What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-05-14 · 116 added, 126 removed, 387 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except par value data)

September 30,

Current assets:

1 unchanged sentence

Restricted cash

Accounts receivable, less allowance for doubtful accounts of $742 and $384 as of March 31, 2021 and June 30, 2020, respectively

Accounts receivable, less allowance for doubtful accounts of $ 154 and $ 434 as of September 30, 2021 and June 30, 2021, respectively

Costs capitalized to obtain revenue contracts, net

3 unchanged sentences

Property and equipment, net

Operating lease right-of-use assets

Operating lease right-of-use assets (Note 5)

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

Operating lease liabilities (Note 5)

Deferred revenue

1 unchanged sentence

Deferred revenue, net of current portion

Operating lease liabilities, net of current portion

Operating lease liabilities, net of current portion (Note 5)

Other long-term liabilities

4 unchanged sentences

50,000 shares;

31,092 shares as of March 31, 2021 and 30,821 shares as of June 30, 2020

31,387 shares as of September 30, 2021 and 31,231 shares as of June 30, 2021

Additional paid-in capital

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Professional services

12 unchanged sentences

Other income (expense), net

Income before income tax (provision) benefit

Income tax (provision) benefit

Income before income tax provision

Income tax provision

Per share information:

6 unchanged sentences

Three Months Ended

Nine Months Ended

Other comprehensive income (loss), net of taxes:

September 30,

Other comprehensive income, net of taxes:

Foreign currency translation adjustments

4 unchanged sentences

(in thousands)

Three Months Ended March 31, 2021

Additional Paid-in

Notes Receivable From

Accumulated Other Comprehensive

Total Stockholders'

Income (Loss)

Balances as of December 31, 2020

Interest on stockholder notes

Issuance of common stock upon exercise of stock options

Stock-based compensation

Foreign currency translation adjustments

Balances as of March 31, 2021

Three Months Ended March 31, 2020

Additional Paid-in

Notes Receivable From

Accumulated Other Comprehensive

Total Stockholders'

Income (Loss)

Balances as of December 31, 2019

Issuance of common stock upon exercise of stock options

Stock-based compensation

Foreign currency translation adjustments

Balances as of March 31, 2020

See accompanying notes to condensed consolidated financial statements.

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (cont.)

(in thousands)

Nine Months Ended March 31, 2021

Three Months Ended September 30, 2021

Additional Paid-in

2 unchanged sentences

Total Stockholders'

Income (Loss)

Balances as of June 30, 2021

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

Stock-based compensation

Foreign currency translation adjustments

Balances as of March 31, 2021

Nine Months Ended March 31, 2020

Balances as of September 30, 2021

Three Months Ended September 30, 2020

Additional Paid-in

2 unchanged sentences

Total Stockholders'

Income (Loss)

Balances as of June 30, 2020

1 unchanged sentence

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection with employee stock purchase plan

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

Stock-based compensation

Foreign currency translation adjustments

Balances as of March 31, 2020

Balances as of September 30, 2020

See accompanying notes to condensed consolidated financial statements

2 unchanged sentences

(in thousands)

Nine Months Ended

Three Months Ended

September 30,

Cash flows from operating activities:

6 unchanged sentences

Stock-based compensation

Gain on disposal of property and equipment

Loss on disposal of property and equipment

Changes in operating assets and liabilities:

15 unchanged sentences

Cash flows from financing activities:

Payments on bank borrowings

Proceeds from bank borrowings

Proceeds from exercise of employee stock options

Proceeds from employee stock purchase plan

Net cash provided by financing activities

4 unchanged sentences

Supplemental cash flow disclosures:

Cash paid for interest

Cash paid for taxes, net of tax refunds

Cash paid for taxes

ROU assets and lease liabilities recognized from lease modification

Non-cash items:

Purchases of equipment through accounts payable

See accompanying notes to condensed consolidated financial statements

EGAIN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

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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).

Approximately one hundred seventy-five leading brands use eGain cloud software to improve customer satisfaction, empower agents, reduce service cost and boost sales.

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

Our fiscal year ends on June 30.

1 unchanged sentence

Basis of Presentation

The accompanying condensed consolidated balance sheet as of March 31, 2021 and the condensed consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the three and nine months ended March 31, 2021 and 2020, are unaudited.

The consolidated balance sheet as of June 30, 2020 included herein was derived from the audited financial statements as of that date.

The accompanying condensed consolidated balance sheet as of September 30, 2021 and the condensed consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the three months ended September 30, 2021 and 2020, are unaudited.

The condensed consolidated balance sheet as of June 30, 2021 was derived from audited consolidated financial statements as of that date but does not include all the information and footnotes required by GAAP for complete financial statements.

Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles (GAAP), have been condensed or omitted pursuant to such rules and regulations although we believe that the disclosures made are adequate to make the information not misleading.

1 unchanged sentence

These condensed consolidated financial statements and notes should be read in conjunction with our audited consolidated financial statements and accompanying notes for the fiscal year ended June 30, 2021, included in our Annual Report on Form 10-K.

The condensed consolidated balance sheet as of June 30, 2020 was derived from audited consolidated financial statements as of that date but does not include all the information and footnotes required by GAAP for complete financial statements.

The results of our operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending June 30, 2022.

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Pronouncements Not Yet Adopted

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.

Pronouncements Recently Adopted

In August 2018, 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 condensed consolidated financial statements.

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740):

1 unchanged sentence

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 August 2018, FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) .

This update requires customers 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.

We adopted this guidance as of our first quarter of fiscal year 2022 with no impact on our condensed consolidated financial statements.

Revenue Recognition

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Additionally, significant judgment is required to determine the timing of revenue recognition.

We allocate the transaction price to each performance obligation on a relative standalone selling price (SSP).

We allocate the transaction price to each performance obligation on a relative SSP.

The SSP is the price at which we would sell a promised service separately to one of our customers.

14 unchanged sentences

● Maintenance and support arrangements;

● Term license subscriptions which incorporate on-premise software licenses and substantial cloud functionality that are not distinct in the context of our arrangements as such are considered highly interrelated and represent a single combined performance obligation.

● Term license subscriptions which incorporate on-premise software licenses and substantial cloud functionality that are not distinct in the context of our arrangements are considered highly interrelated and represent a single combined performance obligation.

For contracts involving distinct software licenses, the license performance obligation is satisfied at a point in time when control is transferred to the customer.

1 unchanged sentence

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 royalty revenue agreements with two partners related to the Company’s embedded intellectual property.

Under the terms of these agreements, the partners are to provide to the Company a combined fixed fee and per agent fee, for each software license sold containing the embedded software.

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 remit a percentage of sales to the Company.

These embedded OEM royalties are included as subscription revenue.

Under Topic 606-10-55-65 revenue guidance (Topic 606), since these arrangements are for sales-based licenses of intellectual property, the Company recognizes revenue only as the subsequent sale occurs.

However, certain sales from one partner are reported with a quarter in arrears, such revenue is recognized at the time it is reported and paid by the customer given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals.

Under Topic 606, since these arrangements are for sales-based licenses of intellectual property, for which the guidance in paragraph ASC 606-10-55-65 applies, the Company recognizes revenue only as the subsequent sale occurs.

As the sales in connection with the royalty revenue agreement are reported by the customer a quarter in arrears, such revenue is recognized at the time it is reported and paid by the customer given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals.

Professional Services Revenue

6 unchanged sentences

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

Costs Capitalized to Obtain Revenue Contracts

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 SSP for each performance obligation.

Costs Capitalized to Obtain Revenue Contracts, Net

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

6 unchanged sentences

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

During the three and nine months ended March 31, 2021, we capitalized $677,000 and $1.1 million of costs to obtain revenue contracts, respectively, and amortized $309,000 and $872,000 to sales and marketing expense, respectively.

During the three and nine months ended March 31, 2020, we capitalized $459,000 and $1.0 million of costs to obtain revenue contracts, respectively, and amortized $210,000 and $607,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $3.8 million and $3.4 million as of March 31, 2021 and June 30, 2020, 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 periods ended September 30, 2021 and 2020.

During the three months ended September 30, 2021 and 2020, we capitalized $ 646,000 and $ 14,000 of costs to obtain revenue contracts, respectively, and amortized $ 356,000 and $ 250,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were approximately $ 4.2 million and $ 3.9 million as of September 30, 2021 and June 30, 2021, respectively.

Deferred Revenue

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

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.

9 unchanged sentences

The Company operates in one operating segment and all required financial segment information can be found in the condensed consolidated financial statements.

Results for Asia Pacific represent costs and long-lived assets of our operations in India.

Our sales are derived from North America and Europe, Middle East, and Africa.

However, we incur operating expenses in the North America, Europe, Middle East, Africa and Asia Pacific regions.

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

The following table presents our operating income among our three operating regions (in thousands):

Three Months Ended

Nine Months Ended

September 30,

North America

Europe, Middle East, & Africa

Total revenue

Income from operations:

3 unchanged sentences

The following table presents our long-lived assets, corresponding to our geographic areas are as follows (in thousands):

September 30,

Long-lived Assets:

2 unchanged sentences

Long-lived Assets

We define long-lived assets as hard assets, that cannot be easily removed, such as property and equipment.

For the purposes of entity-wide geographic area disclosures, we define long-lived assets as hard assets that cannot be easily removed, such as property and equipment.

Concentration of Credit Risk and Significant Customers

2 unchanged sentences

Receivables are written off against the allowance when we have exhausted collection efforts without success.

Two customers, who are also our partners, accounted for 23% and 13%, respectively, of total revenue during the three months ended March 31, 2021 and 20% and 12%, respectively for the nine months ended March 31, 2021.

The same partners, accounted for 18% and 10%, respectively, of total revenue during the three months ended March 31, 2020 and 18% and 10%, respectively, for the nine months ended March 31, 2020.

Two customers, who are also our partners, accounted for 24 % and 13 %, respectively, of total revenue during the three months ended September 30, 2021.

Two customers, who are also partners, accounted for 19 % and 11 % of total revenue during the three months ended September 30, 2020, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

8 unchanged sentences

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 $855,000 and $1.7 million as of March 31, 2021, and June 30, 2020, respectively, and are included in the accounts receivable balance.

Unbilled accounts receivables, for which the Company has the unconditional right to consideration, totaled approximately $ 1.2 million and $ 719,000 as of September 30, 2021, and June 30, 2021, respectively, and are included in the accounts receivable balance.

Stock-Based Compensation

1 unchanged sentence

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 2017 employee stock purchase plan (ESPP).

Stock-based compensation expense consists of expenses for stock options granted under our Amended and Restated 2005 Management Stock Option Plan and our Amended and Restated 2005 Stock Incentive Plan and our 2017 employee stock purchase plan (ESPP).

The ESPP provides that eligible employees may 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.

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Stock-Based Compensation Expense:

4 unchanged sentences

Total stock-based compensation expense

Total stock-based compensation includes expense related to non-employee awards of an expense reversal of $12,000 and expense of $21,000 during the three and nine months ended March 31, 2021, respectively.

Total stock-based compensation includes expense related to non-employee awards of $14,000 and $57,000 during the three and nine months ended March 31, 2020, respectively.

Total stock-based compensation includes expense related to the ESPP of $137,000 and $354,000 for the three and nine months ended March 31, 2021, respectively.

Total stock-based compensation includes expense related to the ESPP of $87,000 and $211,000 for the three and nine months ended March 31, 2020, respectively.

Total stock-based compensation includes expense related to non-employee awards of approximately $ 55,000 and $ 51,000 during the three months ended September 30, 2021, and 2020, respectively.

Total stock-based compensation includes expense related to the ESPP of approximately $ 132,000 and $ 102,000 for the three months ended September 30, 2021, and 2020, respectively.

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

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 SEC on Registration Statements on Form S-8.

During the three months ended March 31, 2021 and 2020, we granted options to purchase 47,050 and 46,550 shares of common stock with a weighted-average fair value of $5.98 and $5.12 per share, respectively.

During the nine months ended March 31, 2021 and 2020, we granted options to purchase 163,625 and 294,875 shares of common stock with a weighted-average fair value of $6.86 and $4.42 per share, respectively.

During the three months ended September 30, 2021 and 2020, we granted options to purchase 2,950,560 and 41,200 shares of common stock with a weighted-average fair value of $ 7.30 and $ 6.34 per share, respectively.

We used the following assumptions:

Three Months Ended

Nine Months Ended

September 30,

Expected volatility

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Treasury Strips rate with maturities approximating the expected lives of the awards during the period, which approximate the rate in effect at the time of the grant.

On June 1, 2020, employees were granted the right to purchase an aggregate of 58,096 shares under the ESPP, and compensation expense related to those purchase rights for the nine months ended March 31, 2021 was $169,000.

On December 1, 2020, employees were granted the right to purchase an aggregate of 74,752 shares under the ESPP, and compensation expense related to those purchase rights for the three and nine months ended March 31, 2021 was $185,000.

On December 1, 2019, employees were granted the right to purchase an aggregate of 69,368 shares under the ESPP, and compensation expense related to those purchase rights for the three and nine months ended March 31, 2020 was $87,000.

As of March 31, 2021, there were 716,122 shares of common stock available for issuance under the ESPP.

On June 1, 2021, employees were granted the right to purchase an aggregate of 80,018 shares under the ESPP, and compensation expense related to those purchase rights for the three months ended September 30, 2021 was $ 132,000 .

On June 1, 2020, employees were granted the right to purchase an aggregate of 58,096 shares under the ESPP, and compensation expense related to those purchase rights for the three months ended September 30, 2020 was $ 102,000 .

As of September 30, 2021, there were 643,075 shares of common stock available for issuance under the ESPP.

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 equity shares have been publicly traded, the contractual term of the option, the vesting period and the expected remaining term of the outstanding options.

1 unchanged sentence

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

As of March 31, 2021 there was approximately $1.2 million of total unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over the weighted-average period of 1.2 years.

There were 43,796 and 52,004 options exercised during the three months ended March 31, 2021 and 2020 , respectively.

There were 213,850 and 141,639 options exercised during the nine months ended March 31, 2021 and 2020, respectively.

As of September 30, 2021 there was approximately $ 18.9 million of total unrecognized compensation cost, net of expected forfeitures, related to unvested stock options, which is expected to be recognized over the weighted-average period of 1.91 years.

There were 156,170 and 102,905 options exercised during the three months ended September 30, 2021 and 2020 , respectively.

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

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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 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.

1 unchanged sentence

Disaggregation of Revenue

The following table presents our subscription and professional services revenue during the three and nine months ended March 31, 2021 and 2020, respectively:

The following table presents our subscription and professional services revenue during the three months ended September 30, 2021 and 2020, respectively:

Three Months Ended

Nine Months Ended

September 30,

Legacy revenue

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Three Months Ended

Nine Months Ended

September 30,

North America

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

There were no contract assets for the period ended March 31, 2021 and 2020.

There were contract assets of unbilled accounts receivable of $ 1.2 million and $ 719,000 for the period ended September 30, 2021 and 2020, respectively.

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

Balance as of June 30, 2021

Balance as of March 31, 2021

Balance as of September 30, 2021

Contract liabilities:

1 unchanged sentence

Deferred revenue, net of current portion

With respect to deferred revenue balances as of June 30, 2020, $8.3 million and $32.9 million was recognized to revenue during the three and nine months ended March 31, 2021, respectively.

$ 15.0 million of the deferred revenue deductions during the three months ended September 30, 2021, were from amounts outstanding as of June 30, 2021.

Remaining Performance Obligations

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The transaction price allocated to the remaining performance obligation is influenced by a variety of factors, including seasonality, timing of renewals, average contract terms and foreign currency exchange rates.

As of March 31, 2021, our remaining performance obligations were $62.3 million of which we expect to recognize $50.1 million and $12.2 million as revenue within one year and beyond one year, respectively.

As of September 30, 2021, our remaining performance obligations were $ 71.9 million, of which we expect to recognize $ 52.8 million and $ 19.1 million as revenue within one year and beyond one year, respectively.

NET INCOME PER COMMON SHARE

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Three Months Ended

Nine Months Ended

September 30,

Per share information:

2 unchanged sentences

Effect of dilutive options

Weighted-average shares of stock options to purchase 322,088 and 663,821 shares of common stock for the three months ended March 31, 2021 and 2020, respectively, and weighted-average shares of stock options to purchase 283,600 and 615,649 shares of common stock for the nine months ended March 31, 2021 and 2020, respectively, were not included in the computation of diluted net income per common share due to their anti-dilutive effect.

Weighted-average shares of stock options to purchase 1,372,400 and 232,206 shares of common stock for the three months ended September 30, 2021 and 2020, 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.

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

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

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.

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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, 2020, we completed a study under Section 382 of the Internal Revenue Code of 1986, and have determined there was no reduction in net operating losses (NOL) as a result of any ownership changes since eGain’s formation.

As of June 30, 2021, we 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.

1 unchanged sentence

The 2017 Tax Cuts and Jobs Act includes a provision to tax global intangible low-taxed income (GILTI) of foreign subsidiaries.

As of March 31, 2021, we estimate $2.1 million of GILTI income inclusion and used our net operating losses to offset our taxable income.

As of September 30, 2021, we estimate $ 729,000 of GILTI income inclusion and used our net operating losses to offset our taxable income.

We lease our office facilities under non-cancelable operating leases that expire on various dates through fiscal year 2027.

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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.

Total operating lease costs were $437,000 and $436,000 for the three months ended March 31, 2021 and 2020, respectively.

Total operating lease costs were $1.3 million for the nine months ended March 31, 2021 and 2020, respectively.

Total operating lease costs were $ 366,000 and $ 440,000 for the three months ended September 30, 2021 and 2020, respectively.

Operating lease amounts above do not include sublease income.

The Company secured a sublease agreement with a third party and recognized sublease income of $154,000 for the three months ended March 31, 2021 and 2020, and $463,000 for the nine months ended March 31, 2021 and 2020.

For the three and nine months ended March 31, 2021, operating cash outflows for operating leases were $461,000 and $1.5 million, respectively.

For the three and nine months ended March 31, 2020, operating cash outflows for operating leases were $457,000 and $1.4 million, respectively.

During the nine months ended March 31, 2021, the Company modified two of its existing operating leases which resulted in an increase to operating lease right-of-use assets and operating lease liabilities in the amount of $779,000.

The following tables present information about leases on our consolidated balance sheet (in thousands):

The Company secured a sublease agreement with a third party and recognized sublease income of $ 154,000 for the three months ended September 30, 2021 and 2020.

For the three ended September 30, 2021 and 2020, operating cash outflows for operating leases were $ 460,000 and $ 464,000 , respectively.

During the three months ended September 30, 2021, the Company modified one of its existing operating leases by extending it to 2027, which resulted in an increase to operating lease right-of-use assets and operating lease liabilities in the amount of $ 2.8 million.

The following tables present information about leases on our condensed consolidated balance sheets (in thousands):

September 30,

Operating lease right-of-use assets

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

As of March 31, 2021

As of June 30, 2020

Three Months Ended

September 30,

Weighted average remaining lease term (in years)

Weighted average discount rate

As of March 31, 2021, remaining maturities of lease liabilities are as follows (in thousands):

As of September 30, 2021, remaining maturities of lease liabilities are as follows (in thousands):

Fiscal Period:

Remaining three months of fiscal 2021

Remaining nine months of fiscal 2022

Total minimum lease payments

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Generally, the maximum obligation is the amount permitted by law.

Historically, costs related to these warranties have not been significant.

Historically, cost related to these warranties have not been significant.

However, we cannot guarantee that a warranty reserve will not become necessary in the future.

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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 March 31, 2021 and June 30, 2020, cash equivalents classified as level 1 instruments were measured at $42.5 million and $41.8 million, respectively.

As of September 30, 2021 and June 30, 2021, cash equivalents classified as level 1 instruments were measured at $ 54.1 million and $ 55.4 million, respectively.

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-Q

Item 1. Financial Statements