##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-KSB
 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
  x
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2008
 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 number: 0-29637
 SELECTICA, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    77-0432030(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1740 Technology Drive Suite 450, San Jose, California
(Address of principal executive offices)
    
    95110-2111
(Zip Code)
 Registrants telephone number, including area code: (408) 570-9700
 Securities registered pursuant to Section 12(b) of the Act: None
 Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 par value
 o
 x o
 o
 o x
    o x




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##### 



SELECTICA, INC.
 FORM 10-KSB ANNUAL REPORT
FOR THE FISCAL YEAR ENDED
MARCH 31, 2008
 Table of Contents
 PART IItem 1.
    
    Description of Business
    
    
    4Item 1A.
    
    Risk Factors
    
    
    6Item 2.
    
    Description of Property
    
    
    12Item 3.
    
    Legal Proceedings
    
    
    13Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    13PART IIItem 5.
    
    Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases
of Equity Securities
    
    
    14Item 6.
    
    Managements Discussion and Analysis
    
    
    15Item 7.
    
    Consolidated Financial Statements
    
    
    21Item 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    21Item 8A.
    
    Controls and Procedures
    
    
    21PART IIIItem 9.
    
    Directors, Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance With Section 16(A) of the Exchange Act
    
    
    22Item 10.
    
    Executive Compensation
    
    
    25Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    28Item 12.
    
    Certain Relationships and Related Transactions and Director Independence
    
    
    29PART IVItem 13.
    
    Exhibits and Financial Statement Schedules
    
    
    29Item 14.
    
    Principal Accountant Fees and Services
    
    
    31EXHIBIT 10.32EXHIBIT 10.33EXHIBIT 10.34EXHIBIT 10.35EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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Cautionary Statement Pursuant to Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995
 The words Selectica, we, our, ours, us, and the Company refer to Selectica, Inc. In
addition to historical information, this annual report on Form 10-KSB contains forward-looking
statements that involve risks and uncertainties that could cause actual results to differ
materially from those projected. Factors that might cause or contribute to such differences
include, but are not limited to, those discussed in the section entitled Managements Discussion
and Analysis of Consolidated Financial Condition and Results of Operations and Risk Factors. You
should carefully review the risks described in other documents the Company files from time to time
with the Securities and Exchange Commission, including the quarterly reports on Form 10-Q to be
filed by the Company in Fiscal 2009. Readers are cautioned not to place undue reliance on the
forward-looking statements, including statements regarding the Companys expectations, beliefs,
intentions or strategies regarding the future, which speak only as of the date of this annual
report on Form 10-KSB. The Company undertakes no obligation to release publicly any updates to the
forward-looking statements included herein after the date of this document.
 3




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##### Table of Contents



PART I
 
 Item 1. Description of Business
 BUSINESS OVERVIEW
   Products and Services
 Sales Configuration Solutions
 Selecticas Configurator
 Selecticas Pricer
 Contract Management Solutions
 Selecticas CM Software
 Selectica Services
  Employees
  4




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Sales and Marketing
    Research and Development
   International Operations
  Competition
    5




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Intellectual Property and Other Proprietary Rights
   Method and apparatus for use of an application state storage system in interacting with
on-line services.
 Method for merging multiple knowledge bases into one optimized and compressed knowledge base.
 Method and apparatus for remote interaction with and configuration of a WAN-based knowledge
base.
 Method for merging multiple knowledge bases into one optimized and compressed knowledge base.
 Method for generating and updating knowledge-based configurators that are multi platform and
multi language capable.
 AVAILABLE INFORMATION
  
 Item 1A. Risk Factors
 Set forth below and elsewhere in this annual report on Form 10-KSB, and in the other documents
we file with the SEC, are risks and uncertainties that could cause actual results to differ
materially from the results contemplated by the forward-looking statements contained in this annual
report on form 10-KSB . Prospective and existing investors are strongly urged to carefully consider
the various cautionary statements and risks set forth in this annual report and our other public
filings.
 We have a history of significant losses and may incur significant losses in the future.
  We have relied and expect to continue to rely on orders from a relatively small number of customers
for a substantial portion of our revenues, and the loss of any of these customers would
significantly harm our business and operating results.
  Our annual and quarterly revenues and operating results are inherently unpredictable and subject to
fluctuations, and as a result, we may fail to meet the expectations of security analysts and
investors, which could cause volatility or adversely affect the trading price of our common stock.
  6




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In
prior periods, management noted certain
    material weaknesses in our internal control over financial
    reporting. Failure to maintain effective internal
    control over financial reporting could result in our failure to
    accurately report our financial results.
  If our new product marketing strategy is unsuccessful, it could significantly harm our business and
operating results.
  A decline in general economic conditions or a decrease in information technology spending could
harm our results of operations.
  Our future success depends on our proprietary intellectual property, and if we are unable to
protect our intellectual property from potential competitors, our business may be significantly
harmed.
  7




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The loss of any of our key personnel would harm our competitiveness because of the time and effort
that we would have to expend to replace such personnel.
   Our lengthy sales cycle for our products makes it difficult for us
to forecast revenue and exacerbates the variability of quarterly fluctuations, which could cause
our stock price to decline.
  Developments in the market for enterprise software including configuration, pricing, contract
management and quoting solutions may harm our operating results, which could cause a decline in the
price of our common stock.
   We face intense competition, which could reduce our sales, prevent us from achieving or maintaining
profitability and inhibit our future growth.
  8




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

    a longer operating history;

    preferred vendor status with our customers;

    more extensive name recognition and marketing power; and

    significantly greater financial, technical, marketing and other resources, giving
them the ability to respond more quickly to new or changing opportunities, technologies,
and customer requirements.
  If we do not keep pace with technological change, including maintaining interoperability of our
products with the software and hardware platforms predominantly used by our customers, our products
may be rendered obsolete, and our business may fail.
  Our failure to meet customer expectations on deployment of our products could result in negative
publicity and reduced sales, both of which would significantly harm our business and operating
results.
  If we are unable to maintain our direct sales force, sales of our products and services may not
meet our expectations, and our business and operating results will be significantly harmed.
  If we are unable to manage our professional services organization, we will be unable to provide our
customers with technical support for our products, which could significantly harm our business and
operating results.
 9




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If new versions and releases of our products contain errors or defects, we could suffer losses and
negative publicity, which would adversely affect our business and operating results.
  A substantial portion of our operations are outsourced to India-based personnel, and any change in
the political and economic conditions of India or in immigration policies that adversely affects
our ability to conduct our operations in India could significantly harm our business.
   Demand for our products and services will decline significantly if our software cannot support and
manage a substantial number of users.
  If we become subject to product liability litigation, it could be costly and time consuming to
defend and could distract us from focusing on our business and operations.
  Any reduction in expenses will place a significant strain on our management systems and resources,
and if we fail to manage these changes, our business will be harmed.
  10




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Our results of operations will be reduced by charges associated with stock-based compensation,
accelerated vesting associated with stock options issued to employees, charges associated with
other securities issued by us, and charges related to variable accounting.
  Failure to improve and maintain relationships with systems integrators and consulting firms, which
assist us with the sale and installation of our products, would impede the acceptance of our
products and the growth of our revenues.
  Our subscription-based products are hosted by a third-party provider.
  Anti-takeover defenses that we have in place could prevent or frustrate attempts by stockholders to
change our board of directors or the direction of the company.
  
    
    providing for a classified board of directors with staggered three-year terms;
    
    restricting the ability of stockholders to call special meetings of stockholders;
    
    prohibiting stockholder action by written consent;
    
    establishing advance notice requirements for nominations for election to the
board of directors or for proposing matters that can be acted on by stockholders at
stockholder meetings;
    
    granting our board of directors the ability to designate the terms of and issue
new series of preferred stock without stockholder approval; and
    
    issuing shareholders rights to purchase additional shares of
stock in the event that (i) a shareholder accumulates 15% or more of
the Companys voting stock or (ii) a tender offer for the
Companys shares is commenced or announced.
  Compliance with new regulations dealing with corporate governance and public disclosure may result
in additional expenses and require significant management attention.
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Restrictions on export of encrypted technology could cause us to incur delays in international
product sales, which would adversely impact the expansion and growth of our business.
  Unauthorized break-ins or other assaults on our computer systems could harm our business.
  Changes to accounting standards and financial reporting requirements or tax laws, may affect our
financial results.
  Increasing government regulation of the Internet could limit the market for our products and
services, or impose greater tax burdens on us or liability for transmission of protected data.
   
 Item 2. Description of Property
 Facilities
 United States.
 12




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India.
 United Kingdom.
  
 Item 3. Legal Proceedings
 Patent Infringement
  Other
  
 Item 4. Submission of Matters to a Vote of Security Holders
  13




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PART II
 
 Item 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities
  High
    
    
    LowFiscal 2007First Quarter
    
    $
    2.88
    
    
    $
    2.41Second Quarter
    
    $
    2.50
    
    
    $
    2.27Third Quarter
    
    $
    2.50
    
    
    $
    1.61Fourth Quarter
    
    $
    2.05
    
    
    $
    1.64Fiscal 2008First Quarter
    
    $
    2.00
    
    
    $
    1.51Second Quarter
    
    $
    1.90
    
    
    $
    1.42Third Quarter
    
    $
    2.07
    
    
    $
    1.53Fourth Quarter
    
    $
    1.89
    
    
    $
    1.20
   Equity Compensation Plan Information
  A
    
    
    B
    
    
    CNumber of securitiesremaining availableNumber of
    
    
    
    
    
    
    for future issuancesecurities
    
    
    
    
    
    
    under equityto be issued upon
    
    
    Weighted-average
    
    
    compensation plansexercise of
    
    
    exercise price of
    
    
    (excluding securitiesoutstanding
    
    
    outstanding
    
    
    reflected inPlan category
    
    options warrants and rights
    
    
    options warrants and rights
    
    
    Column A)(in thousands, except for per share amounts below)Equity compensation plans approved by security holders
    
    
    2,420
    
    
    $
    2.44
    
    
    
    14,117
    (1)(2)Equity compensation plans not approved by security holders
    
    
    90
    
    
    $
    3.95
    
    
    
    1,755Total
    
    
    2,510
    
    
    $
    2.50
    
    
    
    15,872
 
 (1)
    
    These plans permit the grant of options, stock appreciation rights, shares of restricted
stock and stock units.(2)
    
    On each January 1, starting in 2001, the number of shares reserved for issuance under our
1999 Equity Incentive Plan will be automatically increased by the lesser of 5% of the then
outstanding shares of common stock or 1.8 million shares. On each May 1, starting in 2001, the
number of shares reserved for issuance under our 1999 Employee Stock Purchase Plan will be
automatically increased by the lesser of 2% of the then outstanding shares of common stock or
1.0 million shares. 14




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Stock Option Plans  Not Required to be Approved by Stockholders
 2001 Supplemental Plan
   Dividend Policy
  
 Item 6. Managements Discussion and Analysis
 The following discussion and analysis should be read in conjunction with the consolidated financial
statements and related notes included elsewhere in this Form 10-KSB. This discussion contains
forward-looking statements reflecting our current expectations and estimates and assumptions
concerning events and financial trends that may affect our future operating results or financial
position. Actual results and the timing of events may differ materially from those contained in
these forward-looking statements due to a number of factors, including those discussed in the
Forward-Looking Statements set forth above.
 Overview
  15




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Fiscal Years Ended March 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(as restated)
    
    
    (as restated)
    
    
    (as restated)(in thousands, except per share data)Consolidated Statements of Operations Data:Revenues:License
    
    $
    4,588
    
    
    $
    1,369
    
    
    $
    4,431
    
    
    $
    9,133
    
    
    $
    16,935Services
    
    
    11,415
    
    
    
    13,352
    
    
    
    19,002
    
    
    
    21,987
    
    
    
    23,089Total revenues
    
    
    16,003
    
    
    
    14,721
    
    
    
    23,433
    
    
    
    31,120
    
    
    
    40,024Cost of revenues:License
    
    
    255
    
    
    
    1,112
    
    
    
    625
    
    
    
    819
    
    
    
    1,410Services
    
    
    3,946
    
    
    
    7,558
    
    
    
    8,621
    
    
    
    12,480
    
    
    
    16,906Total cost of revenues
    
    
    4,201
    
    
    
    8,670
    
    
    
    9,246
    
    
    
    13,299
    
    
    
    18,316Gross profit
    
    
    11,802
    
    
    
    6,051
    
    
    
    14,187
    
    
    
    17,821
    
    
    
    21,708Operating expenses:Research and development
    
    
    5,045
    
    
    
    7,358
    
    
    
    8,804
    
    
    
    12,455
    
    
    
    13,621Sales and marketing
    
    
    6,664
    
    
    
    6,868
    
    
    
    6,664
    
    
    
    11,926
    
    
    
    14,586General and administrative
    
    
    5,427
    
    
    
    7,761
    
    
    
    10,573
    
    
    
    9,624
    
    
    
    6,765Restructuring
    
    
    1,193
    
    
    
    6,005
    
    
    
    824
    
    
    
    929
    
    
    
    Professional fees related to stock option investigation
    
    
    3,596
    
    
    
    2,639
    
    
    
    
    
    
    
    
    
    
    
    Litigation settlement
    
    
    16,275
    
    
    
    
    
    
    
    7,500
    
    
    
    
    
    
    
    Total operating expenses
    
    
    38,200
    
    
    
    30,631
    
    
    
    34,365
    
    
    
    34,934
    
    
    
    34,972Loss from operations
    
    
    (26,397
    )
    
    
    (24,580
    )
    
    
    (20,178
    )
    
    
    (17,113
    )
    
    
    (13,264
    )Other income (expense), net
    
    
    381
    
    
    
    465
    
    
    
    (196
    )
    
    
    82
    
    
    
    1,092Interest income
    
    
    2,477
    
    
    
    3,277
    
    
    
    2,907
    
    
    
    1,891
    
    
    
    1,624Net loss before provision (benefit) for income taxes
    
    
    (23,539
    )
    
    
    (20,838
    )
    
    
    (17,467
    )
    
    
    (15,140
    )
    
    
    (10,548
    )Provision (benefit) for income taxes
    
    
    361
    
    
    
    106
    
    
    
    122
    
    
    
    (117
    )
    
    
    Net loss
    
    $
    (23,901
    )
    
    $
    (20,945
    )
    
    $
    (17,589
    )
    
    $
    (15,023
    )
    
    $
    (10,548
    )Basic and diluted net loss per share
    
    $
    (0.84
    )
    
    $
    (0.70
    )
    
    $
    (0.54
    )
    
    $
    (0.46
    )
    
    $
    (0.34
    )Shares used in computing basic and diluted net loss per share
    
    
    28,457
    
    
    
    29,995
    
    
    
    32,808
    
    
    
    32,665
    
    
    
    31,165
 Fiscal Years Ended March 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(as restated)
    
    
    (as restated)
    
    
    (as restated)(in thousands)Consolidated Balance Sheets Data:Current assets
    
    $
    37,462
    
    
    $
    59,795
    
    
    $
    79,507
    
    
    $
    98,349
    
    
    $
    100,597Non-current assets
    
    
    2,778
    
    
    
    3,841
    
    
    
    6,363
    
    
    
    9,275
    
    
    
    25,819Current liabilities
    
    
    6,700
    
    
    
    10,552
    
    
    
    7,601
    
    
    
    9,607
    
    
    
    14,033Non-current liabilities
    
    
    6,282
    
    
    
    3,172
    
    
    
    1,091
    
    
    
    1,434
    
    
    
    1,481Working capital
    
    
    30,762
    
    
    
    49,243
    
    
    
    71,906
    
    
    
    88,742
    
    
    
    86,564Total assets
    
    
    40,240
    
    
    
    63,636
    
    
    
    85,870
    
    
    
    107,624
    
    
    
    126,416Total stockholders equity
    
    $
    27,258
    
    
    $
    49,913
    
    
    $
    77,178
    
    
    $
    96,583
    
    
    $
    110,902
 Restatement of Consolidated Financial Statements
      Summary of Operating Results for Fiscal 2008
   16




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Critical Accounting Policies and Estimates
   Results of Operations
 Revenues
 2008
    
    
    2007
    
    
    Change(in thousands, except percentages)License
    
    $
    4,588
    
    
    $
    1,369
    
    
    $
    3,219Percentage of total revenues
    
    
    29
    %
    
    
    9
    %
    
    
    Services
    
    $
    11,415
    
    
    $
    13,352
    
    
    $
    (1,937
    )Percentage of total revenues
    
    
    71
    %
    
    
    91
    %
    
    
    Total revenues
    
    $
    16,003
    
    
    $
    14,721
    
    
    $
    1,282
 License.
 Services.
  Factors Affecting Operating Results
  Fiscal Year ended March 31, 2008Customer A
    
    
    25
    %Customer B
    
    
    12
    %Fiscal Year ended March 31, 2007Customer A
    
    
    11
    %Customer B
    
    
    30
    %Customer C
    
    
    12
    %
 17




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Cost of Revenues
 2008
    
    
    2007
    
    
    ChangeCost of license revenues
    
    $
    255
    
    
    $
    1,112
    
    
    $
    (857
    )Percentage of license revenues
    
    
    6
    %
    
    
    81
    %
    
    
    Cost of services revenues
    
 $
    3,946
    
    
    $
    7,558
    
    
    $
    (3,612
    )Percentage of services revenues
    
    
    35
    %
    
    
    57
    %
    
    
    Total Cost of revenues$
    4,201
    
    
    $
    8,670
    
    
    $
    (4,469
    )
 Cost of License Revenues.
  Cost of Services Revenues.
 Gross Margin
 2008
    
    
    2007Gross margin, license revenues
    
    
    94
    %
    
    
    19
    %Gross margin, services revenues
    
    
    65
    %
    
    
    43
    %Gross margin, total revenues
    
    
    74
    %
    
    
    41
    %
 Gross Margin 
 Gross Profit
    18




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Operating Expenses
 2008
    
    
    2007
    
    
    ChangeTotal research and development
    
    $
    5,045
    
    
    $
    7,358
    
    
$
    (2,313
    )Percentage of total revenues
    
    
    32
    %
    
    
    50
    %
    
    
    
 Research and Development.
 2008
    
    
    2007
    
    
    ChangeSales and marketing
    
    $
    6,664
    
    
    $
    6,868
    
    
    $
    (204
    )Percentage of total revenues
    
    
    42
    %
    
    
    47
    %
    
    
    
 Sales and Marketing.
 2008
    
    
    2007
    
    
    ChangeGeneral and administrative
    
    $
    5,427
    
    
    $
    7,761
    
    
    $
    (2,335
    )Percentage of total revenues
    
    
    34
    %
    
    
    53
    %
    
    
    Professional fees related to stock
option investigation
    
    $
    3,596
    
    
    $
    2,639
    
    
    $
    957Percentage of total revenues
    
    
    22
    %
    
    
    18
    %
    
    
    Litigation settlement
    
    $
    16,275
    
    
    $
    
    
    
    $
    16,275Percentage of total revenues
    
    
    102
    %
    
    
    
    
    
    
    
 General and Administrative, Professional fees related to stock option investigation, and
Litigation Settlement.
 Restructuring.
 Severance and
    
    
    ExcessBenefits
    
    
    Facilities
    
    
    TotalBalance, March 31, 2007
    
    $
    103
    
    
    $
    5,740
    
    
    $
    5,843Additional accruals
    
    
    300
    
    
    
    436
    
    
    
    736Amounts paid in cash
    
    
    (277
    )
    
    
    (2,974
    )
    
    
    (3,251
    )Loan to Sublessee
    
    
    
    
    
    
    (497
    )
    
    
    (497
    )Balance, March 31, 2008
    
    $
    126
    
    
    $
    2,705
    
    
    $
    2,8312008
    
    
    2007
    
    
    ChangeRestructuring
    
    $
    2,831
    
    
    $
    5,843
    
    
    $
    (3,012
    )Percentage of total revenues
    
    
    18
    %
    
    
    40
    %
    
    
    
  19




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Interest Income
 2008
    
    
    2007
    
    
    ChangeInterest Income
    
    $
    2,477
    
    
    $
    3,277
    
    
    
    (24
    %)
  Provision for Income Taxes
    Liquidity and Capital Resources
 2008
    
    
    2007
    
    
    Change(in thousands, except percentages)Cash, cash equivalents and short-term investments
    
    $
    35,213
    
    
    $
    57,450
    
    
    
    (39
    )%Working capital
    
    $
    30,762
    
    
    $
    49,243
    
    
    
    (38
    )%Net cash used for operating activities
    
    $
    (22,162
    )
    
    $
    (9,558
    )
    
    
    132
    %Net cash provided by investing activities
    
    $
    15,014
    
    
    $
    34,770
    
    
    
    (57
    )%Net cash used for financing activities
    
    $
    (484
    )
    
    $
    (7,675
    )
    
    
    (94
    )%
    Contractual Obligations
  20




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##### Table of Contents



Off-balance sheet arrangements
  
 Item 7. Consolidated Financial Statements
 .
 
 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 8A. Controls and Procedures
 Evaluation
of Disclosure Controls and Procedures
  Changes in Internal Controls
  Management's
Report of Internal Control Over Financial Reporting
    Description
of Material Weakness as of March 31, 2007
  
    
    The absence of adequate processes for detecting
non-compliance with applicable laws and regulations relating to stock
based compensation.
 
    
    Financial statement preparation and review procedures. The Company had inadequate policies,
procedures and personnel to ensure that accurate, reliable interim and annual consolidated financial
statements were prepared and reviewed on a timely basis. The Company had insufficient: a) review and
supervision within the accounting and finance departments; and b) preparation and review of footnote
disclosures accompanying its financial statements. Specifically, deficiencies were noted in the following
areas: a) management review of supporting documentation, calculations and assumptions used to prepare the
financial statements, including spreadsheets and account analyses; and b) management review of journal entries
recorded during the financial statement preparation process. These deficiencies resulted in a reasonable
possibility that a material misstatement of the Companys annual or interim financial statements would
not be prevented or detected.
 Remediation of Prior Year Material Weakness
  
    
    Instituted a new stock option grant policy providing that all stock option awards to
officers and other employees will be granted by the Compensation Committee, and all stock
option awards will be granted at meetings at which minutes shall be taken. Unanimous
Written Consents (UWCs) will no longer be used to grant stock option awards.
 
    
    Instituted a best practices review of the Companys existing stock option controls,
processes, policies and procedures, after which a Special Committee comprised of
independent Board Members proposed improvements intended to strengthen the Companys
options granting practices.
 
    
    Improved training and education for all directors, officers and other relevant
personnel, designed to ensure that everyone involved in the granting and administration of
stock options fully understands the terms of the stock option plans, the relevant
accounting requirements under Generally Accepted Accounting Principles for stock options
and other share-based compensation, as well as recent revisions to the grant approval and
documentation process.
 
    
    Implemented a program of multiple level reviews of Financial Statements and supporting documentation.
  21




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##### Table of Contents



PART III
 
 Item 9.
    
    Directors, Executive Officers, Promoters and Control Persons: Compliance with Section
16(a) of the Exchange Act
  Name
    
    Age
    
    PositionRobert Jurkowski (4)
    
    
    51
    
    
    President, Chief Executive Officer and Chairman of the BoardBill Roeschlein
    
    
    39
    
    
    Vice President, Chief Financial Officer and Corporate SecretaryMichael Shaw
    
    
    56
    
    
    Vice President and General Manager of Sales Configuration SolutionsJames Arnold, Jr.(1)(2)(3)
    
    
    51
    
    
    DirectorJim Thanos(1)(2)(3)
    
    
    58
    
    
    DirectorBrenda Zawatski(1)(2)(3)
    
    
    47
    
    
    DirectorLloyd
Sems (5)
    
    
    37
    
    
    Director
 
 (1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee(3)
    
    Member of the Nominating Committee(4)
    
    In August 2007, Mr. Jurkowski was elected President, Chief Executive Officer and Chairman of
the Board.(5)
    
    Mr. Sems was elected to the Board on June 2, 2008, and did
not serve on the Board during  fiscal year 2008. Bob Jurkowski
 Bill Roeschlein
 Michael Shaw
 James Arnold, Jr.
 Brenda Zawatski
 22




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##### Table of Contents



Jim Thanos
 Lloyd Sems
 Board of Directors Meetings and Committees
  Stockholder Communications with the Board of Directors
  Audit Committee
    Compensation Committee
  Nominating Committee
  23




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##### Table of Contents




    
    the highest level of personal and professional ethics and integrity, including a
commitment to the Companys values as set forth in the Companys code of conduct;
    
    practical wisdom and mature judgment;
    
    diversity in background;
    
    independence as a director as defined by the Securities and Exchange Commission
(the SCSC) and Nasdaq;
    
    understanding of basic financial statements;
    
    broad training and significant leadership experience in business, technology,
finance, corporate governance, public interest or other disciplines relevant to the
long-term success of the Company;
    
    the ability to gain an in-depth understanding of the Companys business; and
    
    a willingness to represent the best interests of all stockholders of the Company
and objectively appraise the managements performance.
      24




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##### Table of Contents



Code of Ethics
  Section 16(a)
Beneficial Ownership Reporting Compliance
  
 Item 10. Executive Compensation
 Summary
  Fiscal 2008 Summary Compensation Table
  Non-EquityStock
    
    
    Option
    
    
    Incentive PlanName and Principal Position
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Awards(1)
    
    
    Awards(1)
    
    
    Compensation(2)
    
    
    TotalRobert Jurkowski (3)
    
    
    2008
    
    
    $
    221,250
    
    
    $
    90,000
    
    
    $
    452,960
    
    
    $
    38,968
    
    
    $
    
    
    
    $
    803,178President and Chief Executive OfficerBill Roeschlein
    
    
    2008
    
    
    
    243,750
    
    
    
    52,635
    
    
    
    148,976
    
    
    
    24,590
    
    
    
    
    
    
    
    469,951Vice President, Chief Financial Officer and
Secretary
    
    
    2007
    
    
    
    116,827
    
    
    
    40,000
    
    
    
    21,274
    
    
    
    12,086
    
    
    
    33,674
    
    
    
    223,861Michael Shaw (4)
    
    
    2008
    
    
    
    59,810
    
    
    
    
    
    
    
    
    
    
    
    2,370
    
    
    
    
    
    
    
    62,180Vice President and General Manager of
Configuration Business UnitStephen Bennion (5)
    
    
    2008
    
    
    
    249,452
    
    
    
    50,000
    
    
    
    
    
    
    
    238,583
    
    
    
    64,364
    
    
    
    602,399Former President and Chief Executive Officer
    
    
    2007
    
    
    
    320,971
    
    
    
    
    
    
    
    
    
    
    
    343,939
    
    
    
    
    
    
    
    664,910J Terry Nicholson (6)
    
    
    2008
    
    
    
    245,014
    
    
    
    59,213
    
    
    
    135,575
    
    
    
    52,891
    
    
    
    96,002
    
    
    
    588,695Former Chief Operating Officer  CM
business unit
    
    
    2007
    
    
    
    130,000
    
    
    
    20,000
    
    
    
    48,925
    
    
    
    26,177
    
    
    
    68,732
    
    
    
    293,834Steve Goldner (7)
    
    
    2008
    
    
    
    221,554
    
    
    
    39,910
    
    
    
    135,200
    
    
    
    39,505
    
    
    
    120,000
    
    
    
    556,169Former Vice President of Engineering
    
    
    2007
    
    
    $
    123,692
    
    
    $
    
    
    
    $
    50,050
    
    
    $
    22,778
    
    
    $
    59,394
    
    
    $
    255,914
 
 (1)
    
    Amounts reflect the total compensation expense for fiscal 2008, calculated in accordance with
SFAS 123R under the modified prospective transition method. See note 9 of the notes to our
consolidated financial statements, included elsewhere in this report, for a discussion of
the assumptions made in determining the grant date fair value and compensation expense of
equity awards.(2)
    
    The amounts in this column represent bonus payments under our 2008 Executive Management Team
Compensation Plan.(3)
    
    Mr. Jurkowskis employment with us started on August 21, 2007.(4)
    
    Mr. Shaws employment with us started on January 14, 2008.(5)
    
    Mr. Bennion entered into a separation agreement with us on October 23, 2007.(6)
    
    Mr. Nicholson resigned on February 14, 2008.(7)
    
    Mr. Goldner entered into a separation agreement with us
on January 9, 2008. 25




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##### Table of Contents



Outstanding
Equity Awards at Fiscal Year-End 2008
  Option Awards
    
    
    Stock AwardsEquityIncentiveEquity
    
    
    PlanIncentive
    
    
    Awards:Plan
    
    
    Market orAwards:
    
    
    PayoutEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of
    
    
    Value ofIncentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market
    
    
    Unearned
    
    
    UnearnedPlan Awards:
    
    
    
    
    
    
    
    
    
    
    Number of
    
    
    Value of
    
    
    Shares,
    
    
    Shares,Number of
    
    
    Number of
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    Shares or
    
    
    Shares or
    
    
    Units or
    
    
    Units orSecurities
    
    
    Securities
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    Units of
    
    
    Units of
    
    
    Other
    
    
    OtherUnderlying
    
    
    Underlying
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Stock
    
    
    Rights
    
    
    RightsUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    Option
    
    
    Option
    
    
    Held That
    
    
    That Have
    
    
    That Have
    
    
    That HaveOptions (#)
    
    
    Options (#)
    
    
    Unearned
    
    
    Exercise
    
    
    Expiration
    
    
    Have Not
    
    
    Not
    
    
    Not
    
    
    NotName
    
    Exercisable(1)
    
    
    Unexercisable
    
    
    Options(#)
    
    
    Price($)
    
    
    Date
    
    
    Vested(#)
    
    
    Vested($)(2)
    
    
    Vested(#)
    
    
    Vested($)Robert Jurkowski
    
    
    87,500
    
    
    
    512,500
    
    
    
    
    
    
    
    1.89
    
    
    
    11/12/2017
    
    
    
    400,000
    
    
    $
    584,000
    
    
    
    
    
    
    
    Robert Jurkowski
    
    
    16,667
    
    
    
    33,333
    
    
    
    
    
    
    
    1.81
    
    
    
    11/15/2017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bill Roeschlein
    
    
    56,250
    
    
    
    93,750
    
    
    
    
    
    
    
    2.42
    
    
    
    9/15/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Michael Shaw
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    1.50
    
    
    
    2/14/2018
    
    
    
    75,000
    
    
    $
    130,500
    
    
    
    
    
    
    
    
 Employment Agreement with Chief Executive Officer
  Employment Agreement with Chief Financial Officer
  Employment Agreement with General Manager of Sales Configuration Unit
  Separation Agreement with Former President and Chief Executive Officer
  Separation
Agreement with Former Chief Operating Officer  CM business unit
  26




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##### Table of Contents



Director Compensation
 FeesEarned or
    
    
    Stock
    
    
    OptionPaid in
    
    
    Awards
    
    
    AwardsName
    
    Cash
    
    

(1)
    
    

(1)
    
    

TotalJamie Arnold
    
    $
    60,500
    
    
    $
    25,000
    
    
    $
    149,837
    
    
    $
    235,337Brenda Zawatski
    
    $
    78,304
    
    
    $
    25,000
    
    
    $
    23,905
    
    
    $
    127,209Jim Thanos
    
    $
    21,728
    
    
    $
    
    
    
    $
    11,209
    
    
    $
    32,937
   (1)
    
    The amounts included in this column are the amounts of
    compensation cost recognized by us in Fiscal 2008. Our
    non-employee
    directors had stock awards outstanding at March 31, 2008 of
    the following: Jim Thanos, 13,812. Our
    non-employee
    directors had option awards outstanding at March 31, 2008
    of the following: Jamie Arnold, 139,705; Brenda Zawatski,
    64,705; and Jim Thanos, 64,705.   27




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##### Table of Contents



Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
   Shares Beneficially Owned as ofMarch 31, 2008(1)Name and Address of Beneficial Owners
    
    Number of Shares
    
    
    Percentage of ClassBill Roeschlein(2)
    
    
    100,439
    
    
    
    *Terry Nicholson(3)
    
    
    116,666
    
    
    
    *Steve Goldner(4)
    
    
    83,333
    
    
    
    *Michael Shaw (5)
    
    
    
    
    
    
    Bob Jurkowski(6)
    
    
    183,068
    
    
    
    *Brenda Zawatski (7)
    
    
    46,043
    
    
    
    *James Arnold (8)
    
    
    106,459
    
    
    
    *Jim Thanos (5)
    
    
    
    
    
    
    *Lloyd Sems
(12)
    
    
    1,167,573
    
    
    
    4.0
    %All executive officers and directors as a group (8 persons) (8)
    
    
    1,793,581
    
    
    
    6.2
    %5% ShareholdersSteele Partners II, L.P. (10)590 Madison Avenue,
32nd Floor New York, NY 10022
    
    
    2,545,222
    
    
    
    8.87
    %Dimensional Fund Advisors, Inc. (9)1299 Ocean Avenue Santa
Monica, CA 90401
    
    
    2,542,967
    
    
    
    8.86
    %Lloyd I. Miller III (9)4550 Gordon Drive Naples, FL, 34102
    
    
    2,192,092
    
    
    
    7.64
    %Bank of America Corporation(9)100 North Tryon Street
Charlotte, NC 28255
    
    
    1,774,725
    
    
    
    6.18
    %
 
 *
    
    Less than 1% of the outstanding shares of Common Stock.(1)
    
    The number of shares of Common Stock deemed outstanding includes shares issuable
pursuant to stock options that may be exercised within 60 days after March 31, 2008.
Percentage of ownership is based on 28,694,542 shares of 28




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##### Table of Contents



Common Stock outstanding on March 31,
2008, plus shares of common stock subject to options or exercisable within 60 days of March
31, 2008 and held by each listed person. Shares of Common Stock subject to options exercisable
within 60 days of March 31, 2008 are deemed outstanding for purposes of computing the
percentage ownership of the person holding such options but are not deemed outstanding for
computing the percentage ownership of any other person.(2)
    
    Includes 37,939 shares of common stock held by Mr. Roeschlein and 62,500 shares of
common stock issuable upon the exercise of stock options exercisable within 60 days of March
31, 2008. Mr. Roeschleins address is c/o Selectica, Inc., 1740 Technology Drive, San Jose,
California 95110.(3)
    
    Includes 116,666 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days of March 31, 2008. Mr. Nicholsons address is c/o Selectica, Inc.,
1740 Technology Drive, San Jose, California 95110.(4)
    
    Includes 83,333 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days of March 31, 2008. Mr. Goldners address is c/o Selectica, Inc.,
1740 Technology Drive, San Jose, California 95110.(5)
    
    Mr. Shaw and Mr. Thanos do not have any options exercisable for shares of Common
Stock within 60 days of March 31, 2008.(6)
    
    Includes 53,901 shares of common stock held by Mr. Jurkowski and 129,167 shares of
common stock issuable upon the exercise of stock options exercisable within 60 days of March
31, 2008. Mr. Jurkowskis address is c/o Selectica, Inc., 1740 Technology Drive, San Jose,
California 95110.(7)
    
    Includes 14,793 shares of common stock held by Ms. Zawatski and 31,250 shares of
common stock issuable upon the exercise of stock options exercisable within 60 days of March 31, 2008. Ms. Zawatskis address is
Pillar c/o Selectica, Inc., 1740 Technology Drive, San Jose, California 95110.(8)
    
    Includes 14,793 shares of common stock held by Mr. Arnold and 91,666 shares of
common stock issuable upon the exercise of stock options exercisable within 60 days of March 31, 2008. Mr. Arnolds address is c/o
Nuance Communications, Inc., 1 Wayside Road, Burlington, MA 01803.(9)
    
    Includes 514,582 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days of March 31, 2008.(10)
    
    Reported by the investor on Schedule 13G as most recently filed with the
Securities and Exchange Commission.(11)
    
    Reported by the investor on Schedule 13D.(12)
    
    Includes 536,162 shares of common
stock held by Mr. Sems and 621,411 shares held beneficially by
Sems Capital, LLC, of which Mr. Sems is the managing member. 
 Item 12. Certain Relationships and Related Transactions, and Director Independence
    
 PART IV
 
 Item 13. Exhibits and Financial Statement Schedules
 The following documents are filed as part of this report:
 (1) Financial Statements:
  
    
    Consolidated Balance Sheets as of March 31, 2008 and 2007
    
    Consolidated Statements of Operations for the years ended
March 31, 2008 and 2007
    
    Consolidated Statements of Stockholders Equity for the years ended March 31,
2008 and 2007
    
    Consolidated Statements of Cash Flows for the years ended
March 31, 2008 and 2007
    
    Notes to Consolidated Financial Statements
    
    Report of Independent Registered Public Accounting Firm
 (2) Financial Statement Schedules:
  (3) Exhibits:
 29




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##### Table of Contents



Exhibit
 No.
    
    Description3.1(1)
    
    The Second Amended and Restated Certificate of Incorporation.3.2(4)
    
    Certificate of Designation of Series A Junior or Participating Preferred Stock.3.3(4)
    
    Amended and Restated Bylaws.4.1(1)
    
    Reference is made to Exhibits 3.1, 3.2 and 3.3.4.2(1)
    
    Form of Registrants Common Stock certificate.4.3(1)
    
    Amended and Restated Investor Rights Agreement dated June 16, 1999.4.4(2)
    
    Rights Agreement between Registrant and U.S. Stock Transfer Corporation, as Rights Agent, dated
February 4, 2003.4.5(10)
    
    Transfer Agent Agreement between Registrant and Wells Fargo Corporation, as Transfer Agent, dated
February 13, 200710.1(1)
    
    Form of Indemnification Agreement.10.2(1)
    
    1996 Stock Plan.10.3(4)
    
    1999 Employee Stock Purchase Plan as amended and restated February 1, 2008.10.4(4)
    
    1999 Equity Incentive Plan, as amended and restated August 1, 2006.10.5(1)
    
    Lease between John Arrillaga Survivors Trust and the Richard T. Perry Separate Property Trust as
Landlord and the Registrant as Tenant, dated October 1, 1999.10.6(3)
    
    Employment Agreement between the Registrant and Stephen Bennion dated as of January 1, 2003.10.7(6)
    
    Sublease Agreement between Selectica Incorporated and Nuova Systems dated March 6, 200710.8(7)
    
    Employment Agreement between the Registrant and Stephen Bennion dated August 9, 2006.10.9(10)
    
    Employment Agreement between the
Registrant and Bill Roeschlein dated September 11, 2006.10.10(10)
    
    Employment Agreement between the Registrant and Steve Goldner dated September 27, 2006.10.11(10)
    
    Employment Agreement between the
Registrant and Terry Nicholson dated September 27, 2006.10.12(4)
    
    Warrant to Purchase Common Stock issued to Sales Technologies Limited, dated April 4, 2001.10.13(4)
    
    Licensed Works Agreement between the Registrant and International Business Machines Corporation,
dated December 11, 2002.10.14(4)
    
    Licensed Works Agreement Statement of Work between the Registrant and International Business
Machines Corporation, dated December 11, 2002.10.15(4)
    
    Professional Services Agreement between the Registrant and GE Medical Services, dated June 28, 2002.10.16(4)
    
    Major Account License Agreement between the Registrant and GE Medical Systems, dated June 28, 2002.10.17(4)
    
    Amendment #1 to Major Account License Agreement between the Registrant and GE Medical Systems.10.18(4)
    
    Amendment #2 to Major Account License Agreement between the Registrant and GE Medical Systems,
dated October 8, 2002.10.19(4)
    
    Amendment #3 to Major Account License Agreement between the Registrant and GE
Medical Systems, dated March 31, 2003.10.20(4)
    
    Addendum #1 to Professional Services Agreement between Registrant and GE
Medical Services, dated August 27, 2002.10.21(4)
    
    Amendment #2 to Professional Services Agreement between Registrant and GE
Medical Services, dated March 3, 2003.10.22(10)
    
    Company Compensation Plan for Non Employee Directors dated August 1, 2006.10.23(8)
    
    Letter Agreement between Registrant and Sanjay Mittal, dated July 21, 2006.
 30




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##### Table of Contents



Exhibit
 No.
    
    Description10.24(7)
    
    Separation Agreement between
Registrant and Vince Ostrosky dated August 9, 2006.10.25(5)
    
    1999 Equity Incentive Plan Stock Option Agreement.10.26(5)
    
    1999 Equity Incentive Plan Stock Option Agreement (Initial Grant to Directors).10.27(5)
    
    1999 Equity Incentive Plan Stock Option Agreement (Annual Grant to Directors).10.28(5)
    
    Selectica UK Limited Major Account License Agreement dated December 5, 2003.10.29(5)
    
    Amendment Agreement between MCI WorldCom, Limited and Selectica UK Limited,
dated December 23, 2004.10.30(9)
    
    Notice of Delisting, dated June 19, 2007.10.31(11)
    
    Separation Agreement between Registrant and Stephen Bennion dated October 23, 2007.10.32
    
    Severance Agreement between
Registrant and William Roeschlein dated  September 27, 200610.33
    
    Severance Agreement between Registrant and Michael Shaw dated January 14, 200810.34
    
    Employment Agreement between the
Registrant and Rober Jurkowski dated August 21, 200710.35
    
    Offer Letter between Registrant and
Michael Shaw dated January 9, 200821.1(4)
    
    Subsidiaries.23.1
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Previously filed in the Companys Registration Statement (No. 333-92545) declared effective
on March 9, 2000.(2)
    
    Previously filed in the Companys report on Form 8-K filed on February 6, 2003.(3)
    
    Previously filed in the Companys report on Form 10-Q filed on February 14, 2003.(4)
    
    Previously filed in the Companys report on Form 10-K filed on June 30, 2003.(5)
    
    Previously filed in the Companys report on Form 10-K filed on June 29, 2005.(6)
    
    Previously filed in the Companys report on Form 8-K filed on March 27, 2007.(7)
    
    Previously filed in the Companys report on Form 8-K on August 15, 2006(8)
    
    Previously filed in the Companys report on Form 8-K on July 27, 2006.(9)
    
    Previously filed in the Companys report on Form 8-K on June 22, 2007.(10)
    
    Previously file in the Companys report on Form 10-K on
October 3, 2007(11)
    
    Previously filed in the Companys report on Form 8-K on
October 23, 2007. Exhibits.
  Financial Statement Schedule.
  
 Item 14. Principal Accountant Fees and Services
 Audit Fees
  Audit Related Fees
  Tax Fees
  31




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##### Table of Contents



FINANCIAL STATEMENTS
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Consolidated Balance Sheets as of March 31, 2008 and 2007
    
    
    F-2Consolidated
Statements of OperationsYears ended March 31, 2008 and 2007
    
    
    F-3Consolidated Statements of Stockholders EquityYears ended March 31, 2008 and 2007
    
    
    F-4Consolidated
Statements of Cash FlowsYears ended March 31, 2008 and 2007
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6Report of Independent Registered Public Accounting Firm
    
    
    F-31
 F-1




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##### Table of Contents



SELECTICA, INC.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,2008
    
    
    2007(in thousands, 
except par value)AssetsCurrent assets:Cash and cash equivalents
    
    $
    22,137
    
    
    $
    30,165Short-term investments
    
    
    13,076
    
    
    
    27,285Accounts receivable, net of allowance for doubtful accounts of $0 and $121, as of
March 31, 2008 and 2007, respectively
    
    
    1,330
    
    
    
    1,778Prepaid expenses and other current assets
    
    
    919
    
    
    
    567Total current assets
    
    
    37,462
    
    
    
    59,795Property and equipment, net
    
    
    2,185
    
    
    
    1,992Intangible assets
    
    
    102
    
    
    
    309Other assets
    
    
    491
    
    
    
    531Long-term investments
    
    
    
    
    
    
    1,009Total assets
    
    $
    40,240
    
    
    $
    63,636Liabilities and Stockholders EquityCurrent liabilities:Current portion of note payable to Versata
    
    $
    786
    
    
    $
    Accounts payable
    
    
    518
    
    
    
    3,014Current portion of accrual for restructuring liability
    
    
    1,937
    
    
    
    3,043Accrued payroll and related liabilities
    
    
    740
    
    
    
    920Other accrued liabilities
    
    
    735
    
    
    
    1,324Deferred revenues
    
    
    1,984
    
    
    
    2,251Total current liabilities
    
    
    6,700
    
    
    
    10,552Accrual for restructuring liability, net of current portion
    
    
    924
    
    
    
    2,653Note payable to Versata, net of current portion
    
    
    5,113
    
    
    
    Other long-term liabilities
    
    
    245
    
    
    
    518Total liabilities
    
    
    12,982
    
    
    
    13,723Commitments and contingencies (See Notes 7 and 8)
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $0.0001 par value:Authorized: 25,000 shares at March 31, 2008 and 2007; None issued and outstanding
    
    
    
    
    
    
    Common stock, $0.0001 par value:Authorized: 150,000 shares at March 31, 2008 and 2007, respectivelyIssued: 33,592 and 33,158 shares at March 31, 2008 and 2007, respectivelyOutstanding: 28,695 and 28,407 shares at March 31, 2008 and 2007, respectively
    
    
    4
    
    
    
    4Additional paid-in capital
    
    
    300,939
    
    
    
    299,476Accumulated deficit
    
    
    (240,783
    )
    
    
    (216,889
    )Accumulated other comprehensive loss net of income taxes
    
    
    4
    
    
    
    (18
    )Treasury stock at cost  11,346 and 11,189 shares at March 31, 2008 and 2007, respectively
    
    
    (32,906
    )
    
    
    (32,660
    )Total stockholders equity
    
    
    27,258
    
    
    
    49,913Total liabilities and stockholders equity
    
    $
    40,240
    
    
    $
    63,636
  F-2




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##### Table of Contents



SELECTICA, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Fiscal Years Ended March 31,2008
    
    
    2007(in thousands, except per share amounts)Revenues:License
    
    $
    4,588
    
    
    $
    1,369Services
    
    
    11,415
    
    
    
    13,352Total revenues
    
    
    16,003
    
    
    
    14,721Cost of revenues:License
    
    
    255
    
    
    
    1,112Services
    
    
    3,946
    
    
    
    7,558Total cost of revenues
    
    
    4,201
    
    
    
    8,670Gross profit
    
    
    11,802
    
    
    
    6,051Operating expenses:Research and development
    
    
    5,045
    
    
    
    7,358Sales and marketing
    
    
    6,664
    
    
    
    6,868General and administrative
    
    
    5,427
    
    
    
    7,761Restructuring
    
    
    1,193
    
    
    
    6,005Professional fees related to stock option investigation
    
    
    3,596
    
    
    
    2,639Litigation settlement
    
    
    16,275
    
    
    
    Total operating expenses
    
    
    38,200
    
    
    
    30,631Loss from operations
    
    
    (26,397
    )
    
    
    (24,580
    )Other income (expense), net
    
    
    381
    
    
    
    465Interest income
    
    
    2,477
    
    
    
    3,277Loss before provision for income taxes
    
    
    (23,539
    )
    
    
    (20,838
    )Provision for income taxes
    
    
    361
    
    
    
    106Net loss
    
    $
    (23,901
    )
    
    $
    (20,944
    )Basic and diluted net loss per share
    
    $
    (0.84
    )
    
    $
    (0.70
    )Weighted-average shares of common stock used in computing
basic and diluted net loss per share
    
    
    28,457
    
    
    
    29,995
  F-3




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##### Table of Contents





SELECTICA, INC.





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


(In
thousands)
 AccumulatedOtherComprehensiveCommon Stock
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    Income
    
    
    Treasury Stock
    
    
    TotalPaid-In
    
    
    Deferred
    
    
    Accumulated
    
    
    (Loss), net of
    
    
    
    
    
    
    
    
    
    
    Stockholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit
    
    
    taxes
    
    
    Shares
    
    
    Amount
    
    
    Equity
    
    
    LossBalance at March 31, 2006
    
    
    39,519
    
    
    $
    4
    
    
    $
    299,107
    
    
    $
    (1,072
    )
    
    $
    (195,945
    )
    
    $
    (107
    )
    
    
    (7,552
    )
    
    $
    (24,809
    )
    
    $
    77,178Reclassification of
deferred compensation
upon adoption of FAS 123R
    
    
    
    
    
    
    
    
    
    
    (1,072
    )
    
    
    1,072
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,637
    )
    
    
    (7,851
    )
    
    
    (7,851
    )Exercise of stock options
by employees, net of
repurchase
    
    
    46
    
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114Shares issued in
connection with ESPP
    
    
    31
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,265
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,265Comprehensive loss:Other comprehensive gain,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89
    
    
    
    
    
    
    
    
    
    
    
    89
    
    
    $
    89Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,944
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,944
    )
    
    
    (20,944
    )Total
comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,855
    )Balance at March 31, 2007
    
    
    39,596
    
    
    
    4
    
    
    
    299,476
    
    
    
    
    
    
    
    (216,889
    )
    
    
    (18
    )
    
    
    (11,189
    )
    
    
    (32,660
    )
    
    
    49,913Exercise of stock options
by employees, net of
repurchase
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted Stock
    
    
    353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )
    
    
    (246
    )
    
    
    (246
    )Share-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    1,463
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,463Comprehensive loss:Other comprehensive gain,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    $
    29Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,901
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,901
    )
    
    
    (23,901
    )Total
comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (23,872
    )Balance at March 31, 2008
    
    
    40,041
    
    
    $
    4
    
    
    $
    300,939
    
    
    $
    
    
    
    $
    (240,783
    )
    
    $
    4
    
    
    
    (11,346
    )
    
    $
    (32,906
    )
    
    $
    27,258
  F-4




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##### Table of Contents



SELECTICA, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Fiscal Years Ended March 31,2008
    
    
    2007(in thousands)Operating activities:Net loss
    
    $
    (23,901
    )
    
    $
    (20,944
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    449
    
    
    
    654Amortization
    
    
    207
    
    
    
    207Non-cash charge for litigation settlement
    
    
    6,118
    
    
    
    Loss (gain) on disposition of property and equipment
    
    
    (20
    )
    
    
    1,091Stock based compensation expense
    
    
    1,469
    
    
    
    1,265Changes in assets and liabilities:Accounts receivable (net)
    
    
    448
    
    
    
    1,465Prepaid expenses and other current assets
    
    
    (352
    )
    
    
    1,692Other assets
    
    
    40
    
    
    
    (20
    )Accounts payable
    
    
    (2,496
    )
    
    
    1,363Accrual for restructuring liability
    
    
    (2,835
    )
    
    
    5,843Accrued payroll and related liabilities
    
    
    (180
    )
    
    
    (511
    )Other accrued and long-term liabilities
    
    
    (841
    )
    
    
    (1,862
    )Deferred revenues
    
    
    (268
    )
    
    
    199Net cash used for operating activities
    
    
    (22,162
    )
    
    
    (9,558
    )Investing activities:Purchase of capital assets
    
    
    (558
    )
    
    
    (1,371
    )Proceeds from disposition of property and equipment
    
    
    22
    
    
    
    40Proceeds from sale of  restricted investments
    
    
    150
    
    
    
    Purchase of short-term investments
    
    
    (55,272
    )
    
    
    (42,674
    )Proceeds from maturities of short-term investments
    
    
    69,663
    
    
    
    76,854Proceeds from maturities of long-term investments
    
    
    1,009
    
    
    
    1,921Net cash provided by investing activities
    
    
    15,014
    
    
    
    34,770Financing activities:Principal payments on note payable to Versata
    
    
    (238
    )
    
    
    Purchase of treasury stock
    
    
    (246
    )
    
    
    (7,851
    )Proceeds from issuance of common stock under stock option and
stock purchase plans
    
    
    
    
    
    
    176Net cash used for financing activities
    
    
    (484
    )
    
    
    (7,675
    )Effect of exchange rate changes on cash
    
    
    (396
    )
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (8,028
    )
    
    
    17,537Cash and cash equivalents at beginning of the period
    
    
    30,165
    
    
    
    12,628Cash and cash equivalents at end of the period
    
    $
    22,137
    
    
    $
    30,165Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    927
    
    
    $
    198Supplemental disclosure of non-cash financing activities:Change in unrealized gain (loss) on available for sales securities
    
    $
    22
    
    
    $
    89
  F-5




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##### Table of Contents



SELECTICA, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.  Organization and Operations
  2.  Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Foreign Currency Transactions
  Concentrations of Credit Risk
  Cash Equivalents and Short-term Investments
   F-6




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##### Table of Contents



Accounts Receivable and Allowance for Doubtful Accounts
  Property and Equipment
  Revenue Recognition
   Arrangements consisting of license and maintenance only. Modification of SOP No. 97-2 Software Revenue Recognition, with Respect to
Certain Transactions
 Arrangements consisting of license, maintenance and other services.
  Accounting
for Performance of Construction Type and Certain Production Type Contracts
 F-7




---



##### Table of Contents



Software Revenue Recognition
 Arrangements consisting of consulting services.
 Conctract Management (CM) Arrangements. Revenue Recognition in Financial
Statements Revenue Recognition
  F-8




---



##### Table of Contents



Customer Concentrations
  Fiscal Years Ended March 31,2008
    
    
    2007Customer A
    
    
    *
    
    
    
    11
    %Customer B
    
    
    25
    %
    
    
    30
    %Customer C
    
    
    12
    %
    
    
    12
    %
 
 *
    
    Revenues were less than 10% of total revenues.  Fiscal Years EndedMarch 31,2008
    
    
    2007Customer A
    
    
    15
    %
    
    
    50
    %Customer B
    
    
    15
    %
    
    
    21
    %Customer C
    
    
    15
    %
    
    
    *Customer D
    
    
    12
    %
    
    
    *Customer E
    
    
    10
    %
    
    
    12
    %
 
 *
    
    Accounts Receivable were less than 10% of total accounts receivable. Warranties and Indemnifications
 Accounting for Contingencies
  Advertising Expense
  F-9




---



##### Table of Contents



Development Costs
  Accumulated Other Comprehensive Income or Loss
 Reporting Comprehensive Income
 Stock-Based Compensation
 Share-Based Payment
     F-10




---



##### Table of Contents



Accounting
for Stock Issued to Employees
  Fiscal Years EndedMarch 31,2008
    
    
    2007Stock-based
compensation expense by category:Cost of revenues
    
    $
    27,000
    
    
    $
    206,000Research and development
    
    
    374,000
    
    
    
    218,000Sales and marketing
    
    
    184,000
    
    
    
    171,000General and administrative
    
    
    882,000
    
    
    
    670,000Impact on net loss
    
    $
    1,467,000
    
    
    $
    1,265,000
 1999 Employee Stock Purchase Plan (ESPP)
  Geographic Information:
  Fiscal Years EndedMarch 31,2008
    
    
    2007International revenues
    
    
    13
    %
    
    
    12
    %Domestic revenues
    
    
    87
    %
    
    
    88
    %Total Revenues
    
    
    100
    %
    
    
    100
    %
 F-11




---



##### Table of Contents



Treasury Stock
    New Accounting Pronouncements
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Fair Value Measurements
 F-12




---



##### Table of Contents



3.     Cash, Cash Equivalents and Investments
  UnrealizedCost
    
    
    Gain
    
    
    Loss
    
    
    Market(in thousands)March 31, 2008:Cash and cash equivalents:Cash
    
    $
    2,418
    
    
    $
    
    
    
    $
    
    
    
    $
    2,418Money market fund
    
    
    5,320
    
    
    
    
    
    
    
    
    
    
    
    5,320Commercial paper
    
    
    9,592
    
    
    
    
    
    
    
    
    
    
    
    9,592Certificate of deposit
    
    
    4,807
    
    
    
    
    
    
    
    
    
    
    
    4,807$
    22,137
    
    
    $
    
    
    
    $
    
    
    
    $
    22,137Short-term investments:(due in less than 12 months)Commercial paper
    
    $
    10,461
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    10,459Corporate notes & bonds
    
    
    2,457
    
    
    
    6
    
    
    
    
    
    
    
    2,463Certificate of deposit
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    154$
    13,072
    
    
    $
    6
    
    
    $
    (2
    )
    
    $
    13,076March 31, 2007:Cash and cash equivalents:Cash
    
    $
    6,104
    
    
    $
    
    
    
    $
    
    
    
    $
    6,104Money market fund
    
    
    645
    
    
    
    
    
    
    
    
    
    
    
    645Commercial paper
    
    
    23,416
    
    
    
    
    
    
    
    (7
    )
    
    
    23,409$
    30,165
    
    
    $
    
    
    
    $
    (7
    )
    
    $
    30,158Short-term investments:(due in less than 12 months)Auction rate securities
    
    $
    2,700
    
    
    $
    
    
    
    $
    
    
    
    $
    2,700Government agencies
    
    
    4,915
    
    
    
    
    
    
    
    
    
    
    
    4,915Corporate notes & bonds
    
    
    15,921
    
    
    
    
    
    
    
    (11
    )
    
    
    15,910Certificate of deposit
    
    
    3,749
    
    
    
    
    
    
    
    
    
    
    
    3,749$
    27,285
    
    
    $
    
    
    
    $
    (11
    )
    
    $
    27,274Long-term investments:(due in 12 to 18 months)Government agencies
    
    $
    983
    
    
    $
    
    
    
    $
    
    
    
    $
    983Certificate of deposit
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    26$
    1,009
    
    
    $
    
    
    
    $
    
    
    
    $
    1,009
   F-13




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##### Table of Contents



2008
    
    
    2007Proceeds from available for sale securities
    
    $
    71,435,686
    
    
    $
    81,706,415Realized gains/losses from sales
    
    $
    548,599
    
    
    $
    266,212Amount of gains and losses reclassified out of comprehensive income
    
    $
    (21,527
    )
    
    $
    (89,107
    )
 4.     Property and Equipment
  March 31,2008
    
    
    2007(in thousands)Computers and software
    
    $
    8,128
    
    
    $
    8,022Furniture and equipment
    
    
    1,584
    
    
    
    2,242Leasehold improvements
    
    
    869
    
    
    
    775Land and building
    
    
    1,225
    
    
    
    1,127Automobile
    
    
    36
    
    
    
    3611,842
    
    
    
    12,202Less: accumulated depreciation
    
    
    (9,657
    )
    
    
    (10,210
    )Total property and equipment, net
    
    $
    2,185
    
    
    $
    1,992
  5.     Accrued and Other Liabilities
  2008
    
    
    2007(in thousands)Accrued PayrollAccrued salaries
    
    $
    203
    
    
    $
    148Accrued vacation
    
    
    299
    
    
    
    431Accrued bonus
    
    
    71
    
    
    
    180Accrued commissions
    
    
    77
    
    
    
    86Accrued benefits
    
    
    90
    
    
    
    75Total
    
    $
    740
    
    
    $
    920
 2008
    
    
    2007(in thousands)Other Accrued LiabilitiesOther payables
    
    
    249
    
    
    
    1,137Accrued sales tax
    
    
    53
    
    
    
    102Accrued taxes and accounting
    
    
    433
    
    
    
    85Total
    
    $
    735
    
    
    $
    1,324Deferred RevenueDeferred revenue license
    
    $
    
    
    
    $
    418Deferred revenue hosting
    
    
    6
    
    
    
    159
 F-14




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##### Table of Contents



2008
    
    
    2007(in thousands)Deferred revenue consulting
    
    
    188
    
    
    
    43Deferred revenue maintenance
    
    
    1,790
    
    
    
    1,631Total
    
    $
    1,984
    
    
    $
    2,251
 2008
    
    
    2007(in thousands)Other Long Term LiabilitiesLong-term deferred revenue
    
    $
    234
    
    
    $
    501Lease obligation
    
    
    11
    
    
    
    17Total
    
    $
    245
    
    
    $
    518
 6.     Intangible Assets
  Amount(in thousands)Cost
    
    $
    801Accumulated amortization
    
    
    (699
    )Net
    
    $
    102
  Fiscal Years Ended March 31,2009
    
    
    2010
    
    
    2011
    
    
    2012(in thousands)Amortization by fiscal year
    
    $
    95
    
    
    $
    7
    
    
    $
    0
    
    
    $
    0
 F-15




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##### Table of Contents



7.     Operating Lease Commitments
  Amount(in thousands)Offices
    
    
    Equipment
    
    
    Sublease Income
    
    
    Total2009
    
    
    2,864
    
    
    
    30
    
    
    
    (736
    )
    
    
    2,1582010
    
    
    1,908
    
    
    
    5
    
    
    
    (544
    )
    
    
    1,369Total future minimum payments
    
    $
    4,772
    
    
    $
    35
    
    
    $
    (1,280
    )
    
    $
    3,527
  8.     Litigation
 Patent Infringement
  9.     Stockholders Equity (Deficit)
 Common Stock Reserved for Future Issuance
  (in thousands)Stock option plans:Outstanding
    
    
    2,510Reserved for future grants
    
    
    13,316Employee Stock Purchase Plan
    
    
    3,668Total common stock reserved for future issuance
    
    
    19,494
 Preferred Stock
   F-16




---



##### Table of Contents



Stock Option Plans  Approved by Stockholders
 1996 Plan
  1999 Equity Incentive Plan
  F-17




---



##### Table of Contents



1999 Employee Stock Purchase Plan
   Stock Option Plans  Not Required to be Approved by Stockholders
 Officer Option Agreement
  2001 Supplemental Plan
  F-18




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##### Table of Contents



Options OutstandingShares
    
    
    
    
    
    
    
    
    
    
    Weighted-Available for
    
    
    Number of
    
    
    
    
    
    
    AverageGrant
    
    
    Shares
    
    
    Exercise Price
    
    
    Exercise Price(in thousands except for per share amounts)Balance at March 31, 2006
    
    
    8,538
    
    
    
    6,824
    
    
    $
    0.50   $63.48
    
    
    $
    3.68Increase in shares reserved
    
    
    1,420
    
    
    
    Options granted
    
    
    (1,732
    )
    
    
    1,732
    
    
    $
    1.68   $2.75
    
    
    $
    2.34Options exercised
    
    
    
    
    
    
    (47
    )
    
    $
    0.50   $2.56
    
    
    $
    2.44Options cancelled
    
    
    4,850
    
    
    
    (4,850
    )
    
    $
    1.68   $63.48
    
    
    $
    3.40Options expired
    
    
    (980
    )
    
    
    Restricted stock awards issued
    
    
    (449
    )Balance at March 31, 2007
    
    
    11,647
    
    
    
    3,659
    
    
    $
    1.68   $63.48
    
    
    $
    3.20Increase in shares reserved
    
    
    1,424
    
    
    
    Options granted
    
    
    (1,368
    )
    
    
    1,368
    
    
    $
    0   $1.89
    
    
    $
    1.82Options exercised
    
    
    
    
    
    
    Options cancelled
    
    
    2,353
    
    
    
    (2,353
    )
    
    $
    1.68   $63.48
    
    
    $
    3.17Options expired
    
    
    (77
    )
    
    
    Restricted stock awards issued
    
    
    (664
    )Balance at March 31, 2008
    
    
    13,316
    
    
    
    2,674
    
    
    $
    1.50   $63.48
    
    
    $
    3.32
  Options Outstanding
    
    
    Options VestedWeighted-Average
    
    
    
    
    
    
    Weighted-Remaining
    
    
    
    
    
    
    AverageRange of
    
    Number of
    
    
    Contractual
    
    
    Number of
    
    
    ExerciseExercise Prices
    
    Shares
    
    
    Life (Years)
    
    
    Shares
    
    

Price
Per Share$1.50  $1.81
    
    
    479,115
    
    
    
    9.58
    
    
    
    59,477
    
    
    $
    1.76$1.89  $1.89
    
    
    958,916
    
    
    
    9.20
    
    
    
    115,444
    
    
    $
    1.89$1.97  $2.79
    
    
    508,207
    
    
    
    4.81
    
    
    
    337,735
    
    
    $
    2.47$2.85  $5.30
    
    
    551,700
    
    
    
    5.10
    
    
    
    486,157
    
    
    $
    3.85$14.61  $63.48
    
    
    12,130
    
    
    
    1.65
    
    
    
    12,130
    
    
    $
    27.46$1.50  $63.48
    
    
    2,510,068
    
    
    
    7.45
    
    
    
    1,010,943
    
    
    $
    3.32
  F-19




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##### Table of Contents



Fiscal Years Ended March 31,2008
    
    
    2007Weighted average grant date fair value
    
    $
    795,531
    
    
    $
    1,290,492Intrinsic value of options exercised
    
    
    
    
    
    
    40,369Fair value of shares vesting during the year
    
    
    1,397,923
    
    
    
    1,032,252
  Fiscal Years Ended March 31,2008
    
    
    2007Risk-free interest rate
    
    
    
    
    
    
    5.14
    %Dividend yield
    
    
    
    
    
    
    0.00
    %Expected volatility
    
    
    
    
    
    
    43.66
    %Expected term in years
    
    
    
    
    
    
    1.25Weighted average fair value at grant date
    
    
    
    
    
    $
    1.02
  Fiscal Years Ended March 31,2008
    
    
    2007Risk-free interest rate
    
    
    3.72
    %
    
    
    4.64
    %Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    34.34
    %
    
    
    37.96
    %Expected option life in years
    
    
    3.91
    
    
    
    3.50Weighted average fair value at grant date
    
    $
    0.58
    
    
    $
    0.75
 Equity Compensation Plan Information
  Weighted-Average
    
    
    Number of SecuritiesNumber of Securities to
    
    
    Exercise Price of
    
    
    Remaining Availablebe Issued upon Exercise
    
    
    Outstanding
    
    
    for Future Issuanceof Outstanding Options,
    
    
    Options and
    
    
    Under Equityand Rights
    
    
    Rights
    
    
    Compensation Plans(in thousands, except for per share amount)Plans Approved by Stockholders1996 Stock Plan
    
    
    130
    
    
    $
    3.72
    
    
    
    1,3461999 Equity Incentive Plan
    
    
    2,290
    
    
    $
    2.37
    
    
    
    9,1031999 Employee Stock Purchase Plan
    
    
    
    
    
    
    
    
    
    
    3,668Plans Not Required to be Approved by StockholdersOfficer Option Agreement
    
    
    
    
    
    $
    
    
    
    
    2001 Supplemental Plan
    
    
    90
    
    
    $
    3.95
    
    
    
    1,755Total
    
    
    2,510
    
    
    
    
    
    
    
    15,872
 
  F-20




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##### Table of Contents



10.     Computation of Basic and Diluted Net Loss Per Share
 Earnings Per Share
  Fiscal Years Ended March 31,2008
    
    
    2007(in thousands)Options excluded due to the exercise price exceeding the average fair market
value of the Companys common stock during the period
    
    
    2,181
    
    
    
    3,455Options excluded for which the exercise price was less than the average fair
market value of the Companys common stock during the period but were
excluded as inclusion would decrease the Companys net loss per share
    
    
    329
    
    
    
    204Total common stock equivalents excluded from diluted net loss per common share
    
    
    2,510
    
    
    
    3,659
 11.     Income Taxes
  Fiscal Years Ended March 31,2008
    
    
    2007(in thousands)Domestic Pre-tax Loss
    
    $
    (24,066
    )
    
    $
    (19,896
    )Foreign Pre-tax Income (Loss)
    
    
    527
    
    
    
    (942
    )Total Pre-tax Loss
    
    $
    (23,539
    )
    
    $
    (20,838
    )
 Fiscal Years Ended March 31,2008
    
    
    2007(in thousands)Federal tax at statutory rate
    
    $
    (8,004
    )
    
    $
    (7,294
    )Computed state tax
    
    
    (1,251
    )
    
    
    (1,023
    )Computed foreign tax
    
    
    275
    
    
    
    77Losses not benefited
    
    
    9,238
    
    
    
    8,346Non-deductible expenses
    
    
    190
    
    
    
    Research and development tax credits
    
    
    (88
    )
    
    
    Income tax provision
    
    $
    361
    
    
    $
    106
  Fiscal Years Ended March 31,2008
    
    
    2007(in thousands)Current:US
    
    $
    196
    
    
    $
    25Foreign
    
    
    165
    
    
    
    81Income tax provision
    
    
    361
    
    
    
    106Deferred:Federal
    
    
    
    
    
    
    State
    
    
    
    
    
    
    Total Income tax provision
    
    $
    361
    
    
    $
    106
 F-21




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##### Table of Contents



March 31,2008
    
    
    2007(in thousands)Deferred tax assets:Net operating loss carryforwards
    
    $
    53,544
    
    
    $
    62,358Intangible assets
    
    
    15,789
    
    
    
    10,603Tax credit carryforwards
    
    
    2,776
    
    
    
    5,827Reserves and accruals
    
    
    1,572
    
    
    
    3,088Depreciation
    
    
    61
    
    
    
    445Stock compensation
    
    
    658
    
    
    
    296Deferred revenue
    
    
    180
    
    
    
    205Total net deferred tax asset
    
    
    74,580
    
    
    
    82,822Valuation allowance
    
    
    (74,580
    )
    
    
    (82,822
    )Net deferred tax assets
    
    $
    
    
    
    $
    
         F-22




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##### Table of Contents



AmountBalance at April 1, 2007
    
    $
    Increases related to current year tax positions
    
    
    1,564Balance at March 31, 2008
    
    $
    1,564
  12.     401(k) Benefit Plan
  13.     Restructuring
 F-23




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##### Table of Contents



Severance and
    
    
    ExcessBenefits
    
    
    Facilities
    
    
    TotalBalance, March 31, 2006
    
    
    
    
    
    
    
    
    
    
    Additional accruals  Plan 6
    
    
    488
    
    
    
    6,392
    
    
    
    6,880Amounts paid in cash  Plan 6
    
    
    (385
    )
    
    
    (652
    )
    
    
    (1,037
    )Balance, March 31, 2007
    
    
    103
    
    
    
    5,740
    
    
    
    5,843Additional accruals  Plan 6
    
    
    300
    
    
    
    436
    
    
    
    736Amounts paid in cash  Plan 6
    
    
    (277
    )
    
    
    (2,974
    )
    
    
    (3,251
    )Loan to Sublessee
    
    
    
    
    
    
    (497
    )
    
    
    (497
    )Balance, March 31, 2008
    
    $
    126
    
    
    $
    2,705
    
    
    $
    2,831
 14. Segment Information
     Fiscal Years Ended March 31,2008
    
    
    2007(in thousands)Sales configuration:Revenue
    
    $
    10,248
    
    
    $
    12,870Cost of Sales
    
    
    2,321
    
    
    
    8,177Gross Profit
    
    
    7,927
    
    
    
    4,693Income (loss) from Operations
    
    
    4,246
    
    
    
    (22,070
    )Contract management:Revenue
    
    
    5,755
    
    
    
    1,851Cost of Sales
    
    
    1,880
    
    
    
    493Gross Profit
    
    
    3,875
    
    
    
    1,358Income (loss) from Operations
    
    
    (4,715
    )
    
    
    (2,510
    )ConsolidatedRevenue
    
    
    16,003
    
    
    
    14,721Cost of Sales
    
    
    4,201
    
    
    
    8,670Gross Profit
    
    
    11,802
    
    
    
    6,051Loss from Operations
    
    $
    (26,397
    )
    
    $
    (24,580
    )
 F-24




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##### Table of Contents



REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    rmanino c enna
 
 F-25




---



##### Table of Contents



SIGNATURES
  SELECTICA, INC.
Registrant/s/ ROBERT JURKOWSKIRobert JurkowskiChairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
 Signature
    
    Title
    
    Date/s/
Robert
Jurkowski

Robert Jurkowski
    
    Chairman and Chief Executive Officer
(Principal Executive Officer) and
Director
    
    June 10, 2008/s/
Bill
Roeschlein

Bill Roeschlein
    
    Vice President and Chief Financial
Officer
(Principal Financial Officer and
Principal Accounting Officer)
    
    June 10, 2008Directors:/s/
Jamie
Arnold

Jamie Arnold
    
    Director
    
    June 10, 2008/s/
Brenda
Zawatski

Brenda Zawatski
    
    Director
    
    June 10, 2008/s/
Jim
Thanos

Jim Thanos
    
    Director
    
    June 10, 2008/s/
Lloyd
Sems

Lloyd Sems
    
    Director
    
    June 10, 2008




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description3.1(1)
    
    The Second Amended and Restated Certificate of Incorporation.3.2(4)
    
    Certificate of Designation of Series A Junior or Participating Preferred Stock.3.3(4)
    
    Amended and Restated Bylaws.4.1(1)
    
    Reference is made to Exhibits 3.1, 3.2 and 3.3.4.2(1)
    
    Form of Registrants Common Stock certificate.4.3(1)
    
    Amended and Restated Investor Rights Agreement dated June 16, 1999.4.4(2)
    
    Rights Agreement between Registrant and U.S. Stock Transfer Corporation, as Rights Agent, dated
February 4, 2003.4.5(10)
    
    Transfer Agent Agreement between Registrant and Wells Fargo Corporation, as Transfer Agent, dated
February 13, 200710.1(1)
    
    Form of Indemnification Agreement.10.2(1)
    
    1996 Stock Plan.10.3(4)
    
    1999 Employee Stock Purchase Plan as amended and restated February 1, 2008.10.4(4)
    
    1999 Equity Incentive Plan, as amended and restated August 1, 2006.10.5(1)
    
    Lease between John Arrillaga Survivors Trust and the Richard T. Perry Separate Property Trust as
Landlord and the Registrant as Tenant, dated October 1, 1999.10.6(3)
    
    Employment Agreement between the Registrant and Stephen Bennion dated as of January 1, 2003.10.7(6)
    
    Sublease Agreement between Selectica Incorporated and Nuova Systems dated March 6, 200710.8(7)
    
    Employment Agreement between the Registrant and Stephen Bennion dated August 9, 2006.10.9(10)
    
    Employment Agreement between the
Registrant and Bill Roeschlein dated September 11, 2006.10.10(10)
    
    Employment Agreement between the Registrant and Steve Goldner dated September 27, 2006.10.11(10)
    
    Employment Agreement between the
Registrant and Terry Nicholson dated September 27, 2006.10.12(4)
    
    Warrant to Purchase Common Stock issued to Sales Technologies Limited, dated April 4, 2001.10.13(4)
    
    Licensed Works Agreement between the Registrant and International Business Machines Corporation,
dated December 11, 2002.10.14(4)
    
    Licensed Works Agreement Statement of Work between the Registrant and International Business
Machines Corporation, Dated December 11, 2002.10.15(4)
    
    Professional Services Agreement between the Registrant and GE Medical Services, dated June 28, 2002.10.16(4)
    
    Major Account License Agreement between the Registrant and GE Medical Systems, dated June 28, 2002.10.17(4)
    
    Amendment #1 to Major Account License Agreement between the Registrant and GE Medical Systems.10.18(4)
    
    Amendment #2 to Major Account License Agreement between the Registrant and GE
Medical Systems, dated October 8, 2002.10.19(4)
    
    Amendment #3 to Major Account License Agreement between the Registrant and GE
Medical Systems, dated March 31, 2003.10.20(4)
    
    Amendment #1 to Professional Services Agreement between Registrant and GE
Medical Services, dated August 27, 2002.10.21(4)
    
    Amendment #2 to Professional Services Agreement between Registrant and GE
Medical Services, dated March 3, 2003.




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##### Table of Contents



ExhibitNo.
    
    Description10.22(10)
    
    Company Compensation Plan for Non Employee Directors dated August 1, 2006.10.23(8)
    
    Letter Agreement between Registrant and Sanjay Mittal, dated July 21, 2006.10.24(7)
    
    Separation Agreement between
Registrant and Vince Ostrosky dated August 9, 2006.

10.25(5)
    
    1999 Equity Incentive Plan Stock Option Agreement.10.26(5)
    
    1999 Equity Incentive Plan Stock Option Agreement (Initial Grant to Directors).10.27(5)
    
    1999 Equity Incentive Plan Stock Option Agreement (Annual Grant to Directors).10.28(5)
    
    Selectica UK Limited Major Account License Agreement dated December 5, 2003.10.29(5)
    
    Amendment Agreement between MCI WorldCom, Limited and Selectica UK Limited,
dated December 23, 2004.10.30(9)
    
    Notice of Delisting, dated June 19, 2007.10.31(11)
    
    Separation Agreement between Registrant and Stephen Bennion dated October 23, 2007.10.32
    
    Severance Agreement between
Registrant and William Roeschlein dated  September 27, 200610.33
    
    Severance Agreement between Registrant and Michael Shaw dated January 14, 200810.34
    
    Employment Agreement between the
Registrant and Rober Jurkowski dated August 21, 200710.35
    
    Offer Letter between Registrant and
Michael Shaw dated January 9, 200821.1(4)
    
    Subsidiaries.23.1
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Previously filed in the Companys Registration Statement (No. 333-92545) declared effective
on March 9, 2000.(2)
    
    Previously filed in the Companys report on Form 8-K filed on February 6, 2003.(3)
    
    Previously filed in the Companys report on Form 10-Q filed on February 14, 2003.(4)
    
    Previously filed in the Companys report on Form 10-K filed on June 30, 2003.(5)
    
    Previously filed in the Companys report on Form 10-K filed on June 29, 2006.(6)
    
    Previously filed in the Companys report on Form 8-K filed on March 27, 2008.(7)
    
    Previously filed in the Companys report on Form 8-K on August 15, 2007.(8)
    
    Previously filed in the Companys report on Form 8-K on July 27, 2007.(9)
    
    Previously filed in the Companys report on Form 8-K on June 22, 2008.(10)
    
    Previously file in the Companys report on Form 10-K on
October 3, 2007(11)
    
    Previously filed in the Companys report on Form 8-K on
October 23, 2007.