What changed in this filing

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Item 1. Financial Statements

2022-02-07 compared with 2021-11-12 · 128 added, 84 removed, 419 unchanged (34% 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 $ 154 and $ 434 as of September 30, 2021 and June 30, 2021, respectively

Accounts receivable, less allowance for doubtful accounts of $ 227 and $ 384 as of December 31, 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 (Note 5)

Operating lease right-of-use assets

Costs capitalized to obtain revenue contracts, net of current portion

5 unchanged sentences

Accrued liabilities

Operating lease liabilities (Note 5)

Operating lease liabilities

Deferred revenue

1 unchanged sentence

Deferred revenue, net of current portion

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

Operating lease liabilities, net of current portion

Other long-term liabilities

3 unchanged sentences

Common stock, par value $ 0.001 - authorized:

50,000 shares;

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

60,000 and 50,000 shares;

31,493 and 31,231 shares as of December 31, 2021 and June 30, 2021, respectively

Additional paid-in capital

9 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Professional services

9 unchanged sentences

Total operating expenses

Income from operations

(Loss) Income from operations

Interest income, net

Other income (expense), net

Income before income tax provision

Other expense, net

(Loss) Income before income tax provision

Income tax provision

Net (loss) income

Per share information:

Earnings per share:

(Loss) Earnings per share:

Weighted-average shares used in computation:

1 unchanged sentence

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

Three Months Ended

September 30,

Other comprehensive income, net of taxes:

Six Months Ended

Net (loss) income

Other comprehensive (loss) income, net of taxes:

Foreign currency translation adjustments

Total comprehensive income

Total comprehensive (loss) income

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

Additional Paid-in

2 unchanged sentences

Total Stockholders'

Balances as of June 30, 2021

Interest on stockholders' notes

Balances as of September 30, 2021

Interest on stockholder 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 December 31, 2021

Three Months Ended December 31, 2020

Additional Paid-in

Notes Receivable From

Accumulated Other Comprehensive

Total Stockholders'

Balances as of September 30, 2020

Three Months Ended September 30, 2020

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 December 31, 2020

See accompanying notes to condensed consolidated financial statements.

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (cont.)

(in thousands)

Six Months Ended December 31, 2021

Additional Paid-in

5 unchanged sentences

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 September 30, 2020

Balances as of December 31, 2021

Six Months Ended December 31, 2020

Additional Paid-in

Notes Receivable From

Accumulated Other Comprehensive

Total Stockholders'

Balances as of June 30, 2020

Interest on stockholder 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 December 31, 2020

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

September 30,

Six Months Ended

Cash flows from operating activities:

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

Net (loss) income

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

Amortization of intangible assets

1 unchanged sentence

Amortization of right-of-use assets

Provision of doubtful accounts

(Recovery of) provision for doubtful accounts

Deferred income taxes

15 unchanged sentences

Cash flows from investing activities:

Purchase of property and equipment

Purchases of property and equipment

Net cash used in investing activities

1 unchanged sentence

Proceeds from exercise of employee stock options

Proceeds from employee stock purchase plan

Net cash provided by financing activities

7 unchanged sentences

Non-cash items:

Purchases of equipment through accounts payable

Purchases of equipment through trade accounts payable

See accompanying notes to condensed consolidated financial statements.

EGAIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

9 unchanged sentences

Basis of Presentation

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 accompanying condensed consolidated balance sheet as of December 31, 2021 and the condensed consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for the three and six months ended December 31, 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.

87 unchanged sentences

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.

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 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 December 31, 2021 and 2020.

Professional Services Revenue

18 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.

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.

During the three and six months ended December 31, 2021, we capitalized $ 769,000 and $ 1.4 million of costs to obtain revenue contracts, respectively, and amortized $ 376,000 and $ 732,000 to sales and marketing expense, respectively.

During the three and six months ended December 31, 2020, we capitalized $ 343,000 and $ 370,000 of costs to obtain revenue contracts, respectively, and amortized $ 305,000 and $ 562,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $ 4.6 million and $ 3.9 million as of December 31, 2021 and June 30, 2021, respectively.

Deferred Revenue

11 unchanged sentences

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

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

Our sales are derived from North America and Europe, Middle East, and Africa and is disclosed in Note 2.

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):

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

Three Months Ended

September 30,

North America

Europe, Middle East, & Africa

Total revenue

Income from operations:

Six Months Ended

(Loss) Income from operations:

North America

Europe, Middle East, & Africa

Income from operations

(Loss) Income from operations

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

September 30,

Long-lived Assets:

5 unchanged sentences

Our financial instruments that are exposed to concentrations of credit risk include cash and cash equivalents and accounts receivable.

We maintain an allowance for doubtful accounts which is based on historical losses and the number of days past due for collection.

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

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.

Two customers, who are also our partners, accounted for 23 % and 12 %, respectively, of total revenue during both the three and six months ended December 31, 2021.

The same partners, accounted for 19 % and 13 %, respectively, of total revenue during the three months ended December 31, 2020 and 18 % and 10 %, respectively, for the six months ended December 31, 2020.

Accounts Receivable and Allowance for Doubtful Accounts

6 unchanged sentences

We write off a receivable after collection efforts have been exhausted and the amount is deemed uncollectible.

We maintain an allowance for doubtful accounts which is based on historical losses and the number of days past due for collection.

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

In certain Company contracts, contractual billings do not coincide with revenue recognized on the contract.

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 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.

Unbilled accounts receivables, for which the Company has the unconditional right to consideration, totaled $ 689,000 and $ 719,000 as of December 31, 2021, and June 30, 2021, respectively, and are included in the accounts receivable balance on the accompanying condensed consolidated balance sheets.

Stock-Based Compensation

9 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Stock-Based Compensation Expense:

4 unchanged sentences

Total stock-based compensation expense

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.

Total stock-based compensation includes expense related to non-employee awards of $ 75,000 and $ 130,000 during the three and six months ended December 31, 2021, respectively.

Total stock-based compensation includes expense related to non-employee awards of $ 17,000 and $ 33,000 during the three and six months ended December 31, 2020, respectively.

Total stock-based compensation includes expense related to the ESPP of $ 93,000 and $ 225,000 for the three and six months ended December 31, 2021, respectively.

Total stock-based compensation includes expense related to the ESPP of $ 115,000 and $ 217,000 for the three and six months ended December 31, 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 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.

During the three months ended December 31, 2021 and 2020, we granted options to purchase 241,379 and 75,375 shares of common stock with a weighted-average fair value of $ 5.78 and $ 7.69 per share, respectively.

During the six months ended December 31, 2021 and 2020, we granted options to purchase 3,191,939 and 116,575 shares of common stock with a weighted-average fair value of $ 7.19 and $ 7.21 per share, respectively.

We used the following assumptions:

Three Months Ended

September 30,

Six Months Ended

Expected volatility

6 unchanged sentences

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, 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.

On December 1, 2021, employees were granted the right to purchase an aggregate of 86,928 shares under the ESPP, and compensation expense related to those purchase rights for the three and six months ended December 31, 2021 was $ 47,000

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 six months ended December 31, 2020 was $ 48,000

On December 17, 2021, our board of directors authorized an additional 600,000 shares of common stock to be available for issuance under ESPP.

As of December 31, 2021, there were 1,178,409 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 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.

As of December 31, 2021 there was approximately $ 15.8 million of total unrecognized compensation cost, net of expected forefeitures, related to unvested stock options, which is expected to be recognized over the weighted-average period of 1.8 years.

There were 41,309 and 67,149 options exercised during the three months ended December 31, 2021 and 2020 , respectively.

There were 197,479 and 170,054 options exercised during the six months ended December 31, 2021 and 2020, respectively.

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

15 unchanged sentences

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.

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.

These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.

In addition, we evaluate purchased intangible assets to determine that all such assets have determinable lives.

We operate under a single reporting unit and accordingly, all of our goodwill is associated with the entire company.

We had no impairment during the three and six months ended December 31, 2021.

REVENUE RECOGNITION

Disaggregation of Revenue

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

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

Three Months Ended

September 30,

Six Months Ended

Legacy revenue

6 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

North America

5 unchanged sentences

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

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.

There were contract assets of unbilled accounts receivable of $ 689,000 as of December 31, 2021 and none as of December 31, 2020.

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

Balance as of June 30, 2021

Balance as of September 30, 2021

Balance as of December 31, 2021

Contract liabilities:

1 unchanged sentence

Deferred revenue, net of current portion

$ 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.

*Deductions include revenue recognized from beginning of period and impact of foreign currency translation.

$ 11.8 million and $ 26.8 million of deferred revenue as of June 30, 2021 was recognized to revenue during the three and six months ended December 31, 2021.

Remaining Performance Obligations

1 unchanged sentence

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 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

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 per common share (unaudited, in thousands, except per share data):

As of December 31, 2021, our remaining performance obligations were $ 89.8 million of which we expect to recognize $ 58.7 million and $ 31.1 million as revenue within one year and beyond one year, respectively.

NET (LOSS) INCOME PER COMMON SHARE

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

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

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

Three Months Ended

September 30,

Six Months Ended

Net (loss) income

Per share information:

Earnings per share:

(Loss) Earnings per share:

Weighted-average shares used in computation:

Effect of dilutive options

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.

Weighted-average shares of stock options to purchase 3,326,313 and 160,077 shares of common stock for the three months ended December 31, 2021 and 2020, respectively, and weighted-average shares of stock options to purchase 2,349,356 and 223,235 shares of common stock for the six months ended December 31, 2021 and 2020, respectively, were not included in the computation of diluted net (loss) income per common share due to their anti-dilutive effect.

Such securities could have a dilutive effect in future periods.

15 unchanged sentences

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

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

As of December 31, 2021, we estimate $ 365,000 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.

3 unchanged sentences

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 $ 366,000 and $ 440,000 for the three months ended September 30, 2021 and 2020, respectively.

Total operating lease costs were $ 331,000 and $ 452,000 for the three months ended December 31, 2021 and 2020, respectively.

Total operating lease costs were $ 698,000 and $ 895,000 for the six months ended December 31, 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 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,

The Company secured a sublease agreement with a third party and recognized sublease income of $ 154,000 for the three months ended December 31, 2021 and 2020, and $ 309,000 for the six months ended December 31, 2021 and 2020.

For the three and six months ended December 31, 2021, operating cash outflows for operating leases were $ 460,000 and $ 918,000 , respectively.

For the three and six months ended December 31, 2020, operating cash outflows for operating leases were $ 552,000 and $ 1.0 million, respectively.

During the six months ended December 31, 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 sheet (in thousands):

Operating lease right-of-use assets

2 unchanged sentences

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

Three Months Ended

September 30,

As of December 31, 2021

As of June 30, 2021

Weighted average remaining lease term (in years)

Weighted average discount rate

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

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

Fiscal Period:

Remaining nine months of fiscal 2022

Remaining six months of fiscal 2022

Total minimum lease payments

35 unchanged sentences

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 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.

As of December 31, 2021 and June 30, 2021, cash equivalents classified as level 1 instruments were measured at $ 55.9 million and $ 55.4 million, respectively.

STOCKHOLDERS’ EQUITY

On December 17, 2021, our board of directors authorized the amended and restated Certificate of Incorporation which increased the total authorized shares of common stock from 50,000,000 to 60,000,000 shares.

As of December 31, 2021, and June 30, 2021, the Company had 31,493,000 and 31,231,000 shares of common stock issued and outstanding , 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