Stockholders' Equity

12 Months Ended

Jun. 30, 2023

Stockholders Equity

Stockholders' Equity

5. STOCKHOLDERS’ EQUITY

On December 8, 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 June 30, 2023, and 2022, the Company had 32,268,000 and 31,930,000 shares of common stock issued, respectively, and 31,482,000 and 31,930,000 shares of common stock outstanding, respectively.

Common Stock

We have reserved shares of common stock for issuance as of June 30, 2023 as follows:

	Reserved
	Stock
	Options
Stock options outstanding	4,885,999
Stock available for future grants or issuance:
2005 Stock Incentive Plan	1,057,983
2005 Management Stock Option Plan	71,983
2017 Employee Stock Purchase Plan	938,403
Total reserved shares of common stock for issuance	6,954,368

Preferred Stock

We are authorized to issue 5,000,000 shares of preferred stock with a par value of $0.001 per share. As of June 30, 2023 and 2022, no shares of preferred stock are issued or outstanding. Our board of directors has the authority, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of the common stock.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period, net of expected forfeitures. Stock-based compensation expense consists of expenses for stock options and our 2017 Employee Stock Purchase Plan (ESPP).

2005 Management Stock Option Plan

In May 2005, our board of directors adopted the 2005 Management Stock Option Plan (2005 Management Plan) which provides for the grant of non-statutory stock options to directors, officers and key employees of eGain and its subsidiaries. Our board extended the expiration date of the 2005 Management Plan to September 30, 2024. Options under the 2005 Management Plan are granted at a price not less than 100% of the fair market value of the common stock on the date of grant. Options granted under the 2005 Management Plan are subject to eGain’s right of repurchase, whose right shall lapse with respect to one-forty-eighth (1/48^th) of the shares granted to a director, officer or key employee for each month of continuous service provided by such director, officer or key employee to eGain. The options granted under this plan are exercisable for up to ten years from the date of grant.

The following table represents the activity under the 2005 Management Plan:

	Shares		Weighted
	Available for	Options	Average
	Grant	Outstanding	Exercise Price
Balance as of June 30, 2021	68,649	1,172,517	$	3.51
Options Granted	—	—	$	—
Options Exercised	—	(342,466)	$	4.08
Options Forfeited / Expired	3,334	(3,334)	$	1.75
Balance as of June 30, 2022	71,983	826,717	$	3.29
Options Granted	—	—	$	—
Options Exercised	—	—	$	—
Options Forfeited / Expired	—	—	$	—
Balance as of June 30, 2023	71,983	826,717	$	3.29

2005 Stock Incentive Plan

In March 2005, our board of directors adopted the 2005 Stock Incentive Plan which provides for the grant of stock options to eGain’s employees, officers, directors and consultants. Our board extended the expiration date of the 2005 Stock Incentive Plan to September 30, 2024 and made certain other changes. Options granted under the 2005 Stock Incentive Plan are non-qualified stock options. Non-qualified stock options may be granted to employees with exercise prices of no less than the fair value of the common stock on the date of grant. The options generally vest ratably over a period of four years and expire no later than ten years from the date of grant.

The following table represents the activity under the 2005 Stock Incentive Plan:

	Shares		Weighted
	Available for	Options	Average
	Grant	Outstanding	Exercise Price
Balance as of June 30, 2021	944,527	1,562,995	$	6.44
Shares Added	3,000,000	—	$	—
Options Granted	(3,607,661)	3,607,661	$	11.18
Options Exercised	—	(210,521)	$	3.52
Options Forfeited / Expired	342,924	(342,924)	$	10.75
Balance as of June 30, 2022	679,790	4,617,211
Options Granted	(228,817)	228,817	$	8.35
Options Exercised	—	(179,736)	$	3.40
Options Forfeited / Expired	607,010	(607,010)	$	10.62
Balance as of June 30, 2023	1,057,983	4,059,282	$	10.06

During the fiscal year ended June 30, 2023, we granted 8,800 stock options to consultants.

The following table summarizes information about stock options outstanding and exercisable under all stock option plans as of June 30, 2023:

	Options Outstanding				Options Exercisable
		Weighted
Range of		Average	Weighted			Weighted
Exercise	Number of	Remaining	Average		Number of	Average
Prices	Shares	Contractual Life	Exercise Price		Shares	Exercise Price
$1.8-$2.13	13,005	3.65	$	1.81	13,005	$	1.81
$2.50	902,375	3.37	$	2.50	902,375	$	2.50
$3.4-$7.77	496,803	3.91	$	5.76	421,833	$	5.50
$7.8-$9.86	492,483	7.10	$	8.82	315,140	$	8.65
$9.87-$11.26	238,843	7.29	$	10.59	108,497	$	10.62
$11.36	2,476,541	8.02	$	11.36	1,104,884	$	11.36
$11.47-$13.75	247,399	6.18	$	12.47	172,587	$	12.70
$14.28	5,000	7.21	$	14.28	3,437	$	14.28
$14.40	3,550	5.12	$	14.40	3,550	$	14.40
$19.11	10,000	7.29	$	19.11	6,666	$	19.11
$1.8-$19.11	4,885,999	6.51	$	8.91	3,051,974	$	7.68

The summary of options vested and exercisable as of June 30, 2023 comprised:

						Weighted
						Average
		Weighted		Aggregate		Remaining
	Number of	Average		Intrinsic		Contractual
	Shares	Exercise Price		Value		Term
Options outstanding	4,885,999	$	8.91	$	5,446,956	6.51
Options fully vested and expected to vest	4,699,430	$	8.84	$	5,443,504	6.44
Options exercisable	3,051,974	$	7.68	$	5,425,564	5.48

The aggregate intrinsic value in the preceding table represents the total intrinsic value based on stock options with a weighted average exercise price less than our closing stock price of $7.49 as of June 30, 2023 that would have been received by the option holders, had they exercised their options on June 30, 2023. The total intrinsic value of stock options exercised was $866,000 and $4.3 million during fiscal years 2023 and 2022, respectively.

2017 Employee Stock Purchase Plan

In October 2017, our board of directors adopted the ESPP which provided eligible employees the option 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. The offering period, meaning a period with respect to which the right to purchase shares of our common stock may be granted under the ESPP, will not exceed twenty-seven months and consist of a series of six-month purchase periods. Eligible employees may join the ESPP at the beginning of any six-month purchase period. Under the terms of the ESPP, employees can choose to have between 1% and 15% of their base earnings withheld to purchase the Company’s common stock. On December 17, 2021, our board of directors authorized an additional 600,000 shares of common stock to be available for issuance under ESPP.

Determining the fair value of the stock-based awards at the grant date requires significant judgment and the use of estimates, particularly surrounding Black-Scholes valuation assumptions such as stock price volatility and expected option term.

The table below summarizes the effect of stock-based compensation (in thousands):

	Fiscal Year Ended June 30,
	2023		2022
Non-cash stock-based compensation expense	$	(6,246)	$	(11,380)
Income tax expense		(117)		(217)
Net income effect	$	(6,363)	$	(11,597)

The Company recognized $117,000 and $217,000 of tax expense related to stock-based compensation expense for eGain UK and Exony for the fiscal years ended June 30, 2023 and 2022, respectively. There is no income tax effect that has been recognized relating to the stock-based compensation expense in the US due to full valuation allowance.

Total stock-based compensation includes expense related to non-employee awards of $140,000 and $232,000 during the fiscal years ended June 30, 2023 and 2022, respectively.  

We utilized 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 Securities and Exchange Commission on a registration statement on Form S-8.

During the fiscal years ended June 30, 2023 and 2022, there were 228,817 and 3,607,661 options granted, respectively, with a weighted average grant date fair value of $4.56 and $5.83, per share, respectively.

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

	Fiscal Year Ended June 30,
	2023			2022
Dividend yield		—		—
Expected volatility		64	%	70	%
Average risk-free interest rate		3.57	%	1.01	%
Expected life (in years)		4.71		4.68

We used the following assumptions as inputs into the Black-Scholes valuation model to estimate the fair value of the ESPP stock purchase right:

	Fiscal Year Ended June 30,
	2023			2022
Dividend yield		—			—
Expected volatility		60	%		57	%
Average risk-free interest rate		1.68	%		1.22	%
Expected term (in years)		0.50			0.50

During the fiscal years ended June 30, 2023 and 2022,employees were granted the right and purchased an aggregate of 158,957 and 145,715 shares, respectively, with a weighted average grant date fair value of $2.54 and $2.96, per share, respectively, pursuant to the ESPP. Total stock-based compensation expense related to those purchase rights was $399,000 and $457,000 for the fiscal years ended June 30, 2023 and 2022, respectively.

As of June 30, 2023 unrecognized compensation expense related to purchase rights that will be recognized over a weighted average period of 0.42 years was $143,000.

The dividend yield of zero is based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends. We determined the appropriate measure of expected volatility by reviewing historic volatility in the share price of our common stock, as adjusted for certain events that management deemed to be non-recurring and non-indicative of future events. The risk-free interest rate is derived from the average U.S. Treasury Strips rate.

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 common stock has been publicly traded, the contractual term of the option, the vesting period and the expected remaining term of the outstanding options.

In accordance with Accounting Standards Updates (ASU) 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Accounting, we elected to continue to estimate forfeitures in the calculation of stock-based compensation expense.

The following table summarizes stock-based compensation expense relating to stock options for the years ended June 30, 2023 and 2022, respectively (in thousands):

	Fiscal Year Ended June 30,
	2023		2022
Cost of revenue	$	1,350	$	2,916
Research and development		1,833		2,797
Sales and marketing		901		2,248
General and administrative		1,763		2,962
Total	$	5,847	$	10,923

Total unamortized compensation cost, net of forfeitures, for all options granted but not yet vested as of June 30, 2023 was $4.4 million which is expected to be recognized over the weighted average period of 1.23 years.