What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-09-10 compared with 2020-09-11 · 149 added, 155 removed, 822 unchanged (27% of the section changed)

19 unchanged sentences

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the two years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

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

12 unchanged sentences

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

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As described in Note 1 to the consolidated financial statements, the Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services.

The Company enters into contracts with its customers that may include promises to transfer cloud delivery arrangements, term software licenses, support and professional services.

Significant judgment may be required by the Company in determining revenue recognition for these customer agreements, including the determination of

whether products and services are considered distinct performance obligations that should be accounted for separately or combined as one unit of accounting and the determination of standalone selling prices (“SSP”) for each distinct performance, particularly for services that are not sold separately.

The principal audit considerations for our determination that performing procedures related to the Company’s revenue recognition for customer agreements is a critical audit matter are the significant amount of judgment required by management in this process.

Significant judgment is required in determining SSP, including the determination of whether services are considered distinct performance obligations that should be accounted for separately or combined as one unit of accounting and the determination of SSP for each distinct performance obligation, particularly for services that are not sold separately.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of internal controls relating to the revenue recognition process, including internal controls related to the identification of distinct performance obligations and data used to establish SSP for products and services.

These procedures also included reviewing executed contracts for a sample of revenue transactions to assess management’s evaluation of significant terms, including the determination of distinct performance obligations, and testing the amounts recognized as revenue or recorded as deferred revenue.

In addition, we tested management’s determination of SSP by performing audit procedures that included, among others, assessing the appropriateness of the methodology applied, testing the mathematical accuracy of the underlying data and calculations, and testing selections to corroborate the data underlying the Company’s calculations.

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

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Property and equipment, net

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

Operating lease right-of-use assets

Costs capitalized to obtain revenue contracts, net of current portion

Intangible assets, net

Other assets, net

LIABILITIES AND STOCKHOLDERS' EQUITY

3 unchanged sentences

Accrued liabilities

Operating lease liabilities (Note 8)

Operating lease liabilities

Deferred revenue

1 unchanged sentence

Deferred revenue, net of current portion

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

Operating lease liabilities, net of current portion

Other long-term liabilities

Total liabilities

Commitments and contingencies (Note 9)

Commitments and contingencies (Note 8 and 9)

Stockholders' equity:

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Income from operations

Interest income (expense), net

Other income (expense), net

Interest income, net

Other (expense) income, net

Income before income tax provision

Income tax provision

Income tax benefit (provision)

Per share information:

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(in thousands)

Stockholders'

Comprehensive

Stockholders'

BALANCES AS OF JULY 1, 2019

Cumulative-effect adjustment upon the modified retrospective

adoption of ASU No.

Interest on stockholder notes

Interest on stockholders' notes

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

Issuance of common stock in connection with employee stock purchase plan

True-up of issuance costs related to public offering

Stock-based compensation

1 unchanged sentence

BALANCES AS OF JUNE 30, 2020

Interest on stockholder notes

Interest on stockholders' notes

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection with employee stock purchase plan

True-up of issuance costs related to public offering

Stock-based compensation

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Amortization of costs capitalized to obtain revenue contracts

Amortization of deferred financing costs

Amortization of right-of-use assets

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Stock-based compensation

(Gain) loss on disposal of property and equipment

Gain on disposal of property and equipment

Changes in operating assets and liabilities:

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Proceeds from bank borrowings

Payments on capital lease obligations

Proceeds from exercise of stock options

Proceeds from employee stock purchase plan

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

Net cash provided by financing activities

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Cash paid for taxes

ROU assets and lease liabilities recognized from lease modification

Non-cash items:

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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.

We help B2C brands operationalize digital customer engagement strategy.

Our suite includes rich applications for digital interaction, knowledge management, and AI-based process guidance.

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.

eGain Corporation (“eGain”, the “Company”, “our”, “we” or “us”) automates customer engagement with an innovative Software as a service (SaaS) platform, powered by deep digital, Artificial intelligence (AI), and knowledge capabilities.

We are headquartered in the United States.

We also operate in United Kingdom and India.

We sell mostly to large enterprises across financial services, telecommunications, retail, government, healthcare, and utilities.

With our mantra of AX + BX + CX = DX™ , we guide clients to effortless digital experience (DX) by holistically optimizing agent experience (AX), business experience (BX) and customer experience (CX).

More than one hundred eighty leading brands use eGain cloud software to improve customer satisfaction, empower agents, reduce service cost and boost sales.

Principles of Consolidation

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All significant intercompany balances and transactions have been eliminated.

Follow-On Public Offering

In March 2019, we completed a follow-on public offering, in which we issued 2.0 million shares of our common stock at a public offering price of $11.00 per share.

In April 2019, the underwriters exercised an over-allotment option to purchase 149,000 additional shares of our common stock.

As of June 30, 2019, we received net proceeds of $21.7 million after deducting underwriting discounts and commissions of $1.6 million and other offering expenses of $282,000.

Business Combinations

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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.

Foreign currency transaction gains and losses are included in “other (expense) income, net” in the consolidated statements of operations, and resulted in a gain of $570,000 and a loss of $172,000, in fiscal years ended June 30, 2021 and 2020, respectively.

Cash and Cash Equivalents, Restricted Cash and Investments

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expected usage more than a year is considered a non-current asset.

As of June 30, 2020 and 2019, our restricted cash was nominal.

As of June 30, 2021 and 2020, our restricted cash was nominal and expected to be used within one year.

Fair Value of Financial Instruments

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Financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable.

Cash and cash equivalents and investments are deposited with high credit quality institutions.

Cash and cash equivalents are deposited with high credit quality institutions.

We are exposed to credit risk in the event of default by these institutions to the extent of the amount recorded on the balance sheet.

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Cisco Systems, Inc.

accounted for 18% and 17% of total revenue in fiscal years 2020 and 2019, respectively.

accounted for 21% and 18% of total revenue and BT PLC accounted for 13% and 10% of total revenue in fiscal years 2021 and 2020, respectively.

We perform ongoing credit evaluations of our customers with outstanding receivables and generally do not require collateral.

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.

Three partners and customers accounted for 30%, 17%, and 16% of accounts receivable as of June 30, 2021, respectively.

Two partners and customers accounted for 23% and 18% of accounts receivable as of June 30, 2020.

Accounts Receivable and Allowance for Doubtful Accounts

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Our accounts receivable are derived from revenue earned from customers and are not interest bearing.

We also maintain an allowance for doubtful accounts to reserve for potential uncollectible trade receivables.

We also maintain an allowance for doubtful accounts to reserve for potential

uncollectible trade receivables.

We review our trade receivables by aging category to identify specific customers with known disputes or collectibility issues.

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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 $1.7 million and $1.4 million as of June 30, 2020 and 2019, respectively, and are included in the accounts receivable balance.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization.

Unbilled accounts receivables, for which the Company has the unconditional right to consideration, totaled $719,000 and $1.4 million as of June 30, 2021 and 2020, respectively, and are included in the accounts receivable balance.

Property and Equipment, Net

Property and equipment, net, is stated at cost, net of accumulated depreciation and amortization.

Depreciation is computed using the straight-line method over the estimated useful life of the respective assets, which typically is between three or five years.

Leasehold improvements and leased equipment are depreciated on a straight-line basis over the shorter of the lease term or useful life of the asset, which is typically three to five years.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets, Net

We review goodwill annually for impairment or sooner whenever events or changes in circumstances indicate that it may be impaired.

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An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

During fiscal years 2020 and 2019, we did not have any such losses.

During fiscal years 2021 and 2020, we did not have any such impairment losses.

Deferred Revenue

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Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent.

Cost Capitalized to Obtain Revenue Contracts

Cost Capitalized to Obtain Revenue Contracts, Net

Under Topic 606, we capitalize incremental costs of obtaining non-cancelable subscription 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.

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.

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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.

The Company does not adjust transaction price for the effects of a significant financing component when the period between the transfers of the promised good or service to the customer and payment for that good or service by the customer is expected to be one year or less.

The Company assessed each of its revenue contracts in order to determine whether a significant financing component exists, and determined its contracts did not include a significant financing component for the years ended June 30, 2021 and 2020.

During the fiscal year ended June 30, 2021 and 2020, we capitalized $1.5 million and $1.8 million of costs to obtain revenue contracts, respectively, and amortized $1.2 million and $842,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $3.9 million and $3.4 million as of June 30, 2021 and June 30, 2020, respectively.

Deferred Financing Costs

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 .

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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.

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.

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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 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.

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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.

Stock-based compensation expense for employee and non-employee awards is recognized as expense over the vesting period.

Fair value for employee awards is measured as of the grant date.

Fair value for non-employee awards is measured as of the grant date and is subsequently remeasured each reporting period.

Stock-based compensation expense for employee and non-employee awards is recognized as expense over the requisite service period, which is generally in line with the vesting period.

Income taxes are accounted for using the asset and liability method in accordance with ASC 740, Income Taxes.

4 unchanged sentences

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

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.

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.

On December 22, 2017, the U.S.

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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, 2021, we have $923,000 of GILTI income inclusion and used our net operating losses to offset our taxable income.

For the fiscal year ended June 30, 2021, we did not incur any BEAT tax.

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Tax positions are evaluated for recognition by determining if the weight of available evidence indicates that it is probable that the position will be sustained on audit, including resolution of related appeals or litigation.

Tax benefits are then measured as the largest amount which is more than 50% likely of being realized upon ultimate settlement.

Tax benefits are then measured as the largest amount which is more than 50% likely of

being realized upon ultimate settlement.

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, 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.

As of June 30, 2021, we have completed a 382 study under Section 382 of the Internal Revenue Code through June 30, 2020, 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.

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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 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.

Total comprehensive income for each of the two years in the period ended June 30, 2021 is shown in the accompanying consolidated statements of comprehensive income.

Accumulated other comprehensive loss presented in the accompanying consolidated balance sheets as of June 30, 2021 and 2020 consists of accumulated foreign currency translation adjustments.

Net Income Per Common Share

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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.

This update is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021).

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

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts.

2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model, which will result in earlier recognition of credit losses.

Subsequent to the issuance of ASU No.

2016-13, the FASB issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instrument, ASU No.

2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief, ASU No.

2016-13, ASU No.

2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and ASU No.

2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses.

The subsequent ASUs do not change the core principle of the guidance in ASU No.

Instead, these amendments are intended to clarify and improve operability of certain topics included within ASU No.

Additionally, ASU No.

2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies (“SRC”) as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal year 2024 for the Company if it continues to be classified as a SRC.

In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses.

The subsequent amendments will have the same effective date and transition requirements as ASU No.

Early adoption is permitted.

Topic 326 requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.

While the Company is currently evaluating the impact of Topic 326, the Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements or the related disclosure.

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

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Pronouncements Recently Adopted

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

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

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.

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.

2018-11, Leases (Topic 842):

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 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 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 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

Adjustments due

Balance as of

Balance sheet captions:

Prepaid expenses

Total current assets

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

Accrued liabilities

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.

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.

We adopted this guidance as of our first quarter of fiscal year 2021 with no impact on our consolidated financial statements.

Revenue Recognition

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Training revenue that meets the criteria to be accounted for separately is recognized when training is provided.

Contracts with Multiple Performance Obligations

The Company enters into contracts that can include various combinations of subscriptions, professional services and maintenance and support, which are generally distinct and accounted for as separate performance obligations.

For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the respective standalone selling prices for each performance obligation.

BALANCE SHEET COMPONENTS

Property and equipment consists of the following:

Property and equipment, net consists of the following:

As of June 30,

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Depreciation and amortization expense was $428,000 and $304,000 for the fiscal years ended June 30, 2021 and 2020, respectively.

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.

Disposed fixed assets, which were substantially fully-depreciated, were $0 and $920,000 for the years ended June 30, 2021, and 2020, respectively.

Accrued compensation consists of the following:

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As of June 30, 2021, our remaining performance obligations were $65.4 million of which we expect to recognize $55.2 million and $10.2 million as revenue within one year and beyond one year, respectively.

BANK BORROWINGS

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):

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

Fiscal Year Ended June 30,

United States

Income before income tax provision

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

Income before income tax (benefit) provision

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

Fiscal Year Ended June 30,

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Effective tax rate

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

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

Fiscal Year Ended June 30,

Current provision (benefit):

Current (benefit) provision:

Total current:

Total deferred:

Income tax provision

Income tax (benefit) provision

As of June 30, 2021, we had federal and state net operating loss carryforwards of approximately $107.0 million and $14.3 million, respectively.

The net operating loss carryforwards will expire at various dates beginning in fiscal year ending June 30, 2022, if not utilized.

We also had federal research and development credit carryforwards of approximately $3.5 million as of June 30, 2020, which will expire at various dates beginning in fiscal year ending June 30, 2021, if not utilized.

We also had federal research and development credit carryforwards of approximately $3.2 million

as of June 30, 2021, which will expire at various dates beginning in fiscal year ending June 30, 2022, if not utilized.

The California research and development credit carryforwards are approximately $5.7 million as of June 30, 2021 and have an indefinite carryover period.

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.

As of June 30, 2021, we have completed a 382 study under Section 382 of the Internal Revenue Code through June 30, 2020, and have determined there was no loss of NOLs as a result of these changes.

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Total deferred tax assets, net *

*included in other assets on balance sheet

*included in other assets on consolidated balance sheet

ASC 740, Income Taxes , provides for the recognition of deferred tax assets if realization of such assets is more likely than not.

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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 carryforwards which had previously been valued against, change in valuation allowance, stock-based compensation, research and development credits, and our foreign operations.

Our income tax rate differs from the statutory tax rates primarily due to the utilization of net operating loss carryforwards which had previously been valued against, change in valuation allowance, stock-based compensation, GILTI inclusion, research and development credits, and our foreign operations.

The net valuation allowance decreased by $13.2 million and $5.7 million for the fiscal years ended June 30, 2021 and 2020, respectively.

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It is our intention to reinvest such undistributed earnings indefinitely in our foreign subsidiaries.

If we distribute these earnings, in the form of dividends or otherwise, we would be subject to withholding taxes payable to the foreign jurisdiction.

If we distribute these

earnings, in the form of dividends or otherwise, we would be subject to withholding taxes payable to the foreign jurisdiction and potential state taxes.

Uncertain Tax Positions

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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.

The Company is not currently under audit with either the IRS, foreign, or any state or local jurisdictions, nor has it been notified of any other potential future income tax audit.

The federal and California statute of limitations remains open for three and four years, respectively, from the date of utilization of any net operating loss or credits.

STOCKHOLDERS’ EQUITY

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Preferred Stock

We are authorized to issue 5,000,000 shares of preferred stock with a par value of $0.001 per share, and no shares of preferred stock are outstanding.

We are authorized to issue 5,000,000 shares of preferred stock with a par value of $0.001 per share.

As of June 30, 2021 and 2020, no shares of preferred stock are issued or outstanding.

Our board of directors has the authority, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.

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Available for

Average Price

Exercise Price

Balance as of June 30, 2019

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Available for

Exercise Price

Balance as of June 30, 2019

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$12.25-$13.75

$14.275-$14.275

$19.11-$19.11

The summary of options vested and exercisable as of June 30, 2021 comprised:

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The aggregate intrinsic value in the preceding table represents the total intrinsic value based on stock options with a weighted average exercise price less than our closing stock price of $11.48 as of June 30, 2021 that would have been received by the option holders, had they exercised their options on June 30, 2021.

The total intrinsic value of stock options exercised during fiscal years 2020 and 2019 was $1.3 million and $4.5 million, respectively.

The total intrinsic value of stock options exercised was $2.0 million and $1.3 million during fiscal years 2021 and 2020, respectively.

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.

Stock-based compensation expense consists of expenses for stock options and our employee stock purchase plan (ESPP).

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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.

The Company recognized $51,000 and $56,000 of tax expense related to stock-based compensation expense for eGain UK and Exony for the fiscal year ended June 30, 2021 and 2020, respectively.

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.

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All shares of our common stock issued pursuant to our stock option plans are only issued out of an authorized reserve of shares of common stock, which were previously registered with the Securities and Exchange Commission on a registration statement on Form S-8.

During the fiscal years ended June 30, 2020 and 2019, there were 350,125 and 334,500 options granted, respectively, with a weighted average fair value of $4.50 and $5.17, per share, respectively.

During the fiscal years ended June 30, 2021 and 2020, there were 207,700 and 350,125 options granted, respectively, with a weighted average grant date fair value of $6.60 and $4.50, per share, respectively.

We used the following assumptions:

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

Total compensation cost, net of forfeitures, for all options granted but not yet vested as of June 30, 2020 was $1.2 million which is expected to be recognized over the weighted average period of 1.13 years.

The following table summarizes stock-based compensation expense relating to stock options for the year ended June 30, 2021 and 2020, respectively (in thousands):

Fiscal Year Ended June 30,

Cost of revenue

Research and development

Sales and marketing

General and administrative

Total unamortized compensation cost, net of forfeitures, for all options granted but not yet vested as of June 30, 2021 was $1.1 million which is expected to be recognized over the weighted average period of 1.23 years.

INTANGIBLE ASSETS

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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:

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Fiscal Period:

Fiscal year 2022

Fiscal year 2023

Fiscal year 2024

Total minimum lease payments

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As of June 30, 2021, 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, 2021 and 2020.

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(in thousands, except per share data)

Fiscal Year 2021

Income from operations

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Diluted net income per share

Fiscal Year 2020

Income from operations

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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 2020 Annual Meeting of Stockholders (Proxy Statement).

The information required by this item 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 2021 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.

The information contained under the caption “Delinquent Section 16(a) Reports” in the Proxy Statement is incorporated herein by reference.

EXECUTIVE COMPENSATION

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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

PRINCIPAL ACCOUNTANT 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.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

Financial Statements

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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.

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.2 the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30,2020).

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

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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.

eGain Corporation 2017 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020).

Credit Agreement dated as of November 21, 2014 among the Registrant, certain subsidiaries of the Registrant.

Wells Fargo Bank N.A.

as agent and the lenders party thereto.

Amendment Number One to Credit Agreement dated as of September 1, 2015 among the Registrant, certain subsidiaries of the Registrant, Wells Fargo Bank, N.A., as agent and the lenders party thereto.

Amendment Number Two to Credit Agreement dated as of January 27, 2017 among the Registrant, certain subsidiaries of the Registrant, Wells Fargo Bank, N.A., as agent and the lenders party thereto.

as agent and the lenders party thereto (incorporated by reference to Exhibit 10.6 the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020).

Amendment Number One to Credit Agreement dated as of September 1, 2015 among the Registrant, certain subsidiaries of the Registrant, Wells Fargo Bank, N.A., as agent and the lenders party thereto (incorporated by reference to Exhibit 10.7 the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020).

Amendment Number Two to Credit Agreement dated as of January 27, 2017 among the Registrant, certain subsidiaries of the Registrant, Wells Fargo Bank, N.A., as agent and the lenders party thereto (incorporated by reference to Exhibit 10.8 the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020).

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.

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Consent of BPM LLP, Independent Registered Public Accounting Firm.

P ower of Attorney (included on the signature page hereof).

Rule 13a-14(a) Certification of Chief Executive Officer.

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Certification pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 of Ashutosh Roy, Chief Executive Officer.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 of Chief Executive Officer.

Certification pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 of Eric Smit, Chief Financial Officer.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 of Chief Financial Officer.

XBRL Instance Document

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XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Indicates management contract or compensatory plan or arrangement.

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Chief Executive Officer

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Ashutosh Roy and Eric Smit, and each of them, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this annual report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Ashutosh Roy and Eric N.

Smit, and each of them, his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments to this annual report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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September 10, 2021

(Duly Authorized Officer and Principal Financial

(Principal Financial

and Accounting Officer)

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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