensation Committee Report” and under the captions “Director Compensation” in the Proxy Statement is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information contained under the heading “Security Ownership of Certain Beneficial Owners and Management”

in the Proxy Statement is incorporated herein by reference.

The information contained under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference.

The following table summarizes our equity compensation plans as of June 30, 2020:

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Equity compensation plans approved by security holders

1998 Stock Plan

2005 Stock Incentive Plan

Equity compensation plans not approved by security holders

2000 Non-Management Stock Option Plan

2005 Management Stock Option Plan

Equity Compensation Plans Not Approved By Security Holders

2000 Non-Management Stock Option Plan

In July 2000, our board of directors adopted the 2000 Non-Management Stock Option Plan, which provides for the grant of non-statutory stock options and stock purchase rights to employees of eGain.

A total of 200,000 shares of common stock were reserved for issuance under the 2000 Non-Management Stock Option Plan.

This plan expired in July 2010, and there are no further options available to grant under the 2000 Non-Management Stock Option Plan.

2005 Management Stock Option Plan

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information contained under the captions “Related Party Transactions”

and “Director Independence”

in the Proxy Statement is incorporated herein by reference.

The information contained under the captions “Related Party Transactions” and “Director Independence” in the Proxy Statement is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information contained under the heading “Ratification of Independent Registered Public Accounting Firm”

in the Proxy Statement is incorporated herein by reference.

The information contained under the heading “Ratification of Independent Registered Public Accounting Firm” in the Proxy Statement is incorporated herein by reference.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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The following schedule, which is filed as part of this Form 10-K:

Schedule II—Valuation and Qualifying Accounts for the fiscal years ended June 30, 2019 and 2018.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Schedule II—Valuation and Qualifying Accounts for the fiscal years ended June 30, 2020 and 2019.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Years Ended June 30, 2020 and 2019

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Description of Exhibits

Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).

Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3(iii) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012).

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 to the Registrant’s Registration Statement on Form S-1, File No.

Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).

Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3(iii) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012).

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 to the Registrant’s Registration Statement on Form S-1, File No.

333-83439, originally filed with the Commission on July 22, 1999, as subsequently amended (Form S-1).

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form S-1).

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form S-1).

Amended and Restated 1998 Stock Plan and forms of stock option agreements thereunder (incorporated by reference to Exhibit 10.3 to the Registrant’s Form S-1).

2000 Non-Management Stock Option Plan (incorporated by reference to Exhibit10.11 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2000).

Amended and Restated 2005 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).

Amended and Restated 2005 Management Stock Option Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).

Form of Executive Change in Control Severance Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form S-1).

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form S-1).

eGain Corporation Amended and Restated 2005 Stock Incentive Plan (as amended through August 30 2019) (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019).

Amended and Restated 2005 Management Stock Option Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).

F orm of Executive Change in Control Severance Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) .

eGain Corporation 2017 Employee Stock Purchase Plan.

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Standard Industrial/Commercial Multi-Tenant Lease Modified Net dated as of May 9, 2011 between the Registrant and DeGuigne Ventures, LLC (incorporated by reference to Exhibit 10.14 to Amendment No.

1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014).

First Amendment to Standard Industrial/Commercial Multi-Tenant Lease Modified Net dated as of May 14, 2014 between the Registrant and D.R.

Stephens Industrial Partners, LLC (Successor in Interest to DeGuigne Ventures, LLC) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 19, 2014).

Subsidiaries of eGain.

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Indicates management contract or compensatory plan or arrangement.

* This exhibit is not deemed “filed”

with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after date hereof and irrespective of any general incorporation language contained in such filing.

This exhibit is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after date hereof and irrespective of any general incorporation language contained in such filing.

Financial Statements

Reference is made to Item 15(a)(2) above.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data