What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-05-09 · 138 added, 172 removed, 390 unchanged (44% 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 provision for credit losses of $ 209 and $ 237 as of March 31, 2024 and June 30, 2023, respectively

Accounts receivable, less provision for credit losses of $ 125 and $ 59 as of September 30, 2024 and June 30, 2024, respectively

Costs capitalized to obtain revenue contracts, net

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60,000 shares;

32,523 and 32,268 ;

30,382 and 31,482 shares as of March 31, 2024 and June 30, 2023, respectively

32,730 and 32,698 shares;

28,522 and 29,160 shares as of September 30, 2024 and June 30, 2024, respectively

Additional paid-in capital

Treasury stock, at cost:

2,141 and 786 shares of common stock as of March 31, 2024 and June 30, 2023, respectively

4,208 and 3,538 common shares as of September 30, 2024 and June 30, 2024, respectively

Notes receivable from stockholders

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Professional services

1 unchanged sentence

Cost of revenue:

Cost of subscription

Cost of professional services

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Total operating expenses

Income (loss) from operations

Income from operations

Interest income

Other income (expense), net

Other (expense) income, net

Income before income tax provision

Income tax provision

Net income (loss)

Per share information:

Earnings (loss) per share:

Earnings per share:

Weighted-average shares used in computation:

1 unchanged sentence

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

Nine Months Ended

Net income (loss)

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustments

Total comprehensive income (loss)

See accompanying notes to condensed consolidated financial statements.

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Three Months Ended March 31, 2024

Treasury Stock

Notes Receivable

Comprehensive

Stockholders'

Balances as of December 31, 2023

Interest on stockholder notes

Issuance of common stock upon exercise of stock options

Repurchase of common stock

Stock-based compensation

September 30,

Other comprehensive income, net of taxes:

Foreign currency translation adjustments

Balances as of March 31, 2024

Total comprehensive income

See accompanying notes to condensed consolidated financial statements.

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(in thousands)

Three Months Ended March 31, 2023

Treasury Stock

Notes Receivable

Comprehensive

Stockholders'

Balances as of December 31, 2022

Issuance of common stock upon exercise of stock options

Repurchase of common stock

Stock-based compensation

Foreign currency translation adjustments

Balances as of March 31, 2023

See accompanying notes to condensed consolidated financial statements.

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (cont.)

(in thousands)

Nine Months Ended March 31, 2024

Three Months Ended September 30, 2024

Additional Paid-in

Treasury Stock

Notes Receivable

Comprehensive

Stockholders'

Notes Receivable From

Accumulated Other Comprehensive

Total Stockholders'

Balances as of June 30, 2024

Interest on stockholder notes

Repayment of stockholder notes

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection with employee stock purchase plan

Repurchase of common stock

1 unchanged sentence

Foreign currency translation adjustments

Balances as of March 31, 2024

See accompanying notes to condensed consolidated financial statements.

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (cont.)

(in thousands)

Nine Months Ended March 31, 2023

Balances as of September 30, 2024

Three Months Ended September 30, 2023

Additional Paid-in

Treasury Stock

Notes Receivable

Comprehensive

Stockholders'

Notes Receivable From

Accumulated Other Comprehensive

Total Stockholders'

Balances as of June 30, 2023

Interest on stockholder notes

Repayment of notes receivable from stockholders

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection

with employee stock purchase plan

Repurchase of common stock

1 unchanged sentence

Foreign currency translation adjustments

Balances as of March 31, 2023

Balances as of September 30, 2023

See accompanying notes to condensed consolidated financial statements.

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(in thousands)

Nine Months Ended

Three Months Ended

September 30,

Cash flows from operating activities:

Net income (loss)

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

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

Amortization of costs capitalized to obtain revenue contracts

1 unchanged sentence

Depreciation and amortization

Provision for credit losses

Provision for (recovery of) credit losses

Deferred income taxes

Stock-based compensation

Loss on disposal of property and equipment

Changes in operating assets and liabilities:

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Proceeds from exercise of stock options

Proceeds from employee stock purchase plan

Repurchases of common stock

Interest on stockholder notes

Repayment of stockholder notes

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of change in exchange rates on cash and cash equivalents

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

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Cash paid for taxes

Right-of-use assets and lease liabilities recognized from lease modification

Non-cash items:

Purchases of equipment through trade accounts payable

See accompanying notes to condensed consolidated financial statements.

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Organization and Nature of Business

eGain Corporation (eGain, the Company, our, we or us) automates customer engagement with an innovative knowledge hub, powered by conversational artificial intelligence (AI) and analytics.

We sell mostly to large enterprises across financial services, telecommunications, retail, government, healthcare, and utilities seeking to better serve customers at scale while coping with content silos, process complexity, and regulatory compliance.

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).

Leading brands use eGain’s cloud software to improve customer satisfaction, empower agents, reduce service cost, and boost sales.

We are headquartered in the United States.

eGain Corporation (eGain, the Company, our, we or us) automates customer engagement with an AI knowledge hub SaaS solution.

We sell to enterprises who want to better serve customers at scale by delivering trusted answers across self-service, contact centers, and field staff.

True to our mantra of AX + BX + CX = DX™ , our AI knowledge hub orchestrates effortless Digital eXperience (DX) as it assists Agent eXperience (AX), empowers Business eXperience (BX) and assures Customer eXperience (CX).

Many global brands use eGain to improve experience and reduce costs.

We are headquartered in the Sunnyvale, California, United States.

We also operate in the United Kingdom and India.

The Company fiscal year ends on June 30.

References to fiscal year 2024 refers to fiscal year ending June 30, 2024.

References to fiscal year 2025 refers to the Company’s fiscal year ending June 30, 2025.

References to fiscal year 2024 refers to the Company’s fiscal year ending June 30, 2024.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of March 31, 2024 and the condensed consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the three and nine months ended March 31, 2024 and 2023 are unaudited.

The condensed consolidated balance sheet as of June 30, 2023 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.

The accompanying condensed consolidated balance sheet as of September 30, 2024 and the condensed consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the three months ended September 30, 2024 and 2023, are unaudited.

The condensed consolidated balance sheet as of June 30, 2024 was derived from audited consolidated financial statements as of that date but does not include all the information and footnotes required by generally accepted accounting principles (GAAP) for complete financial statements.

Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with 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.

In our opinion, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial position, results of operations, and cash flows for the periods presented.

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Actual results could differ significantly from estimates.

We make estimates that we believe to be reasonable based on historical experience and other assumptions.

We make estimates

that we believe to be reasonable based on historical experience and other assumptions.

Significant estimates and assumptions made by management include the following:

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Recent Accounting Pronouncements

Pronouncements Recently Adopted

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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.

We adopted this guidance as of our first quarter of fiscal year 2024 with no material impact on our condensed consolidated financial statements.

Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires disclosures on expanded information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

The ASU is effective within fiscal years beginning after December 15, 2024 (our fiscal year 2025), with early adoption permitted.

The ASU is required to be applied retrospectively to all prior periods presented in the financial statements once adopted.

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

In December 2023, the FASB issued ASU 2023-08, Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets, which requires fair value measurement of certain crypto assets each reporting period with the changes in fair value reflected in net income.

The amendments also requires disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period.

The ASU is effective within fiscal years beginning after December 15, 2024 (our fiscal year 2025), with early adoption permitted.

The ASU is required to be applied retrospectively to all prior periods presented in the financial statements once adopted.

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

Revenue Recognition

Revenue Recognition Policy

Our revenue is comprised of two categories including subscription and professional services.

Subscription includes SaaS revenue and legacy revenue.

Our revenue is comprised of two categories including SaaS and professional services.

SaaS revenue includes cloud delivery arrangements, term licenses, embedded original equipment manufacturer (OEM) royalties, and associated support.

Legacy revenue is associated with license, maintenance, and support contracts on perpetual license arrangements that we no longer sell.

An immaterial amount of SaaS revenue is comprised of our legacy revenue which is associated with license, maintenance, and support contracts on perpetual license arrangements that we no longer sell.

Professional services include consulting, implementation, training, and managed services.

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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 based on relative SSP basis.

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

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

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

Subscription Revenue

The following customer arrangements are recognized ratably over the contract term as the performance obligations are delivered:

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

These embedded OEM royalties are included as subscription revenue.

These embedded OEM royalties are included as SaaS revenue.

Under Topic 606 revenue guidance, since these arrangements are for usage-based licenses of intellectual property, for which the guidance in paragraph ASC 606-10-55-65 applies, the Company estimates revenue recognized only as the performance obligation of the OEM royalties has been satisfied or partially satisfied.

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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, 2024, we capitalized $ 36,000 and $ 522,000 of costs to obtain revenue contracts, respectively, and amortized $ 325,000 and $ 1.2 million to sales and marketing expense, respectively.

During the three and nine months ended March 31, 2023, we capitalized $ 6,000 and $ 415,000 of costs to obtain revenue contracts, respectively, and amortized $ 381,000 and $ 1.2 million to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $ 3.0 million and $ 3.6 million as of March 31, 2024 and June 30, 2023, respectively, on our condensed consolidated balance sheets.

During the three months ended September 30, 2024 and 2023, we capitalized $ 189,000 and $ 89,000 of costs to obtain revenue contracts, respectively, and amortized $ 354,000 and $ 500,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $ 3.0 million and $ 3.1 million as of September 30, 2024 and June 30, 2024, respectively, on our condensed consolidated balance sheets.

Deferred Revenue

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However, we incur operating expenses in the North America, EMEA, and Asia Pacific regions.

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

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

Three Months Ended

Nine Months Ended

Income (loss) from operations:

September 30,

Income from operations

North America

Europe, Middle East, & Africa

Income (loss) from operations

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:

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We also partner with system integrators and managed service providers.

Two customers, who are also partners, accounted for more than 10% of total revenue during the three and nine months ended March 31, 2024.

One of such partners accounted for more than 10% of total revenue during the three and nine months ended March 31, 2023.

Two customers accounted for more than 10% of our gross accounts receivable balance as of March 31, 2024.

Two customers, including one of our partners, accounted for 15 % and 10 %, respectively, of total revenue during the three months ended September 30, 2024.

The same customers and including one of our partner accounted for 17 % and 11 % of total revenue during the three months ended September 30, 2023.

Three and two customers accounted for more than 10% of our gross accounts receivable, less provision for credit losses balance as of September 30, 2024 and 2023, respectively.

Accounts Receivable and Provision for Credit Losses

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

Unbilled accounts receivables (contract assets) 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 $ 1.3 million and $ 1.7 million as of March 31, 2024 and June 30, 2023, respectively, and are included in the accounts receivable, less provision for credit losses, balance on the accompanying condensed consolidated balance sheets.

As of fiscal year 2024, we adopted ASU 2016-13 - Measurement of Credit Losses on Financial Instruments with no material impact on our condensed consolidated financial statements.

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 $ 1.5 million and $ 3.6 million as of September 30, 2024, and June 30, 2024, respectively, and are included in the accounts receivable, provision for credit losses, balance on the accompanying condensed consolidated balance sheets.

Stock-Based Compensation

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Three Months Ended

Nine Months Ended

September 30,

Stock-Based Compensation Expense:

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Total stock-based compensation expense

Total stock-based compensation includes expense related to non-employee awards of $ 26,000 and $ 77,000 during the three and nine months ended March 31, 2024, respectively.

Total stock-based compensation includes expense related to non-employee awards of $ 31,000 and $ 113,000 during the three and nine months ended March 31, 2023, respectively.

Total stock-based compensation includes expense related to the ESPP of $ 102,000 and $ 268,000 for the three and nine months ended March 31, 2024, respectively.

Total stock-based compensation includes expense related to the ESPP of $ 115,000 and $ 305,000 for the three and nine months ended March 31, 2023, respectively.

Total stock-based compensation includes expense related to non-employee awards of $ 20,000 and $ 26,000 during the three months ended September 30, 2024 and 2023, respectively.

Total stock-based compensation includes expense related to the ESPP of $ 80,000 and $ 79,000 for the three months ended September 30, 2024 and 2023, respectively.

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

All shares of our common stock issued pursuant to our stock option, RSUs, and ESPP 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, 2024 and 2023, we granted options to purchase 9,600 and 22,300 shares of common stock with a weighted-average fair value of $ 3.17 and $ 4.66 per share, respectively.

During the nine months ended March 31, 2024 and 2023, we granted options to purchase 60,000 and 176,367 shares of common stock with a weighted-average fair value of $ 3.27 and $ 4.77 per share, respectively.

During the three months ended September 30, 2024 and 2023, we granted options to purchase 26,700 and 29,100 shares of common stock with a weighted-average fair value of $ 3.52 and $ 3.39 per share, respectively.

We used the following weighted-average assumptions as inputs into the Black-Scholes valuation model to estimate the fair value of the options granted:

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 December 1, 2023, employees were granted the right to purchase an aggregate of 87,332 shares under the ESPP, and compensation expense related to those purchase rights for the three and nine months ended March 31, 2024 was $ 102,000 and $ 136,000 , respectively.

On December 1, 2022, employees were granted the right to purchase an aggregate of 88,414 shares under the ESPP, and compensation expense related to those purchase rights for the three and nine months ended March 31, 2023 was $ 115,000 and $ 156,000 , respectively.

As of March 31, 2024, there were 868,129 shares of common stock available for issuance under the ESPP.

On June 1, 2024 and 2023, employees were granted the right to purchase an aggregate of 90,792 and 77,057 shares under the ESPP, respectively.

During each of the three months ended September 30, 2024 and 2023, no ESPP grants or purchase occurred.

As of September 30, 2024, there were 768,297 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.

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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.

As of March 31, 2024, there was approximately $ 1.9 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 0.9 years.

There were 60,992 and 35,850 options exercised during the three months ended March 31, 2024 and 2023, respectively.

There were 184,492 and 165,011 options exercised during the nine months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, there was approximately $ 888,000 of total unrecognized compensation cost, net of expected forfeitures, related to unvested RSUs, which is expected to be recognized over the weighted-average period of 0.6 years.

There were no RSUs granted during the three months ended March 31, 2024.

There were 200,821 RSUs granted during the nine months ended March 31, 2024, with a weighted average grant date fair value of $ 7.55 per share.

No RSUs were granted during the three and nine months ended March 31, 2023.

As of September 30, 2024, there was approximately $ 952,000 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 0.8 years.

There were 32,317 and 1,000 options exercised during the three months ended September 30, 2024 and 2023 , respectively.

As of September 30, 2024, there was approximately $ 167,000 of total unrecognized compensation cost, net of expected forfeitures, related to unvested RSUs, which is expected to be recognized over the weighted-average period of 0.1 years.

There were no RSUs granted during the three months ended September 30, 2024 and 2023.

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

We had no indicators of impairment during the three and nine months ended March 31, 2024.

We had no indicators of impairment during the three months ended September 30, 2024.

REVENUE RECOGNITION

Disaggregation of Revenue

The following table presents our subscription and professional services revenue during the three and nine months ended March 31, 2024 and 2023, respectively (in thousands):

The following table presents our SaaS and professional services revenue during the three months ended September 30, 2024 and 2023, respectively (in thousands):

Three Months Ended

Nine Months Ended

Legacy revenue

Total subscription revenue

September 30,

Professional services revenue

Total revenue

The following table presents our revenue recognized over-time and at a point-in-time during the three and nine months ended March 31, 2024 and 2023, respectively (in thousands):

The following table presents our revenue recognized over-time and at a point-in-time during the three months ended September 30, 2024 and 2023, respectively (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Point-in-time

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Three Months Ended

Nine Months Ended

September 30,

North America

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The following table presents our contract liabilities (in thousands):

March 31, 2024

Balance as of

September 30, 2024

June 30, 2024

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Total deferred revenue

$ 8.2 million and $ 31.6 million of deferred revenue as of June 30, 2023 was recognized to revenue during the three and nine months ended March 31, 2024, respectively.

$ 12.1 million of deferred revenue as of June 30, 2024 was recognized to revenue during the three months ended September 30, 2024.

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, 2024, our remaining performance obligations were $ 67.7 million of which we expect to recognize $ 47.9 million and $ 19.8 million as revenue within one year and beyond one year, respectively.

EARNINGS (LOSS) PER SHARE

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

As of September 30, 2024, our remaining performance obligations were $ 70.4 million of which we expect to recognize $ 54.5 million and $ 15.9 million as revenue within one year and beyond one year, respectively.

EARNINGS PER SHARE

Basic earnings per 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 stock options in the money and shares issuable for RSUs subject to service-based vesting requirements to calculate diluted earnings per share.

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

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

Three Months Ended

Nine Months Ended

Net income (loss)

September 30,

Per share information:

Earnings (loss) per share:

Earnings per share:

Weighted-average shares used in computation:

Effect of dilutive options and RSUs

Weighted-average shares of stock options to purchase 3,458,040 and 3,493,090 shares of common stock for the three months ended March 31, 2024 and 2023, respectively, and weighted-average shares of stock options to purchase 3,504,202 and 3,604,297 shares of common stock for the nine months ended March 31, 2024 and 2023, respectively, were not included in the computation of diluted earnings (loss) per share due to their anti-dilutive effect.

Weighted-average shares of stock options to purchase 3,386,960 and 3,564,660 shares of common stock for the three months ended September 30, 2024 and 2023, respectively, were not included in the computation of diluted net income per 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 (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.

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

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

Under this method, deferred tax liabilities and assets are recognized for the estimated future tax consequences attributable to

differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

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

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

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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 change in our valuation allowance as well as our foreign operations.

Our income tax rate differs from the statutory tax rates primarily due to the change in valuation allowance, stock-based compensation, Section 267 inclusion, research and development tax credits, and our foreign operations.

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

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

As of March 31, 2024, utilization of the net operating loss (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.

As of September 30, 2024, utilization of the NOL or tax credit carryforwards to offset future taxable income and taxes, respectively, are subject to an annual limitation under the Internal Revenue Code of 1986 and similar state provisions, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments such as built in gain or built in loss, as required.

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

The Company has not identified a change in ownership as of September 30, 2024 that would significantly limit the net operating loss (NOL) carryovers.

Under the Tax Cuts and Jobs Act, enacted on December 22, 2017 (TCJA), federal NOLs incurred in 2018 and in future years may be carried forward indefinitely, but generally may not be carried back, and the deductibility of such NOLs is limited to 80% of taxable income.

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The IRA includes multiple incentives to promote clean energy with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases.

These measures may affect our condensed consolidated financial statements and we will continue to evaluate the applicability and effect of the IRA as more guidance is issued.

We lease our office facilities under non-cancelable operating leases that expire on various dates through fiscal year 2033.

We also modified three of our existing operating leases by extending the terms under such leases, which resulted in an increase in operating lease right-of-use assets and operating lease liabilities in the amount of approximately $ 2.1 million during the nine months ended March 31, 2024.

These measures may affect our consolidated financial statements and we will continue to evaluate the applicability and effect of the IRA as more guidance is issued.

In 2024, California enacted legislation including S.B.167, which suspends the use of NOLs by businesses and individuals for tax years 2024 through 2026, limits the use of tax credits by businesses and individuals to $5 million for tax years 2024 through 2026, and clarifies that income not included in apportionable business income is excluded from the sales factor of the apportionment formula.

S.B.175, provides some relief from the $5 million credit limitation in S.B.

167 by allowing taxpayers subject to the limit to elect to later receive a refund of credits they would have otherwise used to reduce tax liabilities during the limitation period.

We leased our office facilities under non-cancelable operating leases that expire on various dates through fiscal year 2033.

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

1 unchanged sentence

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

Total operating lease costs were $ 353,000 and $ 325,000 for the three months ended March 31, 2024 and 2023, respectively.

Total operating lease costs were $ 1.0 million and $ 961,000 for the nine months ended March 31, 2024 and 2023, respectively.

For the three and nine months ended March 31, 2024, operating cash outflows for operating leases were $ 310,000 and $ 900,000 , respectively.

For the three and nine months ended March 31, 2023, operating cash outflows for operating leases were $ 307,000 and $ 900,000 , respectively.

Total operating lease costs were $ 300,000 and $ 326,000 for the three months ended September 30, 2024 and 2023, respectively.

For the three months ended September 30, 2024 and 2023, operating cash outflows for operating leases were $ 274,000 and $ 315,000 , respectively.

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

September 30, 2024

June 30, 2024

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:

March 31, 2024

September 30, 2024

June 30, 2024

1 unchanged sentence

Weighted average discount rate

As of March 31, 2024, remaining maturities of lease liabilities are as follows (in thousands):

As of September 30, 2024, remaining maturities of lease liabilities are as follows (in thousands):

Fiscal Period:

Remaining three months of fiscal 2024

Fiscal 2030 and thereafter

Remaining nine months of fiscal year 2025

Fiscal year 2026

Fiscal year 2027

Fiscal year 2028

Fiscal year 2029

Fiscal year 2030

Fiscal year 2031 and thereafter

Total minimum lease payments

21 unchanged sentences

We review the status of each significant matter and assess its potential financial exposure.

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

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

Contractual Commitments

4 unchanged sentences

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the assets or liabilities in an orderly transaction between market participants on the measurement date.

Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings or other comprehensive income when they occur.

Subsequent changes in fair

value of these financial assets and liabilities are recognized in earnings or other comprehensive income when they occur.

ASC 820 applies whenever other statements require or permit assets or liabilities to be measured at fair value.

7 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 March 31, 2024 and June 30, 2023, cash equivalents classified as level 1 instruments, including money market account investments, were measured at $ 72.2 million and $ 67.3 million, respectively.

As of September 30, 2024 and June 30, 2024, cash equivalents classified as level 1 instruments, including money market account investments, were measured at $ 51.3 million and $ 73.6 million, respectively.

SHARE REPURCHASE PROGRAM

On November 14, 2022, the Company’s Board of Directors authorized a stock repurchase program under which we may purchase up to $ 20.0 million of our outstanding common stock.

As of March 31, 2024, approximately $ 5.7 million remained available for stock repurchases pursuant to our stock repurchase program.

As of September 30, 2024, approximately $ 12.4 million remained available for stock repurchases pursuant to our stock repurchase program.

Under the stock repurchase program, we may purchase shares of common stock on a discretionary basis from time to time through open market transactions or privately negotiated transactions at prices deemed appropriate by us.

1 unchanged sentence

The timing and number of shares repurchased will be determined based on an evaluation of market conditions and other factors, including stock price, trading volume, general business and market conditions, and the availability of capital.

The original stock repurchase program is effective immediately as of November 14, 2022, and was amended to extend the term by an additional year until November 14, 2024, unless further extended, does not obligate us to acquire a specified number of shares and may be modified, suspended, or discontinued at any time at our discretion without notice.

The stock repurchase program is effective immediately on November 14, 2022, has a term of one year from adoption unless extended, does not obligate us to acquire a specified number of shares and may be modified, suspended, or discontinued at any time at our discretion without notice.

The stock repurchase program will be funded using existing cash or future cash flows.

During the three months ended March 31, 2024, 880,569 shares have been repurchased for an average acquisition cost per share of $ 6.26 , totaling $ 5.5 million.

During the nine months ended March 31, 2024, 1,354,467 shares have been repurchased for an average acquisition cost per share of $ 6.30 , totaling $ 8.5 million.

During the three months ended September 30, 2024, 670,824 shares have been repurchased for an average acquisition cost per share of $ 6.84 , totaling $ 4.6 million.

We intend to reissue repurchased shares at a later date and therefore carry the shares as treasury stock at cost.

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