4. INCOME TAXES

Income before income tax (provision) benefit consisted of the following (in thousands):

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The components of the income tax (provision) benefit are as follows (in thousands):

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As further described in Note 1 - Summary of Business and Significant Accounting Policies, we elected to adopt the guidance in ASU 2023-09 on a prospective basis. The reconciliation of the U.S. federal statutory income tax rate and amount to the Company’s effective income tax rate and income tax (provision) benefit is as follows (in thousands):

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For the year ended June 30, 2025, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows (in thousands):

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The amounts of cash income taxes paid by the Company (net of refunds received) are as follows (in thousands):

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As of June 30, 2026, we had $15.8 million federal and approximately $13.7 million state net operating loss carryforwards. The net operating loss carryforwards will expire at various dates beginning in fiscal year ending June 30, 2037, if not utilized. We also had federal research and development credit carryforwards of approximately $5.1 million as of June 30, 2026, which will expire at various dates beginning in fiscal year ending June 30, 2032, if not utilized. The California research and development credit carryforwards are approximately $7.6 million as of June 30, 2026 and have an indefinite carryover period.

In 2024, 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, 2026, 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, 2026, the Company did not identify any ownership change that would significantly limit the net operating loss carryovers.

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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):

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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 do not have a valuation allowance against our U.S. net deferred tax assets except for some California tax attributes. 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 foreign, federal, and state income taxes. Our income tax rate differs from the statutory tax rates primarily due to the increase in valuation allowance, stock-based compensation, research and development credits, and our foreign operations.

The aggregate changes in the balance of the valuation allowance during fiscal years 2026 and 2025 were as follows (in thousands):

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We have not provided for taxes on $30.3 million of undistributed earnings of our foreign subsidiaries as of June 30, 2026. 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, 2026 and 2025, we have zero and $2.2 million of Global Intangible Low Tax Income  inclusion and used our net operating losses and the Section 250 deduction to offset our taxable income, respectively.

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Uncertain Tax Positions

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The aggregate changes in the balance of our gross unrecognized tax benefits during fiscal years 2026 and 2025 were as follows (in thousands):

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As of June 30, 2026 and 2025, the Company had gross unrecognized tax benefits of $5.3 million and $4.6 million, respectively. The unrecognized tax benefits primarily relate to tax credits generated in a prior year. Although the Company incurred a loss during fiscal 2026, $3.0 million of the federal unrecognized tax benefits, if recognized, would affect the Company’s effective tax rate.

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense (benefit). During fiscal 2026 and 2025, the Company did not recognize any interest or penalties.

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.