Note 6. Acquisition

On July 30, 2014, we entered into a Share Purchase Agreement (“Purchase Agreement”) with Exony Limited, a privately held United Kingdom company (“Exony”), and certain of its shareholders (collectively, the “Shareholders”), pursuant to which we agreed to acquire all the outstanding share capital of Exony for (A) an aggregate of 1,209,308 shares of the Company’s common stock, $0.001 par value per share (“Company Stock”), with a value of $8.02 million as of August 6, 2014, the closing date of the acquisition (based on the closing price of the Company’s common stock as of such date) and (B) an aggregate of $8.13 million in cash (collectively “Acquisition Consideration”), with 15% of each of the cash and Company Stock being held in an escrow account to secure certain indemnification obligations of the Shareholders. The Acquisition Consideration is subject to an adjustment based on Exony’s working capital as of the closing. The other purchase consideration relates to two shareholders of Exony who have the right to exercise their options within six months from the acquisition date which entitles them to $299,000 (45,119 shares) of Company Stock and $341,000 of cash acquisition consideration. The cash portion of the transaction was funded from eGain’s existing cash and its available credit facility. We have incurred acquisition costs of approximately $844,000 through June 30, 2015, which are included in general and administrative expenses.

The purchase price for this acquisition had been allocated based on estimates of the fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands):


Purchase consideration:
Cash	$	7,841
Stock (1,164,189 shares of Company Stock)		7,719
Other purchase consideration (includes 45,119 shares of Company Stock)		640
Working capital adjustment		1,355
Total purchase price			$	17,555
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents		2,751
Restricted cash		3,185
Accounts receivable		2,850
Prepaid and other current assets		281
Property and equipment		315
Total assets acquired				9,382
Accounts payable		(786)
Accrued compensation		(3,139)
Accrued liabilities		(352)
Deferred revenue		(4,185)
Other liabilities		(326)
Total liabilities assumed				(8,788)
Fair value of identifiable intangibles at acquisition-date:
Developed technology		6,990
Customer relationships		2,990
Trade name		150
Total identifiable intangibles at acquisition-date				10,130
Deferred tax liability:				(1,475)
Goodwill			$	8,306

The allocation of the purchase price consideration was based on estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of June 30, 2015, we finalized the working capital adjustment and other purchase consideration, adjusting goodwill down by $44,000. Such values were updated in the purchase consideration noted in the table above.

Included in the acquisition of Exony are operating lease commitments for office space in Newbury, England. The annual lease payment for a 5 year term lease is approximately $260,000 and $91,000 for a 2 year term lease.

The goodwill of $8.3 million arising from the Exony acquisition largely reflects the expansion of our service offerings complementary to our existing products. As Exony is considered an innovative contact center software provider, the acquisition was intended to extend eGain's platform with contact center management, reporting and analytics capabilities to our customers.

Intangible assets will be amortized over the estimated lives, as follows (in thousands):


	Gross							Consolidated
	Carrying		Accumulated		Net Balance			Statements of Operations
Intangible Asset	Amount		Amortization		6/30/2016		Life	Category
Developed technology	$	6,990	$	(3,325)	$	3,665	4	Research and development
Customer relationships - software contracts		1,380		(1,313)		67	2	Sales and marketing
Customer relationships - maintenance contracts		1,610		(510)		1,100	6	Cost of subscription and support
Trade name		150		(143)		7	2	General and administrative
	$	10,130	$	(5,291)	$	4,839

	Gross							Consolidated
	Carrying		Accumulated		Net Balance			Statements of Operations
Intangible Asset	Amount		Amortization		6/30/2015		Life	Category
Developed technology	$	6,990	$	(1,577)	$	5,413	4	Research and development
Customer relationships - software contracts		1,380		(623)		757	2	Sales and marketing
Customer relationships - maintenance contracts		1,610		(242)		1,368	6	Cost of subscription and support
Trade name		150		(68)		82	2	General and administrative
	$	10,130	$	(2,510)	$	7,620

Amortization expense related to the above intangible assets for fiscal year ended June 30, 2016, 2015 and 2014 was $2.8 million, $2.5 million and zero, respectively.

Estimated future amortization expense remaining at June 30, 2016 for intangible assets acquired is as follows:


	Year Ending
	June 30,
2017	$	2,090
2018		2,016
2019		438
2020		268
Thereafter		27
Total future amortization expense	$	4,839

The operating results for this acquisition are included in the consolidated results of operations from August 6, 2014 (the date of acquisition). The Company determined that it is impracticable to provide comparative pro forma financial information related to the acquisition. Exony, a private company, did not historically prepare financial statements in accordance with U.S. GAAP for interim financial reporting. Accordingly, significant estimates of amounts to be included in pro forma financial information would be required and subject to an inordinate level of subjectivity. For fiscal year ended 2016 and 2015, Exony contributed revenues of $11.2 million and $11.0 million, respectively, and net income of $3.7 million and $793,000, respectively.