The following discussion of eGain's financial condition and results of
operations should be read together with the consolidated financial statements
and related notes in this Annual Report on Form 10-K. This discussion may
contain forward-looking statements based upon current expectations that involve
risks and uncertainties. These risks and uncertainties may cause actual results
to differ materially from those discussed in the forward-looking statements.

Insight

eGain automates customer engagement with an innovative knowledge hub, powered by
conversational AI and analytics. We sell mostly to large enterprises across
financial services, telecommunications, retail, government, healthcare, and
utilities. That is, organizations 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. We also operate in
United Kingdom and India.

We have transitioned from a hybrid model, where we sold both SaaS and perpetual
license solutions, to a SaaS only business model. Today, we only sell SaaS to
new clients and are actively migrating our remaining perpetual license clients
to SaaS. As we continue to migrate our legacy perpetual license clients to SaaS,
we expect our legacy revenue, primarily comprising annual maintenance and
support fees for legacy perpetual license clients to continue to decline.

We believe our go-forward SaaS business model affords us recurring revenue
visibility and more predictability. Fiscal year 2022 affirmed our view that SaaS
clients adopt our product innovation much faster than the perpetual license
model and get better service levels. We believe SaaS clients enjoy up to 50%
faster time to value from their eGain investment.

COVID-19[feminine]

Since early 2020, several public health organizations have recommended, and many
local governments have implemented, certain measures to slow and limit the
transmission of COVID-19, including shelter-in-place and social distancing
orders, which has resulted in a significant deterioration of economic conditions
in the countries in which we operate.

The impact of COVID-19 and the related disruptions caused to the global economy
and our business did not have a material adverse impact on our business during
the year ended June 30, 2022. However, the ongoing spread of the COVID-19 virus,
including new variants, current availability of COVID-19 vaccinations, and
recent lockdown orders in China, caused us to adapt and modify our business
practices, including implementing hybrid work model policies and limiting travel
by our employees, among other things.

In response to the continued spread of COVID-19, we have taken the following actions to date:

? Implementing a hybrid working model and social distancing policies across our

   organization;


 ? Limited employee travel;


? Canceled some sales and marketing events; and

? Looked at the needs of our customers to better support their operations during this period

crisis.


The effect of the COVID-19 pandemic, may not be fully reflective in our results
of operations and overall financial performance until further periods, if at
all. The impact, if any, of operational changes we may implement is uncertain,

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but changes we have implemented as of the filing date have not affected and are
not expected to affect our ability to maintain operations. We will continuously
monitor the situation to determine what actions may be necessary or appropriate
to address the impact of the COVID-19 pandemic, which may include actions
mandated or recommended by federal, state or local government authorities. See
our "Risk Factors" for further discussion of the possible impact of the COVID-19
pandemic on our business.

Key Financial Measures

We monitor the key financial performance measures set forth below as well as
cash and cash equivalents and available debt capacity, which are discussed in
Liquidity and Capital Resources, to help us evaluate trends, establish budgets,
measure the effectiveness of our sales and marketing efforts and assess
operational effectiveness and efficiencies.

SaaS revenue

With our transition to a SaaS-only business model, we believe SaaS revenues better reflect our business momentum and analyze progress. Therefore, we break down our subscription revenue growth between:

? SaaS revenue, which is defined as revenue from cloud delivery agreements,

term licenses and embedded OEM royalties and associated support; and

? Legacy revenue, which is defined as licensing, maintenance, and

support contracts on perpetual license agreements that we no longer sell.

The following table provides a breakdown of subscription revenue between SaaS revenue and legacy revenue for each of the following periods:

                                    Fiscal Year Ended June 30
                                     2022               2021            Change

Revenue                                  (in thousands, except percentages)
SaaS revenue                     $      80,904      $      66,929  $  13,975   21 %
Legacy revenue                           3,653              5,442   

(1,789) (33)% Total SaaS and legacy revenue $84,557 $72,371 $12,186

As we continue to migrate our legacy perpetual license customers to SaaS, we expect our legacy revenue to continue to decline.

SaaS revenue and professional services

As we continue to shift to a SaaS only business model, substantially all of
professional services revenue is now generated from our SaaS customer base. We
believe the combination of SaaS and professional services revenue is a useful
measure to value our business on a forward-looking basis.

The following table shows the total SaaS revenue and professional services for each of the following periods:

                                       Fiscal Year Ended June 30
                                        2022               2021               Change

Revenue                                       (in thousands, except percentages)
SaaS revenue                        $      80,904      $      66,929    $   13,975   21 %
Professional services                       7,394              5,916         1,478   25 %
Total SaaS and professional
services revenue                    $      88,298      $      72,845    $   15,453


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Non-GAAP operating profit

Non-GAAP operating income is defined as (loss) income from operations, adjusted
for the impact of stock-based compensation expense and amortization of acquired
intangible assets.

Management believes that it is useful to exclude certain non-cash charges and
non-core operational charges from non-GAAP operating income because (i) the
amount of such expenses in any specific period may not directly correlate to the
underlying performance of our business operations; and (ii) such expenses can
vary significantly between periods as a result of the timing of new stock-based
awards and acquisitions. The presentation of the non-GAAP financial measures is
not intended to be considered in isolation, or as a substitute for, or superior
to, the financial information prepared and presented in accordance with
generally accepted accounting principles in the United States of America (GAAP).

The following table provides a reconciliation of GAAP operating income (loss) to non-GAAP operating income for each of the following periods:

                                        Fiscal Year Ended June 30
                                          2022              2021

(Loss) Operating Income ($2,138) $7,339
Add: Stock-Based Compensation

                     11,380            1,700
Amortization of intangible assets                 -               26

Non-GAAP operating profit $9,242 $9,065

Significant Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period.

We believe that the assumptions and estimates associated with revenue
recognition, stock-based compensation, allowance for doubtful accounts, the
valuation of goodwill and intangible assets, the valuation of deferred tax
allowance, and legal contingencies have the greatest potential impact on our
consolidated financial statements. We evaluate these estimates on an ongoing
basis. Management bases its estimates and judgments on historical experience and
on various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

Sources of income

Our revenue is comprised of two categories, subscription and professional
services. Subscription includes SaaS revenue and legacy revenue. SaaS revenue
includes revenue from cloud delivery arrangements, term licenses and embedded
OEM royalties and associated support. Legacy revenue 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.

Subscription Revenue

For our cloud delivery arrangements, our maintenance and support arrangements
and our term license subscriptions that incorporate substantial cloud
functionality, the combined performance obligation is recognized ratably over
the contract term as the obligation is delivered. For contracts involving
distinct software licenses, the license performance obligation is satisfied at a
point in time when control is transferred to the customer.

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We typically invoice our customers in advance upon execution of the contract or
subsequent renewals. Invoiced amounts are recorded in accounts receivable,
deferred revenue or revenue, depending on when control is transferred to our
customers based on each arrangement.

We have a royalty revenue agreement with a customer related to our embedded
intellectual property.  Under the terms of the agreement, the customer is to
provide a combined fixed fee, per agent, for each software license sold
containing the embedded software to us. These embedded OEM royalties are
included as subscription revenue. Under revenue guidance, since these
arrangements are for sales-based licenses of intellectual property, we recognize
revenue only as the subsequent sale occurs. However, since such sales are
reported by the customer 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.

Professional services income

Professional services revenue includes system implementation, consulting,
training, and managed services. The transaction price is allocated to various
performance obligations based on their stand-alone selling prices. Revenue
allocated to each performance obligation is recognized as work is performed. Our
consulting and implementation service contracts are bid either on a
time-and-materials basis or on a fixed-fee basis. Fixed fees are generally paid
on milestone billing at pre-determined points in the contract. Amounts that have
been invoiced are recorded in accounts receivable and in deferred revenue or
revenue, depending on whether transfer of control to customers has occurred.

Training revenue that meets the criteria for separate recognition is recognized when the training is provided.

Remaining performance obligations

Remaining performance obligations represent contracted revenues that have not
yet been recognized, and include billed deferred revenues, consisting of amounts
invoiced to customers whether collected or uncollected which have not been
recognized as revenues, as well as unbilled amounts that will be invoiced and
recognized as revenues in future periods. The transaction price allocated to the
remaining performance obligations are influenced by a variety of factors,
including seasonality, timing of renewals, average contract terms and foreign
currency rates. As of June 30, 2022, our remaining performance obligations were
$100.5 million of which we expect to recognize $63.2 million and $37.3 million
as revenue within one year and beyond one year, respectively.

We expect our remaining performance obligations to change quarterly for several
reasons including the timing of new contracts and renewals, duration and size of
our subscription and support arrangements, variable billing cycles and foreign
exchange rate fluctuation. We typically issue renewal invoices in advance of the
renewal service period. Depending on timing, the initial invoice and subsequent
renewal invoices may occur in different quarters. This may result in an increase
or decrease to our accounts receivable and deferred revenue.

Capitalized costs to obtain revenue contracts

We capitalize incremental costs to obtain non-cancelable subscription and
maintenance and support revenue contracts with amortization periods that may
extend longer than the non-cancelable subscription and maintenance and support
revenue contract terms.

We capitalize incremental costs of obtaining a non-cancelable subscription and
maintenance and support revenue contract with amortization periods of one year
or more. The capitalized amounts consist primarily of sales commissions paid to
our direct sales force. Capitalized amounts also include (i) amounts paid to
employees other than the direct sales force who earn incentive payouts under
annual compensation plans that are tied to the value of contracts acquired and
(ii) the associated payroll taxes and fringe benefit costs associated with the
payments to our employees.

Costs capitalized related to new revenue contracts are generally deferred and
amortized on a straight-line basis over a period of benefit that we estimate to
be five years. We determine the period of benefit by taking into consideration
the

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period from initial contract through renewal, which constitutes the length of
our customer relationship or customer life. Amortization of costs capitalized
related to new revenue contracts is included as a component of sales and
marketing expense in our operating results.

Stock-based compensation

We account for stock-based compensation in accordance with Accounting Standards
Codification (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 an
expense over the vesting period. 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 lives. We determine 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 deems to be
non-recurring and non-indicative of future events. We base our estimate of
expected life on the historical exercise behavior, cancellations of all past
option grants made by us during the time period in which our common stock has
been publicly traded, the contractual term, the vesting period and the expected
remaining term of the option. Based on our historical experience of option
pre-vesting cancellations, we have assumed an annualized forfeiture rate for our
options. We record additional expense if the actual forfeiture rate is lower
than we estimated and record a recovery of prior expense if the actual
forfeiture rate is higher than what we estimated.

Good will and other intangible assets

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 for fiscal years ended
June 30, 2022 and 2021.

Accounts receivable and allowance for doubtful accounts

We extend unsecured credit to customers on a regular basis. Our accounts
receivable is derived from revenue earned from customers and are not interest
bearing. We also maintain an allowance for doubtful accounts to reserve for
potential uncollectible trade receivables. We review our trade receivables by
aging category to identify specific customers with known disputes or
collectability issues. We exercise judgment when determining the adequacy of
these reserves as we evaluate historical bad debt trends, general economic
conditions in the U.S. and internationally, and changes in customer financial
conditions. If we make different judgments or utilize different estimates, then
material differences may result in additional reserves for trade receivables,
which would be reflected by charges in general and administrative expenses for
any period presented. We write-off a receivable after all collection efforts
have been exhausted and the amount is deemed uncollectible.

As described in Note 1 of Notes to Consolidated Financial Statements included in
Item 8 Financial Statements and Supplementary Data of this Annual Report,
certain Company contracts have contractual billings which 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 at contractually specified dates.

Tax legislation

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act), P.L. 116-136,was passed into law, amending portions of certain relevant US
tax laws. The CARES Act included a number of federal income tax law changes,
including, but not limited to: (i) permitting net operating loss carrybacks to
offset 100% of taxable income for taxable years beginning before 2021, (ii)
accelerating alternative minimum tax credit refunds, (iii) temporarily
increasing the allowable business interest deduction from 30% to 50% of adjusted
taxable income, and (iv) providing a technical correction for depreciation
related to qualified improvement property. The CARES Act had no impact on our
consolidated financial statements.

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On December 27, 2020, President Trump signed the Consolidated Appropriations
Act, 2021 (CAA). The CAA contains numerous individual, business, payroll,
disaster, and energy-related tax provisions, as well as tax extenders. Many of
the provisions, including $600 stimulus payments, and an extension of payroll
credits, relate to the COVID-19 pandemic. The COVID-related Tax Relief Act of
2020 (COVIDTRA) and the Taxpayer Certainty and Disaster Tax Relief Act of 2020
(TCDTR), both part of the CAA, contains numerous provisions related to
businesses.

Fiscal 2022 vs. Fiscal 2021

Our effective tax rate for fiscal years 2022 and 2021 was a tax provision of
$1.2 million and a tax benefit of $166,000, respectively. The change in our
effective tax rate for fiscal year 2022 as compared to fiscal year 2021 was
primarily due to the expiration of tax attributes, the change in valuation
allowance, foreign rate differential, stock-based compensation and the research
and development tax credit.

The income before income tax provision between the U.S. and foreign countries
impacted our effective tax rate as a result of the geographic distribution and
customer demand related to our products and services. In fiscal year 2022, our
U.S. and foreign income before our income tax provision was a loss of $4.2
million and income of $3.0 million, respectively. In fiscal year 2021, our U.S.
and foreign income before our income tax benefit was $5.0 million and $1.8
million, respectively.

Provision for Valuation of Deferred Tax

When we prepare our consolidated financial statements, we estimate our income
tax liability for each of the various jurisdictions where we conduct business.
This requires us to estimate our actual current tax exposure and to assess
temporary differences that result from differing treatment of certain items for
tax and accounting purposes. The net deferred tax assets are reduced by a
valuation allowance if, based upon weighted available evidence, it is more
likely than not that some or all of the deferred tax assets will not be
realized. We make significant judgments to determine our provision for income
taxes, our deferred tax assets and liabilities and any valuation allowance to be
recorded against our net deferred tax assets. As of June 30, 2022, we had a
valuation allowance of approximately $32.4 million of which approximately $23.0
million was attributable to U.S. and state net operating losses and domestic
research and development credit carryforwards.

We apply ASC 740, Income Taxes, in determining any uncertain tax positions. The
guidance seeks to reduce the diversity in practice associated with certain
aspects of measurement and recognition in accounting for income taxes and
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position that an entity takes or
expects to take in a tax return. Additionally, ASC 740 provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. Under ASC 740, an entity may only recognize
or continue to recognize tax positions that meet a "more likely than not"
threshold. In accordance with our accounting policy, we recognize accrued
interest and penalties related to unrecognized tax benefits as a component of
other income (expense), net in the consolidated statements of operations.

We consider the earnings of certain non-U.S. subsidiaries to be indefinitely
invested outside the United States, on the basis of estimates, that future
domestic cash generation will be sufficient to meet future domestic cash needs
and our specific plans for reinvestments of those subsidiary earnings. We have
not recorded a deferred tax liability related to state income taxes and foreign
withholding taxes on approximately $21.3 million of undistributed earnings of
foreign subsidiaries indefinitely invested outside the United States. If we
decide to repatriate the foreign earnings, we would need to adjust our income
tax provision in the period we determined that the earnings will no longer be
indefinitely invested outside the United States.

Fair value of financial instruments

Our financial instruments consist of cash and cash equivalents, restricted cash,
accounts receivable, accounts payable and accrued liabilities. We do not have
any derivative financial instruments. We believe the reported carrying amounts
of these financial instruments approximate fair value, based upon their
short-term nature and comparable market information available at the respective
balance sheet dates.

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Results of Operations

The following table sets forth certain items reflected in our consolidated
statements of operations expressed as a percent of total revenue for the periods
indicated:

                                  2022      2021
Revenue:
Subscription                      92 %      92 %
Professional services              8         8
Total revenue                    100       100
Cost of revenue:
Cost of subscription              16        17
Cost of professional services     11         8
Total cost of revenue             27        25
Gross profit                      73        75
Operating Expenses:
Research and development          27        23
Sales and marketing               37        33
General and administrative        12        10
Total operating expenses          76        66
(Loss) Income from operations    (2) %       9 %


Revenue

We classify our income into two categories; revenue from subscriptions and professional services. We then break down subscription revenue into SaaS revenue and legacy revenue, with SaaS revenue being a key metric.

The following table shows our subscription and professional services revenues for the years indicated:

                            Fiscal Year Ended June 30,
                             2022               2021           Change

Revenue                         (in thousands, except percentages)
Subscription             $      84,557      $      72,371  $ 12,186 17 %
Professional services            7,394              5,916     1,478 25 %
Total revenue            $      91,951      $      78,287  $ 13,664


Total Revenue
Total revenue increased $13.7 million during the fiscal year ended June 30,
2022, from the comparable period in 2021, largely due to increased revenues from
SaaS of $14.0 million and professional service revenue of $1.5 million in fiscal
year 2022. This increase was partially offset by a decline in our legacy revenue
of $1.8 million as we continue to migrate legacy perpetual license customers to
our SaaS model.

Our revenue was impacted by foreign exchange rate fluctuation between the U.S.
Dollar, Euro, and British Pound. We recalculate our current period results using
the comparable prior period exchange rates to exclude the impact of foreign
exchange rate fluctuation. Foreign exchange rate fluctuation resulted in a
decrease of $354,000 and an increase of $2.0 million in total revenue during the
fiscal years ended June 30, 2022 and 2021, respectively.

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Subscription Revenue

SaaS Revenue

                                  Fiscal Year Ended June 30,
                                   2022               2021             Change

Revenue                                (in thousands, except percentages)
SaaS revenue                   $      80,904      $      66,929    $ 13,975 21 %
Percentage of total revenue               88 %               85 %


SaaS revenue includes revenue from cloud delivery arrangements, term licenses
and embedded OEM royalties and associated support. Revenues from SaaS increased
by $14.0 million during the fiscal year ended June 30, 2022, as compared to the
comparable period in 2021.

SaaS revenue was $80.9 million and $66.9 million during the fiscal years ended
June 30, 2022 and 2021, respectively, which represented an increase of 21% or
$14.0 million. SaaS revenue represents 88% and 85% of total revenue for the
fiscal years ended June 30, 2022 and 2021, respectively.

Excluding a decrease of $317,000 due to foreign exchange rate fluctuation, SaaS
revenue increased by $14.3 million during the fiscal year ended June 30, 2022,
as compared to the comparable period in 2021. In connection with our SaaS
transition, we are actively migrating our remaining perpetual license clients to
SaaS and continue to sell SaaS to new customers. We expect our SaaS revenue to
increase in future periods.

Legacy Revenue

                                     Fiscal Year Ended June 30,

                                      2022                        2021          Change

Revenue                                     (in thousands, except percentages)
Legacy revenue                 $       3,653                   $ 5,442     $ (1,789) (33) %
Percentage of total revenue                4 %                       7 %


Legacy revenue is associated with license, maintenance and support contracts on
perpetual license arrangements that we no longer sell. We experienced a decrease
of $1.8 million for the fiscal year ended June 30, 2022. This decrease was
primarily due to our focus on migrating our legacy customers to SaaS. We expect
these legacy fees to continue to decline in future periods.

Legacy revenue was $3.7 million and $5.4 million during the fiscal years ended
June 30, 2022 and 2021, respectively, which represented a decrease of 33% or
$1.8 million. Legacy revenue represents 4% and 7% of total revenue for the
fiscal years ended June 30, 2022 and 2021, respectively.

Excluding a decrease of $5,000 due to foreign exchange rate fluctuation, legacy
revenue decreased by $1.8 million during the fiscal year ended June 30, 2022, as
compared to the comparable period in 2021.

Professional services income

                                  Fiscal Year Ended June 30,
                                   2022               2021            Change

Revenue                               (in thousands, except percentages)

Professional services income $7,394 $5,916 $1,478 25% Percentage of total turnover

                8 %                8 %


Professional services revenue includes consulting, implementation, training, and
managed services. Revenues from professional services increased by $1.5 million
during the fiscal year ended June 30, 2022. These increases were primarily

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due to growth of managed services. We expect continued improvements in our
product deployment process resulting in a reduction in the time required for an
average implementation projects. As we continue to onboard new customers and
migrate legacy customers to SaaS, we expect the time required for product
deployment and implementation projects to decrease further.

Professional services revenue was $7.4 million during the fiscal year ended June
30, 2022, which represented an increase of 25% or $1.5 million. Professional
services revenue represents 8% of total revenue for both fiscal years ended June
30, 2022 and 2021.

Excluding decrease of $32,000 due to fluctuating exchange rates, professional services revenue increased by $1.5 million during the year ended June 30, 2022compared to the comparable period in 2021.

Revenue by Geography

                                    Fiscal Year Ended June 30,
                                     2022               2021           Change

Revenue                                 (in thousands, except percentages)
North America                    $      66,793      $      54,380  $ 12,413 23 %
Europe, Middle East, & Africa           25,158             23,907     1,251  5 %
Total revenue                    $      91,951      $      78,287  $ 13,664

Revenue from North America sales increased by 23% from $54.4 million during the
fiscal year ended June 30, 2021 to $66.8 million during the fiscal year ended
June 30, 2022 due to an increase of (i) $12.6 million in SaaS revenue, and (ii)
$1.3 million in professional service revenue; offset by a decrease of (i) $1.5
million in legacy revenue.

Revenue from Europe, Middle East, and Africa sales increased by 5% from $23.9
million during the fiscal year ended June 30, 2021 to $25.2 million during the
fiscal year ended June 30, 2022 due to an increase of (i) $1.4 million in SaaS
revenue and (ii) $208,000 in professional services revenue; offset by a decrease
of $287,000 in legacy revenue.

Cost of Revenue

                                Fiscal Year Ended June 30,
                                 2022               2021            Change

Cost of revenue                     (in thousands, except percentages)
Subscription                 $      14,780      $      13,507    $ 1,273  9 %
Professional services                9,757              5,760      3,997 69 %
Total cost of revenue        $      24,537      $      19,267    $ 5,270
Percentage of total revenue             27 %               25 %
Gross margin                            73 %               75 %




Subscription
Cost of subscription revenues consist primarily of expenses related to our cloud
services and support provided to customers.  These expenses are comprised of
cloud computing costs, personnel-related costs directly associated with cloud
operations, and customer support, including salaries, benefits, bonuses and
stock-based compensation and allocated overhead.

Cost of subscription revenues increased by $1.3 million during the fiscal year
ended June 30, 2022. The increase is primarily due to an increase in (i) cloud
computing cost of $951,000, (ii) personnel related costs of $529,000; partially
offset with a decrease in (i) outside consulting cost of $138,000 and (ii)
intangible asset amortization of $26,000 during the fiscal year ended June 30,
2022, from the comparable period in 2021.

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Excluding a decrease of $43,000 due to foreign exchange rate fluctuation between
the U.S. Dollar, Euro, British Pound and Indian Rupee, cost of subscription
revenues increased by $1.3 million during the fiscal year ended June 30, 2022,
from the comparable period in 2021. Excluding any future foreign exchange rate
fluctuation, we expect our cost of subscription revenue to increase in absolute
dollar terms as revenues increase but expect subscription revenue gross margins
to improve or remain relatively consistent.

Professional services

Professional services cost primarily includes personnel costs directly associated with our professional services and training departments, including salaries, benefits, bonuses, stock-based compensation and allocated overhead.

Cost of professional services increased $4.0 million during the fiscal year
ended June 30, 2022 from the comparable period in 2021. This increase is
primarily due to an increase in personnel-related costs of $4.0 million, of
which $3.1 million is associated with stock-based compensation cost; partially
offset by a decrease in outside consulting costs of $18,000 for the fiscal year
ended June 30, 2022.

Excluding a decrease of $39,000 due to foreign exchange rate fluctuation between
the U.S. Dollar, Euro, British Pound and Indian Rupee, cost of professional
services revenue increased by $3.9 million for the fiscal year ended June 30,
2022, from the comparable period in 2021.

Operating Expenses

Research and Development

                                  Fiscal Year Ended June 30,
                                   2022               2021            Change

                                      (in thousands, except percentages)
Research and development       $      24,387      $      17,933    $ 6,454 36 %
Percentage of total revenue               27 %               23 %


Research and development expense primarily consists of personnel-related
expenses directly associated with our engineering, product management and
development, and quality assurance staff. Included in these costs are salaries,
benefits, bonuses, stock-based compensation and allocated overhead. Research and
development expense also includes outside consulting services contracted for
research and development, and amortization of intangible assets.

Research and development expense increased 36% to $24.4 million during the
fiscal year ended June 30, 2022, from $17.9 million in the comparable period in
2021. Excluding a decrease of $105,000 due to foreign exchange rate fluctuation
between the U.S. Dollar, Euro, British Pound and Indian Rupee, research and
development expense increased by $6.6 million primarily due to increases of (i)
$6.3 million in personnel-related costs, of which $2.9 million is associated
with stock-based compensation cost, and (ii) $258,000 in outside consulting
costs.

Excluding any future foreign exchange rate fluctuation, we expect our research
and development expense to increase in future periods based on our product
development plans.

Sales and Marketing

                                  Fiscal Year Ended June 30,
                                   2022               2021            Change

                                      (in thousands, except percentages)
Sales and marketing            $      33,746      $      25,999    $ 7,747 30 %
Percentage of total revenue               37 %               33 %




Sales and marketing expense primarily consists of personnel-related expenses
directly associated with our sales, marketing, and business development staff.
Included in these costs are salaries, benefits, bonuses, and stock-based
compensation and

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allocated overhead. Sales and marketing expenses also include amortization of
commissions paid to our sales staff, lead generation activities, advertising,
trade show and other promotional costs and, to a lesser extent, occupancy costs
and related overhead.

Sales and marketing expenses increased 30% to $33.7 million during the fiscal
year ended June 30, 2022, from $26.0 million in the comparable period in 2021.
Excluding a decrease of $120,000 due to foreign exchange rate fluctuation
between the U.S. Dollar, Euro, British Pound and Indian Rupee, sales and
marketing expense increased by $7.9 million primarily due to increases of (i)
$6.8 million in personnel-related costs, of which $2.4 million is associated
with stock-based compensation cost, and (ii) $1.1 million in marketing program
costs; partially offset by a decrease of $4,000 in outside consulting costs.

Excluding any future exchange rate fluctuations, we expect our sales and marketing expenses to increase as a percentage of total revenue over the next few quarters based on our current business plan.

General and Administrative

                                  Fiscal Year Ended June 30,
                                    2022               2021           Change

                                      (in thousands, except percentages)
General and administrative     $       11,419      $      7,749    $ 3,670 47 %
Percentage of total revenue                12 %              10 %

General and administrative expense primarily consists of personnel-related
expenses directly associated with our finance, human resources, administrative
and legal personnel. Included in these costs are salaries, benefits, bonuses,
and stock-based compensation and allocated overhead. General and administrative
expenses also include fees for professional services, provision for doubtful
accounts and, to a lesser extent, occupancy costs and related overhead.

General and administrative expense increased 47% to $11.4 million during the
fiscal year ended June 30, 2022, from $7.7 million in the comparable period in
2021. Excluding a decrease of $39,000 due to foreign exchange rate fluctuation
between the U.S. Dollar, Euro, British Pound and Indian Rupee, general and
administrative expense increased by $3.7 million primarily due to increases of
(i) $3.7 million in personnel-related expenses, of which $3.0 million is
associated with stock-based compensation cost, (ii) $147,000 in legal expenses,
(iii) $146,000 in accounting, audit, and administrative expenses, (iv) $12,000
in investor relations expense, and (v) $3,000 in outside consulting cost;
partially offset by a decrease of $319,000 in bad debt expense.

Excluding any future fluctuations in exchange rates, we expect our general and administrative expenses to increase or remain relatively constant as a percentage of total revenue in future periods based on our current business plan.

Stock-based compensation

Stock-based compensation expense is accounted for in accordance with the
provisions of the accounting guidance which requires the measurement and
recognition of compensation expense for all equity-based payment awards made to
employees, members of our board of directors and consultants, based upon the
grant-date fair value of those awards.  We value our share-based payments under
ASC 718, and record compensation expense for all share-based payments made to
employees based on the fair value at the date of the grant.

The effect of recording stock-based compensation for fiscal year 2022 and 2021
is as follows:

                                                Fiscal Year Ended June 30,
                                                  2022               2021

Stock-based compensation by type of award             (in thousands)
Stock options                                $       10,923      $      

1,227

Employee stock purchase plan                            457               

473

Total stock-based compensation               $       11,380      $      1,700


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

Below is a summary of stock-based compensation included in the cost and
expenses:

                                     Fiscal Year Ended June 30,
                                       2022               2021             Change

                                           (in thousands, except percentages)
Cost of revenue                   $        3,056      $        326    $ 2,730   837 %
Research and development                   2,935               509      2,427   477 %
Sales and marketing                        2,367               657      1,710   260 %
General and administrative                 3,022               208     

2,814 1,354% Total compensation in shares $11,380 $1,700 $9,680 569%

The increase in our stock-based compensation expense in fiscal 2022 compared to fiscal 2021 is primarily due to an increase in option grant activity.

We expect our stock-based compensation expense to decrease in fiscal year 2023.


(Loss) Income from Operations

                                   Fiscal Year Ended June 30,

                                        2022               2021       Change

                                       (in thousands, except percentages)
(Loss) Income from operations    $      (2,138)         $  7,339     $ (9,477)
Operating (loss) margin                     (2) %              9 %


Results from operations was loss of $2.1 million in fiscal year 2022, compared
to income of $7.3 million in fiscal year 2021. We recorded a negative operating
margin of 2% in fiscal year 2022, and a positive operating margin of  9% in
fiscal year 2021.

During the year ended June 30, 2022SaaS revenue increased by $14.0 million at $80.9 million compared to $66.9 million in fiscal 2021 due to the continued growth of our cloud delivery business.

Excluding a decrease from foreign exchange fluctuation of $346,000 between the
U.S. Dollar, Euro, British Pound and Indian Rupee, the increase in total costs
and operating expenses in fiscal year 2022 was $23.5 million primarily due to
increases of (i) $21.4 million in personnel-related expenses, of which $11.4
million is associated with stock-based compensation cost, (ii) $1.1 million in
marketing costs, (iii) $951,000 in cloud computing costs, (iv) $147,000 in legal
expenses, (v) $146,000 in accounting and administrative services, (vi) $101,000
in outside consulting costs, and (vii) $12,000 in investor relations cost;
partially offset by a decrease of (i) $319,000 in bad debt expenses and (ii)
$26,000 in intangible asset amortization.

interest income

Interest income consists primarily of interest earned on money market funds.
Interest income was $94,000 and $13,000 for the fiscal years ended June 30,
2022
and 2021, respectively.

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Other Income (Expense), Net

Other income (expense), net primarily included foreign exchange rate
fluctuations on international trade receivables. Other income (expense), net was
income of $838,000 and expense of $559,000 for the fiscal years ended June
30,
2022 and 2021, respectively.

Income Tax Provision

Provision for income taxes consists of federal, state and foreign income taxes.
Due to the current economic state of the U.S. economy, expiring tax attributes
and uncertainty of future profitability, we maintain a valuation allowance
against U.S. deferred tax assets as of June 30, 2022. We consider all available
evidence, both positive and negative, including but not limited to earnings
history, projected future outcomes, industry and market trends and the nature of
each of the deferred tax assets. We recorded an income tax provision of $1.2
million and tax benefit of $166,000 in the fiscal years ended June 30, 2022
and
2021, respectively.

New Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact
of these pronouncements on our consolidated financial statements, see Note 1 of
Notes to Consolidated Financial Statements included in Item 8 Financial
Statements and Supplementary Data of this Annual Report.

Cash and capital resources

Insight

From June 30, 2022our primary sources of liquidity were cash and cash equivalents, and accounts receivable totaling $99.1 million. Our cash, cash equivalents and restricted cash have been $72.2 million and $63.2 million of the June 30, 2022 and 2021, respectively.

As of June 30, 2022, our working capital was $42.1 million compared to $31.1
million as of June 30, 2021. As of June 30, 2022, our deferred revenue was $49.4
million as compared to $49.5 million as of June 30, 2021.

Based upon our current business plan, we believe that existing capital resources
will enable us to maintain current and planned operations for at least the next
12 months. From time to time, however, we may consider opportunities for raising
additional capital. We can make no assurances that such opportunities will be
available to us on economic terms we consider favorable, if at all.

Our expectations as to our future cash flows and our future cash balances are
subject to a number of assumptions, including assumptions regarding anticipated
increases in our revenue, our ability to retain existing customers and customer
purchasing and payment patterns, many of which are beyond our control.

Cash flow

For closed fiscal years June 30, 2022 and 2021, our cash flows were as follows (in thousands):

                                             Fiscal Year Ended June 30,
                                              2022               2021

Net cash flow generated by operating activities $8,121 $13,862
Net cash used in investing activities

            (628)               (402)
Net cash provided by financing activities        3,327               2,352

Cash flow from operating activities consists primarily of net income (loss) adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, timing employee-related costs, including

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capitalized costs to obtain revenue contracts, amortization of right-of-use assets and changes in operating assets and liabilities during the year.

Cash provided by operating activities decreased by $5.7 million during the
fiscal year ended June 30, 2022, driven primarily by the change in our net loss,
stock-based compensation, the timing of prepayments received from customers for
new cloud arrangements, and the renewal of existing cloud and support
arrangements, which is a significant source of operating cash flows.

Net cash used in investing activities decreased by $226,000 during the fiscal
year ended June 30, 2022, driven primarily by activities related to the purchase
of equipment for new employees and facility expenditures. Historically, cash
used in investing activities has been used to purchase equipment and software to
support our business and growth.

Net cash provided by financing activities increased by $975,000 during the year ended June 30, 2022consisted primarily of proceeds from employee stock ownership plans.

Commitments

Our principal commitments consist of obligations under leases relating to office space. Leases are assessed to determine whether an agreement is or contains a lease in accordance with ASC 842, Leases.

The following table summarizes our contractual obligations as of June 30, 2022
and the effect such obligations are expected to have on its liquidity and cash
flow in future periods (in thousands):

                                                           Payments Due by Period

                            Total        Less than 1 Year      1 - 3 Years      3 - 5 Years      More than 5 Years
Operating leases               3,955                 1,193            2,234              528                      -
Total                     $    3,955    $            1,193    $       2,234    $         528    $                 -

Off-balance sheet arrangements

From June 30, 2022we had no material off-balance sheet arrangements within the meaning of Section 303(a)(4) of Regulation SK.

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