<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   Form 10-Q

(Mark One)
     [X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2000

                                      OR

     [_]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ______________

Commission File No. 0-30260

                       eGAIN COMMUNICATIONS CORPORATION
                       --------------------------------
            (Exact name of registrant as specified in its charter)

           Delaware                                      77-0466366
           --------                                      ----------
  (State or other jurisdiction             (I.R.S. Employer Identification No.)
of incorporation or organization)

                      455 W. Maude Avenue, Sunnyvale, CA
                      ----------------------------------
                   (Address of principal executive offices)

                                     94086
                                     -----
                                  (Zip Code)

                                (408) 212-3400
                                --------------
                        (Registrant's telephone number,
                             including area code)

                                      N/A
                                      ---
                    (Former name, former address and former
                  fiscal year, if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

           YES [X]                                        NO [_]

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

            Class                             Outstanding at September 30, 2000
            -----                             ---------------------------------
  Common Stock $0.001 par value                          35,949,147
<PAGE>

                       eGAIN COMMUNICATIONS CORPORATION

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                            <C>
PART I.      FINANCIAL INFORMATION..........................................................................       1
Item 1.      Financial Statements...........................................................................       1
             Condensed Consolidated Balance Sheets at September 30, 2000 and June 30, 2000..................       1
             Condensed Consolidated Statements of Operations for the Three Months Ended
                  September 30, 2000 and 1999...............................................................       2
             Condensed Consolidated Statements of Cash Flows for the Three Months Ended
                  September 30, 2000 and 1999...............................................................       3
             Notes to Condensed Consolidated Financial Statements...........................................       4
Item 2.      Management's Discussion and Analysis of Financial Condition and Results of Operations..........       8
Item 3.      Quantitative and Qualitative Disclosure About Market Risk......................................      23

PART II.     OTHER INFORMATION..............................................................................      24
Item 1.      Legal Proceedings..............................................................................      24
Item 2.      Changes in Securities..........................................................................      24
Item 3.      Defaults upon Senior Securities................................................................      25
Item 4.      Submission of Matters to a Vote of Security Holders............................................      25
Item 5.      Other Information..............................................................................      25
Item 6.      Exhibits and Reports on Form 8-K...............................................................      25
             Signature......................................................................................      26
             Index to Exhibits..............................................................................      27

</TABLE>
<PAGE>

                         Part I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                       eGAIN COMMUNICATIONS CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                (in thousands)

<TABLE>
<CAPTION>

                                                                                     September 30,         June 30,
                                                                                        2000                2000
                                                                                   ----------------   -----------------
<S>                                                                                <C>                <C>
Assets                                                                              (unaudited)
Current Assets:
   Cash and cash equivalents.................................................       $    89,818       $    27,201
   Short-term investments, held as available for sale........................                --             2,991
   Accounts receivable, net..................................................            10,037             8,589
   Prepaid and other current assets..........................................             4,286             4,456
                                                                                   ----------------    ----------------
     Total current assets....................................................           104,141            43,237

Property and equipment, net..................................................            13,787            11,690
Goodwill and other intangible assets, net....................................           110,067           119,629
Other assets.................................................................             1,358             1,344
                                                                                   ----------------    ----------------
     Total assets............................................................       $   229,353       $   175,900
                                                                                   ================    ================
Liabilities and Stockholders' Equity
Current Liabilities:
   Bank borrowings-line of credit............................................       $     1,000       $     1,000
   Accounts payable..........................................................             4,657             5,305
   Accrued compensation......................................................             8,444             8,509
   Accrued liabilities.......................................................             7,177             7,930
   Deferred revenue..........................................................             6,586             7,286
   Current portion of capital lease obligations..............................             1,180             1,116
   Current portion of notes payable..........................................               189               182
                                                                                   ----------------    ----------------
     Total current liabilities...............................................            29,233            31,328

Capital lease obligations, net of current portion............................               772               729
Notes payable, net of current portion........................................               293               343
Other long term liabilities..................................................               172               129
     Total liabilities.......................................................            30,470            32,529
                                                                                   ----------------     --------------
Series B cumulative convertible preferred stock..............................            80,076                --

Stockholders' Equity:
   Series A cumulative convertible preferred stock...........................             3,308                --
   Common stock..............................................................                36                36
   Additional paid in capital................................................           231,279           231,475
   Notes receivable from stockholders........................................              (460)             (475)
   Deferred stock compensation...............................................            (4,997)           (6,798)
   Accumulated other comprehensive income (loss).............................               178              (193)
   Accumulated deficit.......................................................          (110,537)          (80,674)
                                                                                   ---------------   -----------------
     Total stockholders' equity..............................................           118,807           143,371
                                                                                   ---------------   -----------------

     Total liabilities and stockholders' equity..............................       $   229,353       $   175,900
                                                                                   ===============   =================
</TABLE>

                             See accompanying notes

                                      -1-
<PAGE>

                       eGAIN COMMUNICATIONS CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                     (in thousands, except per share data)

                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                            Three Months
                                                                                        Ended September 30,
                                                                                  -----------------------------------
                                                                                        2000              1999
                                                                                  ---------------    ----------------
<S>                                                                               <C>                <C>
Revenue:
   Hosting...................................................................       $     2,295       $       276
   License...................................................................             4,604               571
   Services..................................................................             5,159               541
                                                                                  ---------------    ----------------
     Total revenue...........................................................            12,058             1,388
   Cost of revenue - direct..................................................             8,724             2,202
   Cost of revenue - acquisition related.....................................               362                --
                                                                                  ---------------    ----------------
     Gross profit (loss).....................................................             2,972              (814)
Operating costs and expenses:
   Research and development..................................................             6,079             1,979
   Sales and marketing.......................................................            12,461             3,723
   General and administrative................................................             4,228             1,261
   Amortization of goodwill and other intangible assets......................             9,200             1,826
   Amortization of deferred compensation.....................................             1,098             3,008
                                                                                  ---------------    ----------------
     Total operating costs and expenses......................................            33,066            11,797
                                                                                  ---------------    ----------------
Loss from operations.........................................................           (30,094)          (12,611)
Non-operating income (expense)...............................................               231               (76)
                                                                                  ---------------    ----------------
Net loss.....................................................................           (29,863)          (12,687)

Dividends on convertible preferred stock.....................................              (884)               --
Beneficial conversion feature on convertible preferred stock.................              (767)               --
                                                                                  ---------------    ----------------
Net loss applicable to common stockholders...................................       $   (31,514)      $   (12,687)
                                                                                  ===============    ================
Net loss per common share:
   Pro forma basic and diluted...............................................       $     (0.91)      $     (0.63)
                                                                                  ===============    ================
   Basic and diluted.........................................................       $     (0.91)      $     (1.22)
                                                                                  ===============    ================
Weighted average shares outstanding used in basic and diluted net loss per
common share calculations:
   Pro forma basic and diluted(1)............................................            34,474            20,182
                                                                                  ===============    ================
   Basic and diluted.........................................................            34,474            10,389
                                                                                  ===============    ================
</TABLE>
_____________________

(1)  Pro forma basic and diluted weighted-average shares outstanding include
     convertible preferred stock using the if-converted method from the original
     date of issuance.

                            See accompanying notes

                                      -2-
<PAGE>

                       eGAIN COMMUNICATIONS CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                (in thousands)

                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                             Three Months
                                                                                  -----------------------------------
                                                                                          Ended September 30,
                                                                                        2000              1999
                                                                                  ---------------   -----------------
<S>                                                                               <C>               <C>
Cash flows from operating activities:
   Net loss..................................................................       $   (29,863)      $   (12,687)
   Adjustments to reconcile net loss to net cash used in operating activities:

       Depreciation..........................................................             1,314               183
       Amortization of goodwill and other intangible assets..................             9,562             1,826
       Amortization of deferred compensation.................................             1,098             3,005
       Changes in operating assets and liabilities:
         Accounts receivable.................................................            (1,448)             (562)
         Prepaid and other current assets....................................               170                14
         Other assets........................................................               (14)              (12)
         Accounts payable....................................................              (648)            2,638
         Accrued compensation................................................               (65)            1,135
         Other accrued liabilities...........................................              (753)              513
         Deferred revenue....................................................              (700)              603
         Other...............................................................                43                 3
                                                                                  ----------------  -----------------
Net cash used in operating activities........................................           (21,304)           (3,341)

Cash flows from investing activities:
   Purchases of property and equipment.......................................            (3,030)           (1,606)
   Purchases of short-term securities........................................                --                --
   Proceeds from sale of short-term securities...............................             3,140                --
                                                                                  ----------------  -----------------
Net cash provided by (used in) investing activities..........................               110            (1,606)

Cash flows from financing activities:
   Payments on borrowings....................................................               (43)              (54)
   Payments on capital lease obligations.....................................              (274)               --
   Proceeds from borrowings..................................................                --               408
   Net proceeds from issuance of convertible preferred stock.................            82,500             5,152
   Net proceeds from issuance of common stock................................             1,406            54,927
                                                                                  ----------------  -----------------
Net cash provided by financing activities....................................            83,589            60,433

Effect of exchange rate differences on cash..................................               222                --
                                                                                  ----------------  -----------------

Net increase in cash and cash equivalents....................................            62,617            55,486
Cash and cash equivalents at beginning of year...............................            27,201             1,265
                                                                                  ----------------  -----------------
Cash and cash equivalents at end of year.....................................       $    89,818       $    56,751
                                                                                  ================  =================
Supplemental cash flow disclosures:
   Cash paid for interest....................................................       $       103       $        59
   Equipment acquired under capital leases...................................               381                --
</TABLE>

                            See accompanying notes

                                      -3-
<PAGE>

                        eGAIN COMMUNICATIONS CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Basis of Presentation

         The condensed consolidated financial statements have been prepared by
eGain Communications Corporation pursuant to the rules and regulations of the
Securities and Exchange Commission and include the accounts of eGain
Communications Corporation and its wholly-owned subsidiaries ("eGain"). All
significant intercompany balances and transactions have been eliminated.

         Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations. While in the opinion of eGain, the unaudited condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
position at September 30, 2000 and the operating results and cash flows for the
three months ended September 30, 2000 and 1999, these financial statements and
notes should be read in conjunction with eGain's audited consolidated financial
statements and notes thereto for the year ended June 30, 2000, included in
eGain's Annual Report on Form 10-K. The condensed consolidated balance sheet at
June 30, 2000, has been derived from audited financial statements as of that
date. The results of operations for the three months ended September 30, 2000
are not necessarily indicative of results that may be expected for any other
interim period or for the full fiscal year ending June 30, 2001.

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Note 2.  Software Revenue Recognition

         Revenue from hosting services is recognized ratably over the period of
the agreement as services are provided. Hosting agreements are typically for a
period of one year and automatically renew unless either party cancels the
agreement.

         eGain recognizes revenue in accordance with Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), as amended. Under SOP 97-2, revenue
from license fees is recognized when persuasive evidence of an agreement exists,
delivery of the product has occurred, no significant eGain obligations remain,
the fee is fixed or determinable, and collectibility is probable. License fee
revenue in multiple element contracts is recognized using the residual method
when there is vendor specific objective evidence of the fair value of all
undelivered elements in an arrangement but vendor specific objective evidence of
fair value does not exist for one or more of the delivered elements in an
arrangement. Under the residual method, the total fair value of the undelivered
elements, as indicated by vendor specific objective evidence, is deferred and
the difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements,
regardless of any separate prices stated within the contract for each element.
If sufficient vendor-specific objective evidence does not exist for undelivered
elements in an arrangement, all revenue from the arrangement is deferred until
the earlier of the point at which (a) such sufficient vendor-specific objective
evidence does exist or (b) all elements of the arrangement have been delivered.

         Service revenue is primarily comprised from consulting fees,
maintenance agreements, and training. Service revenue from consulting and
training billed on a time and materials basis is recognized as performed.
Service revenue on fixed price service arrangements is recognized upon
completion of specific contractual milestone events, or based on an estimated
percentage of completion as work progresses. Maintenance agreements include the
right to software updates on an if-and-when-available basis. Maintenance revenue
is deferred and recognized on a straight-line basis as service revenue over the
life of the related agreement, which is typically one year.

                                      -4-
<PAGE>

                       eGAIN COMMUNICATIONS CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

         In all cases, eGain assesses whether the service element of the
arrangement is essential to the functionality of the other elements of the
arrangement. In this determination, eGain focuses on whether the services
include significant alterations to the features and functionality of the
software, whether the services involve the building of complex interfaces, the
timing of payments and the existence of milestones. In making this
determination, eGain considers the following: (1) the relative fair value of the
services compared to the software, (2) the amount of time and effort subsequent
to delivery of the software until the interfaces or other modifications are
completed, (3) the degree of technical difficulty in building the interfaces or
other modifications, and (4) any contractual cancellation, acceptance, or
termination provisions for failure to complete the interfaces. In those
instances where eGain determines that the service elements are essential to the
other elements of the arrangement, eGain accounts for the entire arrangement in
accordance with Accounting Research Bulletin (ARB) No. 45, "Long-Term
Construction--Type Contracts," using the relevant guidance from SOP 97-2 and SOP
81-1, "Accounting for Performance of Construction-Type and Certain
Production-Type Contracts."

Note 3.  Net Loss Per Common Share

         Basic net loss per common share is computed using the weighted-average
number of shares of common stock outstanding, less the weighted-average number
of shares of common stock that are subject to repurchase. Diluted net loss per
common share is computed by using the weighted average number of shares of
common stock used in the basic net loss per common share calculation and, when
dilutive, common equivalent shares from convertible preferred stock, outstanding
stock options and warrants using the treasury stock method.

         eGain's historical capital structure is not indicative of its
prospective structure due to the automatic conversion of all shares of
convertible preferred stock into common stock concurrent with the closing of
eGain's initial public offering on September 28, 1999. Accordingly, a pro forma
calculation assuming the conversion of all outstanding shares of convertible
preferred stock into common stock upon eGain's initial public offering using the
if-converted method from their respective dates of issuance is presented below.

         The following table represents the calculation of basic and diluted net
loss per common share, including the pro forma calculation (in thousands, except
per share data):

                                      -5-
<PAGE>

                       eGAIN COMMUNICATIONS CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


<TABLE>
<CAPTION>
                                                                                             Three Months
                                                                                          Ended September 30,
                                                                                  -----------------------------------
                                                                                        2000              1999
                                                                                  ---------------    ----------------
<S>                                                                               <C>                <C>
Net loss applicable to common stockholders...................................       $   (31,514)      $   (12,687)
                                                                                  ===============    ================
Basic and diluted:
   Weighted-average shares outstanding.......................................            35,743            12,335
   Less weighted-average shares subject to repurchase........................            (1,269)           (1,946)
                                                                                  ---------------    ----------------
   Weighted-average shares used in computing basic and diluted net loss per
     common share............................................................            34,474            10,389
                                                                                  ===============    ================
Basic and diluted net loss per common share..................................       $     (0.91)      $     (1.22)
                                                                                  ===============    ================
Pro forma basic and diluted:

   Shares used above.........................................................            34,474            10,389
                                                                                  ---------------    ----------------
   Pro forma adjustment to reflect weighted effect of assumed conversion of
     convertible preferred stock.............................................                --             9,793
                                                                                  ---------------    ----------------
   Shares used in computing pro forma basic and diluted net loss per common
     share...................................................................            34,474            20,182
                                                                                  ===============    ================
Pro forma basic net loss per common share....................................       $     (0.91)      $     (0.63)
                                                                                  ===============    ================
</TABLE>

         Options and warrants to purchase approximately 6,187,000 and 2,682,000
shares of common stock were outstanding at September 30, 2000 and 1999,
respectively, and convertible preferred stock convertible into up to
approximately 9,661,000 shares of common stock were outstanding at September 30,
2000, but were excluded from the computation of net loss per common share, as
their effect is anti-dilutive.

Note 4.  Comprehensive Loss

         eGain's comprehensive loss is comprised of net loss, foreign currency
translation adjustments and unrealized gains or losses on short-term investments
held as available-for-sale. Comprehensive loss was $29.5 million and $12.7
million for the three months ended September 30, 2000 and 1999, respectively,
and was not materially different from net loss as reported in the statements of
operations.

Note 5.  Segment Information

         eGain operates in one segment, the development and marketing of
customer service infrastructure solutions. eGain markets and sells its products
throughout North America, principally the U.S., and Europe and Asia Pacific,
which comprise international activities.

         Total revenue and operating losses generated by eGain's international
operations were $2.8 million and $1.4 million, respectively, in the three months
ended September 30, 2000, and their corresponding identifiable assets were $5.5
million as of September 30, 2000. Total revenues and operating losses generated
by eGain's international operations and their corresponding identifiable assets
were not material in the three months ended September 30, 1999. During the three
months ended September 30, 2000 and 1999, no single customer accounted for more
than 10% of eGain's total revenue.

Note 6.  New Accounting Pronouncements

         In December 1999, the Securities and Exchange Commission ("SEC") staff
issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in
Financial Statements. The SAB states that all registrants are

                                      -6-
<PAGE>

                       eGAIN COMMUNICATIONS CORPORATION

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

expected to apply the accounting and disclosures described in it. The SEC staff,
however, will not object if registrants that have not applied this accounting do
not restate prior financial statements provided they report a change in
accounting principle in accordance with APB Opinion No. 20, Accounting Changes,
by cumulative catch-up adjustment no later than the quarter ended June 30, 2001.
eGain is currently evaluating the impact, if any, of SAB 101 on its revenue
recognition policy and its consolidated financial statements.

Note 7.  Issuance of Preferred Stock

         On August 22, 2000, eGain issued 35.11 shares of non-voting Series A
Cumulative Convertible Preferred Stock ("Series A"), $100,000 stated value per
share, 849.89 shares of non-voting Series B Cumulative Convertible Preferred
Stock ("Series B"), $100,000 stated value per share, and warrants to purchase
3,826,322 shares of eGain's common stock with a current warrant exercise price
of $9.2517 per share in a private placement. The total proceeds of the offering
were $88.5 million. The Series A and B shares have a liquidation preference of
$100,000 per share which increases on a daily basis at an annual rate of 6.75%
from August 8, 2000, compounded on a semi-annual basis. The Series A and B
stockholders are entitled cash dividends only when and if declared by the board
of directors.

         The Series A shares are convertible at the option of the holder into
common stock at an initial conversion price of $9.2517 per share. The initial
conversion price is subject to adjustment on August 8, 2001 if 122% of the
average closing bid price per share of the eGain's common stock on the 20
consecutive trading days immediately preceding and including August 8, 2001 is
less than $9.2517. In such event, the initial conversion price will not be
adjusted below $5.6875. If not sooner converted, eGain has the option to convert
the Series A shares into common stock after August 8, 2003 if the closing bid
price of the eGain's common stock on 20 of the 30 consecutive trading days prior
to the date of notice requesting conversion is equal to or greater than 250% of
the initial conversion price (or $23.13). If not sooner converted, on August 8,
2005 eGain must either, at its option, redeem the Series A shares for cash or
convert the Series A shares into common stock at a price per share equal to 95%
of the average closing bid price per share of the eGain's common stock on the 20
consecutive trading days immediately prior to the redemption date.

         The Series B shares will automatically convert into Series A shares if
the stockholders approve such conversion on November 20, 2000 at the annual
stockholders meeting. If the stockholders do not approve such conversion, the
Series B shares become convertible into Series C Cumulative Redeemable Preferred
Stock ("Series C").

         The net cash proceeds of the offering, after expenses, were
approximately $82.5 million. The proceeds were further discounted by $25.3
million, representing the value assigned to the 3,826,322 warrants issued in the
private placement applying the accounting treatment prescribed by EITF 98-5,
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios", which eGain believes exceeds the
market value of the warrants. After reducing the proceeds by the value of the
warrants, the remaining proceeds are used to compute a discounted conversion
price, which is compared to the fair market value of eGain's common stock to
determine whether a beneficial conversion feature exists. If stockholder
approval of the conversion of Series B into Series A shares is obtained at the
November 20, 2000 annual stockholder meeting, $19.3 million will be allocated to
the beneficial conversion feature representing the difference between the fair
market value of eGain's common stock on the date of issuance and the discounted
conversion price. The amount representing the beneficial conversion feature will
be included in net loss applicable to common stockholders. Accrued dividends,
representing the increase in liquidation value at the rate of 6.75% per annum,
are charged against additional paid-in capital and are included in net loss
applicable to common stockholders. During the three months ended September 30,
2000, accrued dividends related to Series A and B shares of $884,000 and the
portion of the beneficial conversion feature attributable to the Series A shares
of $767,000 have been included in net loss applicable to common stockholders.

         As discussed above, if stockholder approval of the conversion of Series
B into Series A shares is not obtained, the Series B shares become convertible
into Series C shares. The Series C stockholders may request that eGain redeem
their shares for cash at any time on or after November 30, 2000. If these events
were to occur, the Series C shares would be accreted to redemption value at each
balance sheet date and the aggregate redemption value would be classified as a
current liability.

                                      -7-
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         This report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties. These statements may be identified by the use
of the words such as "anticipates," "believes," "continue," "could," "would,"
"estimates," "forecasts," "expects," "intends," "may," "might," "plans,"
"potential," "predicts," "should," or "will" and similar expressions or the
negative of those terms. The forward-looking statements include, but are not
limited to, the expansion of our operations and employee base, our investment in
product development and technology, the expansion of our strategic distribution,
hosting and solution relationships, our continued expansion into global markets,
the factors influencing competition in our market, our limited operating
history, expected net losses, the adequacy of capital resources, the stockholder
approval of the conversion of Series B Cumulative Convertible Preferred Stock
into Series A Cumulative Convertible Preferred Stock at the annual stockholders'
meeting on November 20, 2000, the continued need for online customer
communications, the continued acceptance of the hosted applications model,
competitive threats and the overall volatility of Internet-related technology
companies. These statements related to our future plans, product releases,
objectives, expectations and intentions, and the assumptions underlying or
relating to any of these statements. Our actual results could differ materially
from those discussed in these statements. Factors that could contribute to such
differences include those discussed in "Additional Factors That May Affect
Future Results" and elsewhere in this document. These forward-looking statements
speak only as of the date hereof. eGain expressly disclaims any obligation or
understanding to release publicly any updates or revisions to any forward-
looking statements contained herein to reflect any change in eGain's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.

Overview

         eGain provides a multi-channel, online customer communications platform
designed to help companies meet the growing demands of Internet-based
communications. eGain markets software products that enable online customers to
communicate through each of the three main channels for online customer
communications--email, real-time and self service. These applications operate on
a shared platform that provides for common archiving, reporting and knowledge
management capabilities across these different channels. In addition, eGain's
platform integrates with leading call center switches, as well as customer
communications, database and ecommerce software applications, to provide
comprehensive information about each customer while permitting companies to
leverage existing investments and installed systems. eGain's customers include
traditional companies engaged in ecommerce, including 3Com, DaimlerChysler,
Fidelity Investments and Home Depot, and dedicated Internet companies, such as
AOL, CNBC.com, MP3.com and Monster.com.

         eGain was incorporated in September 1997. From inception to September
1998, eGain's operating activities related primarily to planning and developing
its proprietary technological solutions, recruiting personnel, raising capital
and purchasing operating assets. In September 1998, eGain commenced commercial
shipment of eGain Mail, and established the eGain Hosted Network.

         On April 30, 1999, eGain acquired Sitebridge Corporation and added its
real-time Web collaboration product to its platform. The product, eGain Live, is
an application that allows ecommerce companies to interact in real-time with
visitors to their Web sites. eGain acquired Sitebridge in exchange for stock and
it accounted for the transaction under the purchase method of accounting.

         On September 28, 1999, eGain completed its initial public offering of
common stock, in which it sold 5.8 million shares of common stock (including
exercise of an over-allotment option in October 1999), at a price of $12.00 per
share, which generated net proceeds of approximately $63.0 million.

         On March 7, 2000, eGain acquired Big Science Company and added its
Web-native self-service product to eGain's platform. The resulting product,
eGain Assistant, enables personalized customer assistance on Web sites through
virtual service agents. Customers interact in natural language dialogue with a
life-like character, which answers questions and leads customers through problem
resolution and sales situations. eGain acquired Big Science in exchange for
common stock and cash. The transaction was accounted for under the purchase
method of accounting.

                                      -8-
<PAGE>

         On May 15, 2000, eGain signed a letter of intent to acquire Nitman
Software Pvt. Ltd., an ecommerce software development company located in Pune,
India. In August 2000, eGain and Nitman executed definitive agreements in
connection with the acquisition, and we expect that the transaction, which is
awaiting final approval by the Indian government, will close in the second
quarter of fiscal 2001. eGain's acquisition of Nitman will enhance eGain's
product development capabilities.

         On June 29, 2000, eGain acquired Inference Corporation in exchange for
its common stock and assumption of outstanding options to purchase Inference
common stock. The acquisition brings together eGain's strength in Web-native,
multi-channel customer communications with Inference's customer profiling and
contact center support capabilities. The acquisition also significantly expands
eGain's European business and adds new product and technology components to the
eGain Commerce platform. The acquisition was accounted for as a purchase
transaction.

         On August 22, 2000, eGain issued (i) an aggregate of 35.11 shares of
its 6.75% Series A Cumulative Convertible Preferred Stock at a price of $100,000
per share (ii) an aggregate of 849.89 shares of its of 6.75% Series B Cumulative
Convertible Preferred Stock at a price of $100,000 per share, in a private
placement to certain investors. In addition, these investors received warrants
to purchase 3,826,322 shares of common stock. The warrants expire on August 22,
2005 and have an initial exercise price of $9.2517 per share. The net proceeds
of the offering, after expenses, were approximately $82.5 million. eGain intends
to use such proceeds primarily for general corporate purposes, including working
capital.

         eGain intends to make significant investments in product development
and technology to enhance its current products and services, develop new
products and services and further advance its solution offerings. In addition,
an important part of eGain's strategy is to expand its operations and employee
base and build sales, marketing, customer support, technical and operational
resources. eGain also intends to expand its strategic distribution, hosting and
solution relationships to add capabilities to its current product offerings and
to help market products to new customers. eGain has incurred significant losses
since its inception, and as of September 30, 2000, had an accumulated deficit of
approximately $110.5 million. eGain has not achieved profitability on a
quarterly or annual basis. eGain expects to continue to incur substantial
operating losses for the foreseeable future. In view of the rapidly evolving
nature of its business and limited operating history, eGain believes that period
to period comparisons of its revenue and operating results are not meaningful
and should not be relied upon as indications of future performance.

                                      -9-
<PAGE>

Results of Operations

         The following table sets forth the percentages that certain statement
of operations items are to total revenue for the three months ended September
30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                             Three Months
                                                                                          Ended September 30,
                                                                                  -----------------------------------
                                                                                        2000              1999
                                                                                  --------------      ---------------
<S>                                                                               <C>                 <C>
Revenue:
   Hosting...................................................................             19%               20%
   License...................................................................             38%               41%
   Services..................................................................             43%               39%
                                                                                  --------------      ---------------
     Total revenue...........................................................            100%              100%
   Cost of revenue - direct..................................................             72%              159%
   Cost of revenue - acquisition related.....................................              3%               --
                                                                                  --------------      ---------------
     Gross profit (loss).....................................................             25%              (59%)

Operating costs and expenses:
   Research and development..................................................             51%              143%
   Sales and marketing.......................................................            103%              268%
   General and administrative................................................             35%               91%
   Amortization of goodwill and other intangible assets......................             76%              131%
   Amortization of deferred compensation.....................................              9%              217%
                                                                                  --------------      ---------------
   Total operating costs and expenses........................................            274%              850%
                                                                                  --------------      ---------------
   Loss from operations.......................................................          (249%)            (909%)
                                                                                  ==============      ===============
</TABLE>

Revenue

         Revenue from hosting services is recognized ratably over the period of
the agreement as services are provided. Hosting agreements are typically for a
period of one year and automatically renew unless either party cancels the
agreement.

         eGain recognizes revenue in accordance with Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), as amended. Under SOP 97-2, revenue
from license fees is recognized when persuasive evidence of an agreement exists,
delivery of the product has occurred, no significant eGain obligations remain,
the fee is fixed or determinable, and collectibility is probable. License fee
revenue in multiple element contracts is recognized using the residual method
when there is vendor specific objective evidence of the fair value of all
undelivered elements in an arrangement but vendor specific objective evidence of
fair value does not exist for one or more of the delivered elements in an
arrangement. Under the residual method, the total fair value of the undelivered
elements, as indicated by vendor specific objective evidence, is deferred and
the difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements,
regardless of any separate prices stated within the contract for each element.
If sufficient vendor-specific objective evidence does not exist for undelivered
elements in an arrangement, all revenue from the arrangement is deferred until
the earlier of the point at which (a) such sufficient vendor-specific objective
evidence does exist or (b) all elements of the arrangement have been delivered.

         Service revenue is primarily comprised from consulting fees,
maintenance agreements, and training. Service revenue from consulting and
training billed on a time and materials basis is recognized as performed.
Service revenue on fixed price service arrangements is recognized upon
completion of specific contractual milestone events, or based on an estimated
percentage of completion as work progresses. Maintenance agreements include the
right to software updates on an if-and-when-available basis. Maintenance revenue
is deferred and recognized on a straight-line basis as service revenue over the
life of the related agreement, which is typically one year.

         In all cases, eGain assesses whether the service element of the
arrangement is essential to the functionality of the other elements of the
arrangement. In this determination, eGain focuses on whether the services
include

                                      10
<PAGE>

significant alterations to the features and functionality of the
software, whether the services involve the building of complex interfaces, the
timing of payments and the existence of milestones. In making this
determination, eGain considers the following: (1) the relative fair value of the
services compared to the software, (2) the amount of time and effort subsequent
to delivery of the software until the interfaces or other modifications are
completed, (3) the degree of technical difficulty in building the interfaces or
other modifications, and (4) any contractual cancellation, acceptance, or
termination provisions for failure to complete the interfaces. In those
instances where eGain determines that the service elements are essential to the
other elements of the arrangement, eGain accounts for the entire arrangement in
accordance with Accounting Research Bulletin (ARB) No. 45, "Long-Term
Construction--Type Contracts," using the relevant guidance from SOP 97-2 and SOP
81-1, "Accounting for Performance of Construction-Type and Certain
Production-Type Contracts."

         Total revenue increased to $12.1 million in the quarter ended September
30, 2000 from $1.4 million in the quarter ended September 30, 1999. The increase
was primarily due to an increase in eGain's customer base through the
acquisition of Inference Corporation in June 2000, expanded direct sales and
marketing efforts, expanded channel partnerships and the introduction of new
products. During the quarter ended September 30, 2000, no single customer
accounted for more than 10% of total revenue, and during the quarter ended
September 30, 1999, one customer accounted for 18% of total revenue. Although
total revenue has increased from prior periods, eGain cannot be certain that it
will continue to grow in future periods or that it will grow at similar rates in
the past.

         Revenue from application hosting increased to $2.3 million in the
quarter ended September 30, 2000 from $276,000 in the quarter ended September
30, 1999. The increase was primarily attributable to an increase in the number
of eGain's hosted customers. Hosting revenue represented 19% and 20% of total
revenue for the quarters ended September 30, 2000 and 1999, respectively.

         Revenue from software license fees increased to $4.6 million in the
quarter ended September 30, 2000 from $571,000 in the quarter ended September
30, 1999. The increase was primarily due to higher unit sales volumes and higher
average sales price per customer. License revenue represented 38% and 41% of
total revenue for the quarters ended September 30, 2000 and 1999, respectively.

         Revenue from consulting and support services increased to $5.2 million
in the quarter ended September 30, 2000 from $541,000 in the quarter ended
September 30, 1999. The increase was primarily attributable to an increase in
eGain's customer base. Service revenue represented 43% and 39% of total revenue
for the quarters ended September 30, 2000 and 1999, respectively.

Cost of Revenue

         Cost of revenue includes personnel costs for eGain's hosting services,
consulting services and customer support. It also includes depreciation of
capital equipment used in eGain's hosted network, cost of third-party products
and lease costs paid to remote co-location centers. Cost of revenue increased to
$9.1 million in the quarter ended September 30, 2000 from $2.2 million in the
quarter ended September 30, 1999. The increase was primarily due to a
significant increase in headcount and the expansion of the eGain Hosted Network.
Included in cost of revenue are acquisition related expenses of $362,000, which
is related to the amortization of developed technology resulting from eGain's
business combinations in fiscal 2000. eGain expects cost of revenue to increase
in future periods as it continues to expand its product line, but at a slower
rate than in previous periods.

Research and Development

         Research and development expenses primarily consist of compensation and
benefits of engineering and quality assurance personnel and, to a lesser extent,
occupancy costs and related overhead. Research and development expenses
increased to $6.1 million in the quarter ended September 30, 2000 from $2.0
million in the quarter ended September 30, 1999. The increase was primarily
attributable to significant growth in the research and development organization
associated with the development of new products. eGain expects research and
development expenses to increase in future periods as eGain continues to expand
its product line, but at a slower rate than in previous periods.

                                     -11-
<PAGE>

Sales and Marketing

         Sales and marketing expenses primarily consist of compensation and
benefits of eGain's sales, marketing and business development personnel,
advertising, trade show and other promotional costs and, to a lesser extent,
occupancy costs and related overhead. Sales and marketing expenses increased to
$12.5 million in the quarter ended September 30, 2000 from $3.7 million in the
quarter ended September 30, 1999. The increase was primarily due to a
significant increase in headcount to enhance eGain's marketing efforts and
increased spending on marketing programs. eGain expects sales and marketing
expenses to increase in future periods as eGain continues to expand its business
operations, but at a slower rate than in previous periods.

General and Administrative

         General and administrative expenses primarily consist of compensation
and benefits for eGain's finance, human resources, administrative and legal
services personnel, fees for outside professional services and, to a lesser
extent, occupancy costs and related overhead. General and administrative
expenses increased to $4.2 million in the quarter ended September 30, 2000 from
$1.3 million in the quarter ended September 30, 1999. The increase was primarily
attributable to an increase in headcount. eGain expects general and
administrative expenses to increase in future periods as eGain continues to
expand its business operations, but at a slower rate than in previous periods.

Amortization of Goodwill and Other Intangible Assets

         Goodwill and other intangible assets represents the excess of the
purchase price over the estimated fair market value of tangible net assets
acquired in various business combinations. eGain recorded amortization of
goodwill and other intangible assets of $9.2 million in the quarter ended
September 30, 2000. This was based upon gross intangible assets totaling $131.9
million recorded in connection with the acquisitions of Sitebridge in fiscal
1999, and Big Science Company and Inference Corporation in fiscal 2000. eGain
recorded amortization of goodwill and other intangible assets of $1.8 million in
the quarter ended September 30, 1999, which was based upon goodwill and other
intangible assets of $21.0 million recorded in connection with the acquisition
of Sitebridge.

Amortization of Deferred Compensation

         Deferred compensation is recorded in connection with grants of stock
options to employees on the date of grant when the deemed fair value of the
underlying common stock exceeds the exercise price for stock options. Deferred
compensation is amortized on a graded vesting method over the vesting period of
the individual grants. In addition, eGain records compensation expense in
connection with grants of stock options to non-employees pursuant to "Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation" ("SFAS 123"). These grants are periodically revalued as they vest
in accordance with SFAS 123 and "EITF 96-18, Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services." eGain recorded amortization of deferred
compensation of $1.1 million and $3.0 million in the quarters ended September
30, 2000 and 1999.

Non-operating Income (Expense)

         eGain recorded non-operating income of $231,000 in the quarter ended
September 30, 2000, compared to non-operating expense of $76,000 in the quarter
ended September 30, 1999. The increase was primarily attributable to an increase
in interest income resulting from an increase in cash and cash equivalents. The
increase was partially offset by an increase in interest expense resulting from
capital leases.

Liquidity and Capital Resources

         Prior to eGain's initial public offering, it financed operations
primarily through the private placement of convertible preferred stock, a bank
line of credit, and financing for capital purchases. On September 28, 1999,
eGain completed its initial public offering of common stock, in which 5.8
million shares of common stock were sold (including exercise of an
over-allotment option in October 1999), at a price of $12.00 per share. Proceeds
to eGain from the offering, before offering expenses, were approximately $69.0
million.

                                     -12-
<PAGE>

         In August 2000, eGain raised net proceeds of approximately $82.5
million through the issuance of Series A and Series B Cumulative Convertible
Preferred Stock and warrants to purchase approximately 3.8 million shares of
common stock at $9.25 per share. The convertible preferred stock liquidation
value accretes at 6.75% per annum. eGain intends to use the net proceeds from
this private placement for general corporate purposes.

         At September 30, 2000, cash and cash equivalents were $89.8 million an
increase of $62.6 million since June 30, 2000. Working capital at September 30,
2000 was $74.9 million, an increase of $63.0 million since June 30, 2000.

         Net cash used in operating activities was $21.3 million and $3.3
million in the quarters ended September 30, 2000 and 1999, respectively. Cash
used in operating activities in each period was primarily the result of net
losses, partially offset by non-cash charges.

         Net cash provided by investing activities was $110,000 in the quarter
ended September 30, 2000 and net cash used in investing activities was $1.6
million in the quarter ended September 30, 1999. Cash provided by investing
activities in the quarter ended September 30, 2000 was related to proceeds from
the sale of short-term securities, partially offset by property and equipment
purchases. Cash used in investing activities in the quarter ended September 30,
1999 was solely related to property and equipment purchases.

         Net cash provided by financing activities was $83.6 million and $60.4
million in the quarters ended September 30, 2000 and 1999, respectively. Cash
provided by financing activities in each of the periods was primarily due to the
issuance of preferred stock and common stock, which included net proceeds of
$82.5 million through the private placement in August 2000 and net proceeds of
approximately $63.0 million from the initial public offering in September 1999.

         eGain intends to make significant investments in product development
and technology to enhance its current products and services, develop new
products and services and further advance its solution offerings. In addition,
an important part of eGain's strategy is to expand its operations and employee
base and build sales, marketing, customer support, technical and operational
resources. eGain believes that existing cash balances will be sufficient to meet
its working capital and capital expenditure requirements for at least the next
12 months.

         At eGain's annual stockholders meeting on November 20, 2000,
stockholders will vote on whether to convert the Series B Cumulative Convertible
Preferred Stock, issued in August 2000, into Series A Cumulative Convertible
Preferred Stock. eGain believes that stockholders will vote to convert the
Series B Cumulative Convertible Preferred Stock into Series A Cumulative
Convertible Preferred Stock. However, if that approval is not obtained, the
Series B shares will be convertible into shares of Series C Cumulative
Redeemable Preferred Stock. The Series C shares are redeemable at the option of
the holders at any time on or after November 30, 2000. If holders of Series C
request eGain to redeem their shares for cash, eGain may not have adequate cash
balances at the time to satisfy the request.


               Additional Factors That May Affect Future Results

eGain expects continuing losses and may never achieve profitability, which in
turn may harm its future operating performance and may cause the market price of
eGain common stock to decline

         eGain incurred net losses of approximately $31.5 million for the
quarter ended September 30, 2000. As of September 30, 2000, eGain had an
accumulated deficit of approximately $110.5 million. eGain expects to continue
to incur net losses for the foreseeable future. If eGain continues to incur net
losses, it may not be able to increase its number of employees or its investment
in capital equipment, sales, marketing, customer support and research and
development programs in accordance with its present plans. eGain does not know
when or if it will become profitable. If eGain does not become profitable within
the timeframe expected by financial analysts or investors, the market price of
eGain common stock will likely decline. If eGain does achieve profitability, it
may not sustain or increase profitability in the future.

                                     -13-
<PAGE>

eGain's operating expenses may increase as eGain builds its business, and this
increase may harm its operating results and financial condition

         eGain has spent heavily on technology and infrastructure development.
eGain expects to continue to spend substantial financial and other resources on
developing and introducing product and service offerings, and expanding its
sales, marketing and customer support organizations and operating
infrastructure. eGain expects that its operating expenses will continue to
increase in absolute dollars and may increase as a percentage of revenue. If
eGain's revenue does not correspondingly increase, its business and operating
results could suffer.

         eGain was incorporated in September 1997 and shipped its first product
in September 1998. Because of this limited operating history and other factors,
eGain's quarterly revenue and operating results are difficult to predict. In
addition, due to the emerging nature of the ecommerce customer communications
market and other factors, eGain's quarterly revenue and operating results may
fluctuate from quarter to quarter. It is possible that eGain's operating results
in some quarters will be below the expectations of financial analysts or
investors. In this event, the market price of eGain common stock is likely to
decline.

         A number of factors is likely to cause fluctuations in eGain's
operating results, including, but not limited to, the following:

         .  the growth rate of ecommerce;

         .  demand for ecommerce customer communications applications;

         .  eGain's ability to attract and retain customers and maintain
            customer satisfaction;

         .  eGain's ability to upgrade, develop and maintain its systems and
            infrastructure;

         .  eGain's ability to develop new products and services;

         .  the amount and timing of operating costs and capital expenditures
            relating to expansion of eGain's business and infrastructure;

         .  technical difficulties or system outages;

         .  eGain's ability to attract and retain qualified personnel with
            software and Internet industry expertise, particularly sales and
            marketing personnel;

         .  the announcement or introduction of new or enhanced products and
            services by eGain's competitors;

         .  changes in eGain's pricing policies and those of its competitors;

         .  litigation relating to proprietary rights;

         .  seasonal trends in technology purchases;

         .  timing of large contracts;

         .  integration of newly acquired businesses and technologies as
            planned, including eGain's purchase of Inference Corporation;

         .  changes in market conditions limiting eGain's ability to raise
            capital;

         .  general business conditions in the industry;

         .  failure to increase eGain's international sales; and

                                     -14-
<PAGE>

         .    governmental regulation regarding the Internet and ecommerce in
              particular.

         eGain bases its expense levels in part on its expectations regarding
future revenue levels. If eGain's revenue for a particular quarter is lower than
it expects, it may be unable to proportionately reduce its operating expenses
for that quarter. For example, eGain's hosting agreements are typically for a
period of one year and automatically renew unless terminated by either party
with 30 days' prior notice. In addition, some of eGain's hosting agreements give
the customer the right to terminate the contract at any time. Period-to-period
comparisons of eGain's operating results are not a good indication of its future
performance.

eGain must compete successfully in the ecommerce customer communications market

         The ecommerce customer communications market is relatively new, growing
rapidly, and intensely competitive. There are no substantial barriers to entry
in this market, and established or new entities may enter this market in the
near future. eGain competes with companies that develop and maintain internally
developed customer communications software applications. eGain also competes
directly with companies that provide licensed software products to assist in
handling customer communications, including AskJeeves, Inc., Brightware, Inc.,
Broadbase Software, Inc., E.Piphany, Inc., Kana Communications, Inc., Primus
Knowledge Solutions, Inc., Quintus Corp., and WebLine Communications Corp., a
subsidiary of Cisco Systems, Inc. In addition, some of eGain's competitors who
currently offer licensed software products are now beginning to offer hosted
approaches. eGain also faces actual or potential competition from larger, front
office software companies such as Clarify, Inc., a subsidiary of Nortel Networks
Corp., PeopleSoft, Inc. and Siebel Systems, Inc. Furthermore, established
enterprise software companies, including Hewlett-Packard Company, IBM, Microsoft
Corporation and similar companies, may seek to leverage their existing
relationships and capabilities to offer ecommerce customer communications
applications.

eGain's business is premised on a novel business model that is largely untested

         eGain's business is premised on novel business assumptions that are
largely untested. Customer communications historically have been conducted
primarily in person or over the telephone. eGain's business model assumes that
companies engaged in ecommerce will continue to elect to communicate with
customers mainly through the Internet rather than by telephone. eGain's business
model also assumes that many companies recognize the benefits of a hosted
delivery model and will seek to have their customer communications applications
hosted by eGain. If any of these assumptions is incorrect, eGain's business will
be seriously harmed.

eGain may engage in future acquisitions or investments that could dilute eGain's
existing stockholders, cause eGain to incur significant expenses or harm its
business

         eGain may review acquisition or investment prospects that might
complement its current business or enhance its technological capabilities.
Integrating any newly acquired businesses or their technologies or products may
be expensive and time-consuming. For example, eGain acquired Inference
Corporation in June 2000. There can be no assurance that eGain can effectively
integrate Inference's products, including k Commerce Support Enterprise and
k-Commerce Sales, successfully with the eGain platform. To finance any
acquisitions, it may be necessary for eGain to raise additional funds through
public or private financings. Additional funds may not be available on terms
that are favorable to eGain, if at all, and, in the case of equity financings,
may result in dilution to eGain's existing stockholders. eGain may not be able
to operate acquired businesses profitably or otherwise implement its growth
strategy successfully. If eGain is unable to integrate newly acquired entities
or technologies effectively, eGain's operating results could suffer. Future
acquisitions by eGain could also result in large and immediate write-offs,
incurrence of debt and contingent liabilities, or amortization of expenses
related to goodwill and other intangibles, any of which could harm eGain's
operating results.

eGain could incur additional non-cash charges associated with stock-based
compensation arrangements

         eGain's operating results may be impacted if it incurs significant
non-cash charges associated with stock-based compensation arrangements with
employees and non-employees. eGain has issued options to non-employees which are
subject to various vesting schedules of up to 48 months. For deferred
compensation purposes, non-employee options are required to be remeasured at
each vesting date, which may require eGain to record additional

                                     -15-
<PAGE>

non-cash accounting expenses. These expenses may result in eGain incurring net
losses or increased net losses for a given period, and this could seriously harm
eGain's operating results and common stock price.

If eGain fails to expand its sales, marketing and customer support activities,
it may be unable to expand its business

         If eGain does not successfully expand its sales, marketing and customer
support activities, eGain may not be able to expand its business, and eGain's
common stock price could decline. The complexity of eGain's ecommerce customer
communications platform and related products and services requires it to have
highly trained sales, marketing and customer support personnel, to educate
prospective customers regarding the use and benefits of eGain's services, and
provide effective customer support. With eGain's relatively brief operating
history and its plans for expansion, eGain has considerable need to recruit,
train, and retain qualified staff. Any delays or difficulties eGain encounters
in these staffing efforts could impair its ability to attract new customers and
to enhance its relationships with existing customers. This in turn would
adversely affect the timing and extent of eGain's revenue. Because many of
eGain's current sales, marketing and customer support personnel have recently
joined eGain and have limited experience working together, eGain's sales,
marketing and customer support organization may not be able to compete
successfully against bigger and more experienced organizations of its
competitors.

eGain must recruit and retain its key employees to expand its business

         eGain's success will depend on the skills, experience and performance
of eGain's senior management, engineering, sales, marketing and other key
personnel, many of whom have worked together for only a short period of time.
Recently, eGain has hired a number of senior executives. The loss of the
services of any of eGain's senior management or other key personnel, including
eGain's Chief Executive Officer and co-founder, Ashutosh Roy, and eGain's
President and co-founder, Gunjan Sinha, could harm its business. Additionally,
the services of Charles Jepson, former Inference President and Chief Executive
Officer, will be needed during the integration of Inference's operations. eGain
does not have employment agreements with, or life insurance policies on, most of
its key employees. Most of these employees may terminate their employment with
eGain at any time. eGain's success also will depend on its ability to recruit,
retain and motivate other highly skilled engineering, sales, marketing and other
personnel. Competition for these personnel is intense, especially in the San
Francisco Bay Area, and eGain has had difficulty hiring employees in its desired
timeframes. In particular, eGain may be unable to hire a sufficient number of
qualified software engineers and information technology professionals. If eGain
fails to retain and recruit necessary engineering, sales and marketing, customer
support or other personnel, eGain's business and its ability to develop new
products and services and to provide acceptable levels of customer service could
suffer. In addition, companies in the software industry whose employees accept
positions with competitors frequently claim that competitors have engaged in
unfair hiring practices. eGain could incur substantial costs in defending itself
against any of these claims, regardless of the merits of such claims.

eGain's failure to expand third-party distribution channels would impede its
revenue growth

         To increase its revenue, eGain must increase the number of its
marketing and distribution partners, including software and hardware vendors and
resellers. eGain's existing or future marketing and distribution partners may
choose to devote greater resources to marketing and supporting the products of
competitors which could also harm eGain. eGain's failure to expand third-party
distribution channels would impede its revenue growth.

         Similarly, to increase its revenue and implementation capabilities,
eGain must develop and expand relationships with systems integrators. eGain
relies on systems integrators to recommend eGain's products to their customers
and to install and support eGain's products for their customers. Systems
integrators may develop, market or recommend software applications that compete
with eGain's products. Moreover, if these firms fail to implement eGain's
products successfully for their customers, eGain may not have the resources to
implement its products on the schedule required by its customers.

                                     -16-
<PAGE>

Unknown software defects could disrupt eGain's products and services, which
could harm eGain's business and reputation

         eGain's product and service offerings depend on complex software, both
internally developed and licensed from third parties. Complex software often
contains defects, particularly when first introduced or when new versions are
released. eGain may not discover software defects that affect its new or current
services or enhancements until after they are deployed. It is possible that,
despite testing by eGain, defects may occur in the software. These defects could
result in damage to eGain's reputation, lost sales, product liability claims,
delays in or loss of market acceptance of eGain's products, product returns and
unexpected expenses and diversion of resources to remedy errors.

eGain may face liability associated with its management of sensitive customer
information

         eGain's applications manage sensitive customer information, and eGain
may be subject to claims associated with invasion of privacy or inappropriate
disclosure, use or loss of this information. Any imposition of liability,
particularly liability that is not covered by insurance or is in excess of
insurance coverage, could harm eGain's reputation and its business and operating
results.

If eGain's system security is breached, eGain's business and reputation could
suffer

         A fundamental requirement for online communications and transactions is
the secure transmission of confidential information over public networks. Third
parties may attempt to breach eGain's security or that of eGain's customers.
eGain may be liable to its customers for any breach in its security and any
breach could harm its business and reputation. Although eGain has implemented
network security measures, eGain's servers are vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions, which could lead to
interruptions, delays or loss of data. eGain may be required to expend
significant capital and other resources to license encryption technology and
additional technologies to protect against security breaches or to alleviate
problems caused by any breach.

Due to the lengthy sales cycles of some of eGain's products, the timing of its
sales is difficult to predict and may cause eGain to miss its revenue
expectations

         eGain's sales cycle for its ecommerce customer communications
applications can be six months or more, and varies substantially from customer
to customer. While eGain's potential customers are evaluating eGain's products
before placing orders, eGain may incur substantial sales and marketing expenses
and spend significant management effort. Consequently, if revenue forecasted
from a specific customer for a particular quarter is not realized in that
quarter, eGain may incur significant expenses that are not offset by
corresponding revenue.

If eGain does not successfully address the risks inherent in the expansion of
its international operations, its business could suffer

         eGain intends to continue to expand into international markets and to
spend significant financial and managerial resources to do so. For example,
eGain has established subsidiaries in the United Kingdom, Australia, and the
Netherlands. If eGain's revenue from international operations does not exceed
the expense associated with establishing and maintaining these operations,
eGain's business and operating results will suffer. eGain has limited experience
in international operations and may not be able to compete effectively in
international markets. eGain faces various risks inherent in conducting business
internationally, such as the following:

         .  unexpected changes in international regulatory requirements;

         .  difficulties and costs of staffing and managing international
            operations;

         .  differing technology standards;

         .  difficulties in collecting accounts receivable and longer collection
            periods;

                                     -17-
<PAGE>

         .  political and economic instability;

         .  fluctuations in currency exchange rates;

         .  imposition of currency exchange controls;

         .  potentially adverse tax consequences;

         .  reduced protection for intellectual property rights in foreign
             countries; and

         .  general business conditions.

eGain's recent growth has placed a strain on its resources and if eGain fails to
manage its future growth, its business could suffer

         eGain recently began to expand its operations rapidly and intends to
continue this expansion. The completed acquisitions of Inference and Big Science
are two examples of this expansion. This rapid expansion has placed, and is
expected to continue to place, a significant strain on eGain's managerial,
operational and financial resources. To manage further growth, eGain will need
to improve or replace its existing operational, customer support and financial
systems, procedures and controls. Any failure by eGain to properly manage these
system and procedural transitions could impair its ability to attract and
service customers, and could cause it to incur higher operating costs and delays
in the execution of its business plan. eGain will also need to continue the
expansion of its operations and employee base. eGain's management may not be
able to hire, train, retain, motivate and manage required personnel. In
addition, eGain's management may not be able to successfully identify, manage
and exploit existing and potential market opportunities.

eGain may not be able to upgrade its systems and the eGain Hosted Network to
accommodate growth in ecommerce

         eGain faces risks related to the ability of the eGain Hosted Network to
operate with higher activity levels while maintaining expected performance. As
the volume and complexity of ecommerce customer communications increase, eGain
will need to expand its systems and hosted network infrastructure. The expansion
and adaptation of eGain's network infrastructure will require substantial
financial, operational and management resources. Customer demand for eGain's
products and services could be greatly reduced if eGain fails to maintain high
capacity data transmission. In addition, as eGain upgrades its network, eGain is
likely to encounter equipment or software incompatibility. eGain may not be able
to expand or adapt the eGain Hosted Network to meet additional demand or eGain's
customers' changing requirements in a timely manner or at all.

Unplanned system interruptions and capacity constraints could reduce eGain's
ability to provide hosting services and could harm its business and reputation

         eGain's customers have in the past experienced some interruptions with
the eGain Hosted Network. eGain believes that these interruptions will continue
to occur from time to time. These interruptions could be due to hardware and
operating system failures. eGain expects a substantial portion of its revenue to
be derived from customers who use the eGain Hosted Network. As a result, eGain's
business will suffer if it experiences frequent or long system interruptions
that result in the unavailability or reduced performance of the eGain Hosted
Network or reduce eGain's ability to provide remote management services. eGain
expects to experience occasional temporary capacity constraints due to sharply
increased traffic, which may cause unanticipated system disruptions, slower
response times, impaired quality and degradation in levels of customer service.
If this were to continue to happen, eGain's business and reputation could be
seriously harmed.

         eGain's success largely depends on the efficient and uninterrupted
operation of its computer and communications hardware and network systems. Most
of eGain's computer and communications systems are located in Sunnyvale,
California. eGain's systems and operations are vulnerable to damage or
interruption from fire, earthquake, power loss, telecommunications failure and
similar events.

                                     -18-
<PAGE>

         eGain has entered into service agreements with some of its customers
that require minimum performance standards, including standards regarding the
availability and response time of eGain's remote management services. If eGain
fails to meet these standards, eGain's customers could terminate their
relationships with eGain, and eGain could be subject to contractual monetary
penalties. Any unplanned interruption of services may harm eGain's ability to
attract and retain customers.

eGain relies on relationships with, and the system integrity of, hosting
partners for the eGain Hosted Network

         The eGain Hosted Network consists of virtual data centers co-located in
the physical data centers of eGain's hosting partners including AboveNet
Communications, GlobalCenter Inc. and Exodus Communications. Accordingly, eGain
relies on the speed and reliability of the systems and networks of these hosting
partners. If eGain's hosting partners experience system interruptions or delays,
or if eGain does not maintain or develop relationships with reliable hosting
partners, eGain's business could suffer.

Problems arising from use of eGain's products with other vendors' products could
cause eGain to incur significant costs, divert attention from eGain's product
development efforts and cause customer relations problems

         eGain's customers generally use eGain products together with products
from other companies. As a result, when problems occur in the network, it may be
difficult to identify the source of the problem. Even when these problems are
not caused by eGain's products, they may cause it to incur significant warranty
and repair costs, divert the attention of eGain's engineering personnel from
product development efforts and cause significant customer relations problems.

eGain may be unable to protect its intellectual property and proprietary rights

         eGain regards its patents, copyrights, service marks, trademarks, trade
secrets and similar intellectual property as critical to its success, and relies
on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with eGain employees, customers and partners to
protect its proprietary rights. eGain has numerous registered trademarks and
trademark applications pending in the United States and internationally, as well
as common law trademark rights. In addition, eGain owns several patents in the
area of case-based reasoning, and has patents pending relating to various
technologies. eGain will seek additional trademark and patent protection in the
future. eGain does not know if its trademark and patent applications will be
granted, or whether they will provide the protection eGain desires, or whether
they will subsequently be challenged or invalidated. It is difficult to monitor
unauthorized use of technology, particularly in foreign countries, where the
laws may not protect eGain's proprietary rights as fully as in the United
States. Furthermore, eGain's competitors may independently develop technology
similar to eGain's technology.

         Despite eGain's efforts to protect its proprietary rights through
confidentiality and license agreements, unauthorized parties may attempt to copy
or otherwise obtain and use eGain's products or technology. These precautions
may not prevent misappropriation or infringement of eGain's intellectual
property. In addition, eGain routinely requires its employees, customers, and
potential business partners to enter into confidentiality and nondisclosure
agreements before eGain will disclose any sensitive aspects of its products,
technology, or business plans. In addition, eGain requires employees to agree to
surrender to eGain any proprietary information, inventions or other intellectual
property they generate or come to possess while employed by eGain. Despite
eGain's efforts to protect its proprietary rights through confidentiality and
license agreements, unauthorized parties may attempt to copy or otherwise obtain
and use its products or technology. These precautions may not prevent
misappropriation or infringement of its intellectual property. In addition, some
of eGain's license agreements with certain customers and partners require eGain
to place the source code for its products into escrow. These agreements
typically provide that some party will have a limited, non-exclusive right to
access and use this code as authorized by the license agreement if there is a
bankruptcy proceeding instituted by or against eGain, or if eGain materially
breaches a contractual commitment to provide support and maintenance to the
party.

                                     -19-
<PAGE>

eGain may face intellectual property infringement claims that could be costly to
defend

         Third parties may infringe or misappropriate eGain's copyrights,
trademarks and similar proprietary rights. In addition, other parties may assert
infringement claims against eGain. Although eGain has received no notice of any
alleged infringement, eGain's products may infringe issued patents that may
relate to its products. In addition, because the contents of patent applications
in the United States are not publicly disclosed until the patent is issued,
applications may have been filed which relate to eGain's software products.
eGain may be subject to legal proceedings and claims from time to time in the
ordinary course of its business, including claims of alleged infringement of the
trademarks and other intellectual property rights of third parties. Intellectual
property litigation is expensive and time-consuming and could divert
management's attention away from running eGain's business. This litigation could
also require eGain to develop non-infringing technology or enter into royalty or
license agreements. These royalty or license agreements, if required, may not be
available on acceptable terms, if at all, in the event of a successful claim of
infringement. eGain's failure or inability to develop non-infringing technology
or license the proprietary rights on a timely basis would harm its business.

eGain may need to license third-party technologies and may be unable to do so

         To the extent eGain needs to license third-party technologies, it may
be unable to do so on commercially reasonable terms or at all. In addition,
eGain may fail to successfully integrate any licensed technology into its
products or services. Third-party licenses may expose eGain to increased risks,
including risks associated with the integration of new technology, the diversion
of resources from the development of eGain's own proprietary technology, and
eGain's inability to generate revenue from new technology sufficient to offset
associated acquisition and maintenance costs. eGain's inability to obtain any of
these licenses could delay product and service development until equivalent
technology can be identified, licensed and integrated. This in turn would harm
eGain's business and operating results.

The conversion of our preferred shares and the exercise of the related warrants
could result in substantial numbers of additional shares being issued if our
market price declines.

      On August 8, 2000, eGain issued 35.11 shares of 6.75% Series A Cumulative
Convertible Preferred Stock (the "Series A") and 849.89 shares of 6.75% Series B
Cumulative Convertible Preferred Stock (the "Series B"), and warrants to
purchase approximately 3.8 million shares of eGain common stock with a current
exercise price of $9.2517 per share. The Series A shares and Series B shares
each have a liquidation preference which accretes and cumulates on a daily basis
at an annual rate of 6.75% and is compounded on a semi-annual basis. The Series
A shares are convertible into common stock and, subject to stockholder approval,
the Series B shares are convertible into Series A shares. The Series A shares
are convertible into common stock (including all amounts accreted from August 8,
2000) at a conversion price of $9.2517 per share. By way of illustration, at the
current conversion price of $9.2517 per share and assuming all Series B shares
were converted into Series A shares, as of September 30, 2000 the Series A
shares would be convertible into approximately 9,661,000 shares of common stock.

      The conversion price will be adjusted to a price equal to 122% of the
average market price of eGain common stock for the 20 trading days preceding
August 8, 2001 in the event that such adjusted price would be less than $9.2517.
However, the Series A Certificate of Designation provides that the conversion
price will not be adjusted to less than $5.6875 per share. Accordingly, a
decrease in the price of eGain common stock in August 2001 will increase the
number of shares of common stock issuable upon conversion of the preferred
stock.

      To the extent the preferred shares are converted into common stock
(including all amounts accreted from August 8, 2000), a significant number of
shares of common stock may be sold into the market, such sales could decrease
the price of our common stock and encourage short sales by selling
securityholders (subject to the price floor described above) or others. Any such
short sales could place further downward pressure on the price of eGain common
stock, requiring the issuance of a greater number of shares of eGain common
stock upon future conversions of the preferred shares.

      If stockholder approval is not obtained by November 30, 2000, the Series B
shares are convertible into shares of Series C Cumulative Redeemable Preferred
Stock (the "Series C"). The Series C shares are entitled to cumulative dividend
payments and are redeemable at the option of the holders. Therefore, the
conversion could result in a forced
                                     -20-
<PAGE>

dividend payment or redemption at a time when eGain might not have, and could
not raise, the cash necessary to pay the cumulative dividends set forth in the
Series C Certificate of Designation or redeem the Series C shares if a
redemption is required by the Series C Certificate of Designation.

eGain's stock price may be volatile

         The price at which eGain common stock will trade has been and will
likely continue to be highly volatile and fluctuate substantially due to factors
such as the following:

         .  actual or anticipated fluctuations in eGain's operating results;

         .  changes in or failure to meet securities analysts' expectations;

         .  announcements of technological innovations;

         .  introduction of new services by eGain or its competitors;

         .  developments with respect to intellectual property rights;

         .  conditions and trends in the Internet and other technology
            industries; and

         .  general market conditions.

eGain may become involved in securities class action litigation which could
divert management's attention and harm its business

         The stock market has from time to time experienced significant price
and volume fluctuations that have affected the market prices for the common
stocks of technology companies, particularly Internet companies. These broad
market fluctuations may cause the market price of eGain common stock to decline.
In the past, following periods of volatility in the market price of a particular
company's securities, securities class action litigation has often been brought
against that company. eGain may become involved in this type of litigation in
the future. Litigation is often expensive and diverts management's attention and
resources, which could harm eGain business and operating results.

eGain may need additional capital, and raising additional capital may dilute
existing stockholders

         eGain believes that its existing capital resources will enable it to
maintain its current and planned operations for the next 12 months. However,
eGain may choose to, or be required to, raise additional funds due to unforeseen
circumstances. If eGain's capital requirements vary materially from those
currently planned, it may require additional financing sooner than anticipated.
This financing may not be available in sufficient amounts or on terms acceptable
to eGain and may be dilutive to existing stockholders.

         eGain believes competition will increase as its current competitors
increase the sophistication of their offerings and as new participants enter the
market. Many of eGain's current and potential competitors have:

         .  longer operating histories;

         .  larger customer bases;

         .  greater brand recognition;

         .  more diversified lines of products and services; and

         .  significantly greater financial, marketing and other resources.

                                     -21-
<PAGE>

         These competitors may enter into strategic or commercial relationships
with larger, more established and better-financed companies. These competitors
may be able to:

         .   undertake more extensive marketing campaigns;

         .   adopt more aggressive pricing policies; and

         .   make more attractive offers to businesses to induce them to use
             their products or services.

         Further, any delays in the general market acceptance of eGain's
ecommerce customer communications applications would likely harm its competitive
position. Any delay would allow eGain's competitors additional time to improve
their service or product offerings, and also provide time for new competitors to
develop ecommerce customer communications applications and solicit prospective
customers within eGain's target markets. Increased competition could result in
pricing pressures, reduced operating margins and loss of market share.

eGain depends on broad market acceptance of Web-based ecommerce customer
communications applications

         eGain depends on the widespread acceptance and use of Web-based
customer communications applications as an effective solution for businesses
seeking to manage high volumes of customer communication over the Internet.
eGain cannot estimate the size or growth rate of the potential market for its
product and service offerings, and does not know whether its products and
services will achieve broad market acceptance. The market for Web-based
ecommerce customer communications is new and rapidly evolving, and concerns over
the security and reliability of online transactions, the privacy of users and
quality of service or other issues may inhibit the growth of the Internet and
commercial online services. If the market for ecommerce customer communications
applications fails to grow or grows more slowly than eGain currently
anticipates, its business will be seriously harmed.

eGain may be unable to develop or enhance products or services that address the
changing needs of the ecommerce customer communications market

         To be competitive in the ecommerce customer communications market,
eGain must continually improve the performance, features and reliability of
eGain products and services, including eGain's existing ecommerce customer
communications applications, and develop new products, services, functionality
and technology that address changing industry standards and customer needs. If
eGain cannot bring new or enhanced products to market in a timely and effective
way, its business and operating results will suffer. More generally, if eGain
cannot adapt or respond in a cost-effective and timely manner to changing
industry standards, market conditions or customer requirements, eGain's business
and operating results will suffer.

eGain will only be able to execute its business plan if Internet usage continues
to grow

         eGain's business will be seriously harmed if Internet usage does not
continue to grow or grows at significantly lower rates compared to current
trends. The continued growth of the Internet depends on various factors, most of
which are outside eGain's control. These factors include the following:

         .  the Internet infrastructure may be unable to support the demands
            placed on it;

         .  the performance and reliability of the Internet may decline as usage
            grows;

         .  security and authentication concerns with respect to transmission
            over the Internet of confidential information, such as credit card
            numbers, and attempts by unauthorized computer users, so-called
            hackers, to penetrate online security systems; and

         .  privacy concerns, including those related to the ability of Web
            sites to gather user information without the user's knowledge or
            consent.

                                     -22-
<PAGE>

Because eGain provides its customer communications applications to companies
conducting business over the Internet, eGain's business could suffer if
efficient transmission of data over the Internet is interrupted

         The recent growth in the use of the Internet has caused frequent
interruptions and delays in accessing the Internet and transmitting data over
the Internet. Because eGain provides Internet-based ecommerce customer
communications applications, interruptions or delays in Internet transmissions
will harm eGain customers' ability to receive and respond to email messages.
Therefore, eGain's market depends on improvements being made to the entire
Internet infrastructure to alleviate overloading and congestion.

Governmental regulation and legal uncertainties could impair the growth of the
Internet and decrease demand for eGain's services or increase eGain's cost of
doing business

         Governmental regulation may impair the growth of the Internet or
commercial online services. This could decrease the demand for eGain's products
and services, increase its cost of doing business or otherwise harm its business
and operating results. Although there are currently few laws and regulations
directly applicable to the Internet and the use of the Internet as a commercial
medium, a number of laws have been proposed involving the Internet. These
proposed laws include laws addressing user privacy, pricing, content,
copyrights, distribution, antitrust, and characteristics and quality of products
and services. Further, the growth and development of the market for commercial
online transactions may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies engaged in ecommerce.
Moreover, the applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, sales and other
taxes, libel and personal privacy is uncertain and may take years to resolve.

eGain may be liable for activities of its customers or others using the eGain
Hosted Network

         As a provider of ecommerce customer communications applications, eGain
faces potential liability for defamation, negligence, copyright, patent or
trademark infringement and other claims based on the actions of eGain customers
or others using the eGain Hosted Network. This liability could result from the
nature and content of the communications transmitted by eGain customers through
the eGain Hosted Network. eGain does not and cannot screen all of the
communications generated by its customers, and eGain could be exposed to
liability with respect to this content. Furthermore, some foreign governments
have enforced laws and regulations related to content distributed over the
Internet that are more strict than those currently in place in the United
States.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

         eGain develops products in the United States and India and sells these
products internationally. Generally, sales are made in local currency. As a
result, eGain's financial results could be affected by factors such as changes
in foreign currency exchange rates or weak economic conditions in foreign
markets. To date, the effect of changes in foreign currency exchange rates on
revenues and operating expenses has not been material. eGain does not currently
use derivative instruments to hedge against foreign exchange risk.

         eGain's exposure to market rate risk for changes in interest rates
relates primarily to its investment portfolio. eGain's investments consist
primarily of commercial paper and money market funds, which have an average
fixed rate of 5.5% to 6.0%, and have maturities of six months or less. eGain
does not consider its cash equivalents to be subject to interest rate risk due
to their short maturities.

                                     -23-
<PAGE>

                          Part II. OTHER INFORMATION

Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities

Changes in Securities

         During the quarter ended September 30, 2000 eGain granted options to
purchase 2,780,000 shares of common stock to employees and consultants under our
1998 and 2000 Stock Plans.

         During the quarter ended September 30, 2000, employees and consultants
of the eGain exercised options for 294,000 shares of common stock. Also during
the period, eGain repurchased 111,000 shares of common stock from employees.

         The sale of the above securities was deemed to be exempt from
registration under the Securities Act of 1933 ("the Act") in reliance upon
Section 4(2) of the Act or Rule 701 promulgated under Section 3(b) of the Act.

Use of Proceeds

         On August 22, 2000, eGain issued 35.11 shares of non-voting Series A
Cumulative Convertible Preferred Stock ("Series A"), $100,000 stated value per
share, 849.89 shares of non-voting Series B Cumulative Convertible Preferred
Stock ("Series B"), $100,000 stated value per share, and warrants to purchase
3,826,322 shares of eGain's common stock with a current warrant exercise price
of $9.2517 per share in a private placement. The total proceeds of the offering
were $88.5 million. The net cash proceeds of the offering, after expenses, were
approximately $82.5 million. eGain intends to use the proceeds from the private
placement for general corporate purposes, including working capital.

                                     -24-
<PAGE>

Item 3.  Defaults upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.

Item 5.  Other Information

         None.

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits required by Item 601 of Regulation S-K.

            Exhibit
            Number              Exhibit
          ---------     ------------------------

              27        Financial Data Schedule.

         (b)  Reports on Form 8-K.

         1.    On July 14, 2000, eGain filed a Form 8-K with the Securities
               and Exchange Commission related to the merger with Inference
               Corporation.

         2.    On August 9, 2000, eGain filed a Form 8-K with the Securities and
               Exchange Commission reporting that on August 9, 2000, eGain
               issued a press release announcing that it will issue
               approximately $88.5 million of 6.75% convertible preferred stock,
               and warrants to purchase approximately 3.8 million shares of
               common stock at $9.25 per share to purchasers of such preferred
               stock.

         3.    On August 15, 2000, eGain filed a Form 8-K with the Securities
               and Exchange Commission reporting that on August 8, 2000 eGain
               entered into a Securities Purchase Agreement providing for the
               issuance and sale of (i) an aggregate of 35.11 shares of its
               6.75% Series A Cumulative Convertible Preferred Stock, and (ii)
               an aggregate of 849.89 shares of its of 6.75% Series B Cumulative
               Convertible Preferred Stock in a private placement.

                                     -25-
<PAGE>

                                   SIGNATURE

         Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated:  November 14, 2000          eGAIN COMMUNICATIONS CORPORATION

                                   By           /s/ Harpreet Grewal
                                      ------------------------------------------
                                                   Harpreet Grewal
                                               Chief Financial Officer
                                             (Duly Authorized Officer and
                                      Principal Financial and Accounting Officer


                                     -26-




<PAGE>
                               INDEX TO EXHIBITS


            Exhibit
            Number            Exhibit
          ----------   -----------------------
              27       Financial Data Schedule.

                                     -27-