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INCOME TAXES | 12 Months Ended
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Jun. 30, 2025
INCOME TAXES |
INCOME TAXES | 4. INCOME TAXES Income before income tax benefit (provision) consisted of the following (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year Ended June 30,
​ |  | 2025 |  | 2024
United States |  | $ | 3,636 | ​ | $ | 6,248
Foreign |  | ​ | 2,001 | ​ |  | 3,470
Income before income tax benefit (provision) | ​ | $ | 5,637 | ​ | $ | 9,718
​ The reconciliation of income tax expense at the statutory federal income tax rate and the Company’s effective tax rate is as follows (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year Ended June 30,
​ |  | 2025 |  | 2024
​ | ​ | ​ | ​ | ​ | ​ | ​
Federal statutory income tax rate |  | $ | (1,184) | ​ | $ | (2,041)
Current state taxes, net of federal benefit |  | ​ | (713) |  | ​ | 632
Foreign rate differential |  | ​ | (222) |  | ​ | (292)
Research and development credits |  | ​ | (127) | ​ | ​ | 599
Foreign withholding tax |  | ​ | — |  | ​ | (23)
Stock-based compensation | ​ | ​ | (981) | ​ | ​ | (410)
Deferred return to provision | ​ | ​ | 51 | ​ | ​ | (175)
Section 267 payables | ​ | ​ | — | ​ | ​ | 1,294
Other items |  | ​ | (41) |  | ​ | (52)
Net change in valuation allowance | ​ | ​ | 30,079 | ​ | ​ | (1,470)
Foreign income | ​ | ​ | (245) | ​ | ​ | —
Benefit from (provision for) income taxes |  | $ | 26,617 | ​ | $ | (1,938)
​ ​ The components of the income tax benefit (provision) are as follows (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year Ended June 30,
​ |  | 2025 |  | 2024
Current provision: |  | ​ | ​ | ​ | ​ | ​
Federal | ​ | $ | (14) | ​ | $ | —
State | ​ |  | (101) | ​ |  | (897)
Foreign | ​ | ​ | (521) | ​ | ​ | (951)
Total current: | ​ |  | (636) | ​ |  | (1,848)
Deferred: | ​ |  | ​ | ​ |  | ​
Federal | ​ | ​ | 24,280 | ​ | ​ | —
State | ​ | ​ | 3,094 | ​ | ​ | —
Foreign | ​ |  | (121) | ​ |  | (90)
Total deferred: | ​ |  | 27,253 | ​ |  | (90)
Income tax benefit (provision) | ​ | $ | 26,617 | ​ | $ | (1,938)
​ As of June 30, 2025, we had zero federal and approximately $11.5 million state net operating loss carryforwards. The net operating loss carryforwards will expire at various dates beginning in fiscal year ending June 30, 2036, if not utilized. We also had federal research and development credit carryforwards of approximately $4.8 million as of June 30, 2025, which will expire at various dates beginning in fiscal year ending June 30, 2028, if not utilized. The California research and development credit carryforwards are approximately $6.7 million as of June 30, 2025 and have an indefinite carryover period. In 2025, California enacted legislation, with the first being 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 2025 through 2026, and clarifies that income not included in apportionable business income is excluded from the sales factor of the apportionment formula. The second, 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. As of June 30, 2025, 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. As of June 30, 2025, the Company did not identify any ownership change that would significantly limit the net operating loss carryovers. ​ Deferred tax assets and liabilities reflect the net tax effects of net operating loss and credit carryforwards and of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for federal, state and foreign income taxes are as follows (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of June 30,
​ |  | 2025 |  | 2024
Deferred tax assets: | ​ | ​ | ​ | ​ | ​ | ​
Net operating loss carryforwards | ​ | $ | 850 | ​ | $ | 3,419
Research credits | ​ |  | 10,064 | ​ |  | 10,346
Other credits | ​ | ​ | 3 | ​ | ​ | 15
Deferred revenue | ​ |  | 770 | ​ |  | 853
Stock-based compensation | ​ |  | 4,054 | ​ |  | 4,927
Accruals and reserves | ​ |  | 1,178 | ​ |  | 1,231
Lease liability | ​ | ​ | 286 | ​ | ​ | 443
Intangibles | ​ | ​ | 3 | ​ | ​ | 4
Other | ​ |  | 85 | ​ |  | 178
Section 267 payables | ​ | ​ | 2,335 | ​ | ​ | 1,526
Capitalized research and development | ​ | ​ | 14,453 | ​ | ​ | 14,109
Gross deferred tax assets | ​ |  | 34,081 | ​ |  | 37,051
Less valuation allowance | ​ |  | (5,529) | ​ |  | (35,608)
Net deferred tax assets | ​ | ​ | 28,552 | ​ | ​ | 1,443
Gross deferred tax liabilities | ​ | ​ | ​ | ​ | ​ | ​
Right-of-use asset | ​ | ​ | (297) | ​ | ​ | (464)
Fixed assets | ​ | ​ | (28) | ​ | ​ | (5)
Gross deferred tax liabilities | ​ | ​ | (325) | ​ | ​ | (469)
Total deferred tax assets, net * | ​ | $ | 28,227 | ​ | $ | 974
​ | ​ | ​ | ​ | ​ | ​ | ​
*included in other assets, net, on consolidated balance sheets | ​ | ​ | ​ | ​ | ​ | ​
​ ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. For the legacy eGain business in the United States, based upon the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in prior years, we had historically provided a full valuation allowance against our U.S. net deferred tax assets. However, based on analysis for the year ended June 30, 2025, we have determined that the positive evidence overcame any negative evidence, primarily due to the Company’s cumulative income position and concluded that it is more likely than not that the U.S. federal deferred tax assets and other than certain California state deferred tax assets are realizable. As a result, in the year ended June 30, 2025, we released the valuation allowance against all of the U.S. federal and state deferred tax assets except for California net operating losses and research and development credits. With respect to our foreign operations, we expect to fully utilize the deferred tax assets and have not placed a valuation allowance against them. Our tax benefit (provision) primarily relates to the release of the valuation allowance and foreign, federal, and state income taxes. Our income tax rate differs from the statutory tax rates primarily due to the decrease in valuation allowance, stock-based compensation, Section 267, research and development credits, and our foreign operations. The net valuation allowance decreased by $30.1 million and increased by $1.7 million for the fiscal years ended June 30, 2025 and 2024, respectively. The significant decrease in the valuation allowance was the result of the Company’s release of the entire valuation allowance previously established on its federal and state deferred tax assets except for California net operating losses and research and development credit carryforwards. We continue to maintain a full valuation allowance of $5.5 million on California net operating losses and research and development credit carryforwards, which we believe are not more likely than not to be realized in future periods. We have not provided for taxes on $28.2 million of undistributed earnings of our foreign subsidiaries as of June 30, 2025. It is our intention to reinvest such undistributed earnings indefinitely in our foreign subsidiaries. If we distribute these earnings, in the form of dividends or otherwise, we would be subject to withholding taxes payable to the foreign jurisdiction. For the fiscal years ended June 30, 2025 and 2024, we have $2.2 million and zero of Global Intangible Low Tax Income inclusion and used our net operating losses and the Section 250 deduction to offset our taxable income, respectively. Uncertain Tax Positions ​ The aggregate changes in the balance of our gross unrecognized tax benefits during fiscal years 2025 and 2024 were as follows (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year Ended June 30,
​ |  | 2025 |  | 2024
Beginning balance | ​ | $ | 1,641 | ​ | $ | 1,551
Increases in balances related to tax positions taken during current periods | ​ |  | 2,986 | ​ |  | 161
Expired Attributes | ​ | ​ | — | ​ | ​ | (71)
Ending balance | ​ | $ | 4,627 | ​ | $ | 1,641
​ ​ There is $0 and $45,000 of unrecognized tax benefit, if recognized currently, that would impact the Company’s effective tax rate as of June 30, 2025 and 2024, respectively. No accrued interest and penalties have been recognized in the tax provision related to unrecognized tax benefits. We do not anticipate the amount of existing unrecognized tax benefit to significantly increase or decrease during the next twelve months. Our policy is to record interest and penalties related to unrecognized tax benefits as income tax expense. We file income tax returns in the United States as well as various state and foreign jurisdictions. In these jurisdictions, tax years between 2009 and 2016 remain subject to examination by the appropriate governmental agencies due to tax loss carryovers from those years. For U.S. tax purposes, tax years after 2016 are subject to a three year statute of limitations. The Company is not currently under audit with either the IRS, foreign, or any state or local jurisdictions, nor has it been notified of any other potential future income tax audit. The federal and California statute of limitations remains open for three and four years, respectively, from the date of utilization of any net operating loss or credits.

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